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, 2001

                                       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)

                                136 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, 2001          1,042,926

<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.......16

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 by 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,
                                                                         2001             2000
                                                                    -------------------------------
<S>                                                                 <C>               <C>
Assets
     Cash and due from banks                                        $   2,407,293     $   1,871,880
     Short-term interest-bearing deposits                               2,428,634         3,014,502
                                                                    -------------------------------
         Cash and cash equivalents                                      4,835,927         4,886,382
     Investment securities
         Available for sale                                             4,180,493         9,198,559
         Held to maturity                                                       0         1,348,778
                                                                    -------------------------------
              Total investment securities                               4,180,493        10,547,337
     Loans held for sale                                                1,549,362                 0
     Loans                                                            128,034,956       124,557,898
         Allowance for loan losses                                     (1,083,614)       (1,007,174)
                                                                    -------------------------------
              Net loans                                               126,951,342       123,550,724
     Premises and equipment                                             4,622,972         4,825,460
     Federal Home Loan Bank of Indianapolis stock, at cost              1,025,000           777,800
     Interest receivable                                                  954,501         1,172,511
     Cash value of life insurance                                       2,410,941         2,353,161
     Other assets                                                       1,188,814         1,081,502
                                                                    -------------------------------

         Total assets                                               $ 147,719,352     $ 149,194,877
                                                                    ===============================

Liabilities
     Deposits
         Noninterest-bearing                                        $  10,260,375     $  13,214,606
         Interest-bearing                                             108,033,708       109,793,721
                                                                    -------------------------------
              Total deposits                                          118,294,083       123,008,327
     Federal Home Loan Bank of Indianapolis advances                   15,500,000        13,000,000
     Other borrowings                                                   2,563,902         2,586,424
     Interest payable                                                     333,802           472,442
     Other liabilities                                                  1,064,593           811,666
                                                                    -------------------------------
         Total liabilities                                            137,756,380       139,878,859
                                                                    -------------------------------

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 - 1,042,926 and 1,039,926 shares        7,043,990         7,023,225
     Retained earnings and contributed capital                          2,891,773         2,352,588
     Accumulated other comprehensive gain (loss)                           27,209           (59,795)
                                                                    -------------------------------
         Total stockholders' equity                                     9,962,972         9,316,018
                                                                    -------------------------------

         Total liabilities and stockholders' equity                 $ 147,719,352     $ 149,194,877
                                                                    ===============================
</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,
                                                                ------------------------------------------------------------
                                                                    2001            2000           2001           2000
                                                                ------------------------------------------------------------
<S>                                                             <C>            <C>             <C>            <C>
Interest Income
     Loans, including fees                                      $  2,781,189   $  2,685,337    $  8,320,127   $  7,698,599
     Investment securities
         Taxable                                                       9,784         25,460          47,546        163,102
         Tax exempt                                                   55,171        115,065         243,281        364,483
     Interest-bearing time deposits                                   17,952          9,606          84,197        153,474
     Dividends                                                        18,263         16,664          55,896         49,065
                                                                ------------------------------------------------------------
         Total interest income                                     2,882,359      2,852,132       8,751,047      8,428,723
                                                                ------------------------------------------------------------

Interest Expense
     Deposits                                                      1,125,798      1,503,495       3,923,379      4,438,936
     FHLB advances                                                   230,656         62,064         675,478        188,906
     Other borrowings                                                 46,857         47,409         140,053        142,730
                                                                ------------------------------------------------------------
         Total interest expense                                    1,403,311      1,612,968       4,738,910      4,770,572
                                                                ------------------------------------------------------------

Net Interest Income                                                1,479,048      1,239,164       4,012,137      3,658,151
     Provision for loan losses                                       118,750         40,000         222,250        159,100
                                                                ------------------------------------------------------------
Net Interest Income After Provision for Loan Losses                1,360,298      1,199,164       3,789,887      3,499,051
                                                                ------------------------------------------------------------

