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)            January 21, 2010
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 January 21, 2010, American National Bankshares Inc. reports fourth quarter and full-year 2009 earnings.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits: 

99.1       January 21, 2010 News Release

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: January 21, 2010                                                                                              /s/ William W. Traynham                                         

Senior Vice President and Chief Financial Officer

EX-99.1

Date:	January 21, 2010
Contact:	William W. Traynham, Chief Financial Officer
	434-773-2242
	traynhamw@amnb.com
Traded:	NASDAQ Global Select Market	Symbol:	AMNB

AMERICAN NATIONAL BANKSHARES INC. REPORTS FOURTH QUARTER 2009 EARNINGS

·   Q4 net income of $2,169,000 and diluted EPS of $0.35 per share

·   Q4 net interest margin 3.88%

·   Average shareholders’ equity of $105.3 million represents 12.93% of assets

Danville, VA -- American National Bankshares Inc. (NASDAQ:  AMNB), parent company of American National Bank and Trust Company, today announced  fourth quarter 2009 net income of $2,169,000 compared to $1,683,000 for the same quarter in 2008, a 28.9% increase.  Basic earnings per share were $0.36 for the 2009 quarter compared to $0.28 for the 2008 quarter.  Diluted earnings per share were $0.35 for the 2009 quarter compared to $0.28 for the 2008 quarter. This net income produced returns on average assets of 1.07% and on average equity of 8.24%.  For the quarter, return on tangible equity was 11.03%.

Net income for 2009 was $6,810,000 compared to $8,021,000 for 2008, a 15.1% decline. Earnings per share, basic and diluted, were $1.12 for 2009 compared to $1.32 basic and $1.31 diluted for 2008. Earnings for 2009 were adversely impacted by a first quarter $1.2 million pre-tax charge writing down other real estate owned and increased FDIC premiums and a FDIC special assessment.

Financial Performance and Overview

      Charles H. Majors, President and Chief Executive Officer, stated, “We are very pleased with our fourth quarter earnings. Our income was almost $2.2 million, a 29% improvement over the fourth quarter 2008. This increase was driven by improved net interest income, a diminished need for loan loss provision, strong secondary market mortgage fee income and ongoing cost containment.

           “For the year just ended, our net income was $6.8 million. We were disappointed that the earnings were down 15% from 2008, but in the context of the year’s events we believe that the Bank had a good year.

“During 2009 we experienced continued historically low interest rates and an ongoing massive deleveraging in the commercial and consumer sectors of the economy. The result was a 7.6% decline in the size of our loan portfolio and virtually no dollar increase in our net interest income.

“Trust income was down mostly as a result of wide swings in the stock market and, therefore, the market value of assets under management.

“Service charge income declined as a result of decreasing fee income related to overdrafts.

“Secondary market mortgage income boomed during the year, fueled by low interest rates and a newly enacted home buyers’ tax credit.

“One of the largest factors impacting income was a $1.2 million write down related to foreclosed real estate.

“Our noninterest expenses for 2009 increased $1.2 million or 5.4%, over 2008. However, the FDIC deposit insurance premium increase and special assessment accounted for $1 million of that increase.

Majors concluded, “We are just beginning to see some possible signs of an uptick in demand for loans. The economic recovery may well be painfully slow, but our Bank is ready, willing and able to help our market areas move as quickly as possible to more normal levels of economic activity.”

Capital

American National’s capital ratios are among the highest in its peer group.  For the fourth quarter of 2009, average shareholders’ equity was 12.93% of average assets.

Credit Quality Measurements

Nonperforming assets ($3.6 million of non-accrual loans and $3.4 million of foreclosed real estate) were well below industry averages and represented 0.87% of total assets at December 31, 2009, compared to 0.91% at December 31, 2008.  During the fourth quarter, non-accrual loans increased $536,000 to $3.6 million. During the same period foreclosed real estate decreased $1.1 million to $3.4 million.

The allowance for loans losses was $8.2 million or 1.55% of loans at December 31, 2009, compared to 1.37% at December 31, 2008. Net charge offs were 0.24% for 2009 compared to 0.21% for 2008.

