UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION
                            Washington, D. C.  20549

                                 FORM 10-Q

(Mark One)

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

   For the quarterly period ended                   September 30, 1998
                       ------------------------------------

                                      or

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

    For the transition period from____________________to__________________


                        Commission File Number:   33-14252
                      FIRST NATIONAL BANKSHARES CORPORATION
                (Exact name of registrant as specified in its charter)



        West Virginia                                   62-1306172
(State or other jurisdiction                         (I.R.S. Employer
 of incorporation)                                   Identification No.)


One Cedar Street, Ronceverte, West Virginia                 24970
(Address of principal executive offices)                  (Zip Code)

(304) 647-4500
(Registrant's telephone number, including area code)


                                   N/A
(Former name, former address and former fiscal year, if changed since
 last report)


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________________

The number of shares  outstanding of the issuer's classes of common stock as of
September 30, 1998:

                  Common Stock, $5 par value -- 192,903 shares



                        THIS REPORT CONTAINS    29    PAGES





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                          FIRST NATIONAL BANKSHARES CORPORATION

                                       FORM 10-Q
                      For the Quarterly Period Ended September 30, 1998
                                        INDEX


                                                                    Page
PART I.   FINANCIAL INFORMATION

     Item 1.  Financial Statements

     Condensed Consolidated Balance Sheets -
          September 30, 1998 and December 31, 1997                     3

     Condensed Consolidated Statements of Income -
     Three Months Ended September 30, 1998 and 1997 and
     Nine Months Ended September 30, 1998 and 1997                     4

     Condensed Consolidated Statements of Shareholders' Equity -
     Three Months Ended September 30, 1998 and 1997 and
     Nine Months Ended September 30, 1998 and 1997                     5

     Condensed Consolidated Statements of Cash Flows -
     Nine Months Ended September 30, 1998 and 1997                   6-7

     Condensed Consolidated Statements of Comprehensive Income
     Three Months Ended September 30, 1998 and 1997 and
     Nine Months Ended September 30, 1998 and 1997                     8
              

     Notes to Condensed Consolidated Financial Statements            8-11

     Item 2.  Management's Discussion and Analysis of Financial Condition
              and Results of Operations                             12-20

PART II.  OTHER INFORMATION

     Item 1. Legal Proceedings                                         21

     Item 2. Changes in Securities                                   none

     Item 3. Defaults upon Senior Securities                         none

     Item 4. Submission of Matters to a Vote of Security Holders       21

     Item 5. Other Information                                       none

     Item 6.  Exhibits and Reports on Form 8-K                         21

                  Item 11 - Computation of Per Share Earnings          23

                  Item 27 - Financial Data Schedule                    24

     SIGNATURES                                                        22








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                                                           3
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PART I.  FINANCIAL INFORMATION

         FIRST NATIONAL BANKSHARES CORPORATION AND SUBSIDIARY
         CONDENSED CONSOLIDATED BALANCE SHEETS
         (in thousands of dollars, except per share data)



                                              September 30,        December 31,
                                                   1998                1997
ASSETS                                         (Unaudited)             (1)

Cash and due from banks                   $         2,029    $          2,742
Federal funds sold                                  4,330               3,159
Securities held to maturity 
esitmated fair value
( $6,850 and $12,405, respectively) (Note 2)        6,740              12,322
Securities available for sale (Note 2)             10,129               4,989
Loans, net of allowance of $776 and
      $636, respectively (Notes 3 and 4)           68,604              69,108
Bank premises and equipment                         1,921               2,073
Accrued interest receivable                           635                 660
Other assets                                        1,326                 377
                                             ---------------            -------

              Total assets                $        95,714    $         95,430
                                             ===============    ================

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities
     Deposits:
          Noninterest bearing             $         9,575    $         10,035
          Interest bearing                         68,980              68,301
                                            ---------------    ----------------
              Total deposits                       78,555              78,336
     Repurchase agreements                          1,225               1,330
     Long-term borrowings (Note 7)                  5,490               5,500
     Other liabilities                                844                 939
                                             ---------------    ----------------

              Total liabilities                    86,114              86,105
                                             ---------------    ----------------

Commitments and Contingencies (Note 5)

Shareholders' equity
     Common stock, $5.00 par value, 
          authorized 500,000 shares, 
          issued 192,903 and 192,500
          shares, respectively                        965                 963
     Surplus                                        1,019               1,000
     Retained earnings                              7,603               7,362
     Net unrealized gain (loss) on securities          13                   -
                                             ---------------    ----------------
              Total shareholders' equity            9,600               9,325
                                             ---------------    ----------------

              Total liabilities and 
               shareholders' equity      $          95,714        $    95,430
                                            ================        ===========

(1) Extracted from December 31, 1997 audited financial statements.


See Notes to Condensed Consolidated Financial Statements

                                                                                


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                                                           12
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                 FIRST NATIONAL BANKSHARES CORPORATION AND SUBSIDIARY
                      CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                     (Unaudited)
                    (In thousands of dollars, except per share data)


                                            Three Months Ended
Nine months Ended
                                               September 30,
September 30,
                                     1998         1997         1998        1997
--------------------------------  ---------    ---------    -------    ---------
Interest Income
     Interest and fees on loans   $  1,652   $    1,523    $   4,767    $  4,279
     Interest and dividends 
     on securities:                   
          Taxable                      223          187          619         657
          Tax-exempt                    43           49          134         149
     Interest on Federal funds sold     63           58          172          92
                                   -------     --------     --------    --------
Total interest income                1,981        1,817         5,692      5,177
                                   -------     ---------    ---------    -------
Interest Expense
     Interest on deposits             758           716         2,217      2,015
     Interest on repurchase
           agreements                  18            14            47         28
     Interest on Federal
           funds purchased             -            -            -             5
     Interest on long-term
           borrowings                  92            84           272        175
                                   -------      -------      --------    -------
          Total interest expense      868           814         2,536      2,223

          Net interest income       1,113         1,003         3,156      2,954

Provision for loan losses              29             9           449         22
                               ----------    ----------     ---------    -------

          Net interest income after provision
              for loan losses       1,084           994         2,707      2,932
                                ---------     ---------     ---------    -------

Other income
     Service fees                      65           62          186          198
     Securities gain                   -            -            -            -
     Trust income                      21           32           66           44
     Other income                      55           22           98           77
                                  -------       -------      ------       ------
                                      141          116          350          319
--------------------------------- -------   ----------    ---------    ---------
Other expense
     Salaries and employee
           benefits                   384          400        1,163        1,256
     Net occupancy expense             73           41          202          155
     Equipment rental, 
          depreciation and
          maintenance                  66           82          215          222
     Data processing                   64           31          154           98
     Legal and professional            81           36          149           77
     Directors' fees and 
          shareholders' expense        21           20           74           83
     Other operating expenses         151          179          448          508
                                 --------   ----------    ---------    ---------
                                      840          789        2,405        2,399
-------------------------        --------   ----------    ---------    ---------

Income before income taxes            385          321          652          852

     Income tax expense                90          123          180          302
                                ----------   ----------    ---------    --------
          Net income          $       295     $    198     $    472     $    550
                              ===========     ========     ========     ========

Basic earnings per common
      share (Note 6)          $     1.53   $     1.03    $    2.45    $     2.86
                              ==========   ==========    =========    ==========
Diluted earnings per 
     common share (Note 6)    $     1.53   $     1.03    $    2.44    $     2.85
                              ==========   ==========    =========    ==========
Dividends per common share    $     0.40   $     0.40    $    1.20    $     1.20
                              ==========   ==========    =========    ==========

                     See Notes to Condensed Consolidated Financial Statements





                        FIRST NATIONAL BANKSHARES CORPORATION AND SUBSIDIARY
                     CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                          (Unaudited)
                             (In thousands of dollars, except per share data)



