##### Table of Contents





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##### Table of Contents

Common Shares

Common shares are not traded on any stock exchange. Quotations
may be obtained through the OTC Bulletin Board under the trading symbol FCBS.

Stockholder Inquiries

Communications regarding transfer requirements and lost certificates should be directed to the transfer agent.

Transfer Agent/Registrar

First Century Bank, N.A., Stock Transfer Department, Trust Division, P.O. Box 1559, Bluefield, WV 24701.

Form 10-K
Information

Copies of the First Century Bankshares, Inc. Annual Report to the Securities and Exchange Commission, Form 10-K, may be obtained by writing J. Ronald Hypes,
Treasurer, First Century Bankshares, Inc., P.O. Box 1559, Bluefield, WV 24701.

Annual Meeting

The
annual meeting of the stockholders will be held at 11:00 AM, Tuesday, April 15, 2003, at Fincastle Country Club, Bluefield, Virginia. All stockholders are cordially invited to attend.



Table of Contents



|Financial Highlights                                                                 | 1 
|------------------------------------------------------------------------------------ | --
|                                                                                     |   
|Letter to the Stockholders                                                           | 2 
|                                                                                     |   
|Managements Discussion and Analysis of Financial Condition and Results of Operation | 3 
|                                                                                     |   
|Consolidated Statements of Financial Condition                                       | 23
|                                                                                     |   
|Consolidated Statements of Income and Comprehensive Income                           | 24
|                                                                                     |   
|Consolidated Statements of Cash Flows                                                | 25
|                                                                                     |   
|Consolidated Statements of Changes in Stockholders Equity                           | 26
|                                                                                     |   
|Notes to Consolidated Financial Statements                                           | 27
|                                                                                     |   
|Report of Independent Accountants                                                    | 48
|                                                                                     |   
|Boards of Directors                                                                  | 49
|                                                                                     |   
|Corporate and Bank Officers                                                          | 51
|                                                                                     |   
|First Century Bankshares, Inc. Subsidiary Locations                                  | 52







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##### Table of Contents

Financial Highlights



|                              |  | 2002                                          |         | 2001    |   | 2000    | 
|----------------------------- |  | --------------------------------------------- | ------- | ------- | - | ------- | 
|                              |  |                                               |         |         |   |         | 
|                              |  | (Dollars in Thousands, Except Per Share Data) |        
|FOR THE YEAR                  |  |                                               |         |         |   |         | 
|                              |  |                                               |         |         |   |         | 
|Total operating income        |  | $                                             | 25,785  |         | $ | 29,373  | 
|Total operating expense       |  | 20,435                                        |         | 26,104  |   | 26,520  | 
|Net income                    |  | 3,375                                         |         | 2,145   |   | 3,081   | 
|Cash dividends declared       |  | 1,694                                         |         | 1,700   |   | 1,700   | 
|                              |  |                                               |         |         |   |         | 
|                              |  |                                               |         |         |   |         | 
|AT YEAR END                   |  |                                               |         |         |   |         | 
|                              |  |                                               |         |         |   |         | 
|Assets                        |  | $                                             | 361,264 |         | $ | 369,203 | 
|Deposits                      |  | 307,947                                       |         | 317,373 |   | 327,336 | 
|Loans                         |  | 236,460                                       |         | 244,068 |   | 244,727 | 
|Securities                    |  | 88,949                                        |         | 87,519  |   | 92,770  | 
|Stockholders equity          |  | 33,818                                        |         | 32,967  |   | 31,682  | 
|                              |  |                                               |         |         |   |         | 
|                              |  |                                               |         |         |   |         | 
|PER COMMON SHARE              |  |                                               |         |         |   |         | 
|                              |  |                                               |         |         |   |         | 
|Net income, basic and diluted |  | $                                             | 1.69    |         | $ | 1.07    | 
|Cash dividends declared       |  | 0.85                                          |         | 0.85    |   | 0.85    | 
|Book value                    |  | 16.99                                         |         | 16.48   |   | 15.84   | 





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| |  | 
| |  | 
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Letter to the Stockholders

To Our Stockholders, Customers, and Friends:

The directors, officers, and employees of First Century Bankshares, Inc. and its wholly owned subsidiary, First Century Bank, N.A., are pleased to present this Annual Report to our stockholders for the year
2002.

First Century Bankshares, Inc. had earnings of $3,375,000 for the year, which was an increase of 57.3% from the previous years earnings of $2,145,000.
On a per share basis, net income increased to $1.69 from $1.07. This equated to a return on average assets of 0.92 percent, and a return on average equity of 10.27 percent.

Total assets for the corporation decreased by 2.2% last year, and this reflects managements focus on enhancing credit quality and managing funding sources in the historically low interest rate environment during
the year. We continue to look for opportunities to expand our presence in West Virginia and Virginia, particularly in markets that demonstrate growth potential. We will achieve this either through new branch expansion or through mergers or
acquisitions with prospects that have a similar mission to our own.

We believe that we have accomplished many things throughout the past year. Non-performing
assets, including nonaccrual loans, loans past-due over 90 days and other real estate owned, showed continued improvement during 2002. Non-performing loans as a percentage of total loans improved from 2.2% at year-end 2001 to 1.8% at year-end 2002.
Credit quality continues to be our primary focus, and management is committed to ensuring policies and procedures are in place to achieve our goals.

We are in
the process of finalizing our plans for branch expansions in Princeton, West Virginia, as well as, a new facility for our Bluefield,Virginia operations. We will be constructing a 6,300 square foot facility on Springhaven Drive (just west of
Princeton Community Hospital) in Princeton during 2003. Management anticipates this facility will be completed by late fall, and will compliment our office on Stafford Drive. Also we have purchased a branch facility on Spring Street in Bluefield,
Virginia to move our location presently on Virginia Avenue. This office will offer more lobby space, better customer parking and ATM accessibility. We anticipate this relocation during the spring of 2003.

We believe that we are well positioned for the future to continue to provide quality financial services to the customers of our region. If you feel that we could better serve you please let us know.
We ask for your continued support of First Century Bankshares, Inc., as we are Looking Forward, Reaching Higher to meet your expectations as a full service financial provider. Your confidence and continued support are greatly
appreciated.



|Sincerely,                           |  |  | 
|------------------------------------ |  |  | 
|                                     |  |  | 
|                                     |  |  | 
|R. W. Buz WilkinsonPresident & CEO |  |  | 



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Managements Discussion and Analysis of Financial Condition and Results of Operations

AVERAGE STATEMENTS OF FINANCIAL CONDITION AND
NET INTEREST DIFFERENTIAL



|                                                           |  | 2002                   |         | 2001           |        | 2000       |     
|---------------------------------------------------------- |  | ---------------------- | ------- | -------------- | ------ | ---------- | ----
|                                                           |  |                        |         |                |        |            |     
|                                                           |  | (Dollars in Thousands) |        
|                                                           |  | AverageBalance         |         | Income/Expense |        | Yield/Rate |     
|                                                           |  |                        |         |                |        |            |     
|                                                           |  |                        |         |                |        |            |     
|ASSETS:                                                    |  |                        |         |                |        |            |     
|Interest-bearing deposits with banks                       |  | $                      | 4,407   |                | $      | 68         |     
|Securities available for sale and other equity securities: |  |                        |         |                |        |            |     
|U. S. Government securities                                |  | 2,802                  |         | 157            |        | 5.60       | %   
|U. S. Government agency securities                         |  | 66,642                 |         | 3,458          |        | 5.19       | %   
|Other securities                                           |  | 10,390                 |         | 597            |        | 5.75       | %   
|                                                           |  |                        |         |                |        |            |     
|Total securities available for sale                        |  | 79,834                 |         | 4,212          |        | 5.28       | %   
|                                                           |  |                        |         |                |        |            |     
|Securities held to maturity:                               |  |                        |         |                |        |            |     
|U. S. Government agency securities                         |  | 34                     |         | 1              |        | 2.94       | %   
|State and municipal securities                             |  | 9,942                  |         | 499            |        | 5.02       | %   
|Other securities                                           |  | 150                    |         | 10             |        | 6.67       | %   
|                                                           |  |                        |         |                |        |            |     
|Total securities held to maturity                          |  | 10,126                 |         | 510            |        | 5.04       | %   
|                                                           |  |                        |         |                |        |            |     
|Federal funds sold                                         |  | 4,255                  |         | 69             |        | 1.62       | %   
|Loans                                                      |  | 236,130                |         | 16,675         |        | 7.06       | %   
|                                                           |  |                        |         |                |        |            |     
|Total interestearning assets                              |  | 334,752                |         | 21,534         |        | 6.43       | %   
|                                                           |  |                        |         |                |        |            |     
|Allowance for loan losses                                  |  | (3,108                 | )       |                |        |            |     
|Cash and due from banksdemand                             |  | 13,723                 |         |                |        |            |     
|Premises and equipmentnet                                 |  | 10,423                 |         |                |        |            |     
|Other assets                                               |  | 12,153                 |         |                |        |            |     
|                                                           |  |                        |         |                |        |            |     
|TOTAL ASSETS                                               |  | $                      | 367,943 |                |        |            |     
|                                                           |  |                        |         |                |        |            |     
|LIABILITIES AND STOCKHOLDERS EQUITY:                      |  |                        |         |                |        |            |     
|Interestbearing demand deposits                           |  | $                      | 73,357  |                | $      | 513        |     
|Savings deposits                                           |  | 74,264                 |         | 1,065          |        | 1.43       | %   
|Time deposits                                              |  | 130,469                |         | 4,149          |        | 3.18       | %   
|                                                           |  |                        |         |                |        |            |     
|Total interestbearing deposits                            |  | 278,090                |         | 5,727          |        | 2.06       | %   
|                                                           |  |                        |         |                |        |            |     
|Short-term debt                                            |  | 17,366                 |         | 159            |        | 0.92       | %   
|                                                           |  |                        |         |                |        |            |     
|Total interestbearing liabilities                         |  | 295,456                |         | 5,886          |        | 1.99       | %   
|Demand deposits                                            |  | 37,461                 |         |                |        |            |     
|Other liabilities                                          |  | 2,156                  |         |                |        |            |     
|                                                           |  |                        |         |                |        |            |     
|TOTAL LIABILITIES                                          |  | 335,073                |         |                |        |            |     
|                                                           |  |                        |         |                |        |            |     
|Stockholders equity                                       |  | 32,870                 |         |                |        |            |     
|                                                           |  |                        |         |                |        |            |     
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                 |  | $                      | 367,943 |                |        |            |     
|                                                           |  |                        |         |                |        |            |     
|Average rate paid to fund earning assets                   |  |                        |         |                |        | 1.76       | %   
|                                                           |  |                        |         |                |        |            |     
|NET INTEREST DIFFERENTIAL                                  |  |                        |         | $              | 15,648 |            | 4.67
|                                                           |  |                        |         |                |        |            |     

For purposes of this schedule, interest on
nonaccrual loans have been included only to the extent reflected in the income statement. However, the nonaccrual loan balance is included in the average amount outstanding. Income on loans includes loan fees of$394,000 in 2002, $254,000 in
2001, and $228,000 in 2000. Average balances of securities available for sale are reported at amortized cost; excludes pretax unrealized gains of $1,488,000 in 2002, and $1,337,000 in 2001, and unrealized losses of $1,628,000 in 2000. Interest
income on tax exempt securities is shown based on the actual yield.

VOLUME/RATE ANALYSIS



|                                                          |  | Increase (Decrease) in Interest |     
|--------------------------------------------------------- |  | ------------------------------- | ----
|                                                          |  |                                 |     
|                                                          |  | 2002 VS. 2001                   |     
|                                                          |  |                                 |     
|                                                          |  | (Dollars in Thousands)          |     
|                                                          |  | Due to Change in (1)            |     
|                                                          |  |                                 |     
|                                                          |  | Volume                          |     
|                                                          |  |                                 |     
|Interest income on:                                       |  |                                 |     
|Loans                                                     |  | $                               | (717
|Securities available for sale and other equity securities |  | 291                             |     
|Securities held to maturity                               |  | (46                             | )   
|Federal funds sold                                        |  | 15                              |     
|Interest-bearing deposits with banks                      |  | (54                             | )   
|                                                          |  |                                 |     
|TOTAL INTEREST INCOME                                     |  | (511                            | )   
|                                                          |  |                                 |     
|Interest expense on:                                      |  |                                 |     
|Interest-bearing demand deposits                          |  | 34                              |     
|Savings deposits                                          |  | (60                             | )   
|Time deposits                                             |  | (449                            | )   
|Short-term borrowings                                     |  | (14                             | )   
|                                                          |  |                                 |     
|TOTAL INTEREST EXPENSE                                    |  | (489                            | )   
|                                                          |  |                                 |     
|NET INTEREST INCOME                                       |  | $                               | (22 
|                                                          |  |                                 |     

(1)Changes due to a combination of volume and rate have been allocated proportionally to volume and rate.



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Managements Discussion and Analysis of Financial Condition and Results of Operations

The purpose of this discussion is to focus and expand on certain information about the Corporations financial condition and results of operations which is not otherwise apparent from the audited consolidated
financial statements included in this Annual Report. Reference should be made to those statements and the selected financial data presented elsewhere in this report for a thorough understanding of the following discussion and analysis. Management is
not aware of any market or institutional trends, events or uncertainties that will have or are reasonably likely to have a material effect on the liquidity, capital resources or operations of the Corporation, except as discussed herein. Management
is also not aware of any current recommendations by any regulatory authorities, which would have such a material effect if implemented.

This report may contain certain
forward-looking statements, including certain plans, expectations, goals and projections, which are subject to numerous assumptions, risks and uncertainties. Actual results could differ materially from those contained in or implied by such
statements for a variety of factors including: changes in economic conditions which may affect the Corporations primary market area; rapid movements in interest rates; competitive pressures on product pricing and services; success and timing
of business strategies; the nature and extent of governmental actions and reforms; and rapidly changing technology and evolving financial industry standards.

Corporate
Structure and Acquisitions

First Century Bankshares, Inc. (Corporation) is chartered under the laws of West Virginia and operates as a financial holding
company, headquartered in Bluefield, WV. The Corporation began active operations in March 1984, in a business combination with its then sole subsidiary, The First National Bank of Bluefield. Through a series of acquisitions and consolidations, the
Corporation now operates one subsidiary bank, First Century Bank, N.A., Bluefield, WV (FCBNA). FCBNA is engaged in commercial banking activities that provide financial services to individuals and businesses. FCBNA operates 11 branch
offices and 14 ATM locations throughout southern West Virginia and southwestern Virginia.

During 2001, the Corporation formed a financial subsidiary, First Century Financial
Services, LLC, (FCFSLLC). This entity conducts the Corporations insurance activities through its investment in the Bankers Insurance Corporation, a relationship with 67 community banks, which offers a full range of insurance
products and services. Management believes the expansion of nontraditional financial service offerings to its customers will enhance the Corporations performance, and ultimately, shareholder value. FCFSLLC was formed with a minimal capital
investment, which is carried at cost and eliminates upon consolidation.

Balance Sheet Analysis

Loans

The Corporations primary goal is to meet the credit needs of the retail and commercial customers in the
Corporations primary markets of southern West Virginia and southwestern Virginia. Total loans decreased approximately $7,608,000, or 3.1% in 2002, following a year where loans had remained essentially unchanged in 2001. Competition in the
Corporations market is very aggressive for the acquisition of new loans. Loan demand was relatively strong



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during most of 2001; however, with the events of the terrorist attacks of September 11, 2001, which further weakened an unstable economy, loan demand became
very weak during the last part of 2001. This weakness remained throughout 2002, coupled with managements philosophy of not offering long-term fixed-rate commitments in this low trough in the interest cycle. At December 31, 2002, the loan
portfolio comprised 72.3% of total interest-earning assets as compared to 73.0% of total interest-earning assets at December 31, 2001, and contributed 77.4% of total interest income in 2002 and 2001, and 78.0% of total interest income in 2000.
Management began to see signs of revitalized demand for loans by the end of 2002.

