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)			October 26, 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 October 26, 2007, American National Bankshares Inc. issued a news release announcing year-to-date and third quarter earnings for the period ended September 30, 2007.  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 October 26, 2007, entitled "American National Bankshares Inc. Announces Year-To-Date and Third Quarter Earnings" 

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: October 26, 2007        /s/ Neal A. Petrovich    

                  Senior Vice President and Chief Financial Officer

EX-99.2

American National Bankshares Inc. and Subsidiary
Consolidated Balance Sheets
(Dollars in thousands, except share data)
Unaudited
	September 30
ASSETS	2007			2006
Cash and due from banks	$	20,016		$	24,390
Interest bearing deposits in other banks		24			467
Securities available for sale, at fair value		136,270			155,468
Securities held to maturity		12,009			14,201
Total securities		148,279			169,669
Loans held for sale		375			1,158
Loans, net of unearned income		554,002			549,229
Less allowance for loan losses		(7,334	)		(8,170	)
Net Loans		546,668			541,059
Bank premises and equipment, net		13,197			12,310
Goodwill		22,468			22,489
Core deposit intangibles, net		2,546			2,937
Accrued interest receivable and other assets		13,981			18,155
Total assets	$	767,554		$	792,634
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Demand deposits -- noninterest bearing	$	105,014		$	104,403
Demand deposits -- interest bearing		105,004			103,923
Money market deposits		52,271			51,401
Savings deposits		63,565			75,473
Time deposits		260,300			267,990
Total deposits		586,154			603,190
Repurchase agreements		48,665			37,152
FHLB borrowings		8,975			32,500
Trust preferred capital notes		20,619			20,619
Accrued interest payable and other liabilities		3,807			4,285
Total liabilities		668,220			697,746
Shareholders' equity:
Common stock, $1 par, 10,000,000 shares authorized,
6,121,325 shares outstanding at September 30, 2007 and
6,166,050 shares outstanding at September 30, 2006		6,121			6,166
Capital in excess of par value		26,364			26,426
Retained earnings		68,188			63,112
Accumulated other comprehensive income (loss), net		(1,339	)		(816	)
Total shareholders' equity		99,334			94,888
Total liabilities and shareholders' equity	$	767,554		$	792,634

American National Bankshares Inc. and Subsidiary
Consolidated Statements of Income
(Dollars in thousands, except share and per share data)
Unaudited
	Three Months Ended				Nine Months Ended
	September 30				September 30
	2007		2006		2007		2006
Interest Income:
Interest and fees on loans	$	10,506	$	10,210	$	30,993	$	27,255
Interest and dividends on securities:
Taxable		1,060		1,314		3,224		3,824
Tax-exempt		416		432		1,259		1,313
Dividends		75		84		246		219
Other interest income		236		111		575		534
Total interest income		12,293		12,151		36,297		33,145
Interest Expense:
Interest on deposits		4,004		3,699		11,647		9,544
Interest on repurchase agreements		478		376		1,353		1,020
Interest on trust preferred capital notes		343		344		1,030		664
Interest on other borrowings		122		226		498		681
Total interest expense		4,947		4,645		14,528		11,909
Net Interest Income		7,346		7,506		21,769		21,236
Provision for loan losses		-		125		303		605
Net Interest Income After Provision for Loan Losses		7,346		7,381		21,466		20,631
Noninterest Income:
Trust fees		861		843		2,664		2,483
Service charges on deposit accounts		631		696		1,878		2,004
Other fees and commissions		193		194		591		561
Mortgage banking income		240		172		759		508
Brokerage fees		191		93		439		327
Securities gains, net		45		9		134		47
Other		115		131		454		376
Total noninterest income		2,276		2,138		6,919		6,306
Noninterest Expense:
Salaries		2,380		2,355		7,284		6,866
Employee benefits		779		649		2,164		1,971
Occupancy and equipment		881		775		2,560		2,165
Bank franchise tax		165		171		498		481
Core deposit intangible amortization		94		134		283		307
Other		1,080		1,033		3,208		3,066
Total noninterest expense		5,379		5,117		15,997		14,856
Income Before Income Tax Provision		4,243		4,402		12,388		12,081
Income Tax Provision		1,309		1,301		3,719		3,572
Net Income	$	2,934	$	3,101	$	8,669	$	8,509
Net Income Per Common Share:
Basic	$	0.48	$	0.50	$	1.41	$	1.44
Diluted	$	0.48	$	0.50	$	1.40	$	1.43
Average Common Shares Outstanding:
Basic		6,132,288		6,165,268		6,146,349		5,926,599
Diluted		6,151,750		6,195,972		6,171,243		5,960,556

