UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C.  20549
                                    Form 10-K

              Annual Report Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

For the fiscal year ended                                 Commission file number
   December 31, 1999                                            O-15204

                        National Bankshares, Incorporated
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

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

      101 Hubbard Street
      Blacksburg, Virginia                                          24060
----------------------------------------                    --------------------
(Address of principal executive offices)                         Zip Code

Registrant's telephone number, including area code             (540) 552-2011
                                                            --------------------
Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, Par Value $2.50 per Share
--------------------------------------------------------------------------------
                                (Title of Class)

Indicate  by  a check  mark whether  the Registrant  (1)  has filed  all reports
required  to be filed by  Section 13 or 15(d) of  the Securities Exchange Act of
1934  during the  preceding  12 months  (or  for such  shorter  period that  the
Registrant was required to file such reports), and (2) has  been subject to such
filing requirements for the past 90 days.
    Yes   X        No
        -----        -----

Indicate by check  mark if disclosure of delinquent filers  pursuant to Item 405
of Regulation S-K  is not contained  herein, and will  not be contained,  to the
best of Registrant's  knowledge, in definitive  proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.      X
             -------

The  aggregate  market value  of  voting  stock  held  by nonaffiliates  of  the
Registrant  as of March 15, 2000 was  $65,666,075.  (In determining this amount,
the  registrant assumes  that all of  its Directors  and principal  Officers are
affiliates.   Such  assumption  shall not  be  deemed conclusive  for  any other
purposes.)
<PAGE>


Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date.

           Class                                  Outstanding at March 15, 2000
------------------------------                   -------------------------------
Common Stock, $2.50 Par Value                              3,516,977



                       DOCUMENTS INCORPORATED BY REFERENCE

Selected information from the Registrants' Annual Report to Stockholders for the
year ended December 31, 1999, is incorporated  by reference into Parts I and  II
of this report.

Selected  information  from  the Registrant's  Proxy  Statement  for the  Annual
Meeting to  be held April 11,  2000 and filed  with the Securities  and Exchange
Commission  pursuant to Regulation 14A,  is incorporated by  reference into Part
III of this report.






































                        (This report contains 42 pages.)
                                              --
                   (The Index of Exhibits are on pages 41-42.)<PAGE>




                        National Bankshares, Incorporated
                       Annual Report For 1999 on Form 10-K

                                Table of Contents


                                                              Page
                                                              ----

            Part I

            Item 1.  Business                                   4
            Item 2.  Properties                                30
            Item 3.  Legal Proceedings                         30
            Item 4.  Submission of Matters to a Vote of
                      Security Holders                         30
                     Executive Officers of the Registrant      31
            Part II

            Item 5.  Market for Registrant's Common
                      Equity and Related Stockholder
                      Matters                                  32
            Item 6.  Selected Financial Data                   32
            Item 7.  Management's Discussion and Analysis
                      of Financial Condition and Results
                      of Operations                            32
            Item 7A. Quantitative and Qualitative
                      Disclosures About Market Risk            32
            Item 8.  Financial Statements and
                      Supplementary Data                       36
            Item 9.  Changes in and Disagreements with
                      Accountants on Accounting and
                      Financial Disclosure                     36

            Part III

            Item 10. Directors and Executive Officers of
                       the Registrant                          36
            Item 11. Executive Compensation                    36
            Item 12. Security Ownership of Certain
                       Beneficial Owners and Management        36
            Item 13. Certain Relationships and Related
                       Transactions                            37

            Part IV

            Item 14. Exhibits, Financial Statement
                       Schedules, and Reports on Form 8-K      37

            Signatures                                         40

            Index to Exhibits                                  41<PAGE>


                                     Part I
                                     ------


Item 1.  Business.
-----------------

History and Business

   National Bankshares, Inc.  (Bankshares) is a  bank holding company  organized
under the laws of Virginia in 1986 and registered under the Bank Holding Company
Act (BHCA).  Except for a separate investment portfolio, Bankshares conducts all
of  its business  operations  through  its  two wholly-owned  subsidiaries,  The
National  Bank  of  Blacksburg   (NBB)  and  Bank  of  Tazewell   County  (BTC),
collectively referred to as "the Company".

   On June 1, 1996,  Bankshares 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.  There  were no
adjustments  of a  material  amount resulting  from  Bank of  Tazewell  County's
adoption of Bankshares' accounting policies.

   In May 1996,  Bankshares declared a stock split of  .11129 per share effected
in the form of  a stock dividend to the holders of  Bankshares 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
banking business from  its headquarters  in Blacksburg, Virginia,  and its  nine
area branch  offices.  NBB offers general retail and commercial banking services
to individuals, businesses, local  government units and institutional customers.
These products and  services include accepting deposits in the  form of checking
accounts,  money  market  deposit   accounts,  interest-bearing  demand  deposit
accounts, savings  accounts and time  deposits; making real  estate, commercial,
revolving,  consumer  and  agricultural   loans;  offering  letters  of  credit;
providing  other consumer financial services, such  as automatic funds transfer,
collections,  night depository,  safe  deposit, travelers  checks, savings  bond
sales  and utility payment services;  and providing other miscellaneous services
normally  offered by  commercial  banks.   NBB  also  conducts a  general  trust
business  in Blacksburg  near  its headquarters  location.   Through  its  trust
operation, NBB offers a variety of personal and corporate trust services.

   NBB  makes  loans  in  all   major  loan  categories,  including  commercial,
commercial and residential real estate, construction and consumer loans.

   At December 31,  1999, NBB had total  assets of $278,016.   Total deposits at
this date were $233,245.  NBB's net  income for 1999 was $4,873 which produced a
return on average  assets of 1.79% and a return  on average stockholders' equity
of 17.32%.    Refer to  footnote  11 of  the  Company's  1999 Annual  Report  to
Stockholders for NBB's risk-based capital ratios.

                                       -3-<PAGE>


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  new 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.   These
services include commercial, real  estate and consumer loans.   Deposit accounts
offered  include  demand  deposit  accounts,  interest-bearing  demand   deposit
accounts, money market  deposit accounts, savings  accounts and certificates  of
deposit.   Other services include  automatic funds transfer,  collections, night
depository,  safe deposit,  travelers  checks, savings  bond  sales and  utility
payment services; and providing other miscellaneous  service normally offered by
commercial banks.  BTC also conducts a general trust business.

   At December 31,  1999 BTC had  total assets of  $198,735.  Total  deposits at
this  same date  were $173,963.   BTC's  net income  for 1999  was $2,215  which
produced  a  return  on  average  assets  of  1.21%  and  a  return  on  average
stockholders'  equity of  8.67%.   Refer to  footnote 11  of the  Company's 1999
Annual Report to Stockholders for BTC's risk-based capital ratios.

Commercial Loans

   NBB  and  BTC make  both secured  and unsecured  loans  to businesses  and to
individuals for business purposes.  Loan requests are granted based upon several
factors including credit history,  past and present relationships with  the bank
and marketability of collateral.   Unsecured commercial loans must  be supported
by a satisfactory balance sheet and income statement.   Business loans made on a
secured basis  may be secured  by a security  interest in marketable  equipment,
accounts  receivable,  business  equipment  and/or general  intangibles  of  the
business.  In addition, or in the alternative, the loan may be secured by a deed
of trust lien on business real estate.

   The risks associated with commercial loans are related to the strength of the
individual business, the value of loan  collateral and the general health of the
economy.

Residential Real Estate Loans

   Loans  secured by  residential  real  estate  are  originated  by  both  bank
subsidiaries.  NBB sells a substantial percentage of the residential real estate
loans  it originates  in the  secondary market  on a  servicing released  basis.
There are  occasions when  a borrower or  the real estate  do not  qualify under
secondary market criteria, but  the loan request represents a  reasonable credit
risk.    Also, an  otherwise qualified  borrower may  choose  not to  have their
mortgage loan  sold.   On  these occasions,  if the  loan  meets NBB's  internal
underwriting criteria, the loan  will be closed and  placed in NBB's  portfolio.
Some  loans originated by BTC  are held in the  bank's loan portfolio and others
are sold in the secondary market.     In their secondary market  operations, NBB
and BTC participates  in insured loan  programs sponsored by  the Department  of
Housing  and Urban  Development, the  Veterans  Administration and  the Virginia
Housing Development Authority.

   Residential  real  estate  loans  carry risk  associated  with  the continued
credit-worthiness of the borrower and changes in the value of the collateral.

                                       -4-<PAGE>


Construction Loans

   NBB makes loans for the purpose of financing the construction of business and
residential  structures   to  financially  responsibly  business   entities  and
individuals.  These loans are subject  to the same credit criteria as commercial
and residential real estate  loans.  Although BTC offers construction loans, its
involvement in this area of lending is more limited than NBB's due to the nature
of its market area.

   In  addition to the risks associated with all real estate loans, construction
loans  bear  the risks  that  the  project will  not  be  finished according  to
schedule, the project will not  be finished according to budget and the value of
the collateral may at any point in time be less than the principal amount of the
loan.   Construction loans also bear  the risk that the  general contractor, who
may or may not be the bank's loan customer, is unable to finish the construction
project  as planned  because of  financial pressures  unrelated to  the project.
Loans to customers that  are made as permanent  financing of construction  loans
may likewise  under  certain circumstances  be  affected by  external  financial
pressures.

Consumer Loans

   NBB and BTC  routinely make consumer loans, both secured  and unsecured.  The
credit history and character of  individual borrowers is evaluated as a  part of
the credit decision.  Loans used to purchase vehicles or other specific personal
property and loans  associated with real estate are usually  secured with a lien
on  the subject  vehicle or  property.   NBB also originates  a small  number of
student loans that are sold to the Student Loan Marketing Association.

   Negative  changes  in a  customer's financial  circumstances  due to  a large
number  of  factors, such  as  illness  or loss  of  employment,  can place  the
repayment of a consumer loan at  risk.  In addition, deterioration in collateral
value can add risk to consumer loans.

Sales and Purchases of Loans

   NBB and BTC will occasionally buy or sell  all or a portion of a loan.  These
purchases and sales  are in addition to the secondary  market mortgage loans and
student loans regularly sold by NBB.  Because the demand for loans, particularly
for commercial loans, is greater in NBB's market area than in BTC's market area,
NBB regularly sells loans and participations in loans to BTC.

   Both banks will consider selling a loan or a participation in a loan, if: (i)
the full amount  of the  loan will exceed  the bank's legal  lending limit to  a
single  borrower;  (ii) the  full  amount  of the  loan,  when  combined with  a
borrower's previously outstanding  loans, will exceed  the bank's legal  lending
limit to a  single borrower; (iii)  the Board of  Directors or an internal  Loan
Committee  believes that a  particular borrower has  a sufficient level  of debt
with the bank;  (iv) the  borrower requests the  sale; (v) the  loan to  deposit
ratio is at or above the optimal level as determined by bank management;  and/or
(vi)  the loan may create  too great a concentration  of loans in one particular
location or in one particular type of loan.

   The banks will consider purchasing a loan, or a participation in a loan, from
another financial institution (including from another subsidiary of the Company)
if the  loan meets all  applicable credit quality  standards and (i)  the bank's
loan to deposit ratio is at  a level where additional loans would  be desirable;
and/or (ii) a common customer requests the purchase.

                                       -5-<PAGE>

   The following table sets forth, for the three fiscal years ended December 31,
1999, 1998 and  1997 the percentage  of total  operating revenue contributed  by
each class  of similar services which contributed 15% or more of total operating
revenues of the Company during such periods.

                                                            Percentage of
      Period             Class of Service                   Total Revenues
      ------             ----------------                   --------------

      December 31, 1999  Interest and Fees on Loans             64.95%
                         Interest on Investments                24.41%
      December 31, 1998  Interest and Fees on Loans             61.97%
                         Interest on Investments                25.99%
      December 31, 1997  Interest and Fees on Loans             59.92%
                         Interest on Investments                29.31%

Market Area

The National Bank of Blacksburg Market Area

   NBB's  primary market  area consists  of the  northern portion  of Montgomery
County, all of Giles  County, the City of Galax and adjacent portions of Carroll
and Grayson  Counties, Virginia.  This area includes the towns of Blacksburg and
Christiansburg  in Montgomery County  and the towns  of Pearisburg, Pembroke and
Rich Creek,  in Giles  County.   The local  economy is  diverse and  is oriented
toward   higher  education,   retail  and   service,  light   manufacturing  and
agriculture.   For the years 1999  and 1998 the unemployment  rate in Montgomery
County  was 1.9%  and 2.6% in  1997, and the  rate in Giles  County during those
years was 6.2% in 1999, 5.8% in 1998 and 6.7% in 1997.  The City of Galax had an
unemployment rate of 4.3% in 1999, 3.9% in 1998 and 2.6% in 1997.