                                          Three Months Ended
Nine months Ended
                                          September 30,
September 30,
                                    1998         1997         1998          1997
-------------------------------------------   ----------    ---------    -------

Balance, beginning of period    $  9,376    $   9,035     $  9,325     $   8,841

     Net income                      295          198          472           550

     Cash dividends declared         (77)         (77)        (231)        (231)

     Issued 403 shares of common
          stock pursuant to 
          stock option exercise      -            -             21           -
     Change in net unrealized 
          gain (loss) on securities
           available for sale          6            6           13             2
                              ----------   ----------    ---------    ----------

Balance, end of period         $   9,600    $   9,162     $  9,600     $   9,162
                               ==========   ==========    =========    =========
































                      See Notes to Condensed Consolidated Financial Statements


<PAGE>


                         FIRST NATIONAL BANKSHARES CORPORATION AND SUBSIDIARY
                              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                (Unaudited)
                                          (In thousands of dollars)

                                                         Nine months Ended

                                                             September 30,
                                                            1998         1997
CASH FLOWS FROM OPERATING ACTIVITIES
     Net income                                        $    472     $     550
     Adjustments to reconcile net income to net cash
        provided by (used in) operating activities:
          Depreciation                                      190           169
          Provision for loan losses                         449            22
          Deferred income tax expense (benefit)             (95)           21
          Amortization of security premiums (accretion) of
            security discounts, net                         (40)          (29)
(Gain) loss on sale of other assets                         (29)           (2)
          (Gain) loss on disposal of bank premises and 
          equipment                                           1             -
          (Increase) decrease in accrued interest receivable 25            77
          (Increase) decrease in other assets                17           (38)
          Increase (decrease) in other liabilities          (95)          226
                                                          ---------    ---------
                Net cash provided by (used in) 
               operating activities                         895           996
                                                          ---------    ---------

CASH FLOWS FROM INVESTING ACTIVITIES
     Proceeds from maturities and calls of 
          securities held to maturity                        7,575         8,735
     Proceeds from maturities and calls 
          of securities available for sale                   2,000         1,500
     Purchases of securities held to maturity               (2,001)      (1,197)
     Purchases of securities available for sale             (7,071)      (3.004)
Principal collected on (loans made to) customers, net         (830)     (14,177)
     Proceeds from sale of other assets                         35           -
     Purchases of bank premises and equipment                  (39)        (326)
                                                          --------    ----------
               Net cash provided by (used in) 
                    investing activities                      (331)      (8.469)
                                                         ---------    ----------

CASH FLOWS FROM FINANCING ACTIVITIES
     Net increase (decrease) in demand deposits, 
          NOW and savings accounts                           1,673         (381)
     Proceeds from sales of (payments for matured)
         time deposits, net                                 (1,454)        4,196
     Net increase (decrease) in repurchase agreements         (105)        1,944
     Proceeds from long-term borrowings                          -         5,000
     Repayment of long-term borrowings                         (10)           -
     Proceeds from sale of common stock pursuant to stock
         option exercise                                        21             -
     Dividends paid                                           (231)        (231)
                                                           ---------    --------
               Net cash provided by (used in) 
                    financing activities                      (106)       10,528
                                                          ---------    ---------

     Increase (decrease) in cash and 
               cash equivalents                                458         3,055

     Cash and cash equivalents:
 
          Beginning                                           5,901        5,239
                                                          ---------    ---------

          Ending                                          $   6,359    $   8,294
                                                          =========    =========



                                            (Continued)
                      See Notes to Condensed Consolidated Financial Statements





                        FIRST NATIONAL BANKSHARES CORPORATION AND SUBSIDIARY
                    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
                                           (Unaudited)
                                     (In thousands of dollars)


                                                        Nine months Ended
                                                           September 30,
                                                         1998            1997
-----------------------------------------------------------------      -------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
     Cash payments for:
          Interest paid to depositors                   $   2,541    $    2,211
                                                         =========    ==========
          Income taxes                                  $     352    $      358
                                                         ==========     ========


SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES

     Dividends declared and unpaid                      $      77    $       77
                                                         =========    ==========

     Other real estate acquired in settlement 
                    of loans                            $     885    $        -
                                                         =========    ==========



































                   See Notes to Condensed Consolidated Financial Statements




                            FIRST NATIONAL BANKSHARES CORPORATION
                   CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



(In thousands of dollars, except per share data)       Unaudited
Unaudited
                                 Three Months Ended            Nine Months Ended
                                  September 30,                    September 30,
                                1998          1997             1998         1997

Net Income                $      295    $      198        $      472   $     550
     Other comprehensive 
     income, net of tax:
          Unrealized gains/
          (losses) on securities:
              Gain (loss) 
              arising during
              the period           6             6                13           2
              Reclassification
              adjustment           -             -                 -           -
Other comprehensive income         -             -                 -           -
                           ----------    ----------        ----------   --------
Comprehensive Income      $       301      $    204        $      485   $    552
                              =======      ========            ======      =====






































                    See Notes to Condensed Consolidated Financial Statements




                      FIRST NATIONAL BANKSHARES CORPORATION AND SUBSIDIARY
                       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                          (Unaudited)

Note 1.       Basis of Presentation
              The accounting and reporting policies of First National Bankshares
              Corporation and Subsidiary  (the  "Company")  conform to generally
              accepted accounting  principles and to general policies within the
              financial   services   industry.   The  preparation  of  financial
              statements  in  conformity  with  generally  accepted   accounting
              principles  requires  management to make estimates and assumptions
              that affect the  reported  amounts of assets and  liabilities  and
              disclosure of contingent assets and liabilities at the date of the
              financial  statements  and the  reported  amounts of revenues  and
              expenses during the reporting period.  Actual results could differ
              from those estimates.

              The condensed consolidated  statements include the accounts of the
              Company and its wholly-owned subsidiary,  First National Bank. All
              significant  intercompany  balances  and  transactions  have  been
              eliminated.   The   information   contained   in   the   condensed
              consolidated   financial  statements  is  unaudited  except  where
              indicated.  In the opinion of management,  all  adjustments  for a
              fair  presentation of the results of the interim periods have been
              made. All such adjustments were of a normal, recurring nature. The
              results  of  operations  for  the  three  and  nine  months  ended
              September 30, 1998 are not  necessarily  indicative of the results
              to be  expected  for the full  year.  The  condensed  consolidated
              financial  statements and notes included  herein should be read in
              conjunction with the Company's 1997 audited  financial  statements
              and Form 10-K.

              Certain amounts in the condensed consolidated financial statements
              for  the  prior  year,   as   previously   presented,   have  been
              reclassified to conform to current year classifications.

Note 2.       Securities
              The  amortized  cost,  unrealized  gains,  unrealized  losses  and
              estimated  fair values of  securities  at  September  30, 1998 and
              December 31, 1997 are summarized as follows (in thousands):

                                   September 30, 1998
                                                                       Estimated
                                 Amortized   Unrealized    Unrealized       Fair
                                 Cost         Gains        Losses          Value

        Held to maturity:
         Taxable:
          U.S. Treasury sec.   $      -    $       -     $       -     $      -
          U.S. Gov. agencies
               and corporations    3,229           8             -         3,237
          Corporate debt securities  -             -             -             -
                                --------  -----------   -----------    ---------
               Total Taxable       3,229           8             -         3,237

        Tax Exempt:
          State & political 
               subdivisions        3,511          102             -        3,613
                             -----------  -----------   -----------    ---------

        Total securities 
          held to maturity   $     6,740  $       110   $         -    $   6,850
                              ==========  ===========   ===========    =========







                         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                           September 30, 1998
                                                                       Estimated
                                Amortized    Unrealized    Unrealized       Fair
                                Cost          Gains        Losses          Value

