American National Bankshares Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except share and per share data)
Unaudited
	September 30
ASSETS	2009			2008
Cash and due from banks	$	17,451		$	25,136
Interest-bearing deposits in other banks		8,892			8,050
Securities available for sale, at fair value		181,953			134,114
Securities held to maturity		6,540			7,133
Total securities		188,493			141,247
Loans held for sale		3,840			2,269
Loans		539,188			576,598
Less allowance for loan losses		(8,260	)		(8,083	)
Net Loans		530,928			568,515
Premises and equipment, net		19,390			16,459
Other real estate owned		4,558			707
Goodwill		22,468			22,468
Core deposit intangibles, net		1,792			2,169
Accrued interest receivable and other assets		12,534			13,625
Total assets	$	810,346		$	800,645
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Demand deposits -- noninterest-bearing	$	105,100		$	102,065
Demand deposits -- interest-bearing		92,012			107,228
Money market deposits		71,424			56,574
Savings deposits		62,420			59,563
Time deposits		265,339			263,627
Total deposits		596,295			589,057
Short-term borrowings:
Customer repurchase agreements		71,339			44,951
Other short-term borrowings		4,000			25,920
Long-term borrowings		8,675			13,825
Trust preferred capital notes		20,619			20,619
Accrued interest payable and other liabilities		4,513			3,559
Total liabilities		705,441			697,931
Shareholders' equity:
Common stock, $1 par, 10,000,000 shares authorized,
6,107,327 shares outstanding at September 30, 2009 and
6,090,804 shares outstanding at September 30, 2008		6,107			6,091
Capital in excess of par value		26,900			26,439
Retained earnings		71,445			70,962
Accumulated other comprehensive income (loss), net		453			(778	)
Total shareholders' equity		104,905			102,714
Total liabilities and shareholders' equity	$	810,346		$	800,645

American National Bankshares Inc. and Subsidiaries
Consolidated Statements of Income
(Dollars in thousands, except share and per share data)
Unaudited
	Three Months Ended					Nine Months Ended
	September 30					September 30
	2009		2008			2009			2008
Interest and Dividend Income:
Interest and fees on loans	$	7,666	$	8,916		$	23,617		$	27,347
Interest and dividends on securities:
Taxable		1,241		1,179			3,594			3,644
Tax-exempt		434		388			1,236			1,240
Dividends		27		41			70			191
Other interest income		96		75			287			225
Total interest and dividend income		9,464		10,599			28,804			32,647
Interest Expense:
Interest on deposits		1,921		2,845			6,628			9,543
Interest on short-term borrowings		135		429			548			1,340
Interest on long-term borrowings		65		126			276			423
Interest on trust preferred capital notes		343		343			1,030			1,030
Total interest expense		2,464		3,743			8,482			12,336
Net Interest Income		7,000		6,856			20,322			20,311
Provision for loan losses		492		280			1,334			1,020
Net Interest Income After Provision
for Loan Losses		6,508		6,576			18,988			19,291
Noninterest Income:
Trust fees		813		901			2,338			2,697
Service charges on deposit accounts		536		603			1,549			1,769
Other fees and commissions		257		193			750			622
Mortgage banking income		361		238			1,215			633
Brokerage fees		23		126			153			370
Securities gains (losses), net		1		(87	)		2			(195	)
Impairment of securities		-		-			-			(255	)
Net loss on foreclosed real estate		-		-			(1,222	)		(7	)
Other		128		88			321			404
Total noninterest income		2,119		2,062			5,106			6,038
Noninterest Expense:
