National Bankshares, Inc. Reports Higher First Quarter Earnings

BLACKSBURG, VA--(Marketwire - April 15, 2009) - National Bankshares, Inc. (NASDAQ: NKSH) today announced higher earnings for the first quarter ended March 31, 2009. The Company had net income of nearly $3.39 million, up by 6.48% over the $3.18 million reported for the quarter ended March 31, 2008. This translates to basic net income per share of $0.49, as compared with $0.46 per share last year. Net loans at the end of the first quarter were at $568.60 million, an 8.86% increase over the $522.34 million on March 31 last year. National Bankshares ended the first quarter with total assets of nearly $979.79 million, a 7.47% increase over the March 31, 2008 total of $911.72 million.

The Company's Chairman, President & CEO, James G. Rakes said, "During the last quarter, our conservative approach to banking continued to serve our communities and stockholders well. Because we have strong capital levels and good liquidity, we have been able to continue making loans throughout the economic downturn. As traditional community bankers we have the advantage of knowing our customers and our markets. This helps us make solid loans, and total nonperforming loans have increased just 1.36%, from $1.32 million at March 31, 2008 to $1.34 million at the end of the first quarter this year. The Company has not fully escaped the effects of the current recession, and we have seen the total of other real estate owned grow to $1.92 million at March 31, 2009. However, even this number is modest when compared with our peers. In order to account for growth in the loan portfolio and to prepare for any difficulties that might be on the horizon if the downturn is extended, we have taken the opportunity to make prudent additions to the allowance for loan losses. At the end of the first quarter of 2009, the allowance stood at nearly $6.12 million, a 17.02% increase over the balance at March 31, 2008." Mr. Rakes added, "At National Bankshares, we are committed to community banking, and our subsidiary, National Bank, has been doing business in good and bad times since 1891. We plan to work hard to continue this safe and sound tradition."

National Bankshares, Inc., a financial holding company, is the parent of the National Bank of Blacksburg, which does business as National Bank from 26 offices throughout Southwest Virginia. National Bank offers a full range of banking products and services, including Trust services. The Company, which is headquartered in Blacksburg, Virginia has a financial services subsidiary doing business in the same market as National Bankshares Investment Services and National Bankshares Insurance Services. Company stock is traded on the NASDAQ Capital Market under the symbol "NKSH." Additional information is available at www.nationalbankshares.com.

Forward-Looking Statements

Certain statements in this press release may be "forward-looking statements." Forward-looking statements are statements that include projections, predictions, expectations or beliefs about future events or results that are not statements of historical fact and that involve significant risks and uncertainties. Although the Company believes that its expectations with regard to forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assurance that actual Company results will not differ materially from any future results implied by the forward-looking statements. Actual results may be materially different from past or anticipated results because of many factors, some of which may include changes in economic conditions, the interest rate environment, legislative and regulatory requirements, new products, competition, changes in the stock and bond markets and technology. The Company does not update any forward-looking statements that it may make.

National Bankshares, Inc. And Subsidiaries


(000’s), except ratios and percent data

                                    March 31,      March 31,
Three months ending                   2009           2008        Change
                                  ------------   ------------   ---------

Selected consolidated data:
Interest income                   $     12,578   $     12,711       -1.05%
Interest expense                         4,412          5,407      -18.40%
Net interest income                      8,166          7,304       11.80%
Provision for loan losses                  370            100      270.00%
Trust income                               276            303       -8.91%
Other noninterest income                 1,831          1,993       -8.13%
Salary and benefits                      2,831          2,857       -0.91%
Occupancy expense                          469            456        2.85%
Amortization of intangibles                278            284       -2.11%
Other noninterest expense                2,052          1,860       10.32%
Income taxes                              -886           -862        2.78%
Net income                        $      3,387   $      3,181        6.48%
Basic net income per share        $       0.49   $       0.46   $    0.03

Daily averages:
Gross loans                       $    574,246   $    525,080        9.36%
Loans, net                             567,190        518,794        9.33%
Total securities                       286,479        275,887        3.84%
Total deposits                         839,828        774,962        8.37%
Other borrowings                            53             63      -15.87%
Stockholders’ equity                   113,111        107,036        5.68%
Cash and due from                       11,811         12,749       -7.36%
Interest-earning assets                901,837        833,802        8.16%
Interest-bearing liabilities           730,963        666,590        9.66%
Intangible assets                       13,601         14,717       -7.58%
Total assets                      $    960,824   $    889,104        8.07%

