<PAGE>

                                    [LOGO]

                         FIRST CENTURY BANKSHARES, INC.
                            -----------------------
                               2000 Annual Report
<PAGE>

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
17, 2001, at Fincastle Country Club, Bluefield, Virginia. All stockholders are
cordially invited to attend.

                               Table of Contents

<TABLE>
<S>                                                                <C>
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..................................  20
Consolidated Statements of Income and Comprehensive Income......................  21
Consolidated Statements of Cash Flows...........................................  22
Consolidated Statements of Changes in Stockholders' Equity......................  23
Notes to Consolidated Financial Statements......................................  24
Report of Independent Accountants...............................................  42
Boards of Directors.............................................................  43
Corporate and Bank Officers.....................................................  45
First Century Bankshares, Inc. Subsidiary Locations..............  Inside back cover
</TABLE>
<PAGE>

Financial Highlights

<TABLE>
<CAPTION>
                                                      2000           1999          1998
----------------------------------------------------------------------------------------------
                                               (Dollars in Thousands, Except Per Share Data)
----------------------------------------------------------------------------------------------
<S>                                                 <C>           <C>           <C>
FOR THE YEAR

  Total operating income                            $  31,266        27,967     $  25,239
  Total operating expense                              26,520        22,713        20,223
  Net income                                            3,081         3,416         3,201
  Cash dividends declared                               1,700         1,600         1,500
----------------------------------------------------------------------------------------------
AT YEAR END

  Assets                                            $ 374,176     $ 367,578     $ 294,579
  Deposits                                            327,336       319,895       251,728
  Loans                                               244,727       243,977       202,214
  Securities                                           92,770        85,131        60,936
  Stockholders' equity                                 31,682        28,874        28,503
----------------------------------------------------------------------------------------------
PER COMMON SHARE
  Net income, basic and diluted                     $    1.54     $    1.71     $    1.60
  Cash dividends declared                                0.85          0.80          0.75
  Book value                                            15.84         14.44         14.25
</TABLE>


              LOANS                                         ASSETS
         ($ in millions)                               ($ in millions)

     [BAR CHART APPEARS HERE]                      [BAR CHART APPEARS HERE]



             DEPOSITS                                 BOOK VALUE PER SHARE
         ($ in millions)                                ($ in millions)

     [BAR CHART APPEARS HERE]                      [BAR CHART APPEARS HERE]

                                          First Century Bankshares, Inc.  Page 1
<PAGE>

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 shareholders for the year 2000.

     First Century Bankshares, Inc. had earnings of $3,081,000 for the year
which was a decrease of 9.8% from the previous year's earnings of $3,416,000. On
a per share basis, net income decreased to $1.54 from $1.71. This equated to a
return on average assets of 0.83 percent, and a return on average equity of 9.94
percent. This decrease in earnings was primarily attributable to a one-time
charge of approximately $838,000 due to a check kiting scheme by one of our
customers. We are vigorously pursuing this event, however, there is uncertainty
over the likelihood of recovering this loss.

     Total assets for the Corporation grew last year by 1.8%, and this is
reflective of the primary market areas that we serve. We will continually look
for opportunities to expand our presence in West Virginia and Virginia, in an
effort to expand our markets into other growth potential areas. We will achieve
this either 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.
In January, we moved through the year-end date change without any problems, and
we feel our Year 2000 readiness plan served us well. As we look ahead for 2001,
we will continue to upgrade our computer systems, and bring products to market
that will enhance our ability to serve our customers better.

     We are in the process of implementing Internet Banking services with a bill
payment option. We believe this will give our customers the ability to transact
their banking business in a more convenient way. Also, we have purchased a state
of the art imaging system that will allow for better statement reporting
capabilities for our customers, as well as giving our staff the tools needed to
enhance our statement researching capabilities. We believe that we must stay on
the leading edge of technology going forward to stay competitive in the
ever-changing financial services industry.

     With the passage of the Financial Modernization Act, we are also in the
process of implementing insurance and brokerage services for our customers. We
have joined a consortium of banks throughout Virginia and West Virginia (now
known as Banker's Insurance Corporation) that have purchased and merged four
very successful independent insurance agencies into one entity. We will be
asking our customers to let us have an opportunity to bid on their current
insurance relationship to see if we can help them with their insurance program,
as well as their banking services. We have also entered into an agreement with
Salomon Smith Barney to provide brokerage services to our customers. We believe
that this affiliation with one of the most recognized names in the financial
services industry will be an enhancement to our Trust Department, as we continue
to strive to be a full service financial advisor.

     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
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,

/s/ R. W. Wilkinson
R. W. "Buz" Wilkinson
President & C.E.O.

Page 2   First Century Bankshares, Inc.
<PAGE>

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

AVERAGE STATEMENTS OF FINANCIAL CONDITION AND NET INTEREST DIFFERENTIAL

<TABLE>
<CAPTION>
                                                     2000                       1999                         1998
                                        ----------------------------------------------------------------------------------------
                                                                      (Dollars in Thousands)
                                         Average    Income/     Yield/  Average   Income/   Yield/  Average   Income/    Yield/
ASSETS:                                  Balance    Expense      Rate   Balance   Expense    Rate   Balance   Expense     Rate
                                        ----------------------------------------------------------------------------------------
<S>                                     <C>        <C>          <C>   <C>       <C>         <C>    <C>        <C>        <C>
Interest-bearing deposits with banks     $ 3,063   $   183      5.97% $  5,083  $    251     4.94% $  3,750   $   196      5.23%
Securities available for sale
 and other equity securities:
 U. S. Government securities               8,751       539      6.16%   21,427     1,234     5.76%   18,439     1,116      6.05%
 U. S. Government agency securities       72,249     4,720      6.53%   42,024     2,570     6.12%   20,306     1,296      6.38%
 Other securities                          1,996       124      6.21%    1,920       122     6.35%    2,572       169      6.57%
                                        ---------------------------------------------------------------------------------------
   Total securities available for sale    82,996     5,383      6.49%   65,371     3,926     6.01%   41,317     2,581      6.25%
                                        ---------------------------------------------------------------------------------------
Securities held to maturity:
 U. S. Government securities                  --        --        --       500        27     5.40%    2,307       122      5.29%
 U. S. Government agency securities          178        10      5.62%    1,309        72     5.50%    4,662       273      5.86%
 State and Municipal securities            9,598       486      5.06%    8,874       448     5.05%    6,752       354      5.24%
 Other securities                            150        10      6.67%      150        10     6.67%      129         9      6.98%
                                        ---------------------------------------------------------------------------------------
   Total securities held to maturity       9,926       506      5.10%   10,833       557     5.14%   13,850       758      5.47%
                                        ---------------------------------------------------------------------------------------
Federal funds sold                         1,251        76      6.08%    7,048       341     4.84%    7,158       384      5.36%
Loans                                    242,533    21,775      8.98%  222,837    19,700     8.84%  201,059    18,616      9.26%
                                        ---------------------------------------------------------------------------------------
 Total interest-earning assets           339,769    27,923      8.22%  311,172    24,775     7.96%  267,134    22,535      8.44%
                                        ---------------------------------------------------------------------------------------
Allowance for loan losses                 (3,102)                       (2,788)                      (2,472)
Cash and due from banks--demand           12,468                        12,824                       10,047
Premises and equipment--net               10,514                        10,028                        9,147
Other assets                              12,227                        10,150                        6,765
-------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS                            $371,876                      $341,386                     $290,621
-------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS'
  EQUITY:

Interest-bearing demand deposits        $ 70,026     1,692      2.42% $ 67,395     1,917     2.84% $ 57,317     1,838      3.21%
Savings deposits                          79,665     2,493      3.13%   75,263     2,549     3.39%   63,687     2,305      3.62%
Time deposits                            138,953     7,260      5.22%  119,743     5,990     5.00%   96,118     5,059      5.26%
                                        ---------------------------------------------------------------------------------------
 Total interest-bearing deposits         288,644    11,445      3.97%  262,401    10,456     3.98%  217,122     9,202      4.24%
                                        ---------------------------------------------------------------------------------------
Short-term debt                           16,595       777      4.68%   15,803       598     3.78%   16,300       661      4.06%
 Total interest-bearing liabilities      305,239    12,222      4.00%  278,204    11,054     3.97%  233,422     9,863      4.23%
                                        ---------------------------------------------------------------------------------------
Demand deposits                           33,063                        31,813                       27,618
Other liabilities                          2,593                         2,270                        2,018
                                        ---------------------------------------------------------------------------------------
TOTAL LIABILITIES                        340,895                       312,287                      263,058
                                        ---------------------------------------------------------------------------------------
Stockholders' equity                      30,981                        29,099                       27,563
-------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND
  STOCKHOLDERS' EQUITY                  $371,876                      $341,386                     $290,621
-------------------------------------------------------------------------------------------------------------------------------
Average rate paid to fund earning
 assets                                                         3.60%                        3.55%                         3.69%
-------------------------------------------------------------------------------------------------------------------------------
NET INTEREST DIFFERENTIAL                          $15,701      4.62%           $ 13,721     4.41%            $12,672      4.74%
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

   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 $228,000 in 2000 and 1999, and $216,000 in
   1998. Average balances of securities available for sale are reported at
   amortized cost; excludes pretax unrealized losses of $1,628,000 in 2000,
   unrealized losses of $442,000 in 1999, and unrealized gains of $298,000 in
   1998. Interest income on tax exempt securities is shown based on the actual
   yield.

VOLUME/RATE ANALYSIS

<TABLE>
<CAPTION>
                                                   Increase (Decrease) in Interest
---------------------------------------------------------------------------------------------------------------------------------
                                              2000 vs. 1999                1999 vs. 1998                  1998 vs. 1997
---------------------------------------------------------------------------------------------------------------------------------
                                                                         (Dollars in Thousands)
                                            Due to Change in (1)          Due to Change in (1)           Due to Change in (1)
---------------------------------------------------------------------------------------------------------------------------------
Interest income on:                    Volume      Rate      Total     Volume      Rate      Total     Volume      Rate    Total
---------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>        <C>        <C>        <C>       <C>        <C>        <C>        <C>      <C>
   Loans                              $ 1,755    $   320    $ 2,075    $ 1,971   $  (887)   $ 1,084    $ 1,407    $(295)   $1,112
   Securities available for sale
     and other equity securities        1,101        356      1,457      1,474      (129)     1,345        434      (30)      404
   Securities held to maturity            (46)        (5)       (51)      (160)      (41)      (201)      (828)    (151)     (979)
   Federal funds sold                    (316)        51       (256)        (6)      (37)       (43)       184       (7)      177
   Interest--bearing deposits
     with banks                          (110)        42        (68)        68       (13)        55        117       (7)      110
---------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME                   2,384        764      3,148      3,347    (1,107)     2,240      1,314     (490)      824
---------------------------------------------------------------------------------------------------------------------------------
Interest expense on:
   Interest--bearing demand deposits       69       (294)      (225)       305      (226)        79        146      (59)       87
   Savings deposits                       143       (199)       (56)       406      (162)       244          3       (6)       (3)
   Time deposits                          982        288      1,270      1,213      (282)       931        330       29       359
   Short-term borrowings                   34        145        179        (19)      (44)       (63)        47       (6)       41
---------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE                  1,228        (60)     1,168      1,905      (714)     1,191        526      (42)      484
---------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME                   $ 1,156    $   824    $ 1,980    $ 1,442   $  (393)   $ 1,049    $   788    $(448)   $  340
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

                                         First Century Bankshares, Inc.   Page 3


<PAGE>

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.

Corporate Structure and Acquisitions

First Century Bankshares, Inc. ("Corporation") is chartered under the laws of
West Virginia and operates as an interstate bank 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 10 branch
offices and 14 ATM locations throughout southern West Virginia and southwestern
Virginia.

During 2000, management made commitments to expand nontraditional financial
services offered to the Corporation's customers. The Corporation entered into an
affiliation arrangement with Salomon Smith Barney, Inc. to provide full service
brokerage services. Additionally, the Corporation entered into an affiliation
with the Banker's Insurance Corporation, a relationship with 67 community banks,
which will offer a full range of insurance products and services.

Management continues to seek and evaluate opportunities to increase its market
share throughout the region. The smaller rural communities in the Corporation's
primary market afford the opportunity to provide traditional and nontraditional
community banking services where larger banks have not had a major presence. The
passage of the Graham-Leach-Bliley Financial Modernization Act in late 1999 will
now allow the Corporation to expand its product and service mix into
non-traditional areas such as insurance and brokerage services. Management
believes these new opportunities will enhance the Corporation's performance, and
ultimately, shareholder value.

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 increased less than one percent
in 2000, following an increase of $41.8 million or 20.7% in 1999. Approximately
$40 million of the growth in 1999 occurred during the second quarter with the
acquisition of the Hinton, West Virginia office. Competition in the
Corporation's market is very aggressive for the acquisition of new loans, and
with the rising interest rate environment experienced at the end of 1999 and
through the first half of 2000, there was a decline in the demand for new loans.
At December 31, 2000,

Page 4    First Century Bankshares, Inc.
<PAGE>

the loan portfolio comprised 72.2% of total interest-earning assets as compared
to 73.4% of total interest-earning assets at December 31, 1999, and contributed
78.0% of total interest income in 2000, compared to 79.5% of total interest
income in 1999. If monetary policy by the Federal Reserve results in reduced
interest rates in 2001, management believes there will be revitalized demand for
loans.

