8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report: July 15, 2009 Commission File Number: 0-15204

National Bankshares, Inc.

(Exact name of Registrant as specified in its charter)

Virginia	54-1375874
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

101 Hubbard Street

Blacksburg, VA 24060

(Address of principal executive offices)

(540) 951-6300

Registrant’s telephone number, including area code

Page 1 of 2 Pages

ITEM 2.02. RESULTS OF OPERATIONS, FINANCIAL STATEMENTS AND

EXHIBITS

On July 15, 2009, National Bankshares, Inc. issued a press release announcing its financial results for the second quarter ended June 30, 2009. A copy of the press release is attached as Exhibit 99.1.

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS

(a) Exhibits

99.1 National Bankshares, Inc. Press Release dated July15, 2009.

SIGNATURE

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

NATIONAL BANKSHARES, INC.

Date: July 15, 2009

By:       /s/ JAMES G. RAKES

James G. Rakes

Chairman

President and CEO

Page 2 of 2 Pages

EX-99

FOR IMMEDIATE RELEASE

CONTACTS: JAMES G. RAKES, CHAIRMAN, PRESIDENT & CEO

(540) 951-6236 jrakes@nbbank.com

DAVID K. SKEENS, TREASURER & CFO

(540) 951-6347

NATIONAL BANKSHARES, INC. REPORTS

SECOND QUARTER EARNINGS

BLACKSBURG, VA, JULY 15, 2009: National Bankshares, Inc. (NASDAQ Capital Market: NKSH) reported today that it posted second quarter net income of nearly $3.36 million, or basic net income of $0.48 per share. For the second quarter of 2008, the Company had net income of nearly $3.47 million. Year-to-date net income is over $6.74 million, or $0.97 per share, 1.41% above the $6.65 million total on June 30, 2008. National Bankshares, Inc., a financial holding company headquartered in Blacksburg, Virginia, had net loans of $569.85 million at June 30, 2009, an increase of 7.63% over net loans at the end of the second quarter last year. Total assets on June 30 were $984.76 million, up by 10.04% over the same period in 2008.

Commenting on the Company’s quarterly results, Chairman, President & CEO James G. Rakes said, “Second quarter earnings were impacted by a special Federal Deposit Insurance Corporation assessment, as well as an increase in quarterly fees. It is not commonly understood that insured depository institutions themselves, not the taxpayers, fund FDIC deposit insurance. The financial crisis has put an additional burden on the Deposit Insurance Fund, and all insured banks are contributing so that the Fund’s reserve ratio remains healthy. Although the special assessment hurt second quarter earnings, FDIC insurance is a cornerstone of the American banking industry, and banks are doing what must be done to be certain that the public’s confidence in FDIC remains high.”

Mr. Rakes went on to say, “We are pleased with the level of loan growth through the first half of the year, and the quality of the loan portfolio is good. Although the total of nonperforming assets is somewhat higher, the ratio of nonperforming loans to total loans, at 0.47%, is reasonable and compares very well with our peers. We have increased the provision for loan losses throughout 2009, both in recognition of the difficult economy and to keep pace with loan growth. As we work to meet the challenges that remain this year, we are mindful of the conservative traditions that are a part of our bank’s 118-year heritage and of its important role in the communities we serve.”

National Bankshares, Inc. is the parent of the National Bank of Blacksburg, which does business as National Bank from 25 offices in Southwest Virginia. The Company has a financial services subsidiary that serves the same markets 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 can be found 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
Three months ending	June 30, 2009			June 30, 2008			Change
Selected consolidated data :
Interest income	$	12,711		$	12,472			1.92	%
Interest expense		4,274			4,815			-11.24	%
Net interest income		8,437			7,657			10.19	%
Provision for loan losses		278			135			105.93	%
Trust income		261			319			-18.18	%
Other noninterest income		1,911			1,908			0.16	%
Salary and benefits		2,794			2,746			1.75	%
Occupancy expense		425			435			-2.30	%
Amortization of intangibles		273			279			-2.15	%
Other noninterest expense		2,688			1,846			45.61	%
Income taxes		-794			-974			-18.48	%
Net income	$	3,357		$	3,469			-3.23	%
Basic net income per share	$	0.48		$	0.50			$0.02
Daily averages:
Gross loans	$	578,239		$	529,653			9.17	%
Loans, net		570,964			523,336			9.10	%
Total securities		303,753			290,593			4.53	%
Total deposits		858,977			786,698			9.19	%
Other borrowings		50			61			-18.03	%
Stockholders’ equity		114,981			108,891			5.59	%
Cash and due from		12,135			13,008			-6.71	%
Interest-earning assets		922,876			844,591			9.27	%
Interest-bearing liabilities		745,704			670,099			11.28	%
Intangible assets		13,324			14,435			-7.70	%
Total assets	$	981,514		$	902,368			8.77	%
Financial ratios: Note (1)
Return on average assets		1.37	%		1.55	%		-0.18	%
Return on average equity		11.71	%		12.81	%		-1.10	%
Net interest margin		4.10	%		4.05	%		0.05	%
Efficiency ratio		53.21	%		49.26	%		3.95	%
Average equity to average assets		11.71	%		12.07	%		-0.35	%
Note (1) Ratio change measured in bp
Allowance for loan losses:
Beginning balance	$	6,118		$	5,228			17.02	%
Provision for losses		278			135			105.93	%
Charge-offs		-131			-130			0.77	%
Recoveries		19			34			-44.12	%
Ending balance	$	6,284		$	5,267			19.31	%
Year to Date		June 30, 2009			June 30, 2008			Change
Selected consolidated data :
Interest income	$	25,289		$	25,183			0.42	%
Interest expense		8,686			10,222			-15.03	%

