American National Bankshares Inc. Reports First Quarter 2010 Earnings


DANVILLE, VA--(Marketwire - April 21, 2010) - American National Bankshares Inc. (NASDAQ: AMNB)

-- Net income of $2,185,000
-- EPS of $.36 per share
-- Net interest margin 3.90%
-- Allowance for loan losses 1.57% of loans
-- Shareholders' equity 13.24% of average assets

American National Bankshares Inc. (NASDAQ: AMNB), parent company of American National Bank and Trust Company, today announced first quarter 2010 net income of $2,185,000. Earnings per share were $0.36 on both a basic and diluted basis. This net income produced returns on average assets and average equity of 1.08% and 8.14%, respectively. Annualized return on average tangible equity was 10.83%.

Financial Performance

"Our first quarter 2010 earnings were almost $2.2 million, up $1.4 million or 185% from the first quarter of 2009. It was a solid quarter for American National, considering the current economic environment," stated Charles H. Majors, President and Chief Executive Officer.

"We had improvement in several areas. Net interest income was up $491,000 or 7.7%, mostly the result of effective pricing of deposits and other interest bearing liabilities.

"Noninterest income was up $1.2 million or 162%. The largest component of that change was a first quarter 2009 valuation adjustment on certain foreclosed real estate which resulted in a pre-tax charge of $1.2 million.

"Noninterest expense also improved; it was down $378,000 or 6.4%. Most of that improvement was related to targeted expense control, including lower staff levels and a change in our defined benefit program.

"Our loan portfolio fell $12.6 million or 2.4% during the first quarter. Deposits have increased $5.3 million or 0.9% during the same period. These changes are continuations of trends that dominated our balance sheet during 2009 and into early 2010."

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. But as we noted last quarter, we believe we are beginning to see some early signs of an uptick in demand for loans. The economic recovery will likely be painfully slow and spotty, 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. At March 31, 2010, average shareholders' equity was 13.24% of average assets.

Credit Quality Measurements

Nonperforming assets were below industry averages and represented 0.89% of total assets at March 31, 2010, compared to 0.87% at December 31, 2009. Nonperforming assets at March 31, 2010 consisted of $3.4 million of nonaccrual loans and $3.8 million of foreclosed real estate, up $195,000 from year-end. Annualized net charge-offs decreased to 0.26% during the first quarter of 2010 compared to 0.31% in fourth quarter of 2009. The allowance for loans losses was $8.1 million, or 1.57% of loans, at March 31, 2010 compared to 1.55% at December 31, 2009 and 1.38% at March 31, 2009.

Net Interest Income

Net interest income increased to $6.9 million in the first quarter of 2010 from $6.4 million in the first quarter of 2009, a net increase of $491,000 or 7.7%. Our net interest margin, on a tax equivalent basis, for the first quarter 2010 was 3.90%, up from 3.61% for the same quarter of 2009

Noninterest Income

Noninterest income totaled $1.9 million in the first quarter of 2010, compared with $734,000 in the first quarter of 2009. Noninterest income was significantly reduced in the first quarter of 2009 by a $1.2 million valuation adjustment of one item of foreclosed real estate, noted above.

Noninterest Expense

Noninterest expense totaled $5.5 million in the first quarter of 2010, compared to $5.9 million in the first quarter of 2009. Most of the reduction in expense was related to targeted expense control, including lower staff levels and a change in our defined benefit program, also noted above.

About American National

American National Bankshares Inc. is a bank holding company with assets of $810 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 18 banking offices. The Bank also manages an additional $415 million of assets in its Trust and Investment Services Division.

American National Bank and Trust Company provides a full array of financial products and services. 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.

            American National Bankshares Inc. and Subsidiaries
                        Consolidated Balance Sheets
          (Dollars in thousands, except share and per share data)
                                Unaudited

                                                            March 31
                                                      --------------------
ASSETS                                                  2010       2009
                                                      ---------  ---------

Cash and due from banks                               $  11,059  $  13,632
Interest-bearing deposits in other banks                 25,531     18,188

Securities available for sale, at fair value            190,949    163,846
Securities held to maturity                               5,802      6,811
                                                      ---------  ---------
      Total securities                                  196,751    170,657
                                                      ---------  ---------

Restricted stock, at cost                                 4,362      4,135
Loans held for sale                                       2,208      2,782

Loans                                                   515,366    569,003
  Less allowance for loan losses                         (8,112)    (7,836)
                                                      ---------  ---------
      Net Loans                                         507,254    561,167
                                                      ---------  ---------

Premises and equipment, net                              19,145     18,018
Other real estate owned, net                              3,815      3,345
Goodwill                                                 22,468     22,468
Core deposit intangibles, net                             1,603      1,981
Accrued interest receivable and other assets             16,458     13,105
                                                      ---------  ---------

