POCAHONTAS BANKSHARES CORP, DEF 14A, 1998-03-25

POCAHONTAS BANKSHARES CORP
DEF 14A, 1998-03-25
STATE COMMERCIAL BANKS

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<PAGE>

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))

[X] Definitive Proxy Statement

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

POCAHONTAS BANKSHARES CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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Notes:

<PAGE>

POCAHONTAS BANKSHARES CORPORATION
500 FEDERAL STREET
BLUEFIELD, WEST VIRGINIA 24701

March 30, 1998

Dear Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders of
Pocahontas Bankshares Corporation ("Corporation"), a West Virginia Corporation
and owner of 100% of the outstanding common stock of its subsidiaries, First
Century Bank, N.A., Bluefield, West Virginia ("Bluefield") and First Century
Bank, Wytheville, Virginia, ("Wytheville") which will be held on TUESDAY, APRIL
21, 1998, AT 11:00 O'CLOCK A.M., AT FINCASTLE COUNTRY CLUB, ROUTE 720, DOUBLE
GATES, BLUEFIELD, VIRGINIA.

It is important that your shares be represented at the meeting. Whether or not
you plan to attend the meeting, you are requested to complete, date, sign and
return the enclosed proxy in the enclosed envelope for which postage has been
paid. If you have any questions regarding the information in the attached proxy
materials, please do not hesitate to call the office of First Century Bank,
N.A., (304) 325-8181.

You will be asked at the meeting to fix the number of directors for the
Corporation for the ensuing year at fourteen (14), and to elect the nominees
submitted for your consideration in the accompanying Proxy Statement. You will
also be asked to ratify the selection of independent auditors for the
Corporation for the year ending December 31, 1998. Additionally, you will be
asked to approve the 1998 Director Stock Option Plan and the 1998 Officer Stock
Option Plan.

YOU ARE URGED TO READ THIS ACCOMPANYING PROXY STATEMENT CAREFULLY, AS IT
CONTAINS DETAILED INFORMATION REGARDING THE NOMINEES FOR DIRECTORS OF THE
CORPORATION, THE INDEPENDENT AUDITORS OF THE CORPORATION, THE 1998 DIRECTOR
STOCK OPTION PLAN AND THE 1998 OFFICER STOCK OPTION PLAN.

Very truly yours,

/s/ B. L. Jackson, Jr.

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

/s/ R. W. Wilkinson

R. W. Wilkinson, President
and Chief Executive Officer
<PAGE>

POCAHONTAS BANKSHARES CORPORATION
500 Federal Street, P. O. Box 1559
Bluefield, West Virginia 24701
(304) 325-8181

- -------------------------------------------------------------------------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 21, 1998

- -------------------------------------------------------------------------------

The Annual Meeting of Stockholders of the Corporation will be held on Tuesday,
April 21, 1998, at 11:00 a.m. at Fincastle Country Club, Route 720, Double
Gates, Bluefield, Virginia, for the following purposes:

(1) to fix the number of directors to be elected for the ensuing year at
fourteen (14) and to elect the fourteen (14) nominees submitted for
consideration in the Proxy Statement accompanying this Notice, and,

(2) to ratify the selection of Coopers & Lybrand, Certified Public
Accountants, to serve as independent auditors for the Corporation for the
year ending December 31, 1998, and,

(3) to approve the 1998 Director Stock Option Plan, and,

(4) to approve the 1998 Officer Stock Option Plan, and,

(5) such other business as may lawfully come before the meeting or any
adjournment thereof.

The Board of Directors has fixed the close of business on March 25, 1998, as
the record date for the determination of stockholders entitled to notice of and
to vote at the meeting.

Whether or not you plan to attend the meeting, please mark, date, sign and
return the enclosed form of proxy to the Corporation as soon as possible. If
you attend the meeting and wish to vote your shares in person, you may do so at
any time before the proxy is exercised.

BY ORDER OF THE BOARD OF DIRECTORS,

/s/ Charles A. Peters
Secretary

March 30, 1998

Bluefield, West Virginia
<PAGE>

POCAHONTAS BANKSHARES CORPORATION
500 Federal Street, P.O. Box 1559
Bluefield, West Virginia 24701
(304) 325-8181

PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 21, 1998

PRELIMINARY STATEMENT

Beginning March 30, 1998, this statement is being furnished, in connection
with the solicitation of proxies for use at the Annual Meeting ("Annual
Meeting") of Stockholders of Pocahontas Bankshares Corporation ("Corporation"),
to be held Tuesday, April 21, 1998, at 11:00 a.m. at Fincastle Country Club,
Route 720, Double Gates, Bluefield, Virginia, and any adjournments thereof.