AMOUNTS OF LOANS OUTSTANDING

<TABLE>
<CAPTION>
                                                                     December 31,
                                              ---------------------------------------------------------
                                                2000         1999        1998        1997        1996
                                              ---------------------------------------------------------
                                                                 (Dollars in Thousands)
<S>                                           <C>         <C>          <C>         <C>         <C>
Commercial, financial and agricultural        $  49,883   $  52,872    $ 42,584    $ 46,012    $ 44,209
Real estate-construction                          5,990       5,353      10,369       8,068       5,603
Real estate-mortgage                            158,828     149,121     119,076     116,728     105,564
Installment loans to individuals                 30,026      36,631      30,185      26,286      24,580
-------------------------------------------------------------------------------------------------------
TOTAL LOANS OUTSTANDING                       $ 244,727   $ 243,977    $202,214    $197,094    $179,956
-------------------------------------------------------------------------------------------------------
</TABLE>

MATURITY SCHEDULE OF LOANS

<TABLE>
<CAPTION>
                                                           Remaining maturity at December 31, 2000
                                                       ------------------------------------------------
                                                                    (Dollars in Thousands)
                                                        1 Year       1 to 5       After 5
                                                        or Less       Years        Years         Total
                                                       ------------------------------------------------
<S>                                                    <C>          <C>           <C>          <C>
Commercial, financial and agricultural                 $19,553      $ 17,378      $12,952      $ 49,883
Real estate-construction                                 5,990             0            0         5,990
Real estate-mortgage                                    32,011        71,247       55,570       158,828
Installment loans to individuals                         6,374        20,818        2,834        30,026
-------------------------------------------------------------------------------------------------------
TOTAL                                                  $63,928      $109,443      $71,356      $244,727
-------------------------------------------------------------------------------------------------------

Predetermined interest rates                           $45,197      $ 75,149      $26,480      $146,826
With floating interest rates                            18,731        34,294       44,876        97,901
-------------------------------------------------------------------------------------------------------
TOTAL                                                  $63,928      $109,443      $71,356      $244,727
-------------------------------------------------------------------------------------------------------
</TABLE>

                                          First Century Bankshares, Inc.  Page 5
<PAGE>

NONPERFORMING ASSETS AND LOAN LOSS ANALYSIS

<TABLE>
<CAPTION>
                                                                          Years Ended December 31,
                                                     -----------------------------------------------------------------
                                                        2000         1999          1998           1997         1996
                                                     -----------------------------------------------------------------
                                                                           (Dollars in Thousands)
<S>                                                  <C>           <C>           <C>           <C>           <C>
Average amount of loans outstanding                  $ 242,533     $ 222,837     $ 201,059     $ 185,986     $ 180,341
Allowance for loan losses:
  Balance at beginning of the year                   $   3,050     $   2,533     $   2,370     $   2,240     $   2,145
  Additions from acquisitions                               --           497            --            --            --
  Loans charged off
   Commercial, financial and agricultural                  372            84            66           337           135
   Real estate-mortgage                                    274           150            58             9           140
   Installment loans to individuals                        536           480           316           266           297
                                                     -----------------------------------------------------------------
TOTAL LOANS CHARGED OFF                                  1,182           714           440           612           572
                                                     -----------------------------------------------------------------
  Loan recoveries
   Commercial, financial and agricultural                   12             7            26             3             3
   Real estate-mortgage                                     44           116            --            31            --
   Installment loans to individuals                         47            56            33            17            20
                                                     -----------------------------------------------------------------
TOTAL LOAN RECOVERIES                                      103           179            59            51            23
                                                     -----------------------------------------------------------------
  Net loans charged off                                 (1,079)         (535)         (381)         (561)         (549)
  Provision for loan losses                              1,209           555           544           691           644
----------------------------------------------------------------------------------------------------------------------
BALANCE AT END OF THE YEAR                           $   3,180     $   3,050     $   2,533     $   2,370     $   2,240
----------------------------------------------------------------------------------------------------------------------
Ratio of net loans charged off to average
  loans outstanding                                       0.44%         0.24%         0.19%         0.30%         0.30%

Allowance at year end as a percent of loans               1.30%         1.25%         1.25%         1.20%         1.24%
Provision for loan losses as a percent of loans           0.49%         0.23%         0.27%         0.35%         0.36%
                                                     -----------------------------------------------------------------
Nonperforming assets (at year end)
  Nonaccrual                                         $   5,887     $   2,390     $   1,728     $     828     $   1,398
  Past--due ninety days or more and still accruing       3,320         2,818           273           165         1,427
Restructured loans                                          --            --           637           645            --
Other real estate owned                                  1,001           104           678           993         1,976
                                                     -----------------------------------------------------------------
TOTAL NONPERFORMING ASSETS                           $  10,208     $   5,312     $   3,316     $   2,631     $   4,801
                                                     -----------------------------------------------------------------
Nonperforming assets/total loans                           4.2%          2.2%          1.6%          1.3%          2.7%
Nonperforming assets/total assets                          2.7%          1.4%          1.1%          1.0%          1.7%
                                                     -----------------------------------------------------------------
</TABLE>

ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES

<TABLE>
<CAPTION>
                                 2000                  1999                1998                 1997                1996
                            --------------------------------------------------------------------------------------------------------
                                                                        (Dollars in Thousands)
                                     Percent of           Percent of           Percent of           Percent of           Percent of
                                   Loans in Each        Loans in Each        Loans in Each        Loans in Each        Loans in Each
                                    Category to          Category to          Category to          Category to          Category to
                            Amount  Total Loans  Amount  Total Loans  Amount  Total Loans  Amount  Total Loans  Amount  Total Loans
                            --------------------------------------------------------------------------------------------------------
<S>                         <C>    <C>          <C>     <C>           <C>    <C>           <C>    <C>           <C>    <C>
Commercial, financial and
 agricultural               $  343    20.38%     $  568    21.67%     $  621     21.06%    $  392     23.35%   $  481       24.57%
Real estate-construction        --     2.45%         --     2.19%         --      5.13%        --      4.09%       --        3.11%
Real estate-mortgage         1,654    64.90%        834    61.13%        332     58.88%       456     59.22%      239       58.66%
Installment loans to
 individuals                   469    12.27%        698    15.01%       2741      4.93%       250     13.34%      191       13.66%
Unallocated                    714      N/A         950      N/A       1,306       N/A      1,272       N/A     1,329         N/A
------------------------------------------------------------------------------------------------------------------------------------
TOTAL                       $3,180   100.00%     $3,050   100.00%     $2,533    100.00%    $2,370    100.00%   $2,240      100.00%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

During 2000, 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 increased to 8.98% in 2000 compared to
8.84% in 1999. This reflected the rising interest rate environment during the
last half of 1999 and the first half of 2000, offset by aggressive competition
and weaker loan demand.

Page 6  First Century Bankshares, Inc.
<PAGE>

The commercial loan portfolio is generally diversified and geographically
dispersed within the region. There are no concentrations of lines of business or
industry that represent greater than 20% 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.

The consumer portion of the loan portfolio consisted 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 as consumer bankruptcies continue to increase. If any major weakening in
the economy occurs, the likelihood for increased volatility arises as consumers
are servicing higher credit card and other installment borrowings.

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. The subsidiary banks had out
standing commitments to extend credit of approximately $35,949,000 at December
31, 2000, and $32,802,000 at December 31, 1999.

Nonperforming assets, including nonaccrual loans, loans past-due 90 days or
more, restructured loans and other real estate owned, increased $4,896,000, or
approximately 92%, from December 31, 1999 to December 31, 2000. This increase
occurred primarily as a result of the deterioration of certain commercial loans.
This deterioration was compounded by the Corporation adhering to a more strict
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 increased approximately $897,000 in 2000.

Management continues to enhance the methodology and procedures for determining
the adequacy of the allowance for loan losses. The procedures that are utilized
entail analyzing a loan "watch" list and assigning classifications to each loan,
as set forth by the appropriate regulatory agency. Other real estate owned is
also analyzed and assigned a classification. Subsequently, classified loans are
categorized and allocated appropriate reserves. Other loans, more than 90 days
past due and restructured loans, that have not been considered in the
aforementioned procedures are assigned a classi fication 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 nonaccruals,
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.

                                          First Century Bankshares, Inc.  Page 7
<PAGE>

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. At December 31, 2000, the allowance for loan losses had a net
increase of approximately $130,000. The increase in the allowance for loan
losses was primarily due to the increase in nonperforming loans during 2000. The
allowance for loan losses was 1.30% of year-end loans at December 31, 2000 and
1.25% at December 31, 1999.

During 2000, the Corporation continued 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 design and implement an effective loan review system to provide
management with information that will produce a more focused and effective
approach in managing credit risk inherent in the loan portfolio. As a result, a
system of loan grades will be developed to further quantify the adequacy of the
loan loss allowance.

Securities

Securities, the second largest asset of the Corporation, increased by $7.6
million or 9.0% during 2000. At December 31, 2000, securities comprised 27.4%
of total interest-earning assets compared to 25.6% of total interest-earning
assets at December 31, 1999. 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 adequate levels of interest income. Management of the maturity of the
portfolio is necessary to ensure adequate liquidity and manage interest rate
risk. During 2000, in order to maintain liquidity and flexibility, management
con tinued categorizing most investments in the available for sale portfolio.
Losses from the sale of available for sale securities were approximately $40,000
in 2000 as management restructured approximately $5,000,000 that was invested in
short term U.S. Government obligations. Management believes that the potential
for increased loan demand requires maintaining the liquidity of the securities
portfolio.

Net unrealized gains in the held to maturity portfolio amounted to approximately
$45,000 at December 31, 2000, compared to $213,000 in net unrealized losses at
December 31, 1999. This indicates the effects of the declining interest rate
environment during the last quarter of 2000. The held to maturity portfolio
increased from $9,455,000 at December 31, 1999, to $10,323,000 at December 31,
2000, primarily due to increases in state and municipal obligations. State and
municipal securities contained no individual issues in excess of 10% of
stockholders' equity.

Page 8  First Century Bankshares, Inc.
<PAGE>

SECURITIES

<TABLE>
<CAPTION>
                                                 December 31,
                                           ----------------------------
                                             2000      1999       1998
                                           ----------------------------
                                              (Dollars in Thousands)
<S>                                        <C>       <C>       <C>
Securities available for sale:
  U. S. Government securities              $ 4,024   $15,995   $17,363
  U. S. Government agency securities        76,471    57,782    27,793
  Other securities                             772       744       795
----------------------------------------------------------------------
   TOTAL SECURITIES AVAILABLE FOR SALE     $81,267   $74,521   $45,951
----------------------------------------------------------------------
Securities held to maturity:
  U. S. Government securities              $    --   $    --   $ 2,005
  U. S. Government agency securities           140       219     3,407
  State, county and municipal securities    10,033     9,086     8,395
  Other securities                             150       150       150
----------------------------------------------------------------------
   TOTAL SECURITIES HELD TO MATURITY       $10,323   $ 9,455   $13,957
----------------------------------------------------------------------
</TABLE>

MATURITIES OF SECURITIES

The following table shows the contractual maturities of debt securities at
December 31, 2000 and the weighted average yields of such securities:

<TABLE>
<CAPTION>
                                                                After One        After Five
                                               Within           But Within       But Within            After
                                              One Year          Five Years        Ten Years          Ten Years          Total
----------------------------------------------------------------------------------------------------------------------------------
                                         Amount      Yield    Amount   Yield   Amount     Yield   Amount    Yield   Amount   Yield
----------------------------------------------------------------------------------------------------------------------------------
                                                        (Dollars in Thousands)
<S>                                      <C>         <C>     <C>       <C>    <C>         <C>     <C>       <C>     <C>      <C>
Securities available for sale:
U. S. Treasury securities                $ 1,998      6.70%  $ 1,951   6.56%  $    --        --   $  --       --    $ 3,949   6.63%
U. S. Government agency securities         1,000      6.02%   56,367   6.41%   18,683      7.17%     --       --     76,050   6.59%
----------------------------------------------------------------------------------------------------------------------------------
TOTAL SECURITIES
AVAILABLE FOR SALE                       $ 2,998      6.47%  $58,318   6.42%  $18,683      7.17%  $  --       --    $79,999   6.59%
----------------------------------------------------------------------------------------------------------------------------------
Securities held to maturity:
U. S. Government agency securities       $    --        --   $   140   6.00   $    --        --   $  --       --    $   140   6.00%
State, county and municipal securities     1,449      4.85%    4,249   4.78%    3,895      5.51%    440     5.36%    10,033   5.10%
Other securities                              --        --        75   6.74%       75      7.20%     --       --        150   6.97%
----------------------------------------------------------------------------------------------------------------------------------
TOTAL SECURITIES
HELD TO MATURITY                         $ 1,449      4.85%  $ 4,464   4.85%  $ 3,970      5.54%  $ 440     5.36%   $10,323   5.14%
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

As of December 31, 2000, the Corporation had an investment in a mutual fund
comprised primarily of U.S. agency mortgage-backed securities. The investment
is classified as available for sale. The aggregate book and market value of this
investment was $772,000 at December 31, 2000 and $744,000 at December 31, 1999.
Management is not aware of any adverse information regarding this issue with
regard to regulatory action, downgrading of debt ratings or cessation of
dividends. Approximately $34,000 in losses was recognized from the partial sale
of the fund for the year ended December 31, 1998. No losses were recognized from
this investment in 2000 or 1999.