   Montgomery County's  largest employer  is Virginia Polytechnic  Institute and
State  University  (VPI  &  SU)  located  in  Blacksburg.    VPI  &  SU  is  the
Commonwealth's land grant college and  also its largest university.   Employment
at VPI  &  SU has  remained stable  over the  past three  years, and  it is  not
expected to change materially in the  next few years.  A second  state supported
university, Radford  University, is located in the western edge of NBB's service
area.  It too has provided stable employment opportunities in the region.

   Giles County's primary employer is  the Celanese Corp. plant, a  manufacturer
of  the  material from  which cigarette  filters  are made.    In 1995  and 1996
employment  at that plant was  stable, however, in  late 1997 temporary employee
furloughs were  announced, and  a small number  of these temporary  layoffs have
become permanent.

   The City  of  Galax is  located  in  the Virginia-North  Carolina  furniture-
manufacturing  region.   Three  furniture companies,  Vaughan Bassett  Furniture
Company, Vaughan Furniture  Company, Inc.  and Webb  Furniture Company  together
employ the largest percentage of  the area's work force.   The Galax economy  is
stable.

   Several  other small  manufacturing concerns  are located  in Montgomery  and
Giles  Counties and in  the City of  Galax.  These  concerns manufacture diverse
products and are not  dependent on one sector  of the economy.   Agriculture and
tourism are also important to the region, especially in Giles County and in  the
area near Galax.




                                       -6-<PAGE>


   Since  1988, Montgomery County has  developed into a  regional retail center,
with the construction of two large shopping  areas.  Two area hospitals, each of
which are  affiliated with different large health care systems, have in the past
several years  constructed additional  facilities and have  attracted additional
health care providers to Montgomery County,  making it a center for basic health
care services.  VPI &  SU's Corporate Research Center has brought  several small
high tech companies to Blacksburg, and further expansion is planned.

   Montgomery  County, with an approximate population of 77,000, has experienced
moderate population growth and this trend is predicted to continue.  Neighboring
Giles County  is more  rural, with a  total population of  approximately 16,500.
The population  of Giles County is expected to  slowly decline over the next few
years.  It  is not anticipated  that this decline  will materially impact  NBB's
business in Giles County.   The City of Galax has a population  of approximately
7,000, and the neighboring, mostly rural, counties of Carroll and Grayson have a
total of  approximately 50,000 in habitants.   The area's  population is stable,
and no dramatic changes are predicted.

   NBB's primary  market area offers the  advantages of a good  quality of life,
scenic  beauty, moderate  climate  and the  cultural  attractions of  two  major
universities.  The region  has marketed itself as a  retirement destination, and
it  has had  some  recent success  attracting  retirees, particularly  from  the
Northeast and urban Northern Virginia.   These marketing efforts are expected to
continue.

Bank of Tazewell County Market Area

   Most of BTC's business  originates from Tazewell County, Virginia  and Mercer
County,  West Virginia.   This  includes the  towns of  Tazewell and  Bluefield,
Virginia  and Bluefield, West  Virginia.  BTC's primary  market area has largely
depended  on the coal  mining industry  and farming for  its economic base.   In
recent years, coal companies have mechanized  and this has reduced the number of
individuals required for  the production of coal.   There are still  a number of
support  industries  for  the coal  mining  business  that  continue to  provide
employment  in the  area.    Additionally,  several  new  businesses  have  been
established in the area, and  Bluefield, West Virginia has begun to  emerge as a
regional  medical center.  Unemployment  has stabilized, and  real estate values
also remain stable and comparable to other areas in southwest Virginia.

   For 1999 and 1998 the  unemployment rate for Tazewell County was 7.0%  and in
1997 9.5%.  In the same  years, Mercer County, West Virginia's unemployment rate
was 4.7%, 4.2% and 5.3%, respectively.

Competition

   The  banking and  financial service  business in  Virginia generally,  and in
NBB's  and  BTC's  market  areas  specifically,  is  highly  competitive.    The
increasingly competitive  environment  is a  result  of changes  in  regulation,
changes in technology and product delivery systems and new competition from non-
traditional financial  services provides the accelerating  pace of consolidation
among  financial service providers.  The Company's bank subsidiaries compete for
loans and deposits with  other commercial banks, savings and  loan associations,
securities  and brokerage  companies,  mortgage companies,  money market  funds,
credit  unions and  other nonbank  financial service providers.   Many  of these
competitors are much  larger in  total assets and  capitalization, have  greater
access to capital  markets and offer a broader array  of financial services than
NBB and BTC.  In order to compete with  these other financial service providers,
NBB   and  BTC   rely   upon  service-based   business  philosophies,   personal

                                       -7-<PAGE>


relationships with  customers, specialized services tailored  to meet customers'
needs  and the  convenience of  office locations.   In  addition, the  banks are
generally  competitive with other  financial institutions in  their market areas
with respect to interest rates paid on deposit accounts, interest rates  charged
on loans and other service charges on loans and deposit accounts.

Registrant's Organization and Employment

   Bankshares,  NBB and BTC are  organized in a  holding company/subsidiary bank
structure.    Bankshares has  no employees,  except  for officers,  and conducts
substantially  all of its operations through its subsidiaries.  All compensation
paid to  officers  and  employees is  paid  by  NBB, except  for  fees  paid  by
Bankshares  to  President and  Chief Executive  Officer James  G. Rakes  for his
service as a director of the Company.

   At December 31, 1999, NBB employed 117 full time equivalent  employees at its
main office,  operations center and  branch offices.   BTC at December  31, 1999
employed 68 in its various offices and operational areas.

Certain Regulatory Considerations

   Bankshares, NBB and BTC are subject to various state and federal banking laws
and  regulations  which  impose specific  requirements  or  restrictions  on and
provide for general regulatory  oversight with respect to virtually  all aspects
of operations.   As a result  of the substantial regulatory  burdens on banking,
financial  institutions, including  Bankshares, NBB  and BTC,  are disadvantaged
relative to other competitors who  are not as highly regulated, and  their costs
of doing business  are much higher.   The following  is a  brief summary of  the
material  provisions of  certain statutes,  rules and  regulations which  affect
Bankshares,  NBB  and/or BTC.   This  summary is  qualified  in its  entirety by
reference to  the particular  statutory  and regulatory  provisions referred  to
below and is  not intended to  be an exhaustive  description of the  statutes or
regulations which are  applicable to  the businesses of  Bankshares, NBB  and/or
BTC.   Any change in applicable laws or  regulations may have a material adverse
effect on the business and prospects of Bankshares, NBB and/or BTC.

National Bankshares, Inc.

   Bankshares  is a  bank holding  company within  the meaning  of the  BHCA and
Chapter  13 of the Virginia Banking Act,  as amended (the Virginia Banking Act).
The activities of Bankshares also are governed by  the Gramm-Leach-Bliley Act of
1999.

   The  Bank Holding  Company Act.    The BHCA  is administered  by the  Federal
Reserve Board, and Bankshares is required to file with the Federal Reserve Board
an annual report  and any additional information  the Federal Reserve Board  may
require under the BHCA.  The Federal Reserve Board also is authorized to examine
Bankshares and its  subsidiaries.  The BHCA requires  every bank holding company
to obtain the approval of the Federal Reserve Board  before (i) it or any of its
subsidiaries (other than a  bank) acquires substantially all  the assets of  any
bank; (ii) it acquires ownership  or control of any voting shares of any bank if
after the acquisition it would own or control, directly or indirectly, more than
5% of the voting shares of the bank; or (iii) it merges or consolidates with any
other bank holding company.

   The  BHCA and  the  Change in  Bank Control  Act,  together with  regulations
promulgated  by  the  Federal Reserve  Board,  require  that,  depending on  the
particular circumstances, either Federal Reserve Board approval must be obtained

                                       -8-<PAGE>


or notice must  be furnished to  the Federal Reserve  Board and not  disapproved
prior to  any person or company  acquiring "control" of a  bank holding company,
such  as Bankshares,  subject to  certain exemptions.   Control  is conclusively
presumed to exist if an individual or company acquires 25% or more of  any class
of voting securities of Bankshares.   Control is rebuttably presumed to exist if
a  person acquires  10% or  more, but  less  than 25%,  of any  class of  voting
securities of Bankshares.   The regulations provide a procedure  for challenging
the rebuttable control presumption.

   Under  the BHCA, a bank holding company is generally prohibited from engaging
in, or acquiring direct or indirect control of more than 5% of the voting shares
of  any company  engaged in  nonbanking activities,  unless the  Federal Reserve
Board,  by order  or regulation,  has found  those activities  to be  so closely
related  to banking  or  managing or  controlling  banks as  to  be incident  to
banking.   Under recent  amendments to the  BHCA, included  in the  Gramm-Leach-
Bliley Act of  1999 (see below),  any bank holding  company, all the  depository
institution  subsidiaries of which are well-capitalized,  well managed (as those
terms are defined in the  BHCA) and have a  satisfactory or better rating  under
the Community  Reinvestment  Act as  of  their  last examination,  may  file  an
election with  the Federal Reserve Board to  become a Financial Holding Company.
A Financial Holding Company may engage in any activity that is  (i) financial in
nature (ii)  incidental to  a financial  activity or  (iii)  complementary to  a
financial activity.   The BHCA provides  a long list of  "financial activities",
including:   insurance  underwriting;   securities  dealing   and  underwriting;
providing  financial,  investment or  economic  arising  services; and  merchant
banking  activities.   Financial  Holding Companies  may  also engage  in  other
activities that the Federal  Reserve Board has determined are  permissible under
the BHCA, by regulation or order.

   The Federal Reserve Board imposes certain capital  requirements on Bankshares
under the  BHCA, including  a  minimum leverage  ratio and  a  minimum ratio  of
"qualifying"  capital  to  risk-weighted   assets.    Subject  to  its   capital
requirements and certain other restrictions, Bankshares can borrow money to make
a capital  contribution to  NBB  or BTC,  and these  loans  may be  repaid  from
dividends paid from NBB or BTC to Bankshares (although the ability of NBB or BTC
to pay dividends are subject to regulatory restrictions).   Bankshares can raise
capital for contribution to NBB and BTC by issuing securities  without having to
receive  regulatory  approval, subject  to  compliance  with federal  and  state
securities laws.

   The Gramm-Leach-Bliley Act.   The Gramm-Leach-Bliley Act (the GLBA),  enacted
on November 12,  1999, was a  broad rewrite of  financial services  legislation.
The  GLBA  permits  significant  combinations  among different  sectors  of  the
financial  services  industry; allows  for  significant  expansion of  financial
service  activities  by Bank  holding companies  and  provides for  a regulatory
framework  by   various  governmental  authorities  responsible   for  different
financial  activities;  and  offers  certain financial  privacy  protections  to
consumers.  The GLBA repealed affiliation and  management interlock prohibitions
of  the  Depression-era Glass-Steagall  Act and,  by  amending the  Bank Holding
Companies,  the  GLBA  added  new  substantive  provisions  to  the  non-banking
activities permitted under  the BHCA with the creation of  the financial holding
company.   The GLBA  preempts most  state laws  that prohibit  financial holding
companies  from engaging in insurance activities.  The GLBA permits affiliations
between  banks and securities firms  within the same  holding company structure,
and the  Act permits financial holding  companies to directly engage  in a broad
range securities and merchant banking activities.



                                       -9-<PAGE>


   The Gramm-Leach-Bliley  Act will lead to  important changes in the  manner in
which  financial  services are  delivered in  the United  States.   Bank holding
companies and their subsidiary banks will be able to offer a much  broader array
of financial services; however, there will be greater competition in all sectors
of the financial services market.

   The Virginia Banking Act.  All  Virginia bank holding companies must register
with the  Virginia  State  Corporation  Commission (the  Commission)  under  the
Virginia  Banking  Act.   A  registered bank  holding  company must  provide the
Commission with information with respect to the financial condition, operations,
management  and  intercompany  relationships  of the  holding  company  and  its
subsidiaries.   The Commission  also may  require such  other information  as is
necessary to keep itself  informed about whether the provisions of  Virginia law
and the regulations and orders issued  under Virginia law by the Commission have
been complied  with, and may make  examinations of any bank  holding company and
its  subsidiaries.   The  Virginia Banking  Act  allows bank  holding  companies
located in any state to acquire  a Virginia bank or bank holding company  if the
Virginia bank  or bank holding company  could acquire a bank  holding company in
their state and  the Virginia bank  or bank holding  company to be  acquired has
been  in existence  and continuously  operated  for more  than two  years.   The
Virginia Banking Act permits  bank holding companies from throughout  the United
States to enter the Virginia market, subject to federal and state approval.

