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)            April 20, 2011
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 April 20, 2011, American National Bankshares Inc. reports first quarter 2011 earnings.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits: 

99.1    April 20, 2011 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: April 20, 2011                                                                                                          /s/ William W. Traynham                                         

Senior Vice President and Chief Financial Officer

EX-99.1

Date:	April 20, 2011
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 FIRST QUARTER 2011 EARNINGS

·   Q1 net income of $1,778,000 and diluted EPS of $0.29 per share

·   Q1 net interest margin 3.66%.

·   Average shareholders’ equity of $109 million represents 13.03% of average assets

Danville, VA -- American National Bankshares Inc. (NASDAQ:  AMNB), parent company of American National Bank and Trust Company, today announced  net income of $1,778,000 for the first quarter 2011, compared to $2,185,000 for the first quarter 2010, an 18.6% decrease.  Basic and diluted earnings per share were $0.29 for the 2011 quarter compared to $0.36 for the 2010 quarter.  This quarterly net income produced a return on average assets of 0.85%, a return on average equity of 6.51%, and a return on tangible equity of 8.64%.

Financial Performance and Overview

      Charles H. Majors, President and Chief Executive Officer, stated, “American National had an eventful first quarter 2011.  We were not satisfied with the first quarter operating results, but we were not surprised. Our income for the quarter was $1.78 million, an 18.6% decrease compared to the same quarter in 2010. This decline was driven by two major factors: a decline in net interest income and expenses associated with our pending merger with MidCarolina Financial Corporation.  The decrease in net interest income reflects market driven competition for loans, declining bond yields, and compression of our net interest margin. We consider the merger related costs to be the beginning of an investment in a new and even better American National Bankshares Inc.

“Trust income was up $116,000 or 14.3% for the 2011 quarter, as a result of asset growth and improvement in the stock market.

“Service charge income declined $58,000 or 12.1% mostly as a result of declining overdraft fee income, a trend we’ve seen over the past few years and expect to continue.

“Secondary market mortgage income declined $99,000 or 40.2%, because of decreasing volume. We anticipated a slowdown in this revenue in 2011.

“Our noninterest expenses for the 2011 quarter increased $260,000 or 4.7%, compared to 2010 quarter. This mostly related to $309,000 in expenses associated with our pending merger with MidCarolina Financial.

“During 2010 we experienced historically low interest rates and an ongoing deleveraging in the economy. But, during the year we saw a bottoming out of our loan portfolio and small increases in volume starting in the second quarter and continuing through year end. Year over year our loan portfolio has grown slightly, by $1.3 million or 0.2%. We are anticipating modest, single digit growth in the balance of 2011.

“We are pleased with the growth in our deposits over the past year. They have grown by $49.9 million or 8.2%. This will help provide needed liquidity as the economy begins to recover and as we move closer to the anticipated consummation of our merger with MidCarolina. We expect that growth to continue during 2011 and plan to make every effort to grow our balances more for transaction accounts.

“Our credit quality measurements continue to be strong relative to our peers.  We are maintaining our allowance ratios and, unlike many recent announcements, we are not releasing reserves to boost net income to offset soft loan demand and tightened margins.

Majors concluded, “We believe we are at the early stages of an economic recovery. We expect it will be slow and erratic, but our Bank is ready, willing and able to help our market areas move quickly to increasing levels of economic activity. As we move forward in this year, we are very optimistic about the opportunities for market area growth and business development that will come from our pending merger with MidCarolina Financial Corporation, which we hope to have approved by shareholders and regulators during the second quarter of 2011.”

Capital

American National’s capital ratios are among the highest in its peer group.  For the first quarter of 2011, average shareholders’ equity was 13.03% of average assets.

Credit Quality Measurements

Nonperforming assets ($3.4 million of non-accrual loans and $3.5 million of foreclosed real estate) were below industry averages and represented 0.83% of total assets at March 31, 2011, compared to 0.89% at March 31, 2010.

The allowance for loans losses was $8.3 million or 1.60% of loans at March 31, 2011, compared to $8.1 million or 1.57% at March 31, 2010.

Annualized net charge offs were 0.39% for the first quarter 2011 compared to 0.26% for the first quarter in 2010.