AMOUNTS OF LOANS OUTSTANDING



|                                       |  | December 31,           | 
|-------------------------------------- |  | ---------------------- | 
|                                       |  |                        | 
|                                       |  | 2002                   | 
|                                       |  |                        | 
|                                       |  | (Dollars in Thousands) | 
|Commercial, financial and agricultural |  | $43,725                | 
|Real estate-construction               |  | 12,268                 | 
|Real estate-mortgage                   |  | 159,233                | 
|Installment loans to individuals       |  | 21,234                 | 
|                                       |  |                        | 
|TOTAL LOANS OUTSTANDING                |  | $236,460               | 
|                                       |  |                        | 

MATURITY SCHEDULE OF LOANS



|                                       |  | Remaining maturity at December 31, 2002 |       
|-------------------------------------- |  | --------------------------------------- | ------
|                                       |  |                                         |       
|                                       |  | (Dollars in Thousands)                  |       
|                                       |  | 1 Yearor Less                           |       
|                                       |  |                                         |       
|Commercial, financial and agricultural |  | $                                       | 22,254
|Real estate-construction               |  | 11,701                                  |       
|Real estate-mortgage                   |  | 29,784                                  |       
|Installment loans to individuals       |  | 4,349                                   |       
|                                       |  |                                         |       
|TOTAL                                  |  | $                                       | 68,088
|                                       |  |                                         |       
|                                       |  |                                         |       
|Predetermined interest rates           |  | $                                       | 28,428
|With floating interest rates           |  | 39,660                                  |       
|                                       |  |                                         |       
|TOTAL                                  |  | $                                       | 68,088
|                                       |  |                                         |       



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NONPERFORMING ASSETS AND LOAN LOSS ANALYSIS



|                                                            |  | Years Ended December 31, |        
|----------------------------------------------------------- |  | ------------------------ | -------
|                                                            |  |                          |        
|                                                            |  | 2002                     |        
|                                                            |  |                          |        
|                                                            |  | (Dollars in Thousands)   |        
|Average amount of loans outstanding                         |  | $                        | 236,130
|Allowance for loan losses:                                  |  |                          |        
|Balance at beginning of the year                            |  | $                        | 3,180  
|Additions from acquisitions                                 |  |                         |        
|Loans charged off                                           |  |                          |        
|Commercial, financial and agricultural                      |  | 532                      |        
|Real estatemortgage                                        |  | 1,157                    |        
|Installment loans to individuals                            |  | 477                      |        
|                                                            |  |                          |        
|TOTAL LOANS CHARGED OFF                                     |  | 2,166                    |        
|                                                            |  |                          |        
|Loan recoveries                                             |  |                          |        
|Commercial, financial and agricultural                      |  | 86                       |        
|Real estatemortgage                                        |  | 63                       |        
|Installment loans to individuals                            |  | 57                       |        
|                                                            |  |                          |        
|TOTAL LOAN RECOVERIES                                       |  | 206                      |        
|                                                            |  |                          |        
|Net loans charged off                                       |  | (1,960                   | )      
|Provision for loan losses                                   |  | 1,785                    |        
|                                                            |  |                          |        
|BALANCE AT END OF THE YEAR                                  |  | $                        | 3,005  
|                                                            |  |                          |        
|Ratio of net loans charged off to average loans outstanding |  | 0.83                     | %      
|Allowance at year end as a percent of loans                 |  | 1.27                     | %      
|Provision for loan losses as a percent of loans             |  | 0.76                     | %      
|Nonperforming assets (at year end)                          |  |                          |        
|Nonaccrual                                                  |  | $                        | 2,819  
|Pastdue ninety days or more and still accruing             |  | 612                      |        
|Restructured loans                                          |  |                         |        
|Other real estate owned                                     |  | 793                      |        
|                                                            |  |                          |        
|TOTAL NONPERFORMING ASSETS                                  |  | $                        | 4,224  
|                                                            |  |                          |        
|Nonperforming assets/total loans                            |  | 1.8                      | %      
|Nonperforming assets/total assets                           |  |                          | 1.2    
|                                                            |  |                          |        



ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES



|                                       |  | 2002                   |       | 2001                                          |       | 2000   |   | 1999                                          |       | 1998   |  
|-------------------------------------- |  | ---------------------- | ----- | --------------------------------------------- | ----- | ------ | - | --------------------------------------------- | ----- | ------ | -
|                                       |  |                        |       |                                               |       |        |   |                                               |       |        |  
|                                       |  | (Dollars in Thousands) |      
|                                       |  | Amount                 |       | Percent ofLoans in EachCategory
toTotal Loans |       | Amount |   | Percent ofLoans in EachCategory toTotal Loans |       | Amount |  
|                                       |  |                        |       |                                               |       |        |   |                                               |       |        |  
|Commercial, financial and agricultural |  | $                      | 1,083 |                                               | 18.49 | %      | $ | 1,143                                         |       | 20.10  | %
|Real estateconstruction               |  |                       |       | 5.19                                          | %     |       |   | 3.18                                          | %     |       |  
|Real estatemortgage                   |  | 1,493                  |       | 67.34                                         | %     | 1,485  |   | 65.99                                         | %     | 1,654  |  
|Installment loans to individuals       |  | 429                    |       | 8.98                                          | %     | 546    |   | 10.73                                         | %     | 469    |  
|Unallocated                            |  |                       |       | N/A                                           |       | 6      |   | N/A                                           |       | 714    |  
|                                       |  |                        |       |                                               |       |        |   |                                               |       |        |  
|TOTAL                                  |  | $                      | 3,005 |                                               |       | 100.00 | % | $                                             | 3,180 |        |  
|                                       |  |                        |       |                                               |       |        |   |                                               |       |        |  



During 2002,the Corporations emphasis continued to be on strong local companies with known local management and excellent financial stability. Most of the commercial loans in the portfolio
were made at variable rates of interest. Additionally, the Corporation continued to make loans available in an expanding retail marketplace. Consistent with managements philosophy on relationship banking, most borrowers are also depositors and
utilize other banking services. The average yield of the loan portfolio decreased to 7.06% in 2002 compared to 8.07% in 2001.This reflected the historically low interest rate environment during
2002,further compounded by aggressive competition and weaker demand for loans in the Corporations primary market area.



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The commercial loan portfolio is generally diversified and geographically dispersed within the region. At December 31, 2002, the Corporation had a
concentration of $10,940,000, or 32.4% of stockholders equity in loans to borrowers in the hospitality industry. This concentration is diversified by geography throughout the Mid-Atlantic region. There are no other concentrations of lines of
business or industry that represent greater than 25% of the Corporations equity. Within each specific industry, borrowers are diversified as to specialty, service or other unique feature of the overall industry. A substantial portion of the
customers ability to honor their contractual commitment is largely dependent upon the economic conditions of the respective industry and overall economic conditions of southern West Virginia and southwestern Virginia, which is somewhat less
volatile than many areas of the country.

The consumer portion of the loan portfolio consists of both secured and unsecured loans made to individuals and families for various
reasons including the purchase of automobiles, home improvements, educational expenses and other worthwhile purposes. The Corporation continues to carefully monitor the consumer sector during this period of economic weakness. As recessionary
pressures result in higher levels of unemployment, the likelihood for increased volatility arises in the consumer sector.

Commitments to extend credit are agreements to lend to a
customer provided there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total amount of commitments does not necessarily represent future cash requirements. FCBNA had outstanding commitments to extend credit of approximately $42,956,000 at December 31, 2002, and $40,662,000 at
December 31, 2001. These commitments consisted of unfunded loan commitments and unused lines of credit totaling $37,951,000 at December 31, 2002 and $36,951,000 at December 31, 2001. Additionally, standby letters of credit totaled $5,005,000 at
December 31, 2002, and $3,711,000 at December 31, 2001.

Nonperforming assets, including nonaccrual loans, loans past-due 90 days or more, restructured loans and other real estate
owned, decreased $1,240,000, or approximately 23%, from December 31, 2001 to December 31, 2002, following a decrease of $4,744,000, or approximately 46% in 2001. The 2002 decrease occurred primarily as a result of managements ongoing efforts
to enhance the quality of the loan portfolio. This improvement was further enhanced by the Corporation adhering to a stricter set of criteria in the determination of granting renewals and extensions. The Corporations policy is to discontinue
the accrual of interest on loans that are past due more than 90 days, unless such loans are well collateralized and in process of collection. Loans that are on a current payment status or past due less than 90 days may also be classified as
nonaccrual if repayment of principal or interest is in doubt. The Corporations holdings of other real estate owned decreased approximately $486,000 in 2002, following an increase of approximately $278,000 in 2001.

The Corporation maintains, through its provision, an allowance for loan losses believed by management to be adequate to absorb probable credit losses inherent in the portfolio. Management continues to
enhance the methodology and procedures for determining the adequacy of the allowance for loan losses. The procedures that are utilized entail preparation of a loan watch list and assigning each loan a classification. For those
individually significant loans where it is determined that it is not probable that the borrower will make all payments in accordance with the original loan agreement, management performs an impairment analysis. Specific reserves of $663,000 and
$848,000 are recorded on impaired loans at December 31, 2002 and 2001, respectively. Other classified loans are categorized and



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allocated appropriate reserves. Other loans more than 90 days past due that have not been considered in the aforementioned procedures are assigned a
classification of Substandard and are reserved for accordingly. The remaining portfolio is segregated into consumer, commercial, and residential real estate loans, and the historical net charge off percentage of each category is applied to the
current amount outstanding in that category. Also, a review of concentrations of credit, classes of loans and pledged collateral is performed to determine the existence of any deterioration. In addition, volume and trends in delinquencies and
nonaccrual loans, off-balance sheet credit risks, the loan portfolio composition, loan volume and maturity of the portfolio, national and local economic conditions and the experience, ability and depth of lending management and staff are given
consideration.

The allowance for loan losses was 1.27% of year-end loans at December 31, 2002 and 1.30% at December 31, 2001. The estimation of the adequacy of the allowance for
loan losses is the most significant estimate determined by management. Different amounts could result under different conditions or assumptions.

The Corporation uses an
outsourcing arrangement for its loan review function with an independent third-party firm. This process includes a thorough evaluation of the credit administration systems and personnel. The objective is to have an effective loan review system that
provides management with information that will produce a more focused and effective approach in managing credit risk inherent in the loan portfolio. As a part of this process, a system of loan grades is utilized to further support the adequacy of
the loan loss allowance.

Securities

Securities, the second largest asset of the Corporation,
increased by $1.4 million or 1.6% during 2002. At December 31, 2002, securities comprised 27.2% of total interest-earning assets compared to 26.2% of total interest-earning assets at December 31, 2001. The composition of the Corporations
securities portfolio reflects managements investment strategy of maximizing portfolio yields subject to risk and liquidity considerations. The primary objective of the Corporations investment strategy is to maintain an appropriate level
of asset liquidity and provide management a tool to assist in controlling and managing the Corporations interest rate position while at the same time producing appropriate levels of interest income. Management of the maturity of the portfolio
is necessary to ensure adequate liquidity and manage interest rate risk. During 2002, in order to maintain liquidity and flexibility, management continued categorizing most investments in the available for sale portfolio. Management believes that
the potential for increased loan demand requires maintaining the liquidity of the securities portfolio.

The remaining securities, primarily state, county and municipal
obligations comprise the held to maturity portfolio. Net unrealized gains in the held to maturity portfolio amounted to approximately $405,000 at December 31, 2002, compared to net unrealized gains of $151,000 at December 31, 2001. This indicates
the effects of the declining interest rate environment during 2002 and 2001. The held to maturity portfolio decreased from $10,708,000 at December 31, 2001, to $9,566,000 at December 31, 2002, primarily due to decreases in state and municipal
obligations. State and municipal securities contained no individual issues in excess of 10% of stockholders equity.

As of December 31, 2002, the investment portfolio
contained approximately $9,668,000 of corporate debt obligations in the available for sale portfolio. These obligations have an average remaining life of 2.6 years and are primarily in the financial services sector. No investment with an individual
issuer is in excess of 10% of stockholders equity.



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Realized losses from the sale of available for sale securities were approximately $13,000 in 2001. These losses resulted from the liquidation of the
Corporations final position in a mutual fund that had been in the portfolio for several years. Also, during 2001, the Corporation had an investment in a municipal obligation that was downgraded below investment grade. This security was sold
during the fourth quarter of 2001 resulting in the recognition of a loss of approximately $30,000.

SECURITIES

The following table shows the carrying values of securities at the respective periods, which is market value for available for sale securities and amortized cost for securities held to maturity:



|                                       |  | December 31,           | 
|-------------------------------------- |  | ---------------------- | 
|                                       |  |                        | 
|                                       |  | 2002                   | 
|                                       |  |                        | 
|                                       |  | (Dollars in Thousands) | 
|Securities available for sale:         |  |                        | 
|U.S. Government securities             |  | $3,052                 | 
|U.S. Government agency securities      |  | 65,911                 | 
|Other securities                       |  | 9,668                  | 
|                                       |  |                        | 
|TOTAL SECURITIES AVAILABLE FOR SALE    |  | $78,631                | 
|                                       |  |                        | 
|Securities held to maturity:           |  |                        | 
|U.S. Government agency securities      |  | $9                     | 
|State, county and municipal securities |  | 9,407                  | 
|Other securities                       |  | 150                    | 
|                                       |  |                        | 
|TOTAL SECURITIES HELD TO MATURITY      |  | $9,566                 | 
|                                       |  |                        | 

MATURITIES OF SECURITIES

The following table shows the contractual maturities of debt securities at December 31, 2002 and the weighted average yields of such securities:



|                                       |  | WithinOne Year         |       | After OneBut WithinFive Years |      | After FiveBut WithinTen Years |   | AfterTen Years |   | Total  |  
|-------------------------------------- |  | ---------------------- | ----- | ----------------------------- | ---- | ----------------------------- | - | -------------- | - | ------ | -
|                                       |  |                        |       |                               |      |                               |   |                |   |        |  
|                                       |  | Amount                 |       | Yield                         |      | Amount                        |   | Yield          |   | Amount |  
|                                       |  |                        |       |                               |      |                               |   |                |   |        |  
|                                       |  | (Dollars in Thousands) |      
|Securities available for sale:         |  |                        |       |                               |      |                               |   |                |   |        |  
|U.S. Treasury securities               |  | $                      | 1,992 |                               | 6.55 | %                             | $ | 997            |   | 3.23   | %
|U.S. Government agency securities      |  | 2,993                  |       | 3.97                          | %    | 60,497                        |   | 4.09           | % | 1,465  |  
|Other Debt Securities                  |  |                       |       |                              |      | 9,188                         |   | 5.98           | % |       |  
|                                       |  |                        |       |                               |      |                               |   |                |   |        |  
|TOTAL SECURITIES AVAILABLE FOR SALE    |  | $                      | 4,985 |                               | 5.00 | %                             | $ | 70,682         |   | 4.32   | %
|                                       |  |                        |       |                               |      |                               |   |                |   |        |  
|Securities held to maturity:           |  |                        |       |                               |      |                               |   |                |   |        |  
|U.S. Government agency securities      |  | $                      | 9     |                               | 5.13 | %                             | $ |               |   |       |  
|State, county and municipal securities |  | 673                    |       | 4.66                          | %    | 4,990                         |   | 5.22           | % | 3,404  |  
|Other securities                       |  | 50                     |       | 6.20                          | %    | 100                           |   | 7.35           | % |       |  
|                                       |  |                        |       |                               |      |                               |   |                |   |        |  
|TOTAL SECURITIES HELD TO MATURITY      |  | $                      | 732   |                               | 4.77 | %                             | $ | 5,090          |   | 5.26   | %
|                                       |  |                        |       |                               |      |                               |   |                |   |        |  

Yields on tax-exempt obligations have been computed based on tax
equivalent yield.

During the year ended December 31, 2001, the Corporation had in securities held to maturity, an investment in a municipal obligation that was downgraded
below investment grade. This security was sold during the fourth quarter of 2001 resulting in the recognition of a loss of approximately $30,000.

Deposits

Deposits, the Corporations major source of funds, decreased approximately $9.4 million or 3.0% in 2002, following a decrease of $10.0 million or
3.0% in 2001. These decreases occurred primarily in interest-bearing deposits as management aggressively monitored



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interest rate reductions by the Federal Reserve and, coupled with weaker loan demand, certain price-sensitive certificates of deposit were not retained. The
average rate paid on interest-bearing deposits in 2002 was 2.06% and 3.41% in 2001. Strong competition for deposits exists in the Corporations primary market among commercial banks, savings banks, thrift institutions, credit unions, mutual
funds, brokerage houses, insurance companies, and certain national retailers. Despite this intense competition, management continues to evaluate pricing strategies that will insure the Corporations long-term benefit of maintaining market share
without sacrificing the Corporations profitability.

AVERAGE DEPOSITS



|                                    |  | 2002Average            |  | 2001Average |   | 2000Average | 
|----------------------------------- |  | ---------------------- |  | ----------- | - | ----------- | 
|                                    |  |                        |  |             |   |             | 
|                                    |  | Amount                 |  | Rate        |   | Amount      | 
|                                    |  |                        |  |             |   |             | 
|                                    |  | (Dollars in Thousands) | 
|Noninterest-bearing demand deposits |  | $37,461                |  | N/A         |   | $34,361     | 
|Interest-bearing demand deposits    |  | 73,357                 |  | 0.70        | % | 69,942      | 
|Savings deposits                    |  | 74,264                 |  | 1.43        | % | 77,464      | 
|Time deposits                       |  | 130,469                |  | 3.18        | % | 141,322     | 
|                                    |  |                        |  |             |   |             | 
|TOTAL AVERAGE DEPOSITS              |  | $315,551               |  | 1.81        | % | $323,089    | 
|                                    |  |                        |  |             |   |             | 

There are no foreign offices. Average balances are computed on daily
balances.

MATURITIES OF TIME CERTIFICATES OF DEPOSIT OF $100,000 OR MORE



|                                                  |  | December 31, 2002      | 
|------------------------------------------------- |  | ---------------------- | 
|                                                  |  |                        | 
|                                                  |  | (Dollars in Thousands) | 
|Under 3 months                                    |  | $9,249                 | 
|3 to 6 months                                     |  | 6,922                  | 
|6 to 12 months                                    |  | 7,622                  | 
|Over 12 months                                    |  | 6,095                  | 
|                                                  |  |                        | 
|TOTAL CERTIFICATES OF DEPOSIT OF $100,000 OR
MORE |  | $29,888                | 
|                                                  |  |                        | 

SHORT-TERM BORROWED FUNDS



|                                               |  | December 31,           | 
|---------------------------------------------- |  | ---------------------- | 
|                                               |  |                        | 
|                                               |  | 2002                   | 
|                                               |  |                        | 
|                                               |  | (Dollars in Thousands) | 
|Securities sold under agreements to repurchase |  | $16,719                | 
|Other borrowed funds                           |  | 26                     | 
|                                               |  |                        | 
|TOTAL BORROWED FUNDS                           |  | $16,745                | 
|                                               |  |                        | 

The approximate average interest rates, average amounts outstanding,
and maximum amounts outstanding at any month-end for securities sold under agreements to repurchase are as follows:



|                                             |  | 2002    |   | 2001    |   | 2000    |  
|-------------------------------------------- |  | ------- | - | ------- | - | ------- | -
|                                             |  |         |   |         |   |         |  
|Average interest rates at December 31        |  | 0.56    | % | 0.88    | % | 4.38    | %
|Maximum amounts outstanding at any month-end |  | $20,880 |   | $22,506 |   | $21,433 |  
|Average daily amount outstanding             |  | $17,340 |   | $18,051 |   | $16,539 |  
|Weighted average interest rates              |  | 0.91    | % | 2.96    | % | 4.64    | %

The weighted average interest rates are calculated by dividing the
annual interest expense by the related average daily amounts outstanding.

Capital Resources

Cash dividends paid to stockholders during 2002 totaled $1,694,000, and for 2001 and 2000 amounted to $1,700,000. This represents a dividend pay out ratio (dividends divided by net income) of 50% in 2002, 79% in 2001 and 55% in 2000. Cash
dividends per share equaled $0.85 per share in 2002, 2001 and 2000. The Corporation is dependent upon dividends paid by its subsidiary bank to fund dividends to the stockholders and to cover



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other operating costs. The Corporations board of directors considers historical financial performance, future prospects, and anticipated needs for
capital in formulating the dividend payment policy. Future dividends are dependent upon the Corporations financial results, capital requirements and general economic conditions.

One of managements primary objectives is to maintain a strong capital position. Stockholders equity increased $851,000 or 2.6% in 2002. This increase was most affected by an increase in retained earnings of $1,681,000, offsetting
reductions in accumulated other comprehensive income of $683,000. Additionally, management utilized capital of $147,000 to acquire 9,000 shares of treasury stock at an average purchase price of $16.34 per share. Management currently has approval to
repurchase an additional 11,000 shares of the Corporations common stock. The percentage of earnings reinvested in the Corporation (net income less dividends as a percentage of net income) for the years 2002, 2001 and 2000 was 50%, 21% and 45%,
respectively. The internal capital formation rate (net income less dividends as a percentage of average stockholders equity) indicates the rate at which assets can grow while maintaining the current ratio of stockholders equity to
assets. The internal capital formation rate was 5.1% in 2002, 1.4% in 2001 and 4.5% in 2000.

