-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HaUaB2crEMW1c4bKreigwY4MLaqnOj2K8Fg30kbnXRLruZlOQl/r5/7lu0itAoIu N5xcDS8UknPvtDz4mujJzA== 0000916641-99-000180.txt : 19990316 0000916641-99-000180.hdr.sgml : 19990316 ACCESSION NUMBER: 0000916641-99-000180 CONFORMED SUBMISSION TYPE: SC 13E4 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19990315 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL BANKSHARES INC CENTRAL INDEX KEY: 0000796534 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 541375874 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13E4 SEC ACT: SEC FILE NUMBER: 005-37724 FILM NUMBER: 99565104 BUSINESS ADDRESS: STREET 1: 100 SOUTH MAIN ST CITY: BLACKSBURG STATE: VA ZIP: 24062-9002 BUSINESS PHONE: 7035522011 MAIL ADDRESS: STREET 1: 100 SOUTH MAIN STREET STREET 2: PO BOX 90002 CITY: BLACKSBURG STATE: VA ZIP: 24062-9002 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL BANKSHARES INC CENTRAL INDEX KEY: 0000796534 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 541375874 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13E4 BUSINESS ADDRESS: STREET 1: 100 SOUTH MAIN ST CITY: BLACKSBURG STATE: VA ZIP: 24062-9002 BUSINESS PHONE: 7035522011 MAIL ADDRESS: STREET 1: 100 SOUTH MAIN STREET STREET 2: PO BOX 90002 CITY: BLACKSBURG STATE: VA ZIP: 24062-9002 SC 13E4 1 NATIONAL BANKSHARES, INC. SC13E-4 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20459 Schedule 13E-4 ISSUER TENDER OFFER STATEMENT (Pursuant to Section 13(e)(1) of the Securities Exchange Act of 1934) NATIONAL BANKSHARES, INC. (Name of Issuer and Person Filing Statement) COMMON STOCK, $2.50 PAR VALUE (Title of Class of Securities) 634865109 (CUSIP Number of Class of Securities)
James G. Rakes With Copies to: Chairman Douglas W. Densmore and Hugh B. Wellons President & Chief Executive Officer Flippin, Densmore, Morse, Rutherford & Jessee National Bankshares, Inc. 1800 First Union Tower, Drawer 1200 100 South Main Street, P.O. Box 90002 Roanoke, VA 24006 Blacksburg, VA 24062 (540) 510-3000 (540) 951-6236
(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of the Person Filing the Statement) March 15, 1999 (Date Tender Offer First Published, Sent or Given to Security Holders) Instruction: Ten copies of this statement, including all exhibits, shall be filed with the Commissioner CALCULATION OF FILING FEE ------------------------------------------------------------------------------- Transaction Valuation* Amount of Filing Fee ------------------------------------------------------------------------------- $ 5,600,000.00 $1,120 * For purposes of calculating fee only. Assumes the purchases of 200,000 shares at $28.00 per share. [ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. Amount Previously Paid: Not applicable Form or Registration No.: Not applicable Filing Party: Not applicable Date Filed: Not applicable ITEM 1. SECURITY AND ISSUER. (a) The name of the issuer is National Bankshares, Inc., a Virginia corporation (the "Company"), and the address of its principal executive offices is 100 South Main Street, P. O. Box 90002, Blacksburg, Virginia 24062. (b) This Schedule relates to the offer by the Company to purchase up to 200,000 shares (or such lesser number of shares as are properly tendered) of its common stock, $2.50 par value, (the "Shares"), at a price of $28.00 per Share, net to the seller in cash, all upon the terms and subject to the conditions set forth in the offer to purchase, dated March 15, 1999 (the "Offer to Purchase"), and the related Letter of Transmittal (which together constitute the "Offer"), copies of which are attached as Exhibits (a)(1) and (a)(2). The information set forth on the cover page and under "Price Range of common stock; Dividends" and "Certain Information About the Company; General Information" in the Offer to Purchase is incorporated herein by reference. (c) The Company's common stock is traded over the counter and listed on the OTC Electronic Bulletin Board as "NKSH." On March 8, 1999, the last practicable date of listing on the OTC Electronic Bulletin Board prior to the announcement of the offer, the bid price was $22.00 per share, the ask price was $22.75 per share, and the last known sale price was $22.75 per share. (d) Not applicable. ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a) and (b). The information set forth under "Source and Amount of Funds" in the Offer to Purchase is incorporated herein by reference. ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE. (a) through (j). The information set forth on the cover page and under "Number Of Shares; Proration; Extension of The Offer," "Background and Purpose of the Offer" and "Certain Information About the Company; General Information" in the Offer to Purchase is incorporated herein by reference. ITEM 4. INTEREST IN SECURITIES OF THE ISSUER. The information set forth in "Transactions and Arrangements Concerning the Common Stock" of the Offer to Purchase is incorporated herein by reference ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE ISSUER'S SECURITIES. The information set forth in "Background and Purpose of the Offer" and "Transactions and Arrangements Concerning the Common Stock" in the Offer to Purchase is incorporated herein by reference. ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth in "Fees and Expenses" in the Offer to Purchase is incorporated herein by reference. ITEM 7. FINANCIAL INFORMATION. (a)and (b). The information set forth in "Certain Information About the Company; General Information," "Historical Financial Information" and "Certain Pro Forma Financial Information" in the Offer to Purchase is incorporated herein by reference. In addition, the Company's Form 10-K for the year ended December 31, 1998, filed with the Commission on March 12, 1999, is incorporated herein by reference. ITEM 8. ADDITIONAL INFORMATION. (a) The board of directors of the Company approved on March 10, 1999 a stock option plan, subject to the approval of shareholders in the annual meeting on April 13, 1999. This plan provides for a total of 250,000 awards or options, and allows the board to award qualified and non-qualified options. No options have been awarded at this time. (b) The information set forth in "Certain Information About the Company; Certain Regulatory Considerations", "Government Regulation" and "Miscellaneous" in the Offer to Purchase is incorporated herein by reference. (c) The information set forth in "Effects of the Offer" in the Offer to Purchase is incorporated herein by reference. (d) Not applicable. (e) The information set forth in the Offer to Purchase and the Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively, is incorporated herein by reference. ITEM 9. MATERIAL TO BE FILED AS EXHIBITS. (a)(1) Form of Offer to Purchase dated March 15, 1999. (a)(2) Form of Letter of Transmittal. (a)(3) Form of Notice of Guaranteed Delivery. (a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees dated March 15, 1999. (a)(5) Form of Letter to Clients from Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees dated March 15, 1999. (a)(6) Form of Letter to Stockholders from the President. (a)(7) Form of press release issued by the Company dated March 15, 1999. (b) Not applicable. (c) Not applicable. (d) Not applicable. (e) Not applicable. (f) Not applicable. SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: March 15, 1999 NATIONAL BANKSHARES, INC. By: /s/JAMES G. RAKES -------------------- James G. Rakes Chairman President & CEO EX-99 2 EXHIBIT 99 NATIONAL BANKSHARES, INC. OFFER TO PURCHASE UP TO 200,000 SHARES OF ITS COMMON STOCK AT $28.00 CASH NET PER SHARE THE OFFER PERIOD WILL EXPIRE ON APRIL 30, 1999, AT 5:00 P.M., EASTERN DAYLIGHT TIME, UNLESS THE OFFER IS EXTENDED -------------------------------------------------- TO THE HOLDERS OF NATIONAL BANKSHARES, INC. COMMON STOCK National Bankshares, Inc., a Virginia corporation (the "Company"), offers to purchase up to 200,000 shares (the "Shares"), of its common stock, $2.50 par value per share (the "Common Stock"), at $28.00 net per share to the seller in cash, upon the terms and conditions set forth in this document and in the attached Letter of Transmittal (which together constitute the "Offer"). Tendering shareholders will not be obligated to pay brokerage commissions, solicitation fees, or, subject to the Letter of Transmittal, stock transfer taxes on the purchase of shares by the Company. However, any tendering shareholder or other payee who fails to complete fully and sign the box captioned "Substitute Form W-9" included in the Letter of Transmittal may be subject to a required tax withholding of 31% of the gross proceeds paid to the shareholder or other payee pursuant to the offer. The Company will pay all charges and expenses of The National Bank of Blacksburg (the "Depository") incurred in connection with the offer. THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING TENDERED. THE OFFER IS SUBJECT TO OTHER CONDITIONS. SEE "CERTAIN CONDITIONS OF THE OFFER." Tenders pursuant to the offer may be withdrawn at any time prior to the expiration date (including any extensions); and if not yet accepted for payment, after the expiration of 40 business days from the commencement of the offer (that is, any time after May 7, 1999) until accepted for payment. The Company's common stock is traded over the counter and listed on the OTC Electronic Bulletin Board under the symbol, "NKSH." On March 8, 1999, the last practicable date of listing on the OTC Electronic Bulletin Board prior to the announcement of the offer, the bid price was $22.00 per share, the ask price was $22.75 per share, and the last known sale price was $22.75 per share. THE DATE OF THIS OFFER TO PURCHASE IS MARCH 15, 1999. THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE MAKING OF THE OFFER. SHAREHOLDERS, HOWEVER, MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER. NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY SHAREHOLDER WITH RESPECT TO THE OFFER, AND NO PERSON HAS BEEN AUTHORIZED BY THE COMPANY TO MAKE ANY SUCH 1 RECOMMENDATIONS. SHAREHOLDERS SHOULD EVALUATE CAREFULLY ALL OF THE INFORMATION CONTAINED OR REFERRED TO HEREIN AND MAKE THEIR OWN DECISION AS TO WHETHER OR NOT TO TENDER SHARES PURSUANT TO THE OFFER. SHAREHOLDERS ARE URGED TO CONSULT A TAX ADVISOR CONCERNING ANY FEDERAL, STATE, LOCAL, OR FOREIGN TAX CONSEQUENCES OF A SALE OF STOCK PURSUANT TO THE OFFER. IMPORTANT Any shareholder desiring to tender all or any portion of his or her shares should either (i) complete and sign the Letter of Transmittal or a facsimile thereof in accordance with the instructions in the Letter of Transmittal, mail or deliver it with any required signature guarantee and any other required documents to the Depository, and either mail or deliver the stock certificates for such shares to the Depository (with all such other documents) or (ii) request a broker, dealer, commercial bank, trust company or other nominee to effect the transaction for the shareholder. A shareholder having shares registered in the name of broker, dealer, commercial bank, trust company or other nominee must contact that broker, dealer, commercial bank, trust company or nominee if such shareholder desires to tender such shares. Shareholders who desire to tender shares and whose certificates for such are not immediately available or whose other required documentation cannot be delivered to the Depository by the expiration of the offer should tender such shares by following the procedures for guaranteed delivery set forth under "Procedure for Tendering Shares." TO EFFECT A VALID TENDER OF SHARES, SHAREHOLDERS MUST VALIDLY COMPLETE THE LETTER OF TRANSMITTAL. Questions and requests for assistance or requests for additional copies of this offer and the Letter of Transmittal, may be directed to the Company or to the Dealer manager at their respective addresses and telephone numbers set forth on the back cover of this offer to purchase. THE DEALER MANAGER FOR THE OFFER IS: SCOTT & STRINGFELLOW, INC. 2 SUMMARY This general summary is provided solely for the convenience of the Company's shareholders and is qualified by reference to the full text and more specific details in this Offer to Purchase.
Purchase Price.......................... $28.00 per share Number of Shares to be Purchased........ 200,000 shares (or such number as are validly tendered or such additional shares accepted). How to Tender Shares.................... See "Procedure for Tendering Shares." Brokerage Commissions................... None. Stock Transfer Tax...................... None, if payment is made as instructed to avoid such tax. Expiration and Withdrawal Dates......... Friday, April 30, 1999, at 5:00 p.m. Eastern Daylight Time, unless extended to such later date at the Company's discretion. Payment Date............................ As soon as practicable after expiration date and acceptance of shares tendered pursuant to this offer by the Company. Position of the Company and its......... Neither the Company, nor any Directors............................... Director makes recommendation as to whether a shareholder should tender shares pursuant to this offer. Withdrawal Rights....................... Shares tendered pursuant to the offer may be withdrawn at any time prior to the expiration date and, if not yet accepted for payment, after the expiration of 40 business days from the commencement of the offer, unless accepted for payment.
