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 24, 2008
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:
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))

Item 2.02 Results of Operations and Financial Condition

On October 24, 2008, American National Bankshares Inc. issued a news release announcing second quarter results for the period ended June 30, 2008.

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 24, 2008, entitled "American National Bankshares Inc. "

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 24, 2008                                                                                          /s/ Neal A. Petrovich                                    

         Senior Vice President and Chief Financial

EX-99.1

Date:	October 24,2008
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 REPORTS THIRD QUARTER EARNINGS

·   Net income of $2.22 million for the quarter

·   EPS of $.36 per share for the quarter, up 20% over prior quarter, down 25% vs. third quarter 2007

·   Return on average assets 1.13% 

·   Shareholders’ equity of $103 million

·   Assets increase to $801 million

·   Loans increase to $577 million

·   Allowance for loan losses increases to 1.40% of loans

·   Net interest margin increases from prior quarter to 3.90%

·   Sold remaining investment in Freddie Mac preferred stock

Danville, VA -- American National Bankshares Inc. (NASDAQ:  AMNB), parent company of American National Bank and Trust Company, today announced third   quarter net income of $2.22 million.  Earnings per share were $0.36 on both a basic and diluted basis.  This net income produced annualized returns on average assets and average equity of 1.13% and 8.72%, respectively.  The annualized return on average tangible equity for the quarter was 11.84%.  Net income for the first nine months of 2008 was $6.34 million, which resulted in annualized returns on average assets and average equity of 1.08% and 8.26%, respectively.  The annualized return on average tangible equity for the first nine months of 2008 was 11.25%.

Economic Conditions

National economic conditions, including those in the housing and financial markets, deteriorated during the third quarter.  As a result, the U.S. Government has taken numerous measures to provide liquidity and stability to the financial markets.  American National continues to perform well, even during this period of uncertainty in the economy.

Capital Remains High

American National maintains strong levels of capital, and its capital ratios are among the highest in the country.  At the end of the quarter, total equity was 12.8% of assets, and the ratio of tangible equity-to-assets was 9.8%.  “Strong capital levels and earnings are critical during this period of economic turmoil, and American National has achieved both,” stated Charles H. Majors, President and Chief Executive Officer.  “During the third quarter, American National continued its tradition of operating soundly and profitably.”

On October 14, 2008, the United States Treasury Department announced its voluntary Capital Purchase Program.  Given American National’s already strong capital position, the Company is evaluating the program to determine whether participation would be beneficial to the Company’s financial performance.

Allowance for Loan Losses Increases to 1.40% of Loans

American National increased its allowance for loan losses to $8.08 million, or 1.40% of loans, at the end of the third quarter.  “It is prudent to increase the allowance for loan losses, given the current conditions in the economy and the related impact on customers’ ability to repay their debt,” commented Majors.  Nonperforming assets increased $435,000 over the prior quarter-end, and represented 0.92% of total assets at September 30, 2008, compared to 0.88% at June 30, 2008, and 0.42% at September 30, 2007.  Loans 30-89 days delinquent remain well below industry averages, at 0.25% of loans as of September 30, 2008.  Loan loss provision expense was $280,000 during the quarter.

Sale of Remaining Investment in Freddie Mac Stock

During the quarter, the Company sold its remaining investment in Federal Home Loan Mortgage Corporation (“Freddie Mac”) preferred stock and recorded a $108,000 loss on the sale.  American National no longer owns any Fannie Mae or Freddie Mac stock.

Net Interest Income $6.86 Million

Net interest income during the third quarter was $6.86 million, up 1.9% from the second quarter, and down 6.7% from the third quarter of 2007.  Net interest income was adversely impacted by a series of rate reductions enacted by the Federal Reserve from September 2007 to April 2008.  The net interest margin was 3.90% during the recently completed quarter, up from 3.83% in the previous quarter, and down from 4.27% in the third quarter of 2007.  After the end of the quarter, the Federal Reserve further lowered the federal funds rate by one-half of one percent.  This rate reduction, coupled with the overall low level of interest rates, will place pressure on the Company’s net interest margin in the fourth quarter.