Net Interest Income

Net interest income, on a taxable equivalent basis, decreased to $7,004,000 in the first quarter of 2011 from $7,174,000 in first quarter of 2010, a decrease of 2.4%.  Net interest income has been adversely impacted by low market interest rates and shifts between categories of earning assets. The Bank has mitigated the impact by reducing the cost of its interest bearing liabilities. The Company’s net interest margin declined to 3.66% from 3.90%, a decrease of 24 basis points (0.24%) from the first quarter 2010.

Noninterest Income

Noninterest income totaled $1,949,000 in the first quarter of 2011 compared with $1,921,000 in the first quarter of 2010, a 1.5% increase.  Most of that increase was attributable to increased trust income.

Noninterest Expense

Noninterest expense totaled $5,757,000 in the first quarter of 2011, compared to $5,497,000 in the first quarter of 2010, a 4.7% increase.  The major factor impacting noninterest expense were expenses associated with the pending merger with MidCarolina Financial. During the first quarter, the Company incurred merger-related costs of $309,000, reflected in other noninterest expenses, which accounted for virtually all the increase in costs. Much of these merger related expenses are not tax deductible.

Merger with MidCarolina Financial Corporation

On December 16, 2010, American National announced the signing of an agreement which calls for MidCarolina Financial Corporation to merge with American National in an all stock transaction.  In connection with the proposed transaction, American National has filed with the Securities and Exchange Commission (the “SEC”) a registration statement on Form S-4, which has not yet been declared effective, to register the shares of American National stock to be issued to the shareholders of MidCarolina. The registration statement includes a joint proxy statement/prospectus that will be sent to the shareholders of American National and MidCarolina after the registration statement is declared effective seeking the requisite approvals under the merger agreement. In addition, each of American National and MidCarolina may file other relevant documents concerning the proposed transaction with the SEC.

AMERICAN NATIONAL AND MIDCAROLINA URGE INVESTORS AND SECURITY HOLDERS TO READ THE REGISTRATION STATEMENT ON FORM S-4 AND THE JOINT PROXY STATEMENT/PROSPECTUS INCLUDED WITHIN THE REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED TRANSACTION BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT AMERICAN NATIONAL, MIDCAROLINA AND THE PROPOSED TRANSACTION. Investors and security holders may obtain free copies of these documents, when they become available, through the website maintained by the SEC at www.sec.gov. Free copies of the joint proxy statement/prospectus, when it becomes available, also may be obtained by directing a request by telephone or mail to American National Bankshares Inc., 628 Main Street, Danville, Virginia 24541, Attention: Investor Relations (telephone: (434) 792-5111) or MidCarolina Financial Corporation, 3101 South Church Street, Burlington, North Carolina 27216, Attention: Investor Relations (telephone: (336) 538-1600) or by accessing American National’s website at www.amnb.com under “Investments” or MidCarolina’s website at www.midcarolinabank.com under “Investor Relations.” The information on American National’s and MidCarolina’s websites is not, and shall not be deemed to be, a part of this report or incorporated into other filings either company makes with the SEC.

American National and MidCarolina and their respective directors, executive officers and members of management may be deemed to be participants in the solicitation of proxies from the shareholders of American National and/or MidCarolina in connection with the merger. Information about the directors and executive officers of American National is set forth in the proxy statement for American National’s 2011 annual meeting of shareholders filed with the SEC on April 15, 2011. Information about the directors and executive officers of MidCarolina is set forth in Amendment No. 1 to MidCarolina’s Annual Report on Form 10-K for the year ended December 31, 2010 filed with the SEC on April 12, 2011. Additional information regarding the interests of these participants and other persons who may be deemed participants in the merger may be obtained by reading the joint proxy statement/prospectus regarding the merger when it becomes available.

