FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

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


For the quarterly period ended September 30, 1999

                                       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 No.  0-19618

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

Indiana                                                             35-1833586
(State or other jurisdiction of              (IRS Employer Identification No.)
incorporation or organization)

                                210 East Harriman
                             Bargersville, IN 46106
                    (Address of principal executive offices)
                                   (Zip Code)
                                 (317) 422-5171
              (Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Sections 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.

                                  Yes  X    No
                                      ---      ----

Outstanding Shares of Common Stock on November 1, 1999:  1,015,057


<PAGE>

               FIRST COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
                                   FORM 10-Q

                                     INDEX
                                                                       Page No.
                                                                       --------

Forward Looking Statement....................................................3

Part I. Financial Information:

  Item 1.  Financial Statements:

             Consolidated Condensed Balance Sheet............................4

             Consolidated Condensed Statement of Income......................5

             Consolidated Condensed Statement of Comprehensive Income .......6

             Consolidated Condensed Statement of Stockholders' Equity........7

             Consolidated Condensed Statement of Cash Flows..................8

             Notes to Consolidated Condensed Financial Statements............9

  Item 2.  Management's Discussion and Analysis of Financial
                 Condition and Results of Operations........................10

  Item 3.  Quantitative and Qualitative Disclosures About Market Risk.......13

Part II.  Other Information:

   Item 1. Legal Proceedings................................................17

   Item 2. Changes In Securities............................................17

   Item 3. Defaults Upon Senior Securities..................................17

   Item 4. Submission of Matters to a Vote of Security Holders..............17

   Item 5. Other Information................................................17

   Item 6. Exhibits and Reports on Form 8-K.................................17

Signatures..................................................................18


                                       2
<PAGE>

                           FORWARD LOOKING STATEMENT

This Quarterly Report on Form 10-Q ("Form 10-Q") contains statements which
constitute forward looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements appear in a number of
places in this Form 10-Q and include statements regarding the intent, belief,
outlook, estimate or expectations of the Company (as defined below), its
directors or its officers primarily with respect to future events and the future
financial performance of the Company. Readers of this Form 10-Q are cautioned
that any such forward looking statements are not guarantees of future events or
performance and involve risks and uncertainties, and that actual results may
differ materially from those in the forward looking statements as a result of
various factors. The accompanying information contained in this Form 10-Q
identifies important factors that could cause such differences. These factors
include changes in interest rates; loss of deposits and loan demand to other
financial institutions; substantial changes in financial markets; changes in
real estate values and the real estate market; or regulatory changes.


                                       3
<PAGE>

Item 1.           Financial Statements


               FIRST COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
                      Consolidated Condensed Balance Sheet
                                  (Unaudited)
<TABLE>
<CAPTION>

                                                             September 30,  December 31,
                                                                 1999           1998
                                                             ------------   ------------
<S>                                                          <C>            <C>
Assets
     Cash and due from banks                                 $  2,276,896   $  1,185,790
     Short-term interest-bearing deposits                      12,764,114     13,106,281
                                                             ------------   ------------
         Cash and cash equivalents                             15,041,010     14,292,071
     Investment securities
         Available for sale                                    20,599,728      7,047,098
         Held to maturity                                         802,342      1,032,525
                                                             ------------   ------------
              Total investment securities                      21,402,070      8,079,623
     Loans                                                    106,437,546     94,319,271
         Allowance for loan losses                              1,052,537        955,099
                                                             ------------   ------------
              Net Loans                                       105,385,009     93,364,172
     Premises and equipment                                     3,775,613      3,333,331
     Federal Home Loan Bank of Indianapolis stock, at cost        777,800        777,800
     Interest receivable                                        1,003,030        928,953
     Other assets                                               1,723,155        495,643
                                                             ------------   ------------

         Total assets                                        $149,107,687   $121,271,593
                                                             ============   ============

Liabilities
     Deposits
         Noninterest-bearing                                 $  9,373,239   $  7,976,350
         Interest-bearing                                     121,522,122     98,216,774
                                                             ------------   ------------
              Total deposits                                  130,895,361    106,193,124
     Federal Home Loan Bank of Indianapolis advances            5,668,014      4,753,457
     Other borrowings                                           2,621,679      1,381,933
     Interest payable                                             330,507        258,867
     Other liabilities                                            613,913        198,107
                                                             ------------   ------------
         Total liabilities                                    140,129,474    112,785,488
                                                             ------------   ------------

