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)			July 25, 2007
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				24541
(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:
¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13a-4(c))

Item 2.02Results of Operations and Financial Condition

On July 25, 2007, American National Bankshares Inc. issued a news release announcing second quarter earnings for the period ended June 30, 2007, and the expansion into the City of Bedford, Virginia.  The release included Quarterly Balance Sheets, Statements of Income, Net Interest Income Analysis, and Selected Quarterly Financial Data, copies of which are furnished with this Current Report on Form 8-K as Exhibits 99.1 and 99.2. 

Item 9.01 Financial Statements and Exhibits

 (c) Exhibits: The following exhibits are furnished with this report.

Exhibit

Number    Description                                                                                                                      0;                                                                                                                                                  

99.1 News Release dated July 25, 2007, entitled "American National Bankshares Inc. Announces Second Quarter Earnings and Branch Expansion" 

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: July 25, 2007        /s/ Neal A. Petrovich    

              Senior Vice President and Chief Financial Officer

EX-99.1

Date:	July 25, 2007
Contact:	Neal A. Petrovich, Senior Vice President and Chief Financial Officer
	434-773-2242    petrovichn@amnb.com
Traded:	NASDAQ Global Select Market	Symbol:	AMNB

AMERICAN NATIONAL BANKSHARES INC. ANNOUNCES SECOND QUARTER EARNINGS AND BRANCH EXPANSION

Danville, VA -- American National Bankshares Inc. (NASDAQ:  AMNB), parent company of American National Bank and Trust Company, today announced second  quarter 2007 net income of $3.03 million and expansion into the City of Bedford, Virginia.  Net income of $3.03 million represented a 12.1% increase over the previous quarter and a 1.0% increase over the comparable quarter of 2006.  Diluted earnings per share of $0.49 increased 11.4% over the previous quarter and 2.1% over the second quarter of 2006.  Basic earnings per share of $0.49 improved 11.4% over the previous quarter and were unchanged from the second quarter of 2006.

For the first six months of 2007, net income was $5.74 million, up 6.0% over the first half of 2006.  Earnings per share, on both a basic and diluted basis, were $0.93, unchanged from 2006.

Total loans averaged $550.3 million in the second quarter of 2007, up from $544.2 million in the first quarter of 2007, and down slightly from $550.7 million in the second quarter of 2006.  Total assets averaged $770.7 million in the recently completed quarter, down from $778.9 in the previous quarter and $810.6 million in the second quarter of 2006.  “We have used maturing investments to pay down high-rate certificates of deposit acquired from Community First Bank in 2006,” stated Charles H. Majors, President and Chief Executive Officer.  “This strategy, coupled with a very competitive bank deposit environment, resulted in lower asset levels.”  Total deposits and customer repurchase agreements averaged $634.4 million in the second quarter of 2007, down from $641.1 million in the previous quarter and $679.6 million in the second quarter of 2006.

Second quarter earnings were positively impacted by several factors, including:

·   continued improvement in loan quality indicators, resulting in zero provision for loan loss expense in the second quarter;

·   $147,000 in interest income, before taxes, related to certain loans acquired from Community First Bank in 2006, which are accounted for under special accounting rules;  and

·   a $70,000 decrease in the company’s deferred tax valuation allowance.  

Second quarter earnings were negatively impacted by the costs associated with the opening of the Bank’s newest branch at Smith Mountain Lake, Virginia.  As announced in April, the Bank will operate in a temporary space until a permanent location can be constructed, most likely in 2008.  The opening of any new branch negatively impacts earnings until the earning asset levels increase enough to cover operating expenses.  The net expense of the Smith Mountain Lake branch during the second quarter, before taxes, was approximately $69,000.

Branch Expansion

The Company is pleased to announce a planned expansion into Bedford, Virginia, with the leasing of branch office space and the hiring of banker Scott Carter.  “We are excited to continue our geographic expansion by adding an office in the City of Bedford,” stated Majors.  “We are equally excited that Scott Carter will lead our effort in that market.  Scott has the banking experience and local market knowledge that we need to be successful in Bedford.”  Regulatory branch approval is pending.

Net Interest Income and Provision for Loan Losses

Net interest income before the provision for loan losses was $7.28 million for the quarter, up from $7.14 million in the first quarter of 2007, and down from $7.71 million in the second quarter of 2006.  After the provision for loan losses, net interest income improved 6.5% over the first quarter of 2007, and declined 1.0% over the second quarter of 2006.  “Intense competition for deposits and loans, and a less-than-favorable interest rate environment continue to impact net interest income growth rates in the banking industry,” stated Majors.  “With American National’s focus on relationship banking and new market expansion, I am confident we can improve our growth rates.”

