Note 1 - General	3 Months Ended
Mar. 31, 2018
Notes to Financial Statements
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]	Note 1 : General The consolidated financial statements of National Bankshares, Inc. (“NBI”) and its wholly-owned subsidiaries, The National Bank of Blacksburg (“NBB”) and National Bankshares Financial Services, Inc. (“NBFS”) (collectively, the “Company”), conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry. The accompanying interim period consolidated financial statements are unaudited; however, in the opinion of management, all adjustments consisting of normal recurring adjustments, which are necessary for a fair presentation of the consolidated financial statements, have been included. The results of operations for the three month period ended March 31, 2018 are not necessarily indicative of results of operations for the full year or any other interim period. The interim period consolidated financial statements and financial information included in this Form 10 -Q should be read in conjunction with the notes to consolidated financial statements included in the Company’s 2017 Form 10 -K. The Company posts all reports required to be filed under the Securities and Exchange Act of 1934 on its web site at www.nationalbankshares.com. Accounting Standards Adopted in 2018 ASU No. 2014 - 09, “Revenue from Contracts with Customers” In May 2014, the FASB issued ASU No. 2014 - 09, “Revenue from Contracts with Customers.” The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies generally will be required to use more judgment and make more estimates than under current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. Subsequent to the issuance of ASU 2014 - 09, the FASB issued targeted updates to clarify specific implementation issues including ASU No. 2016 - 08, “Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” ASU No. 2016 - 10, “Identifying Performance Obligations and Licensing,” ASU No. 2016 - 12, “Narrow-Scope Improvements and Practical Expedients,” and ASU No. 2016 - 20 “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.” For financial reporting purposes, the standard allows for either full retrospective adoption, meaning the standard is applied to all of the periods presented, or modified retrospective adoption, meaning the standard is applied only to the most current period presented in the financial statements with the cumulative effect of initially applying the standard recognized at the date of initial application. Since the guidance does not apply to revenue associated with financial instruments, including loans and securities that are accounted for under other GAAP, the new guidance did not have a material impact on revenue most closely associated with financial instruments, including interest income and expense. The Company completed its overall assessment of revenue streams and review of related contracts potentially affected by the ASU, including trust and asset management fees, deposit related fees, interchange fees, merchant income, bank-financed sales of other real estate owned and annuity and insurance commissions. Based on this assessment, the Company concluded that ASU 2014 - 09 did not materially change the method in which the Company currently recognizes revenue for these revenue streams. The Company also completed its evaluation of certain costs related to these revenue streams to determine whether such costs should be presented as expenses or contra-revenue (i.e., gross vs. net). Based on its evaluation, the Company determined that the classification of certain debit and credit card related costs should change (i.e., costs previously recorded as expense is now recorded as contra-revenue). The Company identified $654 previously presented as credit card processing expense at March 31, 2017 and reclassified it to net against credit card fee income. The Company adopted ASU 2014 - 09 and its related amendments on its required effective date of January 1, 2018 utilizing the full retrospective approach. There was no impact to net income. Consistent with the full retrospective approach, the Company adjusted prior period amounts for the debit and credit card costs reclassifications noted above. ASU No. 2016 - 01, “Recognition and Measurement of Financial Assets and Financial Liabilities” In January 2016, the FASB issued ASU No. 2016 - 01, “Recognition and Measurement of Financial Assets and Financial Liabilities.” This ASU addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments by making targeted improvements to GAAP. The provisions of the ASU that apply to the Company are as follows: ( 1 ) require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer; ( 2 ) simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value; ( 3 ) eliminate the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; ( 4 ) require use of the exit price notion when measuring the fair value of financial instruments for disclosure purposes; ( 5 ) require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; and ( 6 ) clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. The adoption of ASU No. 2016 - 01 on January 1, 2018 did not have a material impact on the Company’s Consolidated Financial Statements. In accordance with ( 4 ) above, the Company measured the fair value of its loan portfolio and time deposit portfolio as of March 31, 2018 using an exit price notion (see Note 14 Fair Value of Assets and Liabilities ). ASU No. 2017 - 07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” In March 2017, the FASB issued ASU No. 2017 - 07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” Under the new guidance, employers are required to present the service cost component of the net periodic benefit cost in the same income statement line item (e.g., Salaries and Employee Benefits) as other employee compensation costs arising from services rendered during the period. In addition, only the service cost component will be eligible for capitalization in assets. Employers will present the other components of net periodic benefit cost separately (e.g., Other Noninterest Expense) from the line item that includes the service cost. ASU No. 2017 - 07 is effective for interim and annual reporting periods beginning after December 15, 2017. Employers will apply the guidance on the presentation of the components of net periodic benefit cost in the income statement retrospectively. The guidance limiting the capitalization of net periodic benefit cost in assets to the service cost component will be applied prospectively. The Company adopted ASU No. 2017 - 07 on January 1, 2018 and utilized the ASU’s practical expedient allowing entities to estimate amounts for comparative periods using the information previously disclosed in their pension and other postretirement benefit plan footnote and re-classified non-servicing components of net periodic pension cost from compensation expense to other noninterest expense. ASU No. 2017 - 07 did not have a material impact on the Company’s Consolidated Financial Statements. Reclassifications In addition to reclassifications resulting from adoption of new accounting guidance, certain reclassifications have been made to prior period balances to conform to the current year presentations. Prior to June 2017, the Company reported certain IRA accounts in interest-bearing demand deposit accounts and in time deposits. During 2017, the Company re-classified the accounts as savings accounts. In order to provide comparability to prior periods, deposits have been adjusted to reflect the reclassification in each year reported.