Net Interest Income

Net interest income, on a taxable equivalent basis, increased to $7,208,000 in the fourth quarter of 2009 from $6,933,000 in fourth quarter of 2008, an increase of 4.0%.  Net interest income has been adversely impacted by historically low market interest rates and shifts between categories of earning assets. The Bank has compensated for that impact by reducing the cost of its interest bearing liabilities. The Company’s net interest margin improved two basis point (0.03%) in the fourth quarter 2009 compared to the same quarter in 2008. However, for the year, the margin declined six basis points (0.06%).

Noninterest Income

Noninterest income totaled $1,937,000 in the fourth quarter of 2009, compared with $1,875,000 in the fourth quarter of 2008, a 3.3% increase.  Noninterest income was negatively impacted by $253,000 in losses on disposition of $1.1 million in other real estate owned during the quarter.  However significant increases in secondary market mortgage income and smaller increases in other categories offset that negative impact.

Noninterest Expense

Noninterest expense totaled $5,524,000 in the fourth quarter of 2009, compared to $5,547,000 in the fourth quarter of 2008, a 0.4% decrease.  The major factor impacting noninterest expense was deposit insurance costs. During the fourth quarter the Bank incurred costs of $202,000 compared to $92,000 for the prior year quarter, a 119% increase. For the year, FDIC costs increased $1,006,000 or 558%  over the prior year. These increases were due primarily to industry-wide conditions which resulted in increased FDIC costs for all member Banks.

About American National

American National Bankshares Inc. is a Bank holding company with assets of $809 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 nineteen Banking offices.  The Bank also manages an additional $413 million of assets in its Trust and Investment Services Division.  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 Company 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 Company’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 and per share data)
Unaudited
	December 31
ASSETS	2009			2008
Cash and due from banks	$	13,250		$	15,909
Interest-bearing deposits in other banks		10,693			8,189
Securities available for sale, at fair value		193,157			133,695
Securities held to maturity		6,529			7,121
Total securities		199,686			140,816
Loans held for sale		2,490			1,764
Loans		527,991			571,110
Less allowance for loan losses		(8,166	)		(7,824	)
Net Loans		519,825			563,286
Premises and equipment, net		19,195			17,129
Other real estate owned		3,414			4,311
Goodwill		22,468			22,468
Core deposit intangibles, net		1,698			2,075
Accrued interest receivable and other assets		16,254			13,237
Total assets	$	808,973		$	789,184
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Demand deposits -- noninterest-bearing	$	101,735		$	95,703
Demand deposits -- interest-bearing		97,025			116,132
Money market deposits		75,554			56,615
Savings deposits		61,873			59,624
Time deposits		268,086			261,064
Total deposits		604,273			589,138
Short-term borrowings:
Customer repurchase agreements		65,929			51,741
Other short-term borrowings		-			7,850
Long-term borrowings		8,638			13,787
Trust preferred capital notes		20,619			20,619
Accrued interest payable and other liabilities		3,125			3,749
Total liabilities		702,584			686,884
Shareholders' equity:
Common stock, $1 par, 10,000,000 shares authorized,
6,110,335 shares outstanding at December 31, 2009 and
6,085,628 shares outstanding at December 31, 2008		6,110			6,086
Capital in excess of par value		26,962			26,491
Retained earnings		72,208			71,090
Accumulated other comprehensive income (loss), net		1,109			(1,367	)
Total shareholders' equity		106,389			102,300
Total liabilities and shareholders' equity	$	808,973		$	789,184