Commitments and Contingent Liabilities

Stockholders' Equity
     Preferred stock, no-par value
         Authorized and unissued - 1,000,000 shares
     Common stock, no-par value
         Authorized - 4,000,000 shares
    Issued and outstanding - 1,015,057 and 1,011,412 shares     6,913,199      6,869,426
Retained earnings and contributed capital                       2,088,401      1,597,830
Accumulated other comprehensive income (loss)                     (23,387)        18,849
                                                             ------------   ------------
    Total stockholders' equity                                  8,978,213      8,486,105
                                                             ------------   ------------

    Total liabilities and stockholders' equity               $149,107,687   $121,271,593
                                                             ============   ============
</TABLE>
See notes to consolidated condensed financial statements.

                                       4
<PAGE>

               FIRST COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
                   Consolidated Condensed Statement of Income
                                  (Unaudited)
<TABLE>
<CAPTION>

                                                          Three Months Ended             Nine Months Ended
                                                             September 30,                 September 30,
                                                      --------------------------    --------------------------
                                                          1999           1998           1999          1998
                                                      -----------    -----------    -----------    -----------
<S>                                                   <C>            <C>            <C>            <C>
Interest Income
     Loans, including fees                            $ 2,256,752    $ 1,951,845    $ 6,491,244    $ 5,632,415
     Investment securities
         Taxable                                          101,042         60,951        204,716        193,559
         Tax exempt                                       118,302         55,776        279,159         92,821
     Interest-bearing time deposits                       171,046         66,678        382,749        280,140
     Dividends                                             15,684         15,743         47,999         47,925
                                                      -----------    -----------    -----------    -----------
         Total interest income                          2,662,826      2,150,993      7,405,867      6,246,860
                                                      ===========    ===========    ===========    ===========

Interest Expense
     Deposits                                           1,366,061      1,095,113      3,717,186      3,223,139
     FHLB advances                                         81,465         43,943        238,497        131,238
     Other borrowings                                      44,180         12,363        111,067         12,363
                                                      -----------    -----------    -----------    -----------
         Total interest expense                         1,491,706      1,151,419      4,066,750      3,366,740
                                                      ===========    ===========    ===========    ===========

Net Interest Income                                     1,171,120        999,574      3,339,117      2,880,120
     Provision for loan losses                            (75,000)       (75,000)      (225,000)      (204,000)
                                                      -----------    -----------    -----------    -----------
Net Interest Income After Provision for Loan Losses     1,096,120        924,574      3,114,117      2,676,120
                                                      ===========    ===========    ===========    ===========

Other Income
     Trust fees                                             3,728          2,407         29,043         31,060
     Service charges on deposit accounts                   89,899         76,679        245,354        225,635
     Other operating income                                12,213          4,789         38,158         24,865
                                                      -----------    -----------    -----------    -----------
         Total other income                               105,840         83,875        312,555        281,560
                                                      ===========    ===========    ===========    ===========

Other Expenses
     Salaries and employee benefits                       431,485        365,774      1,211,700      1,017,706
     Premises and equipment                               106,170         80,030        289,873        235,489
     Advertising                                           42,310         30,360        127,372         93,597
     Data processing fees                                  90,663         78,284        254,398        207,155
     Deposit insurance expense                             23,308         13,349         52,651         39,226
     Printing and office supplies                          47,472         23,379        107,297         79,579
     Legal and professional fees                           69,380         32,461        182,006         96,395
     Telephone expense                                     23,160         17,844         69,684         51,404
     Other operating expense                              121,326        110,764        367,573        305,379
                                                      -----------    -----------    -----------    -----------
         Total other expenses                             955,274        752,245      2,662,554      2,125,930
                                                      ===========    ===========    ===========    ===========

Income Before Income Tax                                  246,686        256,204        764,118        831,750
     Income tax expense                                    39,477         75,695        171,524        263,555
                                                      -----------    -----------    -----------    -----------
Net Income                                            $   207,209    $   180,509    $   592,594    $   568,195
                                                      ===========    ===========    ===========    ===========

Basic earnings per share                              $       .20    $       .18    $       .58    $       .57

Diluted earnings per share                                    .20            .18            .56            .57
</TABLE>

See notes to consolidated condensed financial statements.

