American National Bankshares (AMNB) 8-K Results of Operations and Financial Condition

American National Bankshares Inc. and Subsidiary
Consolidated Balance Sheets
March 31, 2007, and 2006
(Dollars in thousands, except share data)
(Unaudited)
		2007			2006
ASSETS
Cash and due from banks...............................................................................................	$	22,844		$	17,986
Interest bearing deposits in other banks.....................................................................		22,817			16,261
Securities available for sale, at fair value.....................................................................		138,533			164,610
Securities held to maturity.............................................................................................		13,475			16,883
Total securities...........................................................................................................		152,008			181,493
Loans held for sale.........................................................................................................		2,017			873
Loans, net of unearned income...................................................................................		543,357			411,335
Less allowance for loan losses....................................................................................		(7,590	)		(6,164	)
Net Loans...................................................................................................................		535,767			405,171
Bank premises and equipment, net..............................................................................		12,759			7,734
Goodwill...........................................................................................................................		22,468			-
Core deposit intangibles, net........................................................................................		2,735			92
Accrued interest receivable and other assets............................................................		14,129			9,841
Total assets......................................................................................................................	$	787,544		$	639,451
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Demand deposits -- noninterest-bearing...................................................................	$	116,940		$	89,899
Demand deposits -- interest bearing...........................................................................		113,778			104,479
Money market deposits................................................................................................		52,856			41,557
Savings deposits............................................................................................................		69,083			77,258
Time deposits..................................................................................................................		253,377			191,486
Total deposits............................................................................................................		606,034			504,679
Repurchase agreements................................................................................................		44,526			40,672
FHLB borrowings...........................................................................................................		15,050			17,200
Trust preferred capital notes.........................................................................................		20,619			-
Accrued interest payable and other liabilities............................................................		4,675			2,848
Total liabilities............................................................................................................		690,904			565,399
Shareholders' equity:
Common stock, $1 par, 10,000,000 shares authorized,
6,156,823 shares outstanding at March 31, 2007 and
5,431,438 shares outstanding at March 31, 2006		6,157			5,431
Capital in excess of par value.......................................................................................		26,456			9,610
Retained earnings..........................................................................................................		65,726			60,088
Accumulated other comprehensive income (loss), net............................................		(1,699	)		(1,077	)
Total shareholders' equity.......................................................................................		96,640			74,052
Total liabilities and shareholders' equity....................................................................	$	787,544		$	639,451

American National Bankshares Inc. and Subsidiary
Consolidated Statements of Income
For the Three Months Ended March 31, 2007, and 2006
(Dollars in thousands, except share and per share data)
(Unaudited)
		2007		2006
Interest Income:
Interest and fees on loans...............................................................................................	$	10,079	$	6,956
Interest and dividends on securities:
Taxable................................................................................................................................		1,136		1,152
Tax-exempt.........................................................................................................................		423		451
Dividends...........................................................................................................................		89		57
Other interest income.......................................................................................................		171		232
Total interest income........................................................................................................		11,898		8,848
Interest Expense:
Deposits.............................................................................................................................		3,783		2,307
Repurchase agreements...................................................................................................		426		309
Other borrowings..............................................................................................................		206		213
Trust preferred capital notes...........................................................................................		343		-
Total interest expense......................................................................................................		4,758		2,829
Net Interest Income.........................................................................................................		7,140		6,019
Provision for Loan Losses..............................................................................................		303		126
Net Interest Income After Provision for Loan Losses..............................................		6,837		5,893
Noninterest Income:
Trust and investment services......................................................................................		879		755
Service charges on deposit accounts...........................................................................		622		571
Other fees and commissions..........................................................................................		289		309
Mortgage banking income.............................................................................................		190		133
Securities gains, net........................................................................................................		25		21
Other..................................................................................................................................		207		112
Total noninterest income...............................................................................................		2,212		1,901
Noninterest Expense:
Salaries.............................................................................................................................		2,390		1,984
Pension and other employee benefits.........................................................................		648		649
Occupancy and equipment...........................................................................................		829		646
Bank franchise tax..........................................................................................................		168		140
Core deposit intangible amortization..........................................................................		94		39
Other................................................................................................................................		1,041		925
Total noninterest expense............................................................................................		5,170		4,383
Income Before Income Tax Provision........................................................................		3,879		3,411
Income Tax Provision..................................................................................................		1,175		1,005
Net Income....................................................................................................................	$	2,704	$	2,406
Net Income Per Common Share:
Basic...............................................................................................................................	$	0.44	$	0.44
Diluted...........................................................................................................................	$	0.44	$	0.44
Average Common Shares Outstanding:
Basic.............................................................................................................................		6,156,812		5,441,758
Diluted.........................................................................................................................		6,185,084		5,477,904

