<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q

[X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934

     For Quarterly Period Ended September 30, 2007

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934

                          Commission File No. 000-50151

                           ALLEGHENY BANCSHARES, INC.
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                          <C>
         West Virginia                                            22-3888163
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)
</TABLE>

                              300 North Main Street
                                  P. O. Box 487
                          Franklin, West Virginia 26807
          (Address of principal executive offices, including zip code)

                                 (304) 358-2311
              (Registrant's Telephone Number, Including Area Code)

Indicate by 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 whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):

Large accelerated filer [ ]   Accelerated filer [ ]   Non-accelerated filer [X]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

     State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.

                         Common Stock, par value - $1.00
                880,633 shares outstanding as of November 9, 2007

<PAGE>

                           ALLEGHENY BANCSHARES, INC.

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
PART I. FINANCIAL INFORMATION

   Item 1.   Financial Statements                                             2

             Unaudited Consolidated Statements of Income - Nine Months
             ended September 30, 2007 and 2006                                2

             Unaudited Consolidated Statements of Income - Three Months
             ended September 30, 2007 and 2006                                3

             Consolidated Balance Sheets - September 30, 2007 (Unaudited)
             and December 31, 2006 (Audited)                                  4

             Unaudited Consolidated Statements of Changes in
             Stockholders' Equity - Nine Months Ended September 30, 2007
             and 2006                                                         5

             Unaudited Consolidated Statements of Cash Flows - Nine
             Months Ended September 30, 2007 and 2006                         6

             Notes to Consolidated Financial Statements                       7

   Item 2.   Management's Discussion and Analysis of Financial Condition
             and Results of Operations                                        9

   Item 3.   Quantitative and Qualitative Disclosures about Market Risk      15

   Item 4T.  Controls and Procedures                                         15

PART II. OTHER INFORMATION

   Item 1.   Legal Proceedings                                               15

   Item 1.A. Risk Factors                                                    15

   Item 2.   Changes in Securities                                           15

   Item 3.   Defaults upon Senior Securities                                 16

   Item 4.   Submission of Matters to a Vote of Security Holders             16

   Item 5.   Other Information                                               16

   Item 6.   Exhibits and Reports on Form 8K                                 16

             SIGNATURES                                                      17

             CERTIFICATIONS                                                  18
</TABLE>

<PAGE>

                                                                          Page 2


PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

                           ALLEGHENY BANCSHARES, INC.
                        CONSOLIDATED STATEMENTS OF INCOME

                                   (Unaudited)

<TABLE>
<CAPTION>
                                          NINE MONTHS ENDED
                                            SEPTEMBER 30,
                                         -------------------
                                           2007       2006
                                         --------   --------
<S>                                      <C>        <C>
INTEREST AND DIVIDEND INCOME:
   Loans and fees                        $  8,508   $  7,543
   Investment securities - taxable            588        537
   Investment securities - nontaxable         537        521
   Deposits and federal funds sold            111         50
                                         --------   --------
   Total Interest and Dividend Income       9,744      8,651
                                         --------   --------
INTEREST EXPENSE:
   Deposits                                 3,727      2,765
   Borrowings                                 276        267
                                         --------   --------
   Total Interest Expense                   4,003      3,032
                                         --------   --------
NET INTEREST INCOME                         5,741      5,619
PROVISION FOR LOAN LOSSES                     138        147
                                         --------   --------
NET INTEREST INCOME AFTER PROVISION
   FOR LOAN LOSSES                          5,603      5,472
                                         --------   --------
NONINTEREST INCOME:
   Service charges on deposit accounts        572        551
   Other income                               357        264
   Loss on security transactions               --         (4)
                                         --------   --------
   Total Noninterest Income                   929        811
                                         --------   --------
NONINTEREST EXPENSE:
   Salaries and benefits                    2,165      1,970
   Occupancy expenses                         269        237
   Equipment expenses                         468        458
   Other expenses                           1,121      1,093
                                         --------   --------
   Total Noninterest Expenses               4,023      3,758
                                         --------   --------
Income Before Income Taxes                  2,509      2,525
INCOME TAX EXPENSE                            719        764
                                         --------   --------
   NET INCOME                            $  1,790   $  1,761
                                         ========   ========
EARNINGS PER SHARE
   Net income                            $   2.03   $   1.97
                                         ========   ========
   Weighted Average Shares Outstanding    882,355    894,407
                                         ========   ========
</TABLE>

        The accompanying notes are an integral part of these statements.

