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: February 7, 2008 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 AND FINANCIAL CONDITION

National Bankshares, Inc. issued a press release on February 7, 2008 announcing and commenting on its earnings for 2007 and for the fourth quarter of that year. 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 February 7, 2008.

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: February 7, 2008

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, Chairman, President & CEO (540) 951-6236

J. Robert Buchanan, Treasurer (276) 979-0341

NATIONAL BANKSHARES, INC. RELEASES EARNINGS FOR 2007

BLACKSBURG, VA, FEBRUARY 7, 2008: National Bankshares, Inc. (NASDAQ Capital Market: NKSH) today reported 2007 net income of nearly $12.68 million, up slightly over the $12.63 million earned in 2006. Because of higher earnings and the Company’s previously announced stock buyback program, basic net income per share increased from $1.80 in 2006 to $1.82 in 2007. Total assets at December 31, 2007 were nearly $887.65 million, an increase of 2.24% over the same period in 2006. Net loans grew to $518.44 million, an increase of 4.63% from 2006. For 2007, National Bankshares, Inc. had a return on average assets of 1.46% and a return on average equity of 12.60%.

For the three months ending December 31, 2007, the Company posted net income of $3.22 million, a small increase over the $3.20 million earned in the fourth quarter of 2006. This translates to basic net income per share of $0.46 for both periods.

James G. Rakes, National Bankshares’ Chairman, President & CEO, commented, “In these interesting times, I am pleased to report another solid year for National Bankshares. We were challenged with compression of the net interest margin during 2007, and we worked to overcome that challenge by adding quality loans to our portfolio and by controlling overhead costs. The 2006 merger of our two bank subsidiaries resulted in nice savings for 2007 in both occupancy expense and salary and benefits costs. Loan quality remained very good when viewed from a historical perspective. We did, however, make regular additions to the provision for loan losses during the year, both because of growth in net loans and because of an increase in total nonperforming assets from 2006’s very low level.” Mr. Rakes went on to say, “We continued to invest in the Company’s technology infrastructure last year. We believe that it is important to have a solid platform from which to offer customers a full range of products and services. But we think it is even more important for our customers to have a trusted person to help them with their financial transactions. It is this relationship-based business philosophy that has guided us since the founding of National Bank in 1891 and will continue to guide us in the future.”

National Bankshares, Inc. is a financial holding company that is the parent of the National Bank of Blacksburg, which does business as National Bank from 26 office locations throughout Southwest Virginia. The Company, which is headquartered in Blacksburg, Virginia, also has a financial services subsidiary, National Bankshares Financial Services, Inc., doing business in the same market as National Bankshares Investment Services and National Bankshares Insurance Services. Company stock is traded on the NASDAQ Capital Market under the symbol “NKSH”. Additional information about National Bankshares, Inc. is available on its website at www.nationalbankshares.com.

(Unaudited tables follow)

National Bankshares, Inc.And Subsidiaries
(000's), except ratios and percent data
Three months ending	December 31, 2007			December 31, 2006			Change
Selected Consolidated Data :
Interest income	$	12,851		$	12,427			3.41	%
Interest expense		5,517			5,261			4.87	%
Net interest income		7,334			7,166			2.34	%
Provision for loan losses		294			9			3166.67	%
Trust income		314			469			-33.05	%
Other noninterest income		1,883			1,830			2.90	%
Salary and benefits		2,533			2,760			-8.22	%
Occupancy expense		427			478			-10.67	%
Amortization of intangibles		285			284			0.35	%
Other noninterest expense		1,850			1,852			-0.11	%
Income taxes		-919			-881			4.31	%
Net income	$	3,223		$	3,201			0.69	%
Basic net income per share	$	0.46		$	0.46		$	0.00
Daily averages:
Gross loans	$	520,992		$	498,366			4.54	%
Loans,net		514,814			492,104			4.61	%
Total securities		277,008			272,644			1.60	%
Total deposits		763,023			751,639			1.51	%
Other borrowings		65			78			-16.67	%
Stockholders' equity		103,677			97,741			6.07	%
Cash and due from		13,870			15,795			-12.19	%
Interest-earning assets		816,169			792,919			2.93	%
Interest-bearing liabilities		651,162			646,673			0.69	%
Intangible assets		15,000			16,138			-7.05	%
Total assets		874,400			854,040			2.38	%
Financial ratios: Note (1)
Return on average assets		1.46	%		1.49	%		-0.03
Return on average equity		12.33	%		12.99	%		-0.66
Net interest margin		3.95	%		4.06	%		-0.11
Average equity to average assets		11.86	%		11.44	%		0.41
Note (1) Ratio change measured in bp
Allowance for loan losses:
Beginning balance	$	5,043		$	5,252			-3.98	%
Provision for losses		294			9			3166.67	%
Charge-offs		-152			-114			33.33	%
Recoveries		34			10			240.00	%
Ending balance	$	5,219		$	5,157			1.20	%