American National Bankshares Inc. and Subsidiaries
Consolidated Statements of Income
(Dollars in thousands, except share and per share data)
Unaudited
	Three Months Ended						Twelve Months Ended
	December 31						December 31
	2009			2008			2009			2008
Interest and Dividend Income:
Interest and fees on loans	$	7,445		$	8,594		$	31,062		$	35,941
Interest and dividends on securities:
Taxable		1,259			1,151			4,853			4,795
Tax-exempt		437			381			1,673			1,621
Dividends		25			23			95			214
Other interest income		91			76			378			301
Total interest and dividend income		9,257			10,225			38,061			42,872
Interest Expense:
Interest on deposits		1,771			2,737			8,399			12,280
Interest on short-term borrowings		127			289			675			1,629
Interest on long-term borrowings		66			134			342			557
Interest on trust preferred capital notes		343			343			1,373			1,373
Total interest expense		2,307			3,503			10,789			15,839
Net Interest Income		6,950			6,722			27,272			27,033
Provision for loan losses		328			600			1,662			1,620
Net Interest Income After Provision
for Loan Losses		6,622			6,122			25,610			25,413
Noninterest Income:
Trust fees		815			770			3,153			3,467
Service charges on deposit accounts		536			555			2,085			2,324
Other fees and commissions		264			235			1,014			857
Mortgage banking income		390			155			1,605			788
Brokerage fees		32			61			185			431
Securities gains (losses), net		1			-			3			(195	)
Impairment of securities		-			-			-			(255	)
Net loss on foreclosed real estate		(253	)		(13	)		(1,475	)		(20	)
Other		152			112			473			516
Total noninterest income		1,937			1,875			7,043			7,913
Noninterest Expense:
Salaries		2,314			2,376			10,048			9,792
Employee benefits		750			789			3,201			3,001
Occupancy and equipment		762			681			2,927			2,788
FDIC assessment		202			92			1,186			180
Bank franchise tax		159			172			642			694
Core deposit intangible amortization		94			94			377			377
Other		1,243			1,343			4,937			5,292
Total noninterest expense		5,524			5,547			23,318			22,124
Income Before Income Taxes		3,035			2,450			9,335			11,202
Income Taxes		866			767			2,525			3,181
Net Income	$	2,169		$	1,683		$	6,810		$	8,021
Net Income Per Common Share:
Basic	$	0.36		$	0.28		$	1.12		$	1.32
Diluted	$	0.35		$	0.28		$	1.12		$	1.31
Average Common Shares Outstanding:
Basic		6,108,340			6,086,868			6,097,810			6,096,649
Diluted		6,116,800			6,090,844			6,102,895			6,105,154

American National Bankshares Inc. and Subsidiaries
Financial Highlights
(In thousands, except share, ratio and
nonfinancial data, unaudited)	4th Qtr			3rd Qtr			4th Qtr			YTD			YTD
	2009			2009			2008			2009			2008
EARNINGS
Interest income	$	9,257		$	9,464		$	10,225		$	38,061		$	42,872
Interest expense		2,307			2,464			3,503			10,789			15,839
Net interest income		6,950			7,000			6,722			27,272			27,033
Provision for loan losses		328			492			600			1,662			1,620
Noninterest income		1,937			2,119			1,875			7,043			7,913
Noninterest expense		5,524			5,598			5,547			23,318			22,124
Income taxes		866			862			767			2,525			3,181
Net income		2,169			2,167			1,683			6,810			8,021
PER COMMON SHARE
Earnings per share - basic	$	0.36		$	0.36		$	0.28		$	1.12		$	1.32
Earnings per share - diluted		0.35			0.35			0.28			1.12			1.31
Cash dividends declared		0.23			0.23			0.23			0.92			0.92
Book value per share		17.41			17.18			16.81			17.41			16.81
Book value per share - tangible (a)		13.46			13.20			12.78			13.46			12.78
Closing market price		21.90			21.82			17.00			21.90			17.00
FINANCIAL RATIOS
Return on average assets		1.07	%		1.07	%		0.86	%		0.84	%		1.02	%
Return on average equity		8.24			8.38			6.53			6.57			7.79
Return on average tangible equity (b)		11.03			11.30			8.90			8.94			10.60
Average equity to average assets		12.93			12.77			13.13			12.79			13.10
Net interest margin, taxable equivalent		3.88			3.91			3.85			3.81			3.87
Efficiency ratio		58.79			59.77			62.36			63.46			60.83
Effective tax rate		28.53			28.46			31.31			27.05			28.40
PERIOD-END BALANCES
Securities	$	199,686		$	188,493		$	140,816		$	199,686		$	140,816
Loans held for sale		2,490			3,840			1,764			2,490			1,764
Loans, net of unearned income		527,991			539,188			571,110			527,991			571,110
Goodwill and other intangibles		24,166			24,260			24,543			24,166			24,543
Assets		808,973			810,346			789,184			808,973			789,184
Assets - tangible (a)		784,807			786,086			764,641			784,807			764,641
Deposits		604,273			596,295			589,138			604,273			589,138
Customer repurchase agreements		65,929			71,339			51,741			65,929			51,741
Other short-term borrowings		-			4,000			7,850			-			7,850
Long-term borrowings		29,257			29,294			34,406			29,257			34,406
Shareholders' equity		106,389			104,905			102,300			106,389			102,300
Shareholders' equity - tangible (a)		82,223			80,645			77,757			82,223			77,757
AVERAGE BALANCES
Securities	$	167,546		$	159,314		$	137,947		$	153,237		$	145,371
Loans held for sale		4,394			6,540			1,669			5,436			1,869
Loans, net of unearned income		540,103			547,075			571,081			553,831			565,530
Interest-earning assets		744,007			741,194			720,197			741,308			722,009
Goodwill and other intangibles		24,217			24,314			24,600			24,360			24,736
Assets		814,232			810,064			785,182			810,140			785,868
Assets - tangible (a)		790,015			785,750			760,582			785,780			761,132
Interest-bearing deposits		499,725			503,793			491,701			507,014			483,544
Deposits		604,506			606,134			590,196			606,700			581,701
Customer repurchase agreements		70,014			65,341			49,868			63,115			52,264
Other short-term borrowings		91			460			3,788			1,037			9,818
Long-term borrowings		29,287			29,325			34,436			30,849			34,235
Shareholders' equity		105,302			103,411			103,126			103,625			102,917
Shareholders' equity - tangible (a)		81,085			79,097			78,526			79,265			78,181