<PAGE>

                                                                          Page 3


                           ALLEGHENY BANCSHARES, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
           (In thousands, except for share and per share information)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                          THREE MONTHS ENDED
                                             SEPTEMBER 30,
                                         -------------------
                                           2007       2006
                                         --------   --------
<S>                                      <C>        <C>
INTEREST AND DIVIDEND INCOME:
   Loans and fees                        $  2,953   $  2,645
   Investment securities - taxable            197        176
   Investment securities - nontaxable         178        173
   Deposits and federal funds sold             30         27
                                         --------   --------
   Total Interest and Dividend Income       3,358      3,021
                                         --------   --------
INTEREST EXPENSE:
   Deposits                                 1,285      1,052
   Borrowings                                 105         89
                                         --------   --------
   Total Interest Expense                   1,390      1,141
                                         --------   --------
NET INTEREST INCOME                         1,968      1,880
PROVISION FOR LOAN LOSSES                      48         34
                                         --------   --------
NET INTEREST INCOME AFTER PROVISION
   FOR LOAN LOSSES                          1,920      1,846
                                         --------   --------
NONINTEREST INCOME:
   Service charges on deposit accounts        213        200
   Other income                               126         94
   Loss on security transactions               --         (4)
                                         --------   --------
   Total Noninterest Income                   339        290
                                         --------   --------
NONINTEREST EXPENSE:
   Salaries and benefits                      730        670
   Occupancy expenses                          90         87
   Equipment expenses                         155        164
   Other expenses                             392        378
                                         --------   --------
   Total Noninterest Expenses               1,367      1,299
                                         --------   --------
Income Before Income Taxes                    892        837
INCOME TAX EXPENSE                            277        259
                                         --------   --------
   NET INCOME                            $    615   $    578
                                         ========   ========
EARNINGS PER SHARE
   Net income                            $    .70   $    .65
                                         ========   ========
   Weighted Average Shares Outstanding    881,150    893,689
                                         ========   ========
</TABLE>

        The accompanying notes are an integral part of these statements.

<PAGE>

                                                                          Page 4


                           ALLEGHENY BANCSHARES, INC.
                           CONSOLIDATED BALANCE SHEETS
           (In thousands, except for share and per share information)

<TABLE>
<CAPTION>
                                                     SEPTEMBER   DECEMBER
                                                      30, 2007   31, 2006
                                                     ---------   --------
                                                     Unaudited    Audited
<S>                                                  <C>         <C>
ASSETS
Cash and due from banks                              $  2,493    $  2,174
Federal funds sold                                      6,213       3,601
Interest bearing deposits in banks                        648         130
Investment securities available for sale               33,006      34,008
Investment securities held to maturity                    500         500
Restricted equity securities                            1,005         967
Loans receivable, net of allowance for loan
   losses of $1,171 and $1,258 respectively           139,886     134,109
Bank premises and equipment, net                        6,491       6,749
Other assets                                            1,754       1,779
                                                     --------    --------
   Total Assets                                      $191,996    $184,017
                                                     ========    ========
LIABILITIES
Deposits
   Noninterest bearing demand                        $ 18,544    $ 16,336
   Interest bearing
      Demand                                           16,615      16,918
      Savings                                          33,680      32,765
      Time deposits over $100,000                      24,836      25,479
      Other time deposits                              61,540      57,844
                                                     --------    --------
   Total Deposits                                     155,215     149,342
Accrued expenses and other liabilities                    693         754
Federal funds purchased                                    --          --
Short-term borrowings                                   2,303       2,769
Long-term debt                                          6,666       5,592
                                                     --------    --------
   Total Liabilities                                  164,877     158,457
                                                     --------    --------
STOCKHOLDERS' EQUITY
Common stock; $1 par value, 2,000,000 shares
   Authorized, 900,000 issued                             900         900
Additional paid in capital                                900         900
Retained earnings                                      26,386      24,596
Accumulated other comprehensive (loss)                    (28)        (60)
Treasury stock (at cost, 19,367 shares in 2007 and
   14,789 shares in 2006)                              (1,039)       (776)
                                                     --------    --------
   Total Stockholders' Equity                          27,119      25,560
                                                     --------    --------
   Total Liabilities and Stockholders' Equity        $191,996    $184,017
                                                     ========    ========
</TABLE>

        The accompanying notes are an integral part of these statements.

<PAGE>

                                                                          Page 5


                           ALLEGHENY BANCSHARES, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                              Accumulated
                                                     Additional                  Other
                                            Common     Paid In    Retained   Comprehensive   Treasury
                                   Total     Stock     Capital    Earnings      (Loss)         Stock
                                  -------   ------   ----------   --------   -------------   --------
<S>                               <C>       <C>      <C>          <C>        <C>             <C>
BALANCE, DECEMBER 31, 2006        $25,560    $900       $900       $24,596       $ (60)      $  (776)
Comprehensive Income
   Net income                       1,790                            1,790
   Change in unrealized loss on
      available for sale
      securities, net of
      income tax effect of $13         32                                           32
                                  -------
   Total Comprehensive Income       1,822
Purchase of Treasury Stock           (263)                                                      (263)
                                  -------    ----       ----       -------       -----       -------
BALANCE, SEPTEMBER 30, 2007       $27,119    $900       $900       $26,386       $ (28)      $(1,039)
                                  =======    ====       ====       =======       =====       =======
BALANCE, DECEMBER 31, 2005        $24,864    $900       $900       $23,389       $(117)      $  (208)
Comprehensive Income
   Net income                       1,761                            1,761
   Change in unrealized loss on
      available for sale
      securities, net of
      income tax effect of $(6)       (14)                                         (14)
   Reclassification
      adjustment Net of taxes
      of $1                            3                                            3
                                  -------
   Total Comprehensive Income       1,750
Purchase of Treasury Stock            (90)                                                       (90)
                                  -------    ----       ----       -------       -----       -------
BALANCE, SEPTEMBER 30, 2006       $26,524    $900       $900       $25,150       $(128)      $  (298)
                                  =======    ====       ====       =======       =====       =======
</TABLE>

        The accompanying notes are an integral part of these statements.

