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 27, 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 July 27, 2010, American National Bankshares Inc. reports second quarter 2010 earnings and announces third quarter cash dividend.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits: 

99.1       July 27, 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: July 27, 2010                                                                                                     /s/ William W. Traynham                        ;                  

Senior Vice President and Chief Financial Officer

EX-99.1

Date:	July 27, 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 SECOND QUARTER 2010 EARNINGS AND

ANNOUNCES THIRD QUARTER CASH DIVIDEND

·   Q2 net income of $2 million and EPS of $.33 per share

·   Net interest margin 3.85%

·   Average shareholders’ equity of $108 million represents 13.21% of assets

·   Dividend declared for Q3 of $.23 per common share

Danville, VA -- American National Bankshares Inc. (NASDAQ:  AMNB), parent company of American National Bank and Trust Company, today announced  second quarter 2010 net income of $2 million compared to $1.7 million for the same quarter in 2009.  Basic and diluted earnings per share were $0.33 for the 2010 quarter compared to $0.28 for the 2009 quarter.  This net income produced returns on average assets and average equity of 0.98% and 7.45%, respectively.

Net income for the first six months of 2010 was $4.2 million compared to $2.5 million for the comparable period of 2009. Basic and diluted earnings per share were $0.69 for the 2010 period compared to $0.41 for the 2009 period.

Earnings for the comparable periods in 2009 were adversely impacted by a first quarter $1.2 million pre-tax charge writing down other real estate owned and a second quarter industry wide FDIC special assessment, which cost the Company approximately $360,000. Income before income taxes for the 2010 period is $2.5 million greater than the 2009 period. The two onetime charges in 2009 represent approximately 62% of that improvement.

Financial Performance and Overview

“Our second quarter 2010 earnings represent a good quarter for American National, even though the earnings improvement was driven primarily by the industry wide FDIC special assessment levied in the second quarter of 2009,” stated Charles H. Majors, President and Chief Executive Officer.

“Net interest income was basically unchanged, down only slightly from the 2009 quarter. The good news here is our net interest margin was actually up one basis point (0.01%) from the same quarter a year earlier.

“Provision for loan losses declined $207,000 or 42%, which was directionally consistent with the decrease in the size of our loan portfolio.

“Noninterest income was down $491,000 or 21.8%. The biggest drivers for the second quarter 2010 were a reduction in secondary market mortgage income and a $253,000 write down in other real estate owned.

“Noninterest expense improved, with a decline of $728,000 or 11.5%. That cost reduction was related to lower staff levels, a change in our defined benefit program, and reduced total FDIC insurance costs.

“Our net loan portfolio fell $8.6 million or 1.6% over the first half of 2010. Deposits increased $25.9 million or 4.3% during the same period. These changes are continuations of trends that have dominated our balance sheet during 2009 and into 2010. However, while we would not yet consider it a trend, our loan totals at June 30, 2010 were higher than the totals at the end of the first quarter."

Mr. Majors concluded, “There has been and continues to be a massive deleveraging in the consumer and commercial sectors of the economy. This is a macro-economic trend that has impacted all segments of our industry. While our industry and the economy at large are hopefully seeing the beginnings of what may be a fragile recovery, the recently enacted federal banking legislation creates new and more onerous regulatory burdens on the entire industry, without adequate regard to institution size or relative risk or cost and benefit.

“We believe that a healthy and active community banking sector is vital for our economy at all levels. We also believe that the community banks that survive and prosper in the future will most likely be those banks today that possess strong balance sheets and whose boards and managements can balance attractive business opportunities with safe and sound risk management. We firmly believe that American National is such a community bank.”

Capital

American National’s capital ratios are among the highest in its peer group.  For the quarter ended June 30, 2010, average shareholders’ equity was 13.21% of average assets and the ratio of tangible equity to tangible assets was 9.91%.

Credit Quality Measurements

Nonperforming assets ($4 million of non-accrual loans and $3.7 million of foreclosed real estate) were below industry averages and represented 0.93% of total assets at June 30, 2010, compared to 0.84% at June 30, 2009.

The allowance for loans losses was $8.1 million or 1.57% of loans at June 30, 2010 compared to 1.42% at June 30, 2009.