3 THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION AS TO WHETHER SHAREHOLDERS SHOULD TENDER OR REFRAIN FROM TENDERING SHARES PURSUANT TO THE OFFER. THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED IN THIS OFFER OR IN THE LETTER OF TRANSMITTAL. DO NOT RELY ON ANY SUCH RECOMMENDATION OR ANY SUCH INFORMATION OR REPRESENTATION, IF GIVEN OR MADE AS HAVING BEEN AUTHORIZED BY THE COMPANY. 4 TABLE OF CONTENTS Section. Page - ------- ---- 1. Number of Shares; Proration; Extension of the Offer...... 6 2. Background and Purpose of the Offer...................... 7 3. Tenders by Holders of Fewer than 100 Shares.............. 8 4. Procedure for Tendering Shares........................... 8 5. Withdrawal Rights........................................ 10 6. Purchase of Shares and Payment of Purchase Price......... 11 7. Conditional Tender of Shares............................. 11 8. Certain Conditions of the Offer.......................... 12 9. Price Range of Common Stock; Dividends................... 13 10. Effects of the Offer..................................... 14 11. Source and Amount of Funds............................... 15 12. Certain Information About the Company; General Information................................... 15 13. Historical Financial Information......................... 16 14. Certain Pro Forma Financial Information.................. 18 15. Transactions and Arrangements Concerning the Common Stock.......................................... 21 16. Federal Income Tax Consequences.......................... 21 17. Government Regulation.................................... 25 18. Extension of the Offer Period; Termination; Amendments............................................ 25 19. Fees and Expenses........................................ 26 20. Miscellaneous............................................ 26 5 THE OFFER 1. NUMBER OF SHARES; PRORATION; EXTENSION OF THE OFFER Upon the terms and subject to the conditions and qualifications of the offer, the Company will purchase up to 200,000 shares of its common stock which are duly tendered prior to 5:00 p.m., Eastern Daylight Time, on April 30, 1999 (the expiration date). The Company reserves the right, at any time, to extend the period of time during which the offer is open by giving oral or written notice of such extension to the Depository, in which event the expiration date shall be the latest time and date on which the offer, as so extended, shall expire. See "Extension of the Offer Period; Termination; Amendments" for description of the Company's right to extend the time during which the offer is open. Subject to the conditions of the offer, if 200,000 or fewer shares of common stock are duly tendered prior to the expiration date, the Company will purchase all shares so tendered, except as provided below. The offer is not conditioned on any minimum number of shares being tendered. In the event of an over subscription of the offer, shares tendered shall be purchased on a pro-rata basis, disregarding fractions, according to the number of shares tendered by each shareholder prior to the expiration date of the offer, provided, however, that: (a) All shares tendered prior to the expiration date by any shareholder who owned beneficially as of the expiration date, an aggregate of fewer than 100 shares and who tenders all of such shares (partial tenders will not qualify for this preference) and completes the box captioned "Odd Lots" in the letter of transmittal shall be purchased in full, prior to the proration of shares tendered by any other shareholder; (b) The Company reserves the right to purchase, prior to purchasing any shares to be purchased on pro-rata basis, all shares tendered by any shareholder who has tendered all shares beneficially owned by him or her and, as a result of the contemplated pro-rating would then own an aggregate of fewer than 100 shares; (c) The Company reserves the right, in its sole discretion, to elect to purchase any and all of the excess shares tendered; and so long as the excess number accepted by the Company does not exceed two percent (2%) of the issued and outstanding common shares, no extension of the offer period and no further notice to the shareholders will be required or given. If the Company elects to purchase excess tendered shares, but less than all of the tendered shares, then the shares tendered shall be purchased on a pro-rata basis, as described above (subject to the exceptions noted in paragraphs (a) and (b), above). If (i) the Company increases or decreases the price to be paid for the shares, increases the number of shares being sought by greater than two percent (2%) of the outstanding common 6 shares of the Company, decreases the shares being sought, or incurs dealers/managers soliciting fees, and (ii) the offer is scheduled to expire less than ten business days from and including the date that notice of such increase or decrease is first published, sent or given in the manner specified in "Extension of the offer Period; Termination; Amendments," herein, the offer will be extended to the expiration of such period of ten business days from and including the date of such notice. For purposes of the offer, a "business day" means any day other than a Saturday, Sunday or federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, Eastern Daylight Time. THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED BUT IS SUBJECT TO CERTAIN OTHER CONDITIONS. See "Conditions to the Offer". As of December 31, 1998, the Company had issued and outstanding 3,792,833 shares of common stock. The 200,000 shares that the Company is offering to purchase represent approximately 5.3% of the outstanding common stock. As of that date, there were approximately 1,154 holders of record of common stock. Fewer than 135 shareholders held fewer than 100 shares of common stock on December 31, 1998. Because some shares are held in the names of brokers and nominees, the Company is unable to determine the total number of beneficial holders of fewer than 100 shares or the aggregate number of shares they own. The Company's Stock Plan makes available to key employees common stock in the form of options. However, no options have been granted pursuant to the Stock Plan. This offer to purchase and the related Letter of Transmittal will be mailed to record holders of shares as of March 15, 1999 and will be furnished to brokers, banks and similar persons whose names, or the names of whose nominees appear on the Company's shareholder list. 2. BACKGROUND AND PURPOSE OF THE OFFER The Company believes that the repurchase of Company common stock is consistent with the Company's long-term goal of increasing shareholder value. Over the past few years, the Company's profitable operations have increased capital in excess of regulatory standards, and the amount of capital on hand now is more than needed to support the Company's banking business. After considering other alternatives, the Company's management and its board of directors believe that reducing outstanding capital by this repurchase will maximize shareholder value in the long term. The result of the offer and reduction in capital should increase return on equity and earnings per share by reducing the amount of equity and shares outstanding. We hope the offer also will provide immediate liquidity for shareholders who need it. We believe that remaining capital and future earnings will be adequate to meet funding needs for the foreseeable future. After completion of the offer, we expect that the Company and the Banks will continue to maintain the highest regulatory standard for capital, which is designated as "well capitalized" by the Federal Deposit Insurance Corporation Improvement Act of 1991. 7 THE BOARD OF DIRECTORS HAS APPROVED THE OFFER. HOWEVER, THE COMPANY AND ITS BOARD OF DIRECTORS MAKES NO RECOMMENDATION AS TO WHETHER ANY SHAREHOLDER SHOULD TENDER SHARES OR NOT, AND NEITHER THE COMPANY NOR THE BOARD HAS AUTHORIZED ANY PERSON TO MAKE ANY SUCH RECOMMENDATION. SHAREHOLDERS ARE URGED TO EVALUATE CAREFULLY ALL INFORMATION IN THE OFFER, CONSULT THEIR OWN INVESTMENT AND TAX ADVISORS, AND MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES, AND, IF SO, HOW MANY SHARES TO TENDER. 3. TENDERS BY HOLDERS OF FEWER THAN 100 SHARES - "ODD LOTS" All shares tendered for purchase by persons who beneficially held fewer than 100 shares of common stock on the expiration date, and who properly tender all of their shares prior to the expiration date, will be accepted before proration, if any, of the purchase of other tendered shares. Partial tenders will not qualify for this preference, and it is not available to the holders who beneficially own 100 or more shares on the expiration date, even though such holder has separate stock certificates for fewer than 100 shares. Any shareholder owning fewer than 100 shares and who wishes to tender all such shares must complete the box captioned "Odd Lots" in the Letter of Transmittal. The Company has reserved the right, but will not be obligated, to purchase all shares properly tendered by any shareholder who has tendered all shares beneficially owned by him or her and as a result of proration would then own an aggregate of fewer than 100 shares. See "Number of Shares; Proration; Extension of the Offer." 4. PROCEDURE FOR TENDERING SHARES For a shareholder to tender shares pursuant to the offer, certificates for those shares, together with a properly completed and duly executed Letter of Transmittal and any other documents required by the Letter of Transmittal, must be received prior to the expiration date by the Depository at the appropriate address set forth in the Letter of Transmittal, except as otherwise provided in this section. MATERIALS IN THE MAIL ON THE EXPIRATION DATE DO NOT CONSTITUTE A TIMELY TENDER. No signature guarantee is required unless Special Payment Instructions or Special Delivery Instructions are given on the Letter of Transmittal. If a shareholder wishes to tender shares pursuant to the offer and such shareholder's certificates are not immediately available or time will not permit the Letter of Transmittal and other required documents to reach the Depository by the expiration date, such shares still may be tendered, provided that all of the following conditions are satisfied: (a) Such tenders are made by or through a member of a registered national securities exchange, a member of the National Association of Securities Dealers ("NASD") or a commercial bank or trust company with membership in an approved signature guarantee medallion program pursuant to Rule 17Ab-15 of the Exchange Act (an "Eligible Institution"); 8 (b) The Depository receives (by hand, mail, telegram, or acceptable facsimile transmission), prior to the expiration date, a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form the Company has provided and includes a guarantee by an eligible institution in the form set forth in the Notice; and (c) The certificates for all tendered shares, together with a properly completed and duly executed Letter of Transmittal and any other documents required by the Letter of Transmittal, are received by the Depository within five business days after receipt by the Depository of the Notice of Guaranteed Delivery. Payments for shares of common stock tendered and purchased will be made only after receipt by the Depository of the stock certificate(s), a properly completed and duly executed Letter of Transmittal, and any other documents required by the Letter of Transmittal. THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING SHARE CERTIFICATES, IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS BY MAIL, INSURED REGISTERED MAIL -- RETURN RECEIPT REQUESTED SHOULD BE CONSIDERED, AND ENOUGH TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. All questions regarding the validity, form, eligibility (including time of receipt) and acceptance of any tender will be determined by the Company in its sole discretion, and its determination shall be final and binding. The Company reserves the right to reject any or all tenders determined by it not to be in appropriate form or which would, in the opinion of the Company's counsel, be unlawful. The Company also reserves the absolute right to waive any of the conditions of the offer or any defect or irregularity in any tender with respect to any particular shares of common stock or any particular shareholder, and the Company's interpretations of the terms and conditions of the offer will be final and binding. Tenders will not be deemed to have been made until any defects and any irregularities have been cured or waived. Neither the Company, nor the Depository nor any other person shall be obligated to give any such notice nor incur any liability for failure to give any such notice. A tender of shares made pursuant to any one of the procedures set forth above will constitute an agreement between the tendering shareholder and the Company in accordance with the terms and subject to the conditions of this offer. If any tendered shares are not purchased, or if less than all shares evidenced by a shareholder's certificate are tendered, certificates for unpurchased shares will be returned as promptly as practicable after the expiration or termination of the offer. A tender of shares according to any of the procedures described above will constitute the tendering shareholder's acceptance of the terms and conditions of the offer, as well as the tendering shareholder's representation and warranty to the Company that (a) the shareholder has 9 a net long position in the shares being tendered within the meaning of Rule 14e-4 promulgated by the Commission under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and (b) the tender of such shares complies with Rule 14e-4. It is a violation of Rule 14e-4 for a person, directly or indirectly, to tender shares for his own account unless, at the time of tender and at the end of the proration period, the person tendering (i) has a net long position equal to or greater than the amount of the shares tendered or other securities convertible into or exchangeable or exercisable for the shares tendered and will acquire such shares for tender by conversion, exchange or exercise and (ii) will cause such shares to be delivered in accordance with the terms of the offer. Rule 14e-4 provides a similar restriction applicable to the tender or guarantee of a tender on behalf of another person. The Company's acceptance for payment of shares tendered pursuant to the offer will constitute a binding agreement between the tendering shareholder and the Company upon the terms and subject to the conditions of the offer. Certificates for shares, together with a properly completed letter of transmittal and any other documents required by the letter of transmittal, must be delivered to The National Bank of Blacksburg at 100 South Main Street, P. O. Box 90002, Blacksburg, Virginia 24062. 