Financial Highlights 60;
American National Bankshares Inc. and Subsidiary
(Dollars in thousands, except share and per share data)
Unaudited& #160;
	As of and for the								As of and for the
	Three Months Ended September 30								Nine Months Ended September 30
	2007			2006			Change		2007			2006				Change
EARNINGS
Interest income	$	12,293		$	12,151		1.2	%	$	36,297		$	33,145			9.5	%
Interest expense		4,947			4,645		6.5			14,528			11,909			22.0
Net interest income		7,346			7,506		(2.1	)		21,769			21,236			2.5
Provision for loan losses		-			125		(100.0	)		303			605			(49.9	)
Noninterest income		2,276			2,138		6.5			6,919			6,306			9.7
Noninterest expense		5,379			5,117		5.1			15,997			14,856			7.7
Income taxes		1,309			1,301		0.6			3,719			3,572			4.1
Net income		2,934			3,101		(5.4	)		8,669			8,509			1.9
PER COMMON SHARE
Earnings per share - basic	$	0.48		$	0.50		(4.0	)%	$	1.41		$	1.44			(2.1	)%
Earnings per share - diluted		0.48			0.50		(4.0	)		1.40			1.43			(2.1	)
Cash dividends declared		0.23			0.22		4.5			0.68			0.65			4.6
Book value per share		16.23			15.39		5.5			16.23			15.39			5.5
Book value per share - tangible (a)		12.14			11.27		7.7			12.14			11.27			7.7
Closing market price		22.22			23.68		(6.2	)		22.22			23.68			(6.2	)
FINANCIAL RATIOS
Return on average assets		1.52	%		1.56	%	(4	)bp		1.49	%		1.50	%		(1	)bp
Return on average equity		11.98			13.24		(126	)		11.92			12.67			(75	)
Return on average tangible equity (b)		16.46			18.75		(229	)		16.46			16.12			34
Average equity to average assets		12.68			11.76		92			12.53			11.85			68
Net interest margin (FTE)		4.27			4.26		1			4.22			4.17			5
Efficiency ratio		56.42			53.35		307			56.27			53.74			253
PERIOD END BALANCES
Securities	$	148,279		$	169,669		(12.6	)	$	148,279		$	169,669			(12.6	)%
Loans held for sale		375			1,158		(67.6	)		375			1,158			(67.6	)
Loans, net of unearned income		554,002			549,229		0.9			554,002			549,229			0.9
Goodwill and other intangibles		25,014			25,426		(1.6	)		25,014			25,426			(1.6	)
Assets		767,554			792,634		(3.2	)		767,554			792,634			(3.2	)
Assets - tangible (a)		742,540			767,208		(3.2	)		742,540			767,208			(3.2	)
Deposits		586,154			603,190		(2.8	)		586,154			603,190			(2.8	)
Repurchase agreements		48,665			37,152		31.0			48,665			37,152			31.0
FHLB borrowings		8,975			32,500		(72.4	)		8,975			32,500			(72.4	)
Trust preferred capital notes		20,619			20,619		N/A			20,619			20,619			N/A
Shareholders' equity		99,334			94,888		4.7			99,334			94,888			4.7
Shareholders' equity - tangible (a)		74,320			69,462		7.0			74,320			69,462			7.0
AVERAGE BALANCES
Securities	$	141,296		$	175,050		(19.3	)%	$	147,069		$	177,927			(17.3	)%
Total loans		549,405			545,991		0.6			547,978			509,866			7.5
Interest earning assets		708,794			729,551		(2.8	)		709,807			702,881			1.0
Goodwill and other intangibles		25,052			25,505		(1.8	)		25,146			17,382			44.7
Assets		772,060			796,446		(3.1	)		773,784			755,301			2.4
Assets - tangible (a)		747,008			770,941		(3.1	)		748,638			737,919			1.5
Interest bearing deposits		487,427			509,483		(4.3	)		489,496			486,706			0.6
Deposits		590,904			616,547		(4.2	)		591,445			588,883			0.4
Repurchase agreements		48,427			42,670		13.5			46,912			41,683			12.5
Other borrowings		29,932			38,114		(21.5	)		33,487			31,476			6.4
Shareholders' equity		97,927			93,647		4.6			96,961			89,531			8.3
Shareholders' equity - tangible (a)		72,875			68,142		6.9			71,815			72,149			(0.5	)
CAPITAL
Average shares outstanding - basic		6,132,288			6,165,268		(0.5	)%		6,146,349			5,926,599			3.7	%
Average shares outstanding - diluted		6,151,750			6,195,972		(0.7	)		6,171,243			5,960,556			3.5
Shares repurchased		28,900			3,000		863.3			53,200			34,200			55.6
Average price of shares repurchased	$	21.19		$	23.35		(9.3	)	$	21.97		$	23.29			(5.7	)
ALLOWANCE FOR LOAN LOSSES
Beginning balance	$	7,493		$	8,208		(8.7	)%	$	7,264		$	6,109			18.9	%
Allowance acquired in merger		-			-		-			-			1,598		N/A
Provision for loan losses		-			125		(100.0	)		303			605			(49.9	)
Charge-offs		(227	)		(239	)	(5.0	)		(431			(465	)		(7.3	)
Recoveries		68			76		(10.5	)		198			323			(38.7	)
Ending balance	$	7,334		$	8,170		(10.2	)	$	7,334		$	8,170			(10.2	)
NONPERFORMING ASSETS
Nonperforming loans:
90 days past due	$	157		$	1,276		(87.7	)	$	157		$	1,276			(87.7	)%
Nonaccrual		2,454			4,345		(43.5	)		2,454			4,345			(43.5	)
Foreclosed real estate		632			312		102.6			632			312			102.6
Nonperforming assets	$	3,243		$	5,933		(45.3	)	$	3,243		$	5,933			(45.3	)
ASSET QUALITY RATIOS
Net chargeoffs (recoveries) to average loans		0.12	%		0.12	%	0	bp		0.06	%		0.04	%		2	bp
Nonperforming assets to total assets (c)		0.42			0.75		(33	)		0.42			0.75			(33	)
Nonperforming loans to total loans (c)		0.47			1.02		(55	)		0.47			1.02			(55	)
Allowance for loan losses to total loans (c)		1.32			1.49		(17	)		1.32			1.49			(17	)
Allowance for loan losses to nonperforming loans (c)		2.81	X		1.45	X	136			2.81	X		1.45	X		136
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 September 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	$	89,531	$	86,944	$	1,774	$	1,715	7.93	%	7.89	%
Real estate		449,172		445,943		8,496		8,221	7.57		7.37
Consumer		10,702		13,104		253		297	9.46		9.07
Total loans		549,405		545,991		10,523		10,233	7.66		7.50
Securities:
Federal agencies		64,738		96,205		732		990	4.52		4.12
Mortgage-backed		24,489		21,426		304		252	4.97		4.70
State and municipal		45,414		46,749		624		667	5.50		5.71
Other		6,655		10,670		97		160	5.83		6.00
Total securities		141,296		175,050		1,757		2,069	4.97		4.73
Deposits in other banks		18,093		8,510		236		112	5.22		5.26
Total interest earning assets		708,794		729,551		12,516		12,414	7.06		6.81
Nonearning assets		63,266		66,895
Total assets	$	772,060	$	796,446
Deposits:
Demand	$	107,259	$	109,868		405		445	1.51		1.62
Money market		54,203		49,211		379		321	2.80		2.61
Savings		65,162		77,597		220		267	1.35		1.38
Time		260,803		272,807		3,000		2,666	4.60		3.91
Total deposits		487,427		509,483		4,004		3,699	3.29		2.90
Repurchase agreements		48,427		42,670		478		376	3.95		3.52
Other borrowings		29,932		38,114		465		570	6.21		5.98
Total interest bearing liabilities		565,786		590,267		4,947		4,645	3.50		3.15
Noninterest bearing demand deposits		103,477		107,064
Other liabilities		4,870		5,468
Shareholders' equity		97,927		93,647
Total liabilities and shareholders' equity	$	772,060	$	796,446
Interest rate spread									3.56	%	3.66	%
Net interest margin									4.27	%	4.26	%
Net interest income (taxable equivalent basis)						7,569		7,769
Less: Taxable equivalent adjustment						223		263
Net interest income					$	7,346	$	7,506