Noninterest Income $2.06 Million

Noninterest income totaled $2.06 million in the third quarter of 2008.  Noninterest income during the quarter included $87,000 of net losses on securities, including the aforementioned $108,000 loss on the Company’s remaining investment in Freddie Mac stock.

Noninterest Expense $5.49 Million

Noninterest expense totaled $5.49 million in the third quarter of 2008.  Increases in noninterest expense over the prior year have been modest, due to expense control practices.  Noninterest expense increased 2.0% over the same quarter of 2007, and decreased 2.8% from the second quarter of 2008.  Included in noninterest expense for the quarter was $101,000 to increase the reserve for unfunded lending commitments.  During 2007 and through the first nine months of 2008, the Company, like many other financial institutions, incurred no FDIC insurance premium expense, due to a credit that was used to offset the expense.  During the fourth quarter, American National expects to exhaust the credit and begin incurring FDIC insurance premium expense.  The amount of the expense is determined based on the level of deposits and other factors.  Based upon deposit levels as of September 30, 2008 and current premium rates, the Company estimates that quarterly FDIC insurance premium expense would be approximately $75,000.  Additionally, on October 7, 2008, the FDIC proposed to raise insurance premiums in 2009.  The FDIC is seeking public comment on the proposal.

About American National

American National Bankshares Inc. is a bank holding company with assets of $801 million.  Headquartered in Danville, Virginia, it 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.  The Bank also manages an additional $459 million of assets in its Trust and Investment Services Division.

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” telephone 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.”

Forward-Looking Statements

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 Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except share data)
Unaudited
	September 30
ASSETS	2008			2007
Cash and due from banks	$	25,136		$	20,016
Interest-bearing deposits in other banks		8,050			24
Securities available for sale, at fair value		134,114			136,270
Securities held to maturity		7,133			12,009
Total securities		141,247			148,279
Loans held for sale		2,269			375
Loans, net of unearned income		576,598			554,002
Less allowance for loan losses		(8,083	)		(7,334	)
Net Loans		568,515			546,668
Premises and equipment, net		16,825			13,197
Goodwill		22,468			22,468
Core deposit intangibles, net		2,169			2,546
Accrued interest receivable and other assets		13,966			13,981
Total assets	$	800,645		$	767,554
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Demand deposits -- noninterest-bearing	$	102,065		$	105,014
Demand deposits -- interest-bearing		107,228			105,004
Money market deposits		56,574			52,271
Savings deposits		59,563			63,565
Time deposits		263,627			260,300
Total deposits		589,057			586,154
Customer repurchase agreements		44,951			48,665
FHLB borrowings		39,745			8,975
Trust preferred capital notes		20,619			20,619
Accrued interest payable and other liabilities		3,559			3,807
Total liabilities		697,931			668,220
Shareholders' equity:
Common stock, $1 par, 10,000,000 shares authorized,
6,090,804 shares outstanding at September 30, 2008 and
6,121,325 shares outstanding at Septembeer 30, 2007		6,091			6,121
Capital in excess of par value		26,439			26,364
Retained earnings		70,962			68,188
Accumulated other comprehensive income (loss), net		(778	)		(1,339	)
Total shareholders' equity		102,714			99,334
Total liabilities and shareholders' equity	$	800,645		$	767,554