<PAGE>

                                                                          Page 6


                           ALLEGHENY BANCSHARES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                               NINE MONTHS ENDED
                                                                 SEPTEMBER 30,
                                                              ------------------
                                                                2007      2006
                                                              -------   --------
<S>                                                           <C>       <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                 $ 1,790   $  1,761
   Adjustments to reconcile net income to net
      cash provided by operating activities:
      Provision for loan losses                                   138        147
      Depreciation and amortization                               375        358
      Net amortization of securities                               14         20
      Deferred income tax benefit                                  27         --
      Loss on sale of securities                                   --          4
      Gain on sale of equipment                                    --         (7)
      Net change in:
         Accrued income                                           (58)      (129)
         Other assets                                              41       (149)
         Accrued expense and other liabilities                    (62)        62
                                                              -------   --------
   Net Cash Provided by Operating Activities                    2,265      2,067
                                                              -------   --------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Net change in federal funds sold                            (2,612)    (2,990)
   Net change in interest bearing deposits in banks              (518)       391
   Proceeds from sales, calls and maturities
      of available for sale securities                          3,330      2,467
   Purchase of securities available for sale                   (2,296)    (2,016)
   Net increase in restricted investments                         (38)      (446)
   Net increase  in loans                                      (5,916)    (7,586)
   Proceeds from sale of bank equipment                            --         23
   Purchase of bank premises and equipment                       (115)    (1,142)
                                                              -------   --------
   Net Cash Used in Investing Activities                       (8,165)   (11,299)
                                                              -------   --------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Net change in:
      Demand and savings deposits                               2,821        390
      Time deposits                                             3,053      9,858
      Short-term borrowings                                      (466)        --
   Proceeds from long-term borrowings                           1,500      1,060
   Curtailments of long-term borrowings                          (426)    (2,067)
   Purchase of treasury stock                                    (263)       (90)
                                                              -------   --------
   Net Cash Provided by Financing Activities                    6,219      9,151
                                                              -------   --------
CASH AND DUE FROM BANKS
   Net increase (decrease) in cash and due from banks             319        (81)
   Cash and due from banks, beginning of period                 2,174      2,882
                                                              -------   --------
   Cash and due from banks, end of period                     $ 2,493   $  2,801
                                                              =======   ========
Supplemental Disclosure of Cash Paid During the Period for:
   Interest                                                   $ 4,038   $  2,955
   Income taxes                                               $   696   $    805
</TABLE>

        The accompanying notes are an integral part of these statements.

<PAGE>

                                                                          Page 7


                           ALLEGHENY BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 ACCOUNTING PRINCIPLES:

     The financial statements conform to accounting principles generally
accepted in the United States of America ("GAAP") and to general industry
practices. In the opinion of management, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of September 30,
2007, and the results of operations for the periods ended September 30, 2007 and
2006. The notes included herein should be read in conjunction with the notes to
the financial statements included in the 2006 annual report to stockholders of
Allegheny Bancshares, Inc.

NOTE 2 INVESTMENT SECURITIES AND RESTRICTED SECURITIES:

     The amortized costs of investment securities and their approximate fair
values at September 30, 2007 and December 31, 2006 follows (in thousands of
dollars):

<TABLE>
<CAPTION>
                                  SEPTEMBER 30, 2007    DECEMBER 31, 2006
                                 -------------------   -------------------
                                 AMORTIZED     FAIR    AMORTIZED     FAIR
                                    COST      VALUE       COST      VALUE
                                 ---------   -------   ---------   -------
<S>                               <C>        <C>        <C>        <C>
SECURITIES AVAILABLE FOR SALE:
   U.S. Government Mortgaged
      Backed Securities           $ 3,141    $ 3,040    $ 3,667    $ 3,576
   Government-Sponsored
      Enterprise Securities        11,487     11,489     11,730     11,671
   Obligations of States and
      Political Subdivisions       18,287     18,345     18,599     18,661
   Other Equity Securities            132        132        100        100
                                  -------    -------    -------    -------
      Total                       $33,047    $33,006    $34,096    $34,008
                                  =======    =======    =======    =======
SECURITIES HELD TO MATURITY:
   Government-Sponsored
      Enterprise Securities       $   500    $   495    $   500    $   490
                                  =======    =======    =======    =======
</TABLE>

     The Company evaluates each of its security investments for impairment under
guidelines contained in SFAS 115, Accounting for Certain Investments in Debt and
Equity Securities. These guidelines require the Company to determine if declines
in market value are other than temporary.