REGULATORY CAPITAL



|Entity                   |  |       | Tier 1 |       | Combined Capital(Tier 1 and Tier 2) |      | Leverage | 
|------------------------ |  | ----- | ------ | ----- | ----------------------------------- | ---- | -------- | 
|                         |  |       |        |       |                                     |      |          | 
|Consolidated             |  | 10.94 | %      | 12.12 | %                                   | 7.75 | %       
|First Century Bank, N.A. |  | 10.62 | %      | 11.81 | %                                   | 7.53 | %       

Risk-based capital regulations require all banks and bank holding
companies to have a minimum total risk-based capital ratio of 8% with half of the capital composed of core capital. Conceptually, risk-based capital requirements assess the risk of a financial institutions balance sheet and off-balance sheet
commitments in relation to its capital. Under the guidelines, capital strength is measured in two tiers which are used in conjunction with risk adjusted assets in determining the risk-based capital ratios. The Corporations Tier I capital,
which consists of stockholders equity, adjusted for certain intangible assets, amounted to $27,843,000 at December 31, 2002, or 10.94% of total risk-weighted assets, compared to $26,668,000 at December 31, 2001, or 10.29% of total
risk-weighted assets. Tier II capital, or supplementary capital, includes capital components such as qualifying allowance for loan losses, and can equal up to 100% of an institutions Tier I capital with certain limitations. The
Corporations Tier II capital amounted to $3,005,000 at December 31, 2002, or 1.18% of total risk-weighted assets, compared to $3, 180,000 at December 31, 2001, or 1.23% of total risk-weighted assets. The Corporations total consolidated
risk-based capital was $30,848,000 at December 31, 2002, or 12.12% of total risk-weighted assets, compared to $29,848,000, or 11.52% of total risk-weighted assets as of December 31, 2001. Additionally, risk-based capital guidelines require a minimum
leverage ratio (Tier I capital divided by average adjusted total consolidated assets) of 4%, which may be increased for institutions with higher levels of risk or that are experiencing or anticipating significant growth. The Corporation has not been
advised by any regulatory agency of any specific minimum leverage ratio applicable to it. As of December 31, 2002 and 2001, the Corporations leverage ratio was 7.75% and 7.20%, respectively; therefore, the Corporation exceeded all current
minimum capital requirements.



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Asset and Liability Management and Interest Rate Sensitivity

The income
stream of the Corporation is subject to risk resulting from interest rate fluctuations to the extent there is a difference between the amount of the Corporations interest-earning assets and the amount of interest-bearing liabilities that are
prepaid, withdrawn, mature or reprice in specified periods. The goal of asset and liability management is to maintain high quality and consistent growth of net interest income with acceptable levels of risk to changes in interest rates.

Interest rate sensitivity varies with different types of interest-earning assets and interest-bearing liabilities. Overnight federal funds, on which rates change daily, and loans that are
tied to the prime rate differ considerably from long-term securities and fixed rate loans. Similarly, time deposits of $100,000 and over, now accounts and money market deposit accounts are much more interest sensitive than passbook savings accounts
and other interest-bearing liabilities. The Corporation uses a number of tools to measure interest rate risk, including simulating net interest income under various rate scenarios, monitoring the change in present value of the asset and liability
portfolios under the same rate scenarios and monitoring the difference or gap between rate sensitive assets and liabilities over various time periods.

Management continues its
efforts to generate variable rate loans. However, with strong competition for loans, and in an historically low interest rate environment, customers are requiring more fixed rate commitments. The results of managements efforts to balance
interest-earning assets against interest-bearing liabilities can be seen in the Analysis of Interest Rate Sensitivity table.

Management continues to monitor the
Corporations asset/liability gap positions, while incorporating more sophisticated risk measurement tools, including simulation modeling which calculates expected net interest income based on projected interest-earning assets, interest-bearing
liabilities and interest rates. Utilizing simulation modeling allows the Corporation to evaluate earnings and capital at risk due to significant changes in interest rates. The Corporation monitors exposure to the effect of an instantaneous change in
rates of 200 basis points up or down over the same period. As of December 31, 2002, simulation indicated the impact of a 200 basis point increase in rates would approximate a 6.0% increase in net interest income, while a 200 basis point decline in
rates would approximate a 8.1% decrease from an unchanged rate environment. These changes are within the Corporations policy limits for the maximum negative impact on net interest income from a change in interest rates.



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ANALYSIS OF INTEREST RATE SENSITIVITY



|                                                                     |  | Months                 |         | Years |    |         |   
|-------------------------------------------------------------------- |  | ---------------------- | ------- | ----- | -- | ------- | --
|                                                                     |  |                        |         |       |    |         |   
|                                                                     |  | Less Than 3            |         | 3 - 6 |    | 6 - 12  |   
|                                                                     |  |                        |         |       |    |         |   
|                                                                     |  | (Dollars in thousands) |        
|Investment securities                                                |  | $                      | 1,013   |       | $  | 1,601   |   
|Federal funds sold and interest-bearing balances with banks          |  | 1,871                  |         |      |    |        |   
|Loans                                                                |  | 116,156                |         | 5,841 |    | 11,683  |   
|                                                                     |  |                        |         |       |    |         |   
|Interest-earning assets                                              |  | $                      | 119,040 |       | $  | 7,443   |   
|                                                                     |  |                        |         |       |    |         |   
|Time deposits                                                        |  | $                      | 34,871  |       | $  | 22,749  |   
|Other interest-bearing deposits                                      |  | 73,228                 |         |      |    |        |   
|Other interest-bearing liabilities                                   |  | 14,251                 |         | 422   |    | 843     |   
|                                                                     |  |                        |         |       |    |         |   
|Interest-bearing liabilities                                         |  | $                      | 122,350 |       | $  | 23,171  |   
|                                                                     |  |                        |         |       |    |         |   
|Interest sensitivity gap                                             |  | $                      | (3,310  | )     | $  | (15,728 | ) 
|Cumulative interest sensitivity gap                                  |  | $                      | (3,310  | )     | $  | (19,038 | ) 
|Ratio of interest-earning assets to interest-bearing liabilities     |  | 0.97                   | x       | 0.32  | x  | 0.32    | x 
|                                                                     |  |                        |         |       |    |         |   
|Ratio of cumulative interest sensitivity gap to total earning assets |  | (1.01                  | )%      | (5.82 | )% | (15.43  | )%
|                                                                     |  |                        |         |       |    |         |   

Liquidity Management

Liquidity management involves the ability to meet the cash flow requirements of depositors wanting to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet
their credit needs. To ensure the Corporation is positioned to meet immediate and future cash demands, management relies on liquidity analysis, knowledge of business trends over past economic cycles and forecasts of future conditions.

Liquidity can best be demonstrated by an analysis of the Corporations cash flows. The primary source of cash flows for the Corporation is operating activities. Operating activities
provided $7,118,000 of liquidity for the year ended December 31, 2002, compared to $8,252,000 and $4,501,000 in 2001 and 2000, respectively. The principal elements of these operating flows are net income, increased for significant non-cash expenses
for the provision for loan losses and depreciation and amortization. In 2002, these funds were utilized primarily for withdrawals of deposits, aggregating $9,426,000.Management decided to not retain
certain price sensitive certificates of deposit in an environment of weakened loan demand and interest rate volatility.

A secondary source of liquidity for the Corporation comes
from investing activities, principally the maturities of investment securities. During 2002, due to the rapidly declining interest rate environment, maturities and calls of investment securities amounted to $57,122,000, compared to $64,490,000 in
2001 and $13,896,000 in 2000. As of December 31, 2002, the Corporation had approximately $44,885,000 of investment securities that mature in 36 months. It is anticipated that interest rates will begin to stabilize and the rapidity of calls in
investment securities will decline. For the year ended December 31, 2002, $59,260,000 of cash was redeployed in investment securities. Weaker loan demand resulted in a net decrease in loans of $5,296,000 for 2002.

Additional sources of liquidity are available to FCBNA through the Federal Reserve System and through membership in the Federal Home Loan Bank system. As of December 31, 2002, FCBNA had a maximum
borrowing capacity exceeding $70,000,000 through the Federal Home Loan Bank of Pittsburgh. These funds can be made available with various maturities and interest rate structures. Borrowings cannot exceed twenty times the amount of Federal Home Loan
Bank stock owned by the borrowing bank. During 2002,



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the Federal Home Loan Bank changed its capitalization structure, reducing the amount of stock FCBNA is required to own for membership. At December 31, 2002,
FCBNA owned $368,900 of stock, which would allow FCBNA to borrow up to $7,378,000 without acquiring additional stock. Borrowings are collateralized by a blanket lien by the Federal Home Loan Bank on its members qualifying assets. As of
December 31, 2002, there were no outstanding advances from the Federal Home Loan Bank of Pittsburgh. As a member of the Federal Reserve System, FCBNA has access to funding through the Federal Reserve Bank of Richmond. The Federal Reserve requires
its members to exhaust other sources of liquidity before seeking advances, therefore, unless FCBNA would leave the Federal Home Loan Bank of Pittsburgh, borrowing from the Federal Reserve Bank of Richmond would be very unlikely. Any borrowings from
the Federal Reserve Bank of Richmond would require assets of FCBNA to be pledged as collateral, and advances would be expected to be repaid as soon as possible.

Income
Statement Analysis

Earnings Overview

Net income for 2002 was $3,375,000 or $1.69 per
diluted share, an increase of $1,230,000 or 57.3% from the $2,145,000 or $1.07 per diluted share earned in 2001, and $294,000 more than the $3,081,000 or $1.54 per diluted share earned in 2000. This increase occurred primarily as a result of a
decrease in the provision for loan losses and enhanced net interest income due to the reductions in interest expense from repricing time deposits exceeding the decline in interest income from loans and investment securities. Additional noninterest
income and reductions in noninterest expense further enhanced earnings.

Earnings Per Share

The Earnings Per Share Table summarizes the principal sources of changes in earnings per share for 2002. For further details on the computation of earnings per share, refer to Note 10 of the Notes to Consolidated Financial Statements,
presented elsewhere in this report.

EARNINGS PER SHARE



|Net income per share  2001           |  | $     | 1.07 | 
|------------------------------------- |  | ----- | ---- | 
|                                      |  |       |      | 
|Increase (decrease) due to change in: |  |       |     
|Net interest income                   |  | 0.22  |     
|Provision for loan losses             |  | 0.28  |     
|Other operating income                |  | 0.24  |     
|Personnel expense                     |  | (0.22 | )   
|Other expense                         |  | 0.10  |     
|                                      |  |       |     
|Net income per share  2002           |  | $     | 1.69 | 
|                                      |  |       |      | 

Net Interest Income

The major portion of the Corporations earnings is derived from net interest income, which is the interest income on interest-earning assets less the interest expense on interest-bearing
liabilities. During 2002 net interest income increased $427,000 or 2.8%. This followed a 3.1 % decrease in 2001, and a 14.4% increase in 2000. For the year ended



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December 31, 2002, interest income decreased $4,073,000, or approximately 15.9%, compared to a decrease of $2,316,000, or 8.3% for 2001, and an increase of
$3,148,000, or 12.7% for 2000. Interest on loans, which decreased $3,154,000 or 15.9%, contributed to the decrease for 2002, along with interest on securities, which decreased $644,000, or 13.3%. The decrease in interest income was accompanied by a
decrease in interest expense of $4,500,000 or 43.3% for 2002. This followed a decrease in interest expense of $1,836,000, or 15.0% for 2001, and an increase of $1,168,000, or 10.6% for 2000.

Net interest income is affected by many factors, but most significantly by the prevailing interest rates during the period, the spread between the various sources and uses of funds, and by changes in the volume of
various assets and liabilities. The performance for 2002 is indicative of the historically low interest rate environment that followed the rapid decline in interest rates that prevailed throughout 2001. This is further supported through volume/rate
analysis that shows most changes in net interest income were due to changes in interest rate and not due to the mix of loans, investments or interest-bearing liabilities. For 2000, the increases in interest income and expense are primarily
attributable to having a full year of operations from the Hinton, West Virginia office compared to approximately six months of operations in 1999.

Provision for Loan
Losses

The Corporation experienced a 23.5% decrease in the provision for loan losses during 2002. The provision for loan losses was $1,785,000 for 2002, compared to
$2,334,000 for 2001 and $1,209,000 for 2000. Factors contributing to the decreased provision in 2002 included decreased charge-offs of approximately $472,000, primarily in certain commercial and commercial mortgage loans, along with fewer
charge-offs in the retail sector. In evaluating the loan portfolio at December 31, 2002, with the improved level of nonaccrual and past-due loans, it is anticipated that loan losses will show continued improvement in 2003.

Noninterest Income and Expense

Noninterest income increased $485,000 or 12.9% in 2002, following a $423,000 or
12.7% increase in 2001, and a $151,000 or 4.7% increase in 2000. The most significant factor contributing to this increase was a $475,000 recovery that resulted from the settlement of certain litigation surrounding a check-kiting scheme and is
reflected in other noninterest income. The largest component of noninterest income is fees from fiduciary activities. Fees from fiduciary activities increased approximately $7,000 in 2002 after being unchanged in 2001, which followed an increase of
$175,000 or 14.3% for 2000. The second largest component of non-interest income is service charges on deposit accounts. These fees increased approximately $85,000 or 6.8% in 2002, after a decrease of approximately $25,000 or 2.0% in 2001, and an
increase of approximately $130,000 or 11.4% in 2000.

Noninterest expense, excluding the provision for loan losses, decreased 4.6% in 2002, following a 2.3% increase in 2001 and a
17.9% increase in 2000. Personnel expense is the largest component of noninterest expense. Personnel expense increased 6.7% in 2002, following an increase of 9.1% in 2001, and 9.6% in 2000. The additional staff required for a full year of operations
of the Hinton, West Virginia branch acquisition contributed to the 2000 increase. In addition to salaries, employee benefits, which included increased costs for health care benefits and net periodic pension cost, contributed to the increase in
personnel expense for 2002 and 2001. For a complete discussion of the Corporations



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employee benefits, refer to Note 12 of the Notes to Consolidated Financial Statements, presented elsewhere in this report. Management remains committed to
improving operational efficiency throughout the organization while keeping personnel expense at an adequate level to attract and retain competent staff.

The primary factor
contributing to the decrease in noninterest expense for 2002 was the discontinuance of goodwill amortization of approximately $425,000 upon the adoption of Financial Accounting Standards Board Statement No. 142 Goodwill and Other Intangible
Assets, (SFAS 142). Refer to Note 2 of the Notes to Consolidated Financial Statements, presented elsewhere in this report for a complete discussion of the effects of adopting SFAS 142.

Income Taxes

Applicable income taxes for 2002 increased $851,000 or 75.7%. This followed a $541,000 or 32.5% decrease for 2001, and a
$173,000 or 9.4% decrease for 2000. Income taxes computed at the statutory rate are reduced primarily by interest earned on state and municipal obligations. For a complete discussion of the Corporations tax position, refer to Note 13 of the
Notes to Consolidated Financial Statements, presented elsewhere in this report.

RETURN ON EQUITY AND ASSETS



|                                                                                 |  | December 31, |  
|-------------------------------------------------------------------------------- |  | ------------ | -
|                                                                                 |  |              |  
|                                                                                 |  | 2002         |  
|                                                                                 |  |              |  
|Percentage of net income to:                                                     |  |              |  
|Average stockholders equity                                                     |  | 10.27        | %
|Average total assets                                                             |  | 0.92         | %
|Percentage of dividends declared per common share to net income per common share |  | 50.30        | %
|Percentage of average stockholders equity to average total
assets               |  | 8.93         | %

The Effects of Inflation and Changing
Prices

Inflation affects the Corporation in several ways, but not to the same extent that it does a company that makes large capital expenditures or has a large
investment in inventory. The Corporations asset and liability structure is primarily monetary in nature and, therefore, its financial results are more affected by changes in interest rates than by inflation. However, the actions of the Federal
Reserve Board indicate that interest rate management will continue to be the primary tool used to curtail inflationary pressures. Inflation does affect noninterest expense, such as personnel expense and the cost of services and supplies. These
increases must be offset to the extent possible, by increases in noninterest income and by control of noninterest expense.

Accounting, Legislative and Regulatory
Matters

Effective January 1, 2002, the Corporation adopted the provisions of Financial Accounting Standards Board Statement No. 14 1, Business Combinations
(SFAS 141). SFAS 141requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Use of the pooling-of-interests method is prohibited. The
implementation of SFAS 141 did not have a material impact on the Corporations consolidated financial position or consolidated results of operations.



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Effective January 1, 2002, the Corporation adopted the provisions of Financial Accounting Standards Board Statement No. 142 Goodwill and Other
Intangible Assets, (SFAS 142). As of January 1, 2002, the Corporation had approximately $5,183,000 in unamortized goodwill from previous acquisitions. SFAS 142 required a transitional impairment test be performed within six-months of adoption.
The initial valuation of the Corporations goodwill pursuant to this pronouncement resulted in no write-downs for impairment. Refer to Note 2 of the Notes to Consolidated Financial Statements, presented elsewhere in this report for a complete
discussion of the effects of adopting SFAS 142.

Effective January 1, 2002, the Corporation adopted the provisions of Financial Accounting Standards Board Statements No. 143
Accounting for Asset Retirement Obligations (SFAS 143), and No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144).

SFAS 143
requires that obligations associated with the retirement of tangible long-lived assets be recorded as a liability when those obligations are incurred, with the amount of liability initially measured at fair value. SFAS 143 is effective for financial
statements beginning after June 15, 2002, though early adoption is encouraged. The implementation of this statement did not have a material impact on the Corporations consolidated financial position or consolidated results of
operations.

SFAS 144 supersedes SFAS 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. SFAS 144 applies to all
long-lived assets including discontinued operations, and amends Accounting Principle Board Opinion No. 30, Reporting the Effect of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions. SFAS 144 requires that long-lived assets that are to be disposed of by sale be measured at the lower of book or fair value less cost to sell. SFAS 144 is effective for financial statements issued for fiscal years beginning after
December 15, 2001 and its provisions are generally expected to be applied prospectively. The implementation of this statement did not have a material impact on the Corporations consolidated financial position or consolidated results of
operations.