Salaries		2,471		2,466			7,734			7,416
Employee benefits		806		688			2,451			2,212
Occupancy and equipment		704		684			2,174			2,120
FDIC assessment		203		47			984			88
Bank franchise tax		160		172			483			522
Core deposit intangible amortization		94		94			283			283
Other		1,160		1,334			3,685			3,936
Total noninterest expense		5,598		5,485			17,794			16,577
Income Before Income Taxes		3,029		3,153			6,300			8,752
Income Taxes		862		929			1,659			2,414
Net Income	$	2,167	$	2,224		$	4,641		$	6,338
Net Income Per Common Share:
Basic	$	0.36	$	0.36		$	0.76		$	1.04
Diluted	$	0.35	$	0.36		$	0.76		$	1.04
Average Common Shares Outstanding:
Basic		6,104,505		6,093,851			6,094,261			6,099,933
Diluted		6,111,913		6,100,089			6,098,221			6,109,947

American National Bankshares Inc. and Subsidiaries
Financial Highlights
(In thousands, except share, ratio and nonfinancial data, unaudited)
	3rd Qtr			2nd Qtr			3rd Qtr			YTD			YTD
	2009			2009			2008			2009			2008
EARNINGS
Interest income	$	9,464		$	9,690		$	10,599		$	28,804		$	32,647
Interest expense		2,464			2,781			3,743			8,482			12,336
Net interest income		7,000			6,909			6,856			20,322			20,311
Provision for loan losses		492			492			280			1,334			1,020
Noninterest income		2,119			2,253			2,062			5,106			6,038
Noninterest expense		5,598			6,321			5,485			17,794			16,577
Income taxes		862			643			929			1,659			2,414
Net income		2,167			1,706			2,224			4,641			6,338
PER COMMON SHARE
Earnings per share - basic	$	0.36		$	0.28		$	0.36		$	0.76		$	1.04
Earnings per share - diluted		0.35			0.28			0.36			0.76			1.04
Cash dividends declared		0.23			0.23			0.23			0.69			0.69
Book value per share		17.18			16.82			16.86			17.18			16.86
Book value per share - tangible (a)		13.20			12.83			12.82			13.20			12.82
Closing market price		21.82			19.25			18.00			21.82			18.00
FINANCIAL RATIOS
Return on average assets		1.07	%		0.84	%		1.13	%		0.77	%		1.08	%
Return on average equity		8.38			6.63			8.72			6.00			8.26
Return on average tangible equity (b)		11.30			9.05			11.84			8.22			11.25
Average equity to average assets		12.77			12.66			12.97			12.74			13.02
Net interest margin, taxable equivalent		3.91			3.84			3.90			3.79			3.87
Efficiency ratio		59.77			66.98			59.51			65.07			60.33
Effective tax rate		28.46			27.37			29.46			26.33			27.58
PERIOD-END BALANCES
Securities	$	188,493		$	151,418		$	141,247		$	188,493		$	141,247
Loans held for sale		3,840			10,408			2,269			3,840			2,269
Loans		539,188			557,042			576,598			539,188			576,598
Goodwill and other intangibles		24,260			24,354			24,637			24,260			24,637
Assets		810,346			811,483			800,645			810,346			800,645
Assets - tangible (a)		786,086			787,129			776,008			786,086			776,008
Deposits		596,295			615,231			589,057			596,295			589,057
Customer repurchase agreements		71,339			59,437			44,951			71,339			44,951
Other short-term borrowings		4,000			-			25,920			4,000			25,920
Long-term borrowings		29,294			29,331			34,444			29,294			34,444
Shareholders' equity		104,905			102,618			102,714			104,905			102,714
Shareholders' equity - tangible (a)		80,645			78,264			78,077			80,645			78,077
AVERAGE BALANCES
Securities	$	159,314		$	147,576		$	141,697		$	148,415		$	147,863
Loans held for sale		6,540			7,787			1,986			5,788			1,936
Loans		547,075			562,654			572,196			559,938			563,667
Interest-earning assets		741,194			744,899			724,368			740,399			722,619
Goodwill and other intangibles		24,314			24,406			24,695			24,408			24,781