     Restricted securities consist of stock in the Federal Home Loan Bank (FHLB)
and Community Financial Services, Inc. (CFSI). Investment in the FHLB stock is
determined by the level of the Bank's participation with FHLB various products
and is collateral against outstanding borrowings from that institution. CFSI is
the parent company of the Bank's correspondent bank. Both of these investments
are carried at cost, and each is restricted as to transferability.

<PAGE>

                                                                          Page 8


                           ALLEGHENY BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 LOANS RECEIVABLE:

     Loans outstanding are summarized as follows (in thousands of dollars):

<TABLE>
<CAPTION>
                                  SEPTEMBER 30,   DECEMBER 31,
                                      2007            2006
                                  -------------   ------------
<S>                               <C>             <C>
Real estate loans                    $ 64,387       $ 60,768
Commercial and industrial loans        60,426         59,181
Loans to individuals, primarily
   collateralized by autos             11,558         11,381
All other loans                         4,686          4,037
                                     --------       --------
   Total Loans                        141,057        135,367
Less allowance for loan losses          1,171          1,258
                                     --------       --------
   Net Loans Receivable              $139,886       $134,109
                                     ========       ========
</TABLE>

NOTE 4 ALLOWANCE FOR LOAN LOSSES:

     A summary of transactions in the allowance for loan losses for the nine
months ended September 30, 2007 and 2006 follows (in thousands):

<TABLE>
<CAPTION>
                                  NINE MONTHS ENDED
                                    SEPTEMBER 30,
                                  -----------------
                                    2007     2006
                                   ------   ------
<S>                               <C>       <C>
Balance, beginning of period       $1,258   $1,172
Provision charged to operating
   expenses                           138      147
Recoveries of loans charged off        75       67
Loans charged off                    (300)    (118)
                                   ------   ------
Balance, end of period             $1,171   $1,268
                                   ======   ======
</TABLE>

NOTE 5 LONG TERM DEBT:

The Company has borrowed money from the Federal Home Loan Bank of Pittsburgh
(FHLB). The interest rates on all of the notes payable as of September 30, 2007
were fixed at the time of the advance and fixed rates range from 3.15% to 5.61%.
The FHLB notes are secured by FHLB Stock, as well as investment securities and
mortgage loans. The weighted average interest rate is 4.62% at September 30,
2007.

<PAGE>

                                                                          Page 9


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
     OF OPERATIONS

Allegheny Bancshares, Inc. (Company) is a single bank holding company organized
under the laws of West Virginia. The Company provides financial services through
its wholly owned subsidiary Pendleton Community Bank (Bank).

     The Bank is a full service commercial bank offering financial services
through four financial centers located in the West Virginia towns of Franklin,
Moorefield and Marlinton, and its newest branch near Harrisonburg, Virginia.
Currently its primary trade areas are these towns and the West Virginia counties
of Pendleton, Hardy, Pocahontas, and in western Rockingham County, Virginia. The
newest financial center is located in Rockingham County, Virginia just west of
the city limits of Harrisonburg, Virginia and was opened for business July 19,
2006.

     The following discussion and analysis is provided to address information
about the Company's financial condition and results of operations that may not
otherwise be apparent from reading the Consolidated Financial Statements and
notes. This discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and the related notes to the Consolidated
Financial Statements.

                           FORWARD LOOKING STATEMENTS

     The following discussion contains statements that refer to future
expectations, contain projections of the results of operations or of financial
condition or state other information that is "forward-looking."
"Forward-looking" statements are easily identified by the use of words such as
"could," "could anticipate," "estimate," "believe," and similar words that refer
to the future outlook. There is always a degree of uncertainty associated with
"forward-looking" statements. The Company's management believes that the
expectations reflected in such statements are based upon reasonable assumptions
and on the facts and circumstances existing at the time of these disclosures.
Actual results could differ significantly from those anticipated.

     Many factors could cause the Company's actual results to differ materially
from the results contemplated by the forward-looking statements. Some factors,
which could negatively affect the results, include:

     -    General economic conditions, either nationally or within the Company's
          markets, could be less favorable than expected;

     -    Changes in market interest rates could affect interest margins and
          profitability;

     -    Competitive pressures could be greater than anticipated; and

     -    Legal or accounting changes could affect the Company's results.

CRITICAL ACCOUNTING POLICY

          The financial condition and results of operations as presented in the
Consolidated Financial Statements and the Notes to Consolidated Financial
Statements are dependent on the accounting policies. The policies selected and
applied involve judgments, estimates, and may change from period to period based
upon economic conditions. In addition, changes in generally accepted accounting
principles could impact the calculations of these estimates, and even though
this would not affect the true values, it could affect the timing of recognizing
income or expense.