American National Bankshares Inc. and Subsidiaries
Financial Highlights
(In thousands, except share, ratio and
nonfinancial data, unaudited)		4th Qtr			3rd Qtr			4th Qtr			YTD			YTD
		2009			2009			2008			2009			2008
CAPITAL
Average shares outstanding - basic		6,108,340			6,104,505			6,086,868			6,097,810			6,096,649
Average shares outstanding - diluted		6,116,800			6,111,913			6,090,844			6,102,895			6,105,154
Shares repurchased		-			-			7,100			7,600			46,150
Average price of shares repurchased	$	-		$	-		$	16.40		$	15.92		$	19.58
ALLOWANCE FOR LOAN LOSSES
Beginning balance	$	8,260		$	7,934		$	8,083		$	7,824		$	7,395
Provision for loan losses		328			492			600			1,662			1,620
Charge-offs		(485	)		(318	)		(1,012	)		(1,601	)		(1,564	)
Recoveries		63			152			153			281			373
Ending balance	$	8,166		$	8,260		$	7,824		$	8,166		$	7,824
LOANS
Construction and land development	$	40,371		$	46,175		$	63,361		$	40,371		$	63,361
Commercial real estate		208,066			209,470			207,160			208,066			207,160
Residential real estate		121,639			126,392			136,480			121,639			136,480
Home equity		64,678			62,519			57,170			64,678			57,170
Commercial and industrial		86,312			87,226			98,546			86,312			98,546
Consumer		6,925			7,406			8,393			6,925			8,393
Total	$	527,991		$	539,188		$	571,110		$	527,991		$	571,110
NONPERFORMING ASSETS AT PERIOD-END
Nonperforming loans:
90 days past due	$	-		$	-		$	-		$	-		$	-
Nonaccrual		3,642			3,106			2,845			3,642			2,845
Foreclosed real estate		3,414			4,558			4,311			3,414			4,311
Nonperforming assets	$	7,056		$	7,664		$	7,156		$	7,056		$	7,156
ASSET QUALITY RATIOS
Annualized net chargeoffs to average loans		0.31	%		0.12	%		0.60	%		0.24	%		0.21	%
Nonperforming assets to total assets		0.87			0.95			0.91			0.87			0.91
Nonperforming loans to total loans		0.69			0.58			0.50			0.69			0.50
Allowance for loan losses to total loans		1.55			1.53			1.37			1.55			1.37
Allowance for loan losses to
nonperforming loans		224.22			265.94			275.01			224.22			275.01
OTHER DATA
Fiduciary assets at period-end (c)	$	358,124		$	354,860		$	326,614		$	358,124		$	326,614
Retail brokerage assets at period-end (c)	$	54,696		$	63,893		$	84,348		$	54,696		$	84,348
Number full-time equivalent employees (d)		238			246			258			238			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			24			24			24
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