NBB and BTC

   General.  NBB  is a national banking association  incorporated under the laws
of  the  United  States and  is  subject to  examination  by the  Office  of the
Comptroller of the Currency (the OCC).  Deposits in NBB are  insured by the FDIC
up to a maximum amount (generally $100,000 per depositor, subject to aggregation
rules).  The OCC and the FDIC regulate or monitor all areas of NBB's operations,
including security  devices and procedures, adequacy of  capitalization and loss
reserves,  loans,  investments,  borrowings,  deposits,  mergers,  issuances  of
securities, payment of  dividends, interest rates payable  on deposits, interest
rates  or  fees  chargeable  on  loans,  establishment  of  branches,  corporate
reorganizations and maintenance  of books and records.  The  OCC requires NBB to
maintain  certain  capital ratios.    NBB  is required  by  the  OCC to  prepare
quarterly reports on NBB's financial condition and to conduct an annual audit of
its  financial  affairs in  compliance  with  minimum standards  and  procedures
prescribed  by the  OCC.   NBB also  is required  by the  OCC to  adopt internal
control structures and  procedures in order to safeguard assets  and monitor and
reduce  risk exposure.   While appropriate  for safety  and soundness  of banks,
these requirements impact banking overhead costs.

   BTC is organized as a Virginia-chartered banking corporation and is regulated
and supervised  by the Bureau  of Financial  Institutions (BFI) of  the Virginia
State Corporation Commission.  In addition, as a federally insured  bank, BTC is
regulated  and supervised  by  the Federal  Reserve Board,  which serves  as its
primary federal regulator and  is subject to certain regulations  promulgated by
the  FDIC.   Under the provisions  of federal  law, federally  insured banks are
subject,  with certain  exceptions,  to certain  restrictions  on extensions  of
credit to their affiliates, on  investments in the stock or other  securities of
affiliates and on the taking of such stock or securities  as collateral from any
borrower.  In addition, these banks are prohibited from engaging in certain tie-
in-arrangements in connection with  any extension of credit or  the providing of
any property of service.




                                      -10-<PAGE>


   The  Virginia  State Corporation  Commission  and the  Federal  Reserve Board
conduct regular examinations  of BTC  reviewing the  adequacy of  the loan  loss
reserves,  quality  of  the  loans  and  investments,  propriety  of  management
practices, compliance with laws and regulations and other aspects of the  bank's
operations.  In addition to these regular examinations, Virginia chartered banks
must  furnish to the Federal Reserve Board quarterly reports containing detailed
financial statements and schedules.

   Community Reinvestment Act.  NBB and BTC are subject to the provisions of the
Community Reinvestment Act  of 1977  (the CRA), which  requires the  appropriate
federal bank regulatory  agency, in connection with its regular examination of a
bank, to  assess the bank's record in meeting  the credit needs of the community
served by the bank, including low and  moderate-income neighborhoods.  Under the
implementing CRA  regulations, banks have  the option of being  assessed for CRA
compliance under one of several methods.  Small banks are evaluated  differently
than larger  banks and  technically  are not  subject  to some  data  collection
requirements.  The focus of the regulations is on the volume and distribution of
a  bank's  loans, with  particular  emphasis  on  lending  activity in  low  and
moderate-income areas and to  low and moderate-income persons.   The regulations
place substantial importance  on a bank's product  delivery system, particularly
branch locations.   The regulations  require banks, other  than small banks,  to
comply with  significant data collection requirements.   The regulatory agency's
assessment of the bank's record is made available  to the public.  Further, this
assessment is  required for any bank  which has applied to,  among other things,
establish a  new branch office  that will accept deposits,  relocate an existing
office,  or  merge,  consolidate  with  or  acquire  the  assets  or  assume the
liabilities of a federally regulated  financial institution.  It is  likely that
banks' compliance  with the CRA, as  well as other so-called  fair lending laws,
will  face ongoing government scrutiny and that costs associated with compliance
will continue to increase.

   NBB has  received a CRA  rating of "Outstanding"  in its last  examination by
federal bank regulators.  BTC was rated as "Satisfactory".

   Federal  Deposit  Insurance  Corporation  Improvement  Act  of  1991.     The
difficulties encountered  nationwide by  financial institutions during  1990 and
1991 prompted federal legislation designed to reform the banking industry and to
promote  the viability  of the  industry and  of  the deposit  insurance system.
FDICIA,  which became  effective  on December  19,  1991, bolsters  the  deposit
insurance fund, tightens bank regulation and  trims the scope of federal deposit
insurance.

   The  legislation bolsters the bank deposit insurance fund with $70 billion in
borrowing authority and increases to $30  billion from $5 billion the amount the
FDIC can borrow from  the U.S. Treasury to cover the cost of bank failures.  The
loans, plus interest,  would be repaid  by premiums that  banks pay on  domestic
deposits over the next fifteen years.

   Among  other things,  FDICIA requires  the federal  banking agencies  to take
"prompt corrective action" in respect to  banks that do not meet minimum capital
requirements.    FDICIA  establishes  five capital  tiers:  "well  capitalized,"
"adequately  capitalized," "undercapitalized,"  "significantly undercapitalized"
and "critically undercapitalized."

   If a depository  institution's principal federal regulator determines that an
otherwise  adequately  capitalized  institution  is  in  an  unsafe  or  unsound
condition or is engaging in  an unsafe or unsound  practice, it may require  the
institution to  submit a corrective  action plan, restrict its  asset growth and

                                      -11-<PAGE>


prohibit   branching,  new  acquisitions  and   new  lines  of   business.    An
institution's  principal  federal  regulator  may deem  the  institution  to  be
engaging  in  an  unsafe  or  unsound  practice  if  it  receives  a  less  than
satisfactory  rating for asset quality, management, earnings or liquidity in its
most recent examination.

   Among  other possible  sanctions, an undercapitalized  depository institution
may not  pay dividends and is required  to submit a capital  restoration plan to
its  principal  federal regulator.    In addition,  its  holding company  may be
required to guarantee compliance with the capital restoration plan under certain
circumstances.  If an undercapitalized depository institution fails to submit or
implement an  acceptable capital  restoration plan,  it can  be subject  to more
severe sanctions, including an  order to sell sufficient voting stock  to become
adequately  capitalized.   More  severe sanctions  and  remedial actions  can be
mandated  by the  regulators if  an institution  is considered  significantly or
critically undercapitalized.

   In addition,  FDICIA requires regulators  to draft  a new set  of non-capital
measures  of  bank  safety, such  as  loan  underwriting  standards and  minimum
earnings levels.  The legislation also requires regulators to perform annual on-
site  bank examinations,  places  limits on  real  estate lending  by  banks and
tightens  auditing requirements.  In  April 1995, the  regulators adopted safety
and  soundness standards  as  required by  FDICIA in  the  following areas:  (i)
operational and managerial; (ii) asset quality earnings and stock valuation; and
(iii) employee compensation.

   FDICIA reduces  the scope of federal deposit insurance.  The most significant
change ended the "too big to fail" doctrine, under which the government protects
all deposits in  most banks,  including those exceeding  the $100,000  insurance
limit.   The FDIC's ability to reimburse uninsured deposits--those over $100,000
and  foreign deposits--has  been  sharply limited.    Since December  1993,  the
Federal Reserve  Board's ability to finance undercapitalized banks with extended
loans from its discount window has been  restricted.  In addition, only the best
capitalized banks will  be able to offer insured brokered  deposits without FDIC
permission or to insure accounts established under employee pension plans.

   Branching.   In  1986, the  Virginia Banking  Act was  amended to  remove the
geographic restrictions  governing the establishment of  branch banking offices.
Subject to the  approval of  the appropriate federal  and state bank  regulatory
authorities,  BTC as  a state bank,  may establish  a branch  office anywhere in
Virginia.

   National banks, like NBB,  are required by the National Bank Act to adhere to
branch banking laws applicable to  state banks in the  states in which they  are
located.   Under current Virginia  law, NBB  may open branch  offices throughout
Virginia with the prior  approval of the OCC.  In  addition, with prior approval
of one  or more of the Federal  Reserve Board, the Virginia  Commission, the OCC
and the  FDIC,  NBB will  be  able to  acquire  existing banking  operations  in
Virginia.

   The  Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
Interstate  Act) allows bank  holding companies to  acquire banks  in any state,
without regard  to state law, except that if the state has a minimum requirement
for the amount of  time a bank must be in existence, that law must be preserved.
Under the Virginia  Banking Act, a Virginia bank  or all of the  subsidiaries of
Virginia holding  companies sought to be  acquired must have been  in continuous
operation for  more than two years before the date of such proposed acquisition.
The Interstate Act also  permits banks to acquire out-of-state  branches through

                                      -12-<PAGE>


interstate mergers,  if the state has not opted out of interstate branching.  De
novo branching, where an out-of-state bank  holding company sets up a new branch
in  another state,  requires  a state's  specific approval.   An  acquisition or
merger  is not  permitted under the  Interstate Act  if the  bank, including its
insured depository affiliates, will control more than 10% of the total amount of
deposits  of insured  depository  institutions in  the  United States,  or  will
control 30%  or more  of  the total  amount of  deposits  of insured  depository
institutions in any state.

   Virginia has, by  statute, elected  to opt-in fully  to interstate  branching
under the Interstate Act.  Under the Virginia statute, Virginia state banks may,
with  the approval of the  Virginia State Corporation  Commission, establish and
maintain a de novo branch or acquire one or  more branches in a state other than
Virginia,  either separately  or  as part  of  a merger.    Procedures also  are
established  to  allow out-of-state  domiciled  banks  to establish  or  acquire
branches  in Virginia,  provided the "home"  state of the  bank permits Virginia
banks to  establish or acquire branches  within its borders.   The activities of
these branches  are subject to the same laws as Virginia domiciled banks, unless
such activities  are  prohibited by  the law  of  the state  where the  bank  is
organized.    The Virginia  State Corporation  Commission  has the  authority to
examine  and supervise  out-of-state state  banks to ensure  that the  branch is
operating in  a  safe  and sound  manner  and in  compliance  with the  laws  of
Virginia.   The Virginia statute authorizes the Bureau of Financial Institutions
to enter into cooperative agreements with other state and federal regulators for
the  examination  and  supervision of  out-of-state  state  banks with  Virginia
operations,  or  Virginia  domiciled  banks  with  operations  in other  states.
Likewise, national  banks, with the approval of the OCC, may branch into and out
of the state of Virginia.  Any  Virginia branch of an out-of-state national bank
is subject  to Virginia  law (enforced  by the OCC)  with respect  to intrastate
branching, consumer protection, fair lending and community reinvestment as if it
were a branch of a Virginia bank, unless preempted by federal law.

   The Interstate Act permits  banks and bank holding companies  from throughout
the United States to enter Virginia  markets through the acquisition of Virginia
institutions  and  makes  it easier  for  Virginia  bank  holding companies  and
Virginia  state  and national  banks to  acquire  institutions and  to establish
branches in other states.  Competition in market areas served by the Company has
increased as a result of the  Interstate Act and the Virginia interstate banking
statutes.

   Deposit Insurance.  The FDIC establishes rates for the payment of premiums by
federally insured financial  institutions.  A  Bank Insurance Fund (the  BIF) is
maintained  for commercial banks, with insurance premiums from the industry used
to offset  losses from insurance  payouts when banks  fail.  Beginning  in 1993,
insured  depository institutions  like NBB  and BTC  paid for  deposit insurance
under a risk-based premium system.  Beginning in 1997, all  banks, including NBB
and BTC,  were subject to  an additional  FDIC assessment  which funds  interest
payments  for bank issues  to resolve problems  associated with the  savings and
loan industry.  This assessment  will continue until 2018-2019.   The assessment
will vary over the period from 1.29 cents to 2.43 cents per $100 of deposits.

   Gramm-Leach-Bliley Act.  The Gramm-Leach-Bliley Act of 1999 (the GLBA) allows
national banks, with OCC  approval, to acquire financial subsidiaries  to engage
in any  activity  that is  financial  in nature  or  incidental to  a  financial
activity, as defined in the Bank Holding Act, except (i) insurance underwriting,
(ii)  merchant  or  insurance  portfolio  investments,  and  (iii)  real  estate
development or investment.   Well-capitalized national banks are also  given the
authority to engage in municipal bond underwriting.

                                      -13-<PAGE>


   To establish or acquire a financial subsidiary, a national bank must be well-
managed, and the consolidated assets of its financial subsidiary must not exceed
the lesser of 45% of the  consolidated total assets of the bank or  $50 billion.
Relationship between a national bank and a financial subsidiary are subject to a
variety of supervisory  enhancements from  regulators.  The  GLBA also  provides
that state banks that  establish or acquire financial subsidiaries  are required
to comply  with the  same safeguards  imposed on  the financial  subsidiaries of
national banks.