Net Interest Income Analysis
For the Nine Months Ended September 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	$	90,117	$	86,946	$	5,286	$	4,749	7.82	%	7.28	%
Real estate		447,366		410,231		25,025		21,696	7.46		7.05
Consumer		10,495		12,689		742		871	9.43		9.15
Total loans		547,978		509,866		31,053		27,316	7.56		7.14
Securities:
Federal agencies		71,931		97,630		2,337		2,832	4.33		3.87
Mortgage-backed		21,680		21,614		792		742	4.87		4.58
State and municipal		45,664		47,160		1,886		1,980	5.51		5.60
Other		7,794		11,523		342		473	5.85		5.47
Total securities		147,069		177,927		5,357		6,027	4.86		4.52
Deposits in other banks		14,760		15,088		575		535	5.19		4.73
Total interest earning assets		709,807		702,881		36,985		33,878	6.95		6.43
Nonearning assets		63,977		52,420
Total assets	$	773,784	$	755,301
Deposits:
Demand	$	109,469	$	107,051		1,245		1,148	1.52		1.43
Money market		52,881		47,361		1,084		834	2.73		2.35
Savings		67,255		79,874		685		712	1.36		1.19
Time		259,891		252,420		8,633		6,850	4.43		3.62
Total deposits		489,496		486,706		11,647		9,544	3.17		2.61
Repurchase agreements		46,912		41,683		1,353		1,020	3.85		3.26
Other borrowings		33,487		31,476		1,528		1,345	6.08		5.70
Total interest bearing liabilities		569,895		559,865		14,528		11,909	3.40		2.84
Noninterest bearing demand deposits		101,949		102,177
Other liabilities		4,979		3,728
Shareholders' equity		96,961		89,531
Total liabilities and shareholders' equity	$	773,784	$	755,301
Interest rate spread									3.55	%	3.59	%
Net interest margin									4.22	%	4.17	%
Net interest income (taxable equivalent basis)						22,457		21,969
Less: Taxable equivalent adjustment						688		733
Net interest income					$	21,769	$	21,236