American National Bankshares Inc. and Subsidiaries
Net Interest Income Analysis
For the Three Months Ended December 31, 2009 and 2008
(in thousands, except yields and rates)
					Interest				Average
	Average Balance				Income/Expense				Yield/Rate
	2009		2008		2009		2008		2009			2008
Loans:
Commercial	$	80,712	$	93,548	$	986	$	1,296		4.89	%		5.54	%
Real estate		452,136		470,968		6,338		7,132		5.61			6.06
Consumer		7,255		8,234		148		189		8.16			9.18
Total loans		540,103		572,750		7,472		8,617		5.53			6.02
Securities:
Federal agencies and GSE		61,858		43,373		555		533		3.59			4.92
Mortgage-backed & CMO's		38,002		46,237		482		581		5.07			5.03
State and municipal		59,358		43,180		839		595		5.65			5.51
Other		8,328		5,157		76		34		3.65			2.64
Total securities		167,546		137,947		1,952		1,743		4.66			5.05
Deposits in other banks		36,358		9,500		91		76		1.00			3.20
Total interest-earning assets		744,007		720,197		9,515		10,436		5.12			5.80
Non-earning assets		70,225		64,985
Total assets	$	814,232	$	785,182
Deposits:
Demand	$	94,764	$	112,556		27		203		0.11			0.72
Money market		72,342		57,514		74		232		0.41			1.61
Savings		62,026		60,169		33		55		0.21			0.37
Time		270,593		261,462		1,637		2,247		2.42			3.44
Total deposits		499,725		491,701		1,771		2,737		1.42			2.23
Customer repurchase agreements		70,014		49,868		127		274		0.73			2.20
Other short-term borrowings		91		6,788		0		15		0.39			0.88
Long-term borrowings		29,287		34,436		409		477		5.59			5.54
Total interest-bearing liabilites		599,117		582,793		2,307		3,503		1.54			2.40
Noninterest bearing demand deposits		104,781		98,495
Other liabilities		5,032		768
Shareholders' equity		105,302		103,126
Total liabilities and
shareholders' equity	$	814,232	$	785,182
Interest rate spread										3.58	%		3.40	%
Net interest margin										3.88	%		3.85	%
Net interest income (taxable equivalent basis)						7,208		6,933
Less: Taxable equivalent adjustment						258		211
Net interest income					$	6,950	$	6,722

American National Bankshares Inc. and Subsidiaries
Net Interest Income Analysis
For the Years Ended 2009 and 2008
(in thousands, except yields and rates)
					Interest				Average
	Average Balance				Income/Expense				Yield/Rate
	2009		2008		2009		2008		2009			2008
Loans:
Commercial	$	88,551	$	91,117	$	4,213	$	5,515		4.76	%		6.05	%
Real estate		463,093		467,508		26,294		29,712		5.68			6.36
Consumer		7,623		8,774		659		795		8.64			9.06
Total loans		559,267		567,399		31,166		36,022		5.57			6.35
Securities:
Federal agencies and GSE		52,694		45,660		2,139		2,215		4.06			4.85
Mortgage-backed & CMO's		40,363		47,997		2,100		2,433		5.20			5.07
State and municipal		52,687		45,573		2,972		2,505		5.64			5.50
Other		7,493		6,141		261		277		3.48			4.51
Total securities		153,237		145,371		7,472		7,430		4.88			5.11
Deposits in other banks		28,804		9,239		378		301		1.31			3.26
Total interest-earning assets		741,308		722,009		39,016		43,753		5.26			6.06
Non-earning assets		68,832		63,859
Total assets	$	810,140	$	785,868
Deposits:
Demand	$	98,576	$	109,492		290		803		0.29			0.73
Money market		72,918		53,659		527		1,011		0.72			1.88
Savings		62,219		61,620		148		331		0.24			0.54
Time		273,301		258,773		7,434		10,135		2.72			3.92
Total deposits		507,014		483,544		8,399		12,280		1.66			2.54
Customer repurchase agreements		63,115		52,264		670		1,377		1.06			2.63
Other short-term borrowings		1,037		9,818		5		252		0.48			2.57
Long-term borrowings		30,849		34,235		1,715		1,930		5.56			5.64
Total interest-bearing liabilites		602,015		579,861		10,789		15,839		1.79			2.73
Noninterest bearing demand deposits		99,686		98,157
Other liabilities		4,814		4,933
Shareholders' equity		103,625		102,917
Total liabilities and
shareholders' equity	$	810,140	$	785,868
Interest rate spread										3.47	%		3.33	%
Net interest margin										3.81	%		3.87	%
Net interest income (taxable equivalent basis)						28,227		27,914
Less: Taxable equivalent adjustment						955		881
Net interest income					$	27,272	$	27,033