<PAGE>
 
                                  FORM - 10-Q
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

For the three months ended March 31, 1997
                           --------------

Commission file number 33-17172
                       --------

                            Matewan BancShares, Inc.
                            ------------------------
             (Exact name of registrant as specified in its charter)

      Delaware                                  55-0639363
      --------                                  ----------
(State or other jurisdiction of              (I.R.S Employer
incorporation or organization)               Identification No.)

Box 100
Second Avenue and Vinson Street
Williamson, West Virginia                     25661
-------------------------                    --------
(Address of principal executive offices)    (Zip Code)

                                  304 235-1544
                                  ------------
              (registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X  No 
                         ---     ---


                      APPLICABLE ONLY TO CORPORATE ISSUERS
                      ------------------------------------


Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.

Common Stock, $1 Par Value - 3,659,151 shares March 31, 1997
------------------------------------------------------------
<PAGE>
 
                                 Matewan BancShares, Inc.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

     Consolidated balance sheets - March 31, 1997,
        December 31, 1996, and March 31, 1996
     Consolidated statements of income - Three months ended
        March 31, 1997 and March 31, 1996
     Consolidated statement of changes in shareholders' equity             
        for the three months ended March 31, 1997 and 1996
     Consolidated statements of cash flows for the three months
        ended March 31, 1997 and 1996
     Notes to consolidated financial statements

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

PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

SIGNATURES
<PAGE>
 
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MATEWAN BANCSHARES, INC. AND SUBSIDIARIES
(Dollars in thousands)

<TABLE>
<CAPTION>
 
                                             March 31    December 31  March 31
                                             --------    -----------  --------
ASSETS                                           1997           1996      1996
                                             --------    -----------  --------
<S>                                          <C>         <C>          <C>
Cash and due from banks                      $ 26,833       $ 29,721  $ 32,663
Interest bearing deposits
 in other banks                                 6,705          6,034     1,393
Federal funds sold                             33,047         28,928    40,956
                                             --------       --------  --------
 
 Cash and cash equivalents                     66,585         64,683    75,012
 
Investment securities:
 Available-for-sale at
  fair value                                   19,285         25,411    23,912
 Held-to-maturity at cost                     130,943        122,569   115,139
  (Approximate fair value
   $129,269 at March 31,1997;
   $122,427 at December 31, 1997;
   and $114,104 at March 31, 1996)
 
Loans - net                                   371,641        370,801   364,065
 
Premises and equipment                         20,805         20,871    20,214
 
Accrued interest receivable
 and other assets                              23,846         22,851    18,550
                                             --------       --------  --------
 
TOTAL ASSETS                                 $633,105       $627,186  $616,892
                                             ========       ========  ========
 
</TABLE>
See Accompanying Notes to Consolidated Financial Statements


CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<PAGE>
 
MATEWAN BANCSHARES, INC. AND SUBSIDIARIES
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
 
                                                               March 31  December 31  March 31
                                                                   1997         1996      1996
                                                               --------    --------   --------
<S>                                                            <C>         <C>        <C>
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits:
 Non-interest bearing                                          $ 71,322    $ 78,464   $ 68,410
 Interest bearing                                               458,507     444,844    447,295
                                                               --------    --------   --------
 
 TOTAL DEPOSITS                                                 529,829     523,308    515,705
 
Short-term borrowings:
 Repurchase agreements                                            9,349      10,118      9,863
 Other                                                           10,224      13,101     12,451
                                                               --------    --------   --------
 TOTAL SHORT TERM
 BORROWINGS                                                      19,573      23,219     22,314
 
Long-term Borrowings                                              7,431       7,579      8,000
 
Accrued interest payable
 and other liabilities                                            8,138       5,502      8,037
                                                               --------    --------   --------
 