      Total assets                                    $ 810,654  $ 829,478
                                                      =========  =========

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:
   Demand deposits -- noninterest-bearing             $ 101,190  $  98,926
   Demand deposits -- interest-bearing                   98,968     94,505
   Money market deposits                                 79,225     72,085
   Savings deposits                                      64,721     63,553
   Time deposits                                        265,517    286,819
                                                      ---------  ---------
      Total deposits                                    609,621    615,888
                                                      ---------  ---------

   Short-term borrowings:
      Customer repurchase agreements                     60,372     60,768
      Other short-term borrowings                             -     12,440
   Long-term borrowings                                   8,600     13,750
   Trust preferred capital notes                         20,619     20,619
   Accrued interest payable and other liabilities         4,260      4,098
                                                      ---------  ---------
      Total liabilities                                 703,472    727,563
                                                      ---------  ---------

Shareholders' equity:
   Common stock, $1 par, 10,000,000 shares
    authorized, 6,123,275 shares outstanding at March
    31, 2010 and 6,079,161 shares outstanding at March
    31, 2009                                              6,123      6,079
   Capital in excess of par value                        27,063     26,488
   Retained earnings                                     72,985     70,379
   Accumulated other comprehensive income (loss), net     1,011     (1,031)
                                                      ---------  ---------
      Total shareholders' equity                        107,182    101,915
                                                      ---------  ---------

      Total liabilities and shareholders' equity      $ 810,654  $ 829,478
                                                      =========  =========





            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
                                                      --------------------
                                                        2010       2009
                                                      ---------  ---------
 Interest and Dividend Income:
   Interest and fees on loans                         $   7,155  $   8,034
   Interest and dividends on securities:
     Taxable                                              1,316      1,120
     Tax-exempt                                             466        386
     Dividends                                               23         22
   Other interest income                                     91         88
                                                      ---------  ---------
       Total interest and dividend income                 9,051      9,650
                                                      ---------  ---------

Interest Expense:
   Interest on deposits                                   1,635      2,527
   Interest on short-term borrowings                        105        236
   Interest on long-term borrowings                          64        131
   Interest on customer repurchase agreements
   Interest on trust preferred capital notes                343        343
                                                      ---------  ---------
      Total interest expense                              2,147      3,237
                                                      ---------  ---------

 Net Interest Income                                      6,904      6,413
   Provision for loan losses                                285        350
                                                      ---------  ---------

Net Interest Income After Provision
    for Loan Losses                                       6,619      6,063
                                                      ---------  ---------

 Noninterest Income:
   Trust fees                                               812        758
   Service charges on deposit accounts                      479        502
   Other fees and commissions                               278        242
   Mortgage banking income                                  246        286
   Brokerage fees                                            21         57
   Securities gains (losses), net                           (29)         -
   Impairment of securities                                   -          -
   Net loss on foreclosed real estate                        (3)    (1,179)
   Other                                                    117         68
                                                      ---------  ---------
      Total noninterest income                            1,921        734
                                                      ---------  ---------

 Noninterest Expense:
   Salaries                                               2,398      2,531
   Employee benefits                                        640        813
   Occupancy and equipment                                  779        740
   FDIC assessment                                          195        217
   Bank franchise tax                                       167        163
   Core deposit intangible amortization                      94         94
   Other                                                  1,224      1,317
                                                      ---------  ---------
      Total noninterest expense                           5,497      5,875
                                                      ---------  ---------

 Income Before Income Taxes                               3,043        922
 Income Taxes                                               858        154
                                                      ---------  ---------
 Net Income                                           $   2,185  $     768
                                                      =========  =========

Net Income Per Common Share:
    Basic                                             $    0.36  $    0.13
    Diluted                                           $    0.36  $    0.13
 Average Common Shares Outstanding:
    Basic                                             6,119,415  6,081,998
    Diluted                                           6,124,306  6,085,457




            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
                       2010       2009       2009       2010       2009
                     ---------  ---------  ---------  ---------  ---------
EARNINGS
  Interest income    $   9,051  $   9,257  $   9,650  $   9,051  $   9,650
  Interest expense       2,147      2,307      3,237      2,147      3,237
  Net interest income    6,904      6,950      6,413      6,904      6,413
  Provision for loan
   losses                  285        328        350        285        350
  Noninterest income     1,921      1,937        734      1,921        734
  Noninterest expense    5,497      5,524      5,875      5,497      5,875
  Income taxes             858        866        154        858        154
  Net income             2,185      2,169        768      2,185        768

