NATIONAL BANKSHARES INC 10-K

Item 9A. Controls and Procedures   Disclosure Controls and Procedures The Company's management evaluated, with the participation of the Company's principal executive officer and principal financial officer, the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on that evaluation, the Company's principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures are effective as of December 31, 2021 to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified by the Company's management, including the Company's principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. There were no changes in the Company's internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the fourth quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Because of the inherent limitations in all control systems, the Company believes that no system of controls, no matter how well designed and operated, can provide absolute assurance that all control issues have been detected   Internal Control Over Financial Reporting   Management's Report on Internal Control Over Financial Reporting   To the Stockholders of National Bankshares, Inc.:   Management is responsible for the preparation and fair presentation of the consolidated financial statements included in this annual report. The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and reflect management's judgments and estimates concerning effects of events and transactions that are accounted for or disclosed. Management is also responsible for establishing and maintaining adequate internal control over financial reporting. The Company's internal control over financial reporting includes those policies and procedures that pertain to the Company's ability to record, process, summarize and report reliable financial data. Management recognizes that there are inherent limitations in the effectiveness of any internal control over financial reporting, including the possibility of human error and the circumvention or overriding of internal control. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to consolidated financial statement preparation. Further, because of changes in conditions, the effectiveness of internal control over financial reporting may vary over time. In order to ensure that the Company's internal control over financial reporting is effective, management regularly assesses such controls and did so most recently for its financial reporting as of December 31, 2021. This assessment was based on criteria for effective internal control over financial reporting described in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations (COSO, 2013) of the Treadway Commission. Based on this assessment, management believes the Company maintained effective internal control over financial reporting as of December 31, 2021. This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in its annual report. The Board of Directors, acting through its Audit Committee, is responsible for the oversight of the Company's accounting policies, financial reporting and internal control. The Audit Committee of the Board of Directors is comprised entirely of outside directors who are independent of management. The Audit Committee is responsible for the appointment and compensation of the independent registered public accounting firm and approves decisions regarding the appointment or removal of the Company’s internal auditors. It meets periodically with management, the independent registered public accounting firm and the internal auditors to ensure that they are carrying out their responsibilities. The Audit Committee is also responsible for performing an oversight role by reviewing and monitoring the financial, accounting and auditing procedures of the Company in addition to reviewing the Company's financial reports. The independent registered public accounting firm and the internal auditors have full and unlimited access to the Audit Committee, with or without management, to discuss the adequacy of internal control over financial reporting, and any other matter which they believe should be brought to the attention of the Audit Committee.   81 Table of Contents   Item 9B. Other Information   None.   Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections   None.   Part III   Item 10. Directors, Executive Officers and Corporate Governance   The information required by Item 10 with respect to the directors of the Company and the Company’s audit committee and the audit committee financial expert is incorporated herein by reference to the Company’s definitive Proxy Statement for the 2022 Annual Meeting of Stockholders to be held on May 10, 2022 (“Proxy Statement”) under the headings “Proposal 1 - Election of three Class 2 Directors,” “Directors Continuing in Office” and “Corporate Governance Matters”. Information about the Company’s executive officers required by this item is included in Part I, Item I of this Form 10-K under the heading “Executive Officers of the Company”. The information required by Item 10 with respect to applicable filing requirements under Section 16(a) of the Exchange Act is incorporated herein by reference to the information that appears under the heading “Stock Ownership of Directors and Executive Officers – Delinquent Section 16(a) Reports” in the Company’s Proxy Statement. The Company and each of its subsidiaries have adopted codes of ethics for directors, officers and employees, specifically including the Chief Executive Officer and Chief Financial Officer of Bankshares. These Codes of Ethics are available on the Company’s web site at www.nationalbankshares.com .   