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, 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 October 26, 2010, American National Bankshares Inc. reports third quarter 2010 earnings.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits: 

99.1    October 26, 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: October 26, 2010                                                                                                     /s/ William W. Traynham                       &# 160;                 

Senior Vice President and Chief Financial Officer

EX-99.1

Date:	October 26, 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 THIRD QUARTER 2010 EARNINGS

·   Q3 net income of $2.2 million and EPS of $.36 per share

·   Net interest margin 3.74%

·   Average tangible common equity represents 10.87% of average assets

Danville, VA -- American National Bankshares Inc. (NASDAQ:  AMNB), parent company of American National Bank and Trust Company, today announced  third quarter 2010 net income of $2,228,000 compared to $2,167,000 for the same quarter in 2009.  Basic and diluted earnings per share were $0.36 for the 2010 quarter compared to $0.36 basic and $0.35 diluted for the 2009 quarter.  This net income produced returns on average assets and average equity of 1.07% and 8.11%, respectively.

Net income for the nine months of 2010 was $6,427,000 compared to $4,641,000 for the comparable period of 2009, an increase of $1,786,000 or 38.5%. Basic and diluted earnings per share were $1.05 for the 2010 period compared to $0.76 for the 2009 period.

Earnings for the nine months period 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 $2,519,000 greater than the 2009 period. The two above mentioned charges in 2009 represent approximately 62% of that improvement.

Financial Performance and Overview

“Our third quarter 2010 earnings, $2.2 million, represent a good quarter for American National, up about 2.8% from the third quarter 2009,” stated Charles H. Majors, President and Chief Executive Officer.

“Net interest income decreased slightly from the 2009 quarter. With the dramatic reduction in market interest rates, we’ve seen our net interest margin decline to 3.74%, down 0.17% from the same quarter in 2009. Mostly this relates to declines in yields on loans and bonds.

“Provision for loan losses declined $57,000 or 11.6%, which is consistent with the size and quality of our loan portfolio.

“Noninterest income improved $127,000 or 6%. This was driven by increases in secondary mortgage market income, trust income and a securities sale gain.

“Noninterest expense improved, with a decline of $62,000 or 1.1%. That cost reduction was mostly related to lower benefits costs.

“Outstanding loans declined $19.8 million or 3.7% over the past twelve months. Deposits increased $29 million or 4.9% during the same period. Most of these cash flows moved into our bond portfolio, which grew $29.8 million or 16.2%. These changes are continuations of trends that have dominated our balance sheet during 2009 and into 2010 and put pressure on our net interest margin.

Mr. Majors concluded, “There has been and continues to be a deleveraging in the consumer and commercial sectors of the economy. This macroeconomic trend has negatively impacted all segments of our industry, especially community banks. But, for the past two quarters, we have experienced growth in our loan portfolio, albeit very small. In any case, we are hopeful that, as consumers and businesses repair their respective balance sheets, the seeds of recovery are being planted. “

Capital

American National’s capital ratios are among the highest in its peer group.  For the quarter ended September 30, 2010, average shareholders’ equity was 13.14% of average assets and the ratio of tangible equity to tangible assets was 10.87%.

Credit Quality Measurements

Nonperforming assets ($3.9 million of non-accrual loans and $4 million of foreclosed real estate) were below industry averages and represented 0.96% of total assets at September 30, 2010, compared to 0.95% at September 30, 2009.

The allowance for loans losses was $8.5 million or 1.64% of loans at September 2010 compared to 1.53% at September, 2009.

Net Interest Income

Net interest income decreased to $6.8 million in the third quarter of 2010 from $7 million in the third quarter of 2009, a decrease of $241,000 or 3.44%.  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 third quarter, the Company’s net interest margin has decreased 17 basis points (0.17%) to 3.74% compared to the same quarter in 2009. For the comparable nine month period, the net interest margin has increased three basis points (0.03%) to 3.82%.

