National Bankshares (NKSH) 8-K Releases First Quarter Earnings

FOR IMMEDIATE RELEASE

CONTACTS: JAMES G. RAKES, PRESIDENT & CEO (540) 951-6236

J. ROBERT BUCHANAN (276) 979-0341

NATIONAL BANKSHARES, INC.

RELEASES FIRST QUARTER EARNINGS

BLACKSBURG, VA, APRIL 17, 2008: National Bankshares, Inc. (NASDAQ Capital Market: 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
Three months ending	March 31, 2008			March 31, 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	%

Year to Date	March 31, 2008			March 31, 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