The Financial Accounting Standards Board has issued SFAS 145 Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections (SFAS 145). This Statement rescinds SFAS No.4, Reporting Gains and Losses from Extinguishment of Debt, and an amendment of that Statement, SFAS 64, Extinguishments of Debt Made to Satisfy Sinking-Fund
Requirements. This Statement also rescinds SFAS 44, Accounting for Intangible Assets of Motor Carriers. This Statement amends SFAS 13, Accounting for Leases, to eliminate an inconsistency between the required accounting
for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. SFAS 145 also amends other existing authoritative pronouncements to make various
technical corrections, clarify meanings, or describe their applicability under changed conditions. The provisions of SFAS 145 related to the rescission of SFAS 4 shall be applied in fiscal years beginning after May 15, 2002. Any gain or loss on
extinguishment of debt that was classified as an extraordinary item in prior periods presented that does not meet the criteria in Opinion 30 for classification as an extraordinary item shall be reclassified. Early application of the provisions of
this Statement related to the rescission of SFAS 4 is encouraged. The provisions in paragraphs 8 and 9(c) of SFAS 145 related to SFAS 13 shall be effective for transactions occurring after May 15, 2002, with early application encouraged. All other
provisions of SFAS 145 shall be effective for financial statements issued on



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##### Table of Contents

or after May 15, 2002, with early application encouraged. Management does not anticipate the implementation of this statement to have a material impact on
the Corporations consolidated financial position or consolidated results of operations.

In June 2002 the Financial Accounting Standards Board issued FAS 146
Accounting for Costs Associated with Exit or Disposal Activities. This Statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No.
94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). The provisions of this Statement are effective for exit or disposal
activities that are initiated after December 31, 2002, with early application encouraged. Management does not anticipate the implementation of this statement to have a material impact on the Corporations consolidated financial position or
consolidated results of operations.

The Financial Accounting Standards Board has issued FAS 147, Acquisitions of Certain Financial Institutions, an amendment of FASB
Statements No. 72 and 144 and FASB Interpretation No. 9 (SFAS 147). FASB Statement No. 72, Accounting for Certain Acquisitions of Banking or Thrift Institutions, and FASB Interpretation No. 9, Applying APB Opinions No. 16 and
17 When a Savings and Loan Association or a Similar Institution Is Acquired in a Business Combination Accounted for by the Purchase Method, provided interpretive guidance on the application of the purchase method to acquisitions of financial
institutions. Except for transactions between two or more mutual enterprises, SFAS 147 removes acquisitions of financial institutions from the scope of both Statement 72 and Interpretation 9 and requires that those transactions be accounted for in
accordance with FASB Statements No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets. Thus, the requirement in paragraph 5 of Statement 72 to recognize (and subsequently amortize) any excess of
the fair value of liabilities assumed over the fair value of tangible and identifiable intangible assets acquired as an unidentifiable intangible asset no longer applies to acquisitions within the scope of SFAS 147.

In addition, SFAS 147 amends FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, to include in its scope long-term customer-relationship intangible
assets of financial institutions such as depositor- and borrower-relationship intangible assets and credit cardholder intangible assets. Consequently, those intangible assets are subject to the same undiscounted cash flow recoverability test and
impairment loss recognition and measurement provisions that SFAS 144 requires for other long-lived assets that are held and used. Paragraph 5 of SFAS 147, which relates to the application of the purchase method of accounting, is effective for
acquisitions for which the date of acquisition is on or after October 1, 2002. The provisions in paragraph 6 related to accounting for the impairment or disposal of certain long-term customer-relationship intangible assets are effective on October
1, 2002. Transition provisions for previously recognized unidentifiable intangible assets in paragraphs 8-14 are effective on October 1, 2002, with earlier application permitted. Management does not anticipate the implementation of this statement to
have a material impact on the Corporations consolidated financial position or consolidated results of operations.

In December 2002, the Financial Accounting Standards Board
issued FASB Statement No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure (SFAS 148). In light of recent switches by a number of companies to the recognition and measurement provisions of SFAS 123, Accounting
for Stock-Based Compensation, (and of



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announcements by other entities of their intentions to switch), the FASB has amended SFAS 123 to add two new transitional approaches when changing from the
APB Opinion 25 intrinsic value method of accounting for stock-based employee compensation to the SFAS 123 fair value method. In addition, SFAS 123 has been amended to require disclosure of additional information concerning the effects of stock-based
employee compensation on earnings. Finally, SFAS 148 amends APB Opinion 28, Interim Financial Reporting, to call for disclosure of SFAS 123 pro forma information on a quarterly basis. Management does not anticipate the implementation of
this statement to have a material impact on the Corporations consolidated financial position or consolidated results of operations.

On November 25, 2002, the Financial
Accounting Standards Board issued FASB Interpretation No. 45 (FIN 45), Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (an interpretation of FASB
Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34). FIN 45 clarifies the requirements of FASB Statement No. 5 (FAS 5), Accounting for Contingencies, relating to a guarantors accounting for, and
disclosure of, the issuance of certain types of guarantees. For guarantees that fall within the scope of FIN 45, the Interpretation requires that guarantors recognize a liability equal to the fair value of the guarantee upon its issuance. The
Corporations primary guarantees included within the scope of FIN 45 relates to financial standby letters of credit issued to commercial customers. FIN 45 requires the liability recognized in standalone arms-length transactions to be the
premium received or receivable by the guarantor. Management does not anticipate the implementation of this interpretation to have a material impact on the Corporations consolidated financial position or consolidated results of
operations.

In January 2003 the Financial Accounting Standards Board issued FASB Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities (an
interpretation of ARB No. 51). FIN 46 addresses the consolidation by business enterprises of certain variable interest entities. Management does not anticipate the implementation of this interpretation to have a material impact on the
Corporations consolidated financial position or consolidated results of operations.

On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002 (the
Act). The Act contains a number of provisions that dramatically change the reporting and corporate governance obligations of public companies and their directors and officers. The Act also creates new and enhanced criminal and civil
liability provisions related to securities fraud. In order to comply with certain provisions of the Act, the Corporation has taken steps to enhance its controls over financial reporting and disclosures including, but not limited to, the formation of
a disclosure review committee that will be utilized to evaluate the accuracy and completeness of the Corporations reporting to the U.S. Securities and Exchange Commission and to shareholders of the Corporation.

Additional due diligence procedures have been developed to assist the Chief Executive and Chief Financial officers in their certification of the financial statements. The Act also enhances the
responsibilities of the Corporations Audit Committee in the selection of the Corporations external auditors and in the approval of the scope of services the external auditors will be allowed to perform for the Corporation. The Act
further expedites the reporting of transactions by directors and officers in the Corporations common stock. The Corporation will continue to monitor developments and new regulations that will be promulgated pursuant to the Act to provide
enhanced transparency of reporting so that our stockholders or potential stockholders will be able to make informed investment decisions.



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##### Table of Contents

Per Share Data by Quarter

The common stock of the Corporation is quoted
on the NASD OTC Bulletin Board under the trading symbol FCBS. The per share data by quarter table shows the approximate high and low bid as reported by the transfer agent and market makers for 2002 and 2001. Also presented below are the dividends
paid for those respective years. The number of stockholders of record on December 31, 2002, was 574 and outstanding shares totaled 1,991,000.

PER SHARE DATA BY
QUARTER



|               |  |           |      | Market Quotations |     
|-------------- |  | --------- | ---- | ----------------- | ----
|               |  |           |      |                   |     
|               |  | Dividends |      | 2002              |     
|               |  |           |      |                   |     
|Quarter        |  |           | 2002 |                   | 2001
|               |  |           |      |                   |     
|First Quarter  |  | $0.20     |      | $0.20             |     
|Second Quarter |  | 0.20      |      | 0.20              |     
|Third Quarter  |  | 0.20      |      | 0.20              |     
|Fourth Quarter |  | 0.25      |      | 0.25              |     



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##### Table of Contents

Trust Asset Responsibility

Assets managed by the Trust Division are
presented at market value. These assets are not included in the financial statements contained elsewhere in this report. Trust responsibility, as measured by market value, is substantially greater than book value, which is the Federal income tax
basis of the assets.





Trust account administration and investment management are linked through the talents of a skilled professional and support staff. Their education and experience through decades of service results in specialization in
personal and retirement relationships, foundations and charitable and endowment purposes.



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Century Bankshares,
Inc.  Page  21



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##### Table of Contents

CONDENSED STATEMENTS OF FINANCIAL CONDITION

Statistical Summary,
2002  1998



|                                     |  | December 31,                                  |        
|------------------------------------ |  | --------------------------------------------- | -------
|                                     |  |                                               |        
|                                     |  | 2002                                          |        
|                                     |  |                                               |        
|                                     |  | (Dollars in Thousands, Except Per Share Data) |        
|Loans                                |  | $                                             | 236,460
|Securities                           |  |                                               | 88,949 
|Federal funds sold                   |  |                                               |       
|Interest-bearing deposits with banks |  |                                               | 1,871  
|                                     |  |                                               |        
|INTEREST-EARNING ASSETS              |  |                                               | 327,280
|                                     |  |                                               |        
|Cash and due from banks              |  |                                               | 14,947 
|Premises and equipment               |  |                                               | 10,500 
|Other assets                         |  |                                               | 11,542 
|Allowance for loan losses            |  |                                               | (3,005 
|                                     |  |                                               |        
|TOTAL ASSETS                         |  | $                                             | 361,264
|                                     |  |                                               |        
|Savings deposits                     |  | $                                             | 143,931
|Time deposits                        |  |                                               | 124,814
|Other interest-bearing liabilities   |  |                                               | 16,745 
|                                     |  |                                               |        
|INTEREST BEARING LIABILITIES         |  |                                               | 285,490
|                                     |  |                                               |        
|Demand deposits                      |  |                                               | 39,202 
|Other liabilities                    |  |                                               | 2,754  
|                                     |  |                                               |        
|TOTAL LIABILITIES                    |  |                                               | 327,446
|                                     |  |                                               |        
|STOCKHOLDERS EQUITY                 |  |                                               | 33,818 
|                                     |  |                                               |        
|TOTAL LIABILITIES & EQUITY           |  | $                                             | 361,264
|                                     |  |                                               |        
|TOTAL DEPOSITS                       |  | $                                             | 307,947
|                                     |  |                                               |        
|BOOK VALUE PER SHARE                 |  | $                                             | 16.99  
|                                     |  |                                               |        

SUMMARY OF OPERATIONS

Statistical Summary, 2002  1998



|                           |  | Years Ended December 31,                      |       
|-------------------------- |  | --------------------------------------------- | ------
|                           |  |                                               |       
|                           |  | 2002                                          |       
|                           |  |                                               |       
|                           |  | (Dollars in Thousands, Except Per Share Data) |       
|Interest income            |  | $                                             | 21,534
|Interest expense           |  | 5,886                                         |       
|                           |  |                                               |       
|NET INTEREST MARGIN        |  | 15,648                                        |       
|                           |  |                                               |       
|Provision for loan losses  |  | 1,785                                         |       
|                           |  |                                               |       
|Net credit margin          |  | 13,863                                        |       
|                           |  |                                               |       
|Noninterest income         |  | 4,251                                         |       
|Noninterest expense        |  | 12,764                                        |       
|                           |  |                                               |       
|INCOME BEFORE INCOME TAXES |  | 5,350                                         |       
|                           |  |                                               |       
|Provision for income taxes |  | 1,975                                         |       
|                           |  |                                               |       
|NET INCOME                 |  | $                                             | 3,375 
|                           |  |                                               |       
|EARNINGS PER COMMON SHARE: |  |                                               |       
|Basic                      |  | $                                             | 1.69  
|Diluted                    |  | $                                             | 1.69  
|                           |  |                                               |       
|Dividends per common share |  | $                                             | 0.85  
|Payout ratio               |  | 50                                            | %     

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Bankshares,
Inc.  Page  22



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##### Table of Contents

Consolidated Statements of Financial Condition



|                                                                                                                                                                                                                              |  | December 31,           |        
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | -------
|                                                                                                                                                                                                                              |  |                        |        
|                                                                                                                                                                                                                              |  | 2002                   |        
|                                                                                                                                                                                                                              |  |                        |        
|                                                                                                                                                                                                                              |  | (Dollars in Thousands) |        
|                                                                                                                                                                                                                              |  |                        |        
|ASSETS                                                                                                                                                                                                                        |  |                        |        
|Cash and due from banks                                                                                                                                                                                                       |  | $                      | 14,947 
|Interest-bearing balances with banks                                                                                                                                                                                          |  | 1,871                  |        
|Securities available for sale                                                                                                                                                                                                 |  | 78,631                 |        
|Securities held to maturity (estimated market value of $9,971 in 2002 and $10,859
in 2001)                                                                                                                                    |  | 9,566                  |        
|Federal Home Loan Bank and Federal Reserve Bank Stock                                                                                                                                                                         |  | 752                    |        
|Federal funds sold                                                                                                                                                                                                            |  |                       |        
|Loans                                                                                                                                                                                                                         |  | 236,460                |        
|Less allowance for loan losses                                                                                                                                                                                                |  | 3,005                  |        
|                                                                                                                                                                                                                              |  |                        |        
|Net loans                                                                                                                                                                                                                     |  | 233,455                |        
|Premises and equipment, net                                                                                                                                                                                                   |  | 10,500                 |        
|Other assets                                                                                                                                                                                                                  |  | 11,542                 |        
|                                                                                                                                                                                                                              |  |                        |        
|TOTAL ASSETS                                                                                                                                                                                                                  |  | $                      | 361,264
|                                                                                                                                                                                                                              |  |                        |        
|                                                                                                                                                                                                                              |  |                        |        
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                                          |  |                        |        
|Deposits:                                                                                                                                                                                                                     |  |                        |        
|Noninterest-bearing                                                                                                                                                                                                           |  | $                      | 39,202 
|Interest-bearing                                                                                                                                                                                                              |  | 268,745                |        
|                                                                                                                                                                                                                              |  |                        |        
|Total deposits                                                                                                                                                                                                                |  | 307,947                |        
|Short-term borrowings                                                                                                                                                                                                         |  | 16,745                 |        
|Other liabilities                                                                                                                                                                                                             |  | 2,754                  |        
|                                                                                                                                                                                                                              |  |                        |        
|TOTAL LIABILITIES                                                                                                                                                                                                             |  | 327,446                |        
|                                                                                                                                                                                                                              |  |                        |        
|Commitments and contigencies (see Notes 14 and 15)                                                                                                                                                                            |  |                        |        
|STOCKHOLDERS EQUITY                                                                                                                                                                                                          |  |                        |        
|Common stock - $1.25 par value; 10,000,000 shares authorized and2,000,000
shares issued at December 31, 2002 and 2001;1,991,000 shares outstanding at December 31, 2002 and2,000,000 shares outstanding at December 31, 2001: |  | 2,500                  |        
|Paid-in capital                                                                                                                                                                                                               |  | 785                    |        
|Retained earnings                                                                                                                                                                                                             |  | 30,247                 |        
|Treasury stock, at cost; 9,000 shares                                                                                                                                                                                         |  | (147                   | )      
|Accumulated other comprehensive income, net of tax                                                                                                                                                                            |  | 433                    |        
|                                                                                                                                                                                                                              |  |                        |        
|TOTAL STOCKHOLDERS EQUITY                                                                                                                                                                                                    |  | 33,818                 |        
|                                                                                                                                                                                                                              |  |                        |        
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                                    |  | $                      | 361,264
|                                                                                                                                                                                                                              |  |                        |        

The accompanying notes are an integral part of the
consolidated financial statements.



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Inc.  Page  23



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##### Table of Contents

Consolidated Statements of Income and Comprehensive Income



|                                                                                       |  | Years Ended December 31,                      |       
|-------------------------------------------------------------------------------------- |  | --------------------------------------------- | ------
|                                                                                       |  |                                               |       
|                                                                                       |  | 2002                                          |       
|                                                                                       |  |                                               |       
|                                                                                       |  | (Dollars in Thousands, Except Per Share Data) |       
|INTEREST INCOME                                                                        |  |                                               |       
|Interest and fees on loans                                                             |  | $                                             | 16,675
|Interest on balances with banks                                                        |  | 68                                            |       
|Interest and dividends from securities available for sale:Taxable                      |  | 4,212                                         |       
|Interest and dividends from securities held to maturity:Taxable                        |  | 78                                            |       
|Tax-exempt                                                                             |  | 432                                           |       
|Interest on federal funds sold                                                         |  | 69                                            |       
|                                                                                       |  |                                               |       
|TOTAL INTEREST INCOME                                                                  |  | 21,534                                        |       
|                                                                                       |  |                                               |       
|                                                                                       |  |                                               |       
|INTEREST EXPENSE                                                                       |  |                                               |       
|Interest on time certificates of $100,000 or more                                      |  | 1,082                                         |       
|Interest on other deposits                                                             |  | 4,645                                         |       
|Interest on federal funds purchased and securities sold under agreements to
repurchase |  | 157                                           |       
|Interest on demand notes to U. S. Treasury and other indebtedness                      |  | 2                                             |       
|                                                                                       |  |                                               |       
|TOTAL INTEREST EXPENSE                                                                 |  | 5,886                                         |       
|                                                                                       |  |                                               |       
|Net interest income                                                                    |  | 15,648                                        |       
|Provision for loan losses                                                              |  | 1,785                                         |       
|Net interest income after provision for loan losses                                    |  | 13,863                                        |       
|                                                                                       |  |                                               |       
|                                                                                       |  |                                               |       
|NONINTEREST INCOME                                                                     |  |                                               |       
|Income from fiduciary activities                                                       |  | 1,407                                         |       
|Service charges on deposit accounts                                                    |  | 1,330                                         |       
|Other noninterest income                                                               |  | 1,514                                         |       
|Securities gains (losses)                                                              |  |                                              |       
|                                                                                       |  |                                               |       
|TOTAL NONINTEREST INCOME                                                               |  | 4,251                                         |       
|                                                                                       |  |                                               |       
|                                                                                       |  |                                               |       
|NONINTEREST EXPENSE                                                                    |  |                                               |       
|Salaries, wages, and other employee benefits                                           |  | 6,960                                         |       
|Premises and equipment expense                                                         |  | 1,869                                         |       
|Data processing expense                                                                |  | 788                                           |       
|Advertising and public relations                                                       |  | 205                                           |       
|Postage                                                                                |  | 258                                           |       
|Intangible amortization                                                                |  |                                              |       
|Supplies and printing                                                                  |  | 344                                           |       
|Other noninterest expense                                                              |  | 2,340                                         |       
|                                                                                       |  |                                               |       
|TOTAL NONINTEREST EXPENSE                                                              |  | 12,764                                        |       
|                                                                                       |  |                                               |       
|Income before income taxes                                                             |  | 5,350                                         |       
|Provision for income taxes                                                             |  | 1,975                                         |       
|                                                                                       |  |                                               |       
|NET INCOME                                                                             |  | 3,375                                         |       
|                                                                                       |  |                                               |       
|                                                                                       |  |                                               |       
|Other comprehensive income (loss), net of tax                                          |  | (683                                          | )     
|                                                                                       |  |                                               |       
|COMPREHENSIVE INCOME                                                                   |  | $                                             | 2,692 
|                                                                                       |  |                                               |       
|                                                                                       |  |                                               |       
|NET INCOME PER COMMON SHARE:                                                           |  |                                               |       
|                                                                                       |  |                                               |       
|Basic                                                                                  |  | $                                             | 1.69  
|Diluted                                                                                |  | $                                             | 1.69  
|                                                                                       |  |                                               |       
|                                                                                       |  |                                               |       
|AVERAGE SHARES OUTSTANDING:                                                            |  |                                               |       
|                                                                                       |  |                                               |       
|Basic                                                                                  |  | 1,994,648                                     |       
|Diluted                                                                                |  | 1,994,648                                     |       
|                                                                                       |  |                                               |       

The accompanying notes are an integral part of the
consolidated financial statements.