   Government Policies.  The operations of NBB and  BTC are affected not only by
general  economic conditions,  but also  by the  policies of  various regulatory
authorities.    In particular,  the Federal  Reserve  Board regulates  money and
credit and interest  rates in  order to influence  general economic  conditions.
These policies have a  significant influence on overall growth  and distribution
of loans, investments and deposits and affect interest rates charged on loans or
paid  for time  and savings deposits.   Federal Reserve  Board monetary policies
have had  a significant effect on  the operating results of  commercial banks in
the past and are expected to continue to do so in the future.

   Limits on Dividends and Other Payments.  As a national bank, NBB, may not pay
dividends  from its capital; all dividends must be  paid out of net profits then
on  hand,  after deducting  expenses, losses,  bad  debts, accrued  dividends on
preferred stock, if any, and taxes.  In  addition, a national bank is prohibited
from declaring a dividend on its shares of common stock until its surplus equals
its stated  capital, unless there has  been transferred to surplus  no less than
one-tenth of the  bank's net profits of (i) the  preceding two consecutive half-
year periods (in the case of an annual dividend) or (ii) the preceding half-year
period (in the  case of a quarterly  or semi-annual dividend).   The approval of
the OCC is required if the total of all dividends declared by a national bank in
any calendar year exceeds  the total of its  net profits for that year  combined
with its retained  net profits for  the preceding two  years, less any  required
transfers to surplus or to fund the retirement of preferred stock.

   The OCC has  promulgated regulations  that became effective  on December  13,
1990,  which significantly affect the  level of allowable  dividend payments for
national  banks.   The  effect is  to make  the  calculation of  national banks'
dividend-paying   capacity   consistent  with   generally   accepted  accounting
principles.   The allowance for loan and lease  losses will not be considered an
element of  "undivided profits then on hand" and provisions to the allowance are
treated as expenses  and therefore not  part of "net  profits."  Accordingly,  a
national bank  with an allowance  greater than its  statutory bad debts  may not
include  the excess  in  calculating undivided  profits  for dividend  purposes.
Further,  a national bank  may be able  to use a  portion of its  earned capital
surplus   account  as  "undivided  profits  then  on  hand,"  depending  on  the
composition of that account.

   As a  state member  bank subject  to the regulations  of the  Federal Reserve
Board, BTC  must  obtain the  approval  of the  Federal  Reserve Board  for  any
dividend  if the  total of  all dividends  declared in  any calendar  year would
exceed the total of  its net profits, as defined  by the Federal Reserve  Board,
for that  year, combined with  its retained  net profits for  the preceding  two
years.  In  addition, a state member  bank may not pay  a dividend in an  amount
greater than its  undivided profits then on hand after  deducting its losses and
bad debts.   For this  purpose, bad debts are  generally defined to  include the
principal amount  of loans which are in arrears with  respect to interest by six
months or  more, unless  such loans  are fully  secured and  in  the process  of
collection.  Moreover, for purposes  of this limitation, a state member  bank is
not permitted to add the balance in its allowance for loan losses account to its

                                      -14-<PAGE>


undivided profits then on hand; however, it may net  the sum of its bad debts as
so defined  against the  balance in  its allowance for  loan losses  account and
deduct  from undivided profits  only bad debts  as so defined  in excess of that
account.

   In  addition, the  Federal Reserve  Board is  authorized to  determine, under
certain  circumstances relating  to the  financial condition  of a  state member
bank,  that the payment of dividends would be  an unsafe or unsound practice and
to prohibit  payment thereof.  The  payment of dividends that  depletes a bank's
capital  base could be deemed to constitute  such an unsafe or unsound practice.
The  Federal  Reserve Board  has  indicated  that banking  organizations  should
generally pay dividends only out of current operating earnings.

   Virginia  law  also  imposes  restrictions  on  the  ability  of BTC  to  pay
dividends.   A Virginia state bank is permitted to declare a dividend out of its
"net  undivided profits", after providing for all expenses, losses, interest and
taxes accrued or due by the bank.  In  addition, a deficit in capital originally
paid in must be restored to its initial level, and no dividend can be paid which
could  impair the bank's paid in capital.   The Bureau of Financial Institutions
further has authority to limit the payment of dividends by a Virginia bank if it
determines the limitation is in  the public interest and is necessary  to ensure
the bank's financial soundness.

   The Federal  Deposit Insurance Corporation  Improvement Act of  1991 (FDICIA)
provides  that  no   insured  depository  institution   may  make  any   capital
distribution  (which would  include  a  cash  dividend)  if,  after  making  the
distribution,  the institution  would not  satisfy one  or  more of  its minimum
capital requirements.

   Capital Requirements.    The Federal  Reserve  Board has  adopted  risk-based
capital  guidelines which  are applicable to  Bankshares and  BTC.   The Federal
Reserve Board guidelines redefine  the components of capital, categorize  assets
into different risk classes and include  certain off-balance sheet items in  the
calculation  of  risk-weighted assets.   The  minimum  ratio of  qualified total
capital to risk-weighted assets (including certain off-balance sheet items, such
as standby letters of  credit) is 8.0%.  At least half of the total capital must
be comprised of Tier  1 capital for a minimum  ratio of Tier 1 Capital  to risk-
weighted assets  of 4.0%.   The  remainder may  consist of  a limited amount  of
subordinated  debt,  other  preferred  stock, certain  other  instruments  and a
limited amount of loan  and lease loss  reserves.  The  OCC has adopted  similar
regulations applicable to NBB.

   In addition, the Federal Reserve Board has established minimum leverage ratio
(Tier 1 capital to total assets less intangibles) guidelines that are applicable
to Bankshares  and BTC.  The  OCC has adopted similar  regulations applicable to
NBB.  These  guidelines provide for a minimum ratio of  4.0% for banks that meet
certain  specified criteria,  including that  they have  the highest  regulatory
CAMELS  rating and are not  anticipating or experiencing  significant growth and
have well-diversified risk.   All other  banks will be  required to maintain  an
additional  cushion of  at  least 100  to  200 basis  points,  based upon  their
particular  circumstances and risk profiles.   The guidelines  also provide that
banks  experiencing internal growth or  making acquisitions will  be expected to
maintain strong  capital positions  substantially above the  minimum supervisory
levels, without significant reliance on intangible assets.

   Bank regulators  from time to time  have indicated a desire  to raise capital
requirements applicable  to  banking organizations  beyond current  levels.   In
addition,  the number  of  risks which  may  be included  in risk-based  capital

                                      -15-<PAGE>


restrictions, as  well as the measurement  of these risks, is  likely to change,
resulting in increased capital requirements for banks.   Bankshares, NBB and BTC
are unable to predict whether higher capital ratios would be imposed and, if so,
at what levels and on what schedule.

Other Legislative and Regulatory Concerns

   Other  legislative and regulatory proposals regarding  changes in banking and
the  regulation  of   banks,  thrifts  and  other  financial   institutions  are
periodically  considered  by the  executive  branch of  the  federal government,
Congress and various state governments, including Virginia.  New proposals could
significantly  change  the  regulation  of  banks  and  the  financial  services
industry.  It cannot be predicted what might be proposed or adopted or how these
proposals would affect the Company.

Other Business Concerns

   The banking industry is particularly sensitive to interest rate fluctuations,
as the spread between the rates which  must be paid on deposits and those  which
may be charged on  loans is an important component of profit.   In addition, the
interest which can be earned on a bank's invested funds has a significant effect
on profits.   Rising interest rates  typically reduce the demand  for new loans,
particularly  the real  estate loans  which represent  a significant  portion of
NBB's  and  BTC's  loan demand,  as  well  as  certain NBB  loans  in  which BTC
participates.


































                                      -16-<PAGE>


               Statistical Disclosure by National Bankshares, Inc.
                         and Subsidiaries (The Company)

  I.    Distribution of  Assets, Liabilities and Stockholders'  Equity; Interest
        Rates and Interest Differential
        ------------------------------------------------------------------------

        A.   Average Balance Sheets

         The following table presents,  for the years indicated, condensed daily
         average balance sheet information.
         ($ in thousands)
                                                   December 31,
        Assets                               1999      1998      1997
                                             ----      ----      ----
        Cash and due from banks             $ 12,820   10,281      9,954
        Interest bearing deposits              5,263   12,889      4,165
        Federal funds sold                     2,926    6,389      8,181
        Securities available for sale:
           Taxable                            95,979   94,247     54,213
           Nontaxable                         29,286   29,284      6,312
        Securities held to maturity:
           Taxable                             8,940    9,972     67,046
           Nontaxable                         17,219   18,929     29,608
        Mortgage loans held for sale             709    1,017        413
        Loans, net                           266,431  225,613    204,540
        Other assets                          14,616   12,367     11,500
                                            --------  -------    -------

             Total assets                   $454,189  420,988    395,932
                                            ========  =======    =======

        Liabilities and Stockholders' Equity
        Noninterest-bearing demand
         deposits                           $ 55,700   49,552     44,193
        Interest-bearing demand deposits      85,284   77,842     75,519
        Savings deposits                      46,792   47,475     47,781
        Time deposits                        203,807  185,101    171,946
                                            --------  -------    -------
             Total deposits                  391,583  359,970    339,439

        Short-term borrowings                  4,228      216        319

        Other liabilities                      2,182    2,520      2,462
                                            --------  -------    -------
           Total liabilities                 397,993  362,706    342,220

        Stockholders' equity                  56,196   58,282     53,712
                                             -------  -------    -------
           Total liabilities and
            stockholders' equity            $454,189  420,988    395,932
                                            ========  =======    =======








                                      -17-<PAGE>

<TABLE>
B.      Analysis of Net Interest Earnings

        The  following table  shows  the major  categories of  interest-earning assets  and interest-bearing
        liabilities, the interest  earned or paid, the  average yield or rate  on the daily average  balance
        outstanding,  net interest income  and net  yield on average  interest-earning assets for  the years
        indicated.
<CAPTION>
                              December 31, 1999           December 31, 1998           December 31, 1997
                                            Average                     Average                     Average
                          Average            Yield/   Average           Yield/    Average           Yield/
($ in thousands)          Balance  Interest   Rate    Balance Interest   Rate     Balance Interest   Rate
                          -------  -------- -------   ------- --------  -------   ------- --------  -------
<S>                       <C>      <C>      <C>       <C>     <C>       <C>      <C>      <C>       <C>
Interest-earning assets:
Loans, net (1)(2)(3)      $267,140  24,244     9.08%  226,630   21,726    9.59%  $204,953   19,667   9.60%
Taxable securities         104,919   6,820     6.50%  104,219    7,201    6.91%   121,259    7,776   6.41%
Nontaxable securities
 (1)                        46,505   3,414     7.34%   48,213    2,899    6.01%    35,920    2,708   7.54%
Federal funds sold           2,926     170     5.81%    6,389      345    5.40%     8,181      470   5.75%
Interest bearing deposits    5,263     269     5.11%   12,889      696    5.40%     4,165      230   5.52%
                          -------- -------            -------  -------           --------  -------
Total interest-earning
 assets                   $426,753  34,917     8.18%  398,340   32,867    8.25%  $374,478   30,851   8.24%
                          ======== =======            =======  =======           ========  =======
Interest-bearing
 liabilities:
Interest-bearing
 demand deposits          $ 85,284   2,129     2.50%   77,842    2,203    2.83%  $ 75,519    2,161   2.86%
Savings deposits            46,792   1,212     2.59%   47,475    1,511    3.18%    47,781    1,571   3.29%
Time deposits              203,807  10,630     5.22%  185,101   10,203    5.51%   171,946    9,357   5.44%
Short-term borrowings        4,228     232     5.49%      216       11    5.09%       319       17   5.33%
Long-term debt                 ---     ---      ---       ---      ---     ---        ---      ---    ---
                          -------- -------            -------  -------           --------  -------
Total interest-
 bearing liabilities      $340,111  14,203     4.18%  310,634   13,928    4.48%   295,565   13,106   4.43%
                          ======== =======            =======  =======           ========  =======
Net interest income and
 interest rate spread               20,714     4.00%            18,939    3.77%             17,745   3.81%
Net yield on average
 interest-earning assets                       4.85%                      4.75%                      4.74%

(1)     Interest on nontaxable loans and  securities is computed on a fully taxable equivalent  basis using
        a Federal income tax rate of 34%.
(2)     Loan fees of $680 in 1999, $414 in 1998 and $339 in 1997 are included in total interest income.
(3)     Nonaccrual loans are included in average balances for yield computations.
</TABLE>
                                                    -18-<PAGE>

