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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C., 20549

FORM 10-Q

For the quarterly period ended: September 30, 2004

or

For the transition period from            to            

Commission file number: 0-11671

FIRST CENTURY BANKSHARES, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (304) 325-8181

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).     Yes  ¨    No  x

The number of shares outstanding of the registrant’s $1.25 par value common stock,

as of November 10, 2004, was 1,991,000 shares.

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FIRST CENTURY BANKSHARES, INC.

INDEX

The total number of pages of the Form 10-Q Quarterly Report is twenty-one (21) pages.

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FIRST CENTURY BANKSHARES, INC.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands, except per share data)

See accompanying notes to unaudited consolidated financial statements

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FIRST CENTURY BANKSHARES, INC.

AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

(Unaudited)

See accompanying notes to consolidated financial statements

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FIRST CENTURY BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

See accompanying notes to unaudited consolidated financial statements

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FIRST CENTURY BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF CHANGES

IN STOCKHOLDERS’ EQUITY

(Unaudited)

See accompanying notes to consolidated financial statements

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FIRST CENTURY BANKSHARES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2004

NOTE A - BASIS OF PRESENTATION

The accompanying unaudited 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 Rule 10-01 of Rule 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 considered necessary for a fair presentation have been included. All such adjustments were of a normal recurring nature. Certain reclassifications have been made to the prior period’s financial statements to place them on a comparable basis with the current period’s financial statements. Operating results are for the three and nine-month periods ended September 30, 2004, and are not necessarily indicative of the results that may be expected for the year ending December 31, 2004. For further information refer to the financial statements and footnotes thereto included as Exhibit 13 to Corporation’s annual report on Form 10-K for the year ended December 31, 2003.

NOTE B – OTHER COMPREHENSIVE INCOME

Comprehensive income is defined as net income plus transactions and other occurrences that are the result of nonowner changes in equity. Other comprehensive income is defined as comprehensive income exclusive of net income. Unrealized gains and losses on available for sale investment securities are the only components of the Corporation’s other comprehensive income. Information concerning the Corporation’s other comprehensive income for the three and nine-month periods ended September 30, 2004 and 2003 is as follows:

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FIRST CENTURY BANKSHARES, INC.

AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

September 30, 2004

NOTE C - EARNINGS PER SHARE

The following tables reconcile the numerator and denominator of the basic and diluted computations for income from continuing operations for the three and nine-month periods ended September 30, 2004 and 2003:

NOTE D – COMPENSATION AND BENEFIT 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 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 defined by the Officer Plan. The options vest 20% per year after their date of grant. During the nine months ended September 30, 2004, no options were granted under the Officer Plan. The weighted average remaining contractual life of currently outstanding options under the Officer Plan is 51 months. At September 30, 2004, 88,220 options were outstanding and options for 81,780 shares of common stock were reserved for future issuance for the Officer Plan.

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FIRST CENTURY BANKSHARES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

September 30, 2004

NOTE D – COMPENSATION AND BENEFIT PLANS (Continued)

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 defined by the Director Plan. The options are fully vested upon their date of grant. During the nine months ended September 30, 2004, no options were granted under the Director Plan. The weighted average remaining contractual life of currently outstanding options under the Director Plan is 51 months. At September 30, 2004, 19,000 options were outstanding and options for 11,000 shares of common stock were reserved for future issuance for the Director Plan.

As permitted by SFAS No. 123, “Accounting for Stock Based Compensation,” 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 had 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—basic would have been decreased to the pro forma amounts indicated below.

During the third quarter of 2004, the Corporation’s pension plan had a significant lump-sum distribution. This distribution triggered recognition of previously deferred actuarial losses under the accounting provisions set forth in Statement of Financial Accounting Standards No. 88 of approximately $323,000 for the three and nine-month periods ended September 30, 2004. This compared to approximately $542,000 recognized during the nine-month period ended September 30, 2003.

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FIRST CENTURY BANKSHARES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

September 30, 2004

NOTE E - REGULATORY CAPITAL REQUIREMENTS

Regulators of the Corporation and its subsidiary have implemented risk-based capital guidelines which require the maintenance of certain minimum capital as a percent of assets and certain off-balance sheet items adjusted for predefined credit risk factors. The regulatory minimums for Tier 1 and combined Tier 1 and Tier 2 capital ratios were 4.0% and 8.0%, respectively. Tier 1 capital includes common stockholders’ equity reduced by goodwill and certain other intangibles. Tier 2 capital includes portions of the allowance for loan losses, not to exceed Tier 1 capital. In addition to the risk-based guidelines, a minimum leverage ratio (Tier 1 capital as a percentage of average total consolidated assets) of 4% is required. The following table contains the capital ratios for the Corporation.