                                       5
<PAGE>

               FIRST COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
            Consolidated Condensed Statement of Comprehensive Income
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                     Three Months Ended       Nine Months Ended
                                                        September 30,           September 30,
                                                    ---------------------   ----------------------
                                                      1999        1998        1999         1998
                                                    ---------   ---------   ---------    ---------
<S>                                                 <C>         <C>         <C>          <C>
Net Income                                          $ 207,209   $ 180,509   $ 592,594    $ 568,195
Other comprehensive income, net of tax
    Unrealized losses on securities available
        Unrealized holding gains (losses) arising
        during the period, net of  tax expense
        (benefit) of $57,826,  $5,210, $(27,703)
        and $617                                       88,163       7,943     (42,236)         941
                                                    ---------   ---------   ---------    ---------
 Comprehensive income                               $ 295,372   $ 188,452   $ 550,358    $ 569,136
                                                    =========   =========   =========    =========
</TABLE>




See notes to consolidated condensed financial statements.

                                       6
<PAGE>

                FIRST COMMUNITY BANCSHARES, INC AND SUBSIDIARIES
            Consolidated Condensed Statement of Stockholders' Equity
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                     Retained
                                             Common Stock            Earnings     Accumulated
                                      --------------------------        and          Other
                                        Shares                      Contributed   Comprehensive
                                      Outstanding      Amount         Capital     Income (Loss)      Total
                                      -----------    -----------    -----------   -------------   -----------
<S>                                     <C>          <C>            <C>            <C>            <C>
Balances, January 1, 1999               1,011,412    $ 6,869,426    $ 1,597,830    $    18,849    $ 8,486,105

    Net income for the period                                           592,594                       592,594
    Unrealized losses on securities                                                    (42,236)       (42,236)
    Cash dividend ($.10 per share)                                     (102,023)                     (102,023)
    Purchase of stock                      (6,951)       (60,419)                                     (60,419)
    Rights exercised, net of cost
    of $1,768                              10,596        104,192                                      104,192
                                      -----------    -----------    -----------    -----------    -----------

Balances, September 30, 1999            1,015,057    $ 6,913,199    $ 2,088,401    $   (23,387)   $ 8,978,213
                                      ===========    ===========    ===========    ===========    ===========
</TABLE>


See notes to consolidated condensed financial statements.


                                       7
<PAGE>

               FIRST COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
                 Consolidated Condensed Statement of Cash Flows
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                                 Nine Months Ended
                                                                                    September 30,
                                                                            ----------------------------
                                                                                1999            1998
                                                                            ----------------------------
Operating Activities
<S>                                                                         <C>             <C>
     Net income                                                             $    592,594    $    568,195
     Adjustments to reconcile net income to net cash provided by
        operating activities
       Provision for loan losses                                                 225,000         204,000
       Depreciation and amortization                                             146,732         110,758
       Investment securities amortization                                         48,878          10,021
       Loss on sale of fixed assets                                                2,318
       Gain on sale of foreclosed real estate                                     (7,241)
       Net change in:
         Interest receivable                                                     (74,077)       (161,361)
         Interest payable                                                         71,640          15,198
         Other assets                                                           (238,888)       (140,414)
         Other liabilities                                                       375,084         (48,855)
                                                                            ------------    ------------
              Net cash provide by operating activities                         1,142,040         557,542
                                                                            ------------    ------------

Investing Activities
     Purchases of securities available for sale                              (15,360,373)     (3,246,815)
     Purchases of securities held to maturity                                   (225,000)
     Proceeds from maturities of securities available for sale                 1,689,110         420,000
     Proceeds from paydowns and maturities of securities held to maturity        455,000         675,000
     Net change in loans                                                     (12,322,018)     (8,356,826)
     Proceeds from sale of foreclosed real estate                                 72,500          70,883
     Purchases of property and equipment                                        (591,332)       (910,360)
     Premiums paid on life insurance                                            (950,000)
                                                                            ------------    ------------
              Net cash used by investing activities                          (27,232,113)    (11,348,118)
                                                                            ------------    ------------

Financing Activities
     Net change in
       Noninterest-bearing, NOW and savings deposits                           3,057,164       2,306,367
       Certificates of Deposit                                                21,645,073       3,494,481
     Proceeds from borrowings                                                  2,252,800         800,000
     Repayment of borrowings                                                     (98,497)        (97,210)
     Purchase of stock                                                           (60,419)
     Cash dividends                                                              (61,301)
     Rights exercised, net of costs                                              104,192          85,427
                                                                            ------------    ------------
              Net cash provided by financing activities                       26,839,012       6,589,065
                                                                            ------------    ------------