Net Interest Income

Net interest income decreased slightly to $6.8 million in the second quarter of 2010 from $6.9 million in the second quarter of 2009, a decrease of $51,000 or 0.74%.  The Bank has mitigated the impact of the current historically low rate environment by actively managing the cost of its interest bearing liabilities.

For the second quarter, the Company’s net interest margin has increased one basis point (0.01%) to 3.85% compared to the same quarter in 2009. For the six month period the net interest margin has increased 14 basis points (0.14%) to 3.86%.

Noninterest Income

Noninterest income totaled $1.8 million in the second quarter of 2010, compared with $2.3 million in the second quarter of 2009, a decrease of $491,000 or 21.8%.  Noninterest income in the 2010 quarter was negatively impacted by decrease in demand for secondary market mortgage loans, related to the overall slowdown in the real estate market and secondarily to the expiration of the home buyer tax credit. The 2010 quarter was also negatively impacted by a $253,000 write down in other real estate owned. This write down was related to the same asset the Company wrote down $1.2 million last year.

Noninterest Expense

Noninterest expense totaled $5.6 million in the second quarter of 2010, compared to $6.3 million in the second quarter of 2009, a decrease of $728,000 or 11.5%.  The second quarter of 2010 was positively impacted by reduced salaries and benefits costs, related to lower staff levels and a change in the Company’s defined benefit program, and by reductions in FDIC insurance costs.

Dividend Declaration

American National Bankshares Inc. announced today that its Board of Directors has declared a quarterly cash dividend of $0.23 per share, payable September 17, 2010, to shareholders of record September 3, 2010.

American National Bankshares Inc. considers the payment of appropriate dividends a vital part of its capital planning and management program. The Company adheres to a dividend policy based on a review of earnings, growth, capital and such other factors that the Board of Directors considers relevant to the dividend decision process.

About American National

American National Bankshares Inc. is a bank holding company with assets of $833 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 $388 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 languag e 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
	June 30
ASSETS	2010			2009
Cash and due from banks	$	11,398		$	13,905
Interest-bearing deposits in other banks		22,705			26,879
Securities available for sale, at fair value		211,574			140,344
Securities held to maturity		4,823			6,712
Total securities		216,397			147,056
Restricted stock, at cost		4,362			4,362
Loans held for sale		2,879			10,408
Loans		519,416			557,042
Less allowance for loan losses		(8,135	)		(7,934	)
Net Loans		511,281			549,108
Premises and equipment, net		19,658			18,912
Other real estate owned, net		3,730			4,033
Goodwill		22,468			22,468
Core deposit intangibles, net		1,509			1,886
Accrued interest receivable and other assets		16,257			12,466
Total assets	$	832,644		$	811,483
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Demand deposits -- noninterest-bearing	$	100,099		$	101,449
Demand deposits -- interest-bearing		92,771			91,424
Money market deposits		81,247			81,306
Savings deposits		64,425			62,768
Time deposits		291,609			278,284
Total deposits		630,151			615,231
Short-term borrowings:
Customer repurchase agreements		61,665			59,437
Long-term borrowings		8,563			8,712
Trust preferred capital notes		20,619			20,619
Accrued interest payable and other liabilities		2,886			4,866
Total liabilities		723,884			708,865
Shareholders' equity:
Common stock, $1 par, 20,000,000 shares authorized,
6,124,892 shares outstanding at June 30, 2010 and
6,100,330 shares outstanding at June 30, 2009		6,125			6,100
Capital in excess of par value		27,131			26,772
Retained earnings		73,590			70,682
Accumulated other comprehensive income (loss), net		1,914			(936	)
Total shareholders' equity		108,760			102,618
Total liabilities and shareholders' equity	$	832,644		$	811,483