Financial ratios: Note (1)
Return on average assets                  1.43%          1.44%      -0.01%
Return on average equity                 12.14%         11.95%       0.19%
Net interest margin                       4.08%          3.93%       0.15%
Efficiency ratio                         50.34%         52.33%      -1.99%
Average equity to average assets         11.77%         12.04%      -0.27%
  Note (1)  Ratio change measured in bp

Allowance for loan losses:
Beginning balance                 $      5,858   $      5,219       12.24%
Provision for losses                       370            100      270.00%
Charge-offs                               -123           -152      -19.08%
Recoveries                                  13             61      -78.69%
Ending balance                    $      6,118   $      5,228       17.02%

                                    March 31,      March 31,
Year to Date                          2009           2008        Change
                                  ------------   ------------   ---------

Selected consolidated data:
Interest income                   $     12,578   $     12,711       -1.05%
Interest expense                         4,412          5,407      -18.40%
Net interest income                      8,166          7,304       11.80%
Provision for loan losses                  370            100      270.00%
Trust income                               276            303       -8.91%
Other noninterest income                 1,831          1,993       -8.13%
Salary and benefits                      2,831          2,857       -0.91%
Occupancy expense                          469            456        2.85%
Amortization of intangibles                278            284       -2.11%
Other noninterest expense                2,052          1,860       10.32%
Income taxes                              -886           -862        2.78%
Net income                        $      3,387   $      3,181        6.48%
Basic net income per share        $       0.49   $       0.46   $    0.03
Fully diluted net income per
 share                            $       0.49   $       0.46   $    0.03
Dividends per share                        ---            ---         ---
Dividend payout ratio                      ---            ---         ---
Book value per share              $      16.39   $      15.72   $    0.67

Balance sheet at period-end:
Gross loans                       $    575,787   $    528,684        8.91%
Loans, net                        $    568,600   $    522,343        8.86%
Total securities                       300,491        277,492        8.29%
Cash and due from                       13,253         18,742      -29.29%
Total deposits                         857,829        795,085        7.89%
Other borrowings                            51             61      -16.39%
Stockholders’ equity                   113,556        108,957        4.22%
Intangible assets                       13,441         14,554       -7.65%
Total assets                      $    979,787   $    911,721        7.47%

Daily averages:
Gross loans                       $    574,246   $    525,080        9.36%
Loans, net                             567,190        518,794        9.33%
Total securities                       286,479        275,887        3.84%
Total deposits                         839,828        774,962        8.37%
Other borrowings                            53             63      -15.87%
Stockholders’ equity                   113,111        107,036        5.68%
Cash and due from                       11,811         12,749       -7.36%
Interest-earning assets                901,837        833,802        8.16%
Interest-bearing liabilities           730,963        666,590        9.66%
Intangible assets                       13,601         14,717       -7.58%
Total assets                      $    960,824   $    889,104        8.07%

Financial ratios: Note (1)
Return on average assets                  1.43%          1.44%      -0.01%
Return on average equity                 12.14%         11.95%       0.19%
Net interest margin                       4.08%          3.93%       0.15%
Efficiency ratio                         50.34%         52.33%      -1.99%
Average equity to average assets         11.77%         12.04%      -0.27%
  Note (1)  Ratio change measured in bp

Allowance for loan losses:
Beginning balance                 $      5,858   $      5,219       12.24%
Provision for losses                       370            100      270.00%
Charge-offs                               -123           -152      -19.08%
Recoveries                                  13             61      -78.69%
Ending balance                    $      6,118   $      5,228       17.02%

Nonperforming assets:
Nonaccrual loans                  $      1,337   $      1,319        1.36%
Restructured loans                         ---            ---         ---
Total nonperforming loans Note (2)       1,337          1,319        1.36%
Other real estate owned                  1,918            270      610.37%
Total nonperforming assets        $      3,255   $      1,589      104.85%

Asset quality ratios: Note (3)
Nonperforming loans to total
 loans                                    0.23%          0.25%        ---
Allowance for loan losses to
 total loans                              1.06%          0.99%        ---
Allowance for loan losses to
 nonperforming loans                    457.59%        396.36%        ---

 Note (2)  Loans 90 days past due or more not included
 Note (3)  Ratio change measured in bp

Contact Information: CONTACTS: JAMES G. RAKES CHAIRMAN, PRESIDENT & CEO (540) 951-6236 DAVID K. SKEENS TREASURER & CFO (540) 951-6347