Net Change in Cash and Cash Equivalents                                          748,939      (4,201,511)

Cash and Cash Equivalents, Beginning of Period                                14,292,071      11,231,228
                                                                            ------------    ------------

Cash and Cash Equivalents, End of Period                                    $ 15,041,010    $  7,029,717
                                                                            ============    ============

Supplemental cash flow disclosures
     Interest paid                                                          $  3,995,110    $  3,351,542
     Income tax paid                                                             271,570          81,470
     Dividend payable                                                             40,722
</TABLE>

See notes to consolidated condensed financial statements.

                                       8
<PAGE>

                FIRST COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
              Notes to Consolidated Condensed Financial Statements
                               September 30, 1999
                                   (Unaudited)

Note 1: Basis of Presentation

The consolidated financial statements include the accounts of First Community
Bancshares, Inc. (the "Company") and its wholly owned subsidiaries, First
Community Bank & Trust, a state chartered bank (the "Bank") and First Community
Real Estate Management, Inc. ("FCREMI"). FCREMI holds and manages real estate
used by the Company and the Bank. A summary of significant accounting policies
is set forth in Note 1 of Notes to Financial Statements included in the December
31, 1998, Annual Report to Shareholders on Form 10-K. All significant
intercompany accounts and transactions have been eliminated in consolidation.

The interim consolidated financial statements have been prepared in accordance
with instructions to Form 10-Q, and therefore do not include all information and
footnotes necessary for a fair presentation of financial position, results of
operations and cash flows in conformity with generally accepted accounting
principles.

The interim consolidated financial statements at September 30, 1999, and for the
nine and three months ended September 30, 1999 and 1998, have not been audited
by independent accountants, but reflect, in the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows for
such periods.


Note 2: Earnings Per Share
<TABLE>
<CAPTION>
                                             Three Months Ended                Three Months Ended
                                             September 30, 1999                September 30, 1998
                                             ------------------                ------------------
                                                  Weighted                          Weighted
                                                   Average   Per Share               Average   Per Share
                                       Income      Shares      Amount    Income      Shares      Amount
                                      --------------------------------  --------------------------------
<S>                                   <C>        <C>           <C>      <C>         <C>           <C>
Basic earnings per share
      Income available to common
       shareholders                   $207,209   1,019,085     $ .20    $180,509       991,524    $ .18
                                                               -----                              -----

Effect of dilutive stock options                     6,663                              13,365
Effect of convertible debt              10,568      90,910
                                      --------  ----------              --------       -------
Diluted earnings per share
      Income available to common
       shareholders and assumed
       conversions                    $217,777   1,116,658     $ .20    $180,509     1,004,889    $ .18
                                      ========  ==========     =====    ========    ===========   =====
</TABLE>
<TABLE>
<CAPTION>

                                             Nine Months Ended                 Nine Months Ended
                                             September 30, 1999                September 30, 1998
                                             ------------------                ------------------
                                                  Weighted                          Weighted
                                                   Average   Per Share               Average   Per Share
                                       Income      Shares      Amount    Income      Shares      Amount
                                      --------------------------------  --------------------------------
<S>                                   <C>        <C>           <C>      <C>         <C>           <C>
Basic earnings per share
      Income available to common
       shareholders                   $592,594   1,020,263     $ .58    $568,195       990,413    $ .57
                                                               =====                              =====

Effect of dilutive stock options                     7,083                              13,910
Effect of convertible debt              24,404      68,724
                                      ---------  ---------              --------     ---------
Diluted earnings per share
      Income available to common
       shareholders and assumed
       conversions                    $616,998   1,096,070     $ .56    $568,195     1,004,323   $ .57
                                      ========   =========     =====    ========     =========   =====
</TABLE>
                                       9
<PAGE>