American National Bankshares Inc. and Subsidiaries
Consolidated Statements of Income
(Dollars in thousands, except share and per share data)
Unaudited
	Three Months Ended						Six Months Ended
	June 30						June 30
	2010			2009			2010			2009
Interest and Dividend Income:
Interest and fees on loans	$	7,071		$	7,917		$	14,226		$	15,951
Interest and dividends on securities:
Taxable		1,275			1,233			2,591			2,353
Tax-exempt		554			416			1,020			802
Dividends		24			21			47			43
Other interest income		87			103			178			191
Total interest and dividend income		9,011			9,690			18,062			19,340
Interest Expense:
Interest on deposits		1,647			2,180			3,282			4,707
Interest on short-term borrowings		99			177			204			413
Interest on long-term borrowings		63			80			127			211
Interest on trust preferred capital notes		344			344			687			687
Total interest expense		2,153			2,781			4,300			6,018
Net Interest Income		6,858			6,909			13,762			13,322
Provision for loan losses		285			492			570			842
Net Interest Income After Provision
for Loan Losses		6,573			6,417			13,192			12,480
Noninterest Income:
Trust fees		801			767			1,613			1,525
Service charges on deposit accounts		483			511			962			1,013
Other fees and commissions		288			251			566			493
Mortgage banking income		343			568			589			854
Brokerage fees		22			73			43			130
Securities gains (losses), net		4			1			(25	)		1
Foreclosed real estate gains (losses), net		(281	)		(43	)		(284	)		(1,222	)
Other		102			125			219			193
Total noninterest income		1,762			2,253			3,683			2,987
Noninterest Expense:
Salaries		2,596			2,732			4,994			5,263
Employee benefits		633			832			1,273			1,645
Occupancy and equipment		698			724			1,477			1,464
FDIC assessment		199			564			394			781
Bank franchise tax		168			160			335			323
Core deposit intangible amortization		95			95			189			189
Other		1,204			1,214			2,428			2,531
Total noninterest expense		5,593			6,321			11,090			12,196
Income Before Income Taxes		2,742			2,349			5,785			3,271
Income Taxes		728			643			1,586			797
Net Income	$	2,014		$	1,706		$	4,199		$	2,474
Net Income Per Common Share:
Basic	$	0.33		$	0.28		$	0.69		$	0.41
Diluted	$	0.33		$	0.28		$	0.69		$	0.41
Average Common Shares Outstanding:
Basic		6,123,790			6,096,034			6,121,615			6,089,055
Diluted		6,129,943			6,097,047			6,127,137			6,091,291