EX-99.1

Date:	October 26, 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 YEAR-TO-DATE AND THIRD QUARTER EARNINGS

Danville, VA -- American National Bankshares Inc. (NASDAQ:  AMNB), parent company of American National Bank and Trust Company, today announced net income of $8.67 million for the first nine months of the year, up 1.9% over the first nine months of 2006.  Year-to-date earnings per share declined 2.1% due primarily to additional shares issued in connection with the 2006 acquisition of Community First Financial Corporation.

Third quarter 2007 net income was $2.93 million, representing a 5.4% decrease over the comparable quarter of 2006.  Basic and diluted earnings per share were $0.48, a decrease of 4.0% over the third quarter of 2006.

Return on average assets, a widely-used indicator of bank profitability, was 1.49% for the first nine months of 2007, and 1.52% for the third quarter, both well above industry averages.  Return on average equity was 11.92% for the first nine months of the year, and 11.98% for the quarter.  “American National continues to deliver solid financial performance despite a difficult economic environment,” stated Charles H. Majors, President and Chief Executive Officer.  “During this period of market turbulence, our profitability and strong capital position allows us to take advantage of business opportunities that arise, such as our recent branch expansion.”

Loan quality measurements and trends remained favorable.  Nonperforming loans represented 0.47% of total loans at September 30, 2007, down from 0.58% the previous quarter and 1.02% a year ago.  “Our loan portfolio continues to perform well,” stated Majors.  “While many other banks are experiencing a deterioration in loan quality, we have seen a continued improvement in ours, leading to low charge-offs, declining levels  of problem loans, and lower loan loss provisions compared to prior year amounts.”

Net Interest Income

Net interest income after provision for loan losses was $21.47 million for the first nine months of 2007, up 4.0% over the first nine months of 2006.  For the third quarter, net interest income after provision for loan losses was $7.35 million, down slightly from the year earlier quarter.  “Strong competition for deposits and loans, together with a less-than-favorable interest rate and economic environment, continues to impact net interest income growth rates in the banking industry,” said Majors.  “On September 18, 2007, the Federal Open Market Committee reduced short-term interest rates by one-half percent in response to turmoil in the financial markets caused largely by problems in the subprime mortgage market and significant softening in the housing sector.  Although we are not a participant in subprime lending, this interest rate decrease will lower the income we earn on floating rate loans.  While we can lower funding costs to a certain extent, we expect this action by the Federal Reserve will put pressure on bank interest margins, including ours.  Growth in loans, deposits, and noninterest income will continue to be important in offsetting the effect of the margin pressure.”

Noninterest Income and Noninterest Expense

Noninterest income for the first nine months of 2007 was $6.92 million, up 9.7% over the first nine months of 2006.  Third quarter noninterest income was up 6.5% over the comparable 2006 period.  The increases were due largely to growth in mortgage banking, trust, and brokerage revenue.

Noninterest expense for the third quarter was up 5.1% over the same quarter of 2006, while year-to-date noninterest expense increased 7.7%.  The year-to-date increase reflects the additional expense associated with the acquisition of Community First.

Branch Expansion

The Company has obtained regulatory approval for its two new branches at Smith Mountain Lake and Bedford, Virginia.  The Smith Mountain Lake staff is operating in a  temporary location.  Construction of the permanent location will commence on a nearby site.  Loans generated through this office are approximately $7 million, while deposit-taking activities have just begun.

In July 2007, the Company announced a planned expansion into Bedford, Virginia, with the leasing of branch office space and the hiring of an experienced banker.    Regulatory branch approval was recently received.  The Company expects the office renovations to be completed and the office opened early in the first quarter of 2008.

About American National

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

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.