TOTAL LIABILITIES                                               564,971     559,608    554,056
 
SHAREHOLDERS' EQUITY
Preferred stock                                                     805         805        700
 $1 par value; 1,000,000 shares
 authorized;  805,000 issued as
 of March 31, 1997 and December 31,
 1996 and 700,000 as of March 31, 1996,
 including 5,500 shares in treasury
 stock March 31, 1997 ($25 per share
 liquidation preference)
Common Stock - $1 par value                                       3,684       3,684      3,684
 10,000,000 shares authorized;
 3,684,104 shares outstanding at
 March 31, 1997, and December 31, 1996;
 and 3,349,344 shares outstanding  at
 March 31, 1996, including
 24,953, 23,953 and 17,053 shares
 in treasury stock
Surplus                                                          29,773      29,773     27,732
Retained earnings                                                34,378      33,590     30,803
Treasury stock                                                     (360)       (206)       (84)
Net unrealized gain (loss) on
 available-for-sale
 securities, net of income
 taxes                                                             (146)        (68)         1
                                                               --------    --------   --------
TOTAL SHAREHOLDERS' EQUITY                                       68,134      67,578     62,836
                                                               --------    --------   --------
 
TOTAL LIABILITIES AND
 SHAREHOLDERS' EQUITY                                          $633,105    $627,578   $616,892
                                                               ========    ========   ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
 
 
<PAGE>
 
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
MATEWAN BANCSHARES, INC. AND SUBSIDIARIES
(Dollars in thousands, except per share data)

<TABLE>
<CAPTION> 
                                                              Three months ended
                                                              ------------------
                                                                   March 31,
                                                                   ---------
                                                                 1997       1996
                                                               --------   --------
<S>                                                            <C>        <C>
INTEREST INCOME
 Interest and fees on loans                                    $  9,784   $  6,998
 Interest and dividends
 on investment securities:
  Taxable                                                         2,248      1,674
  Tax-exempt                                                        138         50
 Other interest income                                              397        343
                                                               --------   --------
TOTAL INTEREST INCOME                                            12,567      9,065
 
INTEREST EXPENSE
 Deposits                                                         5,102      3,553
 Short-term borrowings                                              403        128
                                                               --------   --------
TOTAL INTEREST EXPENSE                                            5,505      3,681
                                                               --------   --------
 
NET INTEREST INCOME                                               7,062      5,384
PROVISION FOR LOAN LOSSES                                           381        462
                                                               --------   --------
 
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES                                         6,681      4,922
 
OTHER INCOME
 Service fees                                                       868        560
 Other                                                              328        196
 Credit life insurance
   commissions                                                       68        111
                                                               --------   --------
TOTAL OTHER INCOME                                                1,264        867
 
OTHER EXPENSES
 Salaries and employee
   benefits                                                       2,328      1,464
 Net occupancy                                                      357        252
 Equipment                                                          360        214
 Data Processing                                                    346        249
 Advertising                                                        221        133
 Federal deposit insurance                                          103        186
 Other                                                            1,828      1,232
                                                               --------   --------
TOTAL OTHER EXPENSE                                               5,543      3,730
                                                               --------   --------
 
INCOME BEFORE INCOME TAXES                                        2,402      2,059
APPLICABLE INCOME TAXES                                             864        750
                                                               --------   --------
NET INCOME                                                        1,538      1,309
Preferred Stock Dividends                                           311        116
EARNINGS APPLICABLE TO COMMON STOCK                            $  1,227   $  1,193
                                                               ========   ========
Per Share Earnings Applicable to Common Stock                      $.34       $.33
                                                               ========   ========
Average common shares
 outstanding                                                  3,659,495  3,667,120
                                                              =========  =========

Dividends per common share                                         $.12       $.10
                                                              =========  =========
</TABLE>