About American National

American National Bankshares Inc. is a bank holding company with assets of $841 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 $430 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; significant changes in securities markets; and changes regarding acquisitions and dispositions.  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
	March 31
ASSETS	2011			2010
Cash and due from banks	$	10,248		$	11,059
Interest-bearing deposits in other banks		25,397			25,531
Securities available for sale, at fair value		226,171			190,949
Securities held to maturity		3,146			5,802
Total securities		229,317			196,751
Restricted stock, at cost		4,062			4,362
Loans held for sale		1,309			2,208
Loans		516,629			515,366
Less allowance for loan losses		(8,257	)		(8,112	)
Net Loans		508,372			507,254
Premises and equipment, net		19,308			19,145
Other real estate owned, net		3,532			3,815
Goodwill		22,468			22,468
Core deposit intangibles, net		1,226			1,603
Accrued interest receivable and other assets		15,999			16,458
Total assets	$	841,238		$	810,654
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Demand deposits -- noninterest-bearing	$	113,260		$	101,190
Demand deposits -- interest-bearing		96,686			98,968
Money market deposits		57,530			79,225
Savings deposits		63,236			64,721
Time deposits		328,771			265,517
Total deposits		659,483			609,621
Short-term borrowings:
Customer repurchase agreements		43,871			60,372
Other short-term borrowings		-			-
Long-term borrowings		4,450			8,600
Trust preferred capital notes		20,619			20,619
Accrued interest payable and other liabilities		3,443			4,260
Total liabilities		731,866			703,472
Shareholders' equity:
Common stock, $1 par, 10,000,000 shares authorized,
6,153,433 shares outstanding at March 31, 2011 and
6,123,275 shares outstanding at March 31, 2010		6,153			6,123
Capital in excess of par value		27,541			27,063
Retained earnings		75,214			72,985
Accumulated other comprehensive income (loss), net		464			1,011
Total shareholders' equity		109,372			107,182
Total liabilities and shareholders' equity	$	841,238		$	810,654

American National Bankshares Inc. and Subsidiaries
Consolidated Statements of Income
(Dollars in thousands, except share and per share data)
Unaudited
	Three Months Ended
	March 31
	2011			2010
Interest and Dividend Income:
Interest and fees on loans	$	6,679		$	7,155
Interest and dividends on securities:
Taxable		1,169			1,316
Tax-exempt		716			466
Dividends		27			23
Other interest income		70			91
Total interest and dividend income		8,661			9,051
Interest Expense:
Interest on deposits		1,580			1,635
Interest on short-term borrowings		80			105
Interest on long-term borrowings		53			64
Interest on customer repurchase agreements
Interest on trust preferred capital notes		343			343
Total interest expense		2,056			2,147
Net Interest Income		6,605			6,904
Provision for loan losses		337			285
Net Interest Income After Provision
for Loan Losses		6,268			6,619
Noninterest Income:
Trust fees		928			812
Service charges on deposit accounts		421			479
Other fees and commissions		316			278
Mortgage banking income		147			246
Securities gains (losses), net		1			(29	)
Foreclosed real estate (losses), net		(22	)		(3	)
Other		158			138
Total noninterest income		1,949			1,921
Noninterest Expense:
Salaries		2,485			2,398
Employee benefits		541			640
Occupancy and equipment		699			779
FDIC assessment		205			195
Bank franchise tax		175			167
Core deposit intangible amortization		94			94
Other		1,558			1,224
Total noninterest expense		5,757			5,497
Income Before Income Taxes		2,460			3,043
Income Taxes		682			858
Net Income	$	1,778		$	2,185
Net Income Per Common Share:
Basic	$	0.29		$	0.36
Diluted	$	0.29		$	0.36
Average Common Shares Outstanding:
Basic		6,143,602			6,119,415
Diluted		6,152,738			6,124,306