Assets		810,064			812,404			786,804			808,761			785,372
Assets - tangible (a)		785,750			787,998			762,109			784,353			760,591
Interest-bearing deposits		503,793			513,876			480,133			509,470			480,806
Deposits		606,134			612,134			577,263			607,440			578,922
Customer repurchase agreements		65,341			60,876			51,038			60,790			53,069
Other short-term borrowings		460			1,553			17,589			1,355			11,808
Long-term borrowings		29,325			30,460			34,474			31,376			34,195
Shareholders' equity		103,411			102,862			102,052			103,060			102,290
Shareholders' equity - tangible (a)		79,097			78,456			77,357			78,652			77,509
CAPITAL
Average shares outstanding - basic		6,104,505			6,096,034			6,093,851			6,094,261			6,099,933
Average shares outstanding - diluted		6,111,913			6,097,047			6,100,089			6,098,221			6,109,947
Shares repurchased		-			-			7,850			7,600			39,050
Average price of shares repurchased	$	-		$	-		$	17.42		$	15.92		$	20.16

American National Bankshares Inc. and Subsidiaries
Financial Highlights
(In thousands, except share, ratio and nonfinancial data, unaudited)
		3rd Qtr			2nd Qtr			3rd Qtr			YTD			YTD
		2009			2009			2008			2009			2008
ALLOWANCE FOR LOAN LOSSES
Beginning balance	$	7,934		$	7,836		$	7,932		$	7,824		$	7,395
Provision for loan losses		492			492			280			1,334			1,020
Charge-offs		(318	)		(422	)		(179	)		(1,116	)		(552	)
Recoveries		152			28			50			218			220
Ending balance	$	8,260		$	7,934		$	8,083		$	8,260		$	8,083
LOANS
Construction and land development	$	46,175		$	50,930		$	65,826		$	46,175		$	65,826
Commercial real estate		209,470			210,832			208,046			209,470			208,046
Residential real estate		126,392			128,835			139,683			126,392			139,683
Home equity		62,519			61,818			55,665			62,519			55,665
Commercial and industrial		87,226			96,978			99,139			87,226			99,139
Consumer		7,406			7,649			8,239			7,406			8,239
Total	$	539,188		$	557,042		$	576,598		$	539,188		$	576,598
NONPERFORMING ASSETS AT PERIOD-END
Nonperforming loans:
90 days past due	$	-		$	-		$	-		$	-		$	-
Nonaccrual		3,106			2,745			6,674			3,106			6,674
Foreclosed real estate		4,558			4,033			707			4,558			707
Nonperforming assets	$	7,664		$	6,778		$	7,381		$	7,664		$	7,381
ASSET QUALITY RATIOS
Annualized net chargeoffs to average loans		0.12	%		0.28	%		0.09	%		0.21	%		0.08	%
Nonperforming assets to total assets		0.95			0.84			0.92			0.95			0.92
Nonperforming loans to total loans		0.58			0.49			1.16			0.58			1.16
Allowance for loan losses to total loans		1.53			1.42			1.40			1.53			1.40
Allowance for loan losses to
nonperforming loans		265.94			289.03			121.11			265.94			121.11
OTHER DATA
Fiduciary assets at period-end (c)	$	354,860		$	333,754		$	368,341		$	354,860		$	368,341
Retail brokerage assets at period-end (c)	$	63,893		$	89,016		$	91,026		$	63,893		$	91,026
Number full time-time equivalent employees (d)		246			255			258			246			258
Number of full service offices		19			19			20			19			20
Number of loan production offices		2			2			1			2			1
Number of ATM's		24			24			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 September 30, 2009 and 2008
(in thousands, except rates)
					Interest
	Average Balance				Income/Expense				Yield/Rate
	2009		2008		2009		2008		2009			2008
Loans:
Commercial	$	85,894	$	94,575	$	1,027	$	1,423		4.78	%		6.02	%
Real estate		460,253		471,162		6,508		7,323		5.66			6.22
Consumer		7,468		8,445		158		192		8.46			9.09
Total loans		553,615		574,182		7,693		8,938		5.56			6.23