Item 11. Executive Compensation   The information required by Item 11 is incorporated herein by reference to the information that appears under the headings “Compensation Discussion and Analysis,” “Executive Compensation,” “Corporate Governance Matters – Board Compensation,” “Compensation Committee Interlocks and Insider Participation,” and “Compensation Committee Report” in the Company’s Proxy Statement.   Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters   The information required by Item 12 is incorporated herein by reference to the information that appears under the headings “Stock Ownership of Certain Beneficial Owners” and “Stock Ownership of Directors and Executive Officers” in the Company’s Proxy Statement. As of December 31, 2021, there were no equity awards outstanding, and the Company does not have any equity compensation plans in effect.   Item 13. Certain Relationships and Related Transactions, and Director Independence   The information required by Item 13 is incorporated herein by reference to the information that appears under the headings “Corporate Governance Matters,” “Directors Independence and Certain Transactions with Officers and Directors” and “Directors Continuing in Office” in the Company’s Proxy Statement.   Item 14. Principal Accountant Fees and Services   The information required by Item 14 is incorporated herein by reference to the information that appears under the heading “Principal Accounting Fees and Services” in the Company’s Proxy Statement.   82 Table of Contents   Part IV   Item 15. Exhibits and Financial Statement Schedules   (a) (1) Financial Statements The following consolidated financial statements of National Bankshares, Inc. are included in Item 8: Reports of Independent Registered Public Accounting Firm ( Yount, Hyde & Barbour, P.C. , Winchester, VA , U.S. PCAOB Auditor Firm I.D.: 613 ) Consolidated Balance Sheets – As of December 31, 2021 and 2020 Consolidated Statements of Income – Years ended December 31, 2021 and 2020 Consolidated Statements of Comprehensive Income – Years ended December 31, 2021 and 2020 Consolidated Statements of Changes in Stockholders’ Equity – Years ended December 31, 2021 and 2020 Consolidated Statements of Cash Flows – Years ended December 31, 2021 and 2020 Notes to Consolidated Financial Statements   (a) (2) Financial Statement Schedules Certain schedules to the consolidated financial statements have been omitted if they were not required by Article 9 of Regulation S-X or if, under the related instructions, they were inapplicable, or if the information is contained elsewhere in this Form 10-K.   (a) (3) Exhibits A list of the exhibits filed or incorporated in this Form 10-K by reference is as follows:   Exhibit No. Description     3(i) Amended and Restated Articles of Incorporation of National Bankshares, Inc.   (incorporated herein by reference to Exhibit 3.1 of the Form 8-K filed on March 16, 2006) 3(ii) Amended Bylaws of National Bankshares, Inc.   (incorporated herein by reference to Exhibit 3.2 of the Form 8-K filed on April 14, 2021) 4(i) Specimen copy of certificate for National Bankshares, Inc. common stock   (incorporated herein by reference to Exhibit 4(a) of the Annual Report on Form 10-K for fiscal year ended December 31, 1993) 4(ii) Description of National Bankshares, Inc.’s Securities   Filed herewith *10(i) Employee Lease Agreement dated August 14, 2002, between National Bankshares, Inc. and The National Bank of Blacksburg   (incorporated herein by reference to Exhibit 10 of Form 10-Q for the period ended September 30, 2002) *10(ii) Executive Employment Agreement dated March 11, 2015, between National Bankshares, Inc. and F. Brad Denardo   (incorporated herein by reference to Exhibit 10.2 of the Form 8-K filed on March 11, 2015) *10(iii) Salary Continuation Agreement dated February 8, 2006, between The National Bank of Blacksburg and F. Brad Denardo   (incorporated herein by reference to Exhibit 99 of the Form 8-K filed on February 8, 2006) *10(iv) First Amendment, dated December 19, 2007, to The National Bank of Blacksburg Salary Continuation Agreement for F. Brad Denardo   (incorporated herein by reference to Exhibit 10 of the Form 8-K filed on December 19, 2007) *10(v) Second Amendment, dated June 12, 2008, to The National Bank of Blacksburg Salary Continuation Agreement for F. Brad Denardo   (incorporated herein by reference to Exhibit 10 of the Form 8-K filed on June 12, 2008) *10(vi) Third Amendment, dated December 17, 2008, to The National Bank of Blacksburg Salary Continuation Agreement for F. Brad Denardo   (incorporated herein by reference to Exhibit 10(iii) of the Annual Report on Form 10-K for fiscal year ended December 31, 2008) *10(vii) Second Salary Continuation Agreement dated June 26, 2016 between The National Bank of Blacksburg and F. Brad Denardo   (incorporated herein by reference to Exhibit 10.1 of the Form 8-K filed on July 20, 2016) *10(viii) Salary Continuation