Noninterest Income and Noninterest Expense

Noninterest income of $2.43 million in the second quarter represented a 9.9% increase over the first quarter of 2007, and a 7.2% increase over the second quarter of 2006.  The increases are largely due to growth in mortgage banking, trust, and brokerage revenue.

Second quarter noninterest expense was $5.45 million, compared with $5.17 million in the first quarter of 2007 and $5.36 million in the second quarter of 2006.

Credit Quality

Asset quality measurements improved in the second quarter.  Nonperforming loans were 0.58% of total loans at June 30, 2007, down from 0.68% at March 31, 2007 and 0.82% at June 30, 2006.

About American National

American National Bankshares Inc. is the holding company of American National Bank and Trust Company, a community bank with twenty banking offices and one loan production office located in Central Virginia and the northern portion of Central North Carolina.

American National Bank and Trust Company provides a full array of financial products and services, including commercial, mortgage, and consumer banking; trust and investment services; and insurance.  Services are also provided through twenty-three ATMs, “AmeriLink” Internet banking, and 24-hour “Access American” phone banking.  Additional information is available on the Bank’s website at www.amnb.com.  The shares of American National Bankshares Inc. are traded on the NASDAQ Global Select Market under the symbol “AMNB.”

This press release may contain “forward-looking statements,” within the meaning of federal securities laws that involve significant risks and uncertainties. Statements herein are based on certain assumptions and analyses by the Corporation and are factors it believes are appropriate in the circumstances. Actual results could differ materially from those contained in or implied by such statements for a variety of reasons including, but not limited to: changes in interest rates; changes in accounting principles, policies, or guidelines; significant changes in the economic scenario; significant changes in regulatory requirements; and significant changes in securities markets.  Consequently, all forward-looking statements made herein are qualified by these cautionary statements and the cautionary language in the Corporation’s most recent Form 10-K report and other documents filed with the Securities and Exchange Commission. American National Bankshares Inc. does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.

EX-99.2

American National Bankshares Inc. and Subsidiary
Consolidated Balance Sheets
June 30, 2007 and 2006
(Dollars in thousands, except share data)
(Unaudited)
	2007			2006
ASSETS
Cash and due from banks	$	21,735		$	19,352
Interest bearing deposits in other banks		17,053			16,425
Securities available for sale, at fair value		121,083			157,636
Securities held to maturity		13,148			15,501
Total securities		134,231			173,137
Loans held for sale		2,306			1,005
Loans, net of unearned income		551,744			551,434
Less allowance for loan losses		(7,493	)		(8,208	)
Net loans		544,251			543,226
Bank premises and equipment, net		12,899			12,640
Goodwill		22,468			22,517
Core deposit intangibles, net		2,641			3,071
Accrued interest receivable and other assets		13,553			19,195
Total assets	$	771,137		$	810,568
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Demand deposits -- noninterest bearing	$	107,206		$	109,161
Demand deposits -- interest bearing		110,482			119,767
Money market deposits		50,749			48,111
Savings deposits		66,948			81,078
Time deposits		260,359			274,505
Total deposits		595,744			632,622
Repurchase agreements		43,615			43,667
FHLB borrowings		10,012			17,163
Trust preferred capital notes		20,619			20,619
Accrued interest payable and other liabilities		3,898			4,666
Total liabilities		673,888			718,737
Shareholders' equity:
Common stock, $1 par, 10,000,000 shares authorized,
6,145,617 shares outstanding at June 30, 2007 and
6,162,490 shares outstanding at June 30, 2006		6,146			6,162
Capital in excess of par value		26,422			26,353
Retained earnings		67,122			61,423
Accumulated other comprehensive income (loss), net		(2,441	)		(2,107	)
Total shareholders' equity		97,249			91,831
Total liabilities and shareholders' equity	$	771,137		$	810,568

