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    June    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
June 30, 1998:

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






                    THIS REPORT CONTAINS   28 PAGES

<PAGE>









                 FIRST NATIONAL BANKSHARES CORPORATION

                               FORM 10-Q
            For the Three Month Period Ended June 30, 1998

                                 INDEX



                                      Page
PART I. FINANCIAL INFORMATION

   Item 1. Financial Statements

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

        Condensed Consolidated Statements of Income -
          Three Months Ended June 30, 1998 and 1997 and
          Six Months Ended June 30, 1998 and 1997                   4

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

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

        Condensed Consolidated Statement of Comprehensive Income
           Three Months Ended June 30, 1998 and 1997
           Six Months Ended June 30, 1998 and 1997                  8

        Notes to Condensed Consolidated Financial Statements     9-13


   Item 2. Management's Discussion and Analysis of Financial Condition
        and Results of Operations                               14-23



PART II.   OTHER INFORMATION

   Item 1. Legal Proceedings                                       24

   Item 2. Changes in Securities                                 none

   Item 3. Defaults upon Senior Securities
none

   Item 4. Submission of Matters to a Vote of Security Holders     24

   Item 5. Other Information                                       24

   Item 6. Exhibits and Reports on Form 8-K
        24



   SIGNATURES                                                      25


<PAGE>



PART I.  FINANCIAL INFORMATION

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




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

Cash and due from banks ............................    $ 2,703       2,742
Federal funds sold .................................      2,738       3,159
Securities held to maturity (estimated fair value
   $10,324 and $12,405 respectively) (Note 2) ......     10,242      12,322
Securities available for sale (Note 2) .............      7,130       4,989
Loans, net of allowance of $756 and
      $636, respectively (Notes 3 and 4) ...........     67,893
                                                                     69,108
Bank premises and equipment, net ...................      1,979       2,073
Accrued interest receivable ........................        589         660
Other assets .......................................      1,226         377

        Total assets ...............................    $94,500     $95,430
                                                        =======     =======



LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities
   Deposits:
      Noninterest bearing ..........................    $ 9,719     $10,035
      Interest bearing .............................     68,216      68,301
                                                        -------     -------
        Total deposits .............................     77,935      78,336
   Repurchase Agreements ...........................      1,058       1,330
   Long-term borrowings ............................      5,493       5,500
   Other liabilities ...............................        638
                                                                    -------
                                                                             939

        Total liabilities ..........................     85,124      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 .........................................      1,021       1,000
   Retained earnings ...............................      7,383       7,362
   Net Unrealized gain (loss) on securities ........          7
                                                                    -------
                                                                    -------
        Total shareholders' equity .................      9,376       9,325
                                                        -------     -------

        Total liabilities and shareholders' equity .    $94,500     $95,430






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


       See Notes to Condensed Consolidated Financial Statements

<PAGE>


                 FIRST NATIONAL BANKSHARES CORPORATION

              CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                              (Unaudited)
           (In thousands of dollars, except per share data)
<TABLE>
<CAPTION>



                                                     Three Months Ended
Six Months Ended
                                                         June 30,
June 30,
                                              1998     1997    1998      1997
<S>                                        <C>       <C>       <C>     <C>
 Interest Income
   Interest and fees on loans ..........   $ 1,533   $ 1,455   $ 3,115 $  2,756
   Interest and dividends on securities:
      Taxable ..........................       200       226       396       470
      Tax-exempt .......................        41        50        91       100
   Interest on Federal funds sold ......        60        22       109        34
                                           -------   -------   -------   -------
      Total interest income ............     1,834     1,753     3,711     3,360
                                                     -------   -------   -------


Interest Expense
   Interest on deposits ................       735       674     1,459     1,299
   Interest on Repurchase Agreements ...        15         8        29
                                                                              14
   Interest on Fed Funds Purchased .....      --           1      --           5
   Interest on Long-term Borrowings ....        90        85       180        91
      Total Interest Expense ...........       840       768     1,668     1,409

      Net interest income ..............       994       985     2,043     1,951

Provision for loan losses ..............       405        13       420        13
                                           -------   -------   -------   -------

      Net interest income after provision
        for loan losses ................       589       972     1,623     1,938

Other income
   Service fees ........................        65        65       121       136

   Trust income ........................        20         5        45        12

   Other income ........................        19        33        43        55
                                                     -------   -------   -------

                                               104       103       209       203
                                           -------   -------   -------   -------