Securities:
Federal agencies and GSE		56,706		43,543		538		534		3.80			4.91
Mortgage-backed & CMO's		37,609		48,000		506		607		5.38			5.06
State and municipal		56,665		44,104		798		602		5.63			5.46
Other		8,334		6,050		80		54		3.84			3.57
Total securities		159,314		141,697		1,922		1,797		4.83			5.07
Deposits in other banks		28,265		8,489		96		75		1.36			3.53
Total interest-earning assets		741,194		724,368		9,711		10,810		5.24			5.97
Non-earning assets		68,870		62,436
Total assets	$	810,064	$	786,804
Deposits:
Demand	$	94,869	$	110,230		31		215		0.13			0.78
Money market		76,416		54,642		107		246		0.56			1.80
Savings		62,985		60,499		38		76		0.24			0.50
Time		269,523		254,762		1,745		2,308		2.59			3.62
Total deposits		503,793		480,133		1,921		2,845		1.53			2.37
Customer repurchase agreements		65,341		51,038		134		313		0.82			2.45
Other short-term borrowings		460		17,589		1		116		0.87			2.64
Long-term borrowings		29,325		34,474		408		469		5.57			5.44
Total interest-bearing liabilities		598,919		583,234		2,464		3,743		1.65			2.57
Noninterest bearing demand deposits		102,341		97,130
Other liabilities		5,393		4,388
Shareholders' equity		103,411		102,052
Total liabilities and
shareholders' equity	$	810,064	$	786,804
Interest rate spread										3.59	%		3.40	%
Net interest margin										3.91	%		3.90	%
Net interest income (taxable equivalent basis)						7,247		7,067
Less: Taxable equivalent adjustment						247		211
Net interest income					$	7,000	$	6,856

Net Interest Income Analysis
For the Nine Months Ended September 30, 2009 and 2008
(in thousands, except rates)
					Interest
	Average Balance				Income/Expense				Yield/Rate
	2009		2008		2009		2008		2009			2008
Loans:
Commercial	$	91,193	$	90,301	$	3,227	$	4,219		4.72	%		6.23	%
Real estate		466,787		466,346		19,956		22,580		5.70			6.46
Consumer		7,746		8,956		511		606		8.80			9.02
Total loans		565,726		565,603		23,694		27,405		5.58			6.46
Securities:
Federal agencies and GSE		49,606		46,428		1,584		1,682		4.26			4.83
Mortgage-backed & CMO's		41,158		48,588		1,618		1,852		5.24			5.08
State and municipal		50,439		46,376		2,133		1,910		5.64			5.49
Other		7,212		6,471		185		243		3.42			5.01
Total securities		148,415		147,863		5,520		5,687		4.96			5.13
Deposits in other banks		26,258		9,153		287		225		1.46			3.28
Total interest-earning assets		740,399		722,619		29,501		33,317		5.31			6.15
Non-earning assets		68,362		62,753
Total assets	$	808,761	$	785,372
Deposits:
Demand	$	99,860	$	108,463		263		600		0.35			0.74
Money market		73,112		52,365		453		779		0.83			1.98
Savings		62,284		62,107		115		276		0.25			0.59
Time		274,214		257,871		5,797		7,888		2.82			4.08
Total deposits		509,470		480,806		6,628		9,543		1.73			2.65
Customer repurchase agreements		60,790		53,069		543		1,103		1.19			2.77
Other short-term borrowings		1,355		11,808		5		237		0.49			2.68
Long-term borrowings		31,376		34,195		1,306		1,453		5.55			5.67
Total interest-bearing liabilites		602,991		579,878		8,482		12,336		1.88			2.84
Noninterest bearing demand deposits		97,970		98,116
Other liabilities		4,740		5,088
Shareholders' equity		103,060		102,290
Total liabilities and
shareholders' equity	$	808,761	$	785,372
Interest rate spread										3.43	%		3.31	%
Net interest margin										3.79	%		3.87	%
Net interest income (taxable equivalent basis)						21,019		20,981
Less: Taxable equivalent adjustment						697		670
Net interest income					$	20,322	$	20,311