Other Income
     Trust fees                                                        8,456          2,240          30,606         20,229
     Service charges on deposit accounts                             173,926        126,078         514,214        355,688
     Gain on sale of loans                                             7,321              0          11,969              0
     Gain (loss) on sale of securities                                33,018         (4,666)         45,540         (6,515)
     Other operating income                                           72,975         83,161         216,135        184,172
                                                                ------------------------------------------------------------
         Total other income                                          295,696        206,813         818,464        553,574
                                                                ------------------------------------------------------------

Other Expenses
     Salaries and employee benefits                                  600,737        567,478       1,768,124      1,676,337
     Premises and equipment                                          174,491        197,913         525,059        519,852
     Advertising                                                      33,878         37,762          96,953        120,581
     Data processing fees                                            167,855        140,954         479,939        372,473
     Deposit insurance expense                                        14,821         16,464          45,155         29,842
     Printing and office supplies                                     42,970         53,238         121,165        192,877
     Legal and professional fees                                      39,227         41,529         149,382        140,297
     Telephone expense                                                29,094         29,415          88,722         87,590
     Other operating expense                                         148,880        154,462         434,648        379,927
                                                                ------------------------------------------------------------
         Total other expenses                                      1,251,953      1,239,215       3,709,147      3,519,776
                                                                ------------------------------------------------------------

Income Before Income Tax                                             404,041        166,762         899,204        532,849
     Income tax expense                                              131,168          9,714         234,990         46,302
                                                                ------------------------------------------------------------

Net Income                                                       $   272,873    $   157,048     $   664,214    $   486,547
                                                                ============================================================

Basic earnings per share                                         $       .26    $       .15     $       .64    $       .48

Diluted earnings per share                                               .25            .15             .61            .47
</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,
                                                        ------------------------------------------------------------------
                                                             2001             2000             2001             2000
                                                        ------------------------------------------------------------------
<S>                                                      <C>              <C>             <C>              <C>
  Net Income                                             $  272,873       $  157,048      $  664,214       $   486,547
  Other comprehensive income, net of tax

      Unrealized gains (losses) on securities
      available

         Unrealized holding gains arising during the
         period, net of  tax expense of $7,487,
         $51,842, $75,108 and $50,342                        11,419           79,039         114,510            76,572

         Less: Reclassification adjustment for gains
         (losses) included in net income, net of tax
         benefit (expense) of $(13,075), $1,848,
         $(18,040), and $2,581                               19,943           (2,818)         27,506            (3,934)
                                                        ------------------------------------------------------------------

                                                             (8,524)          81,857          87,004            80,686
                                                        ------------------------------------------------------------------
   Comprehensive income                                  $  264,349       $  238,905      $  751,218        $  567,233
                                                        ==================================================================
</TABLE>


See notes to consolidated condensed financial statements

                                       6
<PAGE>

                FIRST COMMUNITY BANCSHARES, INC AND SUBSIDIARIES
            Consolidated Condensed Statement of Stockholders' Equity
                  For the Nine Months Ended September 30, 2001
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                           Retained
                                               Common Stock                Earnings            Accumulated
                                      -------------------------------         and                 Other
                                          Shares                          Contributed         Comprehensive
                                        Outstanding       Amount            Capital            Gain (loss)          Total
                                      ----------------------------------------------------------------------------------------
<S>                                     <C>              <C>               <C>                 <C>                <C>
Balances, January 1, 2001               1,039,926        $7,023,225        $2,352,588          $ (59,795)         $9,316,018

    Net income for the period                                                 664,214                                664,214
    Unrealized gains on securities                                                                87,004              87,004
    Cash dividend ($.12 per share)                                           (125,029)                              (125,029)
    Options exercised, net of cost          3,000            20,625                                                   20,625
    Tax benefits on options                                     140                                                      140
                                      ----------------------------------------------------------------------------------------