Other expense
   Salaries and employee benefits ......       369       430       779       856
   Net occupancy expense ...............        66        67       129       119
   Equipment rental, depreciation and
       maintenance ..........                   75        73       149       140
   Other operating expenses .............      244       215       494       486
                                          -------   -------   -------   -------
                                               754       785     1,551    1,601
                                                    -------   -------   -------


Income before income taxes ..............     (61)      290       281       540

   Income tax expense/(benefit) .........     (25)      102       104       188
                                          -------   -------   -------   -------

      Net income ........................ $   (36)  $   188   $   177   $   352
                                          =======   =======   =======   =======

Basic earnings per common share (Note 6)  $ (0.19)  $  0.98   $ 0.92    $ 1.83
                                                              =======   =======

Diluted earnings per common share (Note 6)$ (0.19)  $  0.98   $ 0.92    $ 1.83
                                                              =======   =======

Dividends per common share .............. $  0.40   $  0.40  $  0.80    $  0.80
                                          =======   =======         =======
</TABLE>


       See Notes to Condensed Consolidated Financial Statements


<PAGE>



                 FIRST NATIONAL BANKSHARES CORPORATION

       CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                              (Unaudited)
           (In thousands of dollars, except per share data)
<TABLE>
<CAPTION>


                                           Three Months Ended  Six Months Ended
                                                June 30,           June 30,
                                            1998     1997       1998      1997
<S>                                       <C>        <C>       <C>       <C>
 Balance, beginning of period ..........  $ 9,464    $ 8,914   $ 9,325   $ 8,841

   Net income .........................      (36)        188       177       352

   Cash dividends declared ............      (77)        (77)     (154)    (154)

   Issued 403 shares of common
      stock pursuant to stock option
      exercise ........................       21        --          21      --

   Change in net unrealized (loss) on
      securities available for sale ...        4          10         7      (4)

Balance, end of period ................  $ 9,376     $ 9,035    $ 9,376  $ 9,035

</TABLE>










       See Notes to Condensed Consolidated Financial Statements


<PAGE>


                 FIRST NATIONAL BANKSHARES CORPORATION

            CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (Unaudited)
                       (In thousands of dollars)


                                                               Six Months Ended
                                                                    June 30,
                                                               1998    1997

 CASH FLOWS FROM OPERATING ACTIVITIES
   Net income ............................................   $ 177  $  352
   Adjustments  to  reconcile  net  income  to net cash
     provided  by (used  in)operating activities:
      Depreciation .......................................     127     113
      Provision for loan losses ..........................     420      13
      Deferred income taxes ..............................      14      --
      Amortization of security premiums (accretion) of
        security discounts, net ..........................   (25)      (28)
      (Gain) Loss on disposal of assets ..................     1        (2)
      (Increase) Decrease in accrued interest receivable .    71       (53)
      (Increase) Decrease in other assets ................     9      (140)
      Increase (Decrease) in other liabilities ...........  (301)     (279)

      Net cash provided by (used in) operating activities.   493       (24)

CASH FLOWS FROM INVESTING ACTIVITIES
   Proceeds from maturities and calls of securities held
      to maturity ........................................ 3,075      3,235
   Proceeds from maturities and calls of securities
      available for sale .................................  --        1,000
   Purchases of securities held to maturity ..............(1,000)      (195)
   Purchases of securities available for sale ............(2,101)         0
   Principal collected on (loans made to) customers, net .   (80)   (10,783)
   Purchases of bank premises and equipment ..............   (34)      (244)


      Net cash provided by (used in) investing activities.  (140)    (6,987)

CASH FLOWS FROM FINANCING ACTIVITIES
   Net increase (decrease) in demand deposits, NOW
      and savings accounts ...............................   419    (1,055)
   Proceeds from sales of (payments for matured)
      time deposits, net .................................  (820)    2,916
   Net increase (decrease) in Repurchase Agreements ......  (272)      388
   Proceeds from long-term borrowings ....................  --       5,000
   Repayments on long-term borrowings ....................    (7)     --
   Proceeds from sale of common stock pursuant to
      stock option exercise ..............................    21      --
   Dividends paid ........................................  (154)     (154)

      Net cash provided by (used in) financing activities.  (813)    7,095

      Increase (decrease) in cash and cash equivalents ...  (460)       84

Cash and cash equivalents:
   Beginning ............................................. 5,901     5,239
   Ending ...............................................$ 5,441   $ 5,323
                              (Continued)
       See Notes to Condensed Consolidated Financial Statements