  Available for Sale:
    Taxable:
    U.S. Treasury securities  $      -     $       -     $       -    $        -
    U.S. Government agencies
       and corporations           9,466            21            -         9,487
    Federal Home Loan Bank Stock    574             -            -           574
    Federal Reserve Bank Stock       57             -            -            57
    Other equities                    9             -            -             9
                              ----------   -----------   -----------    --------
        Total Taxable            10,106            21            -        10,127


 Tax Exempt:
    Federal Reserve Bank Stock        2             -             -            2
                             ----------   -----------   -----------  -----------

 Total securities 
     available for sale     $   10,108   $        21   $         -    $   10,129
                             ==========   ===========   ===========  ===========

                    

                                         December 31, 1997
                                                                       Estimated
                                Amortized    Unrealized    Unrealized       Fair
                                Cost          Gains        Losses          Value
             
 Held to maturity:
   Taxable:
      U.S. Treasury securities  $     500   $        -   $       -     $     500
      U.S. Government agencies
          and corporations          7,233            13            3       7,243
      Corporate debt securities       500             -            3         497
                               ----------     ---------    ----------   --------
 Total Taxable                      8,233            13            6       8,240


Tax Exempt:
  State & political subdivisions    4,089            76            -       4,165
                                ----------     ---------     ---------    ------


Total securities 
     held to maturity          $   12,322     $      89     $      6    $ 12,405
                               ==========     =========     =========    =======

                  
               
                                December 31, 1997
               
                                                                       Estimated
                                Amortized    Unrealized    Unrealized       Fair
                                Cost          Gains        Losses          Value
              
Available for Sale:
  Taxable:
    U.S. Treasury securities   $    1,994   $         3   $        -    $  1,997
    U.S. Government agencies
      and corporations              2,455             4            7       2,452
    Federal Home Loan Bank Stock      481             -            -         481
    Federal Reserve Bank Stock         57             -            -          57
                               ----------      ---------     ---------    ------
Total Taxable                       4,987             7            7       4,987


  Tax Exempt:
     Federal Reserve Bank Stock         2             -            -           2
                               ----------   -----------   -----------   --------


Total securities 
     available for sale       $    4,989   $         7   $         7    $  4,989
                                 ========     =========     =========    =======






                      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

              The  maturities,  amortized  cost and estimated fair values of the
              Company's  securities  at  September  30, 1998 are  summarized  as
              follows (in thousands):


                                                 Held to Maturity
          Available for Sale
                                    Estimated                   Estimated
                             Amortized      Fair         Amortized       Fair
                             Cost          Value         Cost           Value

 Due within 1 year        $    1,483   $     1,486   $     4,462    $     4,476
 Due after 1 but
      within 5 years           3,371         3,402         5,004          5,011
 Due after 5 but
      within 10 years          1,886         1,962             -              -
 Equity Securities                 -             -           642            642
                           ----------   -----------   -----------    -----------
                          $    6,740   $     6,850   $    10,108    $    10,129
                           ==========   ===========   ===========    ===========


              The  Company's  Federal  Reserve  Bank stock and Federal Home Loan
              Bank stock are equity  securities which are included in securities
              available  for  sale in the  accompanying  condensed  consolidated
              financial  statements.  Such securities are carried at cost, since
              they may only be sold back to the  respective  Federal  Reserve or
              Federal Home Loan Bank at par value.

              The proceeds from sales and calls and maturities of securities and
              the  related  gross gains and losses  realized  for the nine month
              periods  ended  September  30,  1998 and 1997 are as  follows  (in
              thousands):


                                                   Proceeds From
Gross Realized
                             Calls and    Principal
                  Sales      Maturities      Payments      Gains          Losses

Nine months
ended 9/30/98
Securities held 
 to maturity     $    -      $    7,575     $     -    $      -     $        -
Securities 
 available for sale   -           2,000           -           -              -
                 ---------   -----------   -----------  -----------   ----------
                 $    -      $    9,575     $     -    $      -     $        -
               ===========   ==========    ===========   ==========   ==========


Nine months 
ended 9/30/97:
  Securities held
  to maturity    $    -      $    8,735    $      -    $       -    $        -
              
Securities 
 available for sale   -           1,500           -            -             -
             -----------     ----------   -----------    -----------    --------
                $     -      $   10,235   $       -    $       -     $       -
             ===========   ==========   ===========   ===========    ===========

Note 3.       Loans

Total loans as of September 30, 1998 and December 31, 1997 are summarized
 as follows (in thousands):

                                            September 30,          December 31,
                                                  1998              1997
-- -----------------------------------------------------------------   ---------
 Commercial, financial and agricultural         $      26,601    $        29,431
 Real estate - construction                             1,910              3,515
 Real estate - mortgage                                30,678             29,067
 Installment loans to individuals                       8,329              6,389
 Other                                                  1,863              1,366
                                                --------------   ---------------
                  Total loans                          69,381             69,768

              Less unearned income                        (1)               (24)
                                               --------------   ----------------
         Total loans net of unearned income            69,380             69,744

              Less allowance for loan losses             (776)             (636)
                                               --------------   ----------------
                      Loans, net                $      68,604    $        69,108
                                                ==============   ===============







                      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Note 4.       Allowance for Loan Losses
              Analyses of the allowance for loan losses are presented  below (in
              thousands) for the nine month periods ended September 30, 1998 and
              1997:


                                          Nine months Ended
                                   September 30,                   December 31, 
                                1998             1997                     1997
                              -----------------------               ------------
                             


Balance, beginning of period     $ 636            $ 654                  $  654
                                 ------           ------                  ------

  Loans charged off               (346)            (105)                   (108)
  Recoveries                        37               42                      59
                                  -----            -----                   ---- 
Net (losses) recoveries          (309)             (63)                    (49)
                                 ------           ------                   -----

Provision for loan losses          449               22                      31
                                -------            -----                   -----
                                                  
Balance, end of period           $ 776            $ 613                    $ 636



              The  Company's  total  recorded  investment  in impaired  loans at
              September 30, 1998 and December 31, 1997 approximated $318,000 and
              $498,000, respectively, for which the related allowance for credit
              losses determined in accordance with generally accepted accounting
              principles approximated $250,000 and $215,000,  respectively.  All
              impaired loans were collateral  dependent,  and  accordingly,  the
              fair  value  of the  loan's  collateral  was used to  measure  the
              impairment of each loan. Impaired loans are included in nonaccrual
              loans.

Note 5.       Commitments and Contingencies
              The Company's  subsidiary  bank is, through the ordinary course of
              business,  party to financial  instruments with off-balance  sheet
              risk.  These  financial  instruments  include  standby  letters of
              credit and  commitments to extend credit.  The contract  amount of
              unused portions of existing lines of credit and other  commitments
              to lend as of  September  30,  1998 and  December  31, 1997 are as
              follows, in thousands of dollars:
                                                 September 30,   December 31,
                                                     1998            1997

              Commitments to extend credit       $     11,100    $   10,898
                                                ===============================

              Management is not aware of any commitments or contingencies  which
              may reasonably be expected to have a material  impact on operating
              results,  liquidity or capital resources. The Company continues to
              have commitments related to various legal actions,  commitments to
              extend  credit,  and  employment  contracts  arising in the normal
              course of business.

Note 6.       Earnings Per Share
              Earnings   per   common   share   are   computed   based   on  the
              weighted-average  shares  outstanding.  For the nine month periods
              ended  September 30, 1998 and 1997,  the  weighted-average  common
              shares  outstanding  was 192,649 and  192,500,  respectively.  The
              weighted  average  common shares  outstanding  for the three month
              periods then ended was also 192,903 and 192,500, respectively.