See Accompanying Notes to Consolidated Financial Statements
<PAGE>
 
CONSOLIDATED STATEMENTS OF CHANGE IN SHAREHOLDERS' EQUITY (UNAUDITED)
MATEWAN BANCSHARES, INC. AND SUBSIDIARIES


<TABLE>
<CAPTION>
                                                                                                                Net
                                                                                                         Unrealized
                                                                                                            Gain on
                                                                                                         Available-
                                           Preferred      Common      Capital       Retained  Treasury     for-Sale
                                               Stock       Stock      Surplus       Earnings     Stock   Securities     Total
                                           ---------      -------   ----------      --------   -------   ----------  --------
<S>                                       <C>            <C>       <C>             <C>        <C>       <C>         <C>
Balance January 1, 1996                           $0       $3,684      $12,182        $29,976      ($78)       $53   $45,817
                                        
Treasury Stock Purchases                           0           0            0               0        (6)         0        (6)
                                        
Change in net unrealized gain on        
  available-for-sale securities, net of 
  deferred income taxes                            0           0            0               0         0        (52)      (52)
Dividends on Common Stock                          0           0            0            (366)        0          0      (366)
    ($.10 per share)                    
                                        
Net income                                         0           0            0           1,309         0          0     1,309
                                        
Issuance of Preferred Shares                     700           0       15,550               0         0          0    16,250
                                        
Dividends on Preferred Shares                      0           0            0            (116)        0          0      (116)  
     ($.1654 per share)                    ---------     -------   ----------      ---------   -------   ----------  -------
                                        
Balance March 31, 1996                          $700      $3,684      $27,732         $30,803      ($84)        $1    $62,836
                                           =========     =======   ==========      =========   =======   ==========  ========
</TABLE>

<TABLE>
<CAPTION>
                                                                                                              Net
                                                                                                       Unrealized
                                                                                                          Gain on
                                                                                                        Available-
                                          Preferred      Common      Capital       Retained  Treasury     for-Sale
                                              Stock       Stock      Surplus       Earnings     Stock   Securities     Total
                                          ---------      -------   ----------      --------   -------   ----------  --------
<S>                                       <C>            <C>       <C>             <C>        <C>       <C>         <C>  
Balance January 1, 1997                       $805      $3,684      $29,773         $33,590     ($206)      ($68)    $67,578
                                       
Treasury Stock Purchases                         0           0            0               0      (154)         0        (154)
                                       
Change in net unrealized gain on       
  available-for-sale securities, net of
  deferred income taxes                          0           0            0               0         0        (78)        (78)
Dividends on Common Stock                        0           0            0            (439)        0          0        (439)
    ($.12 per share)                   
                                       
Net income                                       0           0            0           1,538         0          0       1,538
                                       
Dividends on Preferred Shares                    0           0            0            (311)        0          0        (311)
    ($.387 per share)                    ---------   ---------    ---------       ---------   -------   --------    -------- 
                                       
Balance March 31, 1997                        $805      $3,684      $29,773         $34,378     ($360)     ($146)    $68,134
                                         =========   =========    =========       =========   =======   ========    ========
                                      
</TABLE>                              

See Accompanying Notes to Consolidated Financial Statements
<PAGE>
 
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
MATEWAN BANCSHARES, INC. AND SUBSIDIARIES
(Dollars in thousands)

<TABLE>
<CAPTION>

                                           For the three months ended
                                              March 31,  March 31,
                                                  1997       1996
                                              --------   --------
<S>                                          <C>         <C>
OPERATING ACTIVITIES
 
NET INCOME                                    $  1,538   $  1,309
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH PROVIDED BY OPERATING
ACTIVITIES:
 DEPRECIATION                                      332        192
 AMORTIZATION                                      294         96
 PROVISION FOR LOAN LOSSES                         381        462
 PROVISION FOR DEFERRED TAXES                      143          5
 NET CHANGE IN ACCRUED INTEREST
  RECEIVABLE AND OTHER ASSETS                   (1,294)       793
 NET CHANGE IN ACCRUED INTEREST
  PAYABLE AND OTHER LIABILITIES                  2,350      3,961
                                              --------   --------
NET CASH PROVIDED BY OPERATING ACTIVITIES        3,744      6,818
 