<PAGE>



                 FIRST NATIONAL BANKSHARES CORPORATION
      CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
                              (Unaudited)
                       (In thousands of dollars)
<TABLE>
<CAPTION>



                                                       Six Months Ended
                                                          June 30,
                                                      1998     1997
<S>                                                     <C>    <C>
 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
   Cash payments for:
      Interest paid to depositors                       $1,448 $1,418
                                                        ====== ======
      Income taxes                                      $ 349  $  262
                                                        =====  ======


SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES

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

   Property acquired in settlement of loans            $  875  $  =

</TABLE>



































       See Notes to Condensed Consolidated Financial Statements


<PAGE>


                 FIRST NATIONAL BANKSHARES CORPORATION
       CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME



(In thousands of dollars, except per share data)
Unaudited                                          Unaudited
                                           Three Months Ended
Six Months Ended
                                    June 30,
June 30,
                                     1998    1997     1998      1997
-----------------------------------------  ------     ------  ------

Net Income                          $(36)  $  188     $  177  $ 352
Other comprehensive income,
   net of tax:
  Unrealized gains/(losses) on
   securities:
    Gain (loss) arising during the
       period                          4      10           7     (4)
        Reclassification adjustment    -        -          -      -
      Other comprehensive income       -        -          -      -
                                    ----   ------     ------  -----

Comprehensive Income                $(32)  $  198     $  184  $  348
                                    =====  ======     ======  ======




































       See Notes to Condensed Consolidated Financial Statements


<PAGE>



         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 its wholly owned  subsidiary,  First National Bank, (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
        six months  ended June 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 June 30, 1998 and  December  31, 1997 are
        summarized as follows (in thousands):

                                                                  June 30, 1998
                                                                       Estimated
                                    Amortized Unrealized  Unrealized   Fair
                                     Cost     Gains        Losses      Value
 Held to maturity:
   Taxable:
   U.S. Treasury Securities ......... $  --   $  --        $  --    $   --
   U.S. Government Agencies
   and corporations ...............   6,230      16            1        6,245
 Corporate Debt Securities ........     500      --            1          499
   Total Taxable ..................   6,730      16            2        6,744

 Tax Exempt:
 State & political subdivisions ...   3,512      68           --        3,580

 Total securities held to maturity .$10,242 $    84        $   2      $10,324


<PAGE>



         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

                                                               June 30, 1998
                                                                       Estimated
                                     Amortized  Unrealized Unrealized     Fair
                                         Cost      Gains     Losses       Value
         <S>                          <C>       <C>        <C>         <C>
          Available for Sale:
          Taxable:
           U.S. Treasury Securities   $  1,997  $     3    $  --        $  2,000
           U.S. Government Agencies
             and corporations ........... 4,480       8       --           4,488
           Federal Reserve Bank Stock ...    57       --         --
                                                                              57
           Federal Home Loan Bank Stock .   574       --         --
                                                                             574
           Other Equity Securities ......     9       --         --            9
                                         ------    -------    -------    -------
             Total Taxable .............. 7,117         11       --        7,128
          Tax Exempt:
           Federal Reserve Bank Stock ...     2       --         --
                                                   -------    -------    -------
                                                                               2

           Total securities available
              for sale .................$ 7,119    $    11  $    --      $ 7,130



                                                               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 held to
               maturity ...             $ 4,989    $     7    $     7    $ 4,989
</TABLE>




<PAGE>







         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The  maturities,  amortized  cost and  estimated  fair  values of the  Company's
securities at June 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             $3,983    $3,985  $ 2,977  $2,981
       Due after 1 but within 5 years 4,373    4,403   3,500     3,507
       Due after 5 but within 10 year 1,886    1,936       -       -
           Equity Securities               -       -      642     642
                                      ------  ------  -------  ------
                                      $10,242 $10,324 $ 7,119  $7,130
                                      ======= ======= =======  ======

   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,  including
   principal  payments  received on  mortgage-backed  securities and the related
   gross gains and losses realized for the six month periods ended June 30, 1998
   and 1997 are as follows (in thousands):

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

  Six months ended June 30, 1998
   Securities held to maturity     --      $3,075   $  --     $   --     --

 Securities available for sale     --        --        --         --     --
                                   --       3,075    $ --      $  --  $  --
===============================================    ======    =======   ========

  Six months ended June 30, 1997
   Securities held to maturity     --      $3,235    $  --     $  --     --