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

General
-------

The Bank is a subsidiary of the Company and operates as an Indiana commercial
bank. First Community Real Estate Management, Inc. is also a wholly-owned
subsidiary and its purpose is to purchase and lease back to the Bank properties
currently owned by the Bank thereby allowing the Bank to redeploy its capital to
other uses. FCREMI borrowed $800,000 at a rate of 1.125% under prime, adjustable
every 5 years for a term of 30 years, from another financial institution in
order to purchase the land and building of the Bank's Bargersville branch office
at 210 E. Harriman Ave. in Bargersville, Indiana and the land and building of
its Banta Street office at 597 Banta Street in Franklin, Indiana. On December
18, 1998, FCREMI borrowed $416,000 at a rate of 7.25% with payments due in
monthly installments through November 2003 with a final balloon payment due in
December 2003, from another financial institution in order to purchase the land
and building of the Bank's Greenwood branch office at 298 State Road 135 North
in Greenwood, Indiana. On August 6, 1999, FCREMI borrowed $422,800 from another
financial institution at a rate of 7.50% with payments of principal and interest
due monthly for 5 years based on a 20 year amortization schedule. The balance is
due at the end of 5 years or may be renewed at a variable interest rate. These
loan proceeds were used to purchase the land and buildings of the Bank's North
Vernon branch offices at 21 Madison Avenue and 521 N. State Street, North
Vernon, Indiana. The Bank makes monthly lease payments to FCREMI as lessee of
these locations. These lease payments are in an amount sufficient to service the
debt. In addition, on June 26, 1999, the Company entered into an agreement with
another financial institution to assume a lease on a building located at 34 West
Jefferson Street, Franklin, Indiana. The Company currently uses this facility to
house its operations center. As a part of the assumption agreement, the Company
received an assumption fee of $275,000 in July 1999. The assumption fee will be
considered deferred income and amortized over the term of the lease. As a bank
holding company, the Company depends upon the operations of its subsidiaries for
all revenue and reports its results of operations on a consolidated basis with
its subsidiaries.

The Bank's profitability depends primarily upon the difference between the
income on its loans and investments and the cost of its deposits and borrowings.
This difference is referred to as the spread or net interest margin. The
difference between the amount of interest earned on loans and investments and
the interest incurred on deposits and borrowings is referred to as net interest
income. Interest income from loans and investments is a function of the amount
of loans and investments outstanding during the period and the interest rates
earned. Interest expense related to deposits and borrowings is a function of the
amount of deposits and borrowings outstanding during the period and the interest
rates paid.

                                       10
<PAGE>

Results of Operations
---------------------

The Company had net income of $593,000 and $568,000 for the nine months, and
$207,000 and $181,000 for the three months ending September 30, 1999 and 1998,
respectively. Net interest income was $3.3 million and $2.9 million for the nine
months and $1.2 and $1.0 million for the three months ending September 30, 1999
and 1998, respectively.

Net income increased $25,000 and $26,000 for the nine and three months ended
September 30, 1999, when compared to the same periods in 1998, due primarily to
increases in net interest income offset by general increases in other expenses.
These increases in net interest income resulted primarily from increases in
interest income on loans and tax exempt investment securities offset by an
increase in interest expense. These increases in interest income and expense
resulted primarily from increases in the volume of these interest-earning assets
and interest-bearing liabilities. The increases in other expenses were directly
a result of the overall growth of the Bank. Income taxes decreased $92,000 and
$36,000 for the nine and three months ended September 30, 1999 respectively,
when compared to the same periods in 1998, because of increases in the Company's
tax exempt securities portfolio.

Balance Sheet
-------------

Loans and Deposits The Bank had an increase in net loans outstanding from $93.4
million on December 31, 1998 to $105.4 million on September 30, 1999. Deposits
increased from $106.2 million on December 31, 1998 to $130.9 million on
September 30, 1999.

These increases in loans and deposits can be attributed to several factors, none
of which can be singled out as the predominant reason for the growth, but each
of which is believed to have contributed to these increases. These factors
include: (i) increased population in the geographic areas serviced; (ii)
increased per-household disposable income in the geographic areas serviced;
(iii) an increase in the number of branch offices; and (iv) the preference of
certain individuals in the service area for dealing with a locally owned
institution.

Classification of Assets, Allowance for Loan Losses, and Nonperforming Loans The
Bank currently classifies loans as substandard, doubtful and loss to assist
management in addressing collection risks and pursuant to regulatory
requirements which are not necessarily consistent with generally accepted
accounting principles. Substandard loans represent credits characterized by the
distinct possibility that some loss will be sustained if deficiencies are not
corrected. Doubtful loans possess the characteristics of substandard loans, but
collection or liquidation in full is doubtful based upon existing facts,
conditions and values. A loan classified as a loss is considered uncollectible.
As of September 30, 1999, the Bank had $864,000 of loans classified as
substandard, none as doubtful and none as loss. The allowance for loan losses
was $1.1 million or 1.0% of net loans receivable at September 30, 1999 compared
to $955,000 or 1.0% of net loans receivable at December 31, 1998. A portion of
classified loans are non-accrual loans. First Community had non-accrual loans
totaling $324,000 at September 30, 1999 compared to $17,000 at December 31,
1998.