              Under Financial  Accounting Standards Statement No. 128, "Earnings
              per Share,"  the Company is required to present  basic and diluted
              per  share   amounts.   Diluted  per  share  amounts   assume  the
              conversion,  exercise or issuance of all  potential  common  stock
              instruments  unless the  effect is to reduce the loss or  increase
              the income  per  common  share  from  continuing  operations.  The
              Company has an incentive  stock option plan which is considered in
              determining  diluted  earnings per share.  At September  30, 1998,
              shares  totaling  3,603 were  outstanding  under the stock  option
              plan,  all being fully vested and  exercisable,  with 5,619 shares
              remaining as available for grant. Per share  information for prior
              periods  presented have been restated to conform to this Statement
              No 128.

              For the nine month periods  presented,  basic and diluted earnings
              per share are calculated as follows:




                                   September  30, 1998

                             Income                  Shares           Per Share
                             (Numerator)           (Denominator)         Amount
                             -----------          ---------------    -----------
Basic EPS
   Income available to
      common shareholders     $   472,000            $  192,649        $    2.45
                        
   Effective of Dilutive Securities
          Stock options            -                        918             -
                             -------------            -----------     ----------

Diluted EPS
   Income available to
      common shareholders     $   472,000                193,567       $    2.44
                               ===========            ===========       ========



                                   September 30,1997

                             Income                  Shares           Per Share
                             (Numerator)           (Denominator)         Amount
                            -------------           --------------   -----------
 Basic EPS
    Income available to
      common shareholders     $   550,000             $  192,500       $    2.86
                                                                  

    Effect of Dilutive Securities
         Stock options              -                        321              - 
                             -------------           -----------      ----------

Diluted EPS
    Income available to 
     common shareholders      $    550,000               192,821        $   2.85
                                ===========             =========        =======



              Grants under the plan are  accounted for following APB Opinion No.
              25 and related interpretations.  Accordingly, no compensation cost
              is recognized for grants under the plan. Had compensation cost for
              the  stock-based  compensation  plan been  determined on the grant
              date in  accordance  with FAS Statement No 123, the net income and
              earnings per share would have been reduced to the proforma amounts
              shown below (in thousands except earnings per share data):


                                                 Nine Months Ended
                                                    September 30,
                                            1998                  1997
                                            ----                  ----

              Net income:
                  As reported               $472                  $550          
                  Proforma                  $461                  $531
              Basic earnings per share:
                 As reported                $2.45                 $2.86
                  Proforma                  $2.39                 $2.76
              Diluted earnings per share:
                  As reported               $2.44                 $2.86
                  Proforma                  $2.38                 $2.75


Note 7.  Subsequent Event:

              On September 8, 1998, the Company  terminated merger  negotiations
              with   Pocahontas   Bankshares   Corporation,   a  West   Virginia
              corporation  and registered bank holding company and have canceled
              their  non-binding  letter of  intent  setting  forth  the  merger
              agreement.








                           MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                        FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion and analysis focused on significant changes in the
financial  condition  and results of  operations  of First  National  Bankshares
Corporation  (the "Company" ), and its  subsidiary,  First National Bank for the
periods  indicated.  This  discussion and analysis should be read in conjunction
with the Company's 1997 consolidated  financial statements and notes included in
its Annual Report to  Shareholders  and Form 10-K.  This  discussion may include
forward-looking  statements  based upon  management's  expectations,  and actual
results may differ materially.


EARNINGS SUMMARY
The Company reported net income of $295,000 for the three months ended September
30,  1998  compared  to  $198,000  for the quarter  ended  September  30,  1997,
representing a 49% increase. For the nine month period ended September 30, 1998,
the  Company's net income of $472,000  decreased 14% from the $550,000  reported
for the same period of 1997.  The material  items  impacting  both quarterly and
year to date earnings are discussed below.

Basic  earnings per common share was $1.53 for the quarter  ended  September 30,
1998 compared to the $1.03  reported for the third quarter of 1997. For the nine
month period ended  September 30, 1998,  basic earnings per common share totaled
$2.45  compared  with  $2.86 for the same  period of 1997.  An  analysis  of the
contribution  of each  major  component  of the  statement  of  income  to basic
earnings per share is presented in the following  chart both for the three month
and for the nine month periods ended September 30, 1998 and 1997.



                     Three Months Ended                    Nine months Ended
                         September 30,                     September 30,
                                          Increase                     Increase
                         1998     1997   (Decrease)    1998     1997  (Decrease)
--------------------------------------------------   -------   ------ ----------
Interest income     $   10.29   $  9.45   $   0.84    $ 29.53  $ 26.89  $  2.64
Interest expense         4.51      4.23       0.28      13.16    11.55     1.61
                     --------     -------  -------   --------  -------  --------
 Net interest income     5.78      5.22       0.56      16.37    15.34     1.03
Provision for 
     loan losses         0.15      0.05       0.10       2.18     0.11     2.07
                    ---------   --------- ---------  --------- -------- --------
Net interest income after
  provision for
  loan losses            5.63      5.17       0.46      14.19    15.23    (1.04)
                    ---------   -------------------  --------- --------  -------
Non-interest income      0.73      0.60       0.13       1.67     1.66     0.01
Non-interest expense     4.36      4.10       0.26      12.48    12.46     0.02
                    ---------     -------  --------   -------- --------  -------
     Income before 
       income taxes      2.00      1.67       0.33       3.38     4.43    (1.05)
Income tax expense       0.47      0.64      (0.17)      0.93     1.57    (0.64)
                    ---------   ---------  ---------   -------- -------  -------
  Net income        $    1.53   $  1.03    $  0.50     $ 2.45    $2.86   $(0.41)
                    =========   =========   ========   ======== =======  =======



The Company's annualized return on average assets (ROA) for the third quarter of
1998 was 1.23%  compared to 0.89% for the third  quarter of 1997.  This compares
with ROA of 0.66% and 0.83% for the nine month periods ended  September 30, 1998
and 1997, respectively.  Annualized return on average shareholders' equity (ROE)
was 12.44% for the third  quarter of 1998 compared to 8.60% in the third quarter
of 1997, while year-to-date ROE was 6.63% and 7.95% as of September 30, 1998 and
1997, respectively.

NET INTEREST INCOME
The most  significant  component of the  Company's  net earnings is net interest
income,  which represents the excess of interest income earned on earning assets
over the  interest  expense paid for sources of funds.  Net  interest  income is
affected  by changes in volume  resulting  from  growth  and  alteration  of the
balance sheet's composition, as well as by fluctuations in market interest rates
and maturities of sources and uses of funds.

For purposes of this  discussion,  net  interest  income is presented on a fully
tax-equivalent  basis  to  enhance  the  comparability  of  the  performance  of
tax-exempt to fully taxable earning assets.  For the periods ended September 30,
1998  and  1997,  the   tax-equivalent   adjustment  was  $69,000  and  $77,000,
respectively.





The  Company's  net  interest  income on a fully  tax-equivalent  basis  totaled
$3,225,000  for the nine month  period  ended  September  30,  1998  compared to
$3,031,000 for the same period of 1997,  representing an increase of $194,000 or
6.4%. For the quarters ended September 30, 1998 and 1997, net interest income on
a fully tax-equivalent  basis totaled $1,135,000 and $1,029,000,  an increase of
$106,000 or 10.3%. While net interest income increased,  the Company's net yield
on interest  earning  assets  decreased to 4.73% in 1998 from 4.84% in 1997. The
decrease  in the  net  yield  on  earning  assets  is due to a  higher  cost  of
rate-sensitive  liabilities  in 1998  compared  to 1997.  The  cost of  interest
bearing liabilities increased to 4.49% versus the previous year's 4.29%, and was
primarily  due to the  increased  volume of interest  bearing  deposits and FHLB
borrowings outstanding in 1998 versus 1997.