Year to Date		December 31, 2007			December 31, 2006			Change
Selected Consolidated Data :
Interest income	$	50,769		$	47,901			5.99	%
Interest expense		21,745			18,564			17.14	%
Net interest income		29,024			29,337			-1.07	%
Provision for loan losses		423			49			763.27	%
Trust income		1,333			1,528			-12.76	%
Other noninterest income		7,427			7,274			2.10	%
Salary and benefits		10,773			11,466			-6.04	%
Occupancy expense		1,743			1,957			-10.94	%
Amortization of intangibles		1,138			1,137			0.09	%
Other noninterest expense		7,302			7,110			2.70	%
Income taxes		-3,730			-3,788			-1.53	%
Net income	$	12,675		$	12,632			0.34	%
Basic net income per share	$	1.82		$	1.80		$	0.02
Fully diluted net income per share	$	1.82		$	1.80		$	0.02
Dividends per share	$	0.73		$	0.71		$	0.02
Dividend payout ratio		41.80			40.44		$	1.36
Book value per share	$	15.07			13.86		$	1.21
Balance sheet at period-end:
Gross loans	$	524,773		$	501,702			4.60	%
Loans, net	$	518,435		$	495,486			4.63	%
Total securities		273,343			285,489			-4.25	%
Cash and due from		16,324			15,283			6.81	%
Total deposits		776,339			764,692			1.52	%
Other borrowings		64			73			-12.33	%
Stockholders' equity		104,800			96,755			8.31	%
Intangible assets		14,838			15,976			-7.12	%
Total assets		887,647			868,203			2.24	%
Daily averages:
Gross loans	$	511,215		$	493,668			3.55	%
Loans,net		505,070			487,130			3.68	%
Total securities		282,734			261,743			8.02	%
Total deposits		758,657			724,015			4.78	%
Other borrowings		626			420			49.05	%
Stockholders' equity		100,597			90,470			11.19	%
Cash and due from		13,947			15,976			-12.70	%
Interest-earning assets		807,686			769,931			4.90	%
Interest-bearing liabilities		650,429			610,534			6.53	%
Intangible assets		15,426			17,500			-11.85	%
Total assets		867,061			819,341			5.82	%
Financial ratios: Note (1)
Return on average assets		1.46	%		1.50	%		-0.04
Return on average equity		12.60	%		13.41	%		-0.81
Net interest margin		3.98	%		4.14	%		-0.16

Efficiency ratio		51.11	%		52.74	%	-1.63
Average equity to average assets		11.60	%		11.04	%	0.56
Note (1) Ratio change measured in bp
Allowance for loan losses:
Beginning balance	$	5,157		$	5,449		-5.36	%
Provision for losses		423			49		763.27	%
Charge-offs		-471			-459		2.61	%
Recoveries		110			118		-6.78	%
Ending balance	$	5,219		$	5,157		1.20	%
Nonperforming assets:
Nonaccrual loans		1,150			---		---
Restructured loans		---			---		---
Total nonperforming loans Note (2)		1,150			0		---
Other real estate owned		263			390		-32.56	%
Total nonperforming assets	$	1,413		$	390		262.31	%
Asset quality ratios: Note (3)
Nonperforming loans to total loans		0.220	%		---		---
Allowance for loan losses to total loans		1.00	%		1.03	%	-3.33	%
Allowance for loan losses to nonperforming loans		453.83	%		---		---
Note (2) Loans 90 days past due or more not included
Note (3) Ratio change measured in bp