Balances, September 30, 2001            1,042,926        $7,043,990        $2,891,773           $ 27,209          $9,962,972
                                      ========================================================================================
</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,
                                                                                -----------------------------------
                                                                                     2001              2000
                                                                                -----------------------------------
<S>                                                                             <C>               <C>
Operating Activities
     Net income                                                                 $      664,214    $      486,547
     Adjustments to reconcile net income to net cash provided by
        operating activities
       Provision for loan losses                                                      222,250           159,100
       Depreciation and amortization                                                  278,264           286,704
       Investment securities (accretion) amortization                                  43,494            (4,868)
            Origination of loans for sale                                          (1,669,438)                0
            Proceeds from the sale of loans                                           132,045                 0
       Gain on sale of loans                                                          (11,969)                0
            (Gain) loss on sale of securities available for sale                      (45,540)            6,515
       Net change in:
         Cash value of life insurance                                                 (57,780)          (56,985)
         Interest receivable                                                          218,010            80,296
         Interest payable                                                            (138,640)           79,819
         Other assets                                                                  59,909           (89,413)
         Other liabilities                                                            234,959           166,562
                                                                                -----------------------------------
              Net cash provided (used) by operating activities                        (70,222)        1,114,277
                                                                                -----------------------------------

Investing Activities
     Purchases of securities held to maturity                                               0        (4,973,179)
     Purchase of FHLB stock                                                          (247,200)                0
     Proceeds from paydowns, maturities, and sales of securities available for sale 6,362,193         4,256,137
     Proceeds from paydowns, maturities, and sales of securities held to maturity     150,769        10,522,000
     Net change in loans                                                           (3,829,169)      (10,186,455)
     Purchases of property and equipment                                              (75,776)         (395,637)
                                                                                -----------------------------------
              Net cash provided (used) by investing activities                      2,360,817          (777,134)
                                                                                -----------------------------------

Financing Activities
     Net change in
       Noninterest-bearing, NOW and savings deposits                                2,766,830          (959,625)
       Certificates of Deposit                                                     (7,481,074)          776,686
     Proceeds from borrowings                                                       8,000,000        13,000,000
     Repayment of borrowings                                                       (5,522,522)      (14,117,360)
     Purchase of stock                                                                      0           (89,953)
     Cash dividends                                                                  (124,909)         (122,752)
     Rights and options exercised, net of costs                                        20,625           170,854
                                                                                -----------------------------------
              Net cash used by financing activities                                (2,341,050)       (1,342,150)
                                                                                -----------------------------------

Net Change in Cash and Cash Equivalents                                               (50,455)       (1,005,007)

Cash and Cash Equivalents, Beginning of Period                                      4,886,382         4,603,201
                                                                                -----------------------------------

Cash and Cash Equivalents, End of Period                                          $ 4,835,927       $ 3,598,194
                                                                                ===================================

Supplemental cash flow disclosures
     Interest paid                                                              $   4,877,550     $   4,690,753
     Held to maturity securities transferred to available for sale securities       1,196,445                 0
     Loans transferred to real estate owned                                           305,091                 0
     Loans to finance the sale of real estate owned                                    98,790                 0
     Income tax paid                                                                        0            99,733
     Dividend payable                                                                  41,717            41,597
</TABLE>

See notes to consolidated condensed financial statements.

                                       8
<PAGE>

                FIRST COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
         Notes to Unaudited Consolidated Condensed Financial Statements


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, 2000, Annual Report to Stockholders. 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 condensed financial statements at September 30, 2001,
and for the three months and nine months ended September 30, 2001 and 2000, 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, 2001                           September 30, 2000
                                                ------------------                           ------------------
                                                   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                    $ 272,873       1,042,154     $ .26            $ 157,048     1,039,940     $ .15
                                                                  =========                                    =========