Deposits

Deposits, the Corporation's major source of funds, increased approximately $7.4
million or 2.3% in 2000, following an increase of $68.2 million or 2.3% in
1999. Approximately $60 million of the 1999 increase was attributable to the
acquisition of the Hinton, West Virginia Branch during the second quarter of
1999. The average rate paid on interest-bearing deposits in 2000 was 3.97% and
3.98% in 1999. 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

                                          First Century Bankshares, Inc.  Page 9
<PAGE>

certain national retailers. Despite this intense competition, management
continues to evaluate pricing strategies that will ensure the Corporation's
long-term benefit of maintaining market share without sacrificing the
Corporation's profitability.

AVERAGE DEPOSITS

<TABLE>
<CAPTION>
                                                      2000              1999                 1998
                                                     Average           Average              Average
                                               ----------------------------------------------------------
                                                 Amount    Rate     Amount    Rate      Amount     Rate
                                               ----------------------------------------------------------
                                                                (Dollars in Thousands)
<S>                                            <C>         <C>     <C>        <C>      <C>         <C>
Noninterest-bearing demand deposits            $ 33,063    N/A     $ 31,813   N/A      $ 27,618    N/A
Interest-bearing demand deposits                 70,026    2.42%     67,395   2.84%      57,317    3.21%
Savings deposits                                 79,665    3.13%     75,263   3.39%      63,687    3.62%
Time deposits                                   138,953    5.22%    119,743   5.00%      96,118    5.26%
--------------------------------------------------------------------------------------------------------
TOTAL AVERAGE DEPOSITS                         $321,707    3.56%   $294,214   3.55%    $244,740    3.76%
--------------------------------------------------------------------------------------------------------
</TABLE>

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

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

<TABLE>
<CAPTION>
                                                                        December 31, 2000
                                                                     ----------------------
                                                                     (Dollars in Thousands)
<S>                                                                  <C>
Under 3 months                                                               $ 10,447
3 to 6 months                                                                  11,482
6 to 12 months                                                                  9,257
Over 12 months                                                                  5,812
--------------------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT OF $100,000 OR MORE                            $ 36,998
--------------------------------------------------------------------------------------------
</TABLE>

SHORT-TERM BORROWED FUNDS

<TABLE>
<CAPTION>
                                                                                    December 31,
                                                                           ------------------------------
                                                                             2000      1999        1998
                                                                           ------------------------------
                                                                              (Dollars in Thousands)
<S>                                                                         <C>        <C>       <C>
Securities sold under agreements to repurchase                              $13,461    $13,918   $12,612
U. S. Treasury demand notes and others                                           26      3,040       434
---------------------------------------------------------------------------------------------------------
TOTAL BORROWED FUNDS                                                        $13,487    $16,958   $13,046
---------------------------------------------------------------------------------------------------------
</TABLE>

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:

<TABLE>
<CAPTION>
                                                                             2000       1999        1998
                                                                            ------------------------------
<S>                                                                         <C>        <C>       <C>
Average interest rates at December 31                                          4.38%      3.46%      3.21%
Maximum amounts outstanding at any month-end                                $21,433    $18,500    $18,148
Average daily amount outstanding                                            $16,539    $14,499    $15,050
Weighted average interest rates                                                4.64%      3.63%      3.87%
----------------------------------------------------------------------------------------------------------
</TABLE>

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 2000 amounted to $1,700,000 compared
to $1,600,000 paid to stockholders in 1999 and $1,500,000 in 1998. This
represents a dividend pay out ratio (dividends divided by net income) of 55% in
2000 and 47% in 1999 and 1998. Cash dividends per share equaled $0.85 per share
in 2000, $0.80 per share in 1999 and $0.75 per share in 1998. The Corporation is
dependent upon dividends paid by its subsidiary bank to fund dividends to the
stockholders and to cover 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.

Page 10  First Century Bankshares, Inc.
<PAGE>

One of management's primary objectives is to maintain a strong capital position.
Stockholders' equity, net of unrealized gains (losses) on securities, increased
$2,808,000 or 9.7% in 2000. This increase was most affected by an increase in
accumulated other comprehensive income of $1,427,000, attributable to unrealized
gains in available-for-sale securities. The percent age of earnings reinvested
in the Corporation (net income less dividends as a percentage of net income) for
the years 2000, 1999 and 1998 was 44.8%, 53.6% and 53.1%, 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 4.5% in 2000 and 6.2% in 1999 and 1998.

REGULATORY CAPITAL REQUIREMENTS

<TABLE>
<CAPTION>
                                                    Combined Capital
Entity                                     Tier 1  (Tier 1 and Tier 2)   Leverage
-----------------------------------------------------------------------------------
<S>                                        <C>     <C>                   <C>
Consolidated                               10.16%        11.41%            7.04%
First Century Bank, N.A.                   10.01%        11.26%            6.92%
</TABLE>

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 deter mining the risk-based capital ratios. The Corporation's Tier I capital,
which consists of stockholders' equity, adjusted for certain intangible assets,
amounted to $25,729,000 at December 31, 2000, or 10.16% of total risk-weighted
assets, compared to $23,871,000 at December 31, 1999, or 9.63% 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 $3,166,000 at December 31, 2000, or
1.25% of total risk-weighted assets, compared to $3,050,000 at December 31,
1999, or 1.23% of total risk-weighted assets. The Corporation's total
consolidated risk-based capital was $28,895,000 at December 31, 2000, or 11.41%
of total risk-weighted assets, compared to $26,921,000, or 10.86% of total
risk-weighted assets as of December 31, 1999. 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, 2000 and 1999, the Corporation's leverage ratio was 7.04% and 6.55%,
respectively; therefore, the Corporation exceeded all current minimum capital
requirements.

                                         First Century Bankshares, Inc.  Page 11
<PAGE>

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 consider ably
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. The
Corporation had a positive cumulative gap of 1.39% at three months and negative
cumulative gaps of 3.25% at six months and 12.64% at one year as of December 31,
2000. Management continues to monitor the Corporation's asset/liability gap
positions, and thus has produced interest sensitivity ratios that are within
targeted levels established in the Corporation's asset/liability management
guidelines.

Management incorporates 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, 2000,
simulation indicated the impact of a 200 basis point increase in rates would
approximate a 4.96% increase in net interest income, while a 200 basis point
decline in rates would approximate a 5.77% 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.

Page 12  First Century Bankshares, Inc.
<PAGE>

ANALYSIS OF INTEREST RATE SENSITIVITY

<TABLE>
<CAPTION>
                                                                 Months                             Years
                                                  ----------------------------------------------------------------
                                                  Less Than 3     3 - 6       6 - 12         1 - 5         Over 5       Totals
                                                  -----------------------------------------------------------------------------
                                                                               (Dollars in Thousands)
<S>                                               <C>          <C>           <C>           <C>           <C>          <C>
Investment securities                             $   1,414    $   2,737     $   5,475     $  64,014     $  19,130    $  92,770
Federal funds sold and interest-bearing
   balances with banks                                1,627           --            --            --            --        1,627
Loans                                               121,971        8,202        16,404        77,710        20,440      244,727
                                                  -----------------------------------------------------------------------------
   Interest-earning assets                        $ 125,012    $  10,939     $  21,879     $ 141,724     $  39,570    $ 339,124
                                                  -----------------------------------------------------------------------------
Time deposits                                     $  38,218    $  26,643     $  53,286     $  25,106      $     --    $ 143,253
Other interest-bearing deposits                      69,581           --            --        78,991            --      148,572
Other interest-bearing liabilities                   12,516           --           449           496            26       13,487
                                                  -----------------------------------------------------------------------------
    Interest-bearing liabilities                  $ 120,315    $  26,643     $  53,735     $ 104,593     $      26    $ 305,312
                                                  -----------------------------------------------------------------------------
Interest sensitivity gap                          $   4,697    $ (15,704)    $ (31,856)    $  37,131     $  39,544    $  33,812
Cumulative interest sensitivity gap               $   4,697    $ (11,007)    $ (42,863)    $  (5,732)    $  33,812
Ratio of interest-earning assets to
   interest-bearing liabilities                        1.04x        0.41x         0.41x         1.36x      1521.92x
                                                  ----------------------------------------------------------------
Ratio of cumulative interest sensitivity
   gap to total earning assets                         1.39%       (3.25)%      (12.64)%       (1.69)%        9.97%
                                                  ----------------------------------------------------------------
</TABLE>

Liquidity Management

Liquidity management involves the ability to meet the cash flow requirements of
customers who may be 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 from operating activities. A secondary
source of liquidity for the Corporation comes from investing activities in the
maturities of investment securities. This demonstrates management's strategy to
maintain the investment portfolio with short-term, high quality investments. The
Corporation's primary use of cash was from investing activities, primarily
increases in earning assets deployed in investments and loans. This also
demonstrated the Corporation's ability to accommodate loan demand within its
service areas. At December 31, 1999, the Corporation maintained additional
liquidity in the form of currency as a result of the uncertainty surrounding the
Year 2000 problem. This excess liquidity was reduced to more normal levels as
the threat of liquidity needs diminished after the start of 2000.

Income Statement Analysis

Earnings Overview

Net income for 2000 was $3,081,000 or $1.54 per share, a decrease of $335,000 or
9.8% from the $3,416,000 or $1.71 per share earned in 1999, and $120,000 less
than the $3,201,000 or $1.60 per share earned in 1998. This decrease occurred
primarily as a result of an increase in the provision for loan losses and a
one-time charge related to a loss resulting from a check-kiting scheme by one of
the Corporation's customers.

                                         First Century Bankshares, Inc.  Page 13
<PAGE>

Earnings Per Share

The Earnings Per Share Table summarizes the principal sources of changes in
earnings per share for 2000. 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--1999                      $   1.71
--------------------------------------------------------
Increase (decrease) due to change in:
   Net interest income                              0.99
   Provision for loan losses                       (0.33)
   Other operating income                           0.07
   Personnel expense                               (0.26)
   Other expense                                   (0.64)
--------------------------------------------------------
Net income per share-- 2000                     $   1.54
--------------------------------------------------------

Net Interest Income

The major portion of the Corporation's earnings are derived from the net
interest margin, which is the interest income on interest-earning assets less
the interest expense on interest-bearing liabilities. During 2000 the net
interest margin increased $1,980,000 or 14.4%. This followed an 8.3% increase in
1999, and a 2.8% increase in 1998. For the year ended December 31, 2000,
interest income increased $3,148,000, or approximately 12.7%, compared to
increases of $2,240,000, or 9.9% for 1999, and $824,000, or 3.8% for 1998.
Interest on loans, which increased $2,075,000 or 10.5%, contributed to the
increase for 2000, along with interest on securities, which increased
$1,406,000, or 31.4%. The increase in interest income was offset by an increase
in interest expense of $1,168,000 or 10.6% for 2000. This followed an increase
in interest expense of $1,191,000, or 12.1% for 1999, and an increase of
$484,000, or 5.2% for 1998. 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.

The net interest margin 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 2000 is indicative of the relatively stable
rate environment prevailing through most of 2000 and 1999 as most changes in the
net interest margin were due to changes in the mix of loans and investments.

Provision for Loan Losses

The Corporation experienced significant increases in loan losses during 2000.
The provision for loan losses was $1,209,000 for 2000, compared to $555,000 for
1999 and $544,000 for 1998. Factors contributing to the increased provision in
2000 included a deterioration in certain retail and commercial loans, a
weakening local economy and stricter criteria employed in the granting of
renewals and extensions to loan customers.

Page 14 First Century Bankshares, Inc.
<PAGE>

Noninterest Income and Expense

Noninterest income increased $151,000 or 4.7% in 2000, following a $488,000 or
18.0% increase in 1999, and a $297,000 or 12.3% increase in 1998. The largest
component of noninterest income is fees from fiduciary activities. Fees from
fiduciary activities increased $175,000 or 14.3% for 2000, $135,000 or 12.4% for
1999, and $66,000 or 6.5% for 1998. The second largest component of non interest
income is service charges on deposit accounts. These fees increased
approximately $129,000 or 11.3% in 2000, after an increase of approximately
$189,000 or 19.9% in 1999, and $22,000 or 2.4% in 1998.

Noninterest expense, excluding the provision for loan losses, increased 17.9% in
2000, following a 13.1% increase in 1999 and a 4.5% increase in 1998. Personnel
expense is the largest component of noninterest expense. Personnel expense
increased 9.6% in 2000, following an increase of 15.0% in 1999, and 5.5% in
1998. 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 are a significant component of personnel expense.
For a complete discussion of the Corporation's 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 within current
inflationary levels.

The primary factor contributing to the increase in noninterest expense for 2000
was a one-time charge of $838,000 resulting from losses recognized in a
check-kiting scheme by one of the Corporation's commercial customers. The
Corporation is vigorously pursuing this event, however, there is uncertainty
over the likelihood of recovering this loss.

RETURN ON EQUITY AND ASSETS

<TABLE>
<CAPTION>
                                                                                    December 31,
                                                                            ---------------------------
                                                                              2000      1999      1998
                                                                            ---------------------------
<S>                                                                         <C>        <C>       <C>
Percentage of net income to:
Average stockholders' equity                                                  9.94%    11.74%    11.61%
Average total assets                                                          0.83%     1.00%     1.10%
Percentage of dividends declared per common share
  to net income per common share                                             55.19%    46.78%    46.88%
Percentage of average stockholders' equity to average total assets            8.33%     8.52%     9.48%
</TABLE>


Income Taxes

Applicable income taxes for 2000 decreased $173,000 or 9.4%. This followed a
$23,000 or 1.3% increase for 1999, and a $160,000 or 9.7% increase for 1998.
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.

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,

                                         First Century Bankshares, Inc.  Page 15
<PAGE>

the actions of the Federal Reserve Board during 2000 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

In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities" and in July 1999
issued SFAS 137 which deferred the effective date of SFAS 133, as it pertains to
the Corporation, to fiscal years beginning after July 1, 2000. This statement
did not have a material impact on the Corporation when adopted on January 1,
2001.