NOTE F – 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.

NOTE G – 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 that in the aggregate would have a material adverse effect on the Corporation’s financial statements.

First Century Bank, NA, the Corporation’s wholly-owned banking subsidiary, is party to various financial instruments with off-balance sheet risk arising in the normal course of business to meet the financing needs of its customers. Those financial instruments include commitments to extend credit and standby letters of credit. These commitments include standby letters of credit of approximately $5,316,000 at September 30, 2004 and $4,839,000 at December 31, 2003. These instruments contain various elements of credit and interest rate risk in excess of the amount recognized in the consolidated statements of financial condition. Additionally, certain off-balance sheet items of approximately $37,659,000 at September 30, 2004, and $39,600,000 at December 31, 2003, were comprised primarily of unfunded loan commitments.

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FIRST CENTURY BANKSHARES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

September 30, 2004

NOTE H - INVESTMENT SECURITIES

In the second quarter of 2004, the Emerging Issues Task Force released EITF Issue 03-01, “The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments.” The Issue provided guidance for evaluating whether an investment is other-than-temporarily impaired and requires certain disclosures with respect to these investments. On September 30, 2004, the FASB issued FASB Staff Position (“FSP”) EITF Issue 03-1-1,”Effective Date of Paragraph 10-20 of EITF Issue 03-1, “The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments.” This Staff Position delayed certain measurement and recognition provisions of EITF 03-1.

The following table shows the gross unrealized losses and fair value of Corporation’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category at September 30, 2004:

U. S. TREASURY OBLIGATIONS AND GOVERNMENT AGENCY OBLIGATIONS. The unrealized losses on the Corporation’s investments in U.S. Treasury obligations and direct obligations of U.S. government agencies were the result of interest rate increases. The contractual terms of these investments do not permit the issuer to settle the securities at a price materially less than the amortized cost of the investment.

FEDERAL AGENCY MORTGAGE-BACKED SECURITIES. The unrealized losses on the Corporation’s investment in agency mortgage-backed securities issued by FNMA and FHLMC were caused by interest rate increases. The Corporation purchased these investments, most at a premium relative to their face amount, and the contractual cash flows of these investments are guaranteed by the issuer organization. Accordingly, it is expected that the securities would not be settled at a price materially less than the amortized cost of the Corporation’s investment.

MUNICIPAL BONDS. The unrealized losses on the Corporation’s municipal bonds were caused by interest rate increases. The contractual cash flows of these investments are guaranteed by the issuer organization. Accordingly, it is expected that the securities would not be settled at a price materially less than the amortized cost of the Corporation’s investment.

For all of these securities, because the decline in market value is attributable to changes in interest rates and not credit quality and because the Corporation has the ability and intent to hold these investments until a recovery of fair value, which may be maturity, the Corporation does not consider these investments to be other-than-temporarily impaired at September 30, 2004.

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FIRST CENTURY BANKSHARES, INC.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

September 30, 2004

This narrative will assist readers in their analysis of the accompanying consolidated financial statements and supplemental financial information. It should be read in conjunction with the unaudited consolidated financial statements and the notes, along with the selected financial data presented elsewhere in this report. 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.

Critical Accounting Policies

The Corporation’s accounting policies are an integral part to understanding the results reported. The Corporation’s accounting and reporting policies are in accordance with accounting principles generally accepted in the United States of America, and they conform to general practices within the financial services industry. The Corporation’s most complex accounting policies require management’s judgment to ascertain the valuation of assets, liabilities, commitments and contingencies. A variety of factors could affect the ultimate value obtained by the use of assumptions that involve significant uncertainty at the time of estimation. In some instances we use a discount factor to determine the present value of assets and liabilities. A change in the discount factor could increase or decrease the values of those assets and liabilities, resulting in either a beneficial or adverse impact on our financial results. The following is a brief description of the Corporation’s current accounting policies involving significant management valuation judgments.

Allowance for Loan Losses

The Corporation maintains, through its provision expense, an allowance for loan losses believed by management to be adequate to absorb probable credit losses inherent in the portfolio. Management continues to enhance the methodology and procedures for determining the adequacy of the allowance for loan losses. The procedures that are utilized entail preparation of a loan watch list and assigning each loan a classification. For those individually significant loans where it is determined that it is not probable that the borrower will make all payments in accordance with the original loan agreement, management performs an impairment analysis. The measurement of impaired loans is based on either the fair value of the underlying collateral, the present value of the future cash flows discounted at the historical effective interest rate stipulated in the loan agreement, or the estimated market value of the loan.