Liquidity and Capital Resources
-------------------------------

Liquidity refers to the ability of a financial institution to generate
sufficient cash to fund current loan demand, meet savings deposit withdrawals
and pay operating expenses. The primary sources of liquidity are cash,
interest-bearing deposits in other financial institutions, marketable
securities, loan repayments, increased deposits and total institutional
borrowing capacity.

Cash and interest-bearing deposits, when combined with investments, have
remained a relatively constant percent of total assets, while increasing in
dollar volume. Management's goal is to maintain approximately

                                       11
<PAGE>

twenty percent (20%) to twenty-five percent (25%) of total assets in cash,
interest-bearing deposits and investments in order to satisfy the Company's need
for liquidity and other short-term obligations.

Management believes that it has adequate liquidity for the Company's short- and
long-term needs. Short-term liquidity needs resulting from normal
deposit/withdrawal functions are provided by the Company retaining a portion of
cash generated from operations in a Federal Home Loan Bank ("FHLB") daily
investment account. This account acts as a short-term liquidity source while
providing interest income to the Company. Long-term liquidity and other
liquidity needs are provided by the ability of the Company to borrow from the
FHLB. The balance of its FHLB advances was $5.7 million and $4.8 million at
September 30, 1999 and December 31, 1998, respectively. The approved credit line
for the Company was approximately $17 million at September 30, 1999.

On October 30, 1998, the Company issued rights and warrants to shareholders to
purchase one share of common stock of the Company for every ten shares owned as
of October 29, 1998, subject to a minimum offer and purchase of 100 shares. The
rights were exercisable until March 30, 1999 and the warrants are exercisable
from September 15 to December 13, 1999. The net proceeds to the Company from the
sale of stock upon exercise of the rights, after deducting the expenses, were
$133,000. The purpose of the rights offering was to raise additional capital for
the Bank to support additional growth and for general corporate purposes.

In addition, on October 30, 1998, the Company commenced the offer and sale of up
to $1 million in unsecured convertible notes, of which all $1 million were sold.
The notes are due December 31, 2008, bear interest at the rate of 7% per annum
and, at the option of the holder, are convertible to common stock of the Company
at the conversion price of $11.00 per share. The net proceeds of this offering
were used to provide capital to FCREMI to acquire and lease branch facilities to
the Bank and to provide additional capital to the Bank to support asset growth.

At September 30, 1999, the Bank had core capital of approximately 8.9% and
risk-based capital of approximately 9.9%. The regulatory core and risk-based
capital requirements are 4.0% and 8.0% respectively.

Impact of Inflation and Changing Prices
---------------------------------------

The financial statements and related data presented herein have been prepared in
accordance with generally accepted accounting principles. These principles
require the measurement of financial position and operating results in terms of
historical dollars, without considering changes in the relative purchasing power
of money over time due to inflation.

The primary assets and liabilities of the Company are monetary in nature.
Consequently, interest rates generally have a more significant impact on
performance than the effects of inflation. Interest rates, however, do not
necessarily move in the same direction or with the same magnitude as the price
of goods and services. In a period of rapidly rising interest rates, the
liquidity and the maturity structure of the Company's assets and liabilities are
critical to the maintenance of acceptable performance levels.

Other
-----

The Securities and Exchange Commission maintains a Web site that contains
reports, proxy information statements, and other information regarding
registrants that file electronically with the Commission, including First
Community. The address is (http://www.sec.gov).


                                       12
<PAGE>

Year 2000 Compliance
--------------------

The Company's lending and deposit activities, like those of most financial
institutions, depend significantly upon computer systems. The Company is
addressing the potential problems associated with the possibility that the
computers which control its systems, facilities and infrastructure may not be
programmed to read four digit date codes. This could cause some computer
applications to be unable to recognize the change from the year 1999 to the year
2000, which could cause computer systems to generate erroneous data or to fail.