In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101, or SAB 101, "Revenue Recognition in Financial
Statements," which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements filed with the SEC. SAB 101
outlines the basic criteria that must be met to recognize revenue and provides
guidance for disclosures related to revenue recognition policies. It was
effective no later than the fourth fiscal quarter of fiscal years beginning
after December 15, 1999. This pronouncement did not have a material impact on
the Corporation.

In April 2000, the FASB issued FASB Interpretation No. 44 (FIN 44) which
clarifies the application of Accounting Principles Board Opinion 25 for certain
transactions. The interpretation addresses many issues related to granting or
modifying stock options including changes in accounting for modifications of
awards (increased life, reduction of exercise price, etc.). It was effective
July 1, 2000 but certain conclusions cover specific events that occurred after
either December 15, 1998 or January 12, 2000. The affects of applying the
interpretation are to be recognized on a prospective basis from July 1, 2000.
FIN 44 has not had a material impact on the Corporation.

In September 2000, the FASB issued SFAS 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." This
Statement replaces SFAS 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." It revises the standards
for accounting for securitizations and other transfers of financial assets and
collateral and requires certain disclosures, but it carries over most of
Statement 125's provisions without reconsideration. This statement shall be
effective for transfers and servicing of financial assets and extinguishments of
liabilities occurring after March 31, 2001. This Statement shall be applied
prospectively and is not expected to have a material impact on the Corporation.

During 2000, the FASB continued its project on the accounting for business
combinations and its accounting treatment of purchased goodwill. By the end of
2000, the FASB has recommended the elimination of the pooling method of
accounting for business combinations. FASB further developed an impairment
approach for the reduction in the carrying value of goodwill verses the strict
amortization of goodwill. Management will continue to monitor developments with
this project in order to minimize the impact to the Corporation's future
financial performance.

Page 16  First Century Bankshares, Inc.
<PAGE>

Per Share Data by Quarter

No established public market presently exists for the common stock of the
Corporation. Quotations may be obtained through the 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, listed market makers and
local brokers for 2000 and 1999. Also presented below are the dividends paid for
those respective years. The number of stockholders of record on December 31,
2000, was 597 and out standing shares totaled 2,000,000.

PER SHARE DATA BY QUARTER

<TABLE>
<CAPTION>
                                                                                 Market Quotations
                                                                        -----------------------------------
                                                       Dividends             2000                1999
                                                    -------------------------------------------------------
Quarter                                              2000     1999       High      Low       High     Low
                                                    -------------------------------------------------------
<S>                                                 <C>       <C>       <C>      <C>        <C>      <C>
First Quarter                                       $0.20     $0.20     $17.00   $15.00     $24.00   $21.00
Second Quarter                                       0.20      0.20      17.50    15.88      22.50    19.75
Third Quarter                                        0.20      0.20      17.75    13.13      23.00    19.00
Fourth Quarter                                       0.25      0.20      15.00    12.00      19.00    15.00
</TABLE>

                                         First Century Bankshares, Inc.  Page 17
<PAGE>

Trust Asset Responsibility

Assets managed by the Trust Division are presented at book value, which is the
Federal income tax basis of the assets and is not representative of current
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.

                   TRUST ASSET RESPONSIBILITY AT BOOK VALUE
                           [BAR CHART APPEARS HERE]

Page 18 First Century Bankshares, Inc.
<PAGE>

CONDENSED STATEMENTS OF FINANCIAL CONDITION
Statistical Summary, 2000 -- 1996

<TABLE>
<CAPTION>
                                                                 December 31,
                                      ---------------------------------------------------------------------------------
                                          2000      %     1999      %     1998      %      1997      %    1996      %
                                      ---------------------------------------------------------------------------------
                                                    (Dollars in Thousands, Except Per Share Data)
<S>                                     <C>        <C>  <C>       <C>   <C>        <C>   <C>       <C>  <C>       <C>
Loans                                   $244,727   65   $243,977   66   $202,214    69   $197,094   72  $179,956   65
Securities                                92,770   25     85,131   23     60,936    21     53,511   19    65,500   23
Federal funds sold                            --   --         --   --      4,000     1      3,400    1     5,750    2
Interest-bearing deposits with banks       1,627   --      3,239    1      3,275     1      2,013    1     1,982    1
                                        -----------------------------------------------------------------------------
INTEREST-EARNING ASSETS                  339,124   90    332,347   90    270,425    92    256,018   93   253,188   91
                                        -----------------------------------------------------------------------------
Cash and due from banks                   14,118    4     15,372    4     10,473     4      8,883    3    12,421    4
Premises and equipment                    10,487    3     10,712    3      9,199     3      8,660    3     8,052    3
Other assets                              13,627    4     12,197    4      7,015     2      5,556    2     7,151    3
Allowance for loan losses                 (3,180)  (1)    (3,050)  (1)    (2,533)   (1)    (2,370)  (1)   (2,240)  (1)
---------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS                            $374,176  100   $367,578  100   $294,579   100   $276,747  100  $278,572  100
---------------------------------------------------------------------------------------------------------------------
Savings deposits                        $148,572   40   $152,088   41   $123,353    42   $115,269   42  $112,970   41
Time deposits                            143,253   38    136,064   37    100,528    34     89,145   32    93,190   33
Other interest-bearing liabilities        13,487    4     16,958    5     13,046     4     17,038    6    16,270    6
                                        ------------------------------------------------------------------------------
INTEREST-BEARING LIABILITIES             305,312   82    305,110   83    236,927    80    221,452   80   222,430   80
                                        ------------------------------------------------------------------------------
Demand deposits                           35,511   10     31,743    9     27,847    10     27,923   10    30,562   11
Other liabilities                          1,671   --      1,851   --      1,302    --        783   --       951   --
                                        -----------------------------------------------------------------------------
TOTAL LIABILITIES                        342,494   92    338,704   92    266,076    90    250,158   90   253,943   91
                                        -----------------------------------------------------------------------------
STOCKHOLDERS' EQUITY                      31,682    8     28,874    8     28,503    10     26,589   10    24,629    9
---------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES & EQUITY              $374,176  100   $367,578  100   $294,579   100   $276,747  100  $278,572  100
---------------------------------------------------------------------------------------------------------------------
             TOTAL DEPOSITS             $327,336        $319,895        $251,728         $232,337       $236,722
                                        -----------------------------------------------------------------------------
       BOOK VALUE PER SHARE             $  15.84        $  14.44        $  14.25         $  13.29       $  12.31
---------------------------------------------------------------------------------------------------------------------
</TABLE>


SUMMARY OF OPERATIONS
Statistical Summary, 2000 -- 1996

<TABLE>
<CAPTION>
                                                        Years Ended December 31,
                                      ---------------------------------------------------------
                                            2000       1999       1998        1997       1996
                                      ---------------------------------------------------------
                                             (Dollars in Thousands, Except Per Share Data)
<S>                                       <C>        <C>        <C>         <C>        <C>
Interest income                           $ 27,923    $24,775    $22,535     $21,711    $20,984
Interest expense                            12,222     11,054      9,863       9,379      9,481
                                          -----------------------------------------------------
NET INTEREST MARGIN                         15,701     13,721     12,672      12,332     11,503
                                          -----------------------------------------------------
Provision for loan losses                    1,209        555        544         691        644
                                          -----------------------------------------------------
Net credit margin                           14,492     13,166     12,128      11,641     10,859
                                          -----------------------------------------------------
Noninterest income                           3,343      3,192      2,704       2,407      2,092
Noninterest expense                         13,089     11,104      9,816       9,391      8,664
                                          -----------------------------------------------------
INCOME BEFORE INCOME TAXES                   4,746      5,254      5,016       4,657      4,287
                                          -----------------------------------------------------
Provision for income taxes                   1,665      1,838      1,815       1,655      1,457
-----------------------------------------------------------------------------------------------
NET INCOME                                $  3,081    $ 3,416    $ 3,201     $ 3,002    $ 2,830
-----------------------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE:
Basic                                     $   1.54    $  1.71    $  1.60     $  1.50    $  1.42
Diluted                                   $   1.54    $  1.71    $  1.60     $  1.50    $  1.42
-----------------------------------------------------------------------------------------------
Dividends per common share                $   0.85    $  0.80    $  0.75     $ 0.650    $ 0.605
Payout ratio                                    55%        47%        47%         43%        43%
</TABLE>

                                          First Century Bankshares, Inc. Page 19
<PAGE>

Consolidated Statements of Financial Condition

<TABLE>
<CAPTION>
                                                                               December 31,
                                                                          ---------------------
                                                                             2000        1999
                                                                          ---------------------
<S>                                                                       <C>         <C>
ASSETS                                                                    (Dollars in Thousands)
Cash and due from banks                                                    $ 14,118   $  15,372
Interest-bearing balances with banks                                          1,627       3,239
Securities available for sale                                                81,267      74,521
Securities held to maturity (estimated market value of $10,368
   in 2000 and $9,242 in 1999)                                               10,323       9,455
Federal Home Loan Bank and Federal Reserve Bank Stock                         1,180       1,155
Loans                                                                       244,727     243,977
   Less allowance for loan losses                                             3,180       3,050
                                                                          ---------------------
Net loans                                                                   241,547     240,927
Premises and equipment, net                                                  10,487      10,712
Other assets                                                                 13,627      12,197
-----------------------------------------------------------------------------------------------
TOTAL ASSETS                                                               $374,176   $ 367,578
-----------------------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
   Noninterest-bearing                                                     $ 35,511   $  31,743
   Interest-bearing                                                         291,825     288,152
                                                                          ---------------------
Total deposits                                                              327,336     319,895
Short-term borrowings                                                        13,487      16,958
Other liabilities                                                             1,671       1,851
                                                                          ---------------------
TOTAL LIABILITIES                                                           342,494     338,704
                                                                          ---------------------
STOCKHOLDERS' EQUITY
Common stock - $1.25 par value; shares issued and outstanding:
   2,000,000 at December 31, 2000 and 1999                                    2,500       2,500
Paid-in capital                                                                 785         785
Retained earnings                                                            28,121      26,740
Accumulated other comprehensive income (loss), net of tax                       276      (1,151)
                                                                          ---------------------
TOTAL STOCKHOLDERS' EQUITY                                                   31,682      28,874
-----------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                 $374,176   $ 367,578
-----------------------------------------------------------------------------------------------
</TABLE>

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

Page 20  First Century Bankshares, Inc.
<PAGE>

Consolidated Statements of Income and Comprehensive Income

<TABLE>
<CAPTION>
                                                                    Years Ended December 31,
                                                                  ------------------------------
                                                                   2000        1999       1998
                                                                  ------------------------------
INTEREST INCOME                                           (Dollars in Thousands, Except Per Share Data)
<S>                                                              <C>       <C>        <C>
Interest and fees on loans                                     $   21,775  $   19,700 $   18,616
Interest on balances with banks                                       183         251        196
Interest and dividends from securities available for sale:
   Taxable                                                          5,383       3,926      2,581
Interest and dividends from securities held to maturity:
   Taxable                                                             54         169        410
   Tax-exempt                                                         452         388        348
Interest on federal funds sold                                         76         341        384
                                                               ---------------------------------
TOTAL INTEREST INCOME                                              27,923      24,775     22,535
                                                               ---------------------------------
INTEREST EXPENSE
Interest on time certificates of $100,000 or more                   1,938       1,452      1,236
Interest on other deposits                                          9,507       9,004      7,966
Interest on federal funds purchased and securities
 sold under agreements to repurchase                                  768         527        583
Interest on demand notes to U. S. Treasury and
 other indebtedness                                                     9          71         78
                                                               ---------------------------------
TOTAL INTEREST EXPENSE                                             12,222      11,054      9,863
                                                               ---------------------------------
Net interest income                                                15,701      13,721     12,672
Provision for loan losses                                           1,209         555        544
                                                               ---------------------------------
Net interest income after provision for loan losses                14,492      13,166     12,128
                                                               ---------------------------------
NONINTEREST INCOME
Income from fiduciary activities                                    1,400       1,225      1,090
Service charges on deposit accounts                                 1,270       1,140        951
Other noninterest income                                              713         827        697
Securities gains (losses)                                             (40)         --        (34)
                                                               ---------------------------------
TOTAL NONINTEREST INCOME                                            3,343       3,192      2,704
                                                               ---------------------------------
NONINTEREST EXPENSE
Salaries, wages, and other employee benefits                        5,978       5,453      4,741
Premises and equipment expense                                      1,709       1,574      1,405
Data processing expense                                               716         646        589
Advertising and public relations                                      319         298        381
Insurance and bonding                                                 128         102        112
Supplies and printing                                                 337         391        361
Other noninterest expense                                           3,902       2,640      2,227
                                                               ---------------------------------
TOTAL NONINTEREST EXPENSE                                          13,089      11,104      9,816
                                                               ---------------------------------
Income before income taxes                                          4,746       5,254      5,016
Provision for income taxes                                          1,665       1,838      1,815
------------------------------------------------------------------------------------------------
NET INCOME                                                          3,081       3,416      3,201
------------------------------------------------------------------------------------------------
Other comprehensive income (loss), net of tax                       1,427     (1,445)        213
                                                               ---------------------------------
COMPREHENSIVE INCOME                                           $    4,508  $    1,971 $    3,414
------------------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE:
------------------------------------------------------------------------------------------------
Basic                                                          $     1.54  $     1.71 $     1.60
Diluted                                                        $     1.54  $     1.71 $     1.60
------------------------------------------------------------------------------------------------