SOLICITATION AND REVOCATION OF PROXIES

All costs of this solicitation of proxies will be borne by the Corporation.
In addition to solicitation by mail, certain directors, officers and employees
of the Corporation and the banks may solicit proxies in person or by telephone.
Such persons will not receive compensation for such solicitation. Banks,
brokerage houses and other custodians, nominees and fiduciaries will be
reimbursed for their reasonable out-of-pocket expenses, if any, incurred in
forwarding materials to their respective clients.

A stockholder who executes a proxy may revoke it at any time before it is
voted. Proxies may be revoked by written notice received prior to the Annual
Meeting or by timely submission of a subsequently dated proxy. If the enclosed
form of proxy is properly executed, returned and not revoked, it will be voted
in accordance with the specifications, if any, made by the stockholder. If the
form of proxy is signed and returned but specifications are not made, the proxy
will be voted in favor of the proposals set forth in the Notice of Annual
Meeting which accompanies the Proxy Statement. Attendance at the Annual Meeting
by a stockholder who has given a proxy shall not have the effect of revoking the
proxy unless he or she shall so notify the Secretary of the Annual Meeting
before the proxy is voted. The persons named as proxies on the accompanying
form of proxy were selected by the Board of Directors of the Corporation and are
currently directors of the Corporation.

VOTING AT THE ANNUAL MEETING

The close of business on March 25, 1998, has been fixed as the record date for
the determination of stockholders entitled to notice of and to vote at the
Annual Meeting. As of the close of business on March 25, 1998, there were
10,000,000 authorized shares of capital stock, $1.25 par value, of the
Corporation ("Common Stock"), 2,000,000 of which shares were issued and
outstanding and entitled to vote at the Annual Meeting.

First Century Bank, N.A., a wholly-owned subsidiary of Pocahontas Bankshares
Corporation, holds of record as trustee, co-trustee, executor, co-executor or
agent, but not beneficially, 229,558 shares of Common Stock representing 11.48%
of the outstanding Common Stock of the Corporation. Of these shares the bank
holds 146,301 shares as sole trustee of certain revocable and irrevocable trusts
and as sole executor of certain estates. The shares held by the bank as co-
trustee will be voted by the individual co-trustee and not by the bank. The
shares held by the bank as sole trustee or as sole executor will be voted by the
bank in accordance with the terms of the trust agreement or at the direction of
either (a) the principal or the grantor in the case of revocable trusts, or (b)
at the direction of the majority of the adult beneficiaries in the case of
irrevocable trusts and estates in which the bank serves as sole executor.

1
<PAGE>

Each stockholder will be entitled to one vote for each share of Common Stock
registered in his or her name on the books of the Corporation as of the close of
business on March 25, 1998. The approval of the holders of a majority of the
shares eligible to vote at the meeting is required to elect an individual to
serve as director. Cumulative voting is permitted in the election of directors.
Accordingly, in voting for directors each shareholder has the right to vote the
number of shares owned by him for as many persons as there are directors to be
elected, or to cumulate such shares and give one candidate as many votes as the
number of directors multiplied by the number his shares shall equal, or to
distribute such vote on the same principle among as many candidates as he shall
think fit. The Board of Directors reserves the right to instruct its proxies to
vote cumulatively unless otherwise directed by the shareholder.

PRINCIPAL STOCKHOLDERS

The following table sets forth, as of March 25, 1998, the persons or entities
who to the best information and knowledge of the Corporation, beneficially own
more than 5% of the outstanding shares of the Corporation's Common Stock.
Except where otherwise indicated, the following stockholders are the record
owners of, and possess sole voting and investment powers with respect to, all of
their shares.

<TABLE>
<CAPTION>
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class
- ------------------- --------------------- --------
<S> <C> <C>

R. W. Wilkinson 227,000/(1)/ 11.3500%
2207 Orchard Way
Bluefield, West Virginia 24701

The Ethel N. Bowen Foundation 130,000/(2)/ 6.5000%
500 Federal Street
Bluefield, West Virginia 24701
</TABLE>
- -------------------
(1) Includes 212,000 shares owned of record by Mr. Wilkinson. Also includes
15,000 shares owned of record by Mr. Wilkinson's wife, as to which Mr.
Wilkinson disclaims beneficial ownership.

(2) These shares are held by First Century Bank, N.A. as a safekeeping
custodian for The Ethel N. Bowen Foundation. The Ethel N. Bowen Foundation
is a private charitable foundation, the affairs of which are governed by a
board of directors composed of five persons. Four of these directors are
also directors of Pocahontas Bankshares Corporation and First Century Bank,
N.A. and include: B. L. Jackson, Jr., B. K. Satterfield, F. W. Wilkinson,
and R. W. Wilkinson. The fifth director is Henry C. Bowen.