5. WITHDRAWAL RIGHTS Tenders made pursuant to the offer are revocable and may be withdrawn (a) at any time prior to the expiration date (including any extension of the offer), and (b) if not yet accepted for payment, after the expiration of 40 business days from the commencement of the offer (that is, any time after May 7, 1999), until the tender is accepted for payment. This is in accordance with applicable regulations of the Securities and Exchange Commission ("SEC.") To be effective, a notice of withdrawal in written, telegraphic or facsimile form must be received in a timely manner by the Depository at the appropriate address set forth in the Letter of Transmittal. Any notice of withdrawal must specify the name of the person having tendered the shares to be withdrawn, the number of shares tendered, the number of shares to be withdrawn, and, if certificates representing such shares have been delivered to the Depository, the name of the registered holder(s) of such shares, as set forth in such certificates. If the certificates have been delivered to the Depository, the tendering shareholder must also submit the serial numbers of the particular certificates for the shares to be withdrawn, and the signature on the shareholder's notice of withdrawal must be guaranteed by an eligible institution, as described previously. All questions as to the form and validity (including the time of receipt) of notices of withdrawal will be determined by the Company in its sole discretion, and its determination shall be final and binding on all parties. Neither the Company nor the Depository or any other person is or will be obligated to give notice of any defects or irregularities in any notice of withdrawal, and none of them will incur any liability for failure to give any such notice. Withdrawals may not be rescinded, and shares properly withdrawn shall not be deemed to be duly tendered for purposes of the offer. Withdrawn shares, however, may be re-tendered before the expiration date by again following the procedures described under "Procedure for Tendering Shares." 10 6. PURCHASE OF SHARES AND PAYMENT OF PURCHASE PRICE The Company shall be deemed to have purchased shares of common stock pursuant to the offer when, as and if it gives oral or written notice to the Depository of its acceptance for payment of the shares. That notice, subject to the provisions of the offer, may be given at any time after the expiration date of the offer. Payment for all shares properly tendered prior to the expiration date and purchased pursuant to the offer will be made by the Depository by check as promptly as practicable after the expiration date. However, in the event of proration, the Company does not expect to be able to determine the final proration factor and pay for tendered shares until approximately ten business days after the expiration date. Certificates for all tendered shares not purchased (see "Number of Shares; Proration; Extension of the Offer") will be returned as soon as practicable after the expiration date or termination of the offer, without expense to the tendering shareholder. The Company will pay all stock transfer taxes, if any, payable on the transfer to it of shares purchased pursuant to the offer. However, if purchased shares are to be registered in the name of any person other than the registered holder, or if tendered certificates are registered in the name of any person other than the person signing the Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder or such other person) payable on account of the transfer to such person will be deducted from the purchase price, unless satisfactory evidence of the payment of such taxes or exemption therefrom is submitted. The Depository will act as agent for tendering shareholders for the purpose of receiving payment from the Company and transmitting payment to tendering shareholders. The Company will not pay interest on the purchase price. ANY TENDERING SHAREHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE FULLY AND SIGN THE BOX CAPTIONED "SUBSTITUTE FORM W-9" IN THE LETTER OF TRANSMITTAL MAY BE SUBJECT TO REQUIRED BACK-UP FEDERAL INCOME TAX WITHHOLDING OF 31% OF THE GROSS PROCEEDS PAID TO SUCH SHAREHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE SECTION 16 HEREIN. 7. CONDITIONAL TENDER OF SHARES Under certain circumstances and subject to the exceptions set forth under "Number of Shares; Proration; . . ." above, the Company may prorate the number of shares of common stock purchased pursuant to the offer. As discussed under "Federal Income Tax Consequences," the number of shares purchased from a particular shareholder might affect the tax consequences to such shareholder of such purchase and such shareholder's decision whether to tender. Accordingly, a shareholder may tender shares subject to the condition that a specified minimum number must be purchased, if any are purchased. Any shareholder wanting to make a conditional tender must indicate that in the box captioned "Conditional Tender" on the Letter of Transmittal. It is the tendering shareholder's responsibility to calculate the minimum number of shares. If the effect of accepting tenders on a pro-rata basis is to reduce the number of shares to be purchased from any shareholder below the minimum number specified by that shareholder, 11 that tender will be regarded as withdrawn, except as provided in the next paragraph, and all shares tendered by that shareholder will be returned as soon as practicable thereafter. If so many conditional tenders are withdrawn that the total number of shares to be purchased falls below 200,000 shares, then, to the extent feasible, the Company will select enough of such conditional tenders, which would otherwise have been withdrawn, to purchase the desired number of shares. In selecting among such conditional tenders, the Company will select by lot and will limit its purchase in each case to the designated minimum number of shares to be purchased. 8. CERTAIN CONDITIONS OF THE OFFER Notwithstanding any term of the offer, the Company may, at its option, withdraw the offer and shall not be required to accept for payment or purchase or pay for any shares of common stock tendered, if before termination of the offer, any event has occurred that has been determined by the Company, in the Company's sole judgment, and regardless of the circumstances giving rise to it (including any action or omission to act by the Company), making it inadvisable to proceed with the offer or with the acceptance for payment or payment, including but not limited to the following events: (a) There shall have been instituted or threatened any action or proceeding before any court or administrative agency which challenges the acquisition of shares pursuant to the offer or otherwise relates in any manner to the offer, or in the judgment of the Company could otherwise materially and adversely affect the Company; or (b) Any action shall have been taken, or any statute, rule, regulation or order shall have been proposed, enacted, enforced, or deemed to be applicable to the offer, by any governmental agency or other regulatory administrative authority, domestic or foreign, which, in the judgment of the Company would or might prohibit, restrict or delay consummation of the offer or materially impair the contemplated benefits of the offer to the Company; or (c) There shall have occurred any commencement of armed hostilities directly or indirectly involving the United States, or any national emergency, banking moratorium or suspension of payments by banks in the United States, or any general suspension of trading or limitation of prices for securities on any primary securities exchange or in the over-the-counter market in the United States, or any decline in either the Dow Jones Industrial Average or the Standard & Poor's Index of 500 Industrial Companies by an amount in excess of ten percent measured from the close of business on March 15, 1999; or 12 (d) Any change shall occur or be threatened in the business, condition (financial or otherwise), operations, stock ownership, prospects of the Company or one of its subsidiary banks, which, in the judgment of the Company, is or may be material to the Company or its subsidiary, any of which in the sole judgment of the Company makes it inadvisable to proceed with the acceptance of tenders, purchase of shares, or payment. Any determination by the Company concerning any events described in this section and any related judgment or decision by the Company regarding the inadvisability of proceeding with the purchase of or the payment for any shares tendered shall be final and binding upon all parties. The foregoing conditions are for the sole benefit of the Company and may be asserted by the Company regardless of the circumstances giving rise to those conditions or may be waived by the Company in whole or in part. The Company's failure at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right, and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. 9. PRICE RANGE OF COMMON STOCK; DIVIDENDS The shares are traded over the counter and listed on the OTC Electronic Bulletin Board. The following table sets forth the range of the high and low sale prices of the Company's common stock for all trades reported to the Company during those periods. The following quotations have been adjusted to reflect any stock splits or dividends paid on outstanding shares during the relevant periods stated in the table. Stock Prices Dividends High (1) Low (1) Per Share 1996 1st Quarter.................... $26.50 $24.00 - - 2nd Quarter.................... 26.25 24.50 $0.30 3rd Quarter.................... 27.00 24.50 - - 4th Quarter.................... 26.50 25.00 0.32 1997 1st Quarter.................... 26.25 25.00 - - 2nd Quarter.................... 25.87 23.50 0.33 3rd Quarter.................... 25.75 23.81 - - 4th Quarter.................... 26.50 23.50 0.35 13 1998 1st Quarter.................... 27.75 24.75 - - 2nd Quarter.................... 28.00 26.50 0.36 3rd Quarter.................... 27.50 23.25 - - 4th Quarter.................... 24.25 21.25 0.38 1999 1st Quarter (through March 15) 24.50 22.00 - - (1) In many cases, these stock trades were subject to brokerage commissions that would reduce the total net proceeds to the seller. The stock prices shown above do not reflect such commissions. The Company's common stock is traded over the counter and listed on the OTC Electronic Bulletin Board. On March 8, 1999, the last practicable date of listing on the OTC Electronic Bulletin Board prior to the announcement of the offer, the bid price was $22.00 per share, the ask price was $22.75 per share, and the last known sale price was $22.75 per share. SHAREHOLDERS ARE URGED TO OBTAIN CURRENT QUOTATIONS OF THE MARKET PRICE OF THE SHARES AND TO CONSULT AN INDEPENDENT FINANCIAL ADVISOR. 10. EFFECTS OF THE OFFER The offer will enable shareholders to sell a portion of their shares while retaining a continuing equity interest in the Company, if they so desire. The Company's purchase of shares pursuant to the offer will reduce the number of shares that might otherwise trade publicly and is likely to reduce the number of shareholders. If the purchase of shares in the offer does reduce the number of shareholders of record, the Company may pay less for services to shareholders. For shareholders who do not tender shares, there is no assurance that the price of the stock will not trade below the price currently being offered by the Company pursuant to the offer. For shareholders who do tender, there is no assurance that the trading price of Company common stock will not increase as a result of the offer and at some point exceed the offer price. The Company believes that there will still be a sufficient number of shares outstanding and publicly traded following the offer to ensure a continued trading market in the shares. Following completion of the offer, the Company may repurchase additional shares in the open market, in privately negotiated transactions or otherwise. Any such purchases may be on the same terms or on terms which are more or less favorable to shareholder than the terms of the offer. Rule 13e-4 of the Exchange Act prohibits the Company and its affiliates from purchasing any shares, other than pursuant to the offer, until at least ten business days after the expiration date of this offer. Any possible future purchases by the Company will depend on many factors, including the market price of the shares, the results of the offer, the Company's business and financial position, and general economic and market conditions. The shares are registered under the Exchange Act, which requires, among other things, that the Company furnish certain information to its shareholders and to the Commission and comply with the Commission's proxy rules in connection with meetings of the Company's 14 shareholders. The Company believes that its purchase of shares pursuant to the offer will not result in the shares becoming eligible for deregistration under the Exchange Act. See "Certain Pro Forma Financial Information," herein, for pro-forma financial information showing the effects of the Company's purchase of shares pursuant to the offer. To the extent that shares of common stock are purchased in the offer, the proportionate interest of non-tendering shareholders in the Company will be increased. Shares of common stock purchased pursuant to the offer will have the status of authorized but unissued shares. 11. SOURCE AND AMOUNT OF FUNDS Assuming that the Company purchases 200,000 shares in this offer at a price of $28.00 per share, the total amount required to purchase the shares would equal $5,600,000 plus all fees and expenses applicable to this offer. The Company intends to pay for validly tendered shares, as well as for the costs and expenses of this offer, from proceeds from the maturity or sale of investment securities held by the Company or by the subsidiaries. 