AVERAGE SHARES OUTSTANDING:
------------------------------------------------------------------------------------------------
Basic                                                           2,000,000   2,000,000  2,000,000
Diluted                                                         2,000,000   2,001,907  2,001,847
------------------------------------------------------------------------------------------------
</TABLE>

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

                                         First Century Bankshares, Inc.  Page 21
<PAGE>

Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                          Years Ended December 31,
                                                                      --------------------------------
                                                                        2000        1999        1998
                                                                      --------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES                                       (Dollars in Thousands)
<S>                                                                   <C>         <C>         <C>
Net income before adjustments to reconcile net income
  to net cash provided by operating activities:                       $  3,081    $  3,416    $  3,201
  Provision for loan losses                                              1,209         555         544
  Depreciation and amortization                                          1,291       1,083         812
  Deferred income tax expense                                               56         139          87
  Securities (gains) losses                                                 40          --          34
  (Increase) decrease in interest receivable                              (807)       (364)         31
  Net investment amortization and (accretion)                               (9)         56         142
  Net increase in other assets                                             (60)       (670)       (370)
  Net increase (decrease) in interest payable and other liabilities       (300)         98         163
                                                                      --------    --------    --------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                4,501       4,313       4,644
                                                                      --------    --------    --------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities held to maturity                                (1,779)     (1,308)     (3,665)
Purchases of securities available for sale                             (24,374)    (54,811)    (21,066)
Purchases of Federal Home Loan Bank stock                                  (25)        (37)         --
Purchases of Federal Reserve Bank Stock                                     --         (90)         --
Proceeds from maturities and calls of securities held to maturity          865       5,736       6,987
Proceeds from maturities and calls of securities available for sale     13,031      24,004       8,689
Proceeds from sales of securities available for sale                     4,967          --       1,760
Net increase in loans                                                   (1,703)     (1,555)     (1,881)
Net cash received from branch acquisition                                   --      14,727       8,510
Acquisition of premises and equipment                                     (621)       (665)     (1,160)
Proceeds from disposal of premises and equipment                             2          28          --
                                                                      --------    --------    --------
NET CASH USED BY INVESTING ACTIVITIES                                   (9,637)    (13,971)     (1,826)
                                                                      --------    --------    --------

CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand and savings deposits                     251         (75)      4,442
Net increase in time deposits                                            7,190       8,284       1,684
Net increase (decrease) in short-term borrowings                        (3,471)      3,912      (3,992)
Cash dividends paid                                                     (1,700)     (1,600)     (1,500)
                                                                      --------    --------    --------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES                         2,270      10,521         634
                                                                      --------    --------    --------
Net increase (decrease) in cash and cash equivalents                    (2,866)        863       3,452
Cash and cash equivalents at beginning of year                          18,611      17,748      14,296
------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year                              $ 15,745    $ 18,611    $ 17,748
======================================================================================================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
  Interest                                                            $ 12,242    $ 10,853    $  9,826
  Income taxes                                                        $  2,091    $  1,678    $  1,853
</TABLE>


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

Page 22  First Century Bankshares, Inc.
<PAGE>

Consolidated Statements of Changes in Stockholders' Equity

<TABLE>
<CAPTION>

                                                                                            Accumulated
                                                                                               Other
                                              Common Stock                                 Comprehensive
                                          -------------------      Paid-In    Retained     Income (Loss),
                                            Shares     Amount      Capital    Earnings      Net of tax
                                          -----------------------------------------------------------------
                                                   (Dollars in Thousands, Except Per Share Data)
<S>                                       <C>          <C>         <C>        <C>            <C>
YEAR ENDED DECEMBER 31, 1998
Balance at January 1, 1998                2,000,000    $2,500      $   785    $23,223        $    81
Net income                                       --        --           --      3,201             --
Other comprehensive income, net of tax           --        --           --         --            213
Cash dividends declared-$0.75 per share          --        --           --     (1,500)            --
-----------------------------------------------------------------------------------------------------------
Balance at December 31, 1998              2,000,000     2,500          785     24,924            294
===========================================================================================================

YEAR ENDED DECEMBER 31, 1999
Net income                                       --        --           --      3,416             --
Other comprehensive loss, net of tax             --        --           --         --         (1,445)
Cash dividends declared-$0.80 per share          --        --           --     (1,600)            --
-----------------------------------------------------------------------------------------------------------
Balance at December 31, 1999              2,000,000     2,500          785     26,740         (1,151)
===========================================================================================================

YEAR ENDED DECEMBER 31, 2000
Net income                                       --        --           --      3,081             --
Other comprehensive income, net of tax           --        --           --         --          1,427
Cash dividends declared-$0.85 per share          --        --           --     (1,700)            --
-----------------------------------------------------------------------------------------------------------
Balance at December 31, 2000              2,000,000    $2,500      $   785     $28,121       $   276
===========================================================================================================
</TABLE>

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

                                          First Century Bankshares, Inc. Page 23
<PAGE>

Notes to Consolidated Financial Statements

1.   Summary of Significant Accounting and Reporting Policies

First Century Bankshares, Inc. (the "Corporation"), and its wholly owned
subsidiary, First Century Bank, N.A. operate ten 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 subsidiary. 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, 2000, was
approximately $3,528,000.

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 when income is 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 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,

Page 24 First Century Bankshares, Inc.
<PAGE>

1.   Summary of Significant Accounting and Reporting Policies

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 the 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 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.

                                        First Century Bankshares, Inc. Page 25
<PAGE>

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

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 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.

Restructured loans -- Loans are considered troubled debt restructurings if, for
economic or legal reasons, a concession has been granted to the borrower related
to the borrower's financial difficulties that the Corporation would not have
otherwise considered. The Corporation has restructured certain loans in
instances where a determination was made that greater economic value will be
realized under new terms than through foreclosure, liquidation, or other
disposition. The terms of the renegotiation generally involve some or all of the
following characteristics: a reduction in the interest pay rate to reflect
actual operating income, an extension of the loan maturity date to allow time
for stabilization of operating income, and partial forgiveness of principal and
interest.

The carrying value of a restructured loan is reduced by the fair value of any
assets or equity interest received. In addition, if the present value of future
cash receipts required under the new terms does not equal the recorded
investment in the loan at the time of restructuring the carrying value would be
further reduced by a charge to the allowance. In addition, at the time of
restructuring, loans are classified as impaired.

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 -- The cost of the investments in acquired
institutions in excess of amounts attributable to tangible and identified
intangible assets at dates of acquisition is recorded as goodwill and is being
amortized to operations over periods from 15 - 25 years using the straight-line
method. A portion of the cost of purchased subsidiaries has been allocated to
the value associated with the future earnings potential of the acquired core
deposit base and is being amortized over eight years, the estimated life

Page 26 First Century Bankshares, Inc.
<PAGE>

1.   Summary of Significant Accounting and Reporting Policies

of the deposit base. The unamortized balance of intangibles totaled
approximately $5,627,000 at December 31, 2000 and $6,076,000 at December 31,
1999, net of accumulated amortization of $1,111,000 and $662,000, respectively,
and is included in other assets.

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 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 -- In accordance with SFAS No. 130, "Reporting
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 are the sole component of the Company's other comprehensive income.

New Accounting Pronouncements -- In June 1998, the Financial Accounting
Standards Board ("FASB") issued SFAS 133, "Accounting for Derivative Instruments
and Hedging Activities" and in July 1999 issued SFAS 137 which deferred the
effective date of SFAS 133, as it pertains to the Corporation, to fiscal years
beginning after July 1, 2000.

In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101, or SAB 101, Revenue Recognition in Financial
Statements, which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements filed with the SEC. SAB 101
outlines the basic criteria that must be met to recognize revenue and provides
guidance for disclosures related to revenue recognition policies. It is
effective no later than the fourth fiscal quarter of fiscal years beginning
after December 15, 1999. This pronouncement did not have a material impact on
the Corporation.

In April 2000, the FASB issued FASB Interpretation No. 44 (FIN 44) which
clarifies the application of Accounting Principles Board Opinion 25 for certain
transactions. The interpretation addresses many issues related to granting or
modifying stock options including changes in accounting for modifications of
awards (increased life, reduction of exercise price, etc.). It was effective
July 1, 2000 but certain conclusions cover specific events that occurred after
either December 15, 1998 or January 12, 2000. The affects of applying the
interpretation are to be recognized on a prospective basis from July 1, 2000.
FIN 44 has not had a material impact on the Corporation.

                                         First Century Bankshares, Inc. Page 27
<PAGE>

1.   Summary of Significant Accounting and Reporting Policies

In September 2000, the FASB issued SFAS 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." This
Statement replaces SFAS 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." It revises the standards
for accounting for securitizations and other transfers of financial assets and
collateral and requires certain disclosures, but it carries over most of
Statement 125's provisions without reconsideration. This statement shall be
effective for transfers and servicing of financial assets and extinguishments of
liabilities occurring after March 31, 2001. This Statement shall be applied
prospectively and is not expected to have a material impact on the Corporation.

2.   Branch Acquisitions

Effective June 11, 1999, First Century Bank, N.A., completed the acquisition of
the Hinton, West Virginia branch of City National Bank of West Virginia. The
transaction was accounted for as a purchase; accordingly, operating results of
the Hinton Branch have been included in the consolidated financial statements
since the date of acquisition. The purchase price was based on a premium on
deposits of 8.4% and was allocated based on preliminary estimates of fair value.
The allocation of the purchase price was as follows:

Cash                                                   $14,727
Net loans                                               39,337
Premises and equipment                                   1,620
Interest receivable and other assets                       160
Goodwill                                                 4,681
--------------------------------------------------------------
Total assets acquired                                  $60,525
--------------------------------------------------------------

Deposits                                               $59,958
Interest payable and other liabilities                     567
--------------------------------------------------------------
Total liabilities assumed                              $60,525
--------------------------------------------------------------

Effective April 3, 1998, First Century Bank, N.A., completed the acquisition of
the Bluefield, Virginia branch of First American Federal Savings Bank, Roanoke,
Virginia. The transaction was accounted for as a purchase; accordingly,
operating results of the Virginia Avenue Branch have been included in the
consolidated financial statements since the date of acquisition. The purchase
price was $1,510,000 and was allocated based on preliminary estimates of fair
value. The allocation of the purchase price was as follows:

Cash                                                         $ 8,510
Net loans                                                      3,239
Premises and equipment                                           255
Interest receivable and other assets                              21
Goodwill                                                       1,441
--------------------------------------------------------------------
Total assets acquired                                        $13,466
--------------------------------------------------------------------

Deposits                                                     $13,356
Interest payable and other liabilities                           110
--------------------------------------------------------------------
Total liabilities assumed                                    $13,466
--------------------------------------------------------------------

Goodwill established from these acquisitions is being amortized over an
estimated useful life of 15 years.

Page 28 First Century Bankshares, Inc.
<PAGE>

3.   Securities

Securities available for sale at December 31, 2000 and 1999 are summarized as
follows:

<TABLE>
<CAPTION>
                                                          2000
                                                    Gross       Gross     Estimated
                                       Amortized Unrealized  Unrealized    Market
                                         Cost       Gains      Losses       Value
                                       ---------------------------------------------
                                                 (Dollars in Thousands)
<S>                                    <C>           <C>        <C>        <C>
U.S.  Government obligations           $   3,949     $  75      $   --     $  4,024
U.S.  Government agency obligations       73,307       666         244       73,729
Mortgage-backed securities                 2,743        12          13        2,742
Equity securities                            822        --          50          772
------------------------------------------------------------------------------------
TOTAL SECURITIES AVAILABLE FOR SALE    $  80,821     $ 753      $  307     $ 81,267
------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                          1999
                                                    Gross       Gross     Estimated
                                       Amortized Unrealized  Unrealized    Market
                                         Cost       Gains      Losses       Value
                                       ---------------------------------------------
                                                 (Dollars in Thousands)
<S>                                    <C>           <C>        <C>        <C>
U.S.  Government obligations           $  16,003     $  23      $   31     $ 15,995
U.S.  Government agency obligations       55,833         3       1,547       54,289
Mortgage-backed securities                 3,566        --          73        3,493
Equity securities                            822        --          78          744
------------------------------------------------------------------------------------
TOTAL SECURITIES AVAILABLE FOR SALE    $  76,224     $  26      $1,729     $ 74,521
------------------------------------------------------------------------------------
</TABLE>

Securities held to maturity at December 31, 2000 and 1999 are summarized as
follows:

<TABLE>
<CAPTION>
                                                             2000
                                                       Gross       Gross     Estimated
                                          Amortized Unrealized  Unrealized    Market
                                            Cost       Gains      Losses       Value
                                       -------------------------------------------------
                                                    (Dollars in Thousands)
<S>                                    <C>           <C>        <C>        <C>
Mortgage-backed securities             $     140     $  --      $    2     $    138
State and municipal obligations           10,033       156         107       10,082
Other debt securities                        150        --           2          148
----------------------------------------------------------------------------------------
TOTAL SECURITIES HELD TO MATURITY      $  10,323     $ 156      $  111     $ 10,368
----------------------------------------------------------------------------------------

                                                            1999
                                                      Gross       Gross     Estimated
                                         Amortized Unrealized  Unrealized    Market
                                           Cost       Gains      Losses       Value
                                       -------------------------------------------------
                                                   (Dollars in Thousands)
<S>                                    <C>           <C>        <C>        <C>
Mortgage-backed securities             $     219     $  --      $    6     $    213
State and municipal obligations            9,086        61         264        8,883
Other debt securities                        150        --           4          146
----------------------------------------------------------------------------------------
TOTAL SECURITIES HELD TO MATURITY      $   9,455     $  61      $  274     $  9,242
----------------------------------------------------------------------------------------
</TABLE>

Securities with an aggregate par value of $45,790,000 at December 31, 2000 and
$43,000,000 at December 31, 1999, were pledged to secure public and trust
deposits and for other purposes required or permitted by law, including
approximately $14,900,000 at December 31, 2000 and $15,500,000 at December 31,
1999 pledged to secure repurchase agreements.