Securities available for sale      --       1,000       --        --     --
                                   --       4,235    $  --      $ --  $  --
===============================================    ======    =======   ========
(3)    Loans
        Total loans as of June 30, 1998 and December 31, 1997 are  summarized as
        follows (in thousands):

                                               June 30,     December 31,
                                                1998        1997
        Commercial, financial and agricultural    $26,067   $ 29,431
        Real estate - construction                  1,973      3,515
        Real estate - mortgage                     31,892     29,067
        Installment loans to individuals            7,068      6,389
        Other                                       1,652      1,366
                                                  --------  --------
           Total loans                             68,652     69,768

        Less unearned income                           (3)       (24)
           Total loans net of unearned income      68,649     69,744

        Less allowance for credit losses             (756)      (636)
                                                  --------  ---------
             Loans, net                           $67,893   $ 69,108
                                                  ========  ========



<PAGE>





         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Note 4.    Allowance for Credit Losses
        Analyses of the  allowance  for credit  losses are  presented  below (in
        thousands)  for the three month periods ended June 30, 1998 and 1997 and
        twelve months ended December 31, 1997:

                                Six Months Ended
                                June 30, Dec 31,
                                 1998 1997 1997
--------   ----------                      ------

        Balance, beginning of period       $    636   $  654  $  654

           Loans charged off                   (329)     (51)   (108)
           Recoveries                            29        27     59
                                           ---------  ---- -- ------
             Net (losses)/recoveries           (300)     (24)    (49)
                                           ---------  ------- -------

           Provision for credit losses           420      13      31
                                           ---------  ------- ------

        Balance, end of period             $     756  $  643  $  636
                                           =========  ======= ======

        The Company's  total  recorded  investment in impaired loans at June 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 unused  portions of existing lines of
        credit at June 30, 1998 and December 31, 1997, and the contract  amounts
        of commitments to lend are as follows, in thousands of dollars:

                                           June 30, December 31
                                            1998      1997

        Commitments to extend credit       $  10,396  $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: Basic earnings per common share is computed based
        upon the weighted  average  shares  outstanding.  The  weighted  average
        number of shares  outstanding  was  192,520  and  192,500  for six month
        periods ended June 30, 1998 and 1997, respectively.

        Under Financial  Accounting  Standards  Statement No. 128, "Earnings per
        Share," which was adopted on December 31, 1997,  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 June 30, 1998, 3,603 shares
        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 six month  periods  presented,  basic and diluted  earnings  per
share are calculated as follows:




<PAGE>





                                  June 30, 1998

                                      Income          Shares       Per Share
                                      (Numerator)     (Denominator)  Amount
   Basic EPS
      Income available to common
         shareholders                 $ 177,000        192,520     $  0.92

   Effect of Dilutive Securities
      Stock options                    -                  246
                                    --------          -------

   Diluted EPS
      Income available to common
        shareholders                 $  177,000        192,766     $  0.92



                                                 June 30, 1997

                                      Income          Shares       Per Share
                                      (Numerator)     (Denominator)  Amount
   Basic EPS
      Income available to common
           shareholders               $ 352,000       192,500      $  1.83

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

   Diluted EPS
      Income available to common
           shareholders              $  352,000       192,500       $  1.83

        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 FASB 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)::

                                              Six Months Ended
                                                 June 30,
                                              1998      1997
                                              ----      ----

        Net income:
           As reported                        $177    $352
             Proforma                         $166    $333
        Basic earnings per share:
           As reported                        $0.92   $1.83
           Proforma                           $0.86   $1.73
        Diluted earnings per share:
           As reported                        $0.92   $1.83
           Proforma                           $0.86   $1.73

Note 7.  Subsequent Event:

         On July 31, 1998,  the Company  signed a  non-binding  letter of intent
         setting  forth  an  agreement  in  principle  for the  merger  of First
         National Bankshares Corporation with Pocahontas Bankshares Corporation,
         a West Virginia  corporation and registered bank holding  company.  The
         agreement in principle contemplates that each share of the Company will
         be exchanged for 3.6 shares of Pocahontas Bankshares Corporation common
         stock.  The merger is contingent upon execution of a definitive  merger
         agreement  and  approval  by the  shareholders  of both  companies  and
         regulatory  authorities.  The merger is  anticipated  to be consummated
         under the pooling of interests method of accounting.



<PAGE>


                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 a net loss of $36,000 for the three  months ended June 30,
1998 compared to net income of $188,000 for the quarter ended June 30, 1997. For
the six month period ended June 30, 1998,  the  Company's net income of $177,000
decreased  $175,000 from the $352,000  reported for the same period of 1997. The
decreases in quarterly and year-to-date earnings were primarily  attributable to
an increased loan loss provision.