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
	2008			2007		2008			2007
Interest and Dividend Income:
Interest and fees on loans	$	8,916		$	10,506	$	27,347		$	30,993
Interest and dividends on securities:
Taxable		1,179			1,060		3,644			3,224
Tax-exempt		388			416		1,240			1,259
Dividends		41			75		191			246
Other interest income		75			236		225			575
Total interest and dividend income		10,599			12,293		32,647			36,297
Interest Expense:
Interest on deposits		2,845			4,004		9,543			11,647
Interest on customer repurchase agreements		313			478		1,103			1,353
Interest on other borrowings		242			122		660			498
Interest on trust preferred capital notes		343			343		1,030			1,030
Total interest expense		3,743			4,947		12,336			14,528
Net Interest Income		6,856			7,346		20,311			21,769
Provision for loan losses		280			-		1,020			303
Net Interest Income After Provision
for Loan Losses		6,576			7,346		19,291			21,466
Noninterest Income:
Trust fees		901			861		2,697			2,664
Service charges on deposit accounts		603			631		1,769			1,878
Other fees and commissions		193			193		622			591
Mortgage banking income		238			240		633			759
Brokerage fees		126			191		370			439
Securities gains (losses), net		(87	)		45		(195	)		134
Impairment of securities		-			-		(255	)		-
Other		88			115		397			454
Total noninterest income		2,062			2,276		6,038			6,919
Noninterest Expense:
Salaries		2,466			2,380		7,416			7,284
Employee benefits		688			779		2,212			2,164
Occupancy and equipment		898			881		2,792			2,560
Bank franchise tax		172			165		522			498
Core deposit intangible amortization		94			94		283			283
Other		1,167			1,080		3,352			3,208
Total noninterest expense		5,485			5,379		16,577			15,997
Income Before Income Taxes		3,153			4,243		8,752			12,388
Income Taxes		929			1,309		2,414			3,719
Net Income	$	2,224		$	2,934	$	6,338		$	8,669
Net Income Per Common Share:
Basic	$	0.36		$	0.48	$	1.04		$	1.41
Diluted	$	0.36		$	0.48	$	1.04		$	1.40
Average Common Shares Outstanding:
Basic		6,093,851			6,132,288		6,099,933			6,146,349
Diluted		6,100,089			6,151,750		6,109,947			6,171,243

Financial Highlights
American National Bankshares Inc. and Subsidiaries
Dollars in thousands, except share data
Unaudited
	3rd Qtr			2nd Qtr			3rd Qtr			YTD			YTD
	2008			2008			2007			2008			2007
EARNINGS
Interest income	$	10,599		$	10,788		$	12,293		$	32,647		$	36,297
Interest expense		3,743			4,058			4,947			12,336			14,528
Net interest income		6,856			6,730			7,346			20,311			21,769
Provision for loan losses		280			600			-			1,020			303
Noninterest income		2,062			1,841			2,276			6,038			6,919
Noninterest expense		5,485			5,643			5,379			16,577			15,997
Income taxes		929			519			1,309			2,414			3,719
Net income		2,224			1,809			2,934			6,338			8,669
PER COMMON SHARE
Earnings per share - basic	$	0.36		$	0.30		$	0.48		$	1.04		$	1.41
Earnings per share - diluted		0.36			0.30			0.48			1.04			1.40
Cash dividends declared		0.23			0.23			0.23			0.69			0.68
Book value per share		16.86			16.71			16.23			16.86			16.23
Book value per share - tangible (a)		12.82			12.65			12.14			12.82			12.14
Closing market price		18.00			18.25			22.22			18.00			22.22
FINANCIAL RATIOS
Return on average assets		1.13	%		0.92	%		1.52	%		1.08	%		1.49	%
Return on average equity		8.72			7.06			11.98			8.26			11.92
Return on average tangible equity (b)		11.84			9.69			16.46			11.25			16.46
Average equity to average assets		12.97			12.99			12.68			13.02			12.53
Net interest margin, taxable equivalent		3.90			3.83			4.27			3.87			4.22
Efficiency ratio		59.51			61.40			54.89			60.33			54.73
Effective tax rate		29.46			22.29			30.85			27.58			30.02
PERIOD-END BALANCES
Securities	$	141,247		$	146,460		$	148,279		$	141,247		$	148,279
Loans held for sale		2,269			2,200			375			2,269			375
Loans, net of unearned income		576,598			568,830			554,002			576,598			554,002
Goodwill and other intangibles		24,637			24,732			25,014			24,637			25,014
Assets		800,645			790,695			767,554			800,645			767,554
Assets - tangible (a)		776,008			765,963			742,540			776,008			742,540
Deposits		589,057			569,244			586,154			589,057			586,154
Customer repurchase agreements		44,951			57,973			48,665			44,951			48,665
Borrowings		60,364			58,107			29,594			60,364			29,594
Shareholders' equity		102,714			101,896			99,334			102,714			99,334
Shareholders' equity - tangible (a)		78,077			77,164			74,320			78,077			74,320
AVERAGE BALANCES
Securities	$	141,697		$	150,247		$	141,296		$	147,863		$	147,069
Loans held for sale		1,986			2,206			1,940			1,936			2,055
Loans, net of unearned income		572,196			564,769			547,465			563,667			545,923
Interest-earning assets		724,368			725,789			708,794			722,619			709,807
Goodwill and other intangibles		24,695			24,785			25,052			24,781			25,146
Assets		786,804			789,412			772,060			785,372			773,784
Assets - tangible (a)		762,109			764,627			747,008			760,591			748,638
Interest-bearing deposits		480,133			476,207			487,427			480,806			489,496
Deposits		577,263			576,167			590,904			578,922			591,445
Customer repurchase agreements		51,038			53,535			48,427			53,069			46,912
Borrowings		52,063			52,012			29,932			46,003			33,487
Shareholders' equity		102,052			102,511			97,927			102,290			96,961
Shareholders' equity - tangible (a)		77,357			77,726			72,875			77,509			71,815
CAPITAL
Average shares outstanding - basic		6,093,851			6,098,184			6,132,288			6,099,933			6,146,349
Average shares outstanding - diluted		6,100,089			6,108,536			6,151,750			6,109,947			6,171,243
Shares repurchased		7,850			2,400			28,900			39,050			53,200
Average price of shares repurchased	$	17.42		$	21.43		$	21.19		$	20.16		$	21.97