Other classified loans are categorized and allocated appropriate reserves. Other loans more than 90 days past due that have not been considered in the aforementioned procedures are reserved for as management considers necessary in the circumstance. 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 those categories. Additionally, concentrations of credit, collateral deficient loans, volume and trends in delinquencies, 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.

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FIRST CENTURY BANKSHARES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

September 30, 2004

Pensions

The Corporation has a defined benefit pension plan covering substantially all employees with at least six months of service who are at least 21 ¹/2 years of age. Pension expense is determined by an actuarial valuation, and it is based on assumptions that are evaluated annually as of December 31, the measurement date for pension obligations. The most significant assumptions are the long-term expected rate of return on plan assets, the discount rate used to determine the present value of the pension obligations, and the weighted-average rate of expected increase in future compensation levels. These assumptions are reviewed with the plan actuaries and modified as necessary to reflect current market conditions as well as anticipated long-term market conditions.

Pension expense for 2003 was impacted by lump sum distributions made by the Corporation’s employee pension plan during the second quarter of 2003. These distributions triggered recognition of previously deferred actuarial losses under the accounting provisions set forth in Statement of Financial Accounting Standards No. 88 (“SFAS No. 88”). Lump sum payments made in July 2004 triggered charges to earnings for the third quarter of 2004 pursuant to SFAS No. 88. The Corporation made modifications to the pension plan in prior years eliminating lump sum distributions for employees hired after January 1, 1996, in order to reduce the volatility of the impact of pension expense to the results of operations.

Three Months ended September 30, 2004

The Corporation attained net income of $715,000 during the third quarter of 2004, a decrease of $109,000, or 13.2%, from net income of $824,000 during the third three-month period of 2003. The most significant component, net interest income, for the three-month period ended September 30, 2004 was $3,581,000, an increase of $11,000, or 0.3%, as compared to $3,570,000 for the third quarter of 2003. This increase demonstrated a general stabilization in net interest income and management’s efforts to actively monitor interest rate risk. Net interest margins for the three months ended September 30, 2004 and 2003 were 3.95% and 3.89%, respectively.

Interest income for the three-month period ended September 30, 2004 decreased to $4,466,000, or $17,000, from $4,483,000 for the third three-month period of 2003. Interest income reflected a weighted-average yield on earning assets of 5.27% for the quarter ended September 30, 2004, compared to 5.47% for the same three-month period in 2003. Average interest earning assets were $338,763,000 and $327,768,000 during the three months ended September 30, 2004 and 2003, respectively.

Interest expense decreased to $885,000 for the quarter ended September 30, 2004, or $28,000, from $913,000 for the three-month period ended September 30, 2003. This reflected an average cost of funds of 1.22% and 1.28% respectively, for the three-month periods ended September 30, 2004 and 2003. Average interest bearing liabilities were $290,800,000 and $284,855,000 during the three months ended September 30, 2004 and 2003, respectively.

The provisions for loan losses amounted to $53,000 and $156,000 for the three-month periods ended September 30, 2004 and 2003, respectively. The decreased provision resulted from a reduction in charge-offs as management continues to enhance loan administration.

Non-interest income, exclusive of securities gains and losses, was $912,000 for the three-month period ended September 30, 2004 and represented a decrease of $62,000, or 6.4%, compared to $974,000 for the same period in 2003. This decrease was attributable to reduction in service charges on deposit accounts, as well as, a reduction in income from fiduciary activities related to the timing of the collection of estate settlement fees.

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FIRST CENTURY BANKSHARES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

September 30, 2004

Non-interest expense of $3,322,000 for the quarter ended September 30, 2004 represented an increase of $233,000, or 7.5%, from $3,089,000 for the same period in 2003. This increase was primarily the result of significant lump sum distributions by the Corporation’s employee pension plan in July 2004. These distributions triggered recognition of previously deferred actuarial losses under the accounting provisions set forth in Statement of Financial Accounting Standards No. 88 of approximately $323,000 for the three-month period ended September 30, 2004. Income taxes of $403,000 and $475,000 for the three-month periods ended September 30, 2004 and 2003, respectively, represented 36.1% and 36.6% of net income before income taxes in the respective periods.

Earnings per weighted-average common share, and per diluted share, for the three-month periods ended September 30, 2004 and 2003 were $0.36 and $0.41, respectively. Earnings through September 30, 2004 reflect an annualized return on average assets (ROAA) of 0.77% compared to 0.91% for the period ended September 30, 2003. Also, these earnings reflect an annualized return on average equity (ROAE) of 8.11% and 9.63%, respectively, for the periods ending September 30, 2004 and 2003. Dividends for the third quarter of 2004 increased to $0.21 per share, or 5.0%, from $0.20 per share paid for the third quarter of 2003.