INVESTING ACTIVITIES
 
 NET CASH RECEIVED IN ACQUISITION OF
  BANK                                               0     15,822
 PROCEEDS FROM MATURITIES OF
  AVAILABLE-FOR-SALE SECURITIES                  6,128     10,988
 PROCEEDS FROM MATURITIES OF
  HELD-TO-MATURITY SECURITIES                   10,254     16,072
 PURCHASES OF AVAILABLE-FOR-SALE
  SECURITIES                                       (88)    (2,471)
 PURCHASES OF HELD-TO-MATURITY
  SECURITIES                                   (18,624)   (43,562)
 NET CHANGE IN LOANS                            (1,238)    (2,081)
 PURCHASES OF PREMISES
  AND EQUIPMENT                                   (257)      (140)
                                              --------   --------
NET CASH USED IN INVESTING
ACTIVITIES                                      (3,825)    (5,372)
 
FINANCING ACTIVITIES
 
 NET CHANGE IN DEPOSITS                          6,593     (1,268)
 NET CHANGE IN SHORT-TERM
  BORROWINGS                                    (3,646)     4,128
 PROCEEDS FROM SALE OF PREFERRED
  STOCK                                              0     16,250
 PROCEEDS FROM LONG TERM NOTE                        0      8,000
 PAYMENTS ON LONG TERM BORROWINGS                 (148)         0
 CASH DIVIDENDS PAID                              (816)      (366)
                                              --------   --------
NET CASH PROVIDED BY
FINANCING ACTIVITIES                             1,983     26,744
                                              --------   --------
 
NET CHANGE IN CASH AND CASH EQUIVALENTS          1,902     28,190
CASH AND EQUIVALENTS AT BEGINNING OF YEAR       64,683     46,822
                                              --------   --------
CASH AND EQUIVALENTS AT END OF PERIOD         $ 66,585   $ 75,012
                                              ========   ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MATEWAN BANCSHARES, INC. AND SUBSIDIARIES
MARCH 31, 1997
(Dollars in thousands)

1. The accompanying unaudited interim consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the interim period are not necessarily
indicative of the results that may be expected for the year ending December 31,
1997. For further information, refer to the consolidated financial statements
and footnotes thereto included in Matewan BancShares, Inc. and Subsidiaries'
annual report on Form 10-K for the year ended December 31, 1996.

2. The financial statements presented herein reflect Matewan BancShares, Inc.
and its consolidated subsidiaries, The Matewan National Bank, Matewan Bank FSB,
Matewan National Bank/Kentucky and Matewan Venture Fund, Inc.

3. In January 1997, the Board of Directors of the Company approved the use of up
to $3.00 million to repurchase outstanding preferred shares.

On April 30, 1997, the Company filed a Schedule 13E-4 with the Securities and
Exchange Commission for the purpose of issuing a tender offer to preferred
shareholders to repurchase 114,500 of outstanding preferred shares at a price to
be determined via the offering, but in no event to be less than $24 or greater
than $26.50 per share.

4. On March 15, 1996, the Company acquired for cash all of the outstanding
common stock of Bank One, Pikeville, N.A. (Kentucky) from Banc One Corporation.
This transaction was accounted for under the purchase method of accounting.
Accordingly, the consolidated financial statements include the operations of
Kentucky only from the date of acquisition. The aggregate purchase price was
approximately $29.35 million, which includes costs of acquisition. The Company
financed this transaction with proceeds from the issuance of convertible stock,
long term debt, and available cash.

5. At March 31, 1997, the recorded investment in impaired loans under Statement
No. 114 was $12.15 million (of which $4.47 million were on a nonaccrual basis).
Included in this amount is $2.33 million of impaired loans for which the related
allowance for credit losses is $1.21 million and $9.82 million of impaired loans
that do not have a specific allowance for credit losses. The average recorded
investment in impaired loans during the three month period ended March 31, 1997
approximated $10.97 million.