American National Bankshares Inc. and Subsidiary
Consolidated Statements of Income
(Dollars in thousands, except share and per share data)
(Unaudited)
	Three Months Ended				Six Months Ended
	June 30				June 30
	2007		2006		2007		2006
Interest Income:
Interest and fees on loans	$	10,408	$	10,089	$	20,487	$	17,045
Interest and dividends on securities:
Taxable		1,028		1,358		2,164		2,510
Tax-exempt		420		430		843		881
Dividends		82		78		171		135
Other interest income		168		191		339		423
Total interest income		12,106		12,146		24,004		20,994
Interest Expense:
Interest on deposits		3,860		3,538		7,643		5,845
Interest on repurchase agreements		449		335		875		644
Interest on trust preferred capital notes		344		320		687		320
Interest on other borrowings		170		242		376		455
Total interest expense		4,823		4,435		9,581		7,264
Net Interest Income		7,283		7,711		14,423		13,730
Provision for loan losses		-		354		303		480
Net Interest Income After Provision for Loan Losses		7,283		7,357		14,120		13,250
Noninterest Income:
Trust fees		924		885		1,803		1,640
Service charges on deposit accounts		625		737		1,247		1,308
Mortgage banking income		329		203		519		336
Brokerage fees		159		109		248		234
Other fees and commissions		198		183		398		367
Securities gains, net		64		17		89		38
Other		132		133		339		245
Total noninterest income		2,431		2,267		4,643		4,168
Noninterest Expense:
Salaries		2,514		2,527		4,904		4,511
Employee benefits		737		673		1,385		1,322
Occupancy and equipment		850		744		1,679		1,390
Bank franchise tax		165		170		333		310
Core deposit intangible amortization		95		134		189		173
Other		1,087		1,108		2,128		2,033
Total noninterest expense		5,448		5,356		10,618		9,739
Income Before Income Tax Provision		4,266		4,268		8,145		7,679
Income Tax Provision		1,235		1,266		2,410		2,271
Net Income	$	3,031	$	3,002	$	5,735	$	5,408
Net Income Per Common Share:
Basic	$	0.49	$	0.49	$	0.93	$	0.93
Diluted	$	0.49	$	0.48	$	0.93	$	0.93
Average Common Shares Outstanding:
Basic		6,150,216		6,172,522		6,153,496		5,805,287
Diluted		6,177,165		6,207,543		6,181,107		5,840,871