American National Bankshares Inc. and Subsidiaries
Financial Highlights
(In thousands, except share, ratio and
nonfinancial data, unaudited)	1st Qtr			4th Qtr			1st Qtr			YTD			YTD
	2011			2010			2010			2011			2010
EARNINGS
Interest income	$	8,661		$	8,889		$	9,051		$	8,661		$	9,051
Interest expense		2,056			2,196			2,147			2,056			2,147
Net interest income		6,605			6,693			6,904			6,605			6,904
Provision for loan losses		337			485			285			337			285
Noninterest income		1,949			2,602			1,921			1,949			1,921
Noninterest expense		5,757			6,170			5,497			5,757			5,497
Income taxes		682			789			858			682			858
Net income		1,778			1,851			2,185			1,778			2,185
PER COMMON SHARE
Earnings per share - basic	$	0.29		$	0.30		$	0.36		$	0.29		$	0.36
Earnings per share - diluted		0.29			0.30			0.36			0.29			0.36
Cash dividends declared		0.23			0.23			0.23			0.23			0.23
Book value per share		17.77			17.64			17.50			17.77			17.50
Book value per share - tangible (a)		13.92			13.76			13.57			13.92			13.57
Closing market price		22.51			23.55			20.15			22.51			20.15
FINANCIAL RATIOS
Return on average assets		0.85	%		0.88	%		1.08	%		0.85	%		1.08	%
Return on average equity		6.51			6.69			8.14			6.51			8.14
Return on average tangible equity (b)		8.64			8.83			10.83			8.64			10.83
Average equity to average assets		13.03			13.12			13.24			13.03			13.24
Net interest margin, taxable equivalent		3.66			3.67			3.90			3.66			3.90
Efficiency ratio		64.16			65.70			60.22			64.16			60.22
Effective tax rate		27.72			29.89			28.20			27.72			28.20
PERIOD-END BALANCES
Securities	$	233,379		$	235,691		$	201,113		$	233,379		$	201,113
Loans held for sale		1,309			3,135			2,208			1,309			2,208
Loans, net of unearned income		516,629			520,781			515,366			516,629			515,366
Goodwill and other intangibles		23,694			23,788			24,071			23,694			24,071
Assets		841,238			833,664			810,654			841,238			810,654
Assets - tangible (a)		817,544			809,876			786,583			817,544			786,583
Deposits		659,483			640,098			609,621			659,483			609,621
Customer repurchase agreements		43,871			47,084			60,372			43,871			60,372
Other short-term borrowings		-			6,110			-			-			-
Long-term borrowings		25,069			29,107			29,219			25,069			29,219
Shareholders' equity		109,372			108,087			107,182			109,372			107,182
Shareholders' equity - tangible (a)		85,678			84,299			83,111			85,678			83,111
AVERAGE BALANCES
Securities	$	226,595		$	215,208		$	184,696		$	226,595		$	184,696
Loans held for sale		1,508			5,629			2,444			1,508			2,444
Loans, net of unearned income		516,610			521,832			518,403			516,610			520,847
Interest-earning assets		765,291			770,649			736,183			765,291			736,183
Goodwill and other intangibles		23,750			23,844			24,125			23,750			24,125
Assets		838,151			843,922			810,620			838,151			810,620
Assets - tangible (a)		814,401			820,078			786,495			814,401			786,495
Interest-bearing deposits		542,104			537,662			507,209			542,104			507,209
Deposits		652,922			647,526			606,085			652,922			606,085
Customer repurchase agreements		43,762			52,068			63,947			43,762			63,947
Other short-term borrowings		136			251			-			136			-
Long-term borrowings		27,855			29,136			29,248			27,855			29,248
Shareholders' equity		109,224			110,688			107,336			109,224			107,336
Shareholders' equity - tangible (a)		85,474			86,844			83,211			85,474			83,211
CAPITAL
Average shares outstanding - basic		6,143,602			6,126,817			6,119,415			6,143,602			6,119,415
Average shares outstanding - diluted		6,152,738			6,141,123			6,124,306			6,152,738			6,124,306
Shares repurchased		-			-			-			-			-
Average price of shares repurchased	$	-		$	-		$	-		$	-		$	-