Basic  earning per common share were $(0.19) for the quarter ended June 30, 1998
compared to the $0.98 reported for the second quarter of 1997. For the six month
period  ended June 30, 1998,  basic  earnings  per common  share  totaled  $0.92
compared with $1.83 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 six
month periods ended June 30, 1998 and 1997.


                                      Three Months Ended Six Months Ended
                                      June 30,           June 30,
                                             Increase                  Increase
                                1998     1997(Decrease) 1998   1997   (Decrease)

Interest income                $9.53  $  9.11  $0.42   $19.28 $ 17.45  $ 1.83
Interest expense               4.36      3.99   0.37     8.66    7.32    1.34
   Net interest income         5.17      5.12   0.05    10.62   10.13    0.49
Provision for loan losses      2.10      0.07   2.03     2.18    0.07    2.11
   Net interest income after
   provision for loan losses   3.07      5.05  (1.98)    8.44   10.06   (1.62)
Non-interest income            0.54     0.54       -     1.09    1.05    0.04
Non-interest expense           3.92     4.08   (0.16)    8.06    8.31   (0.25)
                        ----   ------ -------  ------  ------ -------
   Income before income taxes  (0.31)    1.51  (1.82)    1.47    2.80   (1.33)
Income tax expense             (0.12)    0.53  (0.65)    0.55    0.97   (0.42)
                        ------ ------ -------  ------  ------ -------
           Net income         $(0.19)  $ 0.98$ (1.17)  $ 0.92 $  1.83 $ (0.91)


The Company's  annualized  return on average assets (ROA) for the second quarter
of 1998 was  (0.15)%  compared  to 0.87% for the second  quarter  of 1997.  This
compares  with ROA of 0.37% and 0.82% for the six month  periods  ended June 30,
1998 and 1997,  respectively.  Annualized return on average shareholders' equity
(ROE) was (1.52)% for the second quarter of 1998 compared to 8.33% in the second
quarter of 1997, while  year-to-date ROE was 3.74% and 7.80% as of June 30, 1998
and 1997, respectively.

The most significant factor impacting net income and related  performance ratios
was the unanticipated  foreclosure of collateral on a major loan customer and an
additional  provision for loan losses. This factor and other factors influencing
both year to date and  quarterly  results of  operations  are  addressed  in the
following sections.

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 June 30, 1998
and 1997, the tax-equivalent adjustment was $47,000 and $52,000, respectively.


<PAGE>


The  Company's  net  interest  income on a fully  tax-equivalent  basis  totaled
$2,090,000  for the six month period ended June 30, 1998  compared to $2,003,000
for the same period of 1997,  representing  an increase of $87,000 or 4.3%.  For
the  quarters  ended  June 30,  1998 and 1997,  net  interest  income on a fully
tax-equivalent  basis  totaled  $1,015,000  and  $1,011,000,   respectively,  an
increase  of less than 1.8%.  For the six months  ended June 30,  1998 and 1997,
respectively,  the Company's net yield on interest  earning assets  decreased to
4.63% from 4.92%.  This  decrease  was  primarily a result of the higher cost of
rate-sensitive  liabilities.  More  specifically,  the cost of interest  bearing
liabilities  increased  to 4.47%  versus  the  previous  year's  4.22%,  and was
primarily  due to the  increased  volume of interest  bearing  deposit  balances
outstanding  in 1998 versus 1997.  The net yield on interest  earning  assets is
expected  to remain at its  current  level for the  remainder  of 1998.  Further
analysis of the Company's yields on interest earning assets and interest earning
liabilities  and changes in its net interest income are presented in TABLE I and
TABLE II.




<PAGE>


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

                        Six Months Ended         Six Months Ended
                        June 30, 1997               June 30, 1998

                        Average           Yield/ Average            Yield/
                        Balance Interest(1)Rate  BalanceI Interest(1) Rate

INTEREST EARNING ASSETS
   <S>                 <C>       <C>       <C>   <C>      <C>       <C>
   Loans (2): .........$69,357   $3,115    8.98% $59,751  $2,756    9.22%
   Securities:
      Taxable ......... 13,142      396    6.03    16,280     470   5.77
      Tax-exempt ......  3,817      138    7.22     4,151     152   7.30
      Total securities  16,959      534    6.30    20,431     622   6.08