Financial Highlights
American National Bankshares Inc. and Subsidiary
(Dollars in thousands, except share and per share data)
(Unaudited)
	As of and for the									As of and for the
	Three Months Ended June 30									Six Months Ended June 30
	2007			2006			Change			2007			2006		Change
EARNINGS
Interest income	$	12,106		$	12,146		(0.3	)%	$	24,004		$	20,994		14.3	%
Interest expense		4,823			4,435		8.7			9,581			7,264		31.9
Net interest income		7,283			7,711		(5.6	)		14,423			13,730		5.0
Provision for loan losses		-			354		(100.0	)		303			480		(36.9	)
Noninterest income		2,431			2,267		7.2			4,643			4,168		11.4
Noninterest expense		5,448			5,356		1.7			10,618			9,739		9.0
Income taxes		1,235			1,266		(2.4	)		2,410			2,271		6.1
Net income		3,031			3,002		1.0			5,735			5,408		6.0
PER COMMON SHARE
Earnings per share - basic	$	0.49		$	0.49		0.0	%	$	0.93		$	0.93		0.0	%
Earnings per share - diluted		0.49			0.48		2.1			0.93			0.93		0.0
Cash dividends declared		0.23			0.22		4.5			0.45			0.43		4.7
Book value per share		15.82			14.90		6.2			15.82			14.90		6.2
Book value per share - tangible (a)		11.74			10.75		9.2			11.74			10.75		9.2
Closing market price		22.50			23.13		(2.7	)		22.50			23.13		(2.7	)
FINANCIAL RATIOS
Return on average assets		1.57	%		1.48	%	9	bp		1.48	%		1.50	%	(2	)bp
Return on average equity		12.47			13.38		(91	)		11.89			13.32		(143	)
Return on average tangible equity (b)		17.20			19.52		(232	)		16.47			16.28		19
Average equity to average assets		12.61			11.07		154			12.45			11.25		120
Net interest margin (FTE)		4.26			4.24		2			4.19			4.19		0
Efficiency ratio		56.68			54.01		267			56.20			53.96		224
PERIOD END BALANCES
Securities	$	134,231		$	173,137		(22.5	)%	$	134,231		$	173,137		(22.5	)%
Loans held for sale		2,306			1,005		129.5			2,306			1,005		129.5
Loans, net of unearned income		551,744			551,434		0.1			551,744			551,434		0.1
Goodwill and other intangibles		25,109			25,588		(1.9	)		25,109			25,588		(1.9	)
Assets		771,137			810,568		(4.9	)		771,137			810,568		(4.9	)
Assets - tangible (a)		746,028			784,980		(5.0	)		746,028			784,980		(5.0	)
Deposits		595,744			632,622		(5.8	)		595,744			632,622		(5.8	)
Repurchase agreements		43,615			43,667		(0.1	)		43,615			43,667		(0.1	)
FHLB borrowings		10,012			17,163		(41.7	)		10,012			17,163		(41.7	)
Trust preferred capital notes		20,619			20,619		0.0			20,619			20,619		0.0
Shareholders' equity		97,249			91,831		5.9			97,249			91,831		5.9
Shareholders' equity - tangible (a)		72,140			66,243		8.9			72,140			66,243		8.9
AVERAGE BALANCES
Securities	$	143,106		$	183,393		(22.0	)%	$	150,004		$	177,796		(15.6	)%
Total loans		550,310			550,706		(0.1	)		547,253			481,818		13.6
Interest earning assets		706,285			749,709		(5.8	)		710,321			678,053		4.8
Goodwill and other intangibles		25,146			26,268		(4.3	)		25,193			13,260		90.0
Assets		770,710			810,627		(4.9	)		774,667			721,685		7.3
Assets - tangible (a)		745,564			784,359		(4.9	)		749,474			708,425		5.8
Interest bearing deposits		487,322			525,889		(7.3	)		490,546			469,624		4.5
Deposits		588,346			638,020		(7.8	)		591,723			570,098		3.8
Repurchase agreements		46,032			41,594		10.7			46,142			40,772		13.2
Other borrowings		33,884			37,878		(10.5	)		35,294			27,070		30.4
Shareholders' equity		97,183			89,729		8.3			96,434			81,194		18.8
Shareholders' equity - tangible (a)		72,037			63,461		13.5			71,241			67,934		4.9
CAPITAL
Average shares outstanding - basic		6,150,216			6,172,522		(0.4	)%		6,153,496			5,805,287		6.0	%
Average shares outstanding - diluted		6,177,165			6,207,543		(0.5	)		6,181,107			5,840,871		5.8
Shares repurchased		12,700			17,300		(26.6	)		24,300			31,200		(22.1	)
Average price of shares repurchased	$	22.66		$	23.25		(2.5	)	$	22.89		$	23.28		(1.7	)
ALLOWANCE FOR LOAN LOSSES
Beginning balance	$	7,590		$	6,164		23.1	%	$	7,264		$	6,109		18.9	%
Allowance acquired in merger		-			1,598		(100.0	)		-			1,598		(100.0	)
Provision for loan losses		-			354		(100.0	)		303			480		(36.9	)
Charge-offs		(155	)		(75	)	106.7			(204	)		(226	)	(9.7	)
Recoveries		58			167		(65.3	)		130			247		(47.4	)
Ending balance	$	7,493		$	8,208		(8.7	)	$	7,493		$	8,208		(8.7	)
NONPERFORMING ASSETS
Nonperforming loans:
90 days past due	$	-		$	226		(100.0	)%	$	-		$	226		(100.0	)%
Nonaccrual		3,192			4,297		(25.7	)		3,192			4,297		(25.7	)
Foreclosed real estate		85			435		(80.5	)		85			435		(80.5	)
Nonperforming assets	$	3,277		$	4,958		(33.9	)	$	3,277		$	4,958		(33.9	)
ASSET QUALITY RATIOS
Net chargeoffs (recoveries) to average loans		0.07	%		(0.07	)%	14	bp		0.03	%		(0.01	)%	4	bp
Nonperforming assets to total assets (c)		0.42			0.61		(19	)		0.42			0.61		(19	)
Nonperforming loans to total loans (c)		0.58			0.82		(24	)		0.58			0.82		(24	)
Allowance for loan losses to total loans (c)		1.36			1.49		(13	)		1.36			1.49		(13	)
Allowance for loan losses to
nonperforming loans (c)		2.35	X		1.81	X	54			2.35	X		1.81	X	54
Notes:
(a) - Excludes goodwill and other intangible assets
(b) - Excludes amortization expense, net of tax, of intangible assets
(c) - Balance sheet amounts used in calculations are based on period end balances
bp - Change is measured in basis points
FTE - Fully taxable equivalent basis