Financial Highlights
American National Bankshares Inc. and Subsidiary
(Dollars in thousands, except share data)
(Unaudited)
	As of March 31,
		2007			2006		Change
EARNINGS
Interest income	$	11,898		$	8,848		34.5	%
Interest expense		4,758			2,829		68.2
Net interest income		7,140			6,019		18.6
Provision for loan losses		303			126		140.5
Noninterest income		2,212			1,901		16.4
Noninterest expense		5,170			4,383		18.0
Income taxes		1,175			1,005		16.9
Net income		2,704			2,406		12.4
PER COMMON SHARE
Earnings per share - basic	$	0.44		$	0.44		0.0	%
Earnings per share - diluted		0.44			0.44		0.0
Cash dividends paid		0.22			0.21		4.8
Book value per share		15.70			13.63		15.2
Book value per share - tangible (a)		11.60			13.62		(14.8	)
Closing market price		22.88			23.49		(2.6	)
FINANCIAL RATIOS
Return on average assets		1.39	%		1.52	%	(13	) bp
Return on average equity		11.35			13.02		(167	)
Return on average tangible equity (b)		15.81			13.19		262
Average equity to average assets		12.24			11.69		55
Net interest margin (FTE)		4.13			4.14		(1	)
Efficiency ratio		55.70			53.88		182
PERIOD END BALANCES
Securities	$	152,008		$	181,493		(16.2	)%
Loans held for sale		2,017			873		131.0
Loans, net of unearned income		543,357			411,335		32.1
Goodwill and other intangibles		25,203			92		N/A
Assets		787,544			639,451		23.2
Assets - tangible (a)		762,341			639,359		19.2
Deposits		606,034			504,679		20.1
Repurchase agreements		44,526			40,672		9.5
FHLB borrowings		15,050			17,200		(12.5	)
Trust preferred capital notes		20,619			-		N/A
Shareholders' equity		96,640			74,052		30.5
Shareholders' equity - tangible (a)		71,437			73,960		(3.4	)
AVERAGE BALANCES
Securities	$	157,004		$	171,558		(8.5	)%
Total loans		544,162			412,164		32.0
Interest-earning assets		714,427			605,026		18.1
Goodwill and other intangibles		25,240			108		N/A
Assets		778,858			631,934		23.2
Assets - tangible (a)		753,618			631,826		19.3
Interest-bearing deposits		493,806			412,733		19.6
Deposits		594,817			497,758		19.5
Repurchase agreements		46,254			39,941		15.8
Other borrowings		36,720			17,230		113.1
Shareholders' equity		95,332			73,900		29.0
Shareholders' equity - tangible (a)		70,092			73,792		(5.0	)
CAPITAL
Average shares outstanding - basic		6,156,812			5,441,758		13.1	%
Average shares outstanding - diluted		6,185,084			5,477,904		12.9
Shares repurchased		11,600			13,900		(16.5	)
Average price of shares repurchased	$	23.15		$	23.33		(0.8	)
ALLOWANCE FOR LOAN LOSSES
Beginning balance	$	7,264		$	6,109		18.9	%
Provision for loan losses		303			126		140.5
Charge-offs		(49	)		(151	)	(67.5	)
Recoveries		72			80		(10.0	)
Ending balance	$	7,590		$	6,164		23.1
NONPERFORMING ASSETS
Nonperforming loans:
90 days past due	$	-		$	-		N/A
Nonaccrual		3,689			4,274		(13.7	)
Foreclosed real estate		99			155		(36.1	)
Nonperforming assets	$	3,788		$	4,429		(14.5	)
ASSET QUALITY RATIOS (c)
Net chargeoffs (recoveries) to average loans		(0.02	)		0.07		(9	) bp
Nonperforming assets to total assets		0.48	%		0.69	%	(21	)
Nonperforming loans to total loans		0.68			1.04		(36	)
Allowance for loan losses to total loans		1.40			1.50		(10	)
Allowance for loan losses
to nonperforming loans		2.06	x		1.44	x	62
Notes:
(a) - Excludes goodwill and other intangible assets
(b) - Excludes amortization expense, net of tax, of intangible assets
(c) - Balance sheet amounts used in calculations are based on period end balances
bp - Change is measured as difference in basis points
FTE - Fully taxable equivalent basis
N/A - Percentage change is not applicable or not meaningful

Net Interest Income Analysis
For the Three Months Ended March 31, 2007 and 2006
(in thousands, except yields and rates)
Unaudited
		Average Balance				Interest Income/Expense			Average Yield/Rate
		2007		2006		2007		2006	2007		2006
Loans:
Commercial	$	88,962	$	70,421	$	1,693	$	1,238	7.61	%	7.03	%
Real Estate		444,854		331,522		8,165		5,508	7.34		6.65
Consumer		10,346		10,221		242		229	9.36		8.96
Total loans		544,162		412,164		10,100		6,975	7.42		6.77
Securities:
Federal agencies		82,257		90,141		857		807	4.17		3.58
Mortgage-backed		20,001		21,626		241		245	4.82		4.53
State and municipal		45,963		47,419		634		673	5.52		5.68
Other		8,783		12,372		129		154	5.87		4.98
Total securities		157,004		171,558		1,861		1,879	4.74		4.38
Deposits in other banks		13,261		21,304		171		232	5.16		4.36
Total interest earning assets		714,427		605,026		12,132		9,086	6.79		6.00
Nonearning assets		64,431		26,908
Total assets	$	778,858	$	631,934
Deposits:
Demand	$	110,115	$	97,050	$	424	$	303	1.54	%	1.25	%
Money market		52,140		41,414		349		221	2.68		2.13
Savings		68,927		78,256		235		187	1.36		0.96
Time		262,624		196,013		2,775		1,596	4.23		3.26
Total deposits		493,806		412,733		3,783		2,307	3.06		2.24
Repurchase agreements		46,254		39,941		426		309	3.68		3.09
Other borrowings		36,720		17,230		549		213	5.98		4.94
Total interest bearing liabilities		576,780		469,904		4,758		2,829	3.30		2.40
Noninterest bearing demand deposits		101,011		85,025
Other liabilities		5,735		3,105
Shareholders' equity		95,332		73,900
Total liabilities and
shareholders' equity	$	778,858	$	631,934
Interest rate spread									3.49	%	3.60	%
Net interest margin									4.13	%	4.14	%
Net interest income (taxable equivalent basis)						7,374		6,257
Less: Taxable equivalent adjustment						234		238
Net interest income					$	7,140	$	6,019