Loan interest income  improved  $488,000 to $4,767,000 for the nine months ended
September 30, 1998  compared to September  30, 1997,  an increase of 11.4%.  The
improvement  was  predominantly  a  result  of the  increased  volume  of  loans
outstanding  during  1998  compared  to 1997 (see TABLE II).  The  increase  was
further aided by management's decision to restore a long-time nonaccrual loan to
accrual  status in  September  1998.  The quality of the  commercial  credit has
steadily  improved  since it was first placed on nonaccrual  status in 1993. The
borrower  has  demonstrated  the cashflow  ability to support the restored  loan
balance. In addition,  recent independent  appraisals of the collateral securing
the  credit  indicate  the  Bank  is in a  well-secured  position  with  no loss
anticipated. As a result of the restoration,  approximately, $97,000 of interest
income was capitalized  and recorded in September 1998. The annualized  yield on
average  loans at September 30, 1998 was 9.19%.  Disregarding  the impact of the
capitalized interest,  the yield would have been 9.00%, which is more indicative
of the year to date yield.

Further analysis of the Company's yields on interest earning assets and interest
bearing  liabilities  and changes in its net  interest  income are  presented in
TABLE I and TABLE II.





































                                       TABLE I
                               AVERAGE BALANCE SHEET AND
                              NET INTEREST INCOME ANALYSIS
                                (In thousands of dollars)

                  Nine months Ended                      Nine months Ended
                 September 30, 1998                     September 30, 1997
                Average       Yield/              Average    Yield/
                Balance    Interest(1)   Rate     Balance    Interest(1)   Rate

INTEREST EARNING ASSETS

 Loans         $   69,178   $   4,767     9.19%   $ 62,023   $  4,279      9.20%

  Securities:
     Taxable       13,753         619      6.00     15,126        657       5.79
     Tax-exempt     3,771         203      7.18      4,129        226       7.29
               ----------   ---------    -------    -------   -------   --------

Total securities   17,524         822      6.25     19,255        883       6.11
               ----------   ----------   -------  ---------   ----------   -----


Federal funds
      sold          4,158          172      5.52     2,247         92       5.46
               ----------   ----------   -------   ---------   --------   ------

 Total interest earning
      assets       90,860        5,761      8.45    83,525      5,254       8.39
               ----------   ----------   -------   ---------   --------   ------

NON-INTEREST EARNING ASSETS
     Cash and due from banks                     2,300              2,606
     Bank premises and equipment                 2,010              2,089
     Other assets                                1,492              1,128
     Allowance for loan losses                    (710)              (643)
                                             ----------         ----------

              Total assets                   $   95,952         $   88,705
                                             ==========         ==========



INTEREST BEARING LIABILITIES
     Demand deposits      $   12,549   $  237    2.52   $ 13,285   $ 259    2.60
     Savings deposits         25,780      821    4.25     21,744     628    3.85
     Time deposits            29,931    1,159    5.16     29,426   1,128    5.11
                             -------   ------   -----     ------  ------   -----

Total Interest-bearing 
          deposits            68,260    2,217     4.33    64,455   2,015    4.17

  Repurchase agreements        1,605       47     3.90       975      28    3.83
  Federal funds purchased        -         -        -        168       5    3.97
  Long-term FHLB borrowings    5,496      272     6.60     3,462     175    6.74
                              -------   ------   -----    ------    ----- ------

Total other interest bearing
   liabilities                  7,101     319     5.99     4,605     208    6.02

Total Interest bearing
      liabilities               75,361  2,536     4.49    69,060   2,223    4.29

NON-INTEREST BEARING LIABILITIES
     AND SHAREHOLDERS' EQUITY
          Demand deposits                    $   10,250        $    9,440
          Other liabilities                         855               990
          Shareholders' equity                    9,486             9,215
                                             ----------        ----------

                  Total liabilities and
                  shareholders' equity       $   95,952        $   88,705
                                             ==========        ==========

              NET INTEREST
                  EARNINGS                   $    3,225        $    3,031
                                             ==========        ==========

NET YIELD ON INTEREST EARNING
     ASSETS                                       4.73%             4.84%
                                               ========          ========


(1)  - Calculated on a fully tax-equivalent basis using the rate of 34% for 
          1998 and 1997.

(2)  - For purposes of these computations,  nonaccrual loans are included in the
     amounts of average loans outstanding.  Included in interest is loan fees of
     $51,000 and 66,000 for 1998 and 1997, respectively.







                                       TABLE II

                            CHANGES IN INTEREST INCOME AND EXPENSE
                       DUE TO CHANGES IN AVERAGE VOLUME AND INTEREST RATES
                                (In thousands of dollars)

                                         Nine months Ended
                                September 30, 1998 vs. September 30, 1997
                                          Increase (Decrease)

                                               Due to Changes in:
                                       Volume(1)         Rate(1)         Total
INTEREST EARNING ASSETS
     Loans                          $        493   $         (5)  $        488

     Securities:
          Taxable                            (61)            23            (38)
          Tax-exempt (2)                     (20)            (3)           (23)
                                     ------------------------------------------
              Total securities               (81)            20            (61)

     Federal funds sold                        79             1             80
                                       -------------   ------------    ---------

          Total interest earning assets       491             16           507
                                  ____________________________________________

INTEREST BEARING LIABILITIES
     Demand deposits                    (14)              (8)            (22)
     Savings deposits                   124               69             193
     Time deposits                       19               12              31
     Repurchase agreements               18                1              19
     Federal funds purchased             (3)              (2)             (5)
     Long-term FHLB borrowings           101              (4)             97
                                       -------           ------          ----- 
          Total interest bearing 
               liabilities               245              68             313

         NET INTEREST EARNINGS   $       246    $         (52)     $      94
                                    ============   ================  ===========



(1)  - The change in  interest  due to both rate and  volume has been  allocated
     between the  factors in  proportion  to the  relationship  of the  absolute
     dollar amounts of the change in each.

(2) -     Calculated on a fully tax-equivalent basis using the rate of 34%.






PROVISION FOR LOAN LOSSES
The  provision  for loan  losses  represents  charges to earnings  necessary  to
maintain an adequate  allowance for potential  future loan losses.  Management's
determination  of the appropriate  level of the allowance is based on an ongoing
analysis of credit quality and loss potential in the loan portfolio, actual loan
loss experience  relative to the size and characteristics of the loan portfolio,
change in the composition and risk characteristics of the loan portfolio and the
anticipated influence of national and local economic conditions. The adequacy of
the allowance for loan losses is reviewed  quarterly and adjustments are made as
considered necessary.

During the third  quarter of 1998,  the Bank made a $29,000  provision  for loan
losses  compared to $9,000 during the third quarter of 1997. For the nine months
ended September 30, 1998 and 1997,  respectively,  the provision for loan losses
was $449,000  and  $22,000.  The  additional  provision in 1998 was  primarily a
result of a charge-off on a commercial real estate loan, as well as an increase
in the  specific  allocation  for a  previously  reserved credit. For additional
discussion of these factors and the related allowance for loan losses account,
refer to the Loan and Related Risk Elements section of this discussion.

NON-INTEREST INCOME
Non-interest income includes revenues for all sources other than interest income
and yield related loan fees. For the nine month period ended September 30, 1998,
non-interest  income totaled $350,000,  representing an increase of $31,000 from
the $319,000 recorded during the same period of 1997. As a percentage of average
assets,  non-interest  income  was 0.36% for both the nine month  periods  ended
September 30, 1998 and 1997,  respectively.  The increase in non-interest income
is due to increased trust and other income.  Trust income has increased  $22,000
or 50% during the nine months ended September 30, 1998 compared to 1997. Estates
and other trust services tend to fluctuate from year to year, and trust revenues
are currently  expected to increase from 1997's levels during 1998. Other income
for the nine months  ended  September  30, 1998 has  increased  $21,000 over the
comparable  period of 1997.  During the quarter,  the Bank  recognized a $29,000
gain from the sale of two  parcels of  property  acquired  in  foreclosure.  The
increases discussed above were offset by a general decrease in service fees.