Management recognizes the possibility of certain risks associated with Year 2000
and is continuing to evaluate appropriate courses of corrective action. As of
September 30, 1999, the Company had completed inventory of all hardware and
software systems and had made all mission critical classifications. The Company
has implemented both an employee awareness program and a customer awareness
program aimed at educating people about the efforts being made by the Company as
well as bank regulators regarding the Year 2000 issue.

The Company's data processing is performed primarily by a third party servicer.
The Company has been informed by its primary service provider that all
reprogramming efforts were completed at December 31, 1998 and the Company has
completed testing, which revealed no material problems.

The Company also uses software and hardware which are covered under maintenance
agreements with third party vendors. Consequently, the Company is dependent on
these vendors to conduct its business. The Company has contacted each vendor to
request time tables for Year 2000 compliance and the expected costs, if any, to
be passed along to the Company. Most of the Company's vendors have provided
responses as to where they stand regarding Year 2000 readiness. Those who have
not responded to the Company's status requests are being contacted again.
Depending on the responses received from the third party vendors, the Company
will make decisions as to whether to continue those relationships or to search
for new providers of those services.

In addition to possible expenses related to the Company's own systems and those
of its service providers, the Company could be affected by the Year 2000
problems or fears affecting any of its depositors or borrowers. Such problems
could include delayed loan payments due to Year 2000 problems affecting the
borrower. Selected borrowers have been sent questionnaires to assess their
readiness. The Company is still in the process of evaluating that information.

At this time, it is estimated that costs associated with Year 2000 issues will
not be material in 1999. Although management believes it is taking the necessary
steps to address the Year 2000 compliance issue, no assurances can be given that
some problems will not occur or that the Company will not incur significant
additional expenses in future periods. If the Company is ultimately required to
purchase replacement computer systems, programs and equipment, or to incur
substantial expenses to make its current systems, program and equipment Year
2000 compliant, its financial position and results of operation could be
adversely impacted. Amounts expensed in 1999 and 1998 were immaterial.

Item 3         Quantitative and Qualitative Disclosures About Market Risk
------         ----------------------------------------------------------

One of the actions undertaken by the Company's management has been to adopt
asset/liability management policies in an attempt to reduce the susceptibility
of the Company's net interest spread to the adverse impact of volatile interest
rates by attempting to match maturities (or time-to-repricing) of assets with
maturities or repricing of liabilities and then actively managing any mismatch.
Accomplishing this objective requires attention to both the asset and liability
sides of the balance sheet. The difference between maturity of assets and
maturity of liabilities is measured by the interest-rate gap.

At September 30, 1999, the Company's one-year cumulative interest-rate gap as a
percent of total assets was approximately a negative 23.0%. This negative
interest-rate gap represents substantial risk for the Company in

                                       13
<PAGE>

an environment of rising interest rates. A negative interest-rate gap means the
Company's earnings are vulnerable in periods of rising interest rates because
during such periods the interest expense paid on liabilities will generally
increase more rapidly than the interest income earned on assets. Conversely, in
a falling interest-rate environment, the total interest expense paid on
liabilities will generally decrease more rapidly than the interest income earned
on assets. A positive interest-rate gap would have the opposite effect.

Asset management goals have been directed toward obtaining a suitable balance of
asset quality, liquidity and diversification in order to stabilize and improve
earnings. The asset management strategy has concentrated on shortening the
maturity of its loan portfolio by increasing adjustable-rate loans and
short-term installment and commercial loans. However, increasing short-term
installment and commercial loans increases the overall risk of the loan
portfolio. Such risk relates primarily to collection and to the fact that such
loans often are secured by rapidly depreciating assets. The Company's ratio of
non-performing assets to total assets was .31% at September 30, 1999 and .45% at
December 31, 1998.

The primary goal in the management of liabilities has been to extend the
maturities and improve the stability of deposit accounts. Management has
attempted to combine a policy for controlled growth with a strong, loyal
customer base to control interest expense.


                                       14
<PAGE>

The following table provides information about the Company's significant
financial instruments that are sensitive to changes in interest rates at June
30, 1999, the date of the most recent information available. The table presents
principal cash flows and related weighted average interest rates (on a tax
equivalent basis) by expected maturity dates.