Agreement dated February 8, 2006, between The National Bank of Blacksburg and David K. Skeens   (incorporated herein by reference to Exhibit 10.2 of the Form 8-K filed on January 25, 2012) *10(ix) First Amendment, dated December 19, 2007, to The National Bank of Blacksburg Salary Continuation Agreement for David K. Skeens   (incorporated herein by reference to Exhibit 10.2 of the Form 8-K filed on January 25, 2012) *10(x) Second Amendment, dated December 17, 2008, to The National Bank of Blacksburg Salary Continuation Agreement for David K. Skeens   (incorporated herein by reference to Exhibit 10.2 of the Form 8-K filed on January 25, 2012)   83 Table of Contents   *10(xi) Third Amendment, dated January 20, 2012, to The National Bank of Blacksburg Salary Continuation Agreement for David K. Skeens   (incorporated herein by reference to Exhibit 10.2 of the Form 8-K filed on January 25, 2012) *10(xii) Fourth Amendment, dated August 16, 2021, to National Bankshares, Inc. Salary Continuation Agreement for David K. Skeens   (incorporated herein by reference to Exhibit 10.1 of the Form 8-K filed on August 20, 2021) *10(xiii) Salary Continuation Agreement dated February 8, 2006 between The National Bankshares, Inc. and Lara E. Ramsey   (incorporated herein by reference to Exhibit 10.1 of the Form 8-K filed on March 6, 2017) *10(xiv) First Amendment, dated December 19, 2007, to National Bankshares, Inc. Salary Continuation Agreement for Lara E. Ramsey   (incorporated herein by reference to Exhibit 10.1 of the Form 8-K filed on March 6, 2017) *10(xv) Second Amendment, dated December 17, 2008, to National Bankshares, Inc. Salary Continuation Agreement for Lara E. Ramsey   (incorporated herein by reference to Exhibit 10.1 of the Form 8-K filed on March 6, 2017) *10(xvi) Third Amendment, dated June 22, 2016, to National Bankshares, Inc. Salary Continuation Agreement for Lara E. Ramsey   (incorporated herein by reference to Exhibit 10.1 of the Form 8-K filed on March 6, 2017) *10(xvii) Fourth Amendment, dated August 16, 2021, to National Bankshares, Inc. Salary Continuation Agreement for Lara E. Ramsey   (incorporated herein by reference to Exhibit 10.3 of the Form 8-K filed on August 20, 2021) *10(xviii) Salary Continuation Agreement dated May 24, 2013 between The National Bank of Blacksburg and Paul A. Mylum   (incorporated herein by reference to Exhibit 10.1 of the Form 8-K filed on March 8, 2018) *10(xix) First Amendment, dated August 16, 2021, to National Bankshares, Inc. Salary Continuation Agreement for Paul A. Mylum   (incorporated herein by reference to Exhibit 10.2 of the Form 8-K filed on August 20, 2021) +21 Subsidiaries of the Registrant   Filed herewith +31(i) Section 302 Certification of Chief Executive Officer   Filed herewith +31(ii) Section 302 Certification of Chief Financial Officer   Filed herewith +32(i) 18 U.S.C. Section 1350 Certification of Chief Executive Officer   Filed herewith +32(ii) 18 U.S.C. Section 1350 Certification of Chief Financial Officer   Filed herewith +101 The following materials from National Bankshares, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2021, formatted in iXBRL (Inline Extensible Business Reporting Language), furnished herewith: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Changes in Stockholders’ Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements.   Filed herewith 104 Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)   Filed herewith *Indicates a management contract or compensatory plan or arrangement. +Filed with this Annual Report on Form 10-K.   Item 16. Form 10-K Summary   Not applicable.   84 Table of Contents   Signatures   Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.     NATIONAL BANKSHARES, INC.               By: /s/ F. BRAD DENARDO       F. Brad Denardo Chairman, President and Chief Executive Officer (Principal Executive Officer)               Date: March 11, 2022     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.       Date   Title /s/ LAWRENCE J. BALL                      March 11, 2022   Director Lawrence J. Ball                   /s/ F. BRAD DENARDO   March 11, 2022   Chairman, President and CEO, National Bankshares, Inc. F. Brad Denardo       (Principal Executive Officer)         Director /s/ JOHN E. DOOLEY   March 11, 2022   Director John E. Dooley                   /s/ MICHAEL E. DYE   March 11, 2022   Director Michael E. Dye                   /s/ NORMAN V. FITZWATER, III   March 11, 2022   Director Norman V. Fitzwater, III                   /s/ CHARLES E. GREEN, III             March 11, 2022   Director Charles. E. Green, III                   /s/ MILDRED R. JOHNSON   March 11, 2022   Director Mildred R. Johnson                   /s/ MARY G. MILLER            March 11, 2022   Director Mary G. Miller                   /s/ WILLIAM A. PEERY                     March 11, 2022   Director William A. Peery                 (c ontinued )   85 Table of Contents   /s/ GLENN P. REYNOLDS   March 11, 2022   Director Glenn P. Reynolds                   /s/ DAVID K. SKEENS   March 11, 2022   Treasurer and CFO, National Bankshares, Inc. David K. Skeens       (Principal Financial Officer)         (Principal Accounting Officer) /s/ JAMES C. THOMPSON   March 11, 2022   Director James C. Thompson                     86