          The following discussion of allowance for loans loss is, in
management's opinion, the most important and critical policy that affects the
financial condition and results of operations. This critical policy involves the
most difficult and complex judgments about the unknown losses that currently
exist in the Company's largest asset, its loan portfolio.

<PAGE>

                                                                         Page 10


ALLOWANCE FOR LOAN LOSSES AND PROVISION FOR LOAN LOSSES

     The provision for loan losses was $138,000 and $147,000 for the nine month
periods ended September 30, 2007 and 2006 respectively. The allowance for loan
losses ("ALL") was $1,171,000 (.83% of loans) at the end of the first nine
months of 2007 compared with $1,258,000 (.93% of loans) at December 31, 2006.
The ALL decrease was caused primarily by the level of loans charged off during
the first six months of 2007. The Company continues to monitor the loan
portfolio for signs of weakness or developing credit problems. Loan loss
provision for each period is determined after evaluating the loan portfolio and
determining the level of reserves necessary to absorb current charge-offs and
maintain the reserve at adequate levels. See Note 4 for the amounts.

     The ALL is evaluated on a regular basis by management and is based upon
management's periodic review of the collectibility of the loans, industry
historical experience, the nature and volume of the loan portfolio, adverse
situations that may affect the borrower's ability to repay, estimated value of
any underlying collateral and prevailing economic conditions. This evaluation is
inherently subjective as it requires estimates that are susceptible to
significant revision as more information becomes available. Managements'
valuation of the ALL is based upon two principals of accounting: 1) SFAS No. 5
Accounting for Contingencies and SFAS No. 114, Accounting by Creditors for
Impairment of a Loan. The Company utilizes both of theses accounting standards
by first identifying problem loans above a certain threshold and estimating
losses based on the underlying collateral values, and second taking the
remainder of the loan portfolio and separating the portfolio into pools of loans
based on grade of loans as determined by the Company's internal grading system.
We apply loss percentages based upon our historical loss rates, and make
adjustments based on economic conditions. The determination of the ALL is
subjective and actual losses may be more or less than the amount of the
allowance. However management believes that the allowance is a fair estimate of
losses that exists in the loan portfolio as of the balance sheet date.

RESULTS OF OPERATIONS OVERVIEW

     Net income of $1,790,000 for the first nine months of 2007 represents an
increase of 1.65% compared to the same period a year ago. Annualized returns on
average equity and average assets for the nine months ended September 30, 2007
were 9.14% and 1.30%, respectively, compared with 9.51% and 1.33% for the same
period in 2006. The net income for the first nine months of 2007 compared to
same period in 2006 was relatively flat. While net interest income has
increased, due to the volume of earning assets, increase in noninterest expenses
has offset the increased net interest income.

     Also, during the first nine months of 2007, the interest margin has
remained low due to the flat, and at times, inverted interest rate yield curve.
This situation has caused the deposit rates to rise faster than the loan rates
and has caused the Company's main source of income, net interest margin, to
decline as a percentage of earning assets (See Table I).

NET INTEREST INCOME

     The Company's taxable equivalent net interest income increased by 2.60% for
the first nine months of 2007 compared to the first nine months of 2006. This
increase resulted from the increase in the average balance of loans as well as
an increase in federal funds sold. Average balance of interest bearing
liabilities grew by 6.19% while average balance of total earning assets grew by
6.61%. The Company's tax equivalent net yield on earnings assets for first nine
months of 2007 was 4.65% compared to 4.83% for same period in 2006 as the cost
of funds increased 75 basis points while the yield on earning assets increased
41 basis points. Seventeen consecutive increases by the Federal Reserve Board of
the target rate of federal funds from June 2004 to June 2006 have caused

<PAGE>

                                                                         Page 11


the average rates earned on earning assets and the average rates paid on
interest bearing liabilities to continue to increase. Unfortunately for the
Company's interest margin, this rate increase has caused shorter term deposit
rates to rise more than the rates earned on longer term loans and investments.
As shown in the interest sensitivity analysis in Table II, the Company is in a
liability sensitive position, meaning our liabilities mature and reprice faster
than our assets. The last interest rate increase was in June of 2006 and as such
some improvement is being seen in the net interest margin. In September 2007,
the Federal Reserve lowered rates by 50 basis points. While this most recent
rate cut has not had time to affect the Company's interest margin, we expect
some relief from the steepening of the yield curve.

     Table I shows the average balances for interest bearing assets and
liabilities, the rates earned on earning assets and the rates paid on deposits
and borrowed funds.