12. CERTAIN INFORMATION ABOUT THE COMPANY; GENERAL INFORMATION. HISTORY AND BUSINESS. National Bankshares, Inc. is a bank holding company organized under the laws of Virginia in 1986 and registered under the Bank Holding Company Act of 1956 (BHCA). The Company conducts its operations through its two wholly-owned subsidiaries, The National Bank of Blacksburg ("NBB") and Bank of Tazewell County ("BTC"). On June 1, 1996, the Company issued 1,888,209 shares of its common stock in a one-for-one exchange for all the outstanding common stock of Bank of Tazewell County, Tazewell, Virginia. This business combination has been accounted for as a pooling-of-interests and, accordingly, the consolidated financial statements for the periods prior to the combination have been restated to include the accounts and results of operations of Bank of Tazewell County. In May 1996, the Company declared a stock split of 0.11129 per share effected in the form of a stock dividend to the holders of the Company common stock just prior to the merger effective date to facilitate the one-for-one common stock exchange ratio. All stockholders' equity accounts, share and per share data have been adjusted retroactively to reflect the stock split. THE NATIONAL BANK OF BLACKSBURG. The National Bank of Blacksburg was originally chartered as the Bank of Blacksburg in 1891. Its state charter was converted to a national charter in 1922 and it became The National Bank of Blacksburg. NBB operates a full-service general retail and commercial banking business with individuals, businesses, local governments, and institutional customers from its 15 headquarters in Blacksburg, Virginia, and its eight area branch offices. NBB also conducts a general trust business in Blacksburg near its headquarters location. BANK OF TAZEWELL COUNTY. The antecedents of BTC are in a charter issued on September 28, 1889 for Clinch Valley Bank. On December 22, 1893, a second charter was issued in substantially the same form for Bank of Clinch Valley. In 1929, Bank of Clinch Valley merged with Farmers Bank under the charter of the former, and the name of the resulting institution became Farmers Bank of Clinch Valley. Bank of Tazewell County resulted from the 1964 merger of Bank of Graham, Bluefield, Virginia with Farmers Bank of Clinch Valley. BTC provides general retail and commercial banking services to individuals, businesses and local government units. The bank's headquarters are in Tazewell, Virginia, and it operates six branch offices in Tazewell and Bluefield, Virginia. BTC also conducts a general trust business from Tazewell. 13. HISTORICAL FINANCIAL INFORMATION The following tables set forth certain summary historical consolidated financial information of the Company and its subsidiaries. The historical information for the fiscal years 1998 and 1997 has been derived from, and should be read in conjunction with, the audited consolidated financial statements of the Company as reported in the Company's annual report on Form 10-K for the fiscal year ended December 31, 1998, which report is incorporated herein by reference. The summary financial information should be read in conjunction with, and is qualified in its entirety by a reference to, the audited financial statements and the related notes thereto from which it has been derived. Copies of the reports may be inspected or obtained from the Commission in the manner specified in "Additional Information" below. 16 SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION At or for the Year Ended December 31, 1998 1997 (in thousands, except per share data) Income Statement Data: Interest income..................... $ 31,828 29,797 Interest expense.................... 13,928 13,106 ------------- ----------- Net interest income................. 17,900 16,691 Provision for loan losses........... 624 435 Noninterest income.................. 3,174 2,834 Noninterest expense................. 11,061 10,031 Income tax expense.................. 2,591 2,499 -------------- ------------ Net income.......................... 6,798 6,560 ============== ============ Basic net income per share.......... $ 1.79 1.73 Weighted average number of shares outstanding.................. 3,792,833 3,792,833 Balance Sheet Data: Total assets........................ $ 445,166 402,907 Investment securities: Available for sale ................. 136,078 65,582 Held to maturity.................... 30,676 84,392 Loans, net.......................... 236,578 214,552 Deposits............................ 382,696 347,867 Shareholders' equity................ 58,503 54,029 Book value per share (1)............ 16.00 14.73 Shares outstanding.................. 3,792,833 3,792,833 Selected Financial Ratios: Return on average assets............ 1.61 1.66 Return on average equity (1)........ 11.66 12.21 Average equity to average assets (1) 13.84 13.57 - ------------------- (1) Includes $2,180,000 and $1,838,000 at December 31, 1998 and 1997, respectively, related to common stock subject to ESOP put option excluded from stockholders' equity on the Consolidated Balance Sheet. 17 ADDITIONAL INFORMATION. Additional information concerning the Company is set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. Such reports are available upon request from the Company. The Company also has filed a Schedule 13E-4 with the Commission, which includes certain additional information related to the offer. Forms 10-K, as well as other periodic reports, proxy statements and other information, are regularly filed by the Company with the Commission. Such material may be inspected and copied at prescribed rates at the Commission's Public Reference Facilities at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the New York regional office of the Commission located at Suite 1300, Seven World Trade Center, New York, New York 10048, and copies of such material may be obtained by mail at prescribed rates from the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission maintains an internet web site at http://www.sec.gov., containing reports, proxy and informational statements and other information regarding companies who file reports electronically with the Commission. In addition, reports, proxy statements, and other information concerning the Company may be obtained from James G. Rakes, Chairman, President & CEO, 100 South Main Street, P. O. Box 90002, Blacksburg, Virginia 24062, Telephone (540) 951-6236. 14. CERTAIN PRO FORMA FINANCIAL INFORMATION The following summary unaudited pro forma financial information as of and for the year ended December 31, 1998 has been prepared on the assumption that the Company acquired 200,000 shares of its common stock for $28.00 per share pursuant to the offer. The balance sheet data gives effect to the purchase of shares as of December 31, 1998. The income statement data gives effect to the purchase of shares as of January 1, 1998. The pro forma financial information should be read in conjunction with the audited financial statements and related notes contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. The pro forma financial information does not purport to be indicative of the results that would have actually been attained had the purchase of the shares been completed at the dates indicated or that may be attained in the future. 18
At or for the Year Ended December 31, 1998 (in thousands, except per share data) Pro Forma Pro Forma Historical Adjustments (Unaudited) Income Statement Data: Interest income ................. $ 31,828 (361) (1) 31,467 Interest expense ................ 13,928 13,928 ------------- ------------ ------------ Net interest income ............. 17,900 (361) (1) 17,539 Provision for loan losses ....... 624 624 Noninterest income .............. 3,174 3,174 Noninterest expense.............. 11,061 11,061 Income tax expense............... 2,591 (123) (1) 2,468 -------------- ------------- ------------ Net income....................... $ 6,798 (238) 6,560 ============= ============= ============ Basic net income per share....... 1.79 1.83 Weighted average number of shares outstanding............... 3,792,833 (200,000) (1) 3,592,833 Balance Sheet Data: Total assets .................... $ 445,166 (5,600) (1) 439,328 ................................. (238) (1) Investment securities: Available for sale ............ 136,078 (5,600) (1) 130,478 Held to maturity............... 30,676 30,676 Loans, net....................... 236,578 236,578 Deposits ........................ 382,696 382,696 Shareholders' equity............. 58,503 (5,600) (1) 52,665 ................................. (238) (1) Book value per share (4)......... 16.00 15.27 Shares outstanding............... 3,792,833 (200,000) (1) 3,592,833 Selected Financial Ratios: Return on average assets......... 1.61 1.58 Return on average equity (4)..... 11.66 12.51 Average equity to average assets (4) 13.84 12.63
19 Notes to Pro Forma Financial Information (1) The funds used to purchase 200,000 shares at $28.00 per share for $5,600,000 will be obtained from proceeds from the maturity or sale of investment securities. It is assumed these investment securities will have an effective yield of 6.45% ($5,600,000 x 6.45% = $361,200). The tax rate of 34% is assumed ($361,200 x 34% = $122,800). The income statement data reflects the reduction in interest income on the investment securities as if the investments matured as of January 1, 1998. The income statement does not reflect savings by the banks of state franchise tax as a result of reducing capital. The Company expects the savings to be approximately $56,000, commencing in the year following the reduction of capital. (2) The purchase of shares was allocated to common stock at its $2.50 per share par value, and the remainder of the purchase price was allocated to retained earnings. (3) Costs incurred in connection with the offer will be included as part of the cost of shares purchased. No effect of the costs is reflected in the pro forma financial information. Costs incurred in connection with the offer are expected to approximate $35,000. (4) Includes $2,180,000 related to common stock subject to ESOP put options excluded from stockholders' equity on the consolidated balance sheet. PRO FORMA CAPITAL The Company is subject to regulatory requirements regarding maintaining minimum capital. The following table shows the historic capital ratios of the Company at December 31, 1998 (with the unaudited pro forma ratios assuming that 200,000 shares have been purchased by the Company at December 31, 1998) and the minimum required regulatory ratios.
December 31, 1998 ----------------- Minimum Well-Capitalized Historical Pro Forma Required Minimum ---------- --------- -------- -------- Risk-based capital ratio 22.44 20.39 8.00 10.00 Leverage ratio 13.41 12.23 4.00 5.00 Tier-one ratio 21.46 19.40 4.00 6.00
THE COMPANY'S UNAUDITED PRO FORMA FINANCIAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE HISTORICAL CONSOLIDATED FINANCIAL INFORMATION AND DOES NOT PURPORT TO BE INDICATIVE OF FUTURE EARNINGS OR FINANCIAL POSITION OR OF WHAT EARNINGS OR FINANCIAL POSITION WOULD HAVE BEEN HAD THE OFFER BEEN CONSUMMATED AS OF THE DATES FOR WHICH PRO FORMA INFORMATION IS PRESENTED. 20 15. TRANSACTIONS AND ARRANGEMENTS CONCERNING THE COMMON STOCK There were no transactions in the Company's common stock by the Company, its subsidiaries, its executive officers and directors within the period of 40 business days prior to the date of this offer. Neither the Company nor its subsidiaries, nor, to the Company's knowledge, any of its executive officers or directors or any associate of any such officer or director of the Company or its subsidiaries has engaged in any transactions involving shares of common stock during the period of 40 business days prior to the date hereof. Executive officers and directors of the Company will be eligible to tender shares pursuant to the offer. Directors of the Company have indicated that they do not intend to tender shares pursuant to this offer, although they reserve their right to do so. Except as set forth herein, neither the Company nor, to the Company's knowledge, any of its executive officers or directors, or any of the executive officers or directors of any of its subsidiaries, is a party to any contract, arrangement, understanding or relationship relating, directly or indirectly, to this offer with any other person with respect to common stock of the Company. Except as disclosed in this Offer to Purchase, the Company currently has no plans for proposals that relate to or would result in (i) the acquisition by any person of additional securities of the Company or the disposition of securities by the Company (except for the stock option plan); (ii) extraordinary corporate transactions such as a merger, reorganization or liquidation, involving the Company or any and all of its subsidiaries; (iii) a sale or transfer of a material amount of assets of the Company or any of its subsidiaries; (iv) any change in the present Board of Directors or management of the Company; (v) any material change in the present dividend rate or policy for indebtedness or capitalization of the Company; (vi) any other material change in the Company's corporate structure or business; (vii) any material change in the Company's Articles of Incorporation or Bylaws or any action which may impede the acquisition of control of the Company by any person; (viii) a class of equity security of the Company becoming eligible for termination of registration pursuant to the Section 12(g)(4) of the Exchange Act; or (ix) the suspension of the Company's obligation to file reports pursuant to Section 15(b) of the Exchange Act. However, as explained above, on March 10, 1999, the Company's board of directors approved a stock option plan for 250,000 shares, which allows may be either qualified or non-qualified options, at the discretion of the board, all subject to shareholder approval at the annual meeting on April 13, 1999. No options have been awarded under this plan as of this date. 16. FEDERAL INCOME TAX CONSEQUENCES The following discussion is based upon information provided by the Company, the Internal Revenue Code of 1986, as amended and in effect on the date hereof (the "Code"), existing and proposed regulations thereunder, judicial decisions and current administrative rulings and practices. Any of these authorities could be repealed, overruled or modified at any time. Any such change could be retroactive and, accordingly, could modify the tax 21 consequences of this offer. No ruling from the Internal Revenue Service with respect to the matters discussed herein has been requested and there is no assurance that the Internal Revenue Service would agree with the conclusions set forth in this discussion. This discussion is for general information only and does not address the federal income tax consequences that may be relevant to particular shareholders of the Company in