PER COMMON SHARE
  Earnings per share
   - basic           $    0.36  $    0.36  $    0.13  $    0.36  $    0.13
  Earnings per share
   - diluted              0.36       0.35       0.13       0.36       0.13
  Cash dividends
   declared               0.23       0.23       0.23       0.23       0.23
  Book value per
   share                 17.50      17.41      16.76      17.50      16.76
  Book value per
   share - tangible(a)   13.57      13.46      12.74      13.57      12.74
  Closing market price   20.15      21.90      15.60      20.15      15.60

FINANCIAL RATIOS
  Return on average
   assets                 1.08%      1.07%      0.38%      1.08%      0.38%
  Return on average
   equity                 8.14       8.24       2.99       8.14       2.99
  Return on average
   tangible equity(b)    10.83      11.03       4.32      10.83       4.32
  Average equity to
   average assets        13.24      12.93      12.80      13.24      12.80
  Net interest
   margin, taxable
   equivalent             3.90       3.88       3.61       3.90       3.61
  Efficiency ratio       60.22      58.79      68.77      60.22      68.77
  Effective tax rate     28.20      28.53      16.70      28.20      16.70

PERIOD-END BALANCES
  Securities         $ 201,113  $ 199,686  $ 174,792  $ 201,113  $ 174,792
  Loans held for sale    2,208      2,490      2,782      2,208      2,782
  Loans, net of
   unearned income     515,366    527,991    569,003    515,366    569,003
  Goodwill and other
   intangibles          24,071     24,166     24,449     24,071     24,449
  Assets               810,654    808,973    829,478    810,654    829,478
  Assets
   - tangible(a)       786,583    784,807    805,029    786,583    805,029
  Deposits             609,621    604,273    615,888    609,621    615,888
  Customer repurchase
   agreements           60,372     65,929     60,678     60,372     60,678
  Other short-term
   borrowings                -          -     12,440          -     12,440
  Long-term
   borrowings           29,219     29,257     34,369     29,219     34,369
  Shareholders'
   equity              107,182    106,389    101,915    107,182    101,915
  Shareholders'
   equity
   - tangible(a)        83,111     82,223     77,466     83,111     77,466

AVERAGE BALANCES
  Securities         $ 184,696  $ 167,546  $ 138,067  $ 184,696  $ 138,067
  Loans held for
   sale                  2,444      4,394      2,996      2,444      2,996
  Loans, net of
   unearned income     518,403    540,103    570,342    520,847    570,342
  Interest-earning
   assets              736,183    744,007    734,980    736,183    734,980
  Goodwill and other
   intangibles          24,125     24,217     24,507     24,125     24,507
  Assets               810,620    814,232    803,206    810,620    803,206
  Assets
   - tangible(a)       786,495    790,015    778,699    786,495    778,699
  Interest-bearing
   deposits            507,209    499,725    510,821    507,209    510,821
  Deposits             606,085    604,506    604,002    606,085    604,002
  Customer repurchase
   agreements           63,947     70,014     56,051     63,947     56,051
  Other short-term
   borrowings                -         91      2,071          -      2,071
  Long-term
   borrowings           29,248     29,287     34,398     29,248     34,398
  Shareholders'
   equity              107,336    105,302    102,845    107,336    102,845
  Shareholders'
   equity
   - tangible(a)        83,211     81,085     78,338     83,211     78,338

CAPITAL
  Average shares
   outstanding -
   basic             6,119,415  6,108,340  6,081,998  6,119,415  6,081,998
  Average shares
   outstanding -
   diluted           6,124,306  6,116,800  6,085,457  6,124,306  6,085,457
  Shares repurchased         -          -      7,600          -      7,600
  Average price of
   shares
   repurchased       $       -  $       -  $   15.92  $       -  $   15.92

ALLOWANCE FOR LOAN
 LOSSES
  Beginning balance  $   8,166  $   8,260  $   7,824  $   8,166  $   7,824
  Provision for loan
   losses                  285        328        350        285        350
  Charge-offs             (427)      (485)      (376)      (427)      (376)
  Recoveries                88         63         38         88         38
                     ---------  ---------  ---------  ---------  ---------
  Ending balance     $   8,112  $   8,166  $   7,836  $   8,112  $   7,836

LOANS
  Construction and
   land development  $  39,421  $  40,371  $  53,579  $  39,421  $  53,579
  Commercial real
   estate              205,642    208,066    213,508    205,642    213,508
  Residential real
   estate              119,776    121,639    134,510    119,776    134,510
  Home equity           63,302     64,678     61,459     63,302     61,459
  Commercial and
   industrial           80,331     86,312     97,259     80,331     97,259
  Consumer               6,894      6,925      8,688      6,894      8,688
                     ---------  ---------  ---------  ---------  ---------
  Total              $ 515,366  $ 527,991  $ 569,003  $ 515,366  $ 569,003