American National Bankshares Inc. and Subsidiaries
Financial Highlights
(In thousands, except share, ratio and
nonfinancial data, unaudited)	2nd Qtr			1st Qtr			2nd Qtr			YTD			YTD
	2010			2010			2009			2010			2009
EARNINGS
Interest income	$	9,011		$	9,051		$	9,690		$	18,062		$	19,340
Interest expense		2,153			2,147			2,781			4,300			6,018
Net interest income		6,858			6,904			6,909			13,762			13,322
Provision for loan losses		285			285			492			570			842
Noninterest income		1,762			1,921			2,253			3,683			2,987
Noninterest expense		5,593			5,497			6,321			11,090			12,196
Income taxes		728			858			643			1,586			797
Net income		2,014			2,185			1,706			4,199			2,474
PER COMMON SHARE
Earnings per share - basic	$	0.33		$	0.36		$	0.28		$	0.69		$	0.41
Earnings per share - diluted		0.33			0.36			0.28			0.69			0.41
Cash dividends declared		0.23			0.23			0.23			0.46			0.46
Book value per share		17.76			17.50			16.82			17.76			16.82
Book value per share - tangible (a)		13.84			13.57			12.83			13.84			12.83
Closing market price		21.39			20.15			19.25			21.39			19.25
FINANCIAL RATIOS
Return on average assets		0.98	%		1.08	%		0.84	%		1.03	%		0.61	%
Return on average equity		7.45			8.14			6.63			7.79			4.81
Return on average tangible equity (b)		9.91			10.83			9.05			10.36			6.86
Average equity to average assets		13.21			13.24			12.66			13.23			12.73
Net interest margin, taxable equivalent		3.85			3.90			3.84			3.86			3.72
Efficiency ratio		60.55			60.22			66.98			60.39			67.83
Effective tax rate		26.55			28.20			27.37			27.42			24.37
PERIOD-END BALANCES
Securities	$	220,759		$	201,113		$	151,418		$	220,759		$	151,418
Loans held for sale		2,879			2,208			10,408			2,879			10,408
Loans, net of unearned income		519,416			515,366			557,042			519,416			557,042
Goodwill and other intangibles		23,977			24,071			24,354			23,977			24,354
Assets		832,644			810,654			811,483			832,644			811,483
Assets - tangible (a)		808,667			786,583			787,129			808,667			787,129
Deposits		630,151			609,621			615,231			630,151			615,231
Customer repurchase agreements		61,665			60,372			59,437			61,665			59,437
Other short-term borrowings		-			-			-			-			-
Long-term borrowings		29,182			29,219			29,331			29,182			29,331
Shareholders' equity		108,760			107,182			102,618			108,760			102,618
Shareholders' equity - tangible (a)		84,783			83,111			78,264			84,783			78,264
AVERAGE BALANCES
Securities	$	198,289		$	184,696		$	147,576		$	191,530		$	142,847
Loans held for sale		3,529			2,444			7,787			2,990			5,405
Loans, net of unearned income		519,485			520,847			562,654			520,162			566,476
Interest-earning assets		746,879			736,183			744,899			742,776			739,965
Goodwill and other intangibles		24,029			24,125			24,406			24,077			24,456
Assets		818,740			810,620			812,404			814,658			808,071
Assets - tangible (a)		794,711			786,495			787,998			790,581			783,615
Interest-bearing deposits		514,963			507,209			513,876			511,115			512,357
Deposits		615,456			606,085			612,134			610,791			608,105
Customer repurchase agreements		62,072			63,947			60,876			63,005			58,477
Other short-term borrowings		-			-			1,553			-			1,811
Long-term borrowings		29,212			29,248			30,460			29,230			32,418
Shareholders' equity		108,127			107,336			102,862			107,814			102,854
Shareholders' equity - tangible (a)		84,098			83,211			78,456			83,737			78,398
CAPITAL
Average shares outstanding - basic		6,123,790			6,119,415			6,096,034			6,096,034			6,089,055
Average shares outstanding - diluted		6,129,943			6,124,306			6,097,047			6,097,047			6,091,291
Shares repurchased		-			-			-			-			7,600
Average price of shares repurchased	$	-		$	-		$	-		$	-		$	15.92
ALLOWANCE FOR LOAN LOSSES
Beginning balance	$	8,112		$	8,166		$	7,836		$	8,166		$	7,824
Provision for loan losses		285			285			492			570			842
Charge-offs		(305	)		(427	)		(422	)		(732	)		(798	)
Recoveries		43			88			28			131			66
Ending balance	$	8,135		$	8,112		$	7,934		$	8,135		$	7,934
LOANS
Construction and land development	$	40,039		$	39,421		$	50,930		$	40,039		$	50,930
Commercial real estate		202,602			205,642			210,832			202,602			210,832
Residential real estate		119,410			119,776			128,835			119,410			128,835
Home equity		63,992			63,302			61,818			63,992			61,818
Commercial and industrial		86,924			80,331			96,978			86,924			96,978
Consumer		6,449			6,894			7,649			6,449			7,649
Total	$	519,416		$	515,366		$	557,042		$	519,416		$	557,042
NONPERFORMING ASSETS AT PERIOD-END
Nonperforming loans:
90 days past due	$	8		$	-		$	-		$	8		$	-
Nonaccrual		4,005			3,436			2,745			4,005			2,745
Foreclosed real estate		3,730			3,815			4,033			3,730			4,033
Nonperforming assets	$	7,743		$	7,251		$	6,778		$	7,743		$	6,778
ASSET QUALITY RATIOS
Annualized net chargeoffs to average loans		0.20	%		0.26	%		0.28	%		0.23	%		0.26	%
Nonperforming assets to total assets		0.93			0.89			0.84			0.93			0.84
Nonperforming loans to total loans		0.77			0.67			0.49			0.77			0.49
Allowance for loan losses to total loans		1.57			1.57			1.42			1.57			1.42
Allowance for loan losses to
nonperforming loans		202.72			236.09			289.03			202.72			289.03
OTHER DATA
Fiduciary assets at period-end (c)	$	342,519		$	363,205		$	333,754		$	342,519		$	333,754
Retail brokerage assets at period-end (c)	$	45,912		$	51,848		$	89,016		$	45,912		$	89,016
Number full-time equivalent employees (d)		242			235			255			242			255
Number of full service offices		19			18			19			19			19
Number of loan production offices		1			1			2			1			2
Number of ATM's		26			26			24			26			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 June 30, 2010 and 2009
(in thousands, except rates)
						Interest
		Average Balance				Income/Expense				Yield/Rate
		2010		2009		2010		2009		2010			2009
Loans:
Commercial		$	78,673	$	91,701	$	939	$	1,100		4.79	%		4.80	%
Real estate			437,856		470,859		6,033		6,669		5.51			5.67
Consumer			6,485		7,881		137		175		8.47			8.88
Total loans			523,014		570,441		7,109		7,944		5.44			5.57
Securities:
Federal agencies			66,019		46,225		525		525		3.18			4.54
Mortgage-backed & CMO's			45,651		41,382		479		550		4.20			5.32
State and municipal			79,622		51,718		1,079		731		5.42			5.65
Other			6,997		8,251		61		72		3.49			3.49
Total securities			198,289		147,576		2,144		1,878		4.33			5.09
Deposits in other banks			25,576		26,882		87		103		1.36			1.53
Total interest-earning assets			746,879		744,899		9,340		9,925		5.00			5.33
Non-earning assets			71,861		67,505
Total assets		$	818,740	$	812,404
Deposits:
Demand		$	96,098	$	92,447		21		42		0.09			0.18
Money market			82,372		78,143		101		148		0.49			0.76
Savings			64,561		62,557		22		37		0.14			0.24
Time			271,932		280,729		1,503		1,953		2.22			2.78
Total deposits			514,963		513,876		1,647		2,180		1.28			1.70
Customer repurchase agreements			62,072		60,876		99		176		0.64			1.16
Other short-term borrowings			-		1,553		-		1		-			0.26
Long-term borrowings			29,212		30,460		407		424		5.57			5.57
Total interest-bearing
liabilities			606,247		606,765		2,153		2,781		1.42			1.83
Noninterest bearing
demand deposits			100,493		98,258
Other liabilities			3,873		4,519
Shareholders' equity			108,127		102,862
Total liabilities and
shareholders' equity		$	818,740	$	812,404
Interest rate spread											3.58	%		3.50	%
Net interest margin											3.85	%		3.84	%
Net interest income (taxable equivalent basis)							7,187		7,144
Less: Taxable equivalent adjustment							329		235
Net interest income						$	6,858	$	6,909