<TABLE>
C.      Analysis of Changes in Interest Income and Interest Expense

        The Company's primary source  of revenue is net interest income, which is the difference between the
        interest and fees earned on loans and investments and the interest paid on deposits and other funds.
        The Company's net  interest income is affected by changes in  the amount and mix of interest-earning
        assets and interest-bearing liabilities and  by changes in yields earned on  interest-earning assets
        and  rates paid  on interest-bearing liabilities.   The  following table  sets forth, for  the years
        indicated, a summary of the  changes in interest income and interest expense  resulting from changes
        in average asset and liability balances (volume) and changes in average interest rates (rate).
<CAPTION>
                                                   1999 Over 1998                  1998 Over 1997
                                           ------------------------------  -------------------------------
                                             Changes Due To                   Changes Due To
                                             --------------                   --------------
                                                               Net Dollar                       Net Dollar
  ($ in thousands)                         Rates(2)  Volume(2)   Change    Rates(2)  Volume(2)    Change
                                           --------  --------- ----------  --------  ---------  ----------
  <S>                                      <C>       <C>       <C>         <C>       <C>        <C>
  Interest income:(1)
    Loans                                   $(1,206)     3,724      2,518       (19)    2,078       2,059
    Taxable securities                         (429)        48       (381)      572    (1,147)       (575)
    Nontaxable securities                       621       (106)       515      (618)      809         191
    Federal funds sold                           24       (199)      (175)      (98)      (27)       (125)
    Interest bearing deposits                   (35)      (392)      (427)      471        (5)        466
                                            -------     ------     ------    ------    ------      ------
   Increase(decrease) in income on
    interest-earning assets                 $(1,025)     3,075      2,050       308     1,708       2,016
                                            -------     ------     ------    ------    ------      ------
  Interest expense:
    Interest-bearing demand deposits        $  (273)       199        (74)       66       (24)         42
    Savings deposits                           (278)       (21)      (299)      (50)      (10)        (60)
    Time deposits                              (568)       995        427       724       122         846
    Short-term borrowings                         1        220        221        (1)       (5)         (6)
                                            -------     ------     ------    ------    ------      ------
   Increase(decrease) in expense
    of interest-bearing liabilities         $(1,118)     1,393        275       739        83         822
                                            --------    ------     ------    ------    ------      ------
  Increase (decrease) in net interest
   income                                   $    93      1,682      1,775      (431)    1,625       1,194
                                            =======     ======     ======    ======    ======      ======

(1)     Taxable equivalent basis using a Federal income tax rate of 34%.
(2)     Variances  caused by the change in rate  times the change in volume have  been allocated to rate and
        volume changes proportional  to the relationship  of the absolute  dollar amounts  of the change  in
        each.
</TABLE>
                                                    -19-<PAGE>
<TABLE>
 II.    Investment Portfolio

        A.   Book Value of Investments
             The amortized costs and fair  values of securities available for sale as of  December 31, 1999,
             1998 and 1997 were as follows:
<CAPTION>
                                                                        December 31,
                                                          1999              1998              1997
                                                          ----              ----              ----
                                                    Amortized  Fair   Amortized  Fair   Amortized  Fair
   ($ in thousands)                                   Costs   Values    Costs   Values    Costs   Values
                                                    --------- ------  --------- ------  --------- ------
   <S>                                              <C>       <C>     <C>       <C>     <C>       <C>
   Available for sale:
    U.S. Treasury                                   $  6,244    6,164     9,253   9,671    6,742    6,862
    U.S. Government agencies and corporations         50,373   47,498    59,365  59,595   36,252   36,276
    States and political subdivisions                 32,903   31,617    32,183  32,865    9,540    9,639
    Mortgage-backed securities (1)                    13,464   13,176    17,282  17,200    4,172    4,119
    Corporate debt securities                         14,349   13,646    14,528  14,824    7,780    7,824
    Federal Home Loan Bank stock                       1,329    1,329     1,214   1,214      537      537
    Federal Reserve Bank stock                           247      247       247     247      247      247
    Other securities                                     168      168       462     462       18       78
                                                    --------  -------   ------- -------  -------  -------
       Total securities available for sale          $119,077  113,845   134,534 136,078   65,288   65,582
                                                    ========  =======   ======= =======  =======  =======

<CAPTION>
             The amortized costs of securities held to maturity  as of December 31, 1999, 1998 and 1997 were
             as follows:
                                                                            December 31,
       ($ in thousands)                                            1999         1998         1997
                                                                   ----         ----         ----
       <S>                                                         <C>          <C>          <C>
       Held to maturity:
        U.S. Treasury                                             $   500        1,006       7,527
        U.S. Government agencies and corporations                   5,500        7,497      36,853
        States and political subdivisions                          17,283       21,160      32,949
        Mortgage-backed securities (1)                                364          513         630
        Corporate                                                     ---          500       6,433
                                                                  -------      -------     -------
           Total securities held to maturity                      $23,647       30,676      84,392
                                                                  =======      =======     =======

        (1)  The  majority of  mortgage-backed securities  and collateralized  mortgage obligations  held at
             December  31,  1999  were backed  by  U.S.  agencies.   Certain  holdings  are  required  to be
             periodically subjected to  the Financial  Institution Examination Council's  (FFIEC) high  risk
             mortgage security test.   These  tests address possible  fluctuations in  the average life  and
             price sensitivity which  are the primary  risks associated with  this type  of security.   Such
             tests are usually subject to regulatory review.

         Except for U.S. Government securities, the  Company has no securities with any issuer that  exceeds
         10% of stockholders' equity.
</TABLE>

                                                    -20-<PAGE>
<TABLE>
B.      Maturities and Associated Yields
        The following  table presents the  maturities for those  securities available for  sale and  held to
        maturity as of December 31, 1999 and weighted average yield for each range of maturities.

<CAPTION>
                                                              Maturities and Yields
                                                                December 31, 1999
      ($ in thousands except for % data)   < 1 Year 1-5 Years 5-10 Years > 10 Years   None     Total
                                           -------- --------- ---------- ----------   ----    -------
      <S>                                  <C>      <C>       <C>        <C>          <C>     <C>
      Available for Sale
      ------------------
        U.S. Treasury                      $   ---     5,203       961        ---      ---    $ 6,164
                                               ---%     6.03%     5.67%       ---%     ---%      5.97%
        U.S. Government agencies             4,001     5,854    23,188     14,455      ---     47,498
                                              5.95%     6.20%     6.53%      6.67%     ---%      6.48%
        Mortgage-backed securities             ---       ---     2,142     11,035      ---     13,177
                                               ---%      ---%     5.97%      7.16%     ---%      6.95%
        States and Political                   ---     1,701       494      1,287      ---      3,482
         Subdivision - taxable                 ---%     7.24%     7.40%      7.77%     ---%      6.73%

        States and Political Subdivision       ---     5,710     8,436     13,990      ---     28,136
         - nontaxable(1)                       ---%     7.20%     7.36%      7.03%     ---%      7.16%

        Corporate                              ---       992     6,299      6,354      ---     13,645
                                               ---%     6.23%     6.75%      6.79%     ---%      6.73%
        Federal Home Loan Bank stock           ---       ---       ---        ---    1,329      1,329
                                               ---%      ---%      ---%       ---%    7.75%      7.75%
        Federal Reserve Bank stock             ---       ---       ---        ---      247        247
                                               ---%      ---%      ---%       ---%    6.00%      6.00%
        Other securities                       167       ---       ---        ---      ---        167
                                              5.67%      ---%      ---%       ---%     ---%      5.67%
                                             -----    ------    ------     ------   ------    -------
         Total                               4,168    19,460    41,520     47,121    1,576    113,845
                                              5.94%     6.54%     6.69%      6.94%    7.52%      6.75%
      Held to Maturity
      ----------------
        U.S. Treasury                          500       ---       ---        ---      ---        500
                                              5.09%      ---%      ---%       ---%     ---%      5.09%
        U.S. Government agencies               ---     4,500     1,000        ---      ---      5,500
                                               ---%     5.66%     3.96%       ---%     ---%      5.35%
        Mortgage-backed securities             ---        14       102        247      ---        363
                                               ---%     9.00%     7.67%      7.26%     ---%      7.44%
        States and Political                   400     1,072       358        200      ---      2,030
         Subdivision - taxable                6.40%     6.98%     7.03%      9.00%     ---%      7.07%

        States and Political                 1,701    10,283     2,416        854      ---     15,254
         Subdivision - nontaxable             6.86%     7.32%     7.62%      7.09%     ---%      7.30%

        Corporate                              ---       ---       ---        ---      ---        ---
                                               ---%      ---%      ---%       ---%     ---%       ---%
        Other securities                       ---       ---       ---        ---      ---        ---
                                               ---%      ---%      ---%       ---%     ---%       ---%
                                             -----    ------    ------     ------   ------     ------
         Total                               2,601    15,869     3,876      1,301      ---     23,647
                                              6.45%     6.83%     6.62%      7.42%     ---%      6.78%

(1)     Rates shown represent weighted average yield on a fully taxable basis.
</TABLE>

                                                    -21-<PAGE>


III.    Loan Portfolio
        --------------

        The  Company  concentrates  its  lending activities  in  commercial  and
        industrial  loans,  real  estate  mortgage loans  both  residential  and
        business, and loans to  individuals.  The following tables set forth (i)
        a comparison of the Company's loan  portfolio by major category of loans
        as  of the dates  indicated and  (ii) the  maturities and  interest rate
        sensitivity of the loan portfolio at December 31, 1999.

        A.   Types of Loans

                                                  December 31,
         ($ in thousands)            1999     1998     1997     1996     1995
                                       ----     ----     ----     ----     ----
         Commercial and industrial
          loans                    $149,386  110,509  101,379   87,519   59,609
         Real estate mortgage
          loans                      58,829   48,724   42,969   43,917   45,589
         Real estate construction
          loans                      14,669   12,827    8,510    6,295    6,007
         Loans to individuals        73,825   69,493   66,635   60,991   56,920
                                   --------  -------  -------  -------  -------
          Total loans               296,709  241,553  219,493  198,722  168,125

         Less unearned income and
          deferred fees              (1,916)  (2,296)  (2,503)  (2,549)  (2,307)
                                   --------  -------  -------  -------  -------
          Total loans, net of
           unearned income          294,793  239,257  216,990  196,173  165,818

         Less allowance for loans
          losses                     (3,231)  (2,679)  (2,438)  (2,575)  (2,625)
                                   --------  -------  -------  -------  -------
          Total loans, net         $291,562  236,578  214,552  193,598  163,193
                                   ========  =======  =======  =======  =======

        B.   Maturities and Interest Rate Sensitivities



                                                  December 31, 1999
                                                             After
            ($ in thousands)          <1 Year   1-5 Years   5 Years     Total
                                      -------   ---------   -------     -----
            Commercial and
             industrial               $52,277     61,749     35,360     149,386
            Real estate
             construction              14,669        ---        ---      14,669
            Less loans with
             predetermined interest
             rates                     31,052     26,567     34,878      92,497
                                      -------     ------     ------     -------
            Loans with adjustable
             rates                    $35,894     35,182        482      71,558
                                      =======     ======     ======     =======



                                      -22-<PAGE>


        C.   Risk Elements

         1.  Nonaccrual, Past Due and Restructured Loans

             The  following  table  presents  aggregate  amounts  for nonaccrual
             loans,  restructured  loans,  other  real  estate  owned,  net  and
             accruing loans which are contractually past due ninety days or more
             as to interest or principal payments.

                                                       December 31,
            ($ in thousands)                1999    1998   1997    1996   1995
                                            ----    ----   ----    ----   ----
            Nonaccrual loans:
              Commercial and industrial     $   65   ---       55    121    270
              Real estate mortgage              33    28       32    495    418
              Real estate construction         ---   ---      ---    ---    ---
              Loans to individuals              53   ---      ---    ---     30
                                            ------ -----    ----- ------  -----
                                            $  151    28       87    616    718
            Restructured loans:
              Commercial and industrial         40   ---      ---    ---    ---
                                            ------ -----    ----- ------  -----
             Total nonperforming loans      $  191    28       87    616    718

            Other real estate owned, net       447   628      421    474    762
                                            ------ -----    ----- ------  -----
             Total nonperforming assets     $  638   656      508  1,090  1,480
                                            ====== =====    ===== ======  =====
            Accruing loans past due 90
            days or more:
              Commercial and industrial     $   99   186       82     14     11
              Real estate mortgage             704   160      358    252    250
              Real estate construction         ---   ---      ---    ---    ---
              Loans to individuals             274   204      232    192    313
                                            ------ -----    ----- ------  -----
                                            $1,077   550      672    458    574
                                            ====== =====    ===== ======  =====

             The effect  of nonaccrual and restructured loans on interest income
             is presented below:
             ($ in thousands)                            1999    1998     1997
                                                         ----    ----     ----
             Scheduled interest:
               Nonaccrual loans                          $  13        4      8
               Restructured loans                          ---      ---    ---
                                                         -----    -----  -----
                  Total scheduled interest               $  13        4      8
                                                         =====    =====  =====
             Recorded interest:
               Nonaccrual loans                          $ ---      ---      1
               Restructured loans                          ---      ---    ---
                                                         -----    -----  -----
                  Total recorded interest                $ ---      ---      1
                                                         =====    =====  =====





                                      -23-<PAGE>


             Interest is recognized  on the cash basis for all  loans carried in
             nonaccrual status.  Loans generally are placed in nonaccrual status
             when the collection of principal or interest is ninety days or more
             past due, unless  the obligation  is both well-secured  and in  the
             process of collection.