Nine Months ended September 30, 2004

The Corporation attained net income of $2,116,000 for the first nine months of 2004, representing an increase of $60,000, or 2.9%, from the comparable 2003 level of $2,056,000. The most significant component, net interest income, amounted to $10,655,000 for the nine-month period ended September 30, 2004, an increase of $42,000, or 0.4%, as compared to $10,613,000 for the first nine months of 2003. This increase was primarily the result of the lower cost of interest expense for deposits, relative to the continuing reductions in interest income attained for investments and loans. Net interest margins for the nine months ended September 30, 2004 and 2003 were 3.89% and 3.90%, respectively.

Interest income for the nine-month period ended September 30, 2004 was $13,203,000, a decrease of $496,000, or 3.6%, from $13,699,000 for the nine-month period ended September 30, 2003. Interest income reflected a weighted-average yield on earning assets of 5.26% for the nine-month period ended September 30, 2004, compared to 5.58% for the same nine-month period in 2003. Average interest earning assets were $334,774,000 and $327,262,000 during the nine months ended September 30, 2004 and 2003, respectively.

Interest expense was $2,548,000 for the nine-month period ended September 30, 2004 or a decrease of $538,000, from $3,086,000 for the same period in 2003. This reflected an average cost of funds of 1.18% and 1.43%, respectively, for the nine-month periods ended September 30, 2004 and 2003. Average interest bearing liabilities were $287,892,000 and $287,168,000 during the nine months ended September 30, 2004 and 2003, respectively.

Management continues to work diligently to enhance the quality of the loan portfolio. Due to these efforts, the provision for loan losses decreased to $66,000 for the nine months ended September 30, 2004, from $571,000 for the nine-month month period ended September 30, 2003. Management anticipates loan losses will continue to compare favorably during the remainder of 2004; however, continuation of the sluggish economy could result in increased credit deterioration beyond expectations.

Non-interest income exclusive of securities gains and losses of $2,609,000 for the nine-month period ended September 30, 2004 represented a decrease of $273,000, or 9.5%, compared to $2,882,000 for the same period in 2003. This decrease was primarily attributable to reductions in service charges on deposit accounts, fees from mortgage originations and fiduciary fees. The Corporation had net realized gains on the sales of securities of $67,000 in the 2003 period, as compared to $16,000 in losses realized in 2004.

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FIRST CENTURY BANKSHARES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

September 30, 2004

Non-interest expenses amounted to $9,874,000 for the nine months ended September 30, 2004, an increase of $116,000, or 1.2%, from $9,758,000 for the same period in 2003. Pension plan distributions triggering loss recognition under SFAS No. 88 resulted in settlement charges of $323,000 for the nine month period ended September 30, 2004 as compared to $542,000 for the nine-month period ended September 30, 2003. The reduction in SFAS No. 88 charges were offset by increased costs associated with the opening of a new branch facility in Princeton, West Virginia and to improvements in the Corporation’s telecommunication equipment. Income taxes of $1,192,000 and $1,177,000 for the nine-month periods ended September 30, 2004 and 2003, respectively, represented 36.0% and 36.4% of net income before income taxes in the respective periods.

Earnings per weighted-average common share, and per diluted share, for the nine-month periods ended September 30, 2004 and 2003 were $1.06 and $1.03, respectively. Earnings through September 30, 2004 reflect an annualized return on average assets (ROAA) of 0.77% compared to 0.76% for the nine-month period ended September 30, 2003. Also, these earnings reflect an annualized return on average equity (ROAE) of 8.01% and 7.99%, respectively, for the periods ending September 30, 2004 and 2003. Dividends through the third quarter of 2004 increased to $0.63 per share, or 5.0%, from $0.60 per share for the nine-month period ended September 30, 2004.

Financial Condition and Asset Quality

Total assets at September 30, 2004 were approximately $371,073,000 as compared to approximately $363,727,000 at December 31, 2003, or an increase of $7,346,000, or 2.0%. The loan portfolio increased to $248,788,000 at September 30, 2004, or 0.7%, during this nine-month period, from $246,950,000 at December 31, 2003. As the economy began to show signs of improvement during the first nine months of 2004, loan demand began to improve. However, management continues to adhere to its policy of not extending long-term fixed rate financing in this low interest rate environment. By investing short-term, management believes it is better positioned to manage the interest margin as interest rates are beginning to increase. The investment portfolio increased approximately $12,956,000, or 16.5% during this same period. Investment purchases were made to utilize excess liquidity because of the very low interest earning potential of fed funds sold. Total deposits increased by $9,708,000 to $317,427,000 at September 30, 2004 from $307,719,000 at December 31, 2003. Deposit increase occurred in both the interest-bearing and noninterest-bearing categories.