   Federal funds sold .  4,016      109    5.43     1,299      34   5.23

        Total interest
           assets ..... 90,332    3,758    8.32    81,481   3,412   8.37

NON-INTEREST EARNING ASSETS
   Cash and due from
      banks              2,352                      2,360
   Bank premises and
      equipment          2,037                      2,074
   Other assets          1,236                      1,108
   Allowance for
      loan losses         (678)                      (647)
                                -------                ------

        Total assets    $95,279                   $86,376
                          =======                =======

INTEREST BEARING LIABILITIES
Demand deposits         $12,471  $ 157    2.52    $12,924   $ 171   2.65
Savings deposits         25,132    528    4.20     21,601     408   3.78
Time deposits            30,004    774    5.16     28,614     720   5.03
   Total interest-bearing
     deposits            67,607  1,459    4.32     63,139   1,299   4.11

Repurchase Agreements      1,485      29  3.91        733      14   3.82
Federal Funds Purchased        -       -    -         254       5   3.94
Long-term FHLB borrowings  5,497     180  6.55      2,680      91   6.79
                          ------  ------  ----   ------ ------  ----
   Total other interest
      bearing liabilities  6,982     209  5.99      3,667     110   6.42

Total interest bearing
      liabilities         74,589   1,668  4.47     66,806   1,409   4.22

NON-INTEREST BEARING LIABILITIES
   AND SHAREHOLDERS' EQUITY
      Demand deposits     $10,265                $9,575
      Other liabilities      957                    968
      Shareholders' equity 9,468                  9,027
                          ------                 ------

     Total liabilities and
     shareholders' equity $95,279                $86,376
                          =========                =======

        NET INTEREST
           EARNINGS        $2,090                $2,003
                            ======                ======

NET YIELD ON INTEREST EARNING
   ASSETS                              4.63%                 4.92%
(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
$36,000 and $49,000 for 1998 and 1997, respectively.

 </TABLE>


<PAGE>


                               TABLE II

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


                                              Six Months Ended
                                           June 30, 1998 vs. June 30, 1997
                                                   Increase (Decrease)
                                                 Due to Changes in:

                                         Volume(1)   Rate(1)  Total
INTEREST EARNING ASSETS
   <S>                                    <C>      <C>         <C>
   Loans                                  $   508  $  (149)    $ 359

   Securities:
      Taxable                                  (80)        6     (74)
      Tax-exempt (2)                           (17)        3     (14)
                                            -------  -------  -------
        Total securities                       (97)        9     (88)
                                            -------  -------  -------

   Federal funds sold                            72        3      75
                                            -------  -------  ------

      Total interest earning assets            483      (137)    346
                                            ------   -------- ------

INTEREST BEARING LIABILITIES
   Demand deposits                              (7)       (7)    (14)
   Savings deposits                              61       59      120
   Time deposits                                 42       12       54
   Repurchase agreements                        15        -       15
   Federal funds purchased                      (5)       -       (5)
   Long-term FHLB borrowings                    89        -       89
                                            -------  -------  ------

      Total interest bearing liabilities        195       64     259
                                            -------- -------- ------

        NET INTEREST EARNINGS               $  288   $ (201)  $   87
                                            ======   =======  ======
</TABLE>


(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%.



<PAGE>


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 second quarter of 1998,  the Bank made a $405,000  provision for loan
losses  compared  to $13,  000 during the  second  quarter of 1997.  For the six
months ended June 30, 1998 and 1997, respectively, the provision for loan losses
was $420,000  and  $13,000.  The  additional  provision in 1998 was  primarily a
result of a significant  unexpected 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 six month  period  ended June 30,  1998,
non-interest  income totaled $209,000,  representing a slight increase of $6,000
from the $203,000  recorded  during the same period of 1997.  As a percentage of
average  assets,  non-interest  income  was  0.22%  and  0.24% for the six month
periods ended June 30, 1998 and 1997,  respectively.  This dollar  increase is a
direct  result of increased  trust  revenues,  which offset a decline in general
service fees.  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.

On a quarter-to-quarter basis, non-interest income increased to $104,000 for the
second  quarter of 1998  compared  to $103,000  for the second  quarter of 1997.
There were no significant  matters  influencing  non-interest  income during the
second quarter of 1998 compared to the same period of 1997.