         2.  Potential Problem Loans

             At December 31, 1999,  the recorded investment in loans  which have
             been identified  as  impaired  loans totaled  $317,000.    Of  this
             amount, $95,000  related to loans  with no valuation  allowance and
             $222,000 related to loans  with a corresponding valuation allowance
             of $154,000.   For the  year-ended December 31,  1999, the  average
             recorded  investment in  impaired loans was  approximately $292,000
             and  the total  interest income  recognized on  impaired loans  was
             $13,000 of which $0 was recognized on a cash basis.

             At December 31, 1998,  the recorded investment in loans  which have
             been identified  as  impaired  loans totaled  $373,000.    Of  this
             amount, $228,000 related  to loans with no  valuation allowance and
             $145,000 related to loans  with a corresponding valuation allowance
             of $145,000.   For  the year ended  December 31, 1998,  the average
             recorded investment in impaired  loans was approximately  $387,000,
             and  the total  interest income  recognized on  impaired loans  was
             $32,000 of which $0 was recognized on a cash basis.

         3.  Foreign Outstandings

             At  December 31,  1999,  1998  and  1997,  there  were  no  foreign
             outstandings.

         4.  Loan Concentrations

             The  Company   does  a   general  banking  business,   serving  the
             commercial,  agricultural  and   personal  banking  needs   of  its
             customers.  NBB's trade territory, consists of Montgomery and Giles
             Counties,  and the City of Galax, Virginia and portions of adjacent
             counties.  NBB's operating results  are closely correlated with the
             economic  trends within this area which are, in turn, influenced by
             the area's three largest employers, Virginia Polytechnic  Institute
             and State University, Montgomery  County Schools and Celco.   Other
             industries  include a  wide  variety of  manufacturing, retail  and
             service  concerns.   Most  of  BTC's business  originates  from the
             communities  of Tazewell  and  Bluefield and  other communities  in
             Tazewell  County, Virginia  and  in Mercer  County, West  Virginia.
             BTC's service area has largely depended on the coal mining industry
             and farming for its economic base.  In recent years, coal companies
             have  mechanized and reduced the  number of persons  engaged in the
             production of coal.  There are still a number of support industries
             for the coal mining business that continue to provide employment in
             the  area.     Additionally,  several  new   businesses  have  been
             established in the area  and Bluefield, West Virginia has  begun to
             emerge  as a regional medical center.   The ultimate collectibility
             of  the loan portfolios and the recovery of the carrying amounts of
             repossessed  property  are susceptible  to  changes  in the  market
             conditions of these areas.



                                      -24-<PAGE>


             At December 31, 1999  and 1998, approximately $130 million  and $94
             million, respectively,  of the loan portfolio  were concentrated in
             commercial real estate.  This represents approximately  44% and 39%
             of  the loan portfolio at December 31, 1999 and 1998, respectively.
             Included  in commercial real estate  at December 31,  1999 and 1998
             was  approximately $85  million and  $64 million,  respectively, in
             loans for college housing and professional office buildings.  Loans
             secured by  residential real estate were  approximately $74 million
             and $67 million at December 31, 1999 and 1998, respectively.   This
             represents  approximately  25% and  28%  of the  loan  portfolio at
             December  31,  1999  and   1998,  respectively.  Loans  secured  by
             automobiles  were  approximately $33  million  and  $32 million  at
             December  31,  1999  and   1998,  respectively.    This  represents
             approximately  11% of the loan  portfolio at December  31, 1999 and
             13% at December 31, 1998.

             The  Company has  established  operating policies  relating to  the
             credit process  and  collateral in  loan  originations.   Loans  to
             purchase real and personal property are generally collateralized by
             the related  property and  with loan  amounts established  based on
             certain percentage  limitations of  the property's total  stated or
             appraised  value.   Credit  approval  is  primarily a  function  of
             collateral  and  the  evaluation  of the  creditworthiness  of  the
             individual  borrower  or  project  based  on   available  financial
             information.


































                                      -25-<PAGE>

<TABLE>
 IV.    Summary of Loan Loss Experience
        -------------------------------

   A.   Analysis of the Allowance for Loan Losses

        The following tabulation  shows average  loan balances at  the end  of each period;  changes in  the
        allowance for loan losses arising from loans charged off and recoveries  on loans previously charged
        off by loan category; and additions to the allowance which have been charged to operating expense:
<CAPTION>
                                                                            December 31,
            ($ in thousands)                               1999      1998       1997      1996       1995
                                                           ----      ----       ----      ----       ----
            <S>                                         <C>         <C>       <C>        <C>       <C>
            Average loans outstanding                   $266,431    225,613   204,540    177,419   160,643
                                                        ========    =======   =======    =======   =======
            Balance at beginning of year                   2,679      2,438     2,575      2,625     2,551

            Charge-offs:
             Commercial and industrial loans                 185         32       257         95        23
             Real estate mortgage loans                       33         80       ---         11         9
             Real estate construction loans                  ---        ---       ---        ---       ---
             Loans to individuals                            760        526       422        400       259
                                                        --------    -------   -------    -------   -------
                  Total loans charged off                    978        638       679        506       291
                                                        --------    -------   -------    -------   -------
            Recoveries:
             Commercial and industrial loans                  51        ---        70          4        10
             Real estate mortgage loans                        1          2       ---         64        16
             Real estate construction loans                  ---        190       ---        ---       ---
             Loans to individuals                             78         63        37         57        57
                                                        --------    -------   -------    -------   -------
                  Total recoveries                           130        255       107        125        83
                                                        --------    -------   -------    -------   -------
            Net loans charged off                            848        383       572        381       208
            Additions charged to operations                1,400        624       435        331       282
                                                        --------    -------   -------    -------   -------
            Balance at end of year                      $  3,231      2,679     2,438      2,575     2,625
                                                        ========    =======   =======    =======   =======
            Net charge-offs to average net loans
             outstanding                                    0.32%      0.17%     0.28%      0.21%     0.13%

         Factors influencing  management's judgment in  determining the amount  of the  loan loss provision
         charged  to  operating expense  include  the  quality  of  the  loan  portfolio as  determined  by
         management,  the historical  loan loss  experience, diversification  as to  type of  loans in  the
         portfolio,  the amount of  secured as  compared with unsecured  loans and the  value of underlying
         collateral, banking industry standards and averages, and general economic conditions.
</TABLE>
                                                    -26-<PAGE>

<TABLE>
   B.   Allocation of the Allowance for Loan Losses

        The allowance for loan losses has been allocated according to the amount deemed necessary to provide
        for anticipated losses within the categories of loans for the years indicated as follows:
<CAPTION>
                                                       December 31,

                       1999                1998                 1997                  1996                 1995
                       ----                ----                 ----                  ----                 ----
                          Percent               Percent             Percent              Percent               Percent
                             of                   of                   of                   of                   of
                          Loans in             Loans in             Loans in             Loans in             Loans in
                            Each                 Each                 Each                 Each                 Each
                          Category             Category             Category             Category             Category
  ($ in        Allowance  to Total  Allowance  to Total  Allowance  to Total  Allowance  to Total  Allowance  to Total
   thousands)    Amount    Loans     Amount      Loans     Amount    Loans      Amount    Loans      Amount     Loans
               --------- ---------  ---------  --------  ---------  --------  ---------  --------  ---------  --------
 <S>            <C>      <C>        <C>        <C>       <C>        <C>       <C>        <C>       <C>        <C>
 Commercial
  and
  industrial
  loans         $  555     50.35%        222     45.75%      213       46.18%    403      44.04%       411      35.46%

 Real estate
  mortgage
  loans            119     19.83%         73     20.17%       67       19.58%    305      22.10%       363      27.12%

 Real estate
  construction
  loans            ---      4.94%        ---      5.31%      ---        3.88%     51       3.17%       100       3.57%

 Loans to
  individuals      978     24.88%        497     28.77%      416       30.36%    504      30.69%       271      33.85%

 Unallocated     1,579                 1,887               1,742               1,312                 1,480
                ------                ------              ------              ------                ------

                $3,231    100.00%      2,679    100.00%    2,438      100.00%  2,575     100.00%     2,625     100.00%
                ======    ======      ======    ======    ======      ======  ======     ======     ======     ======



</TABLE>



                                                    -27-<PAGE>


Loan Loss Allowance
-------------------

   The adequacy  of  the allowance  for  loan losses  is  based on  management's
judgement  and   analysis  of  current  and  historical  loss  experience,  risk
characteristics of the loan portfolio, concentrations of credit as well as other
internal and external factors such as general economic conditions.

   The evaluation  of the allowance for loan losses is performed by the internal
credit review department.

   Guidance for  the  evaluations performed  are established  by the  regulatory
authorities who periodically review the results for compliance.

   As a  part of this process,  loans are grouped into  principally two classes.
The first involves loans  that are individually reviewed and  direct allocations
made based on collateral  values, financial statements of the borrower and other
documentation.   In addition,  an estimate is  made for losses  inherent to this
portfolio.

   The second class includes pools of loans.  Allocations from this analysis are
derived and based on historical loss averages.

   The unallocated portion  of the  allowance for  loan losses  is the  residual
amount after allocation to the above classes.

   As previously stated, adequacy of the allowance for loan losses is subject to
periodic  regulatory review.   These  reviews cover  the allocation  process and
overall adequacy  of the allowance for  loan losses.  Regulatory  authorities at
their  discretion may set  minimum levels for  the allowance  and/or require the
charge-off of loans as a result of their examination.   This independent grading
process by  regulators serves  as a  standard to gage  the effectiveness  of the
internal credit review.


























                                      -28-<PAGE>


V. Deposits
   --------

   A.   Average Amounts of Deposits and Average Rates Paid

        Average amounts and average  rates paid on deposit categories  in excess
        of 10% of average total deposits are presented below:

                                                 December 31,

                                     1999             1998            1997
                                     ----             ----            ----
                                        Average         Average          Average
                                Average  Rates  Average  Rates  Average   Rates
            ($ in thousands)    Amounts   Paid  Amounts   Paid  Amounts   Paid
                                ------- ------- ------- ------- -------  -------

           Noninterest-bearing
            demand deposits    $ 55,700    ---    49,552   ---    44,193   ---

           Interest-bearing
            demand deposits      85,284   2.50%   77,842  2.83%   75,519  2.86%

           Savings deposits      46,792   2.59%   47,475  3.18%   47,781  3.29%

           Time deposits        203,807   5.22%  185,101  5.51%  171,946  5.44%
                               --------          -------         -------

             Average total
              deposits         $391,583   4.16%  359,970  4.48%  339,439  4.43%
                               ========          =======         =======


   B.   Time Deposits of $100,000 or More

        The  following table sets forth  time certificates of  deposit and other
        time deposits of $100,000 or more:


                                                December 31, 1999

                                           Over 3     Over 6
                                    3      Months     Months
                                  Months  Through 6  Through 12  Over 12
            ($ in thousands)     or Less   Months      Months    Months   Total
                                 -------  ---------  ----------  -------  -----
            Certificates of
             deposit             $46,801      34,200    71,164   67,055  219,220

            Other time deposits   35,590      27,526    54,381   55,551  173,048
                                 -------      ------    ------   ------  -------
              Total time
               deposits of
               $100,000 or more  $11,211       6,674    16,783   11,504   46,172
                                 =======      ======    ======   ======  =======



                                      -29-<PAGE>


 VI.    Return on Equity and Assets
        ---------------------------

        The ratio of  net income to average stockholders'  equity and to average
        total assets, and certain other ratios are presented below:

                                                     December 31,
                                               1999      1998     1997
                                               ----      ----     ----
        Return on average assets                1.56%     1.61%   1.66%
        Return on average equity(1)            12.61%    11.66%  12.21%
        Dividend payout ratio                  39.70%    41.29%  39.31%
        Average equity to average assets(1)    12.37%    13.84%  13.57%

        (1)  Includes amount related to common  stock subject to ESOP put option
             excluded from  stockholders'  equity on  the  Consolidated  Balance
             Sheets for 1998 and 1997.

Item 2.  Properties
-------------------

   Bankshares' headquarters,  including the Main  Office of NBB, are  located at
100 South  Main Street, Blacksburg,  Virginia.  In  addition to the  Bank's Main
Office location,  NBB owns nine branch offices: three in the Town of Blacksburg;
one in the  Town of Christiansburg; one  in Montgomery County; and  three in the
County of Giles and  one in the City of Galax.  An  additional tract of land has
been acquired for the construction of a tenth branch.