Noninterest Income

Noninterest income totaled $2.2 million in the third quarter of 2010, compared with $2.1 million in the third quarter of 2009, an increase of $127,000 or 6%.  Noninterest income in the 2010 quarter was positively impacted by increased secondary market mortgage income, trust income and $67,000 in securities gains.

Noninterest Expense

Noninterest expense totaled $5.5 million in the third quarter of 2010, compared to $5.6 million in the second quarter of 2009, a slight decrease of $62,000 or 1.1%.  This was mostly related to decreased personnel costs.

About American National

American National Bankshares Inc. is a bank holding company with assets of $824 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 eighteen banking offices.  The Bank also manages an additional $418 million of fiduciary and brokerage 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
	September 30
ASSETS	2010			2009
Cash and due from banks	$	10,860		$	17,451
Interest-bearing deposits in other banks		16,338			8,892
Securities available for sale, at fair value		209,434			177,591
Securities held to maturity		4,501			6,540
Total securities		213,935			184,131
Restricted stock, at cost		4,161			4,362
Loans held for sale		3,952			3,840
Loans		519,421			539,188
Less allowance for loan losses		(8,542	)		(8,260	)
Net Loans		510,879			530,928
Premises and equipment, net		20,142			19,390
Other real estate owned, net		3,987			4,558
Goodwill		22,468			22,468
Core deposit intangibles, net		1,415			1,792
Accrued interest receivable and other assets		16,080			12,534
Total assets	$	824,217		$	810,346
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Demand deposits -- noninterest-bearing	$	101,578		$	105,100
Demand deposits -- interest-bearing		91,301			92,012
Money market deposits		53,388			71,424
Savings deposits		62,841			62,420
Time deposits		316,522			265,339
Total deposits		625,630			596,295
Short-term borrowings:
Customer repurchase agreements		54,285			71,339
Other short-term borrowings		-			4,000
Long-term borrowings		8,525			8,675
Trust preferred capital notes		20,619			20,619
Accrued interest payable and other liabilities		4,290			4,513
Total liabilities		713,349			705,441
Shareholders' equity:
Common stock, $1 par, 20,000,000 shares authorized,
6,126,374 shares outstanding at September 30, 2010 and
6,107,327 shares outstanding at September 30, 2009		6,126			6,107
Capital in excess of par value		27,200			26,900
Retained earnings		74,409			71,445
Accumulated other comprehensive income (loss), net		3,133			453
Total shareholders' equity		110,868			104,905
Total liabilities and shareholders' equity	$	824,217		$	810,346

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
	2010		2009		2010			2009
Interest and Dividend Income:
Interest and fees on loans	$	6,994	$	7,666	$	21,220		$	23,617
Interest and dividends on securities:
Taxable		1,253		1,241		3,844			3,594
Tax-exempt		621		434		1,641			1,236
Dividends		24		27		71			70
Other interest income		90		96		268			287
Total interest and dividend income		8,982		9,464		27,044			28,804
Interest Expense:
Interest on deposits		1,722		1,921		5,004			6,628
Interest on short-term borrowings		93		135		297			548
Interest on long-term borrowings		65		65		192			276
Interest on trust preferred capital notes		343		343		1,030			1,030
Total interest expense		2,223		2,464		6,523			8,482
Net Interest Income		6,759		7,000		20,521			20,322
Provision for loan losses		435		492		1,005			1,334
Net Interest Income After Provision
for Loan Losses		6,324		6,508		19,516			18,988
Noninterest Income:
Trust fees		842		813		2,455			2,338
Service charges on deposit accounts		478		536		1,440			1,549
Other fees and commissions		290		257		856			750
Mortgage banking income		428		361		1,017			1,215
Securities gains,  net		67		1		42			2
Foreclosed real estate gains (losses), net		5		-		(279	)		(1,222	)
Other		136		151		398			474
Total noninterest income		2,246		2,119		5,929			5,106
Noninterest Expense:
Salaries		2,596		2,471		7,590			7,734
Employee benefits		564		806		1,837			2,451
Occupancy and equipment		732		701		2,209			2,165
FDIC assessment		203		203		597			984
Bank franchise tax		168		160		503			483
Core deposit intangible amortization		94		94		283			283
Other		1,179		1,163		3,607			3,694
Total noninterest expense		5,536		5,598		16,626			17,794
Income Before Income Taxes		3,034		3,029		8,819			6,300
Income Taxes		806		862		2,392			1,659
Net Income	$	2,228	$	2,167	$	6,427		$	4,641
Net Income Per Common Share:
Basic	$	0.36	$	0.36	$	1.05		$	0.76
Diluted	$	0.36	$	0.35	$	1.05		$	0.76
Average Common Shares Outstanding:
Basic		6,125,359		6,104,505		6,122,876			6,094,261
Diluted		6,131,129		6,111,913		6,128,481			6,098,221