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 June 30,  1998,  the
Company's  non-interest  expense totaled $1,553,000,  representing a decrease of
$48,000,  or 3.0%, over total  non-interest  expense incurred for the six months
ended June 30, 1997.  Expressed as a percentage of average assets,  non-interest
expense  decreased to 1.6% at June 30, 1998,  versus 1.9% at June 30, 1997. This
decrease  is  primarily  attributable  to the  Company's  salaries  and  related
benefits expenses.

Salaries and employee  benefits are the  Company's  largest  non-interest  cost,
representing approximately 50% and 53% of total non-interest expense at June 30,
1998 and 1997,  respectively.  Salaries and employee benefits decreased $77,000,
or 8.9% as of June  30,  1998  compared  to June  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.

On a quarter-to-quarter basis, other non-interest expense decreased to $756,000,
or 3.6%, for the second quarter of 1998 from $785,000  during the second quarter
of 1997. Salaries and employee benefits decreased to $369,000, or 14.1%, for the
second  quarter  of 1998  from  $430,000  for the same  period  of  1997.  These
quarter-to-quarter changes are due to the same reasons discussed above.

INCOME TAXES
The Company's  income tax expense,  which includes both Federal and State income
taxes, totaled $104,000 for the six month period ended June 30, 1998, reflecting
a $84,000 decrease when compared to the same period of 1997.  Income tax expense
equaled  37.2%  and  34.8% of  income  before  taxes at June 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.

CHANGES IN FINANCIAL CONDITION
The  Company's  total  assets were  $94,500,000  at June 30,  1998,  compared to
$95,430,000 at December 31, 1997,  representing a decrease of $930,000, or 1.0%,
while average assets  increased to  $95,279,000  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.


<PAGE>




Securities
The Bank's total securities portfolio decreased by $61,000 or 0.3% from December
31, 1997.  This  decrease is a result of the net impact of normal  maturities in
the Company's securities portfolio and regular purchases of new securities. 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 second quarter of 1998 from
$69,744,000  at year  end 1997 to  $68,649,000  as of June  30,  1998.  The 1.6%
decrease in the loan  portfolio  is largely due to two  commercial  loan payoffs
during the first quarter of 1998 and the foreclosure and resulting charge-off of
a commercial real estate credit.  However,  continued loan growth,  primarily in
high-quality  commercial  and  commercial  real  estate  loans  and  residential
mortgages, is anticipated by Bank management.  Average loans outstanding through
June 30, 1998, of  $69,357,000  increased  significantly  from the average loans
outstanding through June 30, 1997, of $59,751,000. 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.

The allowance for loan losses was $756,000 at June 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 1.10% at June 30, 1998 compared to
0.91% at December 31, 1997. Loans  charged-off,  net of recoveries of previously
charged-off  loans,  totaled  $300,000 and $24,000 for the six months ended June
30, 1998 and 1997,  respectively.  For the year ended  December  31,  1997,  net
charge-offs  totaled  $43,000.  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 six month  periods  ended June 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  June  30,  1998,  the  unallocated   portion  of  the  allowance
approximated  $177,000 compared to $132,000 at year-end 1997, or 23.4% and 20.8%
of the total allowance,  respectively.  The unallocated  amount at June 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)

                                           June 30,    December 31,
                                        1998     1997     1997
---------------------------------------------  -------  ----

Loans past due 90 or more days
      still accruing                $     -   $    -    $    -

NON-PERFORMING assets:
   Non-accruing loans                  $  478  $ 1,174   $1,733
   Other real estate owned                885       22       22
                                       ------  -------   ------

                                       $1,363  $ 1,196   $1,755
                                       ======  =======   ======


In total,  non-performing  assets decreased to $1,363,000 compared to $1,755,000
at December 31, 1997.  Non-accrual loans decreased  significantly to $478,000 as
of June 30, 1998,  compared to  $1,174,000  and  $1,733,000 at June 30, 1997 and
December 31, 1997, respectively.  The $1,255,000 decrease from December 31, 1997
was due in large part to the Bank's unexpected  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 previous quarter due to
the  customer's  serious  delinquency.  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.  The  difference  between  the note  balance  and the
purchase price  ($273,000)  was charged to the allowance for credit losses.  The
property is approximately 85% 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. Based upon an independent  appraisal of the site and  management's
estimate of the foreclosed property's fair value, management expects to sell the
property for at least the current recorded balance,  with no further loss to the
Bank.