Financial Highlights
American National Bankshares Inc. and Subsidiaries
(Dollars in thousands, except share data)
Unauditied
	3rd Qtr			2nd Qtr			3rd Qtr			YTD			YTD
	2008			2008			2007			2008			2007
ALLOWANCE FOR LOAN LOSSES
Beginning balance	$	7,932		$	7,425		$	7,493		$	7,395		$	7,264
Provision for loan losses		280			600			-			1,020			303
Charge-offs		(179	)		(203	)		(227	)		(552	)		(431	)
Recoveries		50			110			68			220			198
Ending balance	$	8,083		$	7,932		$	7,334		$	8,083		$	7,334
LOANS
Construction and land development	$	65,826		$	66,740		$	69,476		$	65,826		$	69,476
Commercial real estate		208,046			201,102			205,048			208,046			205,048
Residential real estate		139,683			140,024			133,476			139,683			133,476
Home equity		55,665			52,773			46,671			55,665			46,671
Commercial and industrial		99,139			99,603			88,638			99,139			88,638
Consumer		8,239			8,588			10,693			8,239			10,693
Total	$	576,598		$	568,830		$	554,002		$	576,598		$	554,002
NONPERFORMING ASSETS AT PERIOD-END
Nonperforming loans:
90 days past due	$	-		$	172		$	157		$	-		$	157
Nonaccrual		6,674			6,216			2,454			6,674			2,454
Foreclosed real estate		707			558			632			707			632
Nonperforming assets	$	7,381		$	6,946		$	3,243		$	7,381		$	3,243
ASSET QUALITY RATIOS
Annualized net chargeoffs to average loans		0.09	%		0.07	%		0.12	%		0.08	%		0.06	%
Nonperforming assets to total assets		0.92			0.88			0.42			0.92			0.42
Nonperforming loans to total loans		1.16			1.12			0.47			1.16			0.47
Allowance for loan losses to total loans		1.40			1.39			1.32			1.40			1.32
Allowance for loan losses to nonperfoming loans		121.11			124.17			280.89			121.11			280.89
OTHER DATA
Fiduciary assets at period-end (c)	$	368,341		$	377,008		$	405,735		$	368,341		$	405,735
Retail brokerage assets at period-end (c)	$	91,026		$	94,472		$	98,820		$	91,026		$	98,820
Number full time-time equivalent employees		258			261			260			258			260
Number of full service offices		20			20			19			20			19
Number of loan production offices		1			1			1			1			1
Number of ATM's		23			23			23			23			23
Notes:
(a) - Excludes goodwill and other intangible assets
(b) - Excludes amortization expense, net of tax, of intangible assets
(c) - Market value