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Inc.  Page  24



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##### Table of Contents

Consolidated Statements of Cash Flows



|                                                                                                    |  | Years Ended December 31, |       
|--------------------------------------------------------------------------------------------------- |  | ------------------------ | ------
|                                                                                                    |  |                          |       
|                                                                                                    |  | 2002                     |       
|                                                                                                    |  |                          |       
|                                                                                                    |  | (Dollars in Thousands)   |       
|CASH FLOWS FROM OPERATING ACTIVITIES                                                                |  |                          |       
|Net income before adjustments to reconcile net income to net cash provided by operating
activities: |  | $                        | 3,375 
|Provision for loan losses                                                                           |  | 1,785                    |       
|Depreciation and amortization                                                                       |  | 828                      |       
|Deferred income tax expense (benefit)                                                               |  | 214                      |       
|Securities losses                                                                                   |  |                         |       
|(Increase) decrease in interest receivable                                                          |  | 426                      |       
|Net investment amortization and (accretion)                                                         |  | 95                       |       
|Net (increase) decrease in other assets                                                             |  | 480                      |       
|Net increase (decrease) in interest payable and other liabilities                                   |  | (85                      | )     
|                                                                                                    |  |                          |       
|NET CASH PROVIDED BY OPERATING ACTIVITIES                                                           |  | 7,118                    |       
|                                                                                                    |  |                          |       
|                                                                                                    |  |                          |       
|CASH FLOWS FROM INVESTING ACTIVITIES                                                                |  |                          |       
|Purchases of securities held to maturity                                                            |  | (1,013                   | )     
|Purchases of securities available for sale                                                          |  | (58,247                  | )     
|Redemptions (purchases) of Federal Home Loan Bank stock                                             |  | 474                      |       
|Proceeds from maturities and calls of securities held to maturity                                   |  | 2,176                    |       
|Proceeds from maturities and calls of securities available for
sale                                 |  | 54,946                   |       
|Proceeds from sales of securities available for sale                                                |  |                         |       
|Proceeds from sales of securities held to maturity                                                  |  |                         |       
|Net (increase) decrease in loans                                                                    |  | 5,296                    |       
|Acquisition of premises and equipment                                                               |  | (679                     | )     
|Proceeds from disposal of premises and equipment                                                    |  |                         |       
|                                                                                                    |  |                          |       
|NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES                                                    |  | 2,953                    |       
|                                                                                                    |  |                          |       
|                                                                                                    |  |                          |       
|CASH FLOWS FROM FINANCING ACTIVITIES                                                                |  |                          |       
|Net increase (decrease) in demand and savings deposits                                              |  | 1,012                    |       
|Net increase (decrease) in time deposits                                                            |  | (10,438                  | )     
|Net increase (decrease) in short-term borrowings                                                    |  | (275                     | )     
|Purchase of treasury stock                                                                          |  | (147                     | )     
|Cash dividends paid                                                                                 |  | (1,694                   | )     
|                                                                                                    |  |                          |       
|NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES                                                    |  | (11,542                  | )     
|                                                                                                    |  |                          |       
|Net increase (decrease) in cash and cash equivalents                                                |  | (1,471                   | )     
|Cash and cash equivalents at beginning of year                                                      |  | 18,289                   |       
|                                                                                                    |  |                          |       
|Cash and cash equivalents at end of year                                                            |  | $                        | 16,818
|                                                                                                    |  |                          |       
|                                                                                                    |  |                          |       
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION                                                   |  |                          |       
|Cash paid during the year for:                                                                      |  |                          |       
|Interest                                                                                            |  | $                        | 6,020 
|Income taxes                                                                                        |  | $                        | 2,004 

The accompanying notes are
an integral part of the consolidated financial statements.



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##### Table of Contents

Consolidated Statements of Changes in Stockholders Equity



|                                          |  | CommonStock                                   |       | Paid-InCapital |   | RetainedEarnings |   | TreasuryStock |        | AccumulatedOtherComprehensiveIncome (Loss),Net of tax |  
|----------------------------------------- |  | --------------------------------------------- | ----- | -------------- | - | ---------------- | - | ------------- | ------ | ----------------------------------------------------- | -
|                                          |  |                                               |       |                |   |                  |   |               |        |                                                       |  
|                                          |  | (Dollars in Thousands, Except Per Share Data) |      
|YEAR ENDED DECEMBER 31, 2000              |  |                                               |       |                |   |                  |   |               |        |                                                       |  
|Balance at January 1, 2000                |  | $                                             | 2,500 |                | $ | 785              |   | $             | 26,740 |                                                       | $
|Net income                                |  |                                              |       |               |   | 3,081            |   |              |        |                                                      |  
|Other comprehensive income, net of tax    |  |                                              |       |               |   |                 |   |              |        | 1,427                                                 |  
|Cash dividends declared - $0.85 per share |  |                                              |       |               |   | (1700            | ) |              |        |                                                      |  
|                                          |  |                                               |       |                |   |                  |   |               |        |                                                       |  
|Balance at December 31, 2000              |  | 2,500                                         |       | 785            |   | 28,121           |   |              |        | 276                                                   |  
|                                          |  |                                               |       |                |   |                  |   |               |        |                                                       |  
|                                          |  |                                               |       |                |   |                  |   |               |        |                                                       |  
|YEAR ENDED DECEMBER 31, 2001              |  |                                               |       |                |   |                  |   |               |        |                                                       |  
|Net income                                |  |                                              |       |               |   | 2,145            |   |              |        |                                                      |  
|Other comprehensive income, net of tax    |  |                                              |       |               |   |                 |   |              |        | 840                                                   |  
|Cash dividends declared - $0.85 per share |  |                                              |       |               |   | (1,700           | ) |              |        |                                                      |  
|                                          |  |                                               |       |                |   |                  |   |               |        |                                                       |  
|Balance at December 31, 2001              |  | 2,500                                         |       | 785            |   | 28,566           |   |              |        | 1,116                                                 |  
|                                          |  |                                               |       |                |   |                  |   |               |        |                                                       |  
|                                          |  |                                               |       |                |   |                  |   |               |        |                                                       |  
|YEAR ENDED DECEMBER 31, 2002              |  |                                               |       |                |   |                  |   |               |        |                                                       |  
|Net income                                |  |                                              |       |               |   | 3,375            |   |              |        |                                                      |  
|Purchase 9,000 shares of treasury stock   |  |                                              |       |               |   |                 |   | (147          | )      |                                                      |  
|Other comprehensive loss, net of tax      |  |                                              |       |               |   |                 |   |              |        | (683                                                  | )
|Cash dividends declared - $0.85 per share |  |                                              |       |               |   | (1,694           | ) |              |        |                                                      |  
|                                          |  |                                               |       |                |   |                  |   |               |        |                                                       |  
|Balance at December 31, 2002              |  | $                                             | 2,500 |                | $ | 785              |   | $             | 30,247 |                                                       | $
|                                          |  |                                               |       |                |   |                  |   |               |        |                                                       |  

The accompanying notes are an integral part of the
consolidated financial statements.



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Inc.  Page  26



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##### Table of Contents

Notes to Consolidated Financial Statements

1. Summary of Significant Accounting and Reporting Policies

First Century Bankshares, Inc. (the Corporation), and its wholly owned subsidiaries, First Century Bank, N.A. and First Century Financial Services, LLC, operate eleven branches in southern
West Virginia and southwestern Virginia. The Corporations primary source of revenue is derived from loans to customers who are predominately small to medium size businesses and middle income individuals. The accounting and reporting policies
of the Corporation conform to generally accepted accounting principles and to general practices within the banking industry. Certain reclassifications have been made to the prior years financial statements to place them on a comparable basis
with the current years financial statements. The following is a summary of the more significant accounting and reporting policies:

Management Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Principles of Consolidation The consolidated financial statements include the accounts of First Century Bankshares, Inc. and its wholly owned subsidiaries. All
significant intercompany balances and transactions have been eliminated in consolidation.

Cash and cash equivalents For purposes of reporting
cash flows, cash equivalents include cash on hand and amounts due from banks (including cash items in process of collection); interest-bearing balances with banks and federal funds sold. To comply with Federal Reserve regulations, the subsidiary
bank is required to maintain reserve balances with the Federal Reserve Bank of Richmond. The amount of those reserve balances at December 31, 2002, was approximately $5,024,000.

Securities Securities are classified as either held to maturity, available for sale or trading. Classification of securities is determined on the date of purchase. In determining such classification, debt
securities that the Corporation has the positive intent and ability to hold to maturity are classified as held to maturity and are carried at amortized cost. All other securities are classified as available for sale and are carried at fair value
with unrealized gains and losses included in comprehensive income. The Corporation has no securities classified as trading.

Realized gains and losses, determined using the
specific identification method, and declines in value judged to be other than temporary are included in noninterest income. Premiums and discounts are amortized into interest income using a level yield method.

LoansLoans are reported at their principal outstanding balance net of charge-offs and certain other deferred or
unearned income. Interest income is recognized as earned using the interest method.

Allowance for loan lossesThe adequacy of the allowance for loan losses is periodically evaluated by the Corporation in order to maintain the allowance at a level that is sufficient to absorb probable credit losses. Managements evaluation of the
adequacy of the allowance



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##### Table of Contents

1. Summary of Significant Accounting and Reporting Policies (continued)

is based on a review of the Corporations historical loss experience, known and inherent risks in the loan portfolio, including adverse circumstances that may affect the ability of the borrower to repay interest and/or principal, the
estimated value of collateral, and an analysis of the levels and trends of delinquencies, charge-offs, and the risk ratings of the various loan categories. Such factors as the level and trend of interest rates and the condition of the national and
local economies are also considered. Estimates may change at some point in the future.

The allowance for loan losses is established through charges to earnings in the form of a
provision for loan losses. Increases and decreases in the allowance due to changes in the measurement of impaired loans are included in the provision for loan losses. Loans continue to be classified as impaired unless they are brought fully current
and the collection of scheduled interest and principal is considered probable.

A loan is considered impaired, based on current information and events, if it is probable that the
Corporation will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. The measurement of impaired loans that are collateral dependent is based on the fair value of
the collateral. The measurement of other impaired loans is generally based on the present value of expected future cash flows discounted at the historical effective interest rate.

The Corporation uses several factors in determining if a loan is impaired. The internal asset classification procedures include a thorough review of significant loans and lending relationships and include the accumulation of related data.
This data includes loan payment status, borrowers financial data and borrowers operating factors such as cash flows, operating income or loss, etc.

When a loan or
portion of a loan is determined to be uncollectible, the portion deemed uncollectible is charged against the allowance and subsequent recoveries, if any, are credited to the allowance.

Income recognition on impaired and nonaccrual loans Loans, including impaired loans, are generally classified as nonaccrual if they are past due as to maturity or payment of principal
or interest for a period of more than 90 days, unless such loans are well-collateralized and in the process of collection. If a loan or a portion of a loan is classified as doubtful or is partially charged off, the loan is classified as nonaccrual.
Loans that are on a current payment status or past due less than 90 days may also be classified as nonaccrual if repayment in full of principal and/or interest is in doubt.

Loans
may be returned to accrual status when all principal and interest amounts contractually due (including arrearages) are reasonably assured of repayment within an acceptable period of time, and there is a sustained period of repayment performance by
the borrower, in accordance with the contractual terms of interest and principal.

While a loan is classified as nonaccrual and the future collectibility of the recorded loan
balance is doubtful, collections of interest and principal are generally applied as a reduction to principal outstanding. When the future collectibility of the recorded loan balance is expected, interest income may be recognized on a cash basis. In
the case where a nonaccrual loan had been partially charged off, recognition of interest on a cash basis is



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##### Table of Contents

1. Summary of Significant Accounting and Reporting Policies (continued)

limited to that which would have been recognized on the recorded loan balance at the contractual interest rate. Cash receipts in excess of that amount are recorded as recoveries to the allowance for loan losses until prior charge-offs have
been fully recovered.

Other Real Estate Owned Other real estate owned includes properties on which the Corporations subsidiary has
foreclosed and taken title. Real estate properties acquired as a result of foreclosures are carried at the lower of the recorded investment in the loan or the fair value less estimated selling costs. Any excess of the outstanding principal loan
balance over the fair value less estimated selling costs of the foreclosed property is charged to the allowance for loan losses. Any subsequent fair value adjustments and net operating expenses are charged to noninterest expense.

Premises and Equipment Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed by the straight-line method based
upon the estimated useful lives of the assets. Buildings and improvements have estimated useful lives of 20 to 40 years. Equipment and fixtures have estimated useful lives of 3 to 10 years. The cost of major improvements is capitalized. The
expenditures for maintenance and repairs are charged to expense as incurred. Gains or losses on assets sold are included in other operating income.

Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities The Corporation applies a financial-components approach that focuses on control when accounting and reporting for transfers and servicing of
financial assets and extinguishments of liabilities. Under that approach, after a transfer of financial assets, an entity recognizes the financial and servicing assets it controls and the liabilities it has incurred, derecognizes financial assets
when control has been surrendered, and derecognizes liabilities when extinguished. This approach provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings.

Goodwill And Other Intangibles Prior to December 31, 2001, the cost of the investments in acquired institutions in excess of amounts attributable to tangible
and identified intangible assets at dates of acquisition was recorded as goodwill and amortized to operations over periods from 15 - 25 years using the straight-line method. A portion of the cost of purchased subsidiaries represented the value
associated with the future earnings potential of the acquired core deposit base and was being amortized over eight years through December 31, 2000, the estimated life of the deposit base. The unamortized balance of intangibles totaled approximately
$5,183,000 at December 31, 2001, representing only goodwill and unidentified intangibles, net of accumulated amortization of $1,555,000 and is included in other assets. In 2002, under Statement of Financial Accounting Standards (SFAS) No. 142,
goodwill and unidentified intangible assets are no longer amortized, but are reviewed at least annually for impairment using the discounted cash flow method. Impaired goodwill or unidentified intangible assets are written down to fair value,
calculated using the discounted cash flow method. The unimpaired balance of intangibles totaled approximately $5,542,000 at December 31, 2002.

Income Taxes The Corporation files a consolidated federal income tax return. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying
amounts of



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##### Table of Contents

1. Summary of Significant Accounting and Reporting Policies (continued)

existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date.

Segment Information Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. The Corporation has determined that it has one significant operating segment, the providing of general commercial financial services to customers located in the geographic areas of southern West
Virginia and southwestern Virginia. The various products are those generally offered by community banks, and the allocation of resources is based on the overall performance of the institution, versus the individual branches or products.

Comprehensive Income The Company classifies items of other comprehensive income by their nature in the financial statements and displays accumulated other
comprehensive income separately from retained earnings in the equity section of the balance sheet. Unrealized gains and losses on available for sale securities and net accrued pension benefit liability are the components of the Companys other
comprehensive income.

New Accounting Pronouncements Effective January 1, 2002, the Corporation adopted the provisions of Financial Accounting
Standards Board Statement No. 141, Business Combinations (SFAS 141). SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Use of the pooling-of-interests method is
prohibited. The implementation of SFAS 141 did not have a material impact on the Corporations consolidated financial position or consolidated results of operations.

Effective January 1, 2002, the Corporation adopted the provisions of Financial Accounting Standards Board Statements No. 143 Accounting for Asset Retirement Obligations (SFAS 143), and No. 144 Accounting for the Impairment
or Disposal of Long-Lived Assets (SFAS 144).

SFAS 143 requires that obligations associated with the retirement of tangible long-lived assets be recorded as a liability when
those obligations are incurred, with the amount of liability initially measured at fair value. SFAS 143 is effective for financial statements beginning after June 15, 2002, though early adoption is encouraged. The implementation of this statement
did not have a material impact on the Corporations consolidated financial position or consolidated results of operations.

SFAS 144 supersedes SFAS 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. SFAS 144 applies to all long-lived assets including discontinued operations, and amends Accounting Principle Board Opinion No. 30, Reporting the Effect of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. SFAS 144 requires that long-lived assets that are to be disposed of by sale be measured at the lower of book or fair value less
cost to sell. SFAS 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001 and its provisions are generally expected to be applied prospectively. The implementation of this statement did not have a
material impact on the Corporations consolidated financial position or consolidated results of operations.



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##### Table of Contents

1. Summary of Significant Accounting and Reporting Policies (continued)

The Financial Accounting Standards Board has issued SFAS 145 Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections (SFAS 145). This Statement rescinds SFAS No.4,
Reporting Gains and Losses from Extinguishment of Debt, and an amendment of that Statement, SFAS 64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. This Statement also rescinds SFAS 44, Accounting
for Intangible Assets of Motor Carriers. This Statement amends SFAS 13, Accounting for Leases, to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain
lease modifications that have economic effects that are similar to sale-leaseback transactions. SFAS 145 also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability
under changed conditions. The provisions of SFAS 145 related to the rescission of SFAS 4 shall be applied in fiscal years beginning after May 15, 2002. Any gain or loss on extinguishment of debt that was classified as an extraordinary item in prior
periods presented that does not meet the criteria in Opinion 30 for classification as an extraordinary item shall be reclassified. Early application of the provisions of this Statement related to the rescission of SFAS 4 is encouraged. The
provisions in paragraphs 8 and 9(c) of SFAS 145 related to SFAS 13 shall be effective for transactions occurring after May 15, 2002, with early application encouraged. All other provisions of SFAS 145 shall be effective for financial statements
issued on or after May 15, 2002, with early application encouraged. Management does not anticipate the implementation of this statement to have a material impact on the Corporations consolidated financial position or consolidated results of
operations.

In June 2002 the Financial Accounting Standards Board issued FAS 146 Accounting for Costs Associated with Exit or Disposal Activities. This Statement
addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring). The provisions of this Statement are effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. Management
does not anticipate the implementation of this statement to have a material impact on the Corporations consolidated financial position or consolidated results of operations.