                                     TABLE I

ALLEGHENY BANCSHARES, INC.
NET INTEREST MARGIN ANALYSIS
(ON A FULLY TAXABLE EQUIVALENT BASIS)(DOLLAR AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                    NINE MONTHS ENDED            NINE MONTHS ENDED
                                   SEPTEMBER 30, 2007           SEPTEMBER 30, 2006
                               --------------------------   --------------------------
                                AVERAGE   INCOME/            AVERAGE   INCOME/
                                BALANCE   EXPENSE   RATES    BALANCE   EXPENSE   RATES
                               --------   -------   -----   --------   -------   -----
<S>                            <C>        <C>       <C>     <C>        <C>       <C>
Interest Income
   Loans (1), (2)              $137,496   $ 8,606   8.35%   $129,802    $7,615   7.82%
   Federal funds sold             2,722       103   5.05%      1,017        38   4.98%
   Interest bearing deposits        231         7   4.04%        338        12   4.73%
Investments
      Taxable                    16,339       588   4.80%     15,563       536   4.59%
      Nontaxable (2)             18,426       814   5.89%     17,627       788   5.96%
                               --------   -------   ----    --------    ------   ----
Total Earning Assets            175,214    10,118   7.70%    164,347     8,989   7.29%
                               --------   -------   ----    --------    ------   ----
Interest Expense
   Demand deposits               15,544       193   1.66%     18,024       205   1.52%
   Savings                       33,329       675   2.70%     28,950       431   1.99%
   Time deposits                 82,283     2,859   4.63%     75,792     2,129   3.75%
   Short-term borrowings          2,469        85   4.59%      2,920        90   4.11%
   Long-term debt                 5,835       191   4.36%      5,639       177   4.19%
                               --------   -------   ----    --------    ------   ----
   Total Interest Bearing
      Liabilities              $139,460   $ 4,003   3.83%   $131,325    $3,032   3.08%
                               --------   -------   ----    --------    ------   ----
   Net Interest Margin (1)                  6,115                        5,957
                                          =======                       ======
Net Yield on Interest
   Earning Assets                                   4.65%                        4.83%
                                                    ====                         ====
</TABLE>

(1)  Interest on loans includes loan fees

(2)  An incremental tax rate of 34% was used to calculate the tax equivalent
     income

<PAGE>

                                                                         Page 12


NONINTEREST INCOME

     Noninterest income increased 14.55% during the first nine months of 2007 as
compared to the same period in 2006. The increase was largely due to an increase
in loan fees earned by our mortgage division, and increased ATM and debit card
fee income. Second quarter 2006 noninterest income included a one time gain of
$26,000 on the sale of the Company's credit card portfolio.

NONINTEREST EXPENSES

     Total noninterest expense increased $265,000 or 7.05% for the first nine
months of 2007, as compared to 2006. Salaries and benefits increased by 9.90%
due to the increase in the number of employees, merit increases, and higher
benefit costs. The number of employees as measured by full time equivalents
(FTE) increased by 2.75 in the first nine months of 2007, as compared to the
same period of 2006. This represents a 4.8% increase in number of employees.

Occupancy and equipment expenses increased by 13.50% primarily due to expenses
of the new Harrisonburg, Virginia office. The Harrisonburg office was opened in
July of 2006, and for the first nine months of 2007, the pre tax loss from the
operations for this branch totaled $292,000. This compares to $139,000 loss for
the same period in 2006.

INCOME TAX EXPENSE

     Income tax expense equaled 28.66% of income before income taxes for the
nine months ended September 30, 2007 compared with 30.26% for the same period of
2006. This was partially due to the charge-off of a loan in 2007 which we had
reserved for, but the actual tax benefit of this transaction was greater than
the tax benefit that we had accrued. In addition, we received a $10,000 refund
on an amended tax issue from the 2003 tax year.

LOANS AND PROVISION FOR LOAN LOSS

     Total loans were $141,057,000 at September 30, 2007, compared to
$135,367,000 at December 31, 2006, representing a 4.20% increase. This growth in
the loan portfolio is primarily driven by residential real estate loans, which
has grown by 6.00% since December 31, 2006. A schedule of loans by type is shown
in Note 3 to the financial statements. Approximately 82% of the loan portfolio
is secured by real estate at September 30, 2007.

LOAN PORTFOLIO RISK FACTORS

     Nonperforming loans include nonaccrual loans, loans over 90 days past due
and restructured loans. Nonaccrual loans are loans in which interest accruals
have been discontinued. Loans are placed in a nonaccrual status when management
has information that indicates that principal or interest may not be
collectable. The Company has a substantial amount of loans in the loan portfolio
related to agribusinesses; see Note 4 of the financial statements for additional
details. Restructured loans are loans for which a borrower has been granted a
concession on the interest rate or the original repayment terms because of
financial difficulties.