Note

General

The consolidated financial statements of National Bankshares, Inc. (“NBI”) and its wholly-owned subsidiaries, The National Bank of Blacksburg (“NBB”) and National Bankshares Financial Services, Inc. (“NBFS”) (collectively, the “Company”), conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry. The accompanying interim period consolidated financial statements are unaudited; however, in the opinion of management, all adjustments consisting of normal recurring adjustments, which are necessary for a fair presentation of the consolidated financial statements, have been included. The results of operations for the

three

month period ended

March 31, 2018

are

not

necessarily indicative of results of operations for the full year or any other interim period. The interim period consolidated financial statements and financial information included in this Form

-Q should be read in conjunction with the notes to consolidated financial statements included in the Company’s

2017

Form

-K. The Company posts all reports required to be filed under the Securities and Exchange Act of

1934

on its web site at www.nationalbankshares.com.

Accounting Standards Adopted in

2018

ASU

No.

2014

09,

“Revenue from Contracts with Customers”

May 2014,

the FASB issued ASU

No.

2014

09,

“Revenue from Contracts with Customers.”

The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies generally will be required to use more judgment and make more estimates than under current guidance. These

may

include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. Subsequent to the issuance of ASU

2014

09,

the FASB issued targeted updates to clarify specific implementation issues including ASU

No.

2016

08,

“Principal versus Agent Considerations (Reporting Revenue Gross versus Net),”

ASU

No.

2016

10,

“Identifying Performance Obligations and Licensing,”

ASU

No.

2016

12,

“Narrow-Scope Improvements and Practical Expedients,”

and ASU

No.

2016

“Technical Corrections and Improvements to Topic

606,

Revenue from Contracts with Customers.”

For financial reporting purposes, the standard allows for either full retrospective adoption, meaning the standard is applied to all of the periods presented, or modified retrospective adoption, meaning the standard is applied only to the most current period presented in the financial statements with the cumulative effect of initially applying the standard recognized at the date of initial application.

Since the guidance does

not

apply to revenue associated with financial instruments, including loans and securities that are accounted for under other GAAP, the new guidance did

not

have a material impact on revenue most closely associated with financial instruments, including interest income and expense. The Company completed its overall assessment of revenue streams and review of related contracts potentially affected by the ASU, including trust and asset management fees, deposit related fees, interchange fees, merchant income, bank-financed sales of other real estate owned and annuity and insurance commissions. Based on this assessment, the Company concluded that ASU

2014

did

not

materially change the method in which the Company currently recognizes revenue for these revenue streams. The Company also completed its evaluation of certain costs related to these revenue streams to determine whether such costs should be presented as expenses or contra-revenue (i.e., gross vs. net). Based on its evaluation, the Company determined that the classification of certain debit and credit card related costs should change (i.e., costs previously recorded as expense is now recorded as contra-revenue). The Company identified

$654

previously presented as credit card processing expense at

March 31, 2017

and reclassified it to net against credit card fee income. The Company adopted ASU

2014

and its related amendments on its required effective date of

January 1, 2018

utilizing the full retrospective approach. There was

impact to net income. Consistent with the full retrospective approach, the Company adjusted prior period amounts for the debit and credit card costs reclassifications noted above.

ASU

No.

2016

01,

“Recognition and Measurement of Financial Assets and Financial Liabilities”

January 2016,

the FASB issued ASU

No.

2016

01,

“Recognition and Measurement of Financial Assets and Financial Liabilities.”

This ASU addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments by making targeted improvements to GAAP. The provisions of the ASU that apply to the Company are as follows: (

) require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity

may

choose to measure equity investments that do

not

have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer; (

) simplify the impairment

assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value; (

) eliminate the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (

) require use of the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (

) require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; and (

) clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. The adoption of ASU

No.

2016

January 1, 2018

did

not

have a material impact on the Company’s Consolidated Financial Statements. In accordance with (

) above, the Company measured the fair value of its loan portfolio and time deposit portfolio as of

March 31, 2018

using an exit price notion (see Note

Fair Value of Assets and Liabilities

ASU

No.

2017

07,

“Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”

March 2017,

the FASB issued ASU

No.

2017

07,

“Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.”

Under the new guidance, employers are required to present the service cost component of the net periodic benefit cost in the same income statement line item (e.g., Salaries and Employee Benefits) as other employee compensation costs arising from services rendered during the period. In addition, only the service cost component will be eligible for capitalization in assets. Employers will present the other components of net periodic benefit cost separately (e.g., Other Noninterest Expense) from the line item that includes the service cost. ASU

No.

2017

is effective for interim and annual reporting periods beginning after

December 15, 2017.

Employers will apply the guidance on the presentation of the components of net periodic benefit cost in the income statement retrospectively. The guidance limiting the capitalization of net periodic benefit cost in assets to the service cost component will be applied prospectively. The Company adopted ASU

No.

2017

January 1, 2018

and utilized the ASU’s practical expedient allowing entities to estimate amounts for comparative periods using the information previously disclosed in their pension and other postretirement benefit plan footnote and re-classified non-servicing components of net periodic pension cost from compensation expense to other noninterest expense. ASU

No.

2017

did

not

have a material impact on the Company’s Consolidated Financial Statements.

Reclassifications

In addition to reclassifications resulting from adoption of new accounting guidance, certain reclassifications have been made to prior period balances to conform to the current year presentations. Prior to

June 2017,

the Company reported certain IRA accounts in interest-bearing demand deposit accounts and in time deposits. During

2017,

the Company re-classified the accounts as savings accounts. In order to provide comparability to prior periods, deposits have been adjusted to reflect the reclassification in each year reported.