light of their personal circumstances or to certain types of shareholders of the Company (such as dealers in securities, insurance companies, foreign individuals and entities, financial institutions and tax-exempt entities) who may be subject to special treatment under the federal income tax laws. This discussion also does not address any tax consequences under state, local or foreign laws. GENERAL CONSEQUENCES. Sales of common stock by tendering shareholders pursuant to the offer will be taxable transactions for federal income tax purposes (and may be a taxable transaction under state, local or foreign tax laws as well). Under the Code, a shareholder whose shares are purchased pursuant to the offer will generally recognize gain or loss in an amount equal to the difference between the cash received and such shareholder's adjusted basis for his shares redeemed, if (i) as a result of the sale, his stock interest in the Company is completely terminated, (ii) the cash distribution is substantially disproportionate with respect to the selling stockholder, or (iii) the cash distribution is deemed to be not essentially equivalent to a dividend. These tests are discussed in greater detail below. Such gain or loss generally will be treated as a capital gain or loss if the shares of common stock are held as capital assets, and generally will be treated as a long-term capital gain or loss if the shareholder's holding period for such shares is more than one year. To determine whether the foregoing tests are met, there must be taken into account both (a) any shares actually owned by such shareholder and (b) any shares considered owned by such shareholder by reason of certain constructive ownership rules set forth in Sections 318 and 302(c) of the Code. Under Section 318, a shareholder generally will be treated as owning shares which he has the right to acquire under options and shares owned (and, in some cases, constructively owned) by members of the tendering shareholder's family and by related entities (such as corporations, partnerships, trusts and estates) in which such shareholder, a member of his family or a related entity has an interest. IF NONE OF THE FOREGOING TESTS (DESCRIBED IN GREATER DETAIL BELOW) ARE SATISFIED, THE CASH RECEIVED PURSUANT TO THE OFFER WILL BE TREATED AS A DIVIDEND AND WILL BE TAXABLE AS ORDINARY INCOME TO THE EXTENT OF THE CURRENT AND ACCUMULATED EARNINGS AND PROFITS OF THE COMPANY. 22 COMPLETE TERMINATION OF INTEREST. A complete termination of stock interest of a tendering shareholder will have occurred if the Company purchases all of his common stock pursuant to this offer, and such shareholder does not own directly and is not deemed to own, under the constructive ownership rules described above, any other stock of the Company. If the offer is prorated, the shares that are not purchased by reason of such proration must be taken into account in determining whether a shareholder has achieved a complete termination of his interest in the Company. If a shareholder would otherwise satisfy the complete termination requirement, but for his constructive ownership of shares held by family members, under certain circumstances such shareholder may be entitled to disregard such constructive ownership. SUBSTANTIALLY DISPROPORTIONATE REDEMPTION. A substantially disproportionate redemption occurs as to a shareholder if the redemption results in the shareholder owning less than 80% of the percentage of outstanding common stock that he owned immediately before the redemption and less than 50% of all of the Company's outstanding common stock. In applying these tests, the constructive ownership rules discussed above will apply. REDEMPTION NOT ESSENTIALLY EQUIVALENT TO A DIVIDEND. A shareholder who meets the requirements of the "not essentially equivalent to a dividend" test generally will receive capital gain or loss treatment, provided that he holds his shares of common stock as capital assets. A redemption will be treated as "not essentially equivalent to a dividend" if, as result of the sale of common stock pursuant to the offer, a shareholder has realized a "meaningful reduction" in his proportionate interest in the Company, taking into account the constructive ownership rules. This determination depends on the facts and circumstances of each case. Shareholders tendering shares in this offer should note that the change in their relative stock interest in the Company may be affected by an proration of the offer. ANY SHAREHOLDER SEEKING TO RELY ON THE "NOT ESSENTIALLY EQUIVALENT TO A DIVIDEND" TEST SHOULD CONSULT WITH HIS OWN TAX ADVISOR AS TO ITS APPLICATION IN HIS PARTICULAR SITUATION. DETERMINING AMOUNT OF TAXABLE GAIN. If one of the three tests described above is satisfied, the tendering shareholder will recognize gain or loss in an amount equal to the difference between the amount of cash received pursuant to the offer and his adjusted basis in the redeemed shares. Different rules may apply to the determination of the adjusted basis of shares of stock, depending upon how the shares were acquired by the shareholder. Generally, the basis of shares is equal to their cost. However, if the shares were received in a tax-free reorganization, inherited, received by gift or received in numerous other ways, special tax rules may apply. Special rules may apply to a significant number of the Company's outstanding shares of common stock which originally were issued in exchange for shares of NBB and BTC in connection with the reorganization of the NBB into a holding company structure and the merger with BTC. Assuming that those transactions qualified 23 as tax-free reorganizations, any shareholder who exchanged all of his Bank shares solely for shares of the Company's common stock in those transactions generally would have an adjusted basis in his common stock equal to his basis in the exchanged bank shares. Assuming that the stock of a particular shareholder is a capital asset and that the shareholder will recognize a capital gain or loss on the repurchase of the shares by the Company pursuant to the offer, a determination then must be made as to the length of time during which the stock has been held or deemed held by that particular shareholder. Currently, the required holding period to obtain long-term capital gain or loss treatment is more than one year. For stock acquired in a tax-free exchange (or received by gift or inheritance) the shareholder may be entitled to add ("tack") the holding period of his exchanged shares (or the holding period of a former owner) to his holding period for the acquired shares. TAXABLE DIVIDEND TREATMENT. If none of the three tests described above is satisfied, then the shareholder generally will be treated as having received a distribution taxable as a dividend (i.e., ordinary income) to the extent of current and accumulated earnings and profits of the Company. To the extent the cash received by the shareholder pursuant to the offer exceeds the Company's earnings and profits, it will be applied to reduce his adjusted basis in his common stock, and any amount in excess of basis will be taxed as capital gain. Corporate shareholders may be entitled to the dividends-received deduction, except that the amount of the deduction may be reduced under certain special tax rules. BACKUP WITHHOLDING REQUIREMENTS. Under federal backup withholding rules, except in the case of certain exempt taxpayers, the Depository will be required to, and will, withhold 31% of the gross proceeds paid to a shareholder or other payee pursuant to the offer unless the shareholder provides his tax identification number (employer identification number or social security number), certifies that such number is correct, and certifies that he is not subject to backup withholding under Section 3406(a)(1)(C) of the Code. Each shareholder should complete fully and sign the box captioned "Substitute Form W-9" included as part of the Letter of Transmittal, so as to provide the information and certifications necessary to avoid backup withholding. See the Letter of Transmittal and the Instructions thereto for further details. THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY. EACH SHAREHOLDER OF THE COMPANY IS URGED TO CONSULT HIS OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO HIM OF THE PURCHASE OF HIS COMMON STOCK PURSUANT TO THE OFFER, INCLUDING THE APPLICABILITY OF THE CONSTRUCTIVE OWNERSHIP RULES, THE APPLICABILITY OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, CHANGES IN APPLICABLE TAX LAWS AND ANY PENDING OR PROPOSED LEGISLATION. 24 17. GOVERNMENT REGULATION The Company is not aware of any license or regulatory permit material to its business that might be adversely affected by the purchase of shares as contemplated in the offering or of any approval or other action by any government or governmental, administrative, or regulatory authority or agency, domestic or foreign, that would be required for the Company's purchase or ownership of shares as contemplated by the offering. Under Federal Reserve Board regulations, promulgated under the Bank Holding Company Act of 1956, a bank holding company must give written notice to the Board of Governors of the Federal Reserve before purchasing or redeeming its equity securities if the gross consideration paid for the purchase or redemption equals or exceeds 10% of the company's consolidated net worth during a 12 month period, unless, (i) the holding company meets the thresholds established for "well capitalized" state member banks under applicable regulations following the redemption, and (ii) the bank holding company received a composite "1" or "2" rating at its most recent Federal Reserve Board examination, and the Company (and subsidiary banks) have no unresolved regulatory supervisory issues restricting capital. The Company meets these criteria, and therefore, it will not be required to file a notice with the Federal Reserve Board prior to making the offer. No approval of any other federal, state or local governmental body is required with respect to the offering. Should any such approval or other action be required, the Company will immediately seek such approval or other action. The Company cannot predict whether it may determine that it is required to delay the acceptance for the payment of or payment for shares tendered pursuant to the offer pending the outcome of any such matter. There can be no assurance that any such approval or other action, if needed, would be obtained without substantial conditions or that the failure to obtain any such approval or other action might not result in adverse consequences to the Company's business. 18. EXTENSION OF THE OFFER PERIOD; TERMINATION; AMENDMENTS The Company reserves the right, in its sole discretion, at any time or from time to time, and regardless of whether or not any of the events set forth under "Certain Conditions of the Offer" shall have occurred or shall be deemed by the Company to have occurred, to extend the period of time during which the offer is open (and thereby delay acceptance for payment of, and payment for, any shares) by giving oral or written notice of extension to the Depository and making a public announcement of that extension. The Company also reserves the right, in its sole discretion, to terminate the offer and not to purchase or pay for any shares of common stock not previously purchased or paid for upon the occurrence of any of the conditions specified herein by giving oral or written notice of such termination to the Depository institution and making a public announcement thereof. The Company further reserves the right, in its sole discretion and regardless of whether any of the events set forth under "Certain Conditions of the Offer" shall have occurred or shall be deemed by the Company to have occurred, to amend the offer in any respect (including, without limitation, by decreasing or increasing the consideration offered in the offer to holders of shares or by decreasing or increasing the number of shares being sought in the offer). Amendments to the offer may be made at any time and from time to time effected by public announcement thereof, such announcement, and in the case of any 25 extension, to be issued no later than 9:00 a.m., Eastern Daylight Time on the next business day after the last previously scheduled or announced expiration date. Any public announcement made pursuant to the offer will be disseminated promptly to shareholders in a manner reasonably designated to inform shareholders of such change. Without limiting the manner in which the Company may choose to make any public announcement, except as provided by applicable law (including Rule 13e-4(e)(2) under the Exchange Act), the Company shall have no obligation to publish, advertise, or otherwise communicate any such public announcement other than by making a press release to the Roanoke Times & World News and filing a Form 8-K with the SEC. If the Company makes a material change in the terms of the offer or the information concerning the offer, or if it waives a material condition of the offer, the Company will extend the offer to the extent required by Rules 13e-4(b)(2) and 13e-4(e)(2) promulgated under the Exchange Act, which require that the minimum period during which any offer must remain open following material changes in the terms of the offer or information concerning the offer than those offers, other than a change in the price or a change in percentage of securities sought will depend upon the facts and circumstances, including the relative materiality of such terms or information. If (i) the Company increases or decreases the price to be paid for shares, the Company increases the number of shares being sought and such increase in the number of shares being sought exceeds 2% of the outstanding capital shares, or the Company decreases the number of shares being sought, and (ii) the offer is scheduled to expire at any time earlier than the expiration of a period ending on the 10th business day from, and including, the date that notice of such increase or decrease is first published, sent or given, the offer will be extended until the expiration of such period of 10 business days. 19. FEES AND EXPENSES The Company will reimburse any broker or dealer, commercial bank or trust company for customary handling and mailing expenses incurred in forwarding the offer. No broker, dealer, commercial bank or trust company has been authorized to act as an agent of the Company or the Depository for purposes of the offer. 