The following table summarizes the Company's nonperforming loans at September
30, 2007 and December 31, 2006 (in thousands of dollars):

<TABLE>
<CAPTION>
                                   SEPTEMBER 30,   DECEMBER 31,
                                       2007            2006
                                   -------------   ------------
<S>                                <C>             <C>
Nonaccrual loans                        $ 15           $104
Restructured loans                       144             24
Loans delinquent 90 days or more         494            206
                                        ----           ----
   Total Nonperforming Loans            $653           $334
                                        ====           ====
</TABLE>

<PAGE>

                                                                         Page 13


DEPOSITS

     The Company's deposits increased $5,873,000 or 3.93% during the first nine
months of 2007. A schedule of deposits by type is shown in the balance sheets.
The primary reason for this increase was the increase in non interest bearing
checking accounts and certificates of deposit. Certificates of deposit increased
even though the bank reduced the level of "brokered deposits". Brokered deposits
are certificates of deposits (CD) that are purchased from a broker acting as an
agent for depositors. They typically are sold in increments of $100,000 and
usually have higher rates than the typical CD rates. The Company has used
brokered deposits in the past for short-term funding. Due to growth in core
deposits during the first nine months of 2007, the Company was able to decrease
its balance of brokered deposits by $3,621,000. Time deposits of $100,000 or
more were 16.00% and 17.06% of total deposits at September 30, 2007 and December
31, 2006, respectively.

BORROWINGS

     The Company borrows funds from the Federal Home Loan Bank (FHLB) to provide
liquidity and to reduce interest rate risk. As competition for deposits have
increased during periods of loan growth, FHLB borrowings have been utilized to
help fund the loan growth. These borrowings have a fixed rate of interest and
are amortized over a period of 5 to 20 years. Interest rates on these
obligations range from 3.15% to 5.61%.

CAPITAL

     The Company continues to maintain a strong capital position to provide an
attractive financial return to our shareholders and to support future growth.
Capital as a percentage of total assets was 14.13% at September 30, 2007 and
significantly exceeded regulatory requirements. The Company is considered to be
well capitalized under the regulatory framework for prompt corrective actions.

UNCERTAINTIES AND TRENDS

     Management is not aware of any known trends, events or uncertainties that
will have or that are reasonably likely to have a material effect on liquidity,
capital resources or operations. Additionally, management is not aware of any
current recommendations by the regulatory authorities which, if they were to be
implemented, would have such an effect.

LIQUIDITY AND INTEREST SENSITIVITY

     Liquidity reflects our ability to ensure that funds are available to meet
present and future obligations. At September 30, 2007, the Company had liquid
assets of approximately $8.71 million in the form of cash and due from banks and
federal funds sold. Management believes that the Company's liquid assets are
adequate at September 30, 2007. Additional liquidity may be provided by the
growth in deposit accounts and loan repayments. In the event the Company would
need additional funds, it has the ability to purchase federal funds and borrow
under established lines of credit of $89.1 million.

At September 30, 2007, the Company had a negative cumulative Gap Rate
Sensitivity Ratio of 27.67% for the one year repricing period. This rate
reflects a very conservative estimate since we show an immediate runoff of
accounts without a specific maturity date, and does not reflect the historical
movement of funds during varying interest rate environments. Adjusted for
historical repricing trends in response to interest rate changes, the adjusted
Gap Ratio is -9.91%. This indicates that the Company is liability sensitive. But
this negative gap ratio is within guidelines set by the Company and the Company
expects interest income would remain stable in both a declining and increasing
interest rate environment. Management constantly monitors the Company's interest

<PAGE>

                                                                         Page 14


rate risk and has decided that the current position is an acceptable risk for a
community bank operating in a rural environment. Table II shows the Company's
interest sensitivity.

                                    TABLE II

ALLEGHENY BANCSHARES, INC.
INTEREST SENSITIVITY ANALYSIS
SEPTEMBER 30, 2007

(In Thousands of Dollars)

<TABLE>
<CAPTION>
                                   0-3       4-12      1-5     OVER 5
                                  MONTHS    MONTHS    YEARS     YEARS    TOTAL
                                 -------   -------   -------   ------   -------
<S>                              <C>       <C>       <C>       <C>      <C>
USES OF FUNDS:
Loans                             33,243    26,186    46,118   35,510   141,057
Federal funds sold                 6,213                                  6,213
Interest bearing deposits            548       100                          648
Investment securities                500     1,235    18,119   13,652    33,506
Restricted Investments                                          1,005     1,005
                                 -------   -------   -------   ------   -------
Total                             40,504    27,521    64,237   50,167   182,429
                                 -------   -------   -------   ------   -------
SOURCES OF FUNDS:
Deposits:
   Interest bearing demand        16,615                                 16,615
   Savings                        33,680                                 33,680
   Time deposits over $100,000     6,773    12,020     6,043             24,836
   Other time deposits            19,656    27,459    13,782      643    61,540
Short-term borrowings              1,700                 603              2,303
Long-term debt                       149       456     2,508    3,553     6,666
                                 -------   -------   -------   ------   -------
Total                             78,573    39,935    22,936    4,196   145,640
                                 -------   -------   -------   ------   -------
Discrete Gap                     (38,069)  (12,414)   41,301   45,971    36,789
Cumulative Gap                   (38,069)  (50,483)   (9,182)  36,789
Ratio of Cumulative Gap
   To Total Earning Assets        -20.87%   -27.67%    -5.03%   20.17%
</TABLE>

Table II reflects the earlier of the maturity or repricing dates for various
assets and liabilities at September 30, 2007. In preparing the above table, no
assumptions are made with respect to loan prepayments or deposit run offs. Loan
principal payments are included in the earliest period in which the loan matures
or can be repriced. Principal payments on installment loans scheduled prior to
maturity are included in the period of maturity or repricing. A loan with a
floating rate that has reached a contractual floor or ceiling level is being
treated as a fixed rate loan until the rate is again free to float.

