FOR IMMEDIATE RELEASE

CONTACTS James G. Rakes, Chairman, President & CEO  (540) 951-6236

jrakes@nbbank.com

David K. Skeens, Treasurer  (540) 951-6347

dskeens@nbbank.com

NATIONAL BANKSHARES, INC.’S FIRST QUARTER

EARNINGS UP BY MORE THAN 11% OVER LAST YEAR

BLACKSBURG, VA, APRIL 15, 2010: Today, National Bankshares, Inc. (NASDAQ Capital Market: NKSH) reported record net income of nearly $3.77 million for the quarter ended March 31, 2010.  Net income is 11.28% above the nearly $3.39 million posted by the Company on March 31, 2009, which was itself a record total for the first quarter of the year.  Basic net income per share for the first three months of 2010 was $0.54, up from $0.49 per share earned in the same period last year. Net loans were at $580.93 million on March 31, 2010, a 2.2% increase over net loans of $568.60 million at the end of the first quarter of 2009 and a slight decline from the $583.02 million reported at year-end.  At March 31, 2010, National Bankshares, Inc. had total assets of $992.94 million, up from both the $982.37 million reported at December 31, 2009 and the $979.79 million in total assets at the end of the first quarter of 2009.   At March 31, the Company reported a return on average assets of 1.57%, a return on average equity of 12.27% and a net interest margin of 4.57%.

The Company’s Chairman, President and CEO, James G. Rakes, said, “At our National Bank subsidiary during the first quarter of the year, the migration of longer-term, higher-cost time deposits into shorter-term deposits continued.  We were able to take advantage of the resulting lower cost of funds in this interest rate environment to maximize the net interest margin.  The result has been good earnings. As has been our longtime practice, we also carefully monitored controllable expenses during the quarter.”   Mr. Rakes went on to say, “This level of earnings has allowed us to continue to prudently add to the allowance for loan losses to help us work through a period of higher nonperforming assets and loan charge-offs.  Our trade area was not as seriously impacted as some other parts of the country during the early stages of the recession.  But we anticipated that our customers would not be able to totally escape its effects, and we have been preparing for this time.  The ratio of nonperforming assets to net loans, plus other real estate owned, grew to 1.77% at March 31, while the ratio of the allowance for loan losses to total loans was 1.21% at the end of the first quarter.”

National Bankshares, Inc. is a financial holding company with headquarters in Blacksburg, Virginia.  It is the parent company of the National Bank of Blacksburg, which does business as National Bank from 25 offices throughout Southwest Virginia, and of National Bankshares Financial Services, Inc., an insurance and investments subsidiary in the same market.  National Bankshares’ stock is traded on the NASDAQ Capital Market under the symbol “NKSH”.  Additional information is available 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.

101 Hubbard Street / Blacksburg, Virginia 24060

P.O. Box 90002 / Blacksburg, Virginia 24062-9002

540 951-6300 / 800 552-4123

www.nationalbankshares.com

National Bankshares, Inc. and Subsidiaries

Consolidated Balance Sheet

($ in thousands)	(Unaudited)						(Audited)
Assets	March 31, 2010			March 31, 2009			December 31, 2009
Cash and due from banks	$	11,744		$	13,603		$	12,894
Interest-bearing deposits		55,706			41,929			32,730
Federal funds sold		---			---			---
Securities available for sale		161,543			166,007			168,041
Securities held to maturity		125,547			134,484			129,376
Total securities		287,090			300,491			297,417
Mortgage loans held for sale		1,358			998			126
Loans:
Real estate construction loans		47,245			58,645			45,625
Real estate mortgage loans		165,604			164,684			165,542
Commercial and industrial loans		284,242			249,925			283,998
Consumer loans		92,035			102,533			95,844
Total loans		589,126			575,787			591,009
Less: unearned income and deferred fees		(1,052	)		(1,069	)		(1,062	)
Loans, net of unearned income and deferred fees		588,074			574,718			589,947
Less: allowance for loan losses		(7,141	)		(6,118	)		(6,926	)
Loans, net		580,933			568,600			583,021
Bank premises and equipment, net		10,729			11,070			10,628
Accrued interest receivable		6,186			6,209			6,250
Other real estate owned		2,567			1,918			2,126
Intangible assets		12,355			13,441			12,626
Other assets		24,276			21,528			24,549
Total assets	$	992,944		$	979,787		$	982,367
Liabilities and Stockholders' Equity
Noninterest-bearing deposits	$	116,153		$	112,473		$	122,549
Interest-bearing demand deposits		325,214			285,218			310,629
Savings deposits		53,977			49,178			51,622
Time deposits		362,124			410,960			367,312
Total deposits		857,468			857,829			852,112
Other borrowed funds		---			51			---
Accrued interest payable		392			650			336
Other liabilities		8,580			7,701			7,843
Total liabilities		866,440			866,231			860,291
Stockholders' Equity
Preferred stock of no par value. Authorized 5,000,000 shares; none issued and outstanding		---			---			---
Common stock of $1.25 par value. Authorized 10,000,000 shares;  issued and outstanding 6,933,474 shares at March 31, 2010, 6,929,474 shares at March 31, 2009 and 6,933,474 shares at December 31, 2009		8,667			8,662			8,667
Retained earnings		117,670			108,743			113,901
Accumulated comprehensive income		167			(3,849	)		(492	)
Total stockholders' equity		126,504			113,556			122,076
Total liabilities and stockholders' equity	$	992,944		$	979,787		$	982,367