6. In June 1996, the Financial Accounting Standards Board (FASB)
<PAGE>
 
issued Statement No. 125, "Accounting for Transfers and Servicings of Financial
Assets and Extinguishments of Liabilities," which was applicable to the Company
January 1, 1997. In October 1996, the FASB agreed to defer the effective date
for one year for the following transactions: securities lending, repurchase
agreements, dollar rolls, and other similarly secured transactions. Statement
No. 125 establishes the standards for determining whether certain transfers of
financial assets should be considered sales of all or part of the assets or
secured borrowings. Statement 125 also establishes standards for settlements of
liabilities through the transfer of assets to a creditor or obtaining an
unconditional release and whether these settlements should prove the debt
extinguished. The adoption of this standard is not expected to have a material
impact on the Company's financial statements.

7. In February 1997, the FASB issued Statement No. 128, "Earnings Per Share,"
(Statement 128) which simplifies the computation of earnings per share available
for common shareholders and make such computation more comparable to
international accounting standards. Under Statement 128, primary earnings per
share will be replaced with "basic" earnings per share and will be computed by
dividing income available to common shareholders by average common shares
outstanding (exclusive of the impact of common stock equivalents). Fully diluted
earnings per share will be renamed "Diluted" and Statement 128 requires that
both computations be shown on the face of the income statement with equal
prominence except for entities with simple capital structures and then only
basic earnings per share will be required. Statement 128 is effective for
interim and annual financial statements ending after December 15, 1997. The
Company does not expect Statement 128 to have a material impact on its financial
statements.
<PAGE>
 
MATEWAN BANCSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

FINANCIAL CONDITION

Total assets at March 31, 1997, have increased approximately $5.9 million since
December 31, 1996, and $16.2 million since March 31, 1996. The Company
experienced annualized growth in each time period of 3.8% and 2.6% percent,
respectively. Deposits have increased approximately $6.5 million and $14.1
million and short term borrowings decreased approximately $3.6 million and $2.7
million over the quarterly and annual intervals. Retained earnings increased
approximately $788 thousand from December 31, 1996, to March 31, 1997, and
approximately $3.5 million in the twelve month period ended March 31, 1997.

The asset structure of the Company's balance sheet at March 31, 1997, compared
to December 31, 1996, and March 31, 1996, has not materially changed, as far as
overall composition. Cash and cash equivalents has increased $1.9 million since
December 31, 1996 and has declined $8.4 million since March 31, 1996.
Investments have increased $2.2 million since December 31, 1996 and $11.2
million since March 31, 1996. Loans have increased $840 thousand since December
31, 1996 and $7.6 million since March 31, 1996. Growth in earning assets in both
the three month period and the twelve month period have been funded by a
combination of deposit growth of $6.5 million and $14.1 million over the same
respective periods and declines in cash and cash equivalents previously noted.
Loan and deposit growth that has taken place in both periods of time has been a
function of growth in the Company's core market areas.

Regarding the loan portfolio, it is the Company's policy to maintain a strategic
asset mix wherein the loan portfolio represents approximately sixty-five percent
(65%) of total assets. More specifically, the desired targeted mix within the
loan portfolio is equally distributed among the commercial, consumer, and real
estate loan categories. Real estate loans represent the largest component of the
Company's loan portfolio. The majority of the real estate loans are of the one-
to-four family residential nature. Consumer loans represent the second largest
category of the loan portfolio. Automobile loans approximate 50% of the total
consumer portfolio. Commercial loans represent the smallest component of the
Company's loan portfolio. All classes of loans are subject to minimum acceptable
underwriting standards regarding downpayment, term, equity, loan-to-value
measures and collateral coverage, adequate cash flow and debt coverage, and
credit history, among other things. The primary focus for all categories of
lending is the thirteen county market area in southern West Virginia, eastern
Kentucky, and western Virginia that the Company has identified as its core
market. As a point of fact, the overwhelming majority of the loans outstanding
on both March 31, 1997, and 1996, respectively, for each loan portfolio category
are to customers within this core market.
<PAGE>
 