Net Interest Income Analysis
For the Three Months Ended June 30, 2007 and 2006
(in thousands, except yields and rates)
(Unaudited)
	Average Balance				Interest Income/Expense				Yield/Rate
	2007		2006		2007		2006		2007			2006
Loans:
Commercial	$	91,852	$	94,281	$	1,819	$	1,796		7.92	%		7.62	%
Real estate		448,024		442,307		8,364		7,967		7.47			7.20
Consumer		10,434		14,118		247		345		9.47			9.77
Total loans		550,310		550,706		10,430		10,108		7.58			7.34
Securities:
Federal agencies		68,991		104,464		748		1,035		4.34			3.96
Mortgage-backed & CMO's		20,501		21,333		247		245		4.82			4.59
State and municipal		45,623		46,296		628		640		5.51			5.53
Other		7,991		11,300		116		167		5.81			5.91
Total securities		143,106		183,393		1,739		2,087		4.86			4.55
Deposits in other banks		12,869		15,610		168		183		5.22			4.69
Total interest earning assets		706,285		749,709		12,337		12,378		6.99			6.60
Nonearning assets		64,425		60,918
Total assets	$	770,710	$	810,627
Deposits:
Demand	$	111,064	$	111,817		416		400		1.50			1.43
Money market		52,279		50,240		356		292		2.72			2.32
Savings		67,716		82,119		230		258		1.36			1.26
Time		256,263		281,713		2,858		2,588		4.46			3.67
Total deposits		487,322		525,889		3,860		3,538		3.17			2.69
Repurchase agreements		46,032		41,594		449		335		3.90			3.22
Other borrowings		33,884		37,878		514		562		6.07			5.93
Total interest bearing liabilities		567,238		605,361		4,823		4,435		3.40			2.93
Noninterest bearing demand deposits		101,024		112,131
Other liabilities		5,265		3,406
Shareholders' equity		97,183		89,729
Total liabilities and shareholders' equity	$	770,710	$	810,627
Interest rate spread										3.59	%		3.67	%
Net interest margin										4.26	%		4.24	%
Net interest income (taxable equivalent basis)						7,514		7,943
Less: Taxable equivalent adjustment						231		232
Net interest income					$	7,283	$	7,711

Net Interest Income Analysis
For the Six Months Ended June 30, 2007 and 2006
(in thousands, except yields and rates)
(Unaudited)& #160;
	Average Balance				Interest Income/Expense				Yield/Rate
	2007		2006		2007		2006		2007			2006
Loans:
Commercial	$	90,415	$	82,496	$	3,512	$	3,034		7.77	%		7.36	%
Real estate		446,448		387,129		16,529		13,475		7.40			6.96
Consumer		10,390		12,193		489		574		9.41			9.42
Total loans		547,253		481,818		20,530		17,083		7.50			7.09
Securities:
Federal agencies		75,587		97,342		1,605		1,842		4.25			3.78
Mortgage-backed & CMO's		20,253		21,478		488		490		4.82			4.56
State and municipal		45,792		46,854		1,262		1,313		5.51			5.60
Other		8,372		12,122		245		313		5.85			5.16
Total securities		150,004		177,796		3,600		3,958		4.80			4.45
Deposits in other banks		13,064		18,439		339		423		5.19			4.59
Total interest earning assets		710,321		678,053		24,469		21,464		6.89			6.33
Nonearning assets		64,346		43,632
Total assets	$	774,667	$	721,685
Deposits:
Demand	$	110,592	$	104,474		840		703		1.52			1.35
Money market		52,210		45,852		705		513		2.70			2.24
Savings		68,318		80,198		465		445		1.36			1.11
Time		259,426		239,100		5,633		4,184		4.34			3.50
Total deposits		490,546		469,624		7,643		5,845		3.12			2.49
Repurchase agreements		46,142		40,772		875		644		3.79			3.16
Other borrowings		35,294		27,070		1,063		775		6.02			5.73
Total interest bearing liabilities		571,982		537,466		9,581		7,264		3.35			2.70
Noninterest bearing demand deposits		101,177		100,474
Other liabilities		5,074		2,551
Shareholders' equity		96,434		81,194
Total liabilities and shareholder's equity	$	774,667	$	721,685
Interest rate spread										3.54	%		3.63	%
Net interest margin										4.19	%		4.19	%
Net interest income (taxable equivalent basis)						14,888		14,200
Less: Taxable equivalent adjustment						465		470
Net interest income					$	14,423	$	13,730