Effect of dilutive stock options                             505
Effect of convertible debt                10,568          90,910                         10,568        90,910
                                      ---------------------------                    -------------------------
Diluted earnings per share
      Income available to  common
       shareholders and assumed
       conversions                     $ 283,441       1,133,569     $ .25            $ 167,616     1,130,850     $ .15
                                      =====================================          ===================================
</TABLE>

                                       9
<PAGE>

<TABLE>
<CAPTION>
                                                 Nine Months Ended                            Nine Months Ended
                                                September 30, 2001                           September 30, 2000
                                                ------------------                           ------------------
                                                   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                    $ 664,214       1,041,131     $ .64            $ 486,547     1,022,145     $ .48
                                                                  =========                                    =========

Effect of dilutive stock options                             253                                        2,614
Effect of convertible debt                31,704          90,910                         21,136        60,607
                                      ---------------------------                    -------------------------
Diluted earnings per share
      Income available to  common
       shareholders and assumed
       conversions                     $ 695,918       1,132,294     $ .61            $ 507,683     1,085,366     $ .47
                                      =====================================          ===================================
</TABLE>


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. In 1998, the Company formed a new subsidiary, First Community Real Estate
Management, Inc. whose purpose is to purchase and lease back to the Bank
properties originally owned by the Bank thereby allowing the Bank to redeploy
its capital to other uses. The Bank makes monthly lease payments to FCREMI as
lessee of these locations. These lease payments are sufficient to service the
debt incurred by FCREMI to purchase these properties. 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.

Financial Condition
-------------------

Total assets decreased $1.5 million, or 1.0%, to $147.7 million at September 30,
2001, from $149.2 million at December 31, 2000. Net loans increased $3.4
million, or 2.8% from $123.6 million on December 31, 2000 to $127.0 million on
September 30, 2001. Total investment securities decreased from $10.5 million at
December 31, 2000 to $4.2 million at September 30, 2001. Deposits decreased $4.7
million or 3.8% from $123.0 million on December 31, 2000 to $118.3 million on
September 30, 2001. FHLB advances increased $2.5 million or 19.2% during the
same time frame. Stockholders equity was $10.0 million at September 30, 2001 as
compared to $9.3 million at December 31, 2000.

The bank has continued to see demand in both its commercial real estate and
installment sections of the loan portfolio during the nine months ended
September 30, 2001. These net loan increases of $3.4 million were primarily
funded by new advances from the Federal Home Loan Bank ("FHLB") of Indianapolis.
Management seeks out alternative funding sources, such as FHLB advances, when
the terms of these funding sources outperform traditional deposit terms in the
Bank's primary markets or for asset-liability matching purposes.

                                       10
<PAGE>

The decrease in deposits is directly related to the pricing methodology used by
management during the period and the efforts being made to shift the
concentration of deposits from higher costing products to lower costing
products. The results include a net increase of $2.8 million in
noninterest-bearing, NOW and savings deposits and a decrease of $7.5 million in
certificates of deposit during the nine months ended September 30, 2001. The net
outflow of deposits were primarily funded by sales and maturities of securities
owned by the Company.

Results of Operations Comparison of Three Months Ended September 30, 2001 and
September 30, 2000
-----------------------------------------------------------------------------

The Company had net income of $273,000 and $157,000 for the three months ended
September 30, 2001 and 2000, respectively. Net interest income was $1.5 million
for the three months ended September 30, 2001 as compared to $1.2 million for
the three months ended September 30, 2000. This stark increase in net interest
income is due to both the shift in concentration of the deposit portfolio and
the result of interest bearing deposits being repriced at a faster pace than
interest earning assets in the falling interest rate environment the Company has
witnessed during the nine months ended September 30, 2001.

The Company made a $119,000 provision for loan loss for the three months ended
September 30, 2001 compared to a $40,000 provision in the same period last year.
Loan loss reserve calculations are reviewed monthly by the Bank's senior lending
officer and the board of directors. The calculations consider all loans in the
portfolio, with special consideration given to classified loans and
non-performing loans. The Company believes the current loan loss reserve levels
are adequate at this time.