By definition, two major credit concentrations exist for the Company: (1) those
delineated by loan category as a proportion of the Company's capital base, and
(2)that of a single industry concentration. Loan categories that exceed 25% of
the Company's capital base are: (1) those secured by one-to-four family
residences, (2) those secured by automobiles, (3) those secured by commercial
real estate and equipment, and (4) those characterized as unsecured loans. The
other type of concentration relates to the general overall reliance on the coal
industry prevalent in the Company's market area. Given the market area's
dependence on this industry, avoidance of this type of concentration by the
Company is neither likely nor practical.

Although the Company has a diversified loan portfolio, a substantial portion of
its debtors' ability to honor their obligations is dependent on the coal
industry. Accordingly, a downturn in the coal industry could impact both the
value of collateral held as security and the ability to repay contracts in
accordance with original terms. The Company attempts to mitigate this
sensitivity somewhat by spreading the portfolio throughout eastern Kentucky,
southern West Virginia, and western Virginia. While the bulk of both the lending
and deposit taking functions of the Company are currently in its present
thirteen county market area, some geographic diversification may be realized by
engaging in business in contiguous counties.

Non-interest bearing deposits decreased approximately $7.1 million in the three
months since December 31, 1996 and increased $2.9 million in the twelve month
period since March 31, 1996. Interest bearing deposits increased approximately
$13.7 million and $11.2 million in the same respective periods of time. All
depository subsidiaries of the Company have interest rate structures that offer
yields that have been consistently competitive with other deposit products
available in the market over these same time periods. This deposit pricing
posture has helped the Company to insulate earnings from rising interest rate
pressures. Short term borrowings decreased $3.6 million and $2.7 million over
these same time periods. Factors contributing to these changes are the volatile
nature of these types of funds (primarily tax deposits), the increasing
placement of public funds in accounts of this nature, and the fact that, in the
interest rate environment prevalent over the periods addressed, these types of
accounts possess most of the unattractive features of money market accounts.
Other liabilities increased approximately $2.6 million and $101 thousand,
respectively, over the same time periods.

Internal capital retention has allowed for equity growth of approximately $788
thousand and $3.6 million in the respective time periods. Issuance of a new
class of preferred shares netted $16.25 million in new capital in the first
quarter of 1996. Exercise of the underwriter's overallotment option added an
additional $2.6 million in the second quarter of 1996. Equity capital as a
percentage of total assets was 10.76%, 10.77%, and 10.19% at March 31, 1997,
December 31, 1996, and March 31, 1996, respectively. The Company is now required
to meet certain regulatory capital requirements for capital on a risk-adjusted
basis. Risk adjustment allows for the inclusion of off-balance sheet items such
as unused credit commitments, exclusion of
<PAGE>
 
certain no-risk assets, as well as inclusion of other factors that may cause
additional risk to the Company. The Company's risk-weighted capital to risk-
weighted asset percentage was 14.93% at March 31, 1997, and 14.19% at March 31,
1996. The percentage at December 31, 1996, was 15.63%.

Management is not aware of any trends, events, or uncertainties, either
favorable or unfavorable, that are reasonably likely to have a material effect
on the Company's liquidity, capital resources, or results of operations. There
are no current recommendations by regulatory authorities which, if implemented,
would have a material effect on the Company. The Company has no outstanding
loans that have been classified for regulatory purposes as loss, doubtful,
substandard, or special mention that result from trends or uncertainties which
management reasonably expects to materially impact future operating results,
liquidity, or capital resources.
<PAGE>
 
MATEWAN BANCSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

SUMMARY

Net income available for common share holders for the first quarter of 1997 was
approximately $1.227 million, representing earnings per share applicable to
common stock of $.34, versus $1.193 million, or $.33 per share for the same
period in 1996. Earnings per share for the year ended December 31, 1996 was
$1.43. Return on Average Assets was 1.02% and 1.21% for the three month periods
ended March 31, 1997, and March 31, 1996, respectively. Return on Average Assets
for the year ended December 31, 1996, was 1.15%. Return on Average Equity was
9.24% and 10.73% for the respective three month time periods and 10.37% for the
year ended December 31, 1996.