Gross losses of $40,000 and $34,000 were recognized on sales of available for
sale securities for the years ended December 31, 2000 and December 31, 1998,
respectively. There were no sales of securities for the year ended December 31,
1999.

                                         First Century Bankshares, Inc. Page 29
<PAGE>

3.  Securities (continued)

The amortized cost and estimated market value for securities available for sale
and securities held to maturity by contractual maturities at December 31, 2000
are shown in the following tables. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations.

<TABLE>
<CAPTION>
                                                             Estimated        Net
                                                  Amortized   Market   Unrealized Gains
                                                    Cost       Value       (Losses)
----------------------------------------------------------------------------------------
                                                        (Dollars in Thousands)
<S>                                               <C>         <C>      <C>
Due in one year or less                           $ 2,998     $ 3,009    $      11
Due after one year through five years              58,318      58,463          145
Due after five years through ten years             18,683      19,023          340
Securities with no contractual maturities             822         772          (50)
----------------------------------------------------------------------------------------
TOTAL SECURITIES AVAILABLE FOR SALE               $ 80,821    $81,267    $     446
----------------------------------------------------------------------------------------


                                                              Estimated       Net
                                                   Amortized   Market  Unrealized Gains
                                                     Cost       Value      (Losses)
----------------------------------------------------------------------------------------
                                                        (Dollars in Thousands)
Due in one year or less                           $  1,449    $ 1,453    $       4
Due after one year through five years                4,464      4,456           (8)
Due after five years through ten years               3,970      4,017           47
Due after ten years                                    440        442            2
----------------------------------------------------------------------------------------
TOTAL SECURITIES HELD TO MATURITY                 $ 10,323    $10,368    $      45
----------------------------------------------------------------------------------------
</TABLE>

4.  Loans

Loans at December 31, 2000 and 1999 consisted of the following:

                                                               December 31,
--------------------------------------------------------------------------------
                                                             2000        1999
--------------------------------------------------------------------------------
                                                          (Dollars in Thousands)
Commercial, financial and agricultural                     $  49,883   $ 52,872
Real estate-construction                                       5,990      5,353
Real estate-mortgage (residential and commercial)            158,828    149,121
Installment loans to individuals                              30,026     36,631
--------------------------------------------------------------------------------
  Total loans                                                244,727    243,977
Less: allowance for loan losses                                3,180      3,050
--------------------------------------------------------------------------------
NET LOANS                                                  $ 241,547   $240,927
--------------------------------------------------------------------------------

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
$13,689,000 and $6,067,000 at December 31, 2000 and 1999, respectively. During
2000, $21,623,000 in loan advances or reclassifications were made and repayments
were $14,001,000.

Page 30 First Century Bankshares, Inc.
<PAGE>

5.  Allowance for Loan Losses

An analysis of the allowance for loan losses for 2000, 1999 and 1998 is as
follows:

<TABLE>
<CAPTION>
                                                                              Years Ended December 31,
                                                                             --------------------------
                                                                              2000      1999      1998
                                                                             --------------------------
                                                                               (Dollars in Thousands)
<S>                                                                          <C>       <C>       <C>
Balance at beginning of year                                                 $3,050    $ 2,533   $2,370
Additions from acquisitions                                                      --        497       --
Provision for loan losses                                                     1,209        555      544
Recoveries on loans previously charged off                                      103        179       59
Loans charged off                                                            (1,182)      (714)    (440)
-------------------------------------------------------------------------------------------------------
BALANCE AT END OF YEAR                                                       $3,180    $ 3,050   $2,533
-------------------------------------------------------------------------------------------------------
</TABLE>

The following is a summary of loans considered impaired:

<TABLE>
<CAPTION>
                                                                                          December 31,
                                                                                     ----------------------
                                                                                        2000      1999
                                                                                     ----------------------
                                                                                     (Dollars in Thousands)
<S>                                                                                  <C>         <C>
Gross impaired loans                                                                   $ 7,371   $2,969
Valuation allowance for impaired loans                                                     577      491
-----------------------------------------------------------------------------------------------------------
Recorded investment in impaired loans                                                  $ 6,794   $2,478
-----------------------------------------------------------------------------------------------------------
</TABLE>

The average recorded investment in impaired loans for the years ended December,
31, 2000, 1999 and 1998 was $4,817,000, $1,865,000 and $1,928,000, 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, 2000, 1999 and
1998. At December 31, 2000, 1999 and 1998, the Corporation had nonaccrual loans
of $5,887,000, $2,390,000 and $1,728,000, respectively. Interest income of
$91,000, $39,000 and $1,000 was recognized on these loans in 2000, 1999 and
1998, respectively. Had these loans performed in accordance with their original
terms, interest income of $527,000, $198,000 and $194,000 would have been
recorded in 2000, 1999 and 1998, respectively.

6.  Premises and Equipment

Premises and equipment at December 31, 2000 and 1999 consisted of the following:

<TABLE>
<CAPTION>
                                                                                          December 31,
                                                                                     ----------------------
                                                                                         2000      1999
                                                                                     ----------------------
                                                                                     (Dollars in Thousands)
<S>                                                                                  <C>         <C>
Land                                                                                   $ 1,466   $ 1,466
Buildings and improvements                                                               9,576     9,485
Equipment and fixtures                                                                   5,395     5,076
                                                                                     ----------------------
 Total                                                                                  16,437    16,027
                                                                                     ----------------------
Less accumulated depreciation                                                            5,950     5,315
-----------------------------------------------------------------------------------------------------------
NET PREMISES AND EQUIPMENT                                                             $10,487   $10,712
-----------------------------------------------------------------------------------------------------------
</TABLE>

Depreciation charged to operating expense amounted to $843,000 in 2000, $791,000
in 1999, and $707,000 in 1998.

                                         First Century Bankshares, Inc.  Page 31
<PAGE>

7.  Deposits

Deposits at December 31, 2000 and 1999 were as follows:

<TABLE>
<CAPTION>
                                                                                        December 31,
                                                                                   ----------------------
                                                                                      2000        1999
                                                                                   ----------------------
                                                                                   (Dollars in Thousands)
<S>                                                                                <C>          <C>
Individuals, partnerships and corporations:
  Demand deposits                                                                   $ 32,395    $ 28,702
  Time and savings deposits                                                          279,025     275,237
U.S. Government                                                                          173         320
States and political subdivisions                                                     13,716      13,733
Certified and official checks                                                          2,027       1,903
---------------------------------------------------------------------------------------------------------
TOTAL DEPOSITS                                                                      $327,336    $319,895
---------------------------------------------------------------------------------------------------------
</TABLE>

The scheduled maturities of time deposits at December 31, 2000 were as follows:

                  (Dollars in Thousands)

2001                                        $117,724
2002                                          19,667
2003                                           4,425
2004                                             860
Thereafter                                       577
----------------------------------------------------
Total Time Deposits                         $143,253
----------------------------------------------------

Time deposits included certificates of deposit issued in amounts of $100,000 or
more totaling approximately $36,998,000 and $34,243,000 at December 31, 2000 and
1999, respectively.

8.  Short-term Borrowings

Short-term borrowings consist of treasury tax and loan deposits, which are
generally repaid within 30 days from the transaction date, and 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 is summarized as
follows:

<TABLE>
<CAPTION>
                                                                                      2000        1999
                                                                                  ------------------------
                                                                                   (Dollars in Thousands)
<S>                                                                                  <C>         <C>
Average balance during the year                                                      $16,539     $14,499
Average interest rate during the year                                                   4.64%       3.63%
Maximum month-end balance during the year                                            $21,433     $18,500
</TABLE>

9.  Other Comprehensive Income

Other comprehensive income is defined as comprehensive income exclusive of net
income. Unrealized gains (losses) on available for sale investment securities
represent the sole component of the Company's other comprehensive income. Other
comprehensive income (loss) consists of the following:

<TABLE>
<CAPTION>
                                                                               Years Ended December 31,
                                                                              ---------------------------
                                                                                2000     1999      1998
                                                                              ---------------------------
<S>                                                                           <C>       <C>       <C>
Unrealized holding gains (losses) arising during the year                     $ 2,108   $(2,163)  $ 273
Reclassification adjustment for (gains) losses included in net income              40        --      34
                                                                              ---------------------------
Other comprehensive income (loss) before tax                                    2,148    (2,163)    307
Income tax (expense) benefit related to other comprehensive income               (721)      718     (94)
---------------------------------------------------------------------------------------------------------
Other comprehensive income (loss), net of tax                                 $ 1,427   $(1,445)  $ 213
---------------------------------------------------------------------------------------------------------
</TABLE>

Page 32  First Century Bankshares, Inc.
<PAGE>

10.  Earnings Per Share

The following table reconciles the numerator and denominator of the basic and
diluted computations for income from continuing operations for the year ended
December 31, 2000, 1999 and 1998:

<TABLE>
<CAPTION>
                                                                                     2000
                                                                   --------------------------------------
                                                                     Income         Shares      Per-Share
                                                                   (Numerator)   (Denominator)   Amount
                                                                   --------------------------------------
<S>                                                                <C>           <C>            <C>
Basic EPS:
Income available to common shareholders                            $3,081,000     2,000,000      $1.54
Diluted EPS:
Effect of dilutive securities--Stock options                                0             0
---------------------------------------------------------------------------------------------------------
Income available to common shareholders and assumed conversions    $3,081,000     2,000,000      $1.54
---------------------------------------------------------------------------------------------------------

<CAPTION>
                                                                                     1999
                                                                   --------------------------------------
                                                                     Income         Shares      Per-Share
                                                                   (Numerator)   (Denominator)   Amount
                                                                   --------------------------------------
<S>                                                                <C>           <C>            <C>
Basic EPS:
Income available to common shareholders                            $3,416,000     2,000,000      $1.71
Diluted EPS:
Effect of dilutive securities--Stock options                                0         1,907
----------------------------------------------------------------------------------------------------------
Income available to common shareholders and assumed conversions    $3,416,000     2,001,907      $1.71
----------------------------------------------------------------------------------------------------------

<CAPTION>
                                                                                     1998
                                                                   --------------------------------------
                                                                     Income         Shares      Per-Share
                                                                   (Numerator)   (Denominator)   Amount
                                                                   --------------------------------------
<S>                                                                <C>           <C>            <C>
Basic EPS:
Income available to common shareholders                            $3,201,000     2,000,000      $1.60
Diluted EPS:
Effect of dilutive securities--Stock options                                0         1,847
----------------------------------------------------------------------------------------------------------
Income available to common shareholders and assumed conversions    $3,201,000     2,001,847      $1.60
----------------------------------------------------------------------------------------------------------
</TABLE>

11.  Stock Option Plans

The Corporation's 1998 Officer Stock Option Plan (the "Officer Plan") provides
for the issuance of options to purchase shares of the Corporation's common stock
to officers of the Corporation. The options have an original term of ten years
with an exercise price equal to the market price of the common stock on the date
of grant, as defined by the plan. The options vest 20% per year after their date
of grant. During the year ended December 31, 1998, 58,470 options were granted
under the Officer Plan at an exercise price of $20.25 per share. During the
years ended December31, 2000 and 1999, there were no options granted under the
plan. At December 31, 2000, the weighted average remaining contractual life of
the outstanding options was 90months. At December 31, 2000, options for 117,780
shares of common stock were reserved for future issuance for the Officer Plan.
As of December 31, 2000, no options had been exercised under the Officer Plan
and 6,250 options had expired unexercised.

The Corporation's 1998 Director Stock Option Plan (the "Director Plan") provides
for the issuance of options to purchase shares of the Corporation's common stock
to directors of the Corporation and its subsidiaries. The options have an
original term of ten years with an exercise price equal to the market price of
the common stock on the date of grant, as

                                         First Century Bankshares, Inc.  Page 33
<PAGE>

11.  Stock Option Plans

defined by the plan. The options are fully vested upon their date of grant.
During the year ended December 31, 1998, 20,000 options were granted under the
Director Plan at an exercise price of $20.25 per share. During the years ended
December 31, 2000 and 1999, there were no options granted under the plan. At
December 31, 2000, the weighted average remaining contractual life of the
outstanding options was 90 months. At December 31, 2000, options for 16,000
shares of common stock were reserved for future issuance for the Director Plan.
As of December 31, 2000, no options had been exercised under the Director Plan,
and 4,000 options had expired unexercised.

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, 2000, 1999
and 1998, would have been decreased to the pro forma amounts indicated below.

