8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report: October 18, 2007 Commission File Number: 0-15204

National Bankshares, Inc.

(Exact name of Registrant as specified in its charter)

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

101 Hubbard Street

Blacksburg, VA 24060

(Address of principal executive offices)

(540) 951-6300

Registrant’s telephone number, including area code

Page 1 of 2 Pages

ITEM 2.02. RESULTS OF OPERATIONS, FINANCIAL STATEMENTS AND

EXHIBITS

On October 18, 2007, National Bankshares, Inc. issued a press release announcing its financial results for the third quarter ended September 30, 2007. A copy of the press release is attached as Exhibit 99.1.

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS

(a) Exhibits

99.1 National Bankshares, Inc. Press Release dated September 30, 2007.

SIGNATURE

Pursuant to the requirements of the Securities and 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.

Date: October 18, 2007

By:       /s/ JAMES G. RAKES

James G. Rakes

Chairman

President and CEO

Page 2 of 2 Pages

EX-99

FOR IMMEDIATE RELEASE

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

J. Robert Buchanan (276) 979-0341

NATIONAL BANKSHARES, INC.

REPORTS THIRD QUARTER EARNINGS

BLACKSBURG, VA, OCTOBER 18, 2007: National Bankshares, Inc. (NASDAQ Capital Market: NKSH) today reported that it posted third quarter net income of nearly $3.2 million. This translates to basic net income per share of $0.46. Year-to-date net income totaled $9.45 million, slightly higher than the $9.43 million reported at September 30, 2006. National Bankshares, Inc., a financial holding company with headquarters in Blacksburg, Virginia, had net loans of $509.20 million at the end of the third quarter, an increase of 3.42% over net loans in the same period last year. Total assets on September 30 were $861.89 million, up by 2% over 2006.

The Company’s Chairman, President & CEO James G. Rakes commented, “I am pleased to report that National Bankshares’ continued focus on the basics of community banking has allowed us to maintain a solid level of earnings. It is our lending philosophy that sound credit underwriting benefits both the customer and the bank, so we have never been involved in sub-prime lending. Loan quality remains good. And this quarter’s addition to the allowance for loan losses is the first significant contribution in well over a year.” Mr. Rakes continued, “As we deal with future challenges, we intend to continue to offer our customers a full range of financial products and services, with the personal attention they deserve.”

National Bankshares, Inc. is the parent company of National Bank, a 116 year-old community bank with 26 office locations in Southwest Virginia. The Company also has a non-bank financial services subsidiary in the same market which does business as National Bankshares Investment Services and National Bankshares Insurance Services. National Bankshares, Inc. stock trades on the NASDAQ Stock Market under the symbol “NKSH”. Additional information is available on the Company’s web site at www.nationalbankshares.com.

(unaudited tables follow)

National Bankshares, Inc. And Subsidiaries
(000’s), except ratios and percent data
Three months ending	September 30, 2007			September 30, 2006			Change
Selected Consolidated Data :
Interest income	$	12,693		$	12,042			5.41	%
Interest expense		5,442			4,691			16.01	%
Net interest income		7,251			7,351			-1.36	%
Provision for loan losses		119			16			643.75	%
Trust income		286			314			-8.92	%
Other noninterest income		1,839			1,918			-4.12	%
Salary and benefits		2,621			2,866			-8.55	%
Occupancy expense		419			474			-11.60	%
Amortization of intangibles		284			284			0.00	%
Other noninterest expense		1,776			1,772			0.23	%
Income taxes		-961			-970			-0.93	%
Net income	$	3,196		$	3,201			-0.16	%
Basic net income per share	$	0.46		$	0.46		$	0.00
Daily averages:
Gross loans	$	510,811		$	495,539			3.08	%
Loans,net		504,725			489,243			3.16	%
Total securities		281,921			267,339			5.45	%
Total deposits		751,896			732,009			2.72	%
Other borrowings		134			528			-74.62	%
Stockholders’ equity		100,527			95,443			5.33	%
Cash and due from		13,021			15,113			-13.84	%
Interest-earning assets		800,998			771,234			3.86	%
Interest-bearing liabilities		641,988			627,895			2.24	%
Intangible assets		15,286			16,424			-6.93	%
Total assets		859,736			832,157			3.31	%
Financial ratios: Note (1)
Return on average assets		1.47	%		1.53	%		-0.06
Return on average equity		12.61	%		13.31	%		-0.70
Net interest margin		3.98	%		4.04	%		-0.06
Average equity to average assets		11.69	%		11.47	%		0.22
Note (1) Ratio change measured in bp
Allowance for loan losses:
Beginning balance	$	5,000		$	5,340			-6.37	%
Provision for losses		119			16			643.75	%
Charge-offs		-94			-136			-30.88	%
Recoveries		18			32			-43.75	%
Ending balance	$	5,043		$	5,252			-3.98	%