On a quarter-to-quarter basis, non-interest income increased to $141,000 for the
third  quarter of 1998 compared to $116,000 for the third quarter of 1997 due to
the reasons discussed above.

NON-INTEREST EXPENSE
Non-interest  expense comprises overhead costs which are not related to interest
expense or to losses from loans or  securities.  As of September  30, 1998,  the
Company's  non-interest expense totaled $2,405,000,  representing an increase of
$6,000, or 0.25%, over total  non-interest  expense incurred for the nine months
ended September 30, 1997. However,  expressed as a percentage of average assets,
non-interest  expense  decreased to 2.51% at September 30, 1998, versus 2.69% at
September 30, 1997.

Salaries and employee  benefits are the  Company's  largest  non-interest  cost,
representing  approximately  48%  and  53%  of  total  non-interest  expense  at
September  30,  1998 and 1997,  respectively.  Salaries  and  employee  benefits
decreased  $93,000,  or 7.4% as of September  30, 1998 compared to September 30,
1997.  This  decrease  is  primarily  due to  the  net  impact  of  certain  job
eliminations  and  retirements,  net of new  employees  and  general  merit  and
promotion-related pay increases for existing staff.

For the nine month period ended  September  30, 1998,  data  processing  expense
totaled  $154,000, an increase of $56,000 from the same period in 1997. In 1998,
the  Company has  incurred  $30,000 of  additional  data  processing  expense in
connection  with its  Year  2000  testing.  The  Company  is  expected  to incur
additional expense during the remainder of 1998, however,  the total expense for
the Year 2000 testing related to the data processing function is not expected to
exceed $35,000 for the fiscal year 1998. See additional  discussion of Year 2000
issues in the Year 2000 section below.






Legal and professional  expense totaled $149,000 for the nine month period ended
September 30, 1998, an increase of $72,000 over the same period of 1997.  During
the quarter, the Company incurred  approximately  $56,000 in non-recurring legal
and  professional  fees associated with its unsuccessful merger with a bank
holding company.   No  further  legal  and   professional   fees   associated 
with the aforementioned attempted merger will be incurred as the Company
terminated the merger  negotiations.  No other  significant or unusual items
accounted for the additional increase.

On a  quarter-to-quarter  basis, other non-interest expense totaled $840,000 for
the third  quarter of 1998 from  $783,000  during the third  quarter of 1997, an
increase of $57,000.  The majority of the  increase  was due to  increased  data
processing and legal expenses as discussed above. These increases were offset by
a decrease in salaries and related benefits also discussed above.

INCOME TAXES
The Company's  income tax expense,  which includes both Federal and State income
taxes,  totaled  $180,000 for the nine month period  ended  September  30, 1998,
reflecting a $122,000  decrease when compared to the same period of 1997. Income
tax expense equaled 27.6% and 36.6% of income before taxes at September 30, 1998
and 1997,  respectively.  For financial reporting  purposes,  income tax expense
does not equal the Federal  statutory  income tax rate of 34.0% when  applied to
pre-tax income,  primarily because of state income taxes and tax-exempt interest
income included in income before income taxes.

FINANCIAL CONDITION
The Company's total assets were  $95,714,000 at September 30, 1998,  compared to
$95,430,000 at December 31, 1997,  representing a 0.29% increase,  while average
assets   increased  to  $95,952,000  from  $90,824,000  for  the  same  periods,
respectively.  Details  concerning  changes in the Company's major balance sheet
items and changes in financial condition follow.

Securities
The  Bank's  total  securities  portfolio  decreased  by  $442,000  or 2.5% from
December  31,  1997.  This  decrease  is a result  of normal  maturities  in the
Company's  securities  portfolio net of new  purchases.  As a general rule,  the
Company is classifying all new securities purchases as available for sale, which
has resulted in a higher  percentage  of available  for sale  securities  in the
Company's  portfolio  compared with previous periods. A summary of the Company's
securities portfolio (both held-to-maturity and  available-for-sale) is included
as Note 2 to the condensed consolidated financial statements.

Loans and Related Risk Elements
Loans, net of unearned  income,  decreased during the third quarter of 1998 from
$69,744,000  at year end 1997 to  $69,380,000  as of September  30,  1998.  Loan
growth has remained  relatively  flat during 1998 compared to 1997. The majority
of loan  growth  in  1998  has  been  mitigated  or  offset  by two  significant
commercial loan payoffs during the first quarter of 1998 and the foreclosure and
resulting charge-off of a commercial real estate credit in the second quarter of
1998. A summary of the Bank's loans by category in  comparison  to year end 1997
is included in Note 3 to the condensed consolidated financial statements.

In contrast to year to date loan growth,  the Bank has  experienced  loan growth
during  the last  three  months of  $731,000  or  1.06%,  and  future  growth is
expected,  primarily in high-quality commercial and commercial real estate loans
and  residential  mortgages.  Management anticipates that the recent  decline 
in the prime rate will impact the bank's loan portfolio primarily through
refinancings.  The Bank expects to remain  competitive  with the interest rates
offered on its loan products.  See the liquidity and interest rate management 
section for further discussion.

The  allowance  for loan losses was $776,000 at September  30, 1998  compared to
$636,000  at December  31,  1997.  Expressed  as a  percentage  of loans (net of
unearned income),  the allowance for loan losses was 1.12% at September 30, 1998
compared to 0.91% at December 31, 1997. Loans charged-off,  net of recoveries of
previously  charged-off loans,  totaled $309,000 and $63,000 for the nine months
ended September 30, 1998 and 1997, respectively. For the year ended December 31,
1997, net charge-offs totaled $49,000.  See Note 4 of the notes to the condensed
consolidated  financial  statements  for  an  analysis  of the  activity  in the
Company's  allowance for loan losses for the nine month periods ended  September
30, 1998 and 1997 and December 31, 1997.


The  Company's   allowance  for  loan  losses  is  divided  into  allocated  and
unallocated categories. The allocated portion of the allowance is established on
a loan-by-loan and pool-by-pool  basis. The unallocated  portion is for inherent
losses  that may  exist  as of the  evaluation  date,  but  which  have not been
specifically identified by the processes used to establish the allocated portion
due to inherent  imprecision  in the objective  process of  identification.  The
unallocated  portion  is  subjective  and  requires  judgment  based on  various
qualitative  factors in the loan  portfolio  and the market in which the Company
operates.  At  September  30, 1998,  the  unallocated  portion of the  allowance
approximated  $101,000 compared to $132,000 at year-end 1997, or 13.0% and 20.8%
of the total allowance,  respectively.  The unallocated  amount at September 30,
1998  and  December  31,  1997  is  considered   necessary  because  the  Bank's
methodology  used to calculate the allocated  portion of the allowance  does not
yet reflect the  additional  risk factors which may be inherent in the portfolio
due to the significant loan growth over the past two years.