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth, as of March 25, 1998, to the best information
and knowledge of the Corporation, (a) the name and age of each nominee currently
serving as a director of the Corporation, (b) certain information regarding his
principal occupation during the last five years, (c) the year in which he first
became a director, (d) the number and percentage ownership of the Corporation's
Common Stock beneficially owned by him, and (e) the number and percentage
ownership of shares of the Corporation's Common Stock beneficially owned by all
officers and directors as a group. Unless otherwise indicated, each director is
the record owner of, and possesses sole voting and investment power with respect
to, all of his shares and has been primarily engaged in the occupation indicated
for the past five years.

2
<PAGE>

<TABLE>
<CAPTION>
Amount and
Nature of
Served as a Beneficial
Principal Director of Ownership
Occupation Pocahontas Bankshares and % of
Name and Age (Five Years) Since Class
- ------------ ------------ ---------------------- ----------
<S> <C> <C> <C>
Paul Cole, Jr. President, Cole Motor Company; New Nominee 20,500/(1)/
66 and, Cole Chevrolet - 1.0250%
Cadillac

Eustace Frederick Mining Engineering Consultant; 1987 3,200/(2)/
67 Formerly, Senior Vice President .1600%
Consolidation Coal Company

B. L. Jackson, Jr. Chairman of the Board of the 1983 12,612/(3)/
73 Corporation, Formerly, President, .6306%
The First National Bank of Bluefield

Robert M. Jones, Jr. Physician and Surgeon 1993 54,932
45 2.6516%

Harold L. Miller President, Flat Top Insurance Agency 1984 3,000
63 .1500%

Charles A. Peters Secretary of the Corporation, 1983 13,260
75 President, Peters Equipment Inc. .6630%

C. E. Richner President, C. E. Richner Drilling 1989 2,924
74 Company .1462%

Byron K. Satterfield Executive Vice President and Trust 1984 17,140/(4)/
58 Officer of First Century Bank, N.A. .8570%

John C. Shott Chairman of the Board, 1987 10,480
74 Paper Supply Company .5240%

Scott H. Shott Vice President, The Hugh I. 1985 25,148
71 Shott, Jr. Foundation 1.2574%

Walter L. Sowers President, Pemco Corporation, 1983 8,500
58 Manufacturer of Electrical Products .4250%

J. Brookins Taylor Physician 1984 36,196/(5)/
70 1.8098%

Frank W. Wilkinson Vice President, Marketing and 1996 5,548/(6)/
36 Branch Administration, First .2774%
Century Bank, N.A.

R. W. Wilkinson President and Chief Executive Officer 1983 227,000/(7)/
64 of the Corporation and First Century 11.3500%
Bank, N.A., Chairman, First Century Bank

All Directors as a 440,440
Group (14 persons) 22.0220%
- ------------
</TABLE>

3
<PAGE>

Notes to Directors Table:

(1) Includes 20,000 shares owned of record by Mr. Cole. Also, includes 500
shares owned of record by Mr. Cole's wife.

(2) Includes 1,600 shares owned of record by Mr. Frederick. Also, includes 400
shares owned of record by Mr. Frederick's wife and 1,200 shares owned of
record by Mr. Frederick's children.

(3) Includes 7,100 shares owned of record by Mr. Jackson. Also, includes 5,160
shares owned of record by Mr. Jackson's wife and 352 shares owned of record
by Mr. Jackson's children.

(4) Includes 12,020 shares owned of record by Mr. Satterfield. Also, includes
1,000 shares controlled by Mr. Satterfield as trustee of a family trust,
3,400 shares owned by Mr. Satterfield's wife and 720 shares owned by Mr.
Satterfield's minor son.

(5) Dr. Taylor disclaims beneficial ownership of 35,196 shares which shares are
held in trust for the benefit of Dr. Taylor's wife.

(6) Includes 4,000 shares owned of record by Mr. Wilkinson. Also includes
1,548 shares owned by Mr. Wilkinson's minor daughter. He is the son of R.
W. Wilkinson, director and executive officer of the Corporation.

(7) Includes 212,000 shares owned of record by Mr. Wilkinson. Also includes
15,000 shares owned of record by Mr. Wilkinson's wife as to which Mr.
Wilkinson disclaims beneficial ownership. Mr. Wilkinson is a principal
stockholder of the Corporation (see "PRINCIPAL STOCKHOLDERS" above). He is
the father of Frank W. Wilkinson, director and executive officer of the
Corporation.

- --------------------------------------------------------------------------------

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Based upon a review of Forms 3, 4 and 5, and amendments thereto, furnished to
the Corporation during or with respect to its most recent fiscal year, and,
information available to the Corporation in its capacity as transfer agent for
the Corporation's Common Stock, the Corporation believes that, all reports and
transactions have been timely filed.