American National Bankshares Inc. and Subsidiaries
Financial Highlights
(In thousands, except share, ratio and
nonfinancial data, unaudited)	3rd Qtr			2nd Qtr			3rd Qtr			YTD			YTD
	2010			2010			2009			2010			2009
EARNINGS
Interest income	$	8,982		$	9,011		$	9,464		$	27,044		$	28,804
Interest expense		2,223			2,153			2,464			6,523			8,482
Net interest income		6,759			6,858			7,000			20,521			20,322
Provision for loan losses		435			285			492			1,005			1,334
Noninterest income		2,246			1,762			2,119			5,929			5,106
Noninterest expense		5,536			5,593			5,598			16,626			17,794
Income taxes		806			728			862			2,392			1,659
Net income		2,228			2,014			2,167			6,427			4,641
PER COMMON SHARE
Earnings per share - basic	$	0.36		$	0.33		$	0.36		$	1.05		$	0.76
Earnings per share - diluted		0.36			0.33			0.35			1.05			0.76
Cash dividends declared		0.23			0.23			0.23			0.69			0.69
Book value per share		18.10			17.76			17.18			18.10			17.18
Book value per share - tangible (a)		14.20			13.84			13.20			14.20			13.20
Closing market price		21.94			21.39			21.82			21.94			21.82
FINANCIAL RATIOS
Return on average assets		1.07	%		0.98	%		1.07	%		1.04	%		0.77	%
Return on average equity		8.11			7.45			8.38			7.90			6.00
Return on average tangible equity (b)		10.69			9.91			11.30			10.47			8.22
Average equity to average assets		13.14			13.21			12.77			13.20			12.74
Net interest margin, taxable equivalent		3.74			3.85			3.91			3.82			3.79
Efficiency ratio		59.54			60.55			59.77			60.10			65.07
Effective tax rate		26.57			26.55			28.46			27.12			26.33
PERIOD-END BALANCES
Securities	$	218,096		$	220,759		$	188,493		$	218,096		$	188,493
Loans held for sale		3,952			2,879			3,840			3,952			3,840
Loans, net of unearned income		519,421			519,416			539,188			519,421			539,188
Goodwill and other intangibles		23,883			23,977			24,260			23,883			24,260
Assets		824,217			832,644			810,346			824,217			810,346
Assets - tangible (a)		800,334			808,667			786,086			800,334			786,086
Deposits		625,630			630,151			596,295			625,630			596,295
Customer repurchase agreements		54,285			61,665			71,339			54,285			71,339
Other short-term borrowings		-			-			4,000			-			4,000
Long-term borrowings		29,144			29,182			29,294			29,144			29,294
Shareholders' equity		110,868			108,760			104,905			110,868			104,905
Shareholders' equity - tangible (a)		86,985			84,783			80,645			86,985			80,645
AVERAGE BALANCES
Securities	$	214,532		$	198,289		$	159,314		$	199,282		$	148,415
Loans held for sale		4,991			3,529			6,540			3,664			5,788
Loans, net of unearned income		519,101			519,485			547,075			519,805			559,938
Interest-earning assets		762,742			746,879			741,194			749,505			740,399
Goodwill and other intangibles		23,935			24,029			24,314			24,029			24,408
Assets		836,033			818,740			810,064			821,861			808,761
Assets - tangible (a)		812,098			794,711			785,750			797,832			784,353
Interest-bearing deposits		530,191			514,963			503,793			517,543			509,470
Deposits		633,692			615,456			606,134			618,508			607,440
Customer repurchase agreements		59,126			62,072			65,341			61,698			60,790
Other short-term borrowings		92			-			460			31			1,355
Long-term borrowings		29,174			29,212			29,325			29,211			31,376
Shareholders' equity		109,885			108,127			103,411			108,512			103,060
Shareholders' equity - tangible (a)		85,950			84,098			79,097			84,483			78,652