<TABLE>
<CAPTION>
                                                                                           2000
                                                                                 -----------------------
                                                                                 As Reported   Pro Forma
                                                                                 -----------------------
<S>                                                                              <C>           <C>
Net income                                                                       $3,081,000    $3,067,000
---------------------------------------------------------------------------------------------------------
Net income per share-Basic and diluted                                           $     1.54    $     1.53
---------------------------------------------------------------------------------------------------------

<CAPTION>
                                                                                           1999
                                                                                 ------------------------
                                                                                 As Reported   Pro Forma
                                                                                 ------------------------
<S>                                                                              <C>           <C>
Net income                                                                       $3,416,000    $3,402,000
---------------------------------------------------------------------------------------------------------
Net income per share-Basic and diluted                                           $     1.71    $     1.70
---------------------------------------------------------------------------------------------------------

<CAPTION>
                                                                                           1998
                                                                                 ------------------------
                                                                                 As Reported   Pro Forma
                                                                                 ------------------------
<S>                                                                              <C>           <C>
Net income                                                                       $3,201,000    $3,171,000
---------------------------------------------------------------------------------------------------------
Net income per share-Basic and diluted                                           $     1.60    $     1.59
---------------------------------------------------------------------------------------------------------
</TABLE>

The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions used for the 1998 grants: 8% dividend growth rate; expected
volatility of 3.31%; risk-free interest rate of 5.46%; and expected life of six
years for directors and seven years for officers.

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. Due to the present excess funded position of the pension
plan, no contributions have been made since 1985. The plan's assets include
common stock, fixed income securities, short-term investments and cash.

Page 34 First Century Bankshares, Inc.
<PAGE>

12.  Post Employment Benefits (continued)

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.

The following table outlines the changes in the Corporation's postemployment
benefit plan obligations, assets and funded status for the years ended December
31, 2000 and 1999, and the assumptions and components of net periodic benefit
costs for the three years in the period ended December 31, 2000.

<TABLE>
<CAPTION>

                                                                                             Other
                                                                                        Postretirement
                                                             Pension Benefits               Benefits
                                                           ---------------------------------------------
                                                             2000          1999          2000       1999
                                                           ---------------------------------------------
                                                                          (Dollars in Thousands)
<S>                                                        <C>          <C>          <C>          <C>
Change in benefit obligation
Benefit obligation at beginning of year                    $ 6,974      $ 6,871      $ 1,352     $ 1,297
Service cost                                                   346          319           24          23
Interest cost                                                  445          439           86          82
Actuarial (gain) loss                                          333          171           (8)         (7)
Benefits paid                                                 (378)        (826)         (42)        (43)
                                                           ---------------------------------------------
Benefit obligation at end of year                            7,720        6,974        1,412       1,352
                                                           ---------------------------------------------

Change in plan asset
Fair value of plan assets at beginning of year               9,501        9,542           --          --
Actual return on plan assets                                   (25)         785           --          --
Employer contribution                                           --           --           42          43
Benefits paid                                                 (378)        (826)         (42)        (43)
                                                           ---------------------------------------------
Fair value of plan assets at end of year                     9,098        9,501           --          --
                                                           ---------------------------------------------
Funded status                                                1,378        2,527       (1,412)     (1,352)
Unrecognized net actuarial gain                               (403)      (1,645)        (160)       (155)
Unrecognized prior service cost                                446          490           --          --
Unrecognized transition obligation                            (324)        (389)         664         720
                                                           ---------------------------------------------
Prepaid (accrued) benefit cost                             $ 1,097      $   983      $  (908)    $  (787)
                                                           ---------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                                        Other
                                                                                    Postretirement
                                                   Pension Benefits                    Benefits
                                             ----------------------------------------------------------
Weighted-average assumptions as of 12/31      2000         1999     1998      2000      1999       1998
                                             ----------------------------------------------------------
<S>                                          <C>          <C>      <C>        <C>        <C>       <C>
Discount rate                                 6.50%       6.50%    6.50%      6.50%      6.50%     6.50%
Expected return on plan assets                9.00%       9.00%    9.00%      N/A        N/A       N/A
Rate of compensation increase                 3.00%       3.00%    3.00%      N/A        N/A       N/A

Components of net periodic benefit cost
Service cost                                 $ 346       $ 319    $ 264      $  24      $  23     $  21
Interest cost                                  445         439      407         86         82        81
Expected return on plan assets                (844)       (848)    (767)        --         --        --
Amortization of prior service cost              44          44       30         --         --        --
Amortization of transition obligation          (65)        (65)     (65)        56         55        55
Recognized net actuarial gain                  (41)        (62)     (62)        (3)        (4)       (7)
                                             ----------------------------------------------------------
Net periodic (benefit) cost                  $(115)      $(173)   $(193)     $ 163      $ 156     $ 150
                                             ----------------------------------------------------------
</TABLE>

                                         First Century Bankshares, Inc.  Page 35
<PAGE>

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 $124,000
in 2000, $110,000 in 1999 and $104,000 in 1998.

13.  Income Taxes

The provision for income taxes consisted of the following:

<TABLE>
<CAPTION>
                                                                  Years Ended December 31,
                                                                 --------------------------
Tax provision attributed to income from operations:                2000     1999     1998
                                                                 --------------------------
  Current:                                                         (Dollars in Thousands)
<S>                                                              <C>       <C>      <C>
    Federal                                                      $1,291    $1,409   $ 1,421
    State                                                           318       290       307
  Deferred expense (benefit)                                         56       139        87
-------------------------------------------------------------------------------------------
PROVISION FOR INCOME TAX                                         $1,665    $1,838   $ 1,815
-------------------------------------------------------------------------------------------
</TABLE>

The components of deferred tax assets and liabilities at December 31, 2000 and
1999 were as follows:

<TABLE>
<CAPTION>
                                                                                         2000       1999
                                                                                     ----------------------
                                                                                     (Dollars in Thousands)
<S>                                                                                  <C>          <C>
Allowance for loan losses                                                                $ 735    $  752
Marketable equity securities and capital loss carryforwards                                231       231
Unrealized losses on securities available for sale                                          --       552
                                                                                     -------------------
  Gross deferred tax assets                                                                966     1,535
  Valuation allowance                                                                     (231)     (231)
                                                                                     -------------------
  Deferred tax assets                                                                      735     1,304
                                                                                     -------------------
Depreciation                                                                              (263)     (239)
Retirement plans                                                                           (62)      (47)
Unrealized gains on securities available for sale                                         (168)       --
                                                                                     -------------------
  Gross deferred tax liabilities                                                          (493)     (286)
--------------------------------------------------------------------------------------------------------
NET DEFERRED TAX ASSET                                                                   $ 242    $1,018
--------------------------------------------------------------------------------------------------------
</TABLE>

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 was as follows:

<TABLE>
<CAPTION>
                                                                      Years Ended December 31,
                                                            --------------------------------------------
                                                                 2000           1999          1998
                                                            --------------------------------------------
                                                                       (Dollars in Thousands)
                                                            Amount     %    Amount     %    Amount    %
                                                            --------------------------------------------
<S>                                                         <C>        <C>  <C>       <C>  <C>        <C>
Provision at statutory rate                                 $1,614     34   $1,786    34   $1,705     34
Tax-exempt interest income from certain investment
  securities and loans                                        (171)    (3)    (172)   (3)    (176)    (4)
State income tax expense, net of federal benefit               208      4      204     4      203      4
Other, net                                                      14     --       20    --       83      2
--------------------------------------------------------------------------------------------------------
PROVISION FOR INCOME TAXES                                  $1,665     35   $1,838    35   $1,815     36
--------------------------------------------------------------------------------------------------------
</TABLE>

Page 36 First Century Bankshares, Inc.
<PAGE>

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 $3,438,000 at December 31,
2000 and $1,341,000 at December 31, 1999. 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 $32,511,000 at December 31, 2000, and
$31,461,000 at December 31, 1999, 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. There are no industry concentrations
that represent more than 25% of the Corporation's equity. Within each specific
industry, borrowers are well 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 the 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.

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.

                                         First Century Bankshares, Inc.  Page 37
<PAGE>

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

The estimated fair value and the recorded book balances at December 31, 2000 and
1999 were as follows:

<TABLE>
<CAPTION>

                                                                     2000                    1999
                                                           ---------------------------------------------
                                                             Estimated   Carrying   Estimated   Carrying
                                                            Fair Value    Amount   Fair Value    Amount
                                                           ---------------------------------------------
                                                           (Dollars in Thousands) (Dollars in Thousands)
<S>                                                        <C>           <C>      <C>           <C>
Assets:
Cash and due from banks                                      $ 15,745    $ 15,745   $  18,611   $ 18,611
Securities available for sale                                  81,267      81,267      74,521     74,521
Securities held to maturity                                    10,368      10,323       9,242      9,455
Federal Home Loan Bank and Federal Reserve Bank stock           1,180       1,180       1,155      1,155
Net loans                                                     243,054     241,547     242,905    240,927

Liabilities:
Deposits with no stated maturities                           $184,083    $184,083   $ 183,832   $183,832
Deposits with stated maturities                               143,196     143,253     135,025    136,063
Short-term borrowings                                          13,487      13,487      16,958     16,958
</TABLE>

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, 2000, retained net profits for the years 2000 and 1999, which were
free of such regulatory restrictions, were approximately $3,181,000.

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 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

Page 38 First Century Bankshares, Inc.
<PAGE>

16. Regulatory Matters (continued)

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,
2000, that the Corporation and its subsidiary meet all capital adequacy
requirements to which they are subject.

As of December 31, 2000, 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.

<TABLE>
<CAPTION>
                                                                                 To Be Well
                                                                              Capitalized Under
                                                           For Capital        Prompt Corrective
                                        Actual          Adequacy Purposes     Action Provisions
                                   --------------------------------------------------------------
                                   Amount     Ratio    Amount       Ratio      Amount     Ratio
                                   --------------------------------------------------------------
<S>                                <C>        <C>      <C>          <C>       <C>         <C>
As of December 31, 2000:
  Total Capital (to Risk Weighted Assets):
   Consolidated                    $ 28,895   11.41%  *$20,260    *142 8.00%
   First Century Bank, N.A.        $ 28,415   11.26%  *$20,181    *142 8.00%   *142  $25,226   *142 10.00%
  Tier I Capital (to Risk Weighted Assets):
   Consolidated                    $ 25,729   10.16%  *$10,130    *142 4.00%
   First Century Bank, N.A.        $ 25,261   10.01%  *$10,090    *142 4.00%   *142  $15,136   *142 6.00%
  Tier I Capital (to Average Assets):
   Consolidated                    $ 25,729    7.04%  *$14,612    *142 4.00%
   First Century Bank, N.A.        $ 25,261    6.92%  *$14,604    *142 4.00%   *142  $18,256   *142 5.00%

<CAPTION>
                                                                                    To Be Well
                                                                                 Capitalized Under
                                                            For Capital          Prompt Corrective
                                         Actual          Adequacy Purposes       Action Provisions
                                   --------------------------------------------------------------------
                                    Amount     Ratio    Amount        Ratio      Amount     Ratio
                                   --------------------------------------------------------------------
<S>                                <C>         <C>      <C>           <C>        <C>         <C>
As of December 31, 1999:
  Total Capital (to Risk Weighted Assets):
   Consolidated                    $ 26,921    10.86%   *<142>$19,838  *<142>8.00%
   First Century Bank, N.A.        $ 26,516    10.73%   *<142>$19,765  *<142>8.00% *<142> $24,707 *<142>10.00%
  Tier I Capital (to Risk Weighted Assets):
   Consolidated                    $ 23,871     9.63%   *<142>$ 9,919  *<142>4.00%
   First Century Bank, N.A.        $ 23,466     9.50%   *<142>$ 9,883  *<142>4.00% *<142> $14,824  *<142>6.00%
  Tier I Capital (to Average Assets):
   Consolidated                    $ 23,871     6.55%   *<142>$14,585 *<142> 4.00%
   First Century Bank, N.A.        $ 23,466     6.44%   *<142>$14,585 *<142> 4.00% *<142> $18,231  *<142>5.00%
</TABLE>

*  Greater than or equal to.

                                          First Century Bankshares, Inc. Page 39


<PAGE>

17.  Quarterly Financial Data (Unaudited)

The summary financial data by quarter for the years ended December 31, 2000,
1999 and 1998 was as follows:

<TABLE>
<CAPTION>
                                                            Quarter Ended
                                               --------------------------------------
                                               Mar. 31   June 30   Sept. 30   Dec. 31
                                               --------------------------------------
                                            (Dollars in Thousands, Except Per Share Data)
<S>                                             <C>      <C>      <C>        <C>
2000
Interest income                                 $6,789   $ 6,936    $7,179    $7,019
Net interest income                              3,870     3,965     4,045     3,821
Provision for possible loan losses                 174       334       491       210
Securities gains (losses)                           --       (40)       --        --
Income before taxes                              1,472     1,356    1,513       405
Net income                                         953       872      979       277
-----------------------------------------------------------------------------------
NET INCOME PER SHARE                            $ 0.48   $  0.43   $ 0.49    $ 0.14
-----------------------------------------------------------------------------------

1999
Interest income                                 $5,443   $ 5,845   $6,744    $6,743
Net interest income                              3,025     3,270    3,700     3,726
Provision for possible loan losses                  45       120       83       307
Securities gains (losses)                           --        --       --        --
Income before taxes                              1,123     1,353    1,391     1,387
Net income                                         716       882      918       900
-----------------------------------------------------------------------------------
NET INCOME PER SHARE                            $ 0.36   $  0.44   $ 0.46    $ 0.45
-----------------------------------------------------------------------------------

1998
Interest income                                 $5,391   $ 5,731   $5,853    $5,560
Net interest income                              3,090     3,213    3,246     3,123
Provision for possible loan losses                 188       133      124        99
Securities gains (losses)                          (14)       --       --       (20)
Income before taxes                              1,130     1,354    1,290     1,242
Net income                                         725       864      820       792
-----------------------------------------------------------------------------------
NET INCOME PER SHARE                            $ 0.36   $  0.43   $ 0.41    $ 0.40
-----------------------------------------------------------------------------------
</TABLE>