The  Company  places  into  non-accrual  status  those  loans for which the full
collection  of  principal  and interest are unlikely or which are past due 90 or
more  days,  unless  the loans are  adequately  secured  and in the  process  of
collection.  A summary of the Company's past due loans and non-performing assets
is provided in the following table:

                         SUMMARY OF PAST DUE LOANS AND NON-PERFORMING ASSETS
                                       (in thousands of dollars)


                                        September 30,       December 31,
                                     1998          1997            1997
-------------------------------------------   -----------   --------------
Loans past due 90 or more days
     still accruing interest    $         -   $         -       $       -
                                 ===========   ===========       =========

Non-performing assets:
     Non-accruing loans         $       425   $       851       $   1,733
     Other real estate owned            875            22              22
                                 -----------   -----------       ---------
                                $     1,300   $       873       $   1,755
            

                                 ===========   ===========       =========



In total,  non-performing  assets decreased to $1,300,000 compared to $1,755,000
at December 31, 1997.  Non-accrual loans decreased  significantly to $425,000 as
of September 30, 1998, compared to $851,000 and $1,733,000 at September 30, 1997
and December 31, 1997,  respectively.  The $1,308,000 decrease from December 31,
1997 was due in large  part to the  Bank's foreclosure  on the real property
securing a commercial real estate  construction  note in May 1998. The
construction  note was placed on nonaccrual status in the first quarter of 1998.
The loan  customer has since filed for  bankruptcy,  and in the best interest of
the Bank,  the  property  was  seized at  foreclosure  in an effort to  minimize
losses. The property was subsequently offered at public auction and purchased by
the Bank for  $875,000  and placed in other real estate  owned in May 1998.  The
difference  between  the note  balance and the  purchase  price  ($273,000)  was
charged to the allowance for credit losses.  The property is  approximately  90%
to 95% complete  for  its  intended  use.  Currently,  the  Bank is in the
process of marketing the real estate at its current  completion  state and
several parties have expressed  interest in the site.  Depending upon the offers
received on the site, management may decide to complete construction of the
property in an effort to improve the site's marketability.  Approximately
$50,000  would be needed to complete construction of the property for its
intended use. Due to the extended period in which the Bank has held the
foreclosed  property, an updated appraisal  value  is  expected  to be  obtained
by year end to ensure proper valuation of property. Additional loss may be
incurred.

As a  result  of  the  aforementioned  foreclosure  and  related  charge  to the
allowance for credit loses and subsequent  evaluation of the  sufficiency of the
allowance,  a provision  for credit  losses of  $449,000  during the nine months
ended September 30, 1998 was necessary to restore the unallocated allowance to a
level considered appropriate by management.  Based upon management's analysis of
the  allocated and  unallocated  reserve  amounts as of September 30, 1998,  the
reserve  appears  adequate to absorb  specifically  identified  losses and other
losses inherent in the loan portfolio.  Future  provisions for credit losses are
not anticipated for the remainder of 1998.

Deposits
Total  deposits  increased  $219,000 or 0.27% to $78,555,000 as of September 30,
1998, from $78,336,000 at December 31, 1997. In addition, average total deposits
increased  from  $65,053,000 as of December 31, 1997 to $68,260,000 at September
30, 1998, or 4.70%.  The majority of the increase in average total  deposits was
in savings  accounts.  Average savings  accounts  increased from  $22,108,000 at
December 31, 1997 to $25,780,000 at September 30, 1998, or 16.61%.  The increase
is primarily due to the  competitive  rate the Bank offers on a certain  savings
product.  Overall,  deposits are expected to remain at their current  levels for
the remainder of 1998.






Long-term borrowings
Due to increased loan demand, the Company obtained a $5,000,000,  3-year advance
from the Federal Home Loan Bank in March of 1997. In anticipation of an increase
in interest rates on borrowed funds, the Company's  subsidiary bank borrowed the
funds  from  the  FHLB  of  Pittsburgh  to  lock-in  a  funding  source  for its
anticipated  loan  growth.  In  addition,  in late  December  1997,  the Company
match-funded  a  certain  commercial  note  with  $500,000  of  amortizing  FHLB
borrowings to lock-in an acceptable fixed interest spread.

LIQUIDITY AND INTEREST RATE RISK MANAGEMENT
Liquidity  reflects the Company's ability to ensure the availability of adequate
funds to meet loan commitments and deposit  withdrawals,  as well as provide for
other Company  transactional  requirements.  Liquidity is provided  primarily by
funds invested in cash and due from banks and Federal funds sold,  which totaled
$6,359,000  at September 30, 1998 versus  $5,901,000  at December 31, 1997.  The
Company's liquidity position is monitored continuously to ensure that day-to-day
as well as anticipated funding needs are met.

Further  enhancing the Company's  liquidity is the  availability as of September
30, 1998 of $5,945,000 in securities maturing within one year. Also, the Company
has  classified  additional  securities  with an estimated  fair value  totaling
$5,011,000  as  available  for  sale  in  response  to an  unforeseen  need  for
liquidity.  Additionally,  the  Company's  subsidiary  bank has unused  lines of
credit available under existing borrowing arrangements.

Management is not aware of any trends, commitments, events or uncertainties that
have resulted in or are reasonably  likely to result in a material change to the
Company's liquidity position.

Interest rate risk  represents  the  volatility in earnings and market values of
interest earning assets and liabilities  resulting from changes in market rates.
The  Company  seeks to  minimize  interest  rate  risk  through  asset/liability
management.  The Company's principal asset/liability  management strategy is gap
management. Gap is the measure of the difference between the volume of repricing
interest  earning  assets and  interest  bearing  liabilities  during given time
periods. When the volume of repricing interest earning assets exceeds the volume
of repricing  interest bearing  liabilities,  the gap is positive -- a condition
which usually is favorable during a rising rate environment.  The opposite case,
a negative gap,  generally is favorable during a falling rate environment.  When
the interest rate sensitivity gap is near zero, the impact of interest rate risk
is  limited,  for at this point  changes  in net  interest  income  are  minimal
regardless of whether  interest rates are rising or falling.  An analysis of the
Company's current gap position is presented in TABLE III.























                                        TABLE III
                               INTEREST RATE SENSITIVITY GAPS




                                     September 30, 1998
                                  (In thousands of dollars)

                                                      Repricing (1)
                           0 to 3      3 to 6       6 to 12     After
                           Months      Months       Months    12 Months    Total

INTEREST EARNING ASSETS
     Loans, net of 
          unearned income $21,378   $  4,104      $ 9,432    $  34,040   $68,954
     Securities             1,984      2,206        1,514       10,523    16,227
Federal funds sold          4,330        -            -           -        4,330
                          --------    -------       ------     -------- --------

   Total interest
      earning assets       27,692       6,310      10,946       44,563    89,511
                       -----------  ----------   ---------   ---------  --------

INTEREST BEARING LIABILITIES
     Demand deposits       12,032       -            -           -        12,032
     Savings deposits      27,438       -            -           -        27,438
     Time deposits         10,016       9,347        5,147       5,000    29,510
     Repurchase
         agreements         1,225       -            -           -         1,225
     Long-term FHLB
           borrowings           6           6            6        5,472    5,490
                         ---------    --------     -------     --------    -----

Total interest bearing
           liabilities     50,717       9,353       5,153        10,472   75,695
                          --------    --------    --------     --------  -------


Contractual interest 
     sensitivity gap      (23,025)     (3,043)      5,793        34,091   13,816

     Adjustment (2)        39,470     (39,470)        -            -         -
                        ---------  ----------   ---------     ---------  -------

Adjusted interest 
     sensitivity gap   $   16,445   $(42,513)   $   5,793   $   34,091  $ 13,816
                      ===========   =========  ==========    ========= =========

Cumulative adjusted
   interest
      sensitivity gap  $   16,445   $ (26,068)   $ (20,275)  $  13,816
                      ===========  ==========    ==========  =========

Cumulative adjusted
      gap ratio             2.46        0.57        0.69        1.18
                      ===========  ==========   =========   =========

Cumulative adjusted gap
 as a percentage
 of total earning assets  18.37%     (29.12%)    (22.65%)      15.43%
                       ==========  ==========   =========   =========



(1) -     Repricing on a contractual basis unless otherwise noted.

(2)  - Adjustment to approximate the actual repricing of interest bearing demand
     deposits and savings accounts based upon historical experience.


The  preceding  table  reflects  the  Bank's  cumulative  one year net  interest
sensitivity  position,  or gap, as 0.69,  or ($20,275).  Thus,  the Bank is in a
negative  gap  position  within a one year time  frame.  This  indicates  that a
significant increase in interest rates within a short time frame during the next
12 months could have a  significant  impact on the Bank's net  interest  income.
However,  interest rates on the majority of the Bank's interest-bearing deposits
may be changed by management at any time based on their terms.  Since management
believes that repricing of interest bearing  deposits in an increasing  interest
rate  environment  will  generally lag behind the repricing of interest  bearing
assets, the Bank's interest rate risk within one year is at an acceptable level.