CAPITAL
Average shares outstanding - basic		6,125,359			6,123,790			6,104,505			6,122,876			6,094,261
Average shares outstanding - diluted		6,131,129			6,129,943			6,111,913			6,128,481			6,098,221
Shares repurchased		-			-			-			-			7,600
Average price of shares repurchased	$	-		$	-		$	-		$	-		$	15.92
ALLOWANCE FOR LOAN LOSSES
Beginning balance	$	8,135		$	8,112		$	7,934		$	8,166		$	7,824
Provision for loan losses		435			285			492			1,005			1,334
Charge-offs		(137	)		(305	)		(318	)		(869	)		(1,116	)
Recoveries		109			43			152			240			218
Ending balance	$	8,542		$	8,135		$	8,260		$	8,542		$	8,260
LOANS
Construction and land development	$	42,602		$	40,039		$	46,175		$	42,602		$	46,175
Commercial real estate		206,142			202,602			209,470			206,142			209,470
Residential real estate		118,554			119,410			126,392			118,554			126,392
Home equity		64,847			63,992			62,519			64,847			62,519
Commercial and industrial		80,818			86,924			87,226			80,818			87,226
Consumer		6,458			6,449			7,406			6,458			7,406
Total	$	519,421		$	519,416		$	539,188		$	519,421		$	539,188
NONPERFORMING ASSETS AT PERIOD-END
Nonperforming loans:
90 days past due	$	-		$	8		$	-		$	-		$	-
Nonaccrual		3,910			4,005			3,106			3,910			3,106
Foreclosed real estate		3,987			3,730			4,558			3,987			4,558
Nonperforming assets	$	7,897		$	7,743		$	7,664		$	7,897		$	7,664
ASSET QUALITY RATIOS
Annualized net chargeoffs to average loans		0.02	%		0.20	%		0.12	%		0.16	%		0.21	%
Nonperforming assets to total assets		0.96			0.93			0.95			0.96			0.95
Nonperforming loans to total loans		0.75			0.77			0.58			0.75			0.58
Allowance for loan losses to total loans		1.64			1.57			1.53			1.64			1.53
Allowance for loan losses to
nonperforming loans		218.47			202.72			265.94			218.47			265.94
OTHER DATA
Fiduciary assets at period-end (c)	$	370,016		$	342,519		$	354,860		$	370,016		$	354,860
Retail brokerage assets at period-end (c)	$	47,507		$	45,912		$	63,893		$	47,507		$	63,893
Number full-time equivalent employees (d)		242			242			246			242			246
Number of full service offices		18			18			19			18			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