- --------------------------------------------------------------------------------

Effective April 21, 1998, Dr. James P. Thomas will retire from the
Corporation's Board of Directors. The Corporation wishes to thank Dr. Thomas
for his many years of dedication and service.

4
<PAGE>

IDENTIFICATION OF EXECUTIVE OFFICERS

The table below shows the names and ages of all executive officers of the
Corporation and/or its subsidiaries and the position held by them and the dates
when elected as an executive officer of the Corporation and/or its subsidiaries
and the number of shares and percentage owned.

<TABLE>
<CAPTION>
Year Present Position with the Number of Shares
Name Age Elected Corporation and/or Banks and Percentage
- ----------- --- ------- ------------------------- ----------------
<S> <C> <C> <C> <C>
B. L. Jackson 73 1983 Chairman of the Board of the 12,612 - .6306%
Corporation

R. W. Wilkinson 65 1983 President and Chief Executive 227,000 - 11.3500%
Officer of the Corporation and
First Century Bank, N.A.;
Chairman, First Century Bank

Charles A. Peters 75 1983 Secretary of the Corporation 13,260 - .6630%

William E. Albert 46 1984 Assistant Secretary of the 600 - .0300%
Corporation; Vice President and
Cashier, First Century Bank, N.A.

Byron K. Satterfield 58 1989 Executive Vice President and 17,140 - .8570%
Trust Officer, First Century
Bank, N.A.

Ronnie S. Kennett 59 1989 Senior Vice President/Loans, 1,000 - .0500%
First Century Bank, N.A.

J. Ronald Hypes 36 1994 Treasurer of the Corporation; 1,000 - .0500%
Vice President and Comptroller
First Century Bank, N.A.

Frank W. Wilkinson 36 1996 Vice President, Marketing and 5,548 - .2774%
Branch Administration; First
Century Bank, N.A.
</TABLE>

COMMITTEES OF THE BOARD

The Corporation has a standing Audit and Compliance Committee which consists
of five (5) members: Messrs. Frederick, J. Shott and Richner, as well as two
(2) directors from the subsidiary banks' boards of directors. The Audit and
Compliance Committee met four (4) times during 1997. This committee reviews and
evaluates significant matters relating to audit, internal control and
compliance. It reviews, with representatives of the independent auditors, the
scope and results of the examination of financial statements, audit fees and any
recommendations with respect to internal controls and financial matters. The
Audit and Compliance Committee is also responsible for monitoring trust
activities, including the review of the assets in each trust as to their safety
and current value, the advisability of retaining or disposing of such assets,
and whether trust funds awaiting investment or distribution have been held
longer than was reasonably necessary.

5
<PAGE>

Although the Board of the Corporation has no standing nominating committee,
the Executive Committee makes recommendations regarding nominees to the Board of
Directors. The members of the committee are Messrs. Jones, Peters, Satterfield,
Scott Shott and R.W. Wilkinson. This committee met two (2) times during 1997.
Additionally, the Executive Committee is responsible for the management of the
budget, the development of policies and implementation of such policies, review
of personnel and salaries and to exercise, when the board is not in session, all
powers of the Board of Directors that may lawfully be delegated.

The Board of the Corporation has no standing compensation committee. The
officers and directors of Pocahontas Bankshares who are also directors or
officers of the subsidiary banks do not receive compensation from the
Corporation. The salaries of the officers and employees of the Corporation's
wholly-owned subsidiaries are established by the boards of directors and
committees of those respective subsidiaries.

The Board of the Corporation met five (5) times in 1997. The following
directors attended fewer than 75% of the aggregate of the total number of
meetings of the Board of Directors and all committees of the board on which he
served: Messrs. Frederick, Jones, and S. Shott.

COMPENSATION OF DIRECTORS

The directors of the Corporation were paid $300 for each Corporation board
meeting attended during 1997. Also, non-employee directors were paid $100 for
each committee meeting attended. Employee directors were not paid for committee
meetings. Directors of the Corporation who were also directors of the various
subsidiaries received compensation as follows: First Century Bank, N.A. - $200
for each board meeting attended and $100 for each committee meeting attended;
First Century Bank - $100 for each board meeting attended and $50 for each
committee meeting attended. During 1997 there were no other arrangements
pursuant to which any director of the Corporation was compensated for services
as a director.

Also, in lieu of paying fees for attending committee meetings of the various
boards of directors of the Corporation and its subsidiaries, Messrs.
Satterfield, F. W. Wilkinson and R. W. Wilkinson, officers of First Century
Bank, N.A., were paid monthly fees for each of the boards of directors of the
Corporation and its subsidiaries on which they serve.

EXECUTIVE COMPENSATION

The following summary compensation table sets