   Bank of  Tazewell County  owns the  land  and building  of six  of its  seven
offices.   The bank  leases the land and  building for its  seventh office.  The
Main  Office is located  at Main Street,  Tazewell, Virginia.   Three additional
branches are located in Tazewell,  one in North Tazewell and two are  located in
Bluefield,  Virginia.   Management  believes that  its  existing facilities  are
adequate to meet present needs and any anticipated growth.

   NBB owns all its computer and  data processing hardware and is a  licensee of
the software it utilizes.  BTC utilizes this same system for data processing.

Item 3.  Legal Proceedings
--------------------------

   Bankshares, NBB nor BTC  are not currently  involved in any material  pending
legal proceedings, other  than routine litigation incidental to  NBB's and BTC's
banking business.

Item 4.  Submission of Matters to a Vote of Security Holders
------------------------------------------------------------

   None










                                      -30-<PAGE>


                      Executive Officers of the Registrant
                      ------------------------------------

Pursuant  to  General  Instruction G(3)  of  Form 10-K,  the  following  list is
included  as an  unnumbered  item in  Part I  of this  report  in lieu  of being
included  in the Proxy  Statement for the  Annual Meeting of  Stockholders to be
held on April 11, 2000.

The  following  is a  list  of  names and  ages  of  all  executive officers  of
Bankshares;  their terms of office as officers; the positions and offices within
Bankshares  held  by each  officer; and  each  person's principal  occupation or
employment during the past five years.

                                                              Year Elected an
                Name         Age  Offices and Positions Held  Officer/Director
                ----         ---  --------------------------  ----------------
         James G. Rakes      55   Chairman, President and           1986
                                  Chief Executive Officer,
                                  National Bankshares, Inc.;
                                  and President and Chief
                                  Executive Officer of The
                                  National Bank of Blacksburg
                                  since 1983.

         J. Robert Buchanan  48   Treasurer, National               1998
                                  Bankshares, Inc.; Senior
                                  Vice President/Chief
                                  Financial Officer of The
                                  National Bank of Blacksburg,
                                  since January 1, 1998; prior
                                  thereto Senior Vice
                                  President, Treasurer and
                                  Chief Financial Officer,
                                  Premier Bankshares Corporate
                                  since 1991.

         Marilyn B. Buhyoff  51   Secretary & Counsel,              1989
                                  National Bankshares, Inc.;
                                  and Senior Vice President/
                                  Administration since 1992,
                                  of The National Bank of
                                  Blacksburg.

         F. Brad Denardo     47   Corporate Officer, National       1989
                                  Bankshares, Inc.; and
                                  Executive Vice President/
                                  Loans since 1989 of The
                                  National Bank of Blacksburg.

Except for J. Robert Buchanan, each  of the executive officers listed above have
served Bankshares  and/or  its  subsidiaries  in  the  aforementioned  executive
capacity for the past five years.









                                      -31-<PAGE>


                                     Part II
                                     -------


Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters
------------------------------------------------------------------------------

   Effective December  1, 1999, National  Bankshares, Inc.'s common  stock began
trading on  the  Nasdaq SmallCap  Market  under the  symbol  "NKSH".   Prior  to
December 1,  1999, National  Bankshares, Inc.'s  common  stock was  traded on  a
limited basis in the over-the-counter market  and was not listed on any exchange
or quoted  on Nasdaq.   As of March 15,  2000, there were  1,103 stockholders of
Bankshares common  stock.  The  following is a  summary of the market  price per
share and  cash dividend per share  of the common stock  of National Bankshares,
Inc. for 1999  and 1998.  Prices  prior to December  1, 1999 do not  necessarily
reflect  the prices which would have prevailed  had there been an active trading
market,  nor do they reflect unreported trades,  which may have been at lower or
higher prices.

   Information  concerning Market  Price and  Dividend Data  is set  forth under
"Common Stock Information and  Dividends" on page 11 of  Bankshares' 1999 Annual
Report to Stockholders and is incorporated herein by reference.


Item 6.  Selected Financial Data
--------------------------------

   The  table entitled  "Selected  Consolidated Financial  Data"  on page  4  of
Bankshares'  1999  Annual  Report  to Stockholders  is  incorporated  herein  by
reference.


Item 7.  Management's Discussion and Analysis of Financial Condition and Results
of Operations
--------------------------------------------------------------------------------

   The  information contained  under "Management's  Discussion and  Analysis" on
pages  5  through  11  of Bankshares'  1999  Annual  Report  to Stockholders  is
incorporated herein by reference.


Item 7A. Quantitative and Qualitative Disclosures About Market Risk
-------------------------------------------------------------------

   See  "Analysis of  Interest Rate  Sensitivity" set  forth below.   Additional
information is set forth under the section "Interest Rate Sensitivity" on page 5
and the section "Derivatives and Market  Risk Exposure" on page 9 of Bankshares'
1999 Annual Report to Stockholders and is incorporated herein by reference.











                                      -32-<PAGE>


Analysis of Interest Rate Sensitivity

The following  discussion of interest rate  sensitivity contains forward-looking
statements  within the meaning of Section 27A  of the Securities Act of 1933 and
Section  21E of  the Securities  Exchange  Act of  1934.   The Company's  actual
results  could differ  materially from  those set  forth in  the forward-looking
statements.

The table  below  sets forth,  as  of December  31,  1999, the  distribution  of
repricing opportunities  of the Company's interest-earning  assets and interest-
bearing  liabilities, the  interest rate  sensitivity gap  (i.e., interest  rate
sensitive assets less interest rate  sensitive liabilities), and the  cumulative
interest  rate sensitivity  gap ratio.   The table  sets forth  the time periods
during which  interest-earning  assets  and  interest-bearing  liabilities  will
mature or may reprice in accordance with their contracted terms.

Certain shortcomings are  inherent in  the method of  analysis presented in  the
following table.  For example, although  certain assets and liabilities may have
similar maturities or periods of repricing, they may  react in different degrees
and  at  different times  to  changes  in market  interest  rates.   Also,  loan
prepayments and early  withdrawals of  certificates of deposit  could cause  the
interest sensitivities to vary from those which appear in the table.

An  interest  rate sensitivity  gap is  considered positive  when the  amount of
interest rate sensitive  assets exceeds  the amount of  interest rate  sensitive
liabilities.   A gap  is considered  negative when the  amount of  interest rate
sensitive  liabilities exceeds  the amount  of  interest rate  sensitive assets.
During a period of rising interest rates, a negative gap would generally tend to
affect adversely net  interest income while a positive gap  would generally tend
to result  in an increase in net interest income.   During a period of declining
interest  rates, a negative gap would generally  tend to result in increased net
interest income, while a  positive gap would generally tend  to affect adversely
net interest income.  The Company's future earnings may be adversely affected by
a sharp upturn  in interest rates  as the Company  is liability sensitive for  a
period extending beyond  five years.   In a  falling rate environment,  earnings
might benefit to a certain  degree from this position, because assets  at higher
rate levels  would reprice  downward at a  slower rate  than interest  sensitive
liabilities.

In prior  years, the Company  has used  its securities available  for sale  as a
primary means  to counter movements  in interest rates.   At December  31, 1999,
this portfolio contained  a substantial  amount of longer  term securities  with
call features.  Due to overall increase in interest rate levels these securities
have not been called as originally anticipated.  The rising interest rate levels
also resulted in a substantial increase in net unrealized losses making the sale
of these securities impractical.  At present and for an  indeterminate amount of
time in  the  future, the  Company will    not be  able  to use  the  securities
available for sale portfolio to respond to interest rate movements to the extent
possible  in  recent years.    This risk  can  be mitigated,  however,  by funds
management,  specifically  through  use of  credit  instruments  offered  by the
Federal  Home Loan  Bank.   Accordingly, the  Company's vulnerability  to upward
movements of interest rates has increased.







                                      -33-<PAGE>
<TABLE>
An interest-sensitivity table  showing all major interest  sensitive asset and liability categories  for the
time intervals indicated and cumulative "gaps" for each interval is set forth on the following table.

<CAPTION>
                 Interest Rate                                     December 31, 1999
              Sensitivity Table (1)              Interest-sensitive (days)
                                                                                1-5       >5
    ($ in thousands)                             1-90      91-180   181-365    Years     Years    Total
                                                 ----      ------   -------    -----     -----    -----
   <S>                                         <C>        <C>       <C>       <C>       <C>      <C>
   Interest-earning assets:
    Commercial and industrial loans            $  31,713     6,345     7,416   64,641    39,206  149,321
    Real estate mortgage loans                     8,953     1,030     2,546   29,562    16,705   58,796
    Real estate construction loans                11,484       655     2,530      ---       ---   14,669
    Loans to individuals                          11,556     5,251     8,689   37,144     9,216   71,856
                                               ---------  --------  --------  -------   -------  -------
      Total loans, net of unearned income (2)  $  63,706    13,281    21,181  131,347    65,127  294,642
                                               ---------  --------  --------  -------   -------  -------
    Federal funds sold                             2,800       ---       ---      ---       ---    2,800
    Interest bearing deposits                      9,219       ---       ---      ---       ---    9,219
    Securities available for sale (3)              2,407       407     1,318   28,263    81,450  113,845
    Securities held to maturity (3)                1,818       710     1,399   16,375     3,345   23,647
    Mortgage loans held for sale                     229       ---       ---      ---       ---      229
                                               ---------  --------  --------  -------   -------  -------
      Total interest-earning assets            $  80,179    14,398    23,898  175,985   149,922  444,382
                                               =========  ========  ========  =======   =======  =======
   Interest-bearing liabilities:
    Interest-bearing demand deposits           $  88,385       ---       ---      ---       ---   88,385
    Savings deposits                              44,834       ---       ---      ---       ---   44,834
    Time deposits                                 46,801    34,200    71,164   67,055       ---  219,220
    Other borrowings                              10,460       ---       ---      ---       ---   10,460
                                               ---------  --------  --------  -------   -------  -------
      Total interest-bearing liabilities       $ 190,480    34,200    71,164   67,055       ---  362,899
                                               =========  ========  ========  =======   =======  =======
   Cumulative ratio of interest-
    sensitive assets to interest-
    sensitive liabilities                            .42       .42       .40      .81      1.22     1.22
   Cumulative interest-sensitivity gap         $(110,301) (130,103) (177,369) (68,439)   81,483   81,483
                                               =========  ========  ========  =======   =======  =======

(1)     The  Company is  sensitive to  interest rate  changes, as  liabilities generally  reprice or
        mature   before  interest-earning  assets.  The  above  gap  table  reflects  the  Company's
        rate-sensitive  position at  December 31,  1999, and  is not  necessarily reflective  of its
        position throughout  the year.  The  carrying amounts of interest-rate  sensitive assets and
        liabilities are presented in the periods in which they reprice to market rates or mature and
        are summed to show the interest-rate sensitivity gap.
(2)     Excludes nonaccrual loans.
(3)     Call features  on certain securities, if exercised,  could have the effect  of materially shortening
        the average life of the investment portfolio.  The exercise of a call feature is  dependent upon the
        rate environment.  The call decision is at the issuers discretion and ultimate benefit.

</TABLE>
                                                    -34-<PAGE>


   The Company also  uses simulation analysis to forecast its  balance sheet and
monitor interest rate sensitivity.  One test used by NBI is shock analysis which
measures the effect of a hypothetical, immediate and parallel  shift in interest
rates.  The following table  shows the results of a rate shock of  100, 200, and
300 basis points  and the effects on net income and return on average assets and
return on average equity at December 31, 1999.

          ($ in thousands, except for percent data)

             Rate       Net          Return on           Return on
            Shift      Income     Average Equity      Average Assets
            -----      ------     --------------      --------------

              300     $ 5,773         10.40%               1.24%

              200       6,614         11.83%               1.42%

              100       7,449         13.23%               1.60%

           (-)100       9,103         15.94%               1.95%

           (-)200       9,921         17.26%               2.12%

           (-)300      10,331         17.91%               2.21%


   Simulation analysis allows the Company to test asset and liability management
strategies under  rising and falling rate  conditions.  As a  part of simulation
process, certain  estimates and assumptions must  be made dealing with  but, not
limited to, asset growth, the  mix of assets and liabilities, rate  environment,
local and national economic conditions.  Asset growth and the mix  of assets can
to  a  degree be  influenced  by  management.   Other  areas  such  as the  rate
environment and economic factors cannot be  controlled.  For this reason  actual
results may vary materially from any particular forecast or shock analysis.

   This shortcoming is offset to a  degree by the periodic re-forecasting of the
balance sheet to reflect current trends and economic conditions.  Shock analysis
must  also be  updated  periodically  as  a  part of  the  asset  and  liability
management process.