National Bankshares, Inc. and Subsidiaries

Consolidated Statements of Income

(Unaudited)

	Three Months Ended
	March 31, 2010			March 31, 2009
($ in thousands, except for per share data)
Interest Income
Interest and fees on loans	$	9,176		$	9,462
Interest on federal funds		---			---
Interest on interest-bearing deposits		19			24
Interest on securities - taxable		1,443			1,561
Interest on securities - nontaxable		1,602			1,531
Total interest income		12,240			12,578
Interest Expense
Interest on time deposits of $100,000 or more		946			1,491
Interest on other deposits		2,033			2,920
Interest on borrowed funds		---			1
Total interest expense		2,979			4,412
Net interest income		9,261			8,166
Provision for loan losses		647			370
Net interest income after provision for loan losses		8,614			7,796
Noninterest Income
Service charges on deposit accounts		714			804
Other service charges and fees		47			73
Credit card fees		666			625
Trust income		269			276
BOLI income		185			172
Other income		104			77
Realized securities gains (losses), net		(14	)		80
Total noninterest income		1,971			2,107
Noninterest Expense
Salaries and employee benefits		2,856			2,831
Occupancy and furniture and fixtures		491			469
Data processing and ATM		357			322
FDIC  assessment		263			121
Credit card processing		508			463
Intangibles and goodwill amortization		271			278
Net costs of other real estate owned		33			60
Franchise taxes		239			227
Other operating expenses		766			859
Total noninterest expense		5,784			5,630
Income before income tax expense		4,801			4,273
Income tax expense		1,032			886
Net income	$	3,769		$	3,387
Basic net income per share	$	0.54		$	0.49
Fully diluted net income per share	$	0.54		$	0.49
Weighted average outstanding number of common shares
Basic		6,933,474			6,929,474
Diluted		6,952,812			6,934,846
Dividends declared per share		---			---
Dividend payout ratio		---			---
Book value per share	$	18.25		$	16.39

Key Ratios and Other Data

(Unaudited)

($ in thousands)	Three Months Ending
Average Balances	March 31, 2010			March 31, 2009
Cash and due from banks	$	11,197		$	11,811
Interest-bearing deposits		34,866			41,121
Securities available for sale		163,438			160,767
Securities held to maturity		125,448			125,712
Mortgage loans held for sale		619			1,091
Gross loans		589,379			574,246
Loans, net		581,296			567,190
Intangible assets		12,511			13,601
Total assets		971,844			960,824
Total deposits		838,697			839,828
Other borrowings		---			53
Stockholders' equity		124,529			113,111
Interest-earning assets		909,654			901,837
Interest-bearing liabilities		723,107			730,963
Financial Ratios
Return on average assets		1.57	%		1.43	%
Return on average equity		12.27	%		12.14	%
Net interest margin		4.57	%		4.08	%
Net interest income - fully taxable equivalent	$	10,241		$	9,077
Efficiency ratio		47.36	%		50.34	%
Average equity to average assets		12.81	%		11.77	%
($ in thousands)
Allowance for Loan Losses
Beginning balance	$	6,926		$	5,858
Provision for losses		647			370
Charge-offs		(455	)		(123	)
Recoveries		23			13
Ending balance	$	7,141		$	6,118

Asset Quality Data

(Unaudited)

($ in thousands)
Nonperforming assets	March 31, 2010			March 31, 2009
Nonaccrual loans	$	7,743		$	1,337
Restructured loans		---			---
Total nonperforming loans		7,743			1,337
Other real estate owned		2,567			1,918
Total nonperforming assets	$	10,310		$	3,255
Loans 90 days or more past due	$	2,217		$	1,607
Asset Quality Ratios
Nonperforming assets to loans net of unearned income and deferred fees, plus other real estate owned		1.77	%		0.56	%
Allowance for loan losses to total loans		1.21	%		1.06	%
Allowance for loan losses to nonperforming loans		92.23	%		457.59	%
Loans past due 90 days or more to loans net of unearned income and deferred fees		0.38	%		0.28	%