Total other income increased by $89,000 or 43.0% for the three months ended
September 30, 2001, compared to the prior year. Service charges on deposit
accounts and trust fees increased a combined $54,000 partially offset by a
decrease in other operating income of $10,000. In addition, the Bank recognized
gains of $7,000 in relation to mortgage banking activities during the quarter
ended September 30, 2001 and gains on securities sales of $33,000 compared to no
mortgage banking activity during the quarter ended September 30, 2000 and losses
on securities sales of $5,000.

Total other expenses only increased by $13,000 for the three months ended
September 30, 2001, compared to the three months ended September 30, 2000.
Management has continually analyzed all operating aspects of the Company in
search of greater efficiencies. Increases in salaries and data processing fees
of $60,000 were almost completely negated by decreases in premises, advertising,
deposit insurance expense, office supplies, legal/professional, and other
operating expenses of $47,000.

Income taxes increased $121,000 for the three months ended September 30, 2001
compared to the prior year as the Company saw it's effective tax rate increase
from 5.8% during the three months ended September 30, 2000 to an effective tax
rate of 32.5% for the three months ended September 30, 2001. The increase in
taxes is primarily due to the Bank having an increase in pre-tax income of
$237,000 coupled with a smaller tax exempt securities portfolio.

Results of Operations Comparison of Nine Months Ended September 30, 2001 and
September 30, 2000
----------------------------------------------------------------------------

Net income for the nine months ended September 30, 2001, was $664,000 compared
with $487,000 for the nine months ended September 30, 2000, an increase of
$177,000 or 36.4%. Interest income for the nine months ended September 30, 2001
increased to $8.8 million, or 3.8% from the $8.4 million in interest income
reported in the same period of the prior year. Interest expense for the nine
months ended September 30, 2001 decreased to $4.7 million, or .1% from the $4.8
million in interest expense for the nine months ended September 30, 2000. As a
result, net interest income for the nine months ended September 30, 2001
increased $354,000 or 9.7% to $4.0 million, compared to $3.7 million in the year
ago period.

                                       11
<PAGE>

The Company made a $222,000 provision for loan loss for the nine months ended
September 30, 2001 compared to a $159,000 provision for the nine months ended
September 30, 2000. As previously discussed, loan loss reserve calculations are
reviewed monthly by the Bank's senior lending officer and the board of
directors.

Total other income increased by $265,000 or 47.9% for the nine months ended
September 30, 2001, compared to the year ago period. Service charges on deposits
increased $159,000 or 44.6% between the two periods primarily due to both an
increase in the number of demand accounts being serviced by the Bank and some
changes to the fee schedules which the Bank imposes on its demand accounts. In
addition, the Bank recognized gains on the sale of loans of $12,000 during the
nine months ended September 30, 2001 as compared to no activity in that area
during the nine months ended September 30, 2000. As previously discussed,
certain securities were sold at gains of $46,000 during the current period
compared to losses on the sale of securities of $7,000 during the year earlier
period. Other operating income also increased $32,000 or 17.4% from $184,000 for
the nine months ended September 30, 2000 to $216,000 for the nine months ended
September 30, 2001. The primary reason for this increase is due to the Bank
collecting surcharges from foreign cardholders at all 10 of its ATM's during
2001, a change that was made in June/July 2000.

Total other expenses increased by $189,000, or 5.4% to $3.7 million for the nine
months ended September 30, 2001, compared to $3.5 million for the nine months
ended September 30, 2000. The primary reason for these increases is due to data
processing fees increasing $108,000 from $372,000 for the nine months ended
September 30, 2000 to $480,000 for the nine months ended September 30, 2001. The
Bank switched its daily item processing and monthly statement rendering process
to imaging in May 2000, which is the primary reason for the increase. Management
believes this investment in technology will be beneficial to the Company going
forward due to increased back-office research efficiencies and increased ability
to satisfy customer demands for these types of services. Advertising and
printing/office supplies decreased a combined $95,000 between the two periods as
management continued to search for operating inefficiencies and to make changes
where applicable. Premises, legal/professional, and telephone remained
relatively unchanged.