                                      -35-<PAGE>


Item 8.  Financial Statements and Supplementary Data
----------------------------------------------------

   The  following consolidated  financial statements of  the Registrant  and the
Independent  Auditors' Report  set forth on  pages 12 through  35 of Bankshares'
1999 Annual Report to Stockholders are incorporated herein by reference:

   1.   Independent Auditors' Report

   2.   Consolidated Balance Sheets - December 31, 1999 and 1998

   3.   Consolidated Statements of Income and Comprehensive Income - Years ended
        December 31, 1999, 1998 and 1997

   4.   Consolidated Statements of Changes in Stockholders' Equity - Years ended
        December 31, 1999, 1998 and 1997

   5.   Consolidated Statements of Cash  Flows - Years ended December  31, 1999,
        1998 and 1997

   6.   Notes to Consolidated Financial Statements - December 31, 1999, 1998 and
        1997

Item  9.   Changes  In  and  Disagreements With  Accountants  on  Accounting and
Financial Disclosure
--------------------------------------------------------------------------------

   None.

                                    Part III
                                    --------

Item 10.  Directors and Executive Officers of the Registrant
------------------------------------------------------------

   Executive Officers of Bankshares as  of December 31, 1999 are listed  on page
32 herein.

   Information with  respect to the directors of Bankshares is set out under the
caption  "Election of  Directors"  on pages  2 through  4  of Bankshares'  Proxy
Statement  dated March  15, 2000,  which information  is incorporated  herein by
reference.

Item 11.  Executive Compensation
--------------------------------

   The information set forth under "Executive Compensation" on pages 5 through 6
of Bankshares' Proxy Statement  dated March 15,  2000 is incorporated herein  by
reference.

Item 12.  Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------

   The  information set forth under  "Voting Securities and  Stock Ownership" on
page 1  and under  "Stock Ownership  of Certain  Beneficial  Owners" and  "Stock
Ownership of Directors  and Executive Officers" on pages 1  and 2 of Bankshares'
Proxy Statement dated March 15, 2000 is incorporated herein by reference.


                                      -36-<PAGE>


Item 13.  Certain Relationships and Related Transactions
--------------------------------------------------------

   The  information  contained under  "Certain  Transactions  With Officers  and
Directors" on  page 11 of  Bankshares' Proxy Statement  dated March 15,  2000 is
incorporated herein by reference.


                                     Part IV
                                     -------

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K
-------------------------------------------------------------------------

 (a)    The following documents are filed as part of this report:

                                                           1999 Annual Report
                                                        To Stockholders Page(s)*
                                                        ------------------------


        1.   Financial Statements:
             --------------------

             Independent Auditors' Report                          12

             Consolidated Balance Sheets -
               December 31, 1999 and 1998                          13

             Consolidated Statements of
               Income and Comprehensive
               Income - Years ended December
               31, 1999, 1998 and 1997                             14

             Consolidated Statements of Changes
               in Stockholders' Equity - Years
               ended December 31, 1999, 1998 and
               1997                                                15

             Consolidated Statements of Cash
               Flows - Years ended December 31,
               1999, 1998 and 1997                                 16

             Notes to Consolidated
               Financial Statements - December
               31, 1999, 1998 and 1997                            17-35

        2.   Financial Statement Schedules:
             -----------------------------

             None





*  Incorporated by reference from the indicated pages  of the 1999 Annual Report
   to Stockholders.

                                      -37-<PAGE>


        3.   Exhibits:
             --------
                                                        Page No. in
        Exhibit No.           Description            Sequential System
        -----------           -----------            -----------------
            3(i)    Articles of Incorporation, as  (incorporated
                    amended, of National           herein by
                    Bankshares, Inc.               reference to
                                                   Exhibit 3(a) of
                                                   the Annual Report on
                                                   Form 10K for
                                                   fiscal year ended
                                                   December 31, 1993)
            4(i)    Specimen copy of certificate   (incorporated
                    for National Bankshares, Inc.  herein by
                    common stock, $2.50 par value  reference to
                                                   Exhibit 4(a) of
                                                   the Annual Report on
                                                   Form 10K for
                                                   fiscal year ended
                                                   December 31, 1993)
            4(i)    Article Four of the Articles   (incorporated
                    of Incorporation of National   herein by
                    Bankshares, Inc. included in   reference to
                    Exhibit No. 3(a))              Exhibit 4(b) of
                                                   the Annual Report on
                                                   Form 10K for
                                                   fiscal year ended
                                                   December 31, 1993)
         10(ii)(B)  Computer software license      (incorporated
                    agreement dated June 18, 1990, herein by
                    by and between Information     reference to
                    Technology, Inc. and The       Exhibit 10(e) of
                    National Bank of Blacksburg    the Annual Report on
                                                   Form 10K for
                                                   fiscal year ended
                                                   December 31, 1992)
        *10(iii)(A) Employment Agreement dated     (incorporated
                    January 1, 1992, by and        herein by
                    between National Bankshares,   reference to
                    Inc. and James G. Rakes        Exhibit 10(a) of
                                                   the Annual Report on
                                                   Form 10K for
                                                   fiscal year ended
                                                   December 31, 1992)
        *10(iii)(A) Capital Accumulation Plan      (incorporated
                    (included in Exhibit No.       herein by
                    10(a))                         reference to
                                                   Exhibit 10(b) of
                                                   the Annual Report on
                                                   Form 10K for
                                                   fiscal year ended
                                                   December 31, 1992)






                                      -38-<PAGE>


                                                        Page No. in
        Exhibit No.           Description            Sequential System
        -----------           -----------            -----------------
        *10(iii)(A) Employee Lease Agreement dated (incorporated
                    May 7, 1992, by and between    herein by
                    National Bankshares, Inc. and  reference to
                    The National Bank of           Exhibit 10(c) of
                    Blacksburg                     the Annual Report on
                                                   Form 10K for
                                                   fiscal year ended
                                                   December 31, 1992)
        *10(iii)(A) National Bankshares, Inc.      (incorporated  herein
                    1999 Stock Option Plan         by    reference    to
                                                   Exhibit  4.3  of  the
                                                   Form  S-8,  filed  as
                                                   Registration      No.
                                                   333-79979  with   the
                                                   Commission  on   June
                                                   4, 1999)
           13(i)    1999 Annual Report to
                    Stockholders (such Report,
                    except to the extent
                    incorporated herein by
                    reference, is being furnished
                    for the information of the
                    Commission only and is not
                    deemed to be filed as part of
                    this Report on Form 10-K)
           21(i)    Subsidiaries of National
                    Bankshares, Inc.
             23     Consent of KPMG LLP to
                    incorporation by reference of
                    independent auditors' report
                    incorporated by reference in
                    this Form 10-K, into
                    registrant's registration
                    statement on Form S-8.
             27     Financial Data Schedule

*  Indicates a management  contract or  compensatory plan required  to be  filed
   herein.

 (b)    Reports on Form 8-K filed during the last quarter of  the period covered
        by this report:
        ------------------------------------------------------------------------

        None.

 (c)    Exhibits required by Item 601 of Regulation S-K:
        -----------------------------------------------

        See Item 14(a)3 above.

 (d)    Financial Statement Schedules required by Regulation S-X:
        --------------------------------------------------------

        See Item 14(a)2 above.


                                      -39-<PAGE>

                                   Signatures
                                   ----------

   Pursuant  to the  requirements  of  Section 13  or  15(d)  of the  Securities
Exchange Act of  1934, National Bankshares, Inc. has duly  caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

                               National Bankshares, Inc.

                         BY:   /s/James G. Rakes
                               -------------------------------------
                               James G. Rakes, Chairman,
                               President and Chief Executive Officer

                         DATE: March 29, 2000
                               -------------------------------------

                         BY:   /s/J. Robert Buchanan
                               -------------------------------------
                               J. Robert Buchanan
                               Treasurer (Principal Financial Officer)

                         DATE: March 29, 2000
                               -------------------------------------

 Pursuant  to the  requirements of  the Securities  Exchange Act  of 1934,  this
report has been signed by the following  persons on behalf of the Registrant and
in the capacities and on the date indicated.

       Name                      Date           Title
       ----                      ----           -----
                                                Director and Vice
       ------------------------- -------------- Chairman of the Board
       C. L. Boatwright
       /s/L. A. Bowman           March 29, 2000 Director
       ------------------------- --------------
       L. A. Bowman
       /s/A. A. Crouse           March 29, 2000 Director
       ------------------------- --------------
       A. A. Crouse
       /s/J. A. Deskins, Sr.     March 29, 2000 Director
       ------------------------- --------------
       J. A. Deskins, Sr.
       /s/P. A. Duncan           March 29, 2000 Director
       ------------------------- --------------
       P. A. Duncan
       /s/C. L. Forrester        March 29, 2000 Director
       ------------------------- --------------
       C. L. Forrester
       /s/W. T. Peery            March 29, 2000 Director
       ------------------------- --------------
       W. T. Peery
       /s/J. G. Rakes            March 29, 2000 Chairman of the Board
       ------------------------- -------------- President and Chief
       J. G. Rakes                              Executive Officer -
                                                National Bankshares, Inc.
       /s/J. R. Stewart          March 29, 2000 Director
       ------------------------- --------------
       J. R. Stewart


                                      -40-<PAGE>

                                Index to Exhibits
                                -----------------


                                                          Page No. in
        Exhibit No.            Description             Sequential System
        -----------            -----------             -----------------
           3(i)     Articles of Incorporation, as    (incorporated
                    amended, of National Bankshares, herein by
                    Inc.                             reference to
                                                     Exhibit 3(a) of
                                                     the Annual Report on
                                                     Form 10K for
                                                     fiscal year ended
                                                     December 31, 1993)
           4(i)     Specimen copy of certificate for (incorporated
                    National Bankshares, Inc. common herein by
                    stock, $2.50 par value           reference to
                                                     Exhibit 4(a) of
                                                     the Annual Report on
                                                     Form 10K for
                                                     fiscal year ended
                                                     December 31, 1993)

           4(i)     Article Fourth of the Articles   (incorporated
                    of Incorporation of National     herein by
                    Bankshares, Inc. included in     reference to
                    Exhibit No. 3(a))                Exhibit 4(b) of
                                                     the Annual Report on
                                                     Form 10K for
                                                     fiscal year ended
                                                     December 31, 1993)
         10(ii)(B)  Computer software license        (incorporated
                    agreement dated June 18, 1990,   herein by
                    by and between Information       reference to
                    Technology, Inc. and The         Exhibit 10(e) of
                    National Bank of Blacksburg      the Annual Report on
                                                     Form 10K for
                                                     fiscal year ended
                                                     December 31, 1992)

        *10(iii)(A) Employment Agreement dated       (incorporated
                    January 1, 1992, by and between  herein by
                    National Bankshares, Inc. and    reference to
                    James G. Rakes                   Exhibit 10(a) of
                                                     the Annual Report on
                                                     Form 10K for
                                                     fiscal year ended
                                                     December 31, 1992)
        *10(iii)(A) Capital Accumulation Plan        (incorporated
                    (included in Exhibit No. 10(a))  herein by
                                                     reference to
                                                     Exhibit 10(b) of
                                                     the Annual Report on
                                                     Form 10K for
                                                     fiscal year ended
                                                     December 31, 1992)



                                      -41-<PAGE>


                                                          Page No. in
        Exhibit No.            Description             Sequential System
        -----------            -----------             -----------------
        *10(iii)(A) Employee Lease Agreement dated   (incorporated
                    May 7, 1992, by and between      herein by
                    National Bankshares, Inc. and    reference to
                    The National Bank of Blacksburg  Exhibit 10(c) of
                                                     the Annual Report on
                                                     Form 10K for
                                                     fiscal year ended
                                                     December 31, 1992)
        *10(iii)(A) National Bankshares, Inc. 1999   (incorporated  herein
                    Stock Option Plan                by    reference    to
                                                     Exhibit  4.3  of  the
                                                     Form  S-8,  filed  as
                                                     Registration      No.
                                                     333-79979  with   the
                                                     Commission  on   June
                                                     4, 1999)

           13(i)    1999 Annual Report to
                    Stockholders (such Report,
                    except to the extent
                    incorporated herein by
                    reference, is being furnished
                    for the information of the
                    Commission only and is not
                    deemed to be filed as part of
                    this Report on Form 10-K)
           21(i)    Subsidiaries of National
                    Bankshares, Inc.

            23      Consent of KPMG LLP to
                    incorporation by reference of
                    independent auditors' report
                    incorporated by reference in
                    this Form 10-K, into
                    registrant's registration
                    statement on Form S-8.
            27      Financial Data Schedule

*    Indicates a management  contract or compensatory plan required  to be filed
     herein.
















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