National Bankshares, Inc. Releases First Quarter Earnings

BLACKSBURG, VA--(Marketwire - April 17, 2008) - National Bankshares, Inc. (NASDAQ: NKSH) today released its earnings for the first quarter ended March 31, 2008. Bankshares had net income of $3.18 million, an increase of 2.09% over the $3.12 million earned in the same quarter of 2007. This translates to basic net income of $0.46 per share. At the end of the first quarter, National Bankshares, Inc. had net loans of $522.34 million, an increase of 4.86% over March 31, 2007. The Company reported total assets of $911.72 million, which is 3.38% above the $881.92 million reported in the same period last year.

James G. Rakes, National Bankshares' Chairman, President & CEO, stated, "In these challenging times for financial markets, I am glad to report that National Bankshares' conservative and traditional approach to community banking has served us well. We offer customers a full range of products and services from a solid platform of up-to-date technology. But it is a relationship-based business philosophy that keeps us on course." Mr. Rakes continued, "I am particularly pleased to see that loan demand was up during the first quarter and that loan quality remains high when compared to peers and from an historical perspective. It is important to us as community bankers to put deposit dollars from our local markets to work in those same markets by making good loans."

National Bankshares, Inc. is a financial holding company headquartered in Blacksburg, Virginia. It is the parent company of National Bank, a 116-year-old community bank with 26 office locations in Southwest Virginia. The Company also has a non-bank financial services subsidiary which does business as National Bankshares Investment Services and National Bankshares Insurance Services. Its stock trades on the NASDAQ Stock Market under the symbol "NKSH." Additional information is available on the Company's web site at www.nationalbankshares.com.

                National Bankshares, Inc. And Subsidiaries
                  (000’s), except ratios and percent data


                                       March 31,    March 31,
Three months ending                      2008         2007        Change
                                      -----------  -----------  ----------

Selected Consolidated Data:
Interest income                       $    12,711  $    12,530        1.44%
Interest expense                            5,406        5,416       -0.18%
Net interest income                         7,305        7,114        2.68%
Provision for loan losses                     100           (3)   -3433.33%
Trust income                                  303          373      -18.77%
Other noninterest income                    1,993        1,806       10.35%
Salary and benefits                         2,857        2,841        0.56%
Occupancy expense                             456          485       -5.98%
Amortization of intangibles                   284          284        0.00%
Other noninterest expense                   1,861        1,647       12.99%
Income taxes                                 -862         -923       -6.61%
Net income                            $     3,181  $     3,116        2.09%
Basic net income per share            $      0.46  $      0.45  $     0.01

Daily averages:
Gross loans                           $   525,080  $   503,040        4.38%
Loans, net                                518,794      496,839        4.42%
Total securities                          275,887      284,789       -3.13%
Total deposits                            774,962      762,817        1.59%
Other borrowings                               63           73      -13.70%
Stockholders’ equity                      107,036       97,927        9.30%
Cash and due from                          12,749       14,684      -13.18%
Interest-earning assets                   833,802      807,632        3.24%
Interest-bearing liabilities              666,590      659,908        1.01%
Intangible assets                          14,717       15,860       -7.21%
Total assets                              889,104      867,945        2.44%

Financial ratios: Note (1)
Return on average assets                     1.44%        1.46%      -0.02
Return on average equity                    11.95%       12.90%      -0.95
Net interest margin                          3.93%        3.96%      -0.03
Average equity to average assets            12.04%       11.28%       0.76
  Note (1)  Ratio change measured in
   bp

Allowance for loan losses:
Beginning balance                     $     5,219  $     5,157        1.20%
Provision for losses                          100           -3    -3433.33%
Charge-offs                                  -152         -136       11.76%
Recoveries                                     61           27      125.93%
Ending balance                        $     5,228  $     5,045        3.63%



                                       March 31,    March 31,
Year to Date                             2008         2007        Change
                                      -----------  -----------  ----------

Selected Consolidated Data:
Interest income                       $    12,711  $    12,530        1.44%
Interest expense                            5,406        5,416       -0.18%
Net interest income                         7,305        7,114        2.68%
Provision for loan losses                     100           -3    -3433.33%
Trust income                                  303          373      -18.77%
Other noninterest income                    1,993        1,806       10.35%
Salary and benefits                         2,857        2,841        0.56%
Occupancy expense                             456          485       -5.98%
Amortization of intangibles                   284          284        0.00%
Other noninterest expense                   1,861        1,647       12.99%
Income taxes                                 -862         -923       -6.61%
Net income                            $     3,181  $     3,116        2.09%
Basic net income per share            $      0.46  $      0.45  $     0.01
Fully diluted net income per share    $      0.46  $      0.45  $     0.01
Dividends per share                             -            -           -
Dividend payout ratio                        0.00         0.00  $     0.00
Book value per share                  $     15.72        14.30  $     1.42

Balance sheet at period-end:
Gross loans                           $   528,684  $   504,277        4.84%
Loans, net                            $   522,343  $   498,129        4.86%
Total securities                          277,492      288,005       -3.65%
Cash and due From                          18,742       13,626       37.55%
Total deposits                            795,085      774,264        2.69%
Other borrowings                               61           71      -14.08%
Stockholders’ equity                      108,957       99,823        9.15%
Intangible assets                          14,554       15,692       -7.25%
Total assets                              911,721      881,915        3.38%

Daily averages:
Gross loans                           $   525,080  $   503,040        4.38%
Loans, net                                518,794      496,839        4.42%
Total securities                          275,887      284,789       -3.13%
Total deposits                            774,962      762,817        1.59%
Other borrowings                               63           73      -13.70%
Stockholders’ equity                      107,036       97,927        9.30%
Cash and due from                          12,749       14,684      -13.18%
Interest-earning assets                   833,802      807,632        3.24%
Interest-bearing liabilities              666,590      659,908        1.01%
Intangible assets                          14,717       15,860       -7.21%
Total assets                              889,104      867,945        2.44%

Financial ratios: Note (1)
Return on average assets                     1.44%        1.46%      -0.02
Return on average equity                    11.95%       12.90%      -0.95
Net interest margin                          3.93%        3.96%      -0.03
Efficiency ratio                            52.33%       52.12%       0.21
Average equity to average assets            12.04%       11.28%       0.76
  Note (1)  Ratio change measured in
   bp

Allowance for loan losses:
Beginning balance                     $     5,219  $     5,157        1.20%
Provision for losses                          100           -3    -3433.33%
Charge-offs                                  -152         -136       11.76%
Recoveries                                     61           27      125.93%
Ending balance                        $     5,228  $     5,045        3.63%

Nonperforming assets:
Nonaccrual loans                            1,319  $     1,132     -100.00%
Restructured loans                              -            -           -
Total nonperforming loans Note (2)          1,319        1,132     -100.00%
Other real estate owned                       270          251        7.57%
Total nonperforming assets            $     1,589  $     1,383       14.90%

Asset quality ratios: Note (3)
Nonperforming loans to total loans           0.25%        0.23%          -
Allowance for loan losses to total
 loans                                       0.99%        1.00%      -0.90%
Allowance for loan losses to
 nonperforming loans                       396.36%      445.67%          -
  Note (2)  Loans 90 days past due
   or more not included
  Note (3)  Ratio change measured in
   bp

Contact Information: CONTACTS: JAMES G. RAKES PRESIDENT & CEO (540) 951-6236 J. ROBERT BUCHANAN (276) 979-0341