Net Interest Income Analysis
For the Three Months Ended September 30, 2008 and 2007
(in thousands, except rates)
					Interest
	Average Balance				Income/Expense				Yield/Rate
	2008		2007		2008		2007		2008			2007
Loans:
Commercial	$	94,575	$	89,531	$	1,423	$	1,774		6.02	%		7.93	%
Real estate		471,162		449,172		7,323		8,496		6.22			7.57
Consumer		8,445		10,702		192		253		9.09			9.46
Total loans		574,182		549,405		8,938		10,523		6.23			7.66
Securities:
Federal agencies		43,543		64,738		534		732		4.91			4.52
Mortgage-backed		48,000		24,489		607		304		5.06			4.97
State and municipal		44,104		45,414		602		624		5.46			5.50
Other		6,050		6,555		54		97		3.57			5.83
Total securities		141,697		141,296		1,797		1,757		5.07			4.97
Deposits in other banks		8,489		18,093		75		236		3.53			5.22
Total interest-earning assets		724,368		708,794		10,810		12,516		5.97			7.06
Non-earning assets		62,436		63,266
Total assets	$	786,804	$	772,060
Deposits:
Demand	$	110,230	$	107,259		215		405		0.78			1.51
Money market		54,642		54,203		246		379		1.80			2.80
Savings		60,499		65,162		76		220		0.50			1.35
Time		254,762		260,803		2,308		3,000		3.62			4.60
Total deposits		480,133		487,427		2,845		4,004		2.37			3.29
Repurchase agreements		51,038		48,427		313		478		2.45			3.95
Other borrowings		52,063		29,932		585		465		4.49			6.21
Total interest-bearing
liabilities		583,234		565,786		3,743		4,947		2.57			3.50
Noninterest bearing
demand deposits		97,130		103,477
Other liabilities		4,388		4,870
Shareholders' equity		102,052		97,927
Total liabilities and
shareholders' equity	$	786,804	$	772,060
Interest rate spread										3.40	%		3.56	%
Net interest margin										3.90	%		4.27	%
Net interest income (taxable equivalent basis)						7,067		7,569
Less: Taxable equivalent adjustment						211		223
Net interest income					$	6,856	$	7,346

Net Interest Income Analysis
For the Nine Months Ended September 30, 2008 and 2007
(in thousands, except rates)
					Interest
	Average Balance				Income/Expense				Yield/Rate
	2008		2007		2008		2007		2008			2007
Loans:
Commercial	$	90,301	$	90,117	$	4,219	$	5,286		6.23	%		7.82	%
Real estate		466,346		447,366		22,580		25,025		6.46			7.46
Consumer		8,956		10,495		606		742		9.02			9.43
Total loans		565,603		547,978		27,405		31,053		6.46			7.56
Securities:
Federal agencies		46,428		71,931		1,682		2,337		4.83			4.33
Mortgage-backed		48,588		21,680		1,852		792		5.08			4.87
State and municipal		46,376		45,664		1,910		1,886		5.49			5.51
Other		6,471		7,794		243		342		5.01			5.85
Total securities		147,863		147,069		5,687		5,357		5.13			4.86
Deposits in other banks		9,153		14,760		225		575		3.28			5.19
Total interest-earning assets		722,619		709,807		33,317		36,985		6.15			6.95
Non-earning assets		62,753		63,977
Total assets	$	785,372	$	773,784
Deposits:
Demand	$	108,463	$	109,469		600		1,245		0.74			1.52
Money market		52,365		52,881		779		1,084		1.98			2.73
Savings		62,107		67,255		276		685		0.59			1.36
Time		257,871		259,891		7,888		8,633		4.08			4.43
Total deposits		480,806		489,496		9,543		11,647		2.65			3.17
Repurchase agreements		53,069		46,912		1,103		1,353		2.77			3.85
Other borrowings		46,003		33,487		1,690		1,528		4.90			6.08
Total interest-bearing
liabilities		579,878		569,895		12,336		14,528		2.84			3.40
Noninterest bearing
demand deposits		98,116		101,949
Other liabilities		5,088		4,979
Shareholders' equity		102,290		96,961
Total liabilities and
shareholders' equity	$	785,372	$	773,784
Interest rate spread										3.31	%		3.55	%
Net interest margin										3.87	%		4.22	%
Net interest income (taxable equivalent basis)						20,981		22,457
Less: Taxable equivalent adjustment						670		688
Net interest income					$	20,311	$	21,769