Net interest income		16,603			14,961			10.98	%
Provision for loan losses		648			235			175.74	%
Trust income		537			622			-13.67	%
Other noninterest income		3,742			3,901			-4.08	%
Salary and benefits		5,625			5,603			0.39	%
Occupancy expense		894			891			0.34	%
Amortization of intangibles		551			562			-1.96	%
Other noninterest expense		4,740			3,707			27.87	%
Income taxes		-1,680			-1,836			-8.50	%
Net income	$	6,744		$	6,650			1.41	%
Basic net income per share	$	0.97		$	0.96		$	0.01
Fully diluted net income per share	$	0.97		$	0.96		$	0.01
Dividends per share	$	0.41		$	0.39		$	0.02
Dividend payout ratio		42.16			40.63			1.53
Book value per share	$	16.58		$	15.50		$	1.08
Balance sheet at period-end:
Gross loans	$	577,226		$	535,837			7.72	%
Loans, net	$	569,852		$	529,465			7.63	%
Total securities		306,283			289,315			5.86	%
Cash and due From		15,039			20,404			-26.29	%
Total deposits		861,862			781,113			10.34	%
Other borrowings		49			59			-16.95	%
Stockholders’ equity		114,979			107,354			7.10	%
Intangible assets		13,168			14,276			-7.76	%
Total assets	$	984,762		$	894,912			10.04	%
Daily averages:
Gross loans	$	576,253		$	527,366			9.27	%
Loans, net		569,087			521,064			9.22	%
Total securities		295,163			283,240			4.21	%
Total deposits		849,456			780,830			8.79	%
Other borrowings		52			61			-14.75	%
Stockholders’ equity		114,050			107,963			5.64	%
Cash and due from		11,798			12,877			-8.38	%
Interest-earning assets		912,589			839,198			8.75	%
Interest-bearing liabilities		738,374			668,344			10.48	%
Intangible assets		13,462			14,576			-7.64	%
Total assets	$	971,224		$	895,701			8.43	%
Financial ratios: Note (1)
Return on average assets		1.40	%		1.49	%		-0.09	%
Return on average equity		11.92	%		12.39	%		-0.47	%
Net interest margin		4.09	%		4.00	%		0.09	%
Efficiency ratio		51.83	%		50.81	%		1.02	%
Average equity to average assets		11.74	%		12.05	%		-0.31	%
Note (1) Ratio change measured in bp
Allowance for loan losses:
Beginning balance	$	5,858		$	5,219			12.24	%
Provision for losses		648			235			175.74	%

Charge-offs		-254			-282		-9.93	%
Recoveries		32			95		-66.32	%
Ending balance	$	6,284		$	5,267		19.31	%
Nonperforming assets:
Nonaccrual loans	$	2,729		$	2,200		24.05	%
Restructured loans		---			---		---
Total nonperforming loans Note (2)		2,729			2,200		0
Other real estate owned		1,869			234		698.72	%
Total nonperforming assets	$	4,598		$	2,434		88.91	%
Asset quality ratios: Note (3)
Nonperforming loans to total loans		0.47	%		0.41	%	---
Allowance for loan losses to total loans		1.09	%		0.98	%	---
Allowance for loan losses to nonperforming loans		230.27	%		239.41	%	---
Note (2) Loans 90 days past due or more not included
Note (3) Ratio change measured in bp
Note (3) Ratio change measured in bp