<TABLE>
<CAPTION>
                                                                 Maturing in years ending June 30,
                                   -------------------------------------------------------------------------------------------

                                      2000       2001        2002        2003       2004    Thereafter    Total    Fair Value
                                   ---------  ---------   ---------   ---------  ---------  ----------   -------   ----------
<S>                                <C>        <C>         <C>         <C>        <C>        <C>         <C>         <C>
Assets
------
  Investment securities
  available for sale
      Fixed rate                   $  1,337   $  1,595    $    894    $  1,706   $  1,108    $  5,817   $ 12,457    $ 12,457
        Average interest rate         9.35%      6.79%       6.04%       5.75%      5.77%       6.10%      6.46%

  Investment securities held to
  maturity
      Fixed rate
        Average interest rate           215        122          19          20        253         208        837         822
                                      6.52%      6.59%       5.23%       5.36%      6.96%       6.26%      6.54%

  Loans
      Fixed rate                     16,775      9,781       7,902       5,627      3,654      19,431     63,169      63,493
        Average interest rate         8.66%      9.03%       8.77%       8.57%      8.41%       7.78%      8.44%
      Variable rate                  10,449      3,263       1,670       1,184      1,244      19,818     37,629      37,827
        Average interest rate         9.11%      9.14%       8.93%       8.59%      8.59%       8.04%      8.51%

Liabilities
-----------
  Deposits
    NOW, Money Market and
    Savings Deposits
      Variable rate                  44,860                                                               44,860      44,860
        Average interest rate         3.32%                                                                3.32%
    Certificates of Deposit
      Fixed rate                     43,954     18,015         656       1,900      1,500       1,094     67,119      67,279
        Average interest rate         5.37%      5.35%       5.83%       6.03%      5.70%       6.40%      5.41%

    FHLB advances
      Fixed rate                        156        638       1,122       2,603      1,234                  5,753       5,677
        Average interest rate         6.01%      6.05%       5.34%       5.55%      5.49%                  5.69%

    Other borrowings
      Fixed rate                         10         11          11          12        367       1,000      1,411       1,392
        Average interest rate         7.25%      7.25%       7.25%       7.25%      7.25%       7.00%      7.07%

      Variable rate                       8          9           9          10        757                    793         788
        Average interest rate         7.38%      7.38%       7.38%       7.38%      7.38%                  7.38%
</TABLE>


Except for the following items, management believes that the composition of the
Company's financial instruments at September 30, 1999 have not changed
significantly since June 30, 1999. From June 30, 1999 to September 30, 1999,
investment securities available for sale increased $8.1 million, or
approximately 65%. The majority of the increase is directly attributable to the
purchase of three U. S. agency securities totaling $6.9 million maturing in less
than one year. From June 30, 1999 to September 30, 1999, certificates of deposit

                                       15
<PAGE>

increased $10.9 million, or approximately 16%. The majority of the increase is a
result of certificates of deposit specials associated with the opening of a new
branch office. The certificates of deposit issued in the third quarter have an
average term of less than one year and rates comparable to the average interest
rate of the certificates of deposit portfolio at June 30, 1999.








                                       16
<PAGE>

                          Part II - Other Information

Item 1.           Legal Proceedings.
-------           ------------------
                  None.

Item 2.           Changes in Securities.
-------           ----------------------
                  Not applicable.

Item 3.           Defaults upon Senior Securities.
-------           --------------------------------
                  Not applicable.

Item 4.           Submission of Matters to a Vote by Security Holders.
-------           ----------------------------------------------------
                  None.

Item 5.           Other Information.
-------           ------------------
                  None.

Item 6.           Exhibits and Reports on Form 8-K.
-------           ---------------------------------
                  (a)      Exhibit 10.11 Deferred Director Fee Agreement by and
                           between First Community Bank & Trust and Frank D.
                           Neese dated October 29, 1999.
                  (b)      Exhibit 10.12 Deferred Director Fee Agreement by and
                           between First Community Bank & Trust and Roy Martin
                           Umbarger dated October 29, 1999.
                  (c)      Exhibit 10.13 First Amendment to the Deferred Fee
                           Agreement by and between First Community Bank & Trust
                           and Merrill M. Wesemann, M.D. dated October 29, 1999.
                  (d)      Exhibit 27 Financial Data Schedule.
                  (e)      No reports were filed on Form 8-K during the quarter
                           ended September 30, 1999.


                                       17
<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 COMMUNITY BANCSHARES, INC.

    Date:    November  15, 1999       By:  /s/ Albert R. Jackson, III
             ------------------          ------------------------------
                                         Albert R. Jackson, III
                                         Chief Executive Officer and Director
                                         Chief Financial Officer



                                       18