As a  result  of  the  aforementioned  foreclosure  and  related  charge  to the
allowance  for credit  loses,  a provision  for credit  losses of  $405,000  was
necessary  during the second quarter 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 June 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  decreased  0.5%  to  $77,935,000  as of  June  30,  1998,  from
$78,336,000 at December 31, 1997. However, average total deposits increased from
$75,149,000  as of December 31, 1997 to  $77,872,000  at June 30, 1998, or 3.6%.
The increase in average total deposits was mainly  limited to savings  accounts.
Average  savings  accounts  increased  from  $22,108,000 at December 31, 1997 to
$25,132,000  at June 30, 1998,  or 13.6%.  The increase is primarily  due to the
competitive  rate the Bank offers on a certain  savings  product.  Deposits  are
expected to remain at 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
$5,441,000  at June 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 June 30,
1998 of $6,960,000 in securities maturing within one year. Also, the Company has
classified   additional   securities  with  an  estimated  fair  value  totaling
$3,507,000  as  available  for  sale  in  response  to an  unforeseen  need  for
liquidity.  Additionally,  the Company's  subsidiary bank has unused portions of
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
                             June 30, 1998
                       (In thousands of dollars)

<TABLE>
<CAPTION>
                                  Repricing (1)
                                       0 to 3  3 to 6  6 to 12 After
                                        Months  Months  Months 12 Months Total
<S>                                                 <C>       <C>        <C>     <C>
INTEREST EARNING ASSETS
   Loans, net of unearned income              20,090    $3,710     $6,762  $38,087  68,649
   Securities                                  4,497       980      1,482   10,413  17,372
   Federal funds sold                          2,738      --         --       --     2,738
                                             -------  --------   --------  -------  ------
        Total interest earning assets         27,325     4,690      8,244   48,500  88,759

INTEREST BEARING LIABILITIES
   Demand deposits                            12,129      --         --       --    12,129
   Savings deposits                           25,944      --         --       --    25,944
   Time deposits                              10,825     9,190      6,131    3,997  30,143
   Repurchase agreements                       1,058      --         --       --     1,058
   Long-term FHLB borrowings                       6         6          6    5,475   5,493
                                             -------  --------   --------  -------  ------

     Total interest bearing liabilities       49,962     9,196      6,137    9,472  74,767

      Contractual interest sensitivity gap   (22,637)   (4,506)      2,107   39,028  13,992
   Adjustment (2)                             25,897   (25,897)
  Cumulative adjusted interest
       sensitivity gap                      $  3,260  $(30,403)     $2,107 $ 39,028 $13,992

      Cumulative adjusted interest
           sensitivity gap ............     $  3,260   (27,143)   $(25,036)  13,992

        Cumulative adjusted gap ratio ..        1.14      0.54        0.62     1.19
                                            ========   ========  =======      ======

      Cumulative adjusted gap as a percentage
        of Total Earning Assets                 3.67%   (30.58)%    (28.21)%  15.76
</TABLE>


(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 0.62,  or $(25,036).  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 June  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 downward movements in interest rates in an effort to limit the effects
of interest rate risk on Company net interest income.





<PAGE>



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  June  30,  1998  was  $9,376,000  compared  to
$9,325,000  at December  31,  1997,  representing  an  increase  of  $51,000.  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 was approximately 9.9% at June 30, 1998,
which is slightly lower than December 31, 1997's level of 10.2%.  Cash dividends
totaling  $154,000,  or $0.40 per share were  declared  during the first half of
1998 which is the same dividend level paid during the first half of 1997.  These
payout  levels   represented   approximately   88%  and  44%  of  the  Company's
year-to-date  earnings for the  six-month  periods ended June 30, 1998 and 1997,
respectively. The Company's return on average equity (ROE) decreased to 3.7% for
the first half of 1998 compared to 7.8% in the first half of 1997. This decrease
is directly  attributable to the decreased  earnings for the first six months of
1998 compared to the same period in 1997.

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 (set forth in
the table below) 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 June  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
                             June 30, 1998
                                                      Minimum
                                          Actual      Requirement

      Tier 1 risk-based capital ratio         14.3%   4.00%
      Total risk-based capital ratio          15.5%   8.00%
      Leverage ratio                           9.8%   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.





<PAGE>



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 the  shareholders for voting during
      the second quarter of 1998.

   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). The  Company  did not file any Form 8-K,  Current  Reports  during the
        quarter ended June 30, 1998.  However, a Form 8-K was filed on August 8,
        1998 disclosing the Company's signing of a non-binding  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.


<PAGE>



                               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:    August 12, 1998



<PAGE>


                               EXHIBIT 11
                    COMPUTATION OF PER SHARE EARNINGS



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 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.