The  information  presented  in the table above  represents a static view of the
Bank's gap position as of September  30,  1998,  and as such,  does not consider
variables such as future loan and deposit volumes, mixes and interest rates. The
Company seeks to maintain its adjusted interest sensitivity gap within 12 months
to a relatively small balance,  positive or negative,  regardless of anticipated
upward or down  movements in interest rates in an effort to limit the effects of
interest rate risk on Company net interest income.


CAPITAL RESOURCES





Maintenance of a strong capital  position is a continuing  goal of the Company's
management.  Through management of its capital  resources,  the Company seeks to
provide an  attractive  financial  return to its  shareholders  while  retaining
sufficient capital to support future growth.

Total  shareholders'  equity at September  30, 1998 was  $9,600,000  compared to
$9,325,000 at December 31, 1997, representing an increase of $275,000, or 2.95%.
A  reconciliation  of the  increase is reported  in the  Condensed  Consolidated
Statement of Shareholders' Equity.  Average total shareholders' equity expressed
as a percentage of average total assets decreased from 10.2% at December 31, 
1997 to 9.9% at September 30, 1998. Cash dividends totaling  $231,000,  or 
$1.20 per share were  declared  during the first  nine  months of 1998,  which
is the same dividend level paid in the same period of 1997. These payout levels
represented 49% and 42% of the  company's  year-to-date  earnings for September
30, 1998 and 1997, respectively.

REGULATORY RESTRICTIONS ON CAPITAL AND DIVIDENDS
The primary source of funds for the dividends paid by First National  Bankshares
Corporation is dividends  received from its subsidiary  bank.  Dividends paid by
the subsidiary bank are subject to restrictions by banking regulations. The most
restrictive  provision  requires  approval by the regulatory agency if dividends
declared  in any year exceed the year's net  income,  as  defined,  plus the net
retained profits of the two preceding years.

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the subsidiary bank to maintain  minimum amounts and ratios of total and
Tier I capital  (as  defined in the  regulations)  to  risk-weighted  assets (as
defined),  and of Tier  capital  (as  defined) to average  assets (as  defined).
Management  believes,  as of September 30, 1998,  that the subsidiary bank meets
all capital  adequacy  requirements to which it is subject,  as evidenced by the
following table:

                                  RISK-BASED CAPITAL RATIOS
                                     September 30, 1998

                                                                       Minimum
                                                   Actual           Requirement

          Total risk-based capital ratio           15.60%                8.00%
          Tier 1 risk-based capital ratio          14.43%                4.00%
          Leverage ratio                            9.83%                3.00%


Improved  operating results and a consistent  dividend program,  coupled with an
effective  management  of credit and interest rate risk will be the key elements
towards the Company  continuing to maintain its present strong capital  position
in the future.

YEAR 2000

The Year 2000 issue has been given a high priority of the Board and  management.
In  preparation  for the Year 2000,  the Board of  Directors  formed a Year 2000
Committee.  The Committee has been in existence since 1997 and has been charged
to review all  mission  critical  systems of the Bank to ensure that all systems
are Year  2000  compliant.  The  Committee  regularly  reports  to the Board the
progress of its review and testing of the mission critical systems.

The  Committee  has  developed  and  adopted a formal  Year 2000 Plan.  The plan
addresses  the risks and  concerns  of not being  Year 2000  compliant.  It also
outlines the scope of the review and related  timetable  for testing the mission
critical  systems.  A contingency plan has been  established  should the Company
encounter Year 2000 disruptions.  The Company has encountered  natural disasters
within  the past two  years in  which a  similar  contingency  plan was put into
action. Because of this recent experience, management feels confident the Bank
is in a good position to handle daily operations with  minimal  disruption  and
inconveniences to its customers should mission critical systems fail.


The Company has outsourceed a number of mission critical functions  with a data
processor.  The data processor is responsible for maintaining the general ledger
and all subsidiary ledgers.  In addition,  the data processor is responsible for
all report and statement generation.  Because of the significant reliance on the
data processor,  management and the data processor have partnered in testing the
data interface between the two. Final testing of the interface is expected to be
completed  by the end of the  year.  In  addition  to the  data  interface,  all
hardware  and  software  of the  Company  have been  inventoried.  To date,  all
hardware  has been  tested  for Year 2000  compliancy,  and  currently  all such
hardware is Year 2000 compliant. Testing of software is expected to be completed
by the end of the  first  quarter  of  1999,  along  with all  automated  teller
machines.  In  addition  to its  own  internal  testing,  management  will  gain
assurance  from all  major  vendors  and  suppliers  that  they  are  Year  2000
compliant.

To date the Company has incurred approximately $30,000 of noncapital expense for
the testing of the interface with its data  processor.  Approximately  $5,000 in
additional  expense will be incurred  throughout  the  remainder of the year for
final  testing.  In  addition,  the  Company  has  leased ten new  computers  in
preparation  for Year 2000.  The lease,  which is accounted  for as an operating
lease,  is for two years  with a  monthly  payment  of  approximately  $800.  As
mentioned  above,  the  automated  teller  machines  will be tested in the first
quarter of 1999. The total cost of the testing is not expected to exceed $4,000.
No other  material  outlays are expected by management in  preparation  for Year
2000.






PART II.  OTHER INFORMATION

     Item 1. Legal Proceedings
          Neither the Company nor its subsidiary  Bank is currently  involved in
          any  material  legal   proceedings,   other  than  routine  litigation
          incidental to their business.


     Item 2 - Changes in Securities
          None


     Item 3 - Defaults upon Senior Securities
          None


     Item. 4. Submission of Matters to a Vote of Security Holders
          No matters were submitted to stockholders during the third 
          quarter of 1997.


     Item 5. Other Information
          None


     Item 6.  Exhibits and Reports on Form 8-K
          a)  All exhibits  included with this filing follow the signature page.
              1.  Exhibit  11,  Computation  of Per  Share  Earnings,  is  filed
              herewith.  2.  Exhibit  27,  Financial  Data  Schedule,  is  filed
              herewith.

          b). A Form  8-K,  Current  Reports  was  filed on  September  6,  1998
              announcing  that the Company has  canceled its letter of intent to
              merge with  Pocahontas  Bankshares  Corporation,  a West  Virginia
              corporation and registered bank holding  company.  The document is
              incorporated herein by reference in its entirety.






                                                       SIGNATURES



Pursuant  to the  requirements  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.




                                        FIRST NATIONAL BANKSHARES CORPORATION



                                  By    /S/ L. Thomas Bulla
                                                               L. Thomas Bulla
                                         President and Chief Executive Officer


                                  By    /S/ Charles A. Henthorn
                                                            Charles A. Henthorn
                                            Secretary to the Board of Directors

                                  By    /S/ Matthew L. Burns
                                                          Matthew L. Burns, CPA
                                   Chief Financial Officer, First National Bank
                                   (Principal Financial and Accounting Officer)




Date:    November 12, 1998






                                                       EXHIBIT 11
                                            COMPUTATION OF PER SHARE EARNINGS


Basic Earnings Per Share
     Basic earnings per share is calculated  based upon the Company's net income
     after  income  taxes,  divided  by the  weighted  average  number of shares
     outstanding during the fiscal period.

Diluted Earnings Per Share
     Diluted  earnings  per share is  calculated  based upon the  Company's  net
     income after income taxes, divided by the weighted average number of shares
     outstanding during the period plus the conversion,  exercise or issuance of
     all potential common stock instruments unless the effect is to increase the
     income per common share from continuing operations.