The Financial Accounting Standards Board has issued FAS 147, Acquisitions of Certain Financial Institutions, an amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9 (SFAS 147). FASB Statement No. 72,
Accounting for Certain Acquisitions of Banking or Thrift Institutions, and FASB Interpretation No. 9, Applying APB Opinions No. 16 and 17 When a Savings and Loan Association or a Similar Institution Is Acquired in a Business
Combination Accounted for by the Purchase Method, provided interpretive guidance on the application of the purchase method to acquisitions of financial institutions. Except for transactions between two or more mutual enterprises, SFAS 147
removes acquisitions of financial institutions from the scope of both Statement 72 and Interpretation 9 and requires that those transactions be accounted for in accordance with FASB Statements No. 141, Business Combinations, and No. 142,
Goodwill and Other Intangible Assets. Thus, the requirement in paragraph 5 of Statement 72 to recognize (and



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##### Table of Contents

1. Summary of Significant Accounting and Reporting Policies (continued)

subsequently amortize) any excess of the fair value of liabilities assumed over the fair value of tangible and identifiable intangible assets acquired as an unidentifiable intangible asset no longer applies to acquisitions within the scope of
SFAS 147.

In addition, SFAS 147 amends FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, to include in its scope long-term
customer-relationship intangible assets of financial institutions such as depositor- and borrower-relationship intangible assets and credit cardholder intangible assets. Consequently, those intangible assets are subject to the same undiscounted cash
flow recoverability test and impairment loss recognition and measurement provisions that SFAS 144 requires for other long-lived assets that are held and used. Paragraph 5 of SFAS 147, which relates to the application of the purchase method of
accounting, is effective for acquisitions for which the date of acquisition is on or after October 1, 2002. The provisions in paragraph 6 related to accounting for the impairment or disposal of certain long-term customer-relationship intangible
assets are effective on October 1, 2002.Transition provisions for previously recognized unidentifiable intangible assets in paragraphs 8-14 are effective on October 1, 2002, with earlier application permitted. Management does not anticipate the
implementation of this statement to have a material impact on the Corporations consolidated financial position or consolidated results of operations.

In December 2002, the
Financial Accounting Standards Board issued FASB Statement No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure (SFAS 148). In light of recent switches by a number of companies to the recognition and measurement
provisions of SFAS 123, Accounting for Stock-Based Compensation, (and of announcements by other entities of their intentions to switch), the FASB has amended SFAS 123 to add two new transitional approaches when changing from the APB
Opinion 25 intrinsic value method of accounting for stock-based employee compensation to the SFAS 123 fair value method. In addition, SFAS 123 has been amended to require disclosure of additional information concerning the effects of stock-based
employee compensation on earnings. Finally, SFAS 148 amends APB Opinion 28, Interim Financial Reporting, to call for disclosure of SFAS 123 pro forma information on a quarterly basis. Management does not anticipate the implementation of
this statement to have a material impact on the Corporations consolidated financial position or consolidated results of operations.

On November 25, 2002, the Financial
Accounting Standards Board issued FASB Interpretation No. 45 (FIN 45), Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (an interpretation of FASB
Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34). FIN 45 clarifies the requirements of FASB Statement No. 5 (FAS 5), Accounting for Contingencies, relating to a guarantors accounting for, and
disclosure of, the issuance of certain types of guarantees. For guarantees that fall within the scope of FIN 45, the Interpretation requires that guarantors recognize a liability equal to the fair value of the guarantee upon its issuance. The
Corporations primary guarantees included within the scope of FIN 45 relates to financial standby letters of credit issued to commercial customers. FIN 45 requires the liability recognized in standalone arms-length transactions to be the
premium received or receivable by the guarantor. Management does not anticipate the implementation of this interpretation to have a material impact on the Corporations consolidated financial position or consolidated results of
operations.



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##### Table of Contents

1. Summary of Significant Accounting and Reporting Policies (continued)

In January 2003 the Financial Accounting Standards Board issued FASB Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities (an interpretation of ARB No. 51). FIN 46 addresess the consolidation by
business enterprises of certain variable interest entities. Management does not anticipate the implementation of this interpretation to have a material impact on the Corporations consolidated financial position or consolidated results of
operations.

2. Goodwill and Other Intangible Assets - Adoption of Statement 142

Effective
January 1, 2002, the Corporation adopted the provisions of Financial Accounting Standards Board Statement No. 142 Goodwill and Other Intangible Assets, (SFAS 142). As of January 1, 2002, the Corporation had approximately $5,183,000 in
unamortized goodwill from previous acquisitions. SFAS 142 requires a transitional impairment test be performed within six-months of adoption. The initial valuation of the Corporations goodwill pursuant to this pronouncement resulted in no
write-downs for impairment. Additionally, SFAS 142 requires a reconciliation of previously reported net income and earnings per share, adjusted for changes pursuant to this statement. Following is the pro forma effect of adoption of SFAS
142.



|                                  |  | Years Ended December 31,                        |      
|--------------------------------- |  | ----------------------------------------------- | -----
|                                  |  |                                                 |      
|                                  |  | 2002                                            |      
|                                  |  |                                                 |      
|                                  |  | (Dollars in Thousands, exceptper share amounts) |      
|Reported net income               |  | $                                               | 3,375
|Goodwill amortization, net of tax |  |                                                |      
|                                  |  |                                                 |      
|Adjusted net income               |  | $                                               | 3,375
|                                  |  |                                                 |      
|Basic earnings per share:         |  |                                                 |      
|Reported net income               |  | $                                               | 1.69 
|Goodwill amortization, net of tax |  |                                                |      
|                                  |  |                                                 |      
|Adjusted net income               |  | $                                               | 1.69 
|                                  |  |                                                 |      
|Diluted earnings per share:       |  |                                                 |      
|Reported net income               |  | $                                               | 1.69 
|Goodwill amortization, net of tax |  |                                                |      
|                                  |  |                                                 |      
|Adjusted net income               |  | $                                               | 1.69 
|                                  |  |                                                 |      



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##### Table of Contents

3. Securities

Securities available for sale at December 31, 2002 and
2001 are summarized as follows:



|                                    |  | 2002                   |       
|----------------------------------- |  | ---------------------- | ------
|                                    |  |                        |       
|                                    |  | AmortizedCost          |       
|                                    |  |                        |       
|                                    |  | (Dollars in Thousands) |       
|U.S. Government obligations         |  | $                      | 2,989 
|U.S. Government agency obligations  |  | 62,058                 |       
|Mortgage-backed securities          |  | 2,897                  |       
|Other debt securities               |  | 9,188                  |       
|                                    |  |                        |       
|TOTAL SECURITIES AVAILABLE FOR SALE |  | $                      | 77,132
|                                    |  |                        |       



|                                    |  | 2001                   |       
|----------------------------------- |  | ---------------------- | ------
|                                    |  |                        |       
|                                    |  | AmortizedCost          |       
|                                    |  |                        |       
|                                    |  | (Dollars in Thousands) |       
|U.S. Government obligations         |  | $                      | 1,971 
|U.S. Government agency obligations  |  | 60,678                 |       
|Mortgage-backed securities          |  | 2,007                  |       
|Equity securities                   |  | 9,239                  |       
|                                    |  |                        |       
|TOTAL SECURITIES AVAILABLE FOR SALE |  | $                      | 73,895
|                                    |  |                        |       

Securities held to maturity at December 31, 2002 and 2001 are summarized
as follows:



|                                  |  | 2002                   |      
|--------------------------------- |  | ---------------------- | -----
|                                  |  |                        |      
|                                  |  | AmortizedCost          |      
|                                  |  |                        |      
|                                  |  | (Dollars in Thousands) |      
|Mortgage-backed securities        |  | $                      | 9    
|State and municipal obligations   |  | 9,407                  |      
|Other debt securities             |  | 150                    |      
|                                  |  |                        |      
|TOTAL SECURITIES HELD TO MATURITY |  | $                      | 9,566
|                                  |  |                        |      



|                                  |  | 2001                   |       
|--------------------------------- |  | ---------------------- | ------
|                                  |  |                        |       
|                                  |  | AmortizedCost          |       
|                                  |  |                        |       
|                                  |  | (Dollars in Thousands) |       
|Mortgage-backed securities        |  | $                      | 64    
|State and municipal obligations   |  | 10,494                 |       
|Other debt securities             |  | 150                    |       
|                                  |  |                        |       
|TOTAL SECURITIES HELD TO MATURITY |  | $                      | 10,708
|                                  |  |                        |       

Securities with an aggregate value of $40,597,000 at December 31, 2002
and $41,688,000 at December 31, 2001, were pledged to secure public and trust deposits and for other purposes required or permitted by law, including approximately $18,571,000 at December 31, 2002 and $15,276,000 at December 31, 2001 pledged to
secure repurchase agreements.

Gross gains of $17,000 and gross losses of $30,000 were recognized on sales of available for sale securities for the year ended December 31, 2001.
Additionally, during the year ended December 31, 2001, approximately $343,000 in held to maturity securities were sold as the result of significant deterioration in the issuers creditworthiness. Gross losses



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##### Table of Contents

3. Securities (continued)

of $30,000 were recognized on this sale.
Gross losses of $40,000 were recognized on sales of available for sale securities for the year ended December 31, 2000. There were no sales of securities for the year ended December 31, 2002.

The amortized cost and estimated market value for securities available for sale and securities held to maturity by contractual maturities at December 31, 2002 are shown in the following tables. Expected maturities may
differ from contractual maturities because borrowers may have the right to call or prepay obligations.



|                                       |  | AmortizedCost          |        | EstimatedMarketValue |   | NetUnrealized Gains | 
|-------------------------------------- |  | ---------------------- | ------ | -------------------- | - | ------------------- | 
|                                       |  |                        |        |                      |   |                     | 
|                                       |  | (Dollars in Thousands) |       
|Due in one year or less                |  | $                      | 4,985  |                      | $ | 5,084               | 
|Due after one year through five years  |  | 70,682                 |        | 72,045               |   | 1,363               | 
|Due after five years through ten years |  | 1,465                  |        | 1,502                |   | 37                  | 
|                                       |  |                        |        |                      |   |                     | 
|TOTAL SECURITIES AVAILABLE FOR SALE    |  | $                      | 77,132 |                      | $ | 78,631              | 
|                                       |  |                        |        |                      |   |                     | 



|                                       |  | AmortizedCost          |       | EstimatedMarketValue |   | NetUnrealized Gains | 
|-------------------------------------- |  | ---------------------- | ----- | -------------------- | - | ------------------- | 
|                                       |  |                        |       |                      |   |                     | 
|                                       |  | (Dollars in Thousands) |      
|Due in one year or less                |  | $                      | 732   |                      | $ | 742                 | 
|Due after one year through five years  |  | 5,090                  |       | 5,288                |   | 198                 | 
|Due after five years through ten years |  | 3,404                  |       | 3,570                |   | 166                 | 
|Due after ten years                    |  | 340                    |       | 371                  |   | 31                  | 
|                                       |  |                        |       |                      |   |                     | 
|TOTAL SECURITIES HELD TO MATURITY      |  | $                      | 9,566 |                      | $ | 9,971               | 
|                                       |  |                        |       |                      |   |                     | 

4. Loans

Loans at December 31, 2002 and 2001 consisted of the following:



|                                                  |  | December 31,           |        
|------------------------------------------------- |  | ---------------------- | -------
|                                                  |  |                        |        
|                                                  |  | 2002                   |        
|                                                  |  |                        |        
|                                                  |  | (Dollars in Thousands) |        
|Commercial, financial and agricultural            |  | $                      | 43,725 
|Real estate-construction                          |  | 12,268                 |        
|Real estate-mortgage (residential and commercial) |  | 159,233                |        
|Installment loans to individuals                  |  | 21,234                 |        
|                                                  |  |                        |        
|Total loans                                       |  | 236,460                |        
|Less: allowance forloan losses                    |  | 3,005                  |        
|                                                  |  |                        |        
|NET LOANS                                         |  | $                      | 233,455
|                                                  |  |                        |        

The Corporations subsidiary has had and can be expected to have in
the future various banking transactions with directors, executive officers, their immediate families and affiliated companies in which they are principal stockholders (commonly referred to as related parties). The total amount of these loans was
$13,796,000 and $14,924,000 at December 31, 2002 and 2001, respectively. During 2002, $14,332,000 in loan advances or reclassifications were made and repayments were $15,460,000.



First Century Bankshares,
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##### Table of Contents

5. Allowance for Loan Losses

An analysis of changes in the allowance
for loan losses for 2002, 2001 and 2000 is as follows:



|                                           |  | Years Ended December 31, |      
|------------------------------------------ |  | ------------------------ | -----
|                                           |  |                          |      
|                                           |  | 2002                     |      
|                                           |  |                          |      
|                                           |  | (Dollars in Thousands)   |      
|Balance at beginning of year               |  | $                        | 3,180
|Provision for loan losses                  |  | 1,785                    |      
|Recoveries on loans previously charged off |  | 206                      |      
|Loans. charged off                         |  | (2,166                   | )    
|                                           |  |                          |      
|BALANCE AT END OF YEAR                     |  | $                        | 3,005
|                                           |  |                          |      

The following is a summary of loans considered impaired:



|                                       |  | December 31,           |      
|-------------------------------------- |  | ---------------------- | -----
|                                       |  |                        |      
|                                       |  | 2002                   |      
|                                       |  |                        |      
|                                       |  | (Dollars in Thousands) |      
|Gross impaired loans                   |  | $                      | 3,375
|Valuation allowance for impaired loans |  | 663                    |      
|                                       |  |                        |      
|Recorded investment in impaired loans  |  | $                      | 2,712
|                                       |  |                        |      

The average recorded investment in impaired loans for the years ended
December, 31, 2002, 2001 and 2000 was $2,959,000, $5,586,000 and $4,817,000, respectively. There was no interest income recognized on impaired loans (during the portion of the year they were impaired) for the years ended December 31, 2002, 2001 and
2000. At December 31, 2002, 2001 and 2000, the Corporation had nonaccrual loans of $2,819,000, $3,045,000 and $5,887,000, respectively. Interest income of $157,000, $46,000 and $91,000 was recognized on these loans in 2002, 2001 and 2000,
respectively. Had these loans performed in accordance with their original terms, additional interest income of $184,000, $484,000 and $527,000 would have been recorded in 2002, 2001 and 2000, respectively.

At December 31, 2002, 2001 and 2000, the Corporation had loans past-due 90 days or more and still in accrual status of $612,000, $1,140,000 and $3,320,000, respectively.

Additionally, at December 31, 2002, 2001 and 2000, the Corporation had other real estate owned of $793,000, $1,279,000 and 1,001,000, respectively.

6. Premises and Equipment

Premises and equipment at December 31, 2002 and 2001 consisted of the following:



|                              |  | December 31,           |       
|----------------------------- |  | ---------------------- | ------
|                              |  |                        |       
|                              |  | 2002                   |       
|                              |  |                        |       
|                              |  | (Dollars in Thousands) |       
|Land                          |  | $                      | 1,856 
|Buildings and improvements    |  | 10,005                 |       
|Equipment and fixtures        |  | 5,627                  |       
|                              |  |                        |       
|Total                         |  | 17,488                 |       
|                              |  |                        |       
|Less accumulated depreciation |  | 6,988                  |       
|                              |  |                        |       
|NET PREMISES AND EQUIPMENT    |  | $                      | 10,500
|                              |  |                        |       

Depreciation charged to operating expense amounted to $828,000 in 2002,
$844,000 in 2001, and $843,000 in 2000.



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Inc.  Page  36



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##### Table of Contents

7. Deposits

Deposits at December 31, 2002 and 2001 were as
follows:



|                                            |  | December 31,           |        
|------------------------------------------- |  | ---------------------- | -------
|                                            |  |                        |        
|                                            |  | 2002                   |        
|                                            |  |                        |        
|                                            |  | (Dollars in Thousands) |        
|Individuals, partnerships and corporations: |  |                        |        
|Demand deposits                             |  | 35,097                 |        
|Time and savings deposits                   |  | 261,403                |        
|U.S. Government                             |  | 307                    |        
|States and political subdivisions           |  | 8,865                  |        
|Certified and official checks               |  | 2,275                  |        
|                                            |  |                        |        
|TOTAL DEPOSITS                              |  | $                      | 307,947
|                                            |  |                        |        

The scheduled maturities of time deposits at December 31, 2002 were as
follows:



|(Dollars in Thousands) |  |        |        
|---------------------- |  | ------ | -------
|2003                   |  | $      | 103,118
|2004                   |  | 12,241 |        
|2005                   |  | 4,645  |        
|2006                   |  | 1,166  |        
|Thereafter             |  | 3,644  |        
|                       |  |        |        
|TOTAL TIME DEPOSITS    |  | $      | 124,814
|                       |  |        |        

Time deposits included certificates of deposit issued in amounts of
$100,000 or more totaling approximately $29,888,000 and $33,107,000 at December 31, 2002 and 2001, respectively.

8. Short-term Borrowings

Short-term borrowings consist of securities sold under agreements to repurchase. Securities sold under agreements to repurchase generally mature within one to four days from the transaction date.
Information concerning securities sold under agreements to repurchase at December 31, 2002 and 2001 is summarized as follows:



|                                          |  | 2002                   |        | 2001 |  
|----------------------------------------- |  | ---------------------- | ------ | ---- | -
|                                          |  |                        |        |      |  
|                                          |  | (Dollars in Thousands) |       
|Average balance during the year           |  | $                      | 17,340 |      | $
|Average interest rate during the year     |  | 0.91                   | %      | 2.96 | %
|Maximum month-end balance during the year |  | $                      | 20,880 |      | $

9. Other Comprehensive
Income

Other comprehensive income is defined as comprehensive income exclusive of net income. Other comprehensive income (loss) consists of the following:



|                                                                                   |  | Years Ended December 31, |     
|---------------------------------------------------------------------------------- |  | ------------------------ | ----
|                                                                                   |  |                          |     
|                                                                                   |  | 2002                     |     
|                                                                                   |  |                          |     
|Unrealized gains (losses) on available for sale securities arising during the
year |  | $                        | (192
|Reclassification adjustment for (gains) losses included in net income              |  |                         |     
|Minimum pension liability adjustment                                               |  | (890                     | )   
|                                                                                   |  |                          |     
|Other comprehensive income (loss) before tax                                       |  | (1,082                   | )   
|Income tax (expense) benefit related to other comprehensive income                 |  | 399                      |     
|                                                                                   |  |                          |     
|Other comprehensive income (loss), net of tax                                      |  | $                        | (683
|                                                                                   |  |                          |     



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Inc.  Page  37



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##### Table of Contents

10. Earnings Per Share

The following table reconciles the numerator and
denominator of the basic and diluted computations for net income per common share for the years ended December 31, 2002, 2001 and 2000:



|                                                                |  | 2002              |          
|--------------------------------------------------------------- |  | ----------------- | ---------
|                                                                |  |                   |          
|                                                                |  | Income(Numerator) |          
|                                                                |  |                   |          
|Basic EPS:                                                      |  |                   |          
|Income available to common shareholders                         |  | $                 | 3,375,000
|Diluted EPS:                                                    |  |                   |          
|Effect of dilutive securities  Stock options                   |  |                  |          
|                                                                |  |                   |          
|Income available to common shareholders and assumed conversions |  | $                 | 3,375,000
|                                                                |  |                   |          



|                                                                |  | 2001              |          
|--------------------------------------------------------------- |  | ----------------- | ---------
|                                                                |  |                   |          
|                                                                |  | Income(Numerator) |          
|                                                                |  |                   |          
|Basic EPS:                                                      |  |                   |          
|Income available to common shareholders                         |  | $                 | 2,145,000
|Diluted EPS:                                                    |  |                   |          
|Effect of dilutive securities  Stock options                   |  |                  |          
|                                                                |  |                   |          
|Income available to common shareholders and assumed conversions |  | $                 | 2,145,000
|                                                                |  |                   |          



|                                                                |  | 2000              |          
|--------------------------------------------------------------- |  | ----------------- | ---------
|                                                                |  |                   |          
|                                                                |  | Income(Numerator) |          
|                                                                |  |                   |          
|Basic EPS:                                                      |  |                   |          
|Income available to common shareholders                         |  | $                 | 3,081,000
|Diluted EPS:                                                    |  |                   |          
|Effect of dilutive securities  Stock options                   |  |                  |          
|                                                                |  |                   |          
|Income available to common shareholders and assumed conversions |  | $                 | 3,081,000
|                                                                |  |                   |          

11. Stock Option Plans

The Corporations 1998 Officer Stock Option Plan (the Officer Plan) provides for the issuance of 170,000 options to purchase shares of the Corporations common stock to officers
of the Corporation. The options can have an original term of up to ten years with an exercise price equal to the market price of the common stock on the date of grant, as defined by the Officer Plan. The options vest 20% per year after their date of
grant. At December 31, 2002, the weighted average remaining contractual life of the outstanding options was 72 months. At December 31, 2002, options for 81,780 shares of common stock were reserved for future issuance for the Officer Plan.