Year to Date		September 30, 2007			September 30, 2006			Change
Selected Consolidated Data :
Interest income	$	37,918		$	35,474			6.89	%
Interest expense		16,228			13,303			21.99	%
Net interest income		21,690			22,171			-2.17	%
Provision for loan losses		129			40			222.50	%
Trust income		1,019			1,059			-3.78	%
Other noninterest income		5,544			5,444			1.84	%
Salary and benefits		8,240			8,706			-5.35	%
Occupancy expense		1,316			1,479			-11.02	%
Amortization of intangibles		853			853			0.00	%
Other noninterest expense		5,452			5,258			3.69	%
Income taxes		-2,811			-2,907			-3.30	%
Net income	$	9,452		$	9,431			0.22	%
Basic net income per share	$	1.36		$	1.35		$	0.01
Fully diluted net income per share	$	1.35		$	1.34		$	0.01
Dividends per share	$	0.37		$	0.36		$	0.01
Dividend payout ratio		27.34			26.77		$	0.57
Book value per share	$	14.77			14.00		$	0.77
Balance sheet at period-end:
Gross loans	$	515,350		$	498,626			3.35	%
Loans, net	$	509,203		$	492,353			3.42	%
Total securities		280,774			266,740			5.26	%
Cash and due From		12,058			14,598			-17.40	%
Total deposits		751,981			742,793			1.24	%
Other borrowings		66			76			-13.16	%
Stockholders’ equity		102,770			97,803			5.08	%
Intangible assets		15,123			16,260			-6.99	%
Total assets		861,889			844,997			2.00	%
Daily averages:
Gross loans	$	507,921		$	491,829			3.27	%
Loans,net		501,786			485,488			3.36	%
Total securities		284,675			270,524			5.23	%
Total deposits		757,185			736,511			2.81	%
Other borrowings		814			495			64.44	%
Stockholders’ equity		99,588			94,499			5.39	%
Cash and due from		13,971			16,028			-12.83	%
Interest-earning assets		804,839			772,356			4.21	%
Interest-bearing liabilities		650,181			626,744			3.74	%
Intangible assets		15,570			16,687			-6.69	%
Total assets		864,570			835,494			3.48	%
Financial ratios: Note (1)
Return on average assets		1.46	%		1.51	%		-0.05
Return on average equity		12.69	%		13.34	%		-0.65
Net interest margin		4.00	%		4.17	%		-0.17
Efficiency ratio		51.73	%		53.08	%		-1.35

Average equity to average assets		11.52	%		11.31	%	0.21
Note (1) Ratio change measured in bp
Allowance for loan losses:
Beginning balance	$	5,157		$	5,449		-5.36	%
Provision for losses		129			40		222.50	%
Charge-offs		-319			-345		-7.54	%
Recoveries		76			108		-29.63	%
Ending balance	$	5,043		$	5,252		-3.98	%
Nonperforming assets:
Nonaccrual loans		1,208		$	4		-100.00	%
Total nonperforming loans Note (2)		1,208			4		-100.00	%
Other real estate owned		192			390		-50.77	%
Total nonperforming assets	$	1,400		$	394		255.33	%
Asset quality ratios: Note (3)
Nonperforming loans to total loans		0.235	%		---		---
Allowance for loan losses to total loans		0.98	%		1.06	%	-7.93	%
Allowance for loan losses to nonperforming loans		417.47	%		1313.00	%	---
Note (2) Loans 90 days past due or more not included
Note (3) Ratio change measured in bp