ACQUISITION ACTIVITY

On March 15, 1996, the Company acquired all of the outstanding common stock of
the Bank One, Pikeville, N.A. franchise (Kentucky). The Kentucky franchise
commenced operations as a wholly owned subsidiary of Matewan BancShares, Inc. At
March 15, 1996, Kentucky had total assets of approximately $204 million,
deposits of approximately $183 million and capital of approximately $20 million.
The Company funded this cash acquisition with long-term debt of approximately $8
million, a capital stock offering of $16.25 million, and available cash.

RESULTS OF OPERATIONS

Net interest income was $7.062 million for the three month period ended March
31, 1997 versus $5.384 million for the three month period ended March 31, 1996.
The increase of approximately $1.678 million was a function of the Company
managing its net interest margin through its core business base and the fact
that the Kentucky acquisition contributed earnings for a full quarter in 1997
versus only sixteen days for the same quarter in 1996. Under normal
circumstances, in the rising interest rate environment experienced in the first
quarter of 1997, institutions that are liability sensitive in the short run
would expect an unfavorable reaction in net interest income as interest-bearing
liabilities reprice at higher rates faster than interest-earning assets reprice.
Because the Company has exercised such extreme vigilance in maintaining its
funds pricing positions, as interest rates increased, net interest income was
not as vulnerable to erosion. Actual Net Interest Margin (net interest income
divided by average earning assets) for the three months ended March 31, 1997 was
5.23% versus 5.59% for the same period in 1996, an erosion of approximately 6%.
The Company continues to be liability sensitive and accordingly future increases
in market interest rates would generally adversely impact net interest income,
while decreases in market interest rates would generally have a positive impact.

The Company's provision for loan losses for the three months ended March 31,
1997 was approximately $81 thousand lower than for the same
<PAGE>
 
period in 1996. Net charge-off activity increased to $563 thousand from $463
thousand for the same respective periods. Non-performing loans (loans past due
greater than ninety days plus nonaccrual loans) approximated $5.497 million at
March 31, 1997, versus $5.693 million at March 31, 1996. These levels represent
approximately 1.46% and 1.54% of the gross loans outstanding for each respective
period. The Company's ratio of allowance for loan losses to non-performing loans
of 105.52% as of March 31, 1997. A similar calculation for the first quarter of
1996 produced a ratio of 107.57%. The ratio of allowance for loan losses to
gross loans was 1.54% and 1.65% for the three month periods ended March 31,
1997, and March 31, 1996, respectively. The relatively stable level of these
ratios for the comparable quarterly periods in the face of higher charge-off
activity in the more recent quarter may be mainly attributable to one
phenomenon. The consolidation of the Kentucky franchise in the first quarter of
1996 included an increase to the consolidated Company reserve position of
approximately $3.152 million. In addition, the market devaluation incurred by
the Company for specific credits acquired via the Kentucky acquisition created
an additional cushion for specific credits separate from the reserve. Because of
these acquired cushions, the Company was able to absorb the higher level of loan
charge-offs incurred in the first quarter without having to generate a parallel
increase to its provision for loan losses. The Company maintains an extremely
aggressive postition in dealing with the workout or liquidation of higher risk
accounts. Management has determined that (1) there exists sufficient coverage in
the loan loss reserve to absorb the effect of anticipated charge-offs without
requiring any additional reserves and (2) on an ongoing basis, provisions to
loan loss reserve will continue to be made to reflect any ongoing additional
exposure to the loan portfolio. Management has analyzed and evaluated the
condition of the loan portfolio, has made provision for known anticipated
losses, and does not anticipate any further significant losses.