Net Interest Income Analysis
For the Three Months Ended September 30, 2010 and 2009
(in thousands, except rates)
					Interest
	Average Balance				Income/Expense				Yield/Rate
	2010		2009		2010		2009		2010			2009
Loans:
Commercial	$	76,618	$	85,894	$	934	$	1,027		4.84	%		4.78	%
Real estate		441,069		460,253		5,968		6,508		5.41			5.66
Consumer		6,405		7,468		126		158		7.80			8.46
Total loans		524,092		553,615		7,028		7,693		5.36			5.56
Securities:
Federal agencies		60,079		56,706		459		538		3.06			3.80
Mortgage-backed & CMO's		53,839		37,609		493		506		3.66			5.38
State and municipal		94,419		56,665		1,217		798		5.16			5.63
Other		6,195		8,334		55		80		3.55			3.84
Total securities		214,532		159,314		2,224		1,922		4.15			4.83
Deposits in other banks		24,118		28,265		90		96		1.48			1.36
Total interest-earning assets		762,742		741,194		9,342		9,711		4.89			5.24
Non-earning assets		73,291		68,870
Total assets	$	836,033	$	810,064
Deposits:
Demand	$	90,731	$	94,869		16		31		0.07			0.13
Money market		70,011		76,416		94		107		0.53			0.56
Savings		63,562		62,985		22		38		0.14			0.24
Time		305,887		269,523		1,590		1,745		2.06			2.59
Total deposits		530,191		503,793		1,722		1,921		1.29			1.53
Customer repurchase agreements		59,126		65,341		93		134		0.62			0.82
Other short-term borrowings		92		460		-		1		0.43			0.87
Long-term borrowings		29,174		29,325		408		408		5.59			5.57
Total interest-bearing
liabilities		618,583		598,919		2,223		2,464		1.43			1.65
Noninterest bearing demand deposits		103,501		102,341
Other liabilities		4,064		5,393
Shareholders' equity		109,885		103,411
Total liabilities and
shareholders' equity	$	836,033	$	810,064
Interest rate spread										3.46	%		3.59	%
Net interest margin										3.74	%		3.91	%
Net interest income (taxable equivalent basis)						7,119		7,247
Less: Taxable equivalent adjustment						360		247
Net interest income					$	6,759	$	7,000

	Net Interest Income Analysis
	For the Nine Months Ended September 30, 2010 and 2009
	(in thousands, except rates)
						Interest
		Average Balance				Income/Expense				Yield/Rate
		2010		2009		2010		2009		2010			2009
Loans:
Commercial		$	78,180	$	91,193	$	2,826	$	3,227		4.83	%		4.72	%
Real estate			438,736		466,787		18,096		19,956		5.50			5.70
Consumer			6,553		7,746		397		511		8.10			8.80
Total loans			523,469		565,726		21,319		23,694		5.43			5.58
Securities:
Federal agencies			63,929		49,606		1,535		1,584		3.20			4.26
Mortgage-backed & CMO's			47,795		41,158		1,473		1,618		4.11			5.24
State and municipal			80,625		50,439		3,223		2,133		5.33			5.64
Other			6,933		7,212		185		185		3.56			3.42
Total securities			199,282		148,415		6,416		5,520		4.29			4.96
Deposits in other banks			26,754		26,258		268		287		1.34			1.46
Total interest-earning assets			749,505		740,399		28,003		29,501		4.98			5.31
Non-earning assets			72,356		68,362
Total assets		$	821,861	$	808,761
Deposits:
Demand		$	94,607	$	99,860		58		263		0.08			0.35
Money market			77,691		73,112		285		453		0.49			0.83
Savings			63,644		62,284		66		115		0.14			0.25
Time			281,601		274,214		4,595		5,797		2.18			2.82
Total deposits			517,543		509,470		5,004		6,628		1.29			1.73
Customer repurchase agreements			61,698		60,790		297		543		0.64			1.19
Other short-term borrowings			31		1,355		-		5		0.43			0.49
Long-term borrowings			29,211		31,376		1,222		1,306		5.58			5.55
Total interest-bearing
liabilities			608,483		602,991		6,523		8,482		1.43			1.88
Noninterest bearing demand deposits			100,965		97,970
Other liabilities			3,901		4,740
Shareholders' equity			108,512		103,060
Total liabilities and
shareholders' equity		$	821,861	$	808,761
Interest rate spread											3.55	%		3.43	%
Net interest margin											3.82	%		3.79	%
Net interest income (taxable equivalent basis)							21,480		21,019
Less: Taxable equivalent adjustment							959		697
Net interest income						$	20,521	$	20,322