Income taxes increased $189,000 for the nine months ended September 30, 2001
when compared to the same period in 2000. The increase in taxes is primarily due
to the Bank having an increase in pre-tax income of $366,000 coupled with a
smaller tax exempt securities portfolio during the nine months ended September
30, 2001, as compared to the year ago period.

Impact of New Accounting Standards
----------------------------------

Accounting for a Business Combination. Statement of Financial Accounting
Standards ("SFAS") No. 141 requires that all business combinations should be
accounted for using the purchase method of accounting; use of the pooling method
is prohibited. A business combination occurs when an enterprise acquires all or
a portion of the net assets that constitutes a business or equity interest of
one or more other enterprises and obtains control over the enterprise or
enterprises. All two-party and multi-party business combinations, including
"roll-up" and "put-together" transactions are included in the scope of this
Statement.

This Statement requires that goodwill be recognized initially as an asset in the
financial statements and measured as the excess of the cost of an acquired
entity over the net of the amounts assigned to identifiable assets acquired and
liabilities assumed. In addition, SFAS No. 141 requires all other intangibles,
such as core deposit intangibles for a financial institution, to be identified.

The provisions of Statement No. 141 are effective for any business combination
that is initiated after June 30, 2001.

Accounting for Goodwill. Under the provisions of SFAS No. 142, goodwill should
not be amortized but should be tested for impairment at the reporting unit
level. An impairment test of goodwill should be done on an

                                       12
<PAGE>

annual basis unless events or circumstances indicate impairment has occurred in
the interim period. The annual impairment test can be performed at any time
during the year as long as the measurement date is used consistently from year
to year.

Impairment testing is a two step process. The first step is a comparison of the
fair value of a reporting unit to its carrying amount including goodwill. If the
fair value of the reporting unit is greater than its carrying value, goodwill is
not impaired and no further work is required. Companies should perform the first
step of the impairment test on all goodwill within six months of initially
applying the Statement. If the fair value is less, the second step should be
performed. The second step is to compare the fair value of goodwill to its
carrying amount. If the fair value of goodwill is less than its carrying value,
then the goodwill is deemed impaired and a loss recognized. Any impairment loss
recognized as a result of completing the transitional impairment test should be
treated as a change in accounting principle and recognized in the first interim
period financial statements.

The provisions of Statement No. 142 would be effective for fiscal years
beginning after December 15, 2001. Early adoption would be permitted for
companies with a fiscal year beginning after March 15, 2001 provided that the
first quarter financial statements have not been previously issued. In all
cases, the Statement must be adopted as of the beginning of a fiscal year.
Goodwill and intangible assets acquired in a transaction completed after June
30, 2001 but before this Statement is initially applied would be accounted for
in accordance with the amortization and nonamortization provisions of the
Statement. The useful economic life of previously recognized intangible assets
should be reassessed upon adoption of the Statement, and remaining amortization
periods should be adjusted accordingly. Intangible assets deemed to have an
indefinite life would no longer be amortized.

Since the Company has no legacy goodwill and is not currently in the process of
acquiring another company, the adoption of SFAS 141 and 142 will have no impact
on the Company's financial statements.

Asset Quality
-------------

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, 2001, the Bank had $3,536,000 of assets classified as
substandard, none as doubtful and none as loss. The allowance for loan losses
was $1,084,000 or .85% of net loans receivable at September 30, 2001 compared to
$1,007,000 or .82% of net loans receivable at December 31, 2000. A portion of
classified loans are non-accrual loans. First Community had non-accrual loans
totaling $464,000 at September 30, 2001 compared to $402,000 at December 31,
2000.