<PAGE>

                                                                         Page 15


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in Quantitative and Qualitative Disclosures
about Market Risk as reported in the 2006 Form 10-K.

ITEM 4T. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

     As a result of the enactment of the Sarbanes-Oxley Act of 2002, issuers
that file periodic reports under the Securities Exchange Act of 1934 (the "Act")
are now required to include in those reports certain information concerning the
issuer's controls and procedures for complying with the disclosure requirements
of the federal securities laws. Under rules adopted by the Securities and
Exchange Commission effective August 29, 2002, these disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by an issuer in the reports it
files or submits under the Act, is communicated to the issuer's management,
including its principal executive officer or officers and principal financial
officer or officers, or persons performing similar functions, as appropriate to
allow timely decisions regarding disclosure.

     We have established disclosure controls and procedures to ensure that
material information related to Allegheny Bancshares, Inc. and its subsidiary is
made known to our principal executive officer and principal financial officer on
a regular basis, in particular during the periods in which our quarterly and
annual reports are being prepared. These disclosure controls and procedures
consist principally of communications between and among the Chief Executive
Officer and the Chief Financial Officer to identify any new transactions,
events, trends, contingencies or other matters that may be material to the
Company's operations. As required, we have evaluated the effectiveness of these
disclosure controls and procedures as of the end of the period covered by this
quarterly report. Based on this evaluation, the Company's management, including
the Chief Financial Officer, concluded that such disclosure controls and
procedures were operating effectively as designed as of the date of such
evaluation.

CHANGES IN INTERNAL CONTROLS

     During the period reported upon, there were no significant changes in the
Company's internal controls pertaining to its financial reporting and control of
its assets or in other factors that could significantly affect these controls.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS -

Not Applicable

ITEM 1 A. RISK FACTORS -

No Material Changes

ITEM 2. CHANGES IN SECURITIES -

During the 3-month period ending September 30, 2007, the Company purchased some
of the Company's stock to be held as treasury stock. This was not part of
publicly announced plan. The details of the transaction were as follows:

<PAGE>

                                                                         Page 16


<TABLE>
<CAPTION>
                     TOTAL NUMBER    AVERAGE
                       OF SHARES    PRICE PER
       DATE            PURCHASED      SHARE
       ----          ------------   ---------
<S>                  <C>            <C>
July 11, 2007              50         $58.00
July 19, 2007               2         $58.00
July 20, 2007             400         $58.00
August 8, 2007            406         $58.00
August 9, 2007            200         $58.00
September 27, 2007        170         $59.00
</TABLE>

ITEM 3. DEFAULTS UPON SENIOR SECURITIES -

Not Applicable

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS -

Not Applicable

ITEM 5. OTHER INFORMATION -

Not Applicable

ITEM 6. EXHIBITS AND REPORTS ON 8-K -

A.   EXHIBITS

     The following Exhibits are filed as part of this Form 10-Q

<TABLE>
<CAPTION>
 No.                                  Description
 --                                   -----------
<S>    <C>
31.1   Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
       (filed herewith).

31.2   Certification of Chief Financial Officer pursuant to Rule 13a-14(a)
       (filed herewith).

32     Certifications of Chief Executive Officer and Chief Financial Officer
       pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
       the Sarbanes-Oxley Act of 2002 (filed herewith).
</TABLE>

     The following exhibit is incorporated by reference to the Exhibits to
Allegheny Bancshares, Inc. Form 10-KSB filed March 30, 2003.

<TABLE>
<CAPTION>
 No.                          Description                         Exhibit Number
 ---                          -----------                         --------------
<S>    <C>                                                        <C>
3.1    Articles of Incorporation - Allegheny Bancshares, Inc.           E2
</TABLE>

     The following exhibit is incorporated by reference to the Exhibits to
Allegheny Bancshares, Inc. Form 10-K filed March 31, 2006.

<TABLE>
<CAPTION>
 No.                          Description                         Exhibit Number
 ---                          -----------                         --------------
<S>    <C>                                                        <C>
3.3    Bylaws of Allegheny Bancshares, Inc.                             3.3
</TABLE>

B.   REPORTS ON 8K

     No reports filed in the third quarter of 2007.

<PAGE>

                                                                         Page 17


                                    SIGNATURE

In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant causes this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                        ALLEGHENY BANCSHARES, INC.


                                        By: /s/ WILLIAM A. LOVING
                                            ------------------------------------
                                            William A. Loving, Jr.
                                            Executive Vice President and
                                            Chief Executive Officer


                                        By: /s/ L. KIRK BILLINGSLEY
                                            ------------------------------------
                                            L. Kirk Billingsley
                                            Chief Financial Officer

Date: November 9, 2007