National Bankshares, Inc.

BLACKSBURG, VA, FEBRUARY 5, 2009: National Bankshares, Inc. (NASDAQ Capital Market: NKSH) today reported 2008 net income of $13.59 million. Net income for the year is a record for the Company and is 7.24% higher than the nearly $12.68 million earned in 2007. Basic net income per share increased from $1.82 last year to $1.96 in 2008. Total assets at December 31, 2008 were $935.37 million, up 5.38% from the $887.65 million reported at December 31, 2007. Net loans grew to nearly $569.70 million at the end of 2008, an increase of 9.89% over the same period last year. The return on average assets for 2008 was 1.51%, and the return on average equity was 12.52%.

Net income for the three months ending December 31, 2008 was nearly $3.33 million. This is 3.26% higher than the $3.22 million earned in the same quarter of 2007, and it translates to quarterly basic net income per share of $0.52 in 2008 and $0.46 in 2007.

In discussing the Company's year-end results, National Bankshares Chairman, President & CEO James G. Rakes said, "We were fortunate that the turmoil in the nation's financial markets last year, particularly in the fourth quarter of 2008, did not seriously affect our primary service areas. In fact, National Bankshares and our subsidiary bank, National Bank, benefited from falling interest rates and higher loan demand. The net interest margin improved from 3.98% at the end of 2007 to 4.12% at December 31, 2008. The improvement in the net interest margin led to higher net interest income, which contributed significantly to the year's higher earnings. National Bank had good loan demand throughout 2008, and we were able to meet the needs of our customers because we maintained excellent levels of capital and liquidity during the year, without having to access additional government funds."

Chairman Rakes continued, "We ended 2008 with the ratio of nonperforming loans to total loans at a reasonable 0.23%. This compares with 0.22% at the end of 2007. Going forward, we clearly anticipate that the weak economy will have some negative
effect on the quality of the loan portfolio. Especially in the last half of 2008, we began to see an increase in total nonperforming assets, which is particularly reflected in the level of other real estate owned. In response to both the higher level of nonperforming assets and the growth in the loan portfolio, the allowance for loan losses to total loans was increased to 1.02% by year-end, up from 1.00% at December 31, 2007. We will continue to carefully monitor loan quality. Our loan officers are staying in close contact with their customers so that we can work with them during these challenging times." Mr. Rakes went on to say, "National Bank was founded in 1891. Through good times and bad, it has been a safe and sound bank for generations of depositors and borrowers. All of us at National Bankshares, Inc. take seriously the responsibility of preserving that careful and conservative heritage in the communities we serve."

National Bankshares, Inc. is a financial holding company that 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".

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.