Asset/Liability Management
--------------------------

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, 2001, the Company's one-year cumulative interest-rate gap as a
percent of total assets was a negative 15.6% compared to a negative 11.07% at
December 31, 2000. This negative interest-rate gap

                                       13
<PAGE>

represents substantial risk for the Company in 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 1.43% at September 30, 2001 compared
to .46% at December 31, 2000. In light of the current economic conditions,
management has been monitoring the Bank's non-performing assets closely. These
non-performing assets are weighted heavier on the Bank's allowance for loan loss
calculation. The Company believes its current loan loss reserve levels are
adequate at this time.

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.

The following schedule illustrates the interest-rate sensitivity of
interest-earning assets and interest-bearing liabilities at September 30, 2001.
Mortgages which have adjustable or renegotiable interest rates are shown as
subject to change every one to three years based upon the contracted-for
adjustment period. This schedule does not reflect the effects of possible
prepayments on enforcement of due-on-sale clauses.


                                       14
<PAGE>

<TABLE>
<CAPTION>
                                                         At September 30, 2001 Maturing or Repricing
                                             --------------------------------------------------------------------

                                               One Year       1 - 3         3 - 5        Over 5
                                               or Less        Years         Years         Years        Total
                                             --------------------------------------------------------------------
                                                                     (Dollars in 000's)
<S>                                           <C>          <C>            <C>          <C>           <C>
Interest-earning assets:
   Adjustable rate mortgages                  $  14,456    $    8,632     $   5,248    $      153    $  28,489
   Fixed rate mortgages                           5,208         2,899         3,321        19,051        30,479
   Commercial loans                              21,224         4,638         2,269         1,725        29,856
   Consumer loans                                15,854        15,439         6,080           978        38,351
   Tax-exempt loans and leases                       44           372           263         1,730         2,409
   Investments                                      573         1,106           845         1,656         4,180
   FHLB stock                                     1,025                                                   1,025
   Interest-bearing deposits                      2,429                                                   2,429
                                             --------------------------------------------------------------------
       Total interest-earning assets             60,813        33,086        18,026        25,293       137,218
                                             --------------------------------------------------------------------
Interest-bearing liabilities:
   Fixed maturity deposits                       47,915        8,121          4,379         1,196        61,611
   Other deposits                                28,465       11,792          4,643         1,523        46,423
   FHLB advances                                  7,500        8,000                                     15,500
                                             --------------------------------------------------------------------
       Total interest-bearing liabilities        83,880       27,913          9,022         2,719       123,534
                                             --------------------------------------------------------------------
Excess (deficiency) of interest-earning
assets over interest-bearing liabilities        (23,067)       5,173          9,004        22,574        13,684

Cumulative excess (deficiency) of
interest-earning assets over
interest-bearing liabilities                    (23,067)     (17,894)        (8,890)       13,684

Cumulative ratio at September 30, 2001 as
a percent of total assets                       (15.6)%
</TABLE>







                                       15
<PAGE>

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 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 $15.5 million at September 30, 2001
and $13.0 million at December 31, 2000.

At September 30, 2001, the Bank had a tier 1 leverage ratio of approximately
7.2% and a total risk-based capital ratio of approximately 10.0%. The regulatory
tier 1 leverage and total 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).

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

Although the Company files a Form 10-K in lieu of Form 10-KSB, the Company
qualifies as a small business issuer. Therefore, Item 7A is not required under
Section 229.305 of Regulation S-K.


                                       16
<PAGE>

                           Part II - Other Information

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

Item 2.           Changes in Securities.
-------           ----------------------
                  None.

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) No reports were filed on Form 8-K during the quarter
                      ended September 30, 2001.


                                       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 14, 2001           By: /s/ Albert R. Jackson III
        -----------------               ------------------------------------
                                        Albert R. Jackson III
                                        Chief Executive Officer and Director

  Date: November 14, 2001           By: /s/ Randy J. Sizemore
        -----------------               ------------------------------------
                                        Randy J. Sizemore
                                        Vice President of Finance







                                       18