20. MISCELLANEOUS The Company is not aware of any jurisdiction in which the making of the offer is not in compliance with applicable law. If the Company becomes aware of any jurisdiction where the making of the offer is not in compliance with any valid applicable law, the Company will make a good faith effort to comply with such law. If, after such good faith effort, the Company cannot comply with such law, the offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of shares residing in such jurisdiction. Pursuant to Rule 13e-4 promulgated under the Exchange Act, the Company has filed with the Commission an Issuer Tender offer Statement on Schedule 13E-4 which contains additional information with respect to the offer. The Schedule 13E-4, including the Exhibits and any 26 amendments thereto, may be examined, and copies may be obtained at the same places and in the same manner as is set forth under "Additional Information" with respect to information concerning the Company. This offer is made to all shareholders of the Company as of the date of this offer. 27 Any questions or requests for assistance or additional copies of this Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery may be directed to the Company or Dealer Manager at the locations and telephone numbers listed below. Shareholders may also contact their local broker, dealer, commercial bank or trust company for assistance concerning this offer. The Company: The Dealer Manager for the Offer is: National Bankshares, Inc. Scott & Stringfellow, Inc. 100 South Main Street 909 East Main Street P.O. Box 90002 Richmond, Virginia 23219 Blacksburg, Virginia 24062 (804) 782-8758 (Christopher W. Choate) (540) 951-6236 (James G. Rakes) (800) 552-7757 (Toll Free) (540) 951-6331 (Marilyn B. Buhyoff) (800) 552-4123 (Toll Free) The Letter of Transmittal, stock certificates and any other required documents should be sent or delivered by each shareholder or by his or her broker, dealer, commercial bank or trust company or nominee to the Depository at one of the addresses below: The Depository for the Offer is: The National Bank of Blacksburg By Mail: By Hand or Overnight Delivery: P.O. Box 90002 100 South Main Street Blacksburg, Virginia 24062 Blacksburg, Virginia 24060 (540) 951-6236 (James G. Rakes) (800) 552-4123 (Toll Free) March 15, 1999 EX-99 3 EXHIBIT A(2) LETTER OF TRANSMITTAL TO ACCOMPANY SHARES OF COMMON STOCK OF NATIONAL BANKSHARES, INC. TENDERED PURSUANT TO THE OFFER TO PURCHASE DATED MARCH 15, 1999 THE OFFER WILL EXPIRE AT 5:00 P.M. EASTERN DAYLIGHT TIME ON APRIL 30, 1999, UNLESS THE OFFER IS EXTENDED TO: The National Bank of Blacksburg PLEASE READ CAREFULLY THE ACCOMPANYING INSTRUCTIONS Ladies and Gentlemen: The undersigned shareholder ("Shareholder" or the "undersigned") of National Bankshares, Inc., a Virginia corporation (the "Company"), hereby agrees to sell and tenders to the Company the number of shares of common stock of the Company (the "Shares") indicated in Box A below and evidenced by share certificate(s) either enclosed herewith or guaranteed to be transmitted as indicated below, to be purchased by the Company at a price of $28.00 net per share, in cash, to the Shareholder, subject to the terms and conditions set forth in the Offer to Purchase dated March 15, 1999, and in this Letter of Transmittal (which together constitute the "Offer to Purchase"). Shareholder acknowledges receipt and review of the Offer to Purchase. The undersigned hereby sells, assigns and transfers to, or upon the order of, the Company all shares that are being tendered hereby that are purchased pursuant to the Offer to Purchase. The undersigned represents that the undersigned has full authority to sell the tendered shares and that such sale will convey to the Company full legal and beneficial title thereto, free and clear of all liens, charges and encumbrances and not subject to any adverse claim. Upon request, the undersigned will execute any additional documents necessary to complete the transfer. The undersigned hereby irrevocably constitutes and appoints The National Bank of Blacksburg ("the Depository") as attorney-in-fact of the undersigned, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), (a) to deliver certificates for the tendered shares, together with all accompanying evidences of transfer and authenticity, to or upon the order of the Company upon receipt of the purchase price by the Depository, as the undersigned's agent, (b) to present such certificates for cancellation and transfer of the tendered shares on the Company's books and (c) to receive all benefits and otherwise exercise all rights of beneficial ownership of the tendered shares, all in accordance with the terms of the Offer to Purchase. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned, and any obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assignees of the undersigned. This tender is revocable only to the extent and during the period stated in the Offer to Purchase. Unless otherwise indicated herein under Box B captioned "Special Payment Instructions" or Box C captioned "Special Delivery Instructions," please issue the check for the purchase price and the certificates for any unpurchased shares (and accompanying documents, as appropriate) in the name of the undersigned and mail such check and any such certificates to the undersigned at the address shown below the undersigned's signature. The undersigned recognizes that the Company has no obligation, pursuant to the Special Payment Instructions, to transfer any certificate for shares from the name of the holder thereof if the Company purchases none of the shares represented by such certificate. - -------------------------------------------------------------------------------- BOX A DESCRIPTION OF SHARES TENDERED (SEE INSTRUCTIONS 4 AND 5) - -------------------------------------------------------------------------------- Certificates Tendered Names and Addresses of Registered Holders (Attach signed Schedule if Necessary) - -------------------------------------------------------------------------------- Certificate No. of No. of Shares No(s). Shares Tendered* ------------------------------------------- ------------------------------------------- ------------------------------------------- ------------------------------------------- Total Shares Tendered _______________ * If you desire to transfer fewer than all the shares evidenced by any certificate listed above, please indicate in this column the number of shares from such certificate that you desire to tender. Otherwise all shares evidenced by such certificate will be deemed to have been tendered. - -------------------------------------------------------------------------------- NOTE: IF YOUR CERTIFICATES ARE LOST, PLEASE REFER TO INSTRUCTION 12. - -------------------------------------------------------------------------------- BOX B SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 6 AND 7) - -------------------------------------------------------------------------------- To be completed ONLY if certificates for any unpurchased shares and/or a check are to be issued in the name of and sent to someone other than the undersigned. Issue: [ ] Check [ ] Certificate(s) to: Name:__________________________________________________________ Address:_______________________________________________________ _______________________________________________________ (include Zip Code) _______________________________________________________ (Taxpayer Identification or Social Security Number) (See Instruction 1) - -------------------------------------------------------------------------------- BOX C SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTION 7) - -------------------------------------------------------------------------------- To be completed ONLY if certificates for any unpurchased shares and/or a check, issued in the name of the undersigned, are to be sent to someone other than the undersigned or are to be sent to the undersigned at an address other than shown below the undersigned's signature. - -------------------------------------------------------------------------------- Mail: [ ] Check [ ] Certificate(s) to: Name:________________________________________________________________ Address:_____________________________________________________________ _____________________________________________________________ (include Zip Code) - -------------------------------------------------------------------------------- BOX D CONDITIONAL TENDER (SEE INSTRUCTION 8) - -------------------------------------------------------------------------------- Minimum number of shares which must be purchased, if any are purchased: __________ shares. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- BOX E ODD LOTS (SEE INSTRUCTION 10) - -------------------------------------------------------------------------------- This Section is to be completed ONLY if shares are being tendered by or on behalf of a person owning beneficially as of close of business on March 15, 1999, an aggregate of fewer than 100 shares of common stock. The undersigned either (check one): [ ] Is the beneficial owner, as of the close of business on March 15, 1999, of an aggregate of fewer than 100 shares of Common Stock, all of which are being tendered; or [ ] Is a broker, dealer, commercial bank, trust company or other nominee which (i) is tendering, for the beneficial owner(s) thereof, shares of common stock with respect to which it is the record owner, and (ii) believes, based upon representations made to it by each such beneficial owner, that such beneficial owner owned beneficially as of the close of business on March 15, 1999, an aggregate of fewer than 100 shares and is tendering all of such shares. - -------------------------------------------------------------------------------- BOX F PAYER'S NAME: NATIONAL BANKSHARES, INC. (SEE INSTRUCTION 9) - -------------------------------------------------------------------------------- SUBSTITUTE PART 1 -- PLEASE PROVIDE SOCIAL SECURITY NUMBER OR FORM W-9 YOUR TIN IN THE BOX AT EMPLOYER IDENTIFICATION RIGHT AND CERTIFY BY NUMBER SIGNING AND DATING BELOW [ ][ ][ ]-[ ][ ]-[ ][ ][ ][ ] ---------------------------------------------------------- PART 2 -- [ ] Check the box if you are NOT subject to withholding under the provisions of section 3406 (a)(1)(C) of the Internal Revenue Code because (1) you have not been notified that you are subject to backup withholding as a result failure to report all interest or dividends or (2) the Internal Revenue Service has notified you that you are no longer subject to backup withholding. - -------------------------------------------------------------------------------- DEPT. OF THE TREASURY CERTIFICATION -- UNDER THE PENALTIES INTERNAL REVENUE OF PERJURY, I CERTIFY THAT THE SERVICE INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT AND COMPLETE. PAYER'S REQUEST FOR SIGNATURE______________________________ TAXPAYER IDENTIFICATION NUMBER (TIN) DATE _______________________________, 1999 PART 3 -- AWAITING TIN [ ] - -------------------------------------------------------------------------------- NOTE: FAILURE TO COMPLETE AND RETURN THE ABOVE FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW INSTRUCTION 9 AND GUIDELINES FOR COMPLETING CERTIFICATION STATEMENTS IN BOX F FOR ADDITIONAL DETAILS. - -------------------------------------------------------------------------------- BOX G SHAREHOLDER SIGN HERE (SEE INSTRUCTION 6) - -------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- [Signature(s) of Owner(s)] IMPORTANT: Also complete Substitute Form W-9 (Box F), above. [PLEASE REFER TO INSTRUCTION 1 TO DETERMINE IF YOUR SIGNATURE MUST BE GUARANTEED.] Name(s):_________________________________________________________ _________________________________________________________ (Please Print) Address:_________________________________________________________ _________________________________________________________ _________________________________________________________ Daytime Area Code and Telephone No.__________________________________________ Tax Identification or Social Security Number_____________________________________________________ Signature(s) Medallion Guaranteed By* _____________________________________________________ (*If required, see Instruction 1) INSTRUCTIONS FOR COMPLETION OF LETTER OF TRANSMITTAL (Forming part of the Terms and Conditions of the offer) 1. GUARANTEE OF SIGNATURES. No signature guarantee on the Letter of Transmittal (Box G) is required unless special instructions have been given under Box B captioned "Special Payment Instructions" or Box C captioned "Special Delivery Instructions." If such special instructions have been given, signatures on this Letter of Transmittal must be guaranteed by an institution, such as a commercial bank, trust company, savings and loan association, credit union, or stockbroker or other member of the NASD or of a national securities exchange, provided such institution is a member of or a participant in a signature guarantee medallion program pursuant to SEC Rule 17Ad-15 ("Eligible Institution"). 2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. The Letter of Transmittal is to be used only if certificates are forwarded herewith, unless delivery of certificates is guaranteed as described under Instruction 3. Certificates for all tendered shares, together with a properly completed and duly executed Letter of Transmittal or facsimile thereof, and any other documents required by this Letter of Transmittal, should be mailed or delivered to The National Bank of Blacksburg, 100 South Main Street, P. O. Box 90002, Blacksburg, Virginia 24062 as Depository, at the appropriate address set forth herein prior to the expiration date of the offer as defined in Section 1 of the Offer to Purchase. Actual delivery to and receipt by the Depository by the expiration date is an absolute requirement unless delivery is properly guaranteed. DEPOSIT IN THE MAIL ON THE EXPIRATION DATE WILL NOT CONSTITUTE A TIMELY TENDER. 3. GUARANTEED OF DELIVERY. Shares represented by certificates which are not immediately available may be tendered by commercial banks or trust companies, by members of any national securities exchange or by members of the NASD, acting on behalf of their customers, if the commercial bank, trust company, exchange or NASD member will execute and deliver a Notice of Guaranteed Delivery and by otherwise complying with the guaranteed delivery procedures set forth in Section 4 of the Offer to Purchase. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by telegram, facsimile transmission or mail to the Depository and must include a signature guarantee by an Eligible Institution in the form set forth in such Notice. For shares to be tendered validly pursuant to the guaranteed delivery procedure, the Depository must receive the Notice of Guaranteed Delivery on or before the expiration date. The adequacy of such Guarantee will be determined solely in the discretion of the Company. Shares tendered pursuant to such a Guarantee should be accompanied by a properly executed Letter of Transmittal. The certificates for the tendered shares must be delivered to the Depository within 5 business days after the Depository's receipt of the Guarantee of Delivery. 4. INADEQUATE SPACE. If the space provided herein is inadequate, the certificate numbers and the number of shares should be listed on a separate schedule attached hereto. 5. PARTIAL TENDERS. If fewer than all the shares evidenced by any certificate submitted are to be tendered, fill in the number of shares which are to be tendered in the column entitled "Number of Shares Tendered." A new certificate for the remainder of the shares evidenced by your old certificate(s) will be sent to you, unless otherwise provided in the appropriate section on this Letter of Transmittal, as soon as practicable after the expiration date of the offer. All shares represented by certificates listed are deemed to have been tendered unless otherwise indicated. 6. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. 6.1 If this Letter of Transmittal is signed by the owner of the certificates tendered hereby, the signature must correspond with the name as written on the face of the certificates, without any change whatsoever. If the names on tendered certificates are not identical, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are certificates in different names. 6.2 If the certificates tendered hereby are owned of record by two or more joint owners, all owners must sign this Letter of Transmittal. 6.3 If any tendered shares are registered in different names, it will be necessary to complete, sign and submit a separate Letter of Transmittal for each different registration. 6.4 When this Letter of Transmittal is signed by the owner(s) of the certificates listed and transmitted hereby, no endorsements of certificates or separate stock powers are required. If, however, the certificates for unpurchased shares are to be issued to a person other than the registered owner, then endorsement of certificates transmitted hereby or separate stock powers is required. See also Instruction 1, above, in such a circumstance. 6.5 If this Letter of Transmittal or any certificates or stock powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of a corporation or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and must submit proper evidence satisfactory to the Company of their authority to so act, if requested. 7. STOCK TRANSFER TAXES. The Company will pay all stock transfer taxes, if any, applicable to the transfer to it of shares purchased pursuant to the offer. If, however, payment of the purchase price is to be made to, or (in circumstances permitted by the offer) if unpurchased shares are to be registered in the name of, any person other than the registered owner, or if tendered certificates are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder or such other person) payable on account of the transfer to such person will be deducted from the purchase price, if satisfactory evidence of the payment of such taxes, exemption therefrom, is not submitted. 8. CONDITIONAL TENDERS. A tendering shareholder may condition his or her tender of shares on the purchase by the Company of a specified number of the shares tendered hereby, all as described in the Offer to Purchase, particularly Section 6 thereof. Unless such specified minimum is purchased by the Company pursuant to the terms of the offer, none of the shares tendered hereby will be purchased. It is the tendering shareholder's responsibility to calculate such minimum number of shares, and such shareholder is urged to consult his or her own tax adviser. Unless Box D has been completed and a minimum specified, the tender will be deemed unconditional. 9. SUBSTITUTE FORM W-9. Under federal income tax law, a shareholder whose tendered shares are accepted for payment is required by law to provide the Depository (as payer) with his or her correct taxpayer identification number, which is accomplished by completing and signing Box F captioned "Substitute Form W-9." In addition, if a shareholder executes Box B captioned "Special Payment Instructions", a separate Substitute Form W-9 should also be executed by the alternate payee. If the Depository is not provided with the correct taxpayer identification number, the shareholder may be subject to a $50.00 penalty imposed by the Internal Revenue Service. In addition, except in the case of certain exempt taxpayers, the Depository will be required to withhold, and will withhold, 31% of the gross proceeds paid to that shareholder or other payee pursuant to the offer, unless the shareholder or other payee provides the depository with his taxpayer identification number, certifies that such number is correct, and certifies that he is not subject to backup withholding under Section 3406(a)(l)(C) of the Internal Revenue Code of 1986, as amended (the "Code"). The taxpayer identification number is the social security number or employer identification number of the shareholder or other payee. For further instructions on determining the proper identification number to give to the Depository, see the Guidelines for Completing Certification Statements in Box F at the end of this Letter of Transmittal. Each tendering shareholder or other payee should fully complete and sign Box F captioned "Substitute Form W-9" and check the box in part 2 of Substitute Form W-9, if so eligible, so as to provide the information and certifications necessary to avoid backup withholding. You may be, or may have been, notified that you are subject to backup withholding under Section 3406 (a)(1)(C) of the Code because you have underreported interest or dividends or you were required to but failed to file a return which would have included a reportable interest or dividend payment. IF YOU HAVE BEEN SO NOTIFIED AND YOU HAVE NOT RECEIVED A SUBSEQUENT NOTICE FROM THE INTERNAL REVENUE SERVICE ADVISING YOU THAT BACKUP WITHHOLDING HAS BEEN TERMINATED, YOU MUST STRIKE OUT THE LANGUAGE ON THE SUBSTITUTE FORM W-9 CERTIFYING THAT YOU ARE NOT SUBJECT TO BACKUP WITHHOLDING. If you are subject to backup withholding and you strike out the language on the Substitute W-9 certifying that you are not subject to backup withholding, you should nonetheless provide your correct taxpayer identification number to the Depository and certify that it is correct. Exempt shareholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. (In order for a foreign individual to qualify as an exempt recipient, that shareholder must submit a statement, signed under penalty of perjury, attesting to that individual's exempt status. Such statements can be obtained from the Depository.) If backup withholding applies, the Depository is required to withhold 31% of any such payments made to the shareholder. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be requested. 10. ODD LOTS. As described in Section 1 of the Offer to Purchase, if less than all shares tendered prior to the expiration date are to be purchased by the Company, the shares purchased first will consist of all shares tendered by any shareholder who owned beneficially as of March 15, 1999, an aggregate of fewer than 100 shares and who tenders all of such shares. This preference will not be available unless Box E captioned "Odd Lots" is completed. 11. IRREGULARITIES. All questions as to the validity, form, eligibility (including time of receipt) and acceptance of any tender of shares will be determined by the Company, which determination shall be final and binding. The Company reserves the right to reject any tenders of shares not in appropriate form or the acceptance of or payment of which would, in the opinion of the Company's counsel, be unlawful. The Company also reserves the right to waive any of the conditions of the offer or any defect in any tender, and the Company's interpretations of the terms and conditions of the offer (including these instructions) shall be final and binding. The Company shall not be obligated to give notice of any defects or irregularities in tenders and shall not incur any liability for failure to give any such notice. Tenders will not be deemed to have been made until all defects and irregularities have been cured or waived. 12. LOST CERTIFICATES. In the event that you are unable to deliver to the Depository the certificate(s) for your shares of common stock due to the loss or destruction of such certificate(s), such fact should be indicated on the face of the Letter of Transmittal. In such event, the Depository will forward additional documentation which you must complete in order to tender effectively such lost or destroyed certificate(s). There may be a fee to replace lost certificates. Tenders will be processed after certificates are replaced. 13. ADDITIONAL INFORMATION AND COPIES. Additional information, as well as additional copies of the Offer to Purchase and this Letter of Transmittal, may be obtained from the Depository by contacting either: James G. Rakes Marilyn B. Buhyoff Chairman Secretary & Counsel President & CEO 100 S. Main Street 100 S. Main Street or P.O. Box 90002 P. O. Box 90002 Blacksburg, VA 24062 Blacksburg, VA 24062 Telephone: (540) 951-6331 Telephone: (540) 951-6236 IMPORTANT: IF YOU DESIRE TO TENDER ANY OR ALL OF YOUR SHARES, THE LETTER OF TRANSMITTAL OR FACSIMILE THEREOF (TOGETHER WITH CERTIFICATES AND OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE DEPOSITORY ON OR PRIOR TO THE EXPIRATION DATE OF THE OFFER. DEPOSIT OF SUCH MATERIALS IN THE MAIL ON THE EXPIRATION DATE WILL NOT CONSTITUTE A TIMELY TENDER. GUIDELINES FOR COMPLETING CERTIFICATION STATEMENTS IN BOX F CERTIFICATION After you have read these instructions, place your signature and the current date in the space provided in Box F. If you are exempt from backup withholding, you should complete Box F of this Letter of Transmittal to avoid possible erroneous backup withholding. Enter your correct Taxpayer Identification Number ("TIN") in Part I, check the box in Part II, and sign and date the form. BACKUP WITHHOLDING Backup withholding will apply if: 1. You fail to furnish us with your taxpayer identification number; or 2. The Internal Revenue Services notifies us that you furnished an incorrect taxpayer identification number; or 3. You are notified that you are subject to backup withholding because you have underreported interest or dividend income to the Internal Revenue Service, or you were required to but failed to file a return which would have included a reportable interest or dividend payment; or 4. You fail to certify to us that you are not subject to backup withholding or fail to certify your taxpayer identification number. TAXPAYER IDENTIFICATION NUMBER For individuals and sole proprietors, the TIN is the social security number, which is a nine (9) digit number separated by two hyphens (i.e. 000-00-0000). For corporations, valid trusts, estates, pension trusts, partnerships, associations, clubs and other organizations which are not tax-exempt, the taxpayer number is the employer identification number, which is a nine (9) digit number separated by only one hyphen (i.e. 00-0000000). EXEMPTIONS FROM BACKUP WITHHOLDING The following include some of the entities which are specifically exempt from backup withholding on ALL payments: o A corporation o An organization exempt from tax under section 501(a), or an individual retirement plan (IRA) o All foreign governments and entities o A dealer in securities or commodities required to register in the U.S. o All federal, state and local government entities o A real estate investment trust o Nonresident aliens NOTE: Nonresident aliens are required to sign a Form W-8 or Substitute W-8 Bank form, Certificate of Foreign Status. PENALTIES Under certain circumstances, you may be subject to penalties imposed by the Internal Revenue Service, as follows: 1. The penalty for failure to furnish your taxpayer identification number to us will be $50.00 for each such failure unless your failure is due to reasonable cause and not to willful neglect. 2. If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500.00. 