	American National Bankshares Inc. and Subsidiaries
	Net Interest Income Analysis
	For the Six Months Ended June 30, 2010 and 2009
(in thousands, except rates)
						Interest
		Average Balance				Income/Expense				Yield/Rate
		2010		2009		2010		2009		2010			2009
Loans:
Commercial		$	78,974	$	93,887	$	1,892	$	2,200		4.83	%		4.69	%
Real estate			437,550		470,106		12,128		13,448		5.54			5.72
Consumer			6,628		7,888		271		353		8.25			8.95
Total loans			523,152		571,881		14,291		16,001		5.47			5.60
Securities:
Federal agencies			65,886		45,997		1,076		1,046		3.27			4.55
Mortgage-backed & CMO's			44,722		42,962		980		1,112		4.38			5.18
State and municipal			73,614		47,247		2,006		1,335		5.45			5.65
Other			7,308		6,641		130		105		3.56			3.16
Total securities			191,530		142,847		4,192		3,598		4.38			5.04
Deposits in other banks			28,094		25,237		178		191		1.28			1.51
Total interest-earning assets			742,776		739,965		18,661		19,790		5.03			5.35
Non-earning assets			71,882		68,106
Total assets		$	814,658	$	808,071
Deposits:
Demand		$	96,578	$	102,397		42		232		0.09			0.45
Money market			81,595		71,433		191		346		0.47			0.97
Savings			63,686		61,927		44		77		0.14			0.25
Time			269,256		276,600		3,005		4,052		2.25			2.93
Total deposits			511,115		512,357		3,282		4,707		1.29			1.84
Customer repurchase agreements			63,005		58,477		204		409		0.65			1.40
Other short-term borrowings			-		1,811		-		4		-			0.44
Long-term borrowings			29,230		32,418		814		898		5.57			5.54
Total interest-bearing
liabilities			603,350		605,063		4,300		6,018		1.43			1.99
Noninterest bearing
demand deposits			99,676		95,748
Other liabilities			3,818		4,406
Shareholders' equity			107,814		102,854
Total liabilities and
shareholders' equity		$	814,658	$	808,071
Interest rate spread											3.60	%		3.36	%
Net interest margin											3.86	%		3.72	%
Net interest income (taxable equivalent basis)							14,361		13,772
Less: Taxable equivalent adjustment							599		450
Net interest income						$	13,762	$	13,322