American National Bankshares Inc. and Subsidiaries
Financial Highlights
(In thousands, except share, ratio and
nonfinancial data, unaudited)		1st Qtr			4th Qtr			1st Qtr			YTD			YTD
		2011			2010			2010			2011			2010
ALLOWANCE FOR LOAN LOSSES
Beginning balance	$	8,420		$	8,542		$	8,166		$	8,420		$	8,166
Provision for loan losses		337			485			285			337			285
Charge-offs		(571	)		(662	)		(427	)		(571	)		(427	)
Recoveries		71			55			88			71			88
Ending balance	$	8,257		$	8,420		$	8,112		$	8,257		$	8,112
LOANS
Construction and land development	$	36,720		$	37,168		$	39,421		$	36,720		$	39,421
Commercial real estate		207,290			210,393			205,642			207,290			205,642
Residential real estate		118,610			119,398			119,776			118,610			119,776
Home equity		61,674			61,064			63,302			61,674			63,302
Commercial and industrial		84,702			85,051			80,331			84,702			80,331
Consumer		7,632			7,707			6,894			7,632			6,894
Total	$	516,628		$	520,781		$	515,366		$	516,628		$	515,366
NONPERFORMING ASSETS AT PERIOD-END
Nonperforming loans:
90 days past due	$	-		$	-		$	-		$	-		$	-
Nonaccrual		3,417			2,597			3,436			3,417			3,436
Foreclosed real estate		3,532			3,716			3,815			3,532			3,815
Nonperforming assets	$	6,949		$	6,313		$	7,251		$	6,949		$	7,251
ASSET QUALITY RATIOS
Annualized net chargeoffs to average loans		0.39	%		0.47	%		0.26	%		0.39	%		0.26	%
Nonperforming assets to total assets		0.83			0.76			0.89			0.83			0.89
Nonperforming loans to total loans		0.66			0.50			0.67			0.66			0.67
Allowance for loan losses to total loans		1.60			1.62			1.57			1.60			1.57
Allowance for loan losses to
nonperforming loans		241.64			324.22			236.09			241.64			236.09
OTHER DATA
Fiduciary assets at period-end (c)	$	380,259		$	368,018		$	363,205		$	380,259		$	363,205
Retail brokerage assets at period-end (c)	$	50,175		$	49,311		$	51,848		$	50,175		$	51,848
Number full-time equivalent employees (d)		242			242			235			242			235
Number of full service offices		18			18			18			18			18
Number of loan production offices		1			1			1			1			1
Number of ATM's		26			26			26			26			26
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

American National Bankshares Inc. and Subsidiaries
Net Interest Income Analysis
For the Three Months Ended March 31, 2011 and 2010
(in thousands, except rates)
					Interest
	Average Balance				Income/Expense				Yield/Rate
	2011		2010		2011		2010		2011			2010
Loans:
Commercial	$	77,925	$	79,279	$	880	$	953		4.52	%		4.81	%
Real estate		432,688		434,795		5,695		6,095		5.26			5.61
Consumer		7,505		6,773		136		134		7.25			7.91
Total loans		518,118		520,847		6,711		7,182		5.18			5.52
Securities:
Federal agencies & GSE		43,345		65,751		323		551		2.98			3.35
Mortgage-backed & CMO's		59,297		43,783		490		501		3.31			4.58
State and municipal		117,916		67,538		1,408		927		4.78			5.49
Other		6,037		7,624		58		69		3.84			3.62
Total securities		226,595		184,696		2,279		2,048		4.02			4.44
Deposits in other banks		20,578		30,640		70		91		1.36			1.19
Total interest earning assets		765,291		736,183		9,060		9,321		4.74			5.06
Nonearning assets		72,860		74,437
Total assets	$	838,151	$	810,620
Deposits:
Demand	$	96,698	$	97,062		18		21		0.07			0.09
Money market		63,125		80,809		83		90		0.53			0.45
Savings		62,505		62,801		21		22		0.13			0.14
Time		319,776		266,537		1,458		1,502		1.82			2.25
Total deposits		542,104		507,209		1,580		1,635		1.17			1.29
Customer repurchase agreements		43,762		63,947		80		105		0.73			0.66
Other short-term borrowings		136		-		-		-		0.47			-
Long-term borrowings		27,855		29,248		396		407		5.69			5.57
Total interest bearing liabilities		613,857		600,404		2,056		2,147		1.34			1.43
Noninterest bearing
demand deposits		110,818		98,876
Other liabilities		4,252		4,004
Shareholders' equity		109,224		107,336
Total liabilities and
shareholders' equity	$	838,151	$	810,620
Interest rate spread										3.40	%		3.63	%
Net interest margin										3.66	%		3.90	%
Net interest income (taxable equivalent basis)						7,004		7,174
Less: Taxable equivalent adjustment						399		270
Net interest income					$	6,605	$	6,904