The Corporations 1998 Director Stock Option Plan (the Director Plan) provides for the issuance of 30,000 options to purchase shares of the Corporations common stock
to directors of the Corporation and its subsidiaries. The options can have an original term of up to ten years with an exercise price equal to the market price of the common stock on the date of grant, as defined by the Director Plan. The options
are fully vested upon their



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##### Table of Contents

11.Stock Option Plans (continued)

date of grant. At December 31, 2002, the weighted average remaining contractual life of the outstanding options was 71 months. At December 31, 2002, options for 10,000 shares of common stock were reserved for future
issuance for the Director Plan.

The Corporation accounts for the Officer Plan and the Director Plan under the provisions of SFAS No. 123, Accounting for Stock Based
Compensation. As permitted by SFAS No. 123, the Corporation has chosen to apply APB Opinion No. 25, Accounting for Stock Issued to Employees and related interpretations in accounting for its plans. Accordingly, no compensation cost
has been recognized for options granted under the plans. Had compensation cost for the Corporations plans been determined based on the fair value at the grant dates for awards under the plans consistent with the method of SFAS No. 123, the
Corporations net income and net income per share for the years ended December 31, 2002, 2001 and 2000, would have been decreased to the pro forma amounts indicated below.



|                                       |  | 2002        |          
|-------------------------------------- |  | ----------- | ---------
|                                       |  |             |          
|                                       |  | As Reported |          
|                                       |  |             |          
|Net income                             |  | $           | 3,375,000
|                                       |  |             |          
|Net income per share-Basic and diluted |  | $           | 1.69     
|                                       |  |             |          



|                                       |  | 2001        |          
|-------------------------------------- |  | ----------- | ---------
|                                       |  |             |          
|                                       |  | As Reported |          
|                                       |  |             |          
|Net income                             |  | $           | 2,145,000
|                                       |  |             |          
|Net income per share-Basic and diluted |  | $           | 1.07     
|                                       |  |             |          



|                                       |  | 2000        |          
|-------------------------------------- |  | ----------- | ---------
|                                       |  |             |          
|                                       |  | As Reported |          
|                                       |  |             |          
|Net income                             |  | $           | 3,081,000
|                                       |  |             |          
|Net income per share-Basic and diluted |  | $           | 1.54     
|                                       |  |             |          

The fair value of each option grant is estimated on the date of grant
using the BlackScholes option pricing model with the following weighted-average assumptions used for the 2002 grants: 5% dividend growth rate; expected volatility of 26.41%; risk-free interest rate of 3.84%; and expected life of seven
years.



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Inc.  Page  39



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##### Table of Contents

11.Stock Option Plans (continued)

A summary of the Corporations stock option activity, and related information for the years ended December 31, is as follows:



|                                                               |  | 2002         |      | 2001                           |       | 2000         |       
|-------------------------------------------------------------- |  | ------------ | ---- | ------------------------------ | ----- | ------------ | ------
|                                                               |  |              |      |                                |       |              |       
|                                                               |  | OptionShares |      | Weighted-AverageExercise Price |       | OptionShares |       
|                                                               |  |              |      |                                |       |              |       
|Officer stock options:                                         |  |              |      |                                |       |              |       
|Outstanding, beginning of year                                 |  | 52,220       |      | $                              | 20.25 |              | 52,220
|Granted                                                        |  | 36,000       |      | 18.00                          |       |             |       
|Exercised                                                      |  |             |      |                               |       |             |       
|Forfeited                                                      |  |             |      |                               |       |             |       
|                                                               |  |              |      |                                |       |              |       
|Outstanding, end of year                                       |  | 88,220       |      | $                              | 19.33 |              | 52,220
|                                                               |  |              |      |                                |       |              |       
|Exercisable at end of year                                     |  | 41,776       |      | $                              | 20.25 |              | 31,332
|Weighted-average fair value of options granted during the year |  | $            | 2.51 |                                |       |              | $     
|Director stock options:                                        |  |              |      |                                |       |              |       
|Outstanding, beginning of year                                 |  | 13,000       |      | $                              | 20.25 |              | 14,000
|Granted                                                        |  | 7,000        |      | 18.00                          |       |             |       
|Exercised                                                      |  |             |      |                               |       |             |       
|Forfeited                                                      |  |             |      |                               |       | 1,000        |       
|                                                               |  |              |      |                                |       |              |       
|Outstanding, end of year                                       |  | 20,000       |      | $                              | 19.46 |              | 13,000
|                                                               |  |              |      |                                |       |              |       
|Exercisable at end of year                                     |  | 20,000       |      | $                              | 19.46 |              | 13,000
|Weighted-average fair value of options granted during the year |  | $            | 2.51 |                                |       |              | $     

12.Post Employment Benefits

The Corporation has a noncontributory pension plan covering all eligible employees with six months of service who have attained the age of
twenty and one-half. Contributions to the plan are based on computations by independent actuarial consultants. The plans assets include common stock, fixed income securities, short-term investments and cash.

The Corporation sponsors two defined benefit post retirement plans that cover both salaried and nonsalaried employees. One plan provides medical benefits, and the other provides life insurance
benefits. The post retirement health care plan is contributory and the life insurance plan is noncontributory. The health plan has an annual limitation (a cap) on the dollar amount of the employers share of the cost of covered
benefits incurred by a plan participant. The retiree is responsible, therefore, for the amount by which the cost of the benefit coverage under the plan incurred during a year exceeds that cap. No health care cost increases have been factored into
the health plans actuarial calculations due to this cap.



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##### Table of Contents

12. Post Employment Benefits (continued)

The following table outlines
the changes in the Corporations postemployment benefit plan obligations, assets and funded status for the years ended December 31, 2002 and 2001, and the assumptions and components of net periodic benefit costs for the three years in the
period ended December 31, 2002.



|                                                                      |  | Pension Benefits       |       | OtherPostretirementBenefits |  
|--------------------------------------------------------------------- |  | ---------------------- | ----- | --------------------------- | -
|                                                                      |  |                        |       |                             |  
|                                                                      |  | 2002                   |       | 2001                        |  
|                                                                      |  |                        |       |                             |  
|                                                                      |  | (Dollars in Thousands) |      
|Change in benefit obligation                                          |  |                        |       |                             |  
|Benefit obligation at beginning of year                               |  | $                      | 8,577 |                             | $
|Service cost                                                          |  | 429                    |       | 418                         |  
|Interest cost                                                         |  | 549                    |       | 493                         |  
|Actuarial (gain) loss                                                 |  | (117                   | )     | 242                         |  
|Benefits paid                                                         |  | (117                   | )     | (296                        | )
|                                                                      |  |                        |       |                             |  
|Benefit obligation at end of year                                     |  | 9,321                  |       | 8,577                       |  
|                                                                      |  |                        |       |                             |  
|                                                                      |  |                        |       |                             |  
|Change in plan asset                                                  |  |                        |       |                             |  
|Fair value of plan assets at beginning of year                        |  | 8,314                  |       | 9,098                       |  
|Actual return on plan assets                                          |  | (1,187                 | )     | (488                        | )
|Employer contribution                                                 |  | 240                    |       |                            |  
|Benefits paid                                                         |  | (117                   | )     | (296                        | )
|                                                                      |  |                        |       |                             |  
|Fair value of plan assets at end of year                              |  | 7,250                  |       | 8,314                       |  
|                                                                      |  |                        |       |                             |  
|Funded status                                                         |  | 2,071                  |       | (263                        | )
|Unrecognized net actuarial (gain) loss                                |  | 2,923                  |       | 1,134                       |  
|Unrecognized prior service cost                                       |  | 359                    |       | 403                         |  
|Unrecognized transition obligation                                    |  | (194                   | )     | (259                        | )
|                                                                      |  |                        |       |                             |  
|Net amount recognized                                                 |  | $                      | 1,017 |                             | $
|                                                                      |  |                        |       |                             |  
|                                                                      |  |                        |       |                             |  
|Amounts recognized in the statement of financial position consist
of: |  |                        |       |                             |  
|Prepaid (accrued) benefit cost                                        |  | $                      | 1,017 |                             | $
|Accrued benefit liability                                             |  | (1,249                 | )     |                            |  
|Intangible asset                                                      |  | 359                    |       |                            |  
|Accumulated other comprehensive income                                |  | 890                    |       |                            |  
|                                                                      |  |                        |       |                             |  
|Net amount recognized                                                 |  | $                      | 1,017 |                             | $
|                                                                      |  |                        |       |                             |  



|                                         |  | Pension Benefits |     | OtherPostretirementBenefits |  
|---------------------------------------- |  | ---------------- | --- | --------------------------- | -
|                                         |  |                  |     |                             |  
|                                         |  | 2002             |     | 2001                        |  
|                                         |  |                  |     |                             |  
|Weighted-average assumptions as of 12/31 |  |                  |     |                             |  
|Discount rate                            |  | 6.50             | %   | 6.50                        | %
|Expected return on plan assets           |  | 8.00             | %   | 9.00                        | %
|Rate of compensation increase            |  | 3.00             | %   | 3.00                        | %
|.                                        |  |                  |     |                             |  
|Components of net periodic benefit cost  |  |                  |     |                             |  
|Service cost                             |  | $                | 429 |                             | $
|Interest cost                            |  | 549              |     | 493                         |  
|Expected return on plan assets           |  | (736             | )   | (806                        | )
|Amortization of prior service cost       |  | 44               |     | 44                          |  
|Amortization of transition obligation    |  | (65              | )   | (65                         | )
|Recognized net actuarial (gain) loss     |  | 17               |     |                            |  
|                                         |  |                  |     |                             |  
|Net periodic (benefit) cost              |  | $                | 238 |                             | $
|                                         |  |                  |     |                             |  



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##### Table of Contents

12. Post Employment Benefits (continued)

The Corporation maintains a
qualified 401(k) retirement savings plan. All full time employees are eligible to participate on a voluntary basis, after completing their first year of service. All employees may elect to make pretax contributions up to a maximum of fifteen percent
(15%) of their salary, which are matched fifty percent (50%) by the Corporation. Total amounts charged to operating expense for payments pursuant to this plan were approximately $128,000 in 2002, $127,000 in 2001 and $124,000 in 2000.

13. Income Taxes

The provision for income taxes consisted of the following:



|                                                    |  | Years Ended December 31, |      
|--------------------------------------------------- |  | ------------------------ | -----
|                                                    |  |                          |      
|                                                    |  | 2002                     |      
|                                                    |  |                          |      
|                                                    |  | (Dollars in Thousands)   |      
|Tax provision attributed to income from operations: |  |                          |      
|Current:                                            |  |                          |      
|Federal                                             |  | $                        | 1,340
|State                                               |  | 421                      |      
|Deferred expense (benefit)                          |  | 214                      |      
|                                                    |  |                          |      
|PROVISION FOR INCOME TAX                            |  | $                        | 1,975
|                                                    |  |                          |      

The components of deferred tax assets and liabilities at December 31,
2002 and 2001 were as follows:



|                                                            |  | 2002                   |     | 2001  |  
|----------------------------------------------------------- |  | ---------------------- | --- | ----- | -
|                                                            |  |                        |     |       |  
|                                                            |  | (Dollars in Thousands) |    
|Allowance for loan losses                                   |  | $                      | 696 |       | $
|Retirement plans                                            |  | 323                    |     |      |  
|Marketable equity securities and capital loss carryforwards |  | 48                     |     | 243   |  
|Other reserves                                              |  | 47                     |     | 73    |  
|                                                            |  |                        |     |       |  
|Gross deferred tax assets                                   |  | 1,114                  |     | 1,042 |  
|Valuation allowance                                         |  | (48                    | )   | (243  | )
|                                                            |  |                        |     |       |  
|Deferred tax assets                                         |  | 1,066                  |     | 799   |  
|                                                            |  |                        |     |       |  
|Depreciation                                                |  | (289                   | )   | (279  | )
|Goodwill                                                    |  | (159                   | )   |      |  
|Retirement plans                                            |  |                       |     | (22   | )
|Unrealized gains on securities available for sale           |  | (510                   | )   | (575  | )
|                                                            |  |                        |     |       |  
|Gross deferred tax liabilities                              |  | (958                   | )   | (876  | )
|                                                            |  |                        |     |       |  
|NET DEFERRED TAX ASSET (LIABILITY)                          |  | $                      | 108 |       | $
|                                                            |  |                        |     |       |  

A valuation allowance was established for the writedowns of marketable
equity securities and capital loss carryforwards because their recognition is limited to future capital gains generated by the Corporation. No tax benefit has been recognized in the financial statements for the writedowns or capital loss
carryforwards.

The principal differences between the effective tax rate and the federal statutory rate were as follows:



|                                                                        |  | Years Ended December 31, |      
|----------------------------------------------------------------------- |  | ------------------------ | -----
|                                                                        |  |                          |      
|                                                                        |  | 2002                     |      
|                                                                        |  |                          |      
|                                                                        |  | (Dollars in Thousands)   |      
|                                                                        |  | Amount                   |      
|                                                                        |  |                          |      
|Provision at statutory rate                                             |  | $                        | 1,819
|Tax-exempt interest income from certain investment securities and loans |  | (168                     | )    
|State income tax expense, net of federal benefit                        |  | 287                      |      
|Other, net                                                              |  | 37                       |      
|                                                                        |  |                          |      
|PROVISION FOR INCOME TAXES                                              |  | $                        | 1,975
|                                                                        |  |                          |      



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14. Commitments and Contingencies

In the normal course of business, the
Corporation is involved in various legal suits and proceedings. In the opinion of management, based on the advice of legal counsel, these suits are without substantial merit and should not result in judgments which in the aggregate would have a
material adverse effect on the Corporations financial statements.

15. Financial Instruments, Concentrations of Credit and Fair Values

The subsidiary of the Corporation is party to various financial instruments with off-balance sheet risk arising in the normal course of business to meet the financing needs of its customers. Those
financial instruments include commitments to extend credit and standby letters of credit. These commitments include standby letters of credit of approximately $5,005,000 at December 31, 2002 and $3,711,000 at December 31, 2001. These instruments
contain various elements of credit and interest rate risk in excess of the amount recognized in the consolidated statements of financial condition. Additionally, certain off-balance sheet items of approximately $37,951,000 at December 31, 2002, and
$36,951,000 at December 31, 2001, comprised primarily of unfunded loan commitments, have an estimated fair value that is not materially different from the notional amount.

The
subsidiarys exposure to credit loss, in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit, is the contractual amount of those instruments. The subsidiary
uses the same credit policies in making commitments and conditional obligations that it does for on-balance sheet instruments.

The Corporations subsidiary grants various
types of credit including, but not limited to, agriculture, commercial, consumer, and residential loans to customers primarily located throughout southern West Virginia and southwestern Virginia. Each customers creditworthiness is examined on
a case by case basis. The amount of collateral obtained, if any, is determined by managements credit evaluation of the customer. Collateral held varies, but may include property, accounts receivable, inventory, plant and equipment, securities,
or other income producing property. The loan portfolio is generally well diversified and geographically dispersed within the region. Within each specific industry, borrowers are well diversified as to specialty, service, or other unique feature
ofthe overall industry. A substantial portion of the customers ability to honor their contractual commitment is largely dependent upon the economic conditions of the respective industry and
overall economic conditions of the region. At December 31, 2002, the Corporation had a concentration of $10,940,000, or 32.4% of stockholders equity in loans to borrowers in the hospitality industry. This concentration is diversified by
geography throughout the Mid-Atlantic region.

SFAS No. 107, Disclosures about Fair Value of Financial Instruments, requires the disclosure of the estimated fair value
of on and off-balance sheet financial instruments. For the Corporation, as for most financial institutions, approximately 95% of its assets and liabilities are considered financial instruments as defined by SFAS 107. Most of the Corporations
financial instruments, however, lack an available trading market characterized by a willing buyer and a willing seller engaging in an exchange transaction. It is also the Corporations general practice and intent to hold its financial
instruments to maturity and not to engage in trading or sales activities. Therefore, significant estimations and present value calculations were used by the Corporation for the purposes of this disclosure.



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##### Table of Contents

15. Financial Instruments, Concentrations of Credit and Fair Values (continued)

Estimated fair values have been determined by the Corporation using the best available data and an estimation methodology suitable for each category of financial instruments.