3. If you falsify certifications or affirmations you may be subject to criminal penalties including fines and/or imprisonment. OBTAINING A NUMBER If you do not have a taxpayer identification number or you do not know your number, obtain Form SS-5, Application for a Social Security Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. EX-99 4 EXHIBIT 99 A(3) NATIONAL BANKSHARES, INC. NOTICE OF GUARANTEED DELIVERY SHARES OF COMMON STOCK PURSUANT TO THE OFFER TO PURCHASE DATED MARCH 15, 1999, This form or a facsimile copy of it must be used to accept the offer, as defined below, if: (a) certificates for common stock, par value $2.50 per share(the "Shares"), of National Bankshares, Inc., a Virginia corporation, (the "Company"), are not immediately available; or (b) time will not permit the Letter of Transmittal or other required documents to reach the Company before the Expiration Date (as defined in Section 1 of the Offer to Purchase, as defined below). This form or a facsimile of it, signed and properly completed, may be delivered by hand, mail, telegram or facsimile transmission to The National Bank of Blacksburg by the expiration date. See Section 4 of the offer. THE NATIONAL BANK OF BLACKSBURG By Mail/Hand Facsimile Transmission: ---------------- ---------------------------- 100 South Main Street Attention: Marilyn B. Buhyoff P. O. Box 90002 (540) 951-6222 Blacksburg, VA 24062 (540) 552-2011 ext. 236 or ext. 331 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN THAT SHOWN ABOVE OR TRANSMISSION OF INSTRUCTIONS TO A FACSIMILE NUMBER OTHER THAN THAT LISTED ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. Ladies and Gentlemen: The undersigned hereby tenders to National Bankshares, Inc., at the Purchase Price, net to the seller in cash, upon the terms and subject to the conditions set forth in the offer to purchase, dated March 15, 1999, (the "Offer to Purchase"), and the related Letter of Transmittal which together with the Offer to Purchase constitute the "Offer"), receipt of which is hereby acknowledged, shares of common stock, par value $2.50 per share (the "Shares"), pursuant to the guaranteed delivery procedure set forth in Section 4 of the Offer to Purchase. ODD LOTS. To be completed only if shares are being tendered by or on behalf of a person owning beneficially, as of the close of business on March 15, 1999, and who continue to own beneficially as of the expiration date, an aggregate of fewer than 100 shares. The undersigned either (check one): [ ] was the beneficial owner, as of the close of business on March 15, 1999, of an aggregate of fewer than 100 shares all of which are being tendered, or [ ] a broker, dealer, commercial bank, trust company, or other nominee which: (a) is tendering, for the beneficial owners thereof, shares with respect to which it is the record owner, and (b) believes, based upon representations made to it by such beneficial owners, that each such person was the beneficial owner, as of the close of business on March 15, 1999, of an aggregate of fewer than 100 shares and is tendering all of such shares. Certificate Nos.:___________________________________________ PLEASE TYPE OR PRINT Name(s):____________________________________________________ Address(es):________________________________________________ Area Code and Telephone Number:_____________________________ Sign Here:__________________________________________________ Dated:______________________________________________________ GUARANTEE (Not to be used for signature guarantee) The undersigned, a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States (each, an "Eligible Institution"), hereby (i) represents that the undersigned has a net long position in shares or equivalent securities within the meaning of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended, at least equal to the shares tendered, (ii) represents that such tender of shares complies with Rule 14e-4, and (iii) guarantees that the certificates representing the shares tendered hereby are in proper form for transfer (pursuant to the procedures set forth in Section 3 of the Offer to Purchase), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantee and any other documents required by the Letter of Transmittal, will be received by the Company at its address set forth above within five business days after the date of execution hereof. Name of Firm:________________________________________________ Address:_____________________________________________________ Area Code and Telephone Number:______________________________ AUTHORIZED SIGNATURE Name:_________________________________________________________ Title:________________________________________________________ Dated:________________________________________________________ DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. EX-99 5 EXHIBIT 99 A(4) OFFER BY NATIONAL BANKSHARES, INC. TO PURCHASE FOR CASH UP TO 200,000 SHARES OF ITS COMMON STOCK To Brokers, Dealers, Commercial Bank, Date: March 15, 1999 Trust Companies and other Nominees: We are enclosing the material listed below relating to the offer by National Bankshares, Inc. a Virginia corporation (the "Company") to purchase up to a maximum of 200,000 shares of common stock (the "Shares") at a price of $28.00 net per share to the selling shareholders, subject to the terms and conditions of the Offer to Purchase dated March 15, 1999, and the related Letter of Transmittal (which together constitute the "Offer"). We enclose copies of the following documents: 1. Offer to Purchase dated March 15, 1999, 2. Letter of Transmittal (including Substitute Form W-9 Guidelines) for your use and for the information of your clients; 3. Letter which may be sent to clients for whose account you hold shares in your name or the name of your nominee, with space provided for obtaining such client's instructions with regard to the offer; and 4. Letter dated March 15, 1999, to the Company's shareholders. Please advise us as to how many additional copies of the tender offer documents you will require for distribution to your clients by contacting our Depository Agent, The National Bank of Blacksburg, 100 South Main Street, P. O. Box 90002, Blacksburg, Virginia 24062, Attn: Marilyn B. Buhyoff. No fees or commissions will be payable to brokers, dealers or persons for soliciting tenders of shares pursuant to the offer. However, the Company will reimburse brokers, dealers, commercial banks, trust companies, and other nominees for their reasonable and necessary costs incurred in forwarding the Offer to Purchase and related documents to beneficial owners of shares held by such entities as nominee or in a fiduciary capacity. Please forward all invoices for reimbursement to The National Bank of Blacksburg, 100 South Main Street, P. O. Box 90002, Blacksburg, Virginia 24062, Attn: Marilyn B. Buhyoff. We urge you to contact your clients promptly. Please note that the withdrawal deadline and expiration date are both April 30, 1999, at 5:00 p.m. Eastern Daylight Time (unless extended). As described in the Offer to Purchase, tenders may be made without the concurrent deposit of stock certificates and any other required documents, if such tenders are made by or through a broker or dealer which is a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office, branch or agency in the United States. Certificates for shares so tendered and any other required documents must be received within five business days after the Depository has previously received a properly completed and duly executed Notice of Guaranteed Delivery. Any questions or requests for assistance or additional copies of the Offer to Purchase and the Letter of Transmittal may be directed to The National Bank of Blacksburg, 100 South Main Street, P. O. Box 90002, Blacksburg, Virginia 24062. Sincerely, NATIONAL BANKSHARES, INC. NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON AS THE AGENT OF THE COMPANY OR THE DEPOSITORY, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENTS OR TO MAKE ANY STATEMENTS ON THEIR BEHALF IN CONNECTION WITH THE OFFER, OTHER THAN THE DOCUMENTS ENCLOSED HEREIN AND THE STATEMENTS CONTAINED THEREIN. EX-99 6 EXHIBIT 99 A(5) OFFER BY NATIONAL BANKSHARES, INC. TO PURCHASE FOR $28.00 PER SHARE UP TO 200,000 SHARES OF ITS COMMON STOCK To Our Clients: Enclosed for your consideration is the Offer to Purchase dated March 15, 1999, and a related Letter of Transmittal (which together constitute the "Offer"), relating to the offer by National Bankshares, Inc. (the "Company") to purchase up to a maximum of 200,000 shares of its common stock (the "Shares"). The Offer to Purchase and the Letter of Transmittal are being forwarded to you as the beneficial owner of shares held by us in your account but not registered in your name. A tender of such shares can be made only by us, since we are the holder of record, but only pursuant to your instructions. We request your instructions as to whether you wish to tender any or all shares held by us for your account, pursuant to the terms and subject to the conditions set forth in the offer. Your attention is called to the following: 1. Shareholders may tender shares at a price of $28.00 net per share. To the best of the Company's knowledge, the most recent trade for the Company's common stock was for 800 shares at $22.75 per share on March 8, 1999. 2. The offer is not conditioned upon any minimum number of shares being tendered, but up to 200,000 shares may be purchased. 3. Tendering shareholders will not be obligated to pay brokerage commissions, solicitation fees, or (subject to Instruction 7 of the Letter of Transmittal) stock transfer taxes on the purchase of shares by the Company pursuant to the offer. However, backup withholding at a 31% rate may be required, unless an exemption is proved or unless the required tax identification information is provided. See Instruction 9 to the Letter of Transmittal. 4. The withdrawal deadline and expiration date of the offer are both April 30, 1999, at 5:00 p.m., Eastern Daylight Time (unless extended). 5. Shares must be validly tendered prior to April 30, 1999, 5:00 p.m., Eastern Daylight Time, to ensure that at least a portion of such shares tendered will be purchased by the Company. YOUR INSTRUCTIONS TO US SHOULD BE FORWARDED IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER. If you wish to have us tender any or all of your shares, please so instruct us by completing, executing, and returning to us the attached instruction form. An envelope to return your instructions is enclosed. If you authorize us to tender your shares, all such shares will be tendered unless otherwise specified. The enclosed Letter of Transmittal is furnished to you for your information only and cannot be used to tender shares. INSTRUCTIONS The undersigned acknowledge(s) receipt of your letter enclosing the Offer to Purchase dated March 15, 1999, and the related Letter of Transmittal (which together constitute the "Offer"), relating to the offer by National Bankshares, Inc. (the "Company") to purchase up to 200,000 shares of its common stock (the "Shares"). This will instruct you to tender the number of shares indicated (or, if no number is indicated below, all shares), which are held by you for the account of the undersigned, pursuant to the terms and subject to the conditions set forth in the offer. Aggregate number of shares to be tendered* by us:_____________________________ *Unless otherwise indicated above, it will be assumed that all of your shares held by us are to be tendered. ODD LOTS [ ] By checking this box, the undersigned represents that the undersigned owned beneficially or of record as of March 15, 1999 an aggregate of less than 100 shares and is tendering all such shares. SIGN HERE Signature:___________________________________________________________________ Name(s):_____________________________________________________________________ (Please Print or Type) Address:_____________________________________________________________________ _____________________________________________________________________ (City) (State) (Zip Code) Area Code and Telephone No.: (________) ________________ Tax Identification or Social Security No.: ____________________________________________ Dated:______________________________________ EX-99 7 EXHIBIT 99 A(6) [NATIONAL BANKSHARES, INC. LETTERHEAD] March 15, 1999 Stock Repurchase Offer ---------------------- Dear Shareholder: I am pleased to inform you that National Bankshares, Inc. (the "Company"), the holding company for The National Bank of Blacksburg and the Bank of Tazewell County, is offering to purchase 200,000 shares (representing approximately 5.3% of currently outstanding shares) of its common stock from its shareholders through a tender offer at a price of $28.00 net per share (the "offer"). Any shares tendered and accepted according to the terms of this offer will result in no brokerage fees or commissions for the owner in this transaction. To the best of the Company's knowledge, the most recent trade for the Company's common stock was for 800 shares at $22.00 per share on March 8, 1999. All of the shares that are validly tendered and accepted will be purchased for cash to be paid to the selling shareholder. All other shares which have been tendered and not purchased will be returned to the tendering shareholder. If this offer is over-subscribed, we may have to prorate some of the offers. Also, we are giving first preference for a complete tender to those who own fewer than 100 shares and are tendering all of those shares. The Company is making this offer as a part of a plan developed to enhance shareholder value. Over the past few years, the Company's profitable operations have increased capital in excess of regulatory standards, and the amount of capital on hand now is more than needed to support the Company's banking business. After considering other alternatives, the Company's management and its Board of Directors believe that reducing outstanding capital by this repurchase will maximize shareholder value in the long term. The result of the offer and reduction in capital should increase return on equity and earnings per share by reducing the amount of equity and shares outstanding. We hope the offer also will provide immediate liquidity for shareholders who need it. We believe that remaining capital and future earnings will be adequate to meet funding needs for the foreseeable future. After completion of the offer, we expect that the Company and both banks will continue to maintain the highest regulatory standard for capital, which is designated as "well capitalized" by the Federal Deposit Insurance Corporation Improvement Act of 1991. The offer is explained in detail in the enclosed Offer to Purchase and Letter of Transmittal. If you wish to tender your shares, detailed instructions on how to tender those shares are provided in the enclosed materials. We encourage you to read these materials carefully before making any decision with respect to the offer. Please note that the tender offer is scheduled to expire at 5:00 p.m. on April 30, 1999, unless extended by the Company. Neither the Company nor its Board of Directors makes any recommendation to any shareholder as to whether to tender or not. Thank you for your consideration of this offer. Sincerely, /s/ JAMES G. RAKES ------------------ James G. Rakes Chairman President & CEO EX-99 8 EXHIBIT 99 A(7) FOR IMMEDIATE RELEASE Monday, March 15, 1999 Contact: James G. Rakes (540) 951-6236 NATIONAL BANKSHARES, INC. ANNOUNCES STOCK REPURCHASE (Blacksburg) -- National Bankshares, Inc., the parent company of The National Bank and Bank of Tazewell County, announced today that it is seeking to purchase up to 200,000 shares, or approximately 5.3% of its outstanding common stock. A price of $28.00 per share will be paid, which is a premium over the current market value. James G. Rakes, Chairman, President and CEO of National Bankshares stated, "We believe that this repurchase of common stock is consistent with National Bankshares long-term goal of increasing shareholder value". Mr. Rakes added, "Over the past few years, National Bankshares' profitable operations have increased capital, and after the offer to repurchase stock is completed, we expect that the company and both banks will continue to maintain the highest regulatory standard for capital. Besides, we consider our stock to be a good value." The National Bank is headquartered in Blacksburg and has a total of nine offices in Montgomery and Giles counties and in the City of Galax. Bank of Tazewell County serves Tazewell and Bluefield from seven office locations. National Bankshares, Inc. stock is traded over the counter with the symbol "NKSH". -----END PRIVACY-ENHANCED MESSAGE-----