Page 40  First Century Bankshares, Inc.
<PAGE>

18.  Parent Company Financial Data

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

STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
                                                                      December 31,
                                                                 ---------------------
                                                                   2000      1999
                                                                 ---------------------
Assets:                                                          (Dollars in Thousands)
<S>                                                              <C>         <C>
Cash                                                               $    151  $   104
Investment in subsidiary at equity                                   31,214   28,469
Other assets                                                            403      352
------------------------------------------------------------------------------------
TOTAL ASSETS                                                       $ 31,768  $28,925
------------------------------------------------------------------------------------
Liabilities:
Other liabilities                                                  $     86  $    51
                                                                   -----------------
TOTAL LIABILITIES                                                        86       51
                                                                   -----------------
Stockholders' Equity:
Common stock -$1.25 par value; shares issued and outstanding:
  2,000,000 at December 31, 2000 and 1999                             2,500    2,500
Paid-in capital                                                         785      785
Retained earnings                                                    28,397   25,589
------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY                                           31,682   28,874
------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                     $     31,768  $28,925
------------------------------------------------------------------------------------
</TABLE>

STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                           Years ended December 31,
                                                          ---------------------------
                                                           2000      1999     1998
                                                          ---------------------------
                                                            (Dollars in Thousands)
<S>                                                       <C>       <C>       <C>
Income:
  Dividends from subsidiary bank                          $1,800    $1,600    $1,500
                                                          ---------------------------
TOTAL INCOME                                               1,800     1,600     1,500
                                                          ---------------------------
Expenses:
  Other                                                       59        75        55
                                                          ---------------------------
TOTAL EXPENSES                                                59        75        55
                                                          ---------------------------
Applicable income taxes (benefits)                           (22)      (28)       25
                                                          ---------------------------
Income before equity in undistributed
  net income of subsidiary                                 1,763     1,553     1,420
Equity in undistributed net income of subsidiary           1,318     1,863     1,781
-------------------------------------------------------------------------------------
NET INCOME                                                $3,081    $3,416    $3,201
-------------------------------------------------------------------------------------
<CAPTION>
STATEMENT OF CASH FLOWS
                                                           Years ended December 31,
                                                          ---------------------------
                                                          2000       1999     1998
                                                          ---------------------------
Cash flows from operating activities                        (Dollars in Thousands)
Net income                                               $ 3,081   $ 3,416   $ 3,201
Adjustments to reconcile net income to net cash
provided by operating activities:
  Equity in undistributed net income of subsidiary        (1,318)   (1,863)   (1,781)
  Other adjustments, net                                     (16)      (22)       31
                                                          ---------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES                  1,747     1,531     1,451
                                                          ---------------------------
Cash flows from financing activities
  Cash dividends paid                                     (1,700)   (1,600)   (1,500)
                                                          ---------------------------
NET CASH USED BY FINANCING ACTIVITIES                     (1,700)   (1,600)   (1,500)
                                                          ---------------------------
Net increase (decrease) in cash                               47       (69)      (49)
Cash at January 1,                                           104       173       222
-------------------------------------------------------------------------------------
Cash at December 31,                                     $   151   $   104   $   173
-------------------------------------------------------------------------------------
</TABLE>
                                         First Century Bankshares, Inc.  Page 41
<PAGE>

Report of Independent Accountants
January 26, 2001

The Board of Directors and Stockholders
First 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, 2000 and 1999, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2000, 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.

PricewaterhouseCoopers LLP

Greensboro, North Carolina
<PAGE>

Boards of Directors

                         First Century Bankshares, Inc.
--------------------------------------------------------------------------------
W. Paul Cole, Jr.
President Cole
Motor & Cole
Chevrolet-Cadillac

Eustace Frederick
Retired, Senior Vice President-
Mining, Consolidation Coal Co.,
Southern Appalachia Region

B. L. Jackson, Jr.
Chairman of the Board
First Century Bankshares, Inc.

Robert M. Jones, Jr., M.D.
Physician

Marshall S. Miller
President, Marshall Miller
& Associates

Charles A. Peters
President
Peters Equipment, Inc.
Secretary, First Century Bankshares, Inc.

C. E. Richner
President
C. E. Richner Drilling Co.

Byron K. Satterfield
Executive Vice President &
Trust Officer, First Century Bank, N.A.

John H. Shott
Attorney

Scott H. Shott
Shott Foundation

Walter L. Sowers
President
Pemco Corporation

J. Brookins Taylor, M.D.
Physician

Frank W. Wilkinson
Executive Vice President &
Chief Operating Officer
First Century Bank, N.A.

R. W. Wilkinson
President & Chief Executive
Officer, First Century Bankshares, Inc.,
First Century Bank, N.A.

                           FIRST CENTURY BANK, N.A.
--------------------------------------------------------------------------------
J. J. Booker, III, M.D.
Physician

C. Scott Briers
President,
Briers, Inc.

W. Paul Cole, Jr.
President,
Cole Motor & Cole
Chevrolet-Cadillac

Eustace Frederick
Retired, Senior Vice President-
Mining, Consolidation Coal Co.,
Southern Appalachia Region

B. L. Jackson, Jr.
Chairman of the Board
First Century Bankshares, Inc.

Robert M. Jones, Jr., MD
Physician

Marshall S. Miller
President, Marshall Miller
& Associates

Charles A. Peters
President
Peters Equipment, Inc.
Secretary, First Century Bankshares, Inc.

C. E. Richner
President
C.E.  Richner Drilling Co.

Byron K. Satterfield
Executive Vice President &
Trust Officer, First Century Bank, N.A.

John H. Shott
Attorney

Scott H. Shott
Shott Foundation

Daniel D. Smith
President
Pocahontas Land Company

Walter L. Sowers
President
Pemco Corporation

William Chandler Swope
President
Swope Construction
Services, Inc.

J. Brookins Taylor, M.D.
Physician

Frank W. Wilkinson
Executive Vice President &
Chief Operating Officer
First Century Bank, N.A.

R. W. Wilkinson
President & Chief Executive
Officer, First Century Bankshares, Inc.,
First Century Bank, N.A.

                           FIRST CENTURY BANK, N.A.
                   WYOMING COUNTY OPERATIONS ADVISORY BOARD
--------------------------------------------------------------------------------
Ted Bailey
President, Pineville Land Co.

Tom Evans, Jr.
President, Evans Funeral Home

Debra L. Brunty
Assistant Vice President-Loans
Wyoming County Operations.

C. E. Richner
President,
C.  E.  Richner Drilling Co.

Byron K. Satterfield
Executive Vice President &
Trust Officer, First Century Bank, N.A.

Frank W. Wilkinson
Executive Vice President & Chief Operating Officer,
First Century Bank, N.A.

Dennis Worrell
Partner, Worrell Exxon &
Owner, D & T Car Wash

                                          First Century Bankshares, Inc. Page 43
<PAGE>

Board of Directors

                           FIRST CENTURY BANK, N.A.
                    WYTHE COUNTY OPERATIONS ADVISORY BOARD
--------------------------------------------------------------------------------

J. J. Booker, III, M.D.
Physician

James W. Caudill
President, R.P.  Johnson & Sons

Lawrence H. Chewning
Chief Executive Officer
Wythe County Community Hospital

Robert T. Dupuis
President, P & T  Products, Inc.

Samuel V. Jones, CPA
Hodges, Jones & Mabry, PC

Stephen A. Lester
Ewald-Lester Insurance
Agency, Inc.

W. Edward Smith
Vice President, Wythe
County Operations
First Century Bank, N.A.

Frank W. Wilkinson
Executive Vice President &
Chief Operating Officer
First Century Bank, N.A.

R. W. Wilkinson
President & Chief Executive
Officer, First Century Bankshares, Inc.,
First Century Bank, N.A.

                           FIRST CENTURY BANK, N.A.
                   SUMMERS COUNTY OPERATIONS ADVISORY BOARD
--------------------------------------------------------------------------------

C. Scott Briers
President
Briers, Inc.

James S. Kerr
Owner
Kerr Realty

James E. Monroe, Jr.
President
Greenbrier Nurseries

David L. Parmer
Attorney at Law

Bob F. Richmond
Vice President,
Summers County Operations
First Century Bank N.A.

Frank W. Wilkinson
Executive Vice President &
Chief Operating Officer
First Century Bank, N.A.

R. W. Wilkinson
President & Chief Executive Officer
First Century Bankshares, Inc.,
First Century Bank, N.A.

Page 44  First Century Bankshares, Inc.
<PAGE>

Officers

                        First Century Bankshares, Inc.
--------------------------------------------------------------------------------

B. L. Jackson, Jr.
Chairman of the Board

R. W. Wilkinson
President & Chief Executive Officer

Robert M. Jones, Jr., MD
Vice Chairman of the Board

Charles A. Peters
Secretary

W. E. Albert
Assistant Secretary

J. Ronald Hypes
Treasurer

                           FIRST CENTURY BANK, N.A.
--------------------------------------------------------------------------------

ADMINISTRATION

R. W. Wilkinson
President & Chief Executive Officer

Frank W. Wilkinson
Executive Vice President
& Chief Operating Officer

J. Ronald Hypes
Senior Vice President &
Chief Financial Officer

Kenneth W. Beard
Vice President &
Compliance Officer

John D. Lay
Vice President & Controller

Wayne L. Blevins
Assistant Controller

Barbara Moore-Ray
Community Development Officer

Cynthia L. Higgins
Auditor

Lisa A. Huff
Director of Human Resources

John R. Phillips
Assistant Cashier &
Director of Marketing

David W. Albert
Network Administrator

Deborah L. Bowman
Special Projects Officer

BRANCH
ADMINISTRATION

Christina H. Naylor
Vice President,
Deposit Operations

Bob F. Richmond
Vice President,
Summers County Operations

W. Edward Smith
Vice President,
Wythe County Operations

Karen R. Kidd
Branch Manager/
Assistant Cashier,
College Avenue Office

Jean F. Stanley
Branch Manager/
Assistant Cashier,
Princeton Office

Brenda G. Davidson
Branch Manager &
Loan Officer,
Bluefield Virginia Office

Juanita M. Growe
Branch Manager,
Pineville Office

Rebecca Lynn Daniels
Branch Manager,
Oceana Office

Stephanie Bailey
Assistant Branch Manager,
Oceana Office

Zerna A. Felts
Branch & Security Officer,
Fort Chiswell Office

Michelle L. Thompson
Customer Service Manager

Rhonda G. Sutherland
Teller Manager

Linda C. Rider
IRA Coordinator

Ronnie M. Hamlin
Facilities Manager &
Assistant Security Officer

Cathy M. Laxton
Bank Security Officer

Nancy M. Cales
Assistant Cashier

LOANS

Jeffrey L. Forlines
Senior Vice President,
Chief Credit Officer

Garnett L. Little
Vice President, Loans

L. Mori Williams
Vice President &
City Executive

Randall D. Price
Vice President,
Corporate Development

Debra L. Brunty
Assistant Vice President-Loans,
Wyoming County Operations

Gregory Shupe
Assistant Vice President,
Princeton Office

Randy N. Bowles
Assistant Vice President,
Hinton Office

Bill J. Keaton
Assistant Vice President,
Hinton Office

Hal L. Absher
Director of Secondary
Mortgage Lending

Marshall V. Lytton
Loan Officer,
Bluefield Office

Linda C. Hamer
Loan Officer,
College Avenue Office

Wanda Blair
Loan Officer,
Wytheville Office

Sheila D. Fortner
Consumer Loan Officer,
Pineville Office

Charlene R. Maynard
Consumer Loan Officer,
Oceana Office

Charles E. Lester
Loan & Collection Officer

Rick D. Blevins
Loan Collections Officer

Barry W. Whitt
Loan Administration Officer

Sharon K. Cole
Assistant Cashier

Janet L. Whitten
Assistant Cashier

OPERATIONS

W. E. Albert
Senior Vice President & Cashier

Lonnie E. Cochran
Vice President, Operations

Martha B. Cooper
Assistant Vice President,
Operations

Harold A. Mitchell
Assistant Vice President,
Item Processing

Judy A. Cecil
Assistant Cashier

TRUST

Byron K. Satterfield
Executive Vice President
& Trust Officer

Patsy R. Sykes
Vice President & Trust Officer

Elizabeth M. Pruett
Vice President &
Trust Officer

Angela M. James
Trust Officer,
Employee Benefits

Carol A. Oliver
Trust Operations
Officer

Yvonne M. Hurst
Trust Administrative Officer

                                          First Century Bankshares, Inc. Page 45
<PAGE>

First Century Bankshares, Inc.

                           First Century Bank, N.A.
                                   Locations

                              500 Federal Street
                              Bluefield, WV 24701
                                (304) 325-8181

                              525 Federal Street
                              Bluefield,WV 24701
                                (304) 325-6600

                              2020 College Avenue
                              Bluefield,WV 24701
                                (304) 327-5660

                              1223 Stafford Drive
                        Pine Plaza, Princeton,WV 24740
                                (304) 425-0856

                               427 Virginia Ave.
                              Bluefield, VA 24605
                                (540) 326-2606

                             Rt. 10, Cook Parkway
                                Oceana,WV 24870
                                (304) 682-6221

                            Rt. 10, East Pineville
                              Pineville,WV 24874
                                (304) 732-8850

                               321 Temple Street
                               Hinton, WV 25951
                                (304) 466-2311

                            200 Pepper's Ferry Road
                              Wytheville,VA 24382
                                (540) 223-1115

                                   Route 94
                             Max Meadows,VA 24360
                                (540) 637-3100

Page 46  First Century Bankshares, Inc.