National Bankshares, Inc. Releases Earnings for 2007

BLACKSBURG, VA--(Marketwire - February 7, 2008) - National Bankshares, Inc. (NASDAQ: NKSH) today reported 2007 net income of nearly $12.68 million, up slightly over the $12.63 million earned in 2006. Because of higher earnings and the Company's previously announced stock buyback program, basic net income per share increased from $1.80 in 2006 to $1.82 in 2007. Total assets at December 31, 2007 were nearly $887.65 million, an increase of 2.24% over the same period in 2006. Net loans grew to $518.44 million, an increase of 4.63% from 2006. For 2007, National Bankshares, Inc. had a return on average assets of 1.46% and a return on average equity of 12.60%.

For the three months ending December 31, 2007, the Company posted net income of $3.22 million, a small increase over the $3.20 million earned in the fourth quarter of 2006. This translates to basic net income per share of $0.46 for both periods.

James G. Rakes, National Bankshares' Chairman, President & CEO, commented, "In these interesting times, I am pleased to report another solid year for National Bankshares. We were challenged with compression of the net interest margin during 2007, and we worked to overcome that challenge by adding quality loans to our portfolio and by controlling overhead costs. The 2006 merger of our two bank subsidiaries resulted in nice savings for 2007 in both occupancy expense and salary and benefits costs. Loan quality remained very good when viewed from a historical perspective. We did, however, make regular additions to the provision for loan losses during the year, both because of growth in net loans and because of an increase in total nonperforming assets from 2006's very low level." Mr. Rakes went on to say, "We continued to invest in the Company's technology infrastructure last year. We believe that it is important to have a solid platform from which to offer customers a full range of products and services. But we think it is even more important for our customers to have a trusted person to help them with their financial transactions. It is this relationship-based business philosophy that has guided us since the founding of National Bank in 1891 and will continue to guide us in the future."

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 office locations throughout Southwest Virginia. The Company, which is headquartered in Blacksburg, Virginia, also has a financial services subsidiary, National Bankshares Financial Services, Inc., 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 about National Bankshares, Inc. is available on its website at www.nationalbankshares.com.

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

                                              December  December
         Three months ending                  31, 2007  31, 2006   Change
         -------------------                  --------- --------- --------

Selected Consolidated Data:
Interest income                               $  12,851 $  12,427     3.41%
Interest expense                                  5,517     5,261     4.87%
Net interest income                               7,334     7,166     2.34%
Provision for loan losses                           294         9  3166.67%
Trust income                                        314       469   -33.05%
Other noninterest income                          1,883     1,830     2.90%
Salary and benefits                               2,533     2,760    -8.22%
Occupancy expense                                   427       478   -10.67%
Amortization of intangibles                         285       284     0.35%
Other noninterest expense                         1,850     1,852    -0.11%
Income taxes                                       -919      -881     4.31%
Net income                                    $   3,223 $   3,201     0.69%
Basic net income per share                    $    0.46 $    0.46 $   0.00

Daily averages:
Gross loans                                   $ 520,992 $ 498,366     4.54%
Loans, net                                      514,814   492,104     4.61%
Total securities                                277,008   272,644     1.60%
Total deposits                                  763,023   751,639     1.51%
Other borrowings                                     65        78   -16.67%
Stockholders' equity                            103,677    97,741     6.07%
Cash and due from                                13,870    15,795   -12.19%
Interest-earning assets                         816,169   792,919     2.93%
Interest-bearing liabilities                    651,162   646,673     0.69%
Intangible assets                                15,000    16,138    -7.05%
Total assets                                    874,400   854,040     2.38%

Financial ratios: Note (1)
Return on average assets                           1.46%     1.49%   -0.03
Return on average equity                          12.33%    12.99%   -0.66
Net interest margin                                3.95%     4.06%   -0.11
Average equity to average assets                  11.86%    11.44%    0.41
Note (1)  Ratio change measured in bp