NONPERFORMING ASSETS
 AT PERIOD-END
  Nonperforming
   loans:
    90 days past due $       -  $       -  $       -  $       -  $       -
    Nonaccrual           3,436      3,642      2,821      3,436      2,821
  Foreclosed real
   estate                3,815      3,414      3,345      3,815      3,345
                     ---------  ---------  ---------  ---------  ---------
  Nonperforming
   assets            $   7,251  $   7,056  $   6,166  $   7,251  $   6,166

ASSET QUALITY RATIOS
  Annualized net
   chargeoffs to
   average loans          0.26%      0.31%      0.24%      0.26%      0.24%
  Nonperforming
   assets to total
   assets                 0.89       0.87       0.74       0.89       0.74
  Nonperforming
   loans to total
   loans                  0.67       0.69       0.50       0.67       0.50
  Allowance for loan
   losses to total
   loans                  1.57       1.55       1.38       1.57       1.38
  Allowance for loan
   losses to
   nonperforming
   loans                236.09     224.22     277.77     236.09     277.77

OTHER DATA
  Fiduciary assets
   at period-end (c) $ 363,205  $ 358,124  $ 305,129  $ 363,205  $ 305,129
  Retail brokerage
   assets at
   period-end (c)    $  51,848  $  54,696  $  82,554  $  51,848  $  82,554
  Number full-time
   equivalent
   employees (d)           235        238        258        235        258
  Number of full
   service offices          18         18         20         18         20
  Number of loan
   production
   offices                   1          2          2          1          2
  Number of ATM's           26         24         23         26         23


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 March 31, 2010 and 2009
                       (in thousands, except rates)

                                            Interest
                      Average Balance    Income/Expense      Yield/Rate
                      ----------------- ----------------- ----------------

                        2010     2009     2010     2009     2010     2009
                      -------- -------- -------- -------- -------  -------
Loans:
  Commercial          $ 79,279 $ 96,097 $    953 $  1,100    4.81%    4.58%
  Real estate          434,795  469,346    6,095    6,779    5.61     5.78
  Consumer               6,773    7,895      134      178    7.91     9.02
                      -------- -------- -------- -------- -------  -------
    Total loans        520,847  573,338    7,182    8,057    5.52     5.62
                      -------- -------- -------- -------- -------  -------

Securities:
  Federal agencies      65,751   45,767      551      521    3.35     4.55
  Mortgage-backed       43,783   44,560      501      562    4.58     5.04
  State and municipal   67,538   42,726      927      604    5.49     5.65
  Other                  7,624    5,014       69       33    3.62     2.63
                      -------- -------- -------- -------- -------  -------
    Total securities   184,696  138,067    2,048    1,720    4.44     4.98
                      -------- -------- -------- -------- -------  -------

Deposits in other
 banks                  30,640   23,575       91       88    1.19     1.49
                      -------- -------- -------- -------- -------  -------

Total interest
 earning assets        736,183  734,980    9,321    9,865    5.06     5.37
                                        -------- -------- -------  -------

Nonearning assets       74,437   68,226
                      -------- --------

    Total assets      $810,620 $803,206
                      ======== ========

Deposits:
  Demand              $ 97,062 $112,459       21      190    0.09     0.68
  Money market          80,809   64,648       90      198    0.45     1.23
  Savings               62,801   61,289       22       40    0.14     0.26
  Time                 266,537  272,425    1,502    2,099    2.25     3.08
                      -------- -------- -------- -------- -------  -------
    Total deposits     507,209  510,821    1,635    2,527    1.29     1.98

Customer repurchase
 agreements             63,947   56,051      105      233    0.66     1.66
Other short-term
 borrowings                  -    2,071        -        3       -     0.58
Long-term borrowings    29,248   34,398      407      474    5.57     5.51
                      -------- -------- -------- -------- -------  -------

  Total interest
   bearing
   liabilities         600,404  603,341    2,147    3,237    1.43     2.15
                                        -------- -------- -------  -------

Noninterest bearing
  demand deposits       98,876   93,181
Other liabilities        4,004    3,839
Shareholders' equity   107,336  102,845
                      -------- --------
    Total liabilities
     and shareholders'
     equity           $810,620 $803,206
                      ======== ========

Interest rate spread                                         3.63%    3.22%
                                                          =======  =======
Net interest margin                                          3.90%    3.61%
                                                          =======  =======

Net interest income
 (taxable equivalent
 basis)                                    7,174    6,628
Less: Taxable
 equivalent
 adjustment                                  270      215
                                        -------- --------
Net interest income                     $  6,904 $  6,413
                                        ======== ========