The continuing stagnation in the local economy places ongoing emphasis on the Corporation’s methodology in determining the adequacy of the allowance for loan losses. The Corporation periodically evaluates the adequacy of the allowance for loan losses in order to maintain the allowance at a level that is sufficient to absorb probable credit losses. This evaluation is based on a review of the Corporation’s historical loss experience, known and inherent risks in the loan portfolio, including adverse circumstances that may affect the ability of the borrower to repay interest and/or principal, the estimated value of collateral, and an analysis of the levels and trends of delinquencies, charge-offs and the risk ratings of the various loan categories. Such factors as the level and trend of interest rates and the condition of the national and local economies are also considered. At September 30, 2004, the allowance for loan losses was $3,020,000, as compared to $3,075,000 at December 31, 2003. This resulted in the ratio of the allowance for loan losses to total loans decreasing slightly from 1.25% at December 31, 2003, compared to 1.21% at September 30, 2004, reflecting continued improvement in credit quality. Estimates may change at some point in the future.

Financial instruments include commitments to extend credit and standby letters of credit. These commitments include standby letters of credit of approximately $5,316,000 at September 30, 2004 and $4,839,000 at December 31, 2003. These instruments contain various elements of credit and interest rate risk in excess of the amount recognized in the consolidated statements of financial condition. Additionally, certain off-balance sheet items of approximately $37,659,000 at September 30, 2004, and $39,600,000 at December 31, 2003, were comprised primarily of unfunded loan commitments.

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FIRST CENTURY BANKSHARES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

September 30, 2004

Liquidity and Capital Resources

Liquidity management involves the ability to meet the cash flow requirements of depositors wanting to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs. Liquidity can best be demonstrated by an analysis of the Corporation’s cash flows. The primary source of cash flows for the Corporation is operating activities. Operating activities provided $3,700,000 of liquidity for the nine-month period ended September 30, 2004, compared to $4,187,000 for the same nine months in 2003. The principal elements of these operating flows are net income, increased for significant non-cash expenses for the provision for loan losses and depreciation and amortization. A secondary source of liquidity for the Corporation comes from investing activities, principally the maturities of investment securities. For the nine-month periods ended September 30, 2004 and 2003, due to the low interest rate environment, maturities and calls of investment securities amounted to $21,997,000 and $53,135,000, respectively. In early 2004, purchases of investment securities in excess of calls and maturities were made in order to utilize excess liquidity and enhance interest income. As of September 30, 2004, the Corporation had approximately $45,969,000 of investment securities that mature or reprice within 36 months. Interest rates have begun to stabilize and calls in investment securities slowed during the third quarter of 2004. Improving loan demand resulted in a net increase in loans of $1,758,000 for the first nine months of 2004 following an increase of $13,774,000 for the same period in 2003.

Additional sources of liquidity are available through the Federal Reserve System and through membership in the Federal Home Loan Bank system. As of September 30, 2004, the Corporation had a maximum borrowing capacity exceeding $80,000,000 through the Federal Home Loan Bank of Pittsburgh. These funds can be made available with various maturities and interest rate structures. At September 30, 2004, the Corporation owned $850,400 of stock in the Federal Home Loan Bank of Pittsburgh. All borrowings are collateralized by a blanket lien by the Federal Home Loan Bank on its member’s qualifying assets. As of September 30, 2004, there were no outstanding advances from either the Federal Home Loan Bank of Pittsburgh or the Federal Reserve Bank of Richmond.

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information called for by this item is incorporated herein by reference to the “Asset and Liability Management and Interest Rate Sensitivity” subsection of the Management’s Discussion and Analysis section contained in the Company’s 2003 Annual Report to shareholders. Management believes there has been no material change in either interest rate risk or market risk since December 31, 2003.

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FIRST CENTURY BANKSHARES, INC.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures:

Within 90 days prior to the date of this report, the Company’s Chief Executive Officer and the Chief Financial Officer evaluated the effectiveness of the Company’s disclosure controls and procedures in accordance with Rule 13a-14 under the Exchange Act. Based on their evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures (i) enable the Company to record, process, summarize and report in a timely manner the information that the Company is required to disclose in its Exchange Act reports, and (ii) are designed with the objective of ensuring that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding disclosure.

Changes in internal controls:

There were not significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation referred to above.

PART II. OTHER INFORMATION

Item 6 - EXHIBITS AND REPORTS ON FORM 8-K.

(b.) Reports on Form 8-K

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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