Non-interest income increased $397 thousand during the first three months of
1997 when compared to the same period in 1995. The major reason was the full
quarter contribution from Kentucky in 1997 versus the sixteen day contribution
for 1996. Service fees and other fees generally increased in the current quarter
due to a change in the service fee schedule from the earlier quarter and normal
business growth. Sales of credit insurance in the same periods translated into
commissions approximately $43 thousand lower in 1997 than for the same three
month period in 1996. High loss experiences by the Company's credit insurance
underwriters resulted in the underwriters' companies tightening eligibility
standards for policies issued in the Company's market area. Sales volumes have
declined accordingly.

Non-interest expenses increased $1.8 million for the first three months of 1997
over the same period in 1996. Otherwise most increases for overhead-related
expenses were a function of normal business growth and activity. Two reasons
account for most of the increase. First of all, there was the full quarter of
operation for Kentucky in 1997 versus the sixteen day operation in 1996.
Secondly, the Company opened four new offices in the second half of 1996 that
have become
<PAGE>
 
full cost centers, but have not for the most part have been slower to generate
additional revenues.

For the three month periods ended March 31, 1997 and March 31, 1996,
respectively, net income before taxes increased $343 thousand.  Applicable
income taxes increased by $114 thousand in the three month period ended March
31, 1997 over the same period in 1996 The effective income tax rate for the
first three months of 1997 was 35.97% versus 36.43% for the first three months
of 1996. These levels reflect both changes in composition of the Company's
earnings and favorable tax effects attributable to Matewan Bank FSB. Net income
after income taxes increased $229 thousand for the three months ended March 31,
1997, over the same period for 1996. Earnings available to common shareholders
increased $33 thousand ($.01 per share) for the three months ended March 31,
1997 over the same period in 1996.
<PAGE>
 
Analysis of the allowance for Loan Losses (Unaudited)
MATEWAN BANCSHARES, INC AND SUBSIDIARIES
(Amounts listed in thousands)

<TABLE>
<CAPTION>

                                          Three months ended
Year-to-date amounts listed through     March 1,     March 31,
                                        --------     ---------
                                           1997         1996
                                           ----         ----
<S>                                     <C>          <C>
Balance at begining of period           $5,986       $2,973


Loans charged-off                         (745)        (537)


Recoveries                                 177           74

Increase incidental to acquisition           0        3,152


Provision for loan losses                  381          462
                                         -----        -----


Balance at the end of period            $5,799       $6,124
                                         =====        =====

Non-performing loans                   $ 5,496       $5,693
 
Ratio of net charge-offs to
average loans (annualized)                 .60%         .73%
 
Ratio of nonperforming loans to
gross loans                               1.46%        1.54%
 
Ratio of nonperforming assets to
total assets                              1.03%        1.02%
 
Ratio of allowance for loan losses
to non-performing loans                 105.52%      107.57%
 
Ratio of allowance for loan losses
to gross loans                            1.54%        1.65%
</TABLE>
The level of loans classified as troubled, restructured debt was immaterial for
either of the above periods.
<PAGE>
 
                           MATEWAN BANCSHARES, INC.

EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibit 27 Financial Date Schedule

    Information included in EX-27 is incorporated herein by reference.

(b) Form 8-K

    None
<PAGE>
 
                               SIGNATURES


   Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                          MATEWAN BANCSHARES, INC.
                                             (Registrant)



May 10, 1997                          By: /s/Dan R. Moore
                                         ----------------------------         
                                                 Dan R. Moore
                                     Chairman of the Board of Directors
                                              and President





May 10, 1997                         By: /s/Lee M. Ellis
                                        ----------------------------
                                           Lee M. Ellis
                             Vice President & Chief Financial Officer