Allowance for loan losses:
Beginning balance                             $   5,043  $  5,252    -3.98%
Provision for losses                                294         9  3166.67%
Charge-offs                                        -152      -114    33.33%
Recoveries                                           34        10   240.00%
Ending balance                                $   5,219  $  5,157     1.20%



                                              December  December
            Year to Date                      31, 2007  31, 2006   Change
            ------------                      --------  --------  --------

Selected Consolidated Data:
Interest income                               $ 50,769  $ 47,901      5.99%
Interest expense                                21,745    18,564     17.14%
Net interest income                             29,024    29,337     -1.07%
Provision for loan losses                          423        49    763.27%
Trust income                                     1,333     1,528    -12.76%
Other noninterest income                         7,427     7,274      2.10%
Salary and benefits                             10,773    11,466     -6.04%
Occupancy expense                                1,743     1,957    -10.94%
Amortization of intangibles                      1,138     1,137      0.09%
Other noninterest expense                        7,302     7,110      2.70%
Income taxes                                    -3,730    -3,788     -1.53%
Net income                                    $ 12,675  $ 12,632      0.34%
Basic net income per share                    $   1.82  $   1.80  $   0.02
Fully diluted net income per share            $   1.82  $   1.80  $   0.02
Dividends per share                           $   0.73  $   0.71  $   0.02
Dividend payout ratio                            41.80     40.44  $   1.36
Book value per share                          $  15.07  $  13.86  $   1.21

Balance sheet at period-end:
Gross loans                                   $524,773  $501,702      4.60%
Loans, net                                    $518,435  $495,486      4.63%
Total securities                               273,343   285,489     -4.25%
Cash and due from                               16,324    15,283      6.81%
Total deposits                                 776,339   764,692      1.52%
Other borrowings                                    64        73    -12.33%
Stockholders' equity                           104,800    96,755      8.31%
Intangible assets                               14,838    15,976     -7.12%
Total assets                                   887,647   868,203      2.24%

Daily averages:
Gross loans                                   $511,215  $493,668      3.55%
Loans, net                                     505,070   487,130      3.68%
Total securities                               282,734   261,743      8.02%
Total deposits                                 758,657   724,015      4.78%
Other borrowings                                   626       420     49.05%
Stockholders' equity                           100,597    90,470     11.19%
Cash and due from                               13,947    15,976    -12.70%
Interest-earning assets                        807,686   769,931      4.90%
Interest-bearing liabilities                   650,429   610,534      6.53%
Intangible assets                               15,426    17,500    -11.85%
Total assets                                   867,061   819,341      5.82%

Financial ratios: Note (1)
Return on average assets                          1.46%     1.50%    -0.04
Return on average equity                         12.60%    13.41%    -0.81
Net interest margin                               3.98%     4.14%    -0.16
Efficiency ratio                                 51.11%    52.74%    -1.63
Average equity to average assets                 11.60%    11.04%     0.56
Note (1)  Ratio change measured in bp

Allowance for loan losses:
Beginning balance                             $  5,157  $  5,449     -5.36%
Provision for losses                               423        49    763.27%
Charge-offs                                       -471      -459      2.61%
Recoveries                                         110       118     -6.78%
Ending balance                                $  5,219  $  5,157      1.20%

Nonperforming assets:
Nonaccrual loans                                 1,150       ---       ---
Restructured loans                                 ---       ---       ---
Total nonperforming loans Note (2)               1,150         0       ---
Other real estate owned                            263       390    -32.56%
Total nonperforming assets                    $  1,413  $    390    262.31%

Asset quality ratios: Note (3)
Nonperforming loans to total loans               0.220%      ---       ---
Allowance for loan losses to total loans          1.00%     1.03%    -3.33%
Allowance for loan losses to nonperforming
 loans                                          453.83%      ---       ---
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 J. Robert Buchanan Treasurer (276) 979-0341