The estimated fair value and the recorded book balances at December 31, 2002 and 2001were as follows:



|                                                      |  | 2002                   |        | 2001                   |  
|----------------------------------------------------- |  | ---------------------- | ------ | ---------------------- | -
|                                                      |  |                        |        |                        |  
|                                                      |  | EstimatedFair Value    |        | CarryingAmount         |  
|                                                      |  |                        |        |                        |  
|                                                      |  | (Dollars in Thousands) |        | (Dollars in Thousands) |  
|                                                      |  |                        |        |                        |  
|Assets:                                               |  |                        |        |                        |  
|Cash and due from banks                               |  | $                      | 16,818 |                        | $
|Securities available for sale                         |  | 78,631                 |        | 78,631                 |  
|Securities held to maturity                           |  | 9,971                  |        | 9,566                  |  
|Federal Home Loan Bank and Federal Reserve Bank stock |  | 752                    |        | 752                    |  
|Federal funds sold                                    |  |                       |        |                       |  
|Net loans                                             |  | 243,589                |        | 233,455                |  
|                                                      |  |                        |        |                        |  
|Liabilities:                                          |  |                        |        |                        |  
|Deposits with no stated maturities                    |  | 183,133                |        | 183,133                |  
|Deposits with stated maturities                       |  | 126,258                |        | 124,814                |  
|Short-term borrowings                                 |  |                        | 16,745 |                        |  

The estimation methodologies used to determine
fair value are as follows: For those loans and deposits with floating interest rates it was presumed that the estimated fair value generally approximated the recorded book balances. Securities actively traded in a secondary market have been valued
using quoted available market prices. Deposits with stated maturities have been valued using a present value discounted cash flow with a discount rate approximating current market rates for similar assets and liabilities. Deposits with no stated
maturities have an estimated fair value equal to the amount payable on demand which is the recorded book balance. The net loan portfolio has been valued using a present value discounted cash flow. The discount rate used in these calculations is the
federal funds sold rate adjusted for noninterest operating costs, credit losses, and assumed prepayment risk. Fair values for nonperforming loans are estimated using discounted cash flow analysis, or underlying collateral values, where applicable.
Changes in assumptions or estimation methodologies may have a material effect on these estimated fair values.

16. Regulatory Matters

The Corporations principal source of funds for dividend payment and debt service is dividends received from the subsidiary bank.

Under applicable Federal laws, the Comptroller of the Currency, the primary regulator of First Century Bank, N.A., restricts the total dividend payments of a national bank in any calendar year to the net profits of that year,as defined, combined with the retained net profits of the two preceding years. At December 31, 2002, retained net profits for the years 2002and 2001,which were free of such regulatory restrictions, aggregated approximately $1,611,000.

The Corporation and its subsidiary are subject to various
regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by



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##### Table of Contents

16. Regulatory Matters (continued)

regulators that, if undertaken,
could have a direct material effect on the Corporations financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation and its subsidiary must meet specific capital guidelines
that involve quantitative measures of the Corporations assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Corporations capital amounts and classifications are also subject to
qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require
the Corporation and its subsidiary to maintain minimum amounts and ratios (set forth in the following table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and Tier I capital to average assets (as
defined). Management believes, as of December 31, 2002, that the Corporation and its subsidiary meet all capital adequacy requirements to which they are subject.

As of December
31, 2002, First Century Bank, N.A. has received notification from the Office of the Comptroller of the Currency that it is well-capitalized under the regulatory framework for prompt corrective action. To be adequately capitalized, minimum total
risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the following table must be maintained. There are no conditions or events since the recent notification that management believes have changed the institutions
category.





|                                          |  | Actual |        | For CapitalAdequacy Purposes |       | To Be WellCapitalized UnderPrompt
CorrectiveAction Provisions |         
|----------------------------------------- |  | ------ | ------ | ---------------------------- | ----- | ------------------------------------------------------------- | --------
|                                          |  |        |        |                              |       |                                                               |         
|                                          |  | Amount |        | Ratio                        |       | Amount                                                        |         
|                                          |  |        |        |                              |       |                                                               |         
|As of December 31, 2002:                  |  |        |        |                              |       |                                                               |         
|Total Capital (to Risk Weighted Assets):  |  |        |        |                              |       |                                                               |         
|Consolidated                              |  | $      | 30,848 |                              | 12.12 | %                                                             | >$20,369
|First Century Bank, N.A.                  |  | $      | 30,012 |                              | 11.81 | %                                                             | >$20,335
|Tier I Capital (to Risk Weighted Assets): |  |        |        |                              |       |                                                               |         
|Consolidated                              |  | $      | 27,843 |                              | 10.94 | %                                                             | >$10,185
|First Century Bank, N.A.                  |  | $      | 27,007 |                              | 10.62 | %                                                             | >$10,168
|Tier 1 Capital (to Average Assets):       |  |        |        |                              |       |                                                               |         
|Consolidated                              |  | $      | 27,843 |                              | 7.75  | %                                                             | >$14,368
|First Century Bank, N.A.                  |  | $      | 27,007 |                              | 7.53  | %                                                             | >$14,350



|                                          |  | Actual |        | For CapitalAdequacy Purposes |       | To Be WellCapitalized UnderPrompt
CorrectiveAction Provisions |         
|----------------------------------------- |  | ------ | ------ | ---------------------------- | ----- | ------------------------------------------------------------- | --------
|                                          |  |        |        |                              |       |                                                               |         
|                                          |  | Amount |        | Ratio                        |       | Amount                                                        |         
|                                          |  |        |        |                              |       |                                                               |         
|As of December 31, 2001:                  |  |        |        |                              |       |                                                               |         
|Total Capital (to Risk Weighted Assets):  |  |        |        |                              |       |                                                               |         
|Consolidated                              |  | $      | 29,848 |                              | 11.52 | %                                                             | >$20,728
|First Century Bank, N.A.                  |  | $      | 29,024 |                              | 11.22 | %                                                             | >$20,699
|Tier I Capital (to Risk Weighted Assets): |  |        |        |                              |       |                                                               |         
|Consolidated                              |  | $      | 26,668 |                              | 10.29 | %                                                             | >$10,364
|First Century Bank, N.A.                  |  | $      | 25,844 |                              | 9.99  | %                                                             | >$10,350
|Tier 1 Capital (to Average Assets):       |  |        |        |                              |       |                                                               |         
|Consolidated                              |  | $      | 26,668 |                              | 7.20  | %                                                             | >$14,809
|First Century Bank, N.A.                  |  | $      | 25,844 |                              | 6.99  | %                                                             | >$14,786



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##### Table of Contents

17. Quarterly Financial Data (Unaudited)

The summary financial data by
quarter for the years ended December 31, 2002, 2001 and 2000 was as follows:



|                                   |  | Quarter Ended                                 |      
|---------------------------------- |  | --------------------------------------------- | -----
|                                   |  |                                               |      
|                                   |  | Mar. 31                                       |      
|                                   |  |                                               |      
|                                   |  | (Dollars in Thousands, Except Per Share Data) |      
|2002                               |  |                                               |      
|Interest income                    |  | $                                             | 5,463
|Net interest income                |  | 3,750                                         |      
|Provision for possible loan losses |  | 263                                           |      
|Securities gains (losses)          |  |                                              |      
|Income before taxes                |  | 1,301                                         |      
|Net income                         |  | 832                                           |      
|                                   |  |                                               |      
|NET INCOME PER SHARE               |  | $                                             | 0.42 
|                                   |  |                                               |      
|                                   |  |                                               |      
|2001                               |  |                                               |      
|Interest income                    |  | $                                             | 6,613
|Net interest income                |  | 3,594                                         |      
|Provision for possible loan losses |  | 195                                           |      
|Securities gains (losses)          |  |                                              |      
|Income before taxes                |  | 1,149                                         |      
|Net income                         |  | 755                                           |      
|                                   |  |                                               |      
|NET INCOME PER SHARE               |  | $                                             | 0.38 
|                                   |  |                                               |      
|                                   |  |                                               |      
|2000                               |  |                                               |      
|Interest income                    |  | $                                             | 6,789
|Net interest income                |  | 3,870                                         |      
|Provision for possible loan losses |  | 174                                           |      
|Securities gains (losses)          |  |                                              |      
|Income before taxes                |  | 1,472                                         |      
|Net income                         |  | 953                                           |      
|                                   |  |                                               |      
|NET INCOME PER SHARE               |  | $                                             | 0.48 
|                                   |  |                                               |      



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##### Table of Contents

18. Parent Company Financial Data

Condensed financial information of
First Century Bankshares, Inc. (parent company only) is presented below:

STATEMENTS OF FINANCIAL CONDITION



|                                                                                                                                                                                                                                |  | December 31,           |       
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | ------
|                                                                                                                                                                                                                                |  |                        |       
|                                                                                                                                                                                                                                |  | 2002                   |       
|                                                                                                                                                                                                                                |  |                        |       
|                                                                                                                                                                                                                                |  | (Dollars in Thousands) |       
|Assets:                                                                                                                                                                                                                         |  |                        |       
|Cash                                                                                                                                                                                                                            |  | $                      | 95    
|Investment in subsidiaries at equity                                                                                                                                                                                            |  | 33,382                 |       
|Other assets                                                                                                                                                                                                                    |  | 364                    |       
|                                                                                                                                                                                                                                |  |                        |       
|TOTAL ASSETS                                                                                                                                                                                                                    |  | $                      | 33,841
|                                                                                                                                                                                                                                |  |                        |       
|Liabilities:                                                                                                                                                                                                                    |  |                        |       
|Other liabilities                                                                                                                                                                                                               |  | $                      | 23    
|                                                                                                                                                                                                                                |  |                        |       
|TOTAL LIABILITIES                                                                                                                                                                                                               |  | 23                     |       
|                                                                                                                                                                                                                                |  |                        |       
|Stockholders Equity:                                                                                                                                                                                                           |  |                        |       
|Common stock$1.25 par value; 10,000,000 shares authorized and 2,000,000 shares issued at
December 31, 2002 and 2001; 1,991,000 shares outstanding at December 31, 2002, and 2,000,000 shares outstanding at December 31, 2001; |  | 2,500                  |       
|Paid-in capital                                                                                                                                                                                                                 |  | 785                    |       
|Retained earnings                                                                                                                                                                                                               |  | 30,680                 |       
|Treasury stock, at cost                                                                                                                                                                                                         |  | (147                   | )     
|                                                                                                                                                                                                                                |  |                        |       
|TOTAL STOCKHOLDERS EQUITY                                                                                                                                                                                                      |  | 33,818                 |       
|                                                                                                                                                                                                                                |  |                        |       
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                                      |  | $                      | 33,841
|                                                                                                                                                                                                                                |  |                        |       

STATEMENTS OF INCOME



|                                                                 |  | Years Ended December 31, |      
|---------------------------------------------------------------- |  | ------------------------ | -----
|                                                                 |  |                          |      
|                                                                 |  | 2002                     |      
|                                                                 |  |                          |      
|                                                                 |  | (Dollars in Thousands)   |      
|Income:                                                          |  |                          |      
|Dividends from subsidiary bank                                   |  | $                        | 1,900
|                                                                 |  |                          |      
|TOTAL INCOME                                                     |  | 1,900                    |      
|                                                                 |  |                          |      
|Expenses:                                                        |  |                          |      
|Other                                                            |  | 73                       |      
|                                                                 |  |                          |      
|TOTAL EXPENSES                                                   |  | 73                       |      
|                                                                 |  |                          |      
|Applicable income taxes (benefits)                               |  | (25                      | )    
|                                                                 |  |                          |      
|Income before equity in undistributed net income of subsidiaries |  | 1,852                    |      
|Equity in undistributed net income of subsidiaries               |  | 1,523                    |      
|                                                                 |  |                          |      
|NET INCOME                                                       |  | $                        | 3,375
|                                                                 |  |                          |      



STATEMENT OF CASH FLOWS



|                                                                                  |  | Years Ended December 31, |      
|--------------------------------------------------------------------------------- |  | ------------------------ | -----
|                                                                                  |  |                          |      
|                                                                                  |  | 2002                     |      
|                                                                                  |  |                          |      
|                                                                                  |  | (Dollars in Thousands)   |      
|Cash flows from operating activities                                              |  |                          |      
|Net income                                                                        |  | $                        | 3,375
|Adjustments to reconcile net income to net cash provided by operating
activities: |  |                          |      
|Equity in undistributed net income of subsidiary                                  |  | (1,523                   | )    
|Other adjustments, net                                                            |  | (29                      | )    
|                                                                                  |  |                          |      
|NET CASH PROVIDED BY OPERATING ACTIVITIES                                         |  | 1,823                    |      
|                                                                                  |  |                          |      
|Cash flows from investing activities                                              |  |                          |      
|Investment in subsidiary                                                          |  |                         |      
|                                                                                  |  |                          |      
|NET CASH USED BY INVESTING ACTIVITIES                                             |  |                         |      
|                                                                                  |  |                          |      
|Cash flows from financing activities                                              |  |                          |      
|Purchase of treasury stock                                                        |  | (147                     | )    
|Cash dividends paid                                                               |  | (1,694                   | )    
|                                                                                  |  |                          |      
|NET CASH USED BY FINANCING ACTIVITIES                                             |  | (1,841                   | )    
|                                                                                  |  |                          |      
|Net increase (decrease) in cash                                                   |  | (18                      | )    
|Cash at January 1,                                                                |  | 113                      |      
|                                                                                  |  |                          |      
|Cash at December 31,                                                              |  | $                        | 95   
|                                                                                  |  |                          |      



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##### Table of Contents

Report of Independent Accountants

January 31, 2003

The Board
of Directors and StockholdersFirst Century Bankshares, Inc.:

In our opinion, the accompanying consolidated statements of financial
condition and the related consolidated statements of income and comprehensive income, of changes in stockholders equity and of cash flows present fairly, in all material respects, the financial position of First Century Bankshares, Inc.
(formerly Pocahontas Bankshares Corporation) and Subsidiary (the Corporation) at December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2002, in
conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Corporations management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for goodwill and intangible assets.



|                           |  |  | 
|-------------------------- |  |  | 
|                           |  |  | 
|Greensboro, North Carolina |  |  | 



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##### Table of Contents

Boards of Directors



|FIRST CENTURY BANKSHARES, INC.                                                                           
|---------------------------------------------------------------------------------------------------------
|                                                                                                         
|W. Paul Cole, Jr.President, ColeMotor & ColeChevrolet-Cadillac                                           
|                                                                                                         
|Eustace FrederickRetired, Senior Vice President-Mining, Consolidation
Coal Co.,Southern Appalachia Region
|                                                                                                         
|B. L. Jackson, Jr.Chairman of the BoardFirst Century Bankshares,
Inc.                                    
|                                                                                                         
|Robert M. Jones, Jr., M.D.Physician                                                                      
|                                                                                                         
|                                                                                                         
|FIRST CENTURY BANK, N.A                                                                                  
|                                                                                                         
|J. J. Booker, III, M.D.Physician                                                                         
|                                                                                                         
|C. Scott BriersPresident, Briers, Inc.                                                                   
|                                                                                                         
|W. Paul Cole, Jr.President,Cole Motor & ColeChevrolet-Cadillac                                           
|                                                                                                         
|Eustace FrederickRetired, Senior Vice President-Mining, Consolidation
Coal Co.,Southern Appalachia Region
|                                                                                                         
|B. L. Jackson, Jr.Chairman of the BoardFirst Century Bankshares,
Inc.                                    
|FIRST CENTURY BANK, N.A.WYOMING COUNTY OPERATIONS ADVISORY BOARD                                         
|                                                                                                         
|Michelle Brown, DDSOceana Dental Clinic                                                                  
|                                                                                                         
|Tom Evans, Jr.President, Evans FuneralHome                                                               



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##### Table of Contents

Board of Directors



|FIRST CENTURY BANK, N.A.WYTHE COUNTY OPERATIONS
ADVISORY BOARD  
|----------------------------------------------------------------
|                                                                
|J. J. Booker, III, M.D.Physician                                
|                                                                
|James W. CaudillPresident, R.P. Johnson & Sons                  
|                                                                
|Robert T. DupuisPresident, P & T Products, Inc.                 
|FIRST CENTURY BANK, N.A.SUMMERS COUNTY OPERATIONS ADVISORY BOARD
|                                                                
|C. Scott BriersPresident,Briers, Inc.                           
|                                                                
|James S. KerrOwnerKerr Realty                                   



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##### Table of Contents

0fficers



|FIRST CENTURY BANKSHARES, INC.                                     
|-------------------------------------------------------------------
|                                                                   
|B. L. Jackson, Jr.Chairman of the Board                            
|                                                                   
|R. W. WilkinsonPresident & Chief ExecutiveOfficer                  
|FIRST CENTURY BANK, N.A.                                           
|                                                                   
|ADMINISTRATION                                                     
|                                                                   
|R. W. WilkinsonPresident & Chief ExecutiveOfficer                  
|                                                                   
|Frank W. WilkinsonExecutive Vice President&
Chief Operating Officer
|                                                                   
|J. Ronald HypesSenior Vice President &Chief Financial
Officer      
|                                                                   
|Kenneth W. BeardVice President &Compliance Officer                 
|                                                                   
|John D. LayVice President & Controller                             
|                                                                   
|Wayne L. BlevinsAssistant Controller                               
|                                                                   
|Barbara Moore-RayCommunity DevelopmentOfficer                      
|                                                                   
|Cynthia L. HigginsAuditor                                          
|                                                                   
|Lisa A. HuffDirector of Human Resources                            
|                                                                   
|David W. AlbertIT Manager                                          
|                                                                   
|Deborah L. BowmanMarketing Director                                
|                                                                   
|BRANCHADMINISTRATION                                               
|                                                                   
|Christina H. NaylorVice President,Deposit Operations               
|                                                                   
|Bob F. RichmondVice President,Summers County Operations            
|                                                                   
|W. Edward SmithVice President,Wythe County
Operations              
|                                                                   
|Karen R. KiddBranch Manager/Assistant
Cashier,College Avenue Office



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First Century Bankshares, Inc.



|First Century Bank, N.A.Locations                               
|----------------------------------------------------------------
|                                                                
|500 Federal StreetBluefield, WV 24701(304)
325-8181             
|                                                                
|525 Federal StreetBluefield, WV 24701(304)
325-6600             
|                                                                
|2020 College AvenueBluefield, WV 24701(304)
327-5660            
|                                                                
|1223 Stafford DrivePine Plaza, Princeton, WV 24740(304) 425-0856
|                                                                
|230 New Hope RoadPrinceton, WV 24740(304)
431-7617              
|                                                                
|427 Virginia Ave.Bluefield, VA 24605(276)
326-2606              
|                                                                
|Rt. 10, Cook ParkwayOceana, WV 24870(304)
682-6221              
|                                                                
|Rt. 10, East PinevillePineville, WV 24874(304)
732-8850         
|                                                                
|321 Temple StreetHinton, WV 25951(304)
466-2311                 
|                                                                
|200 Peppers Ferry RoadWytheville, VA 24382(276) 223-1115       
|                                                                
|148 Ivanhoe RoadMax Meadows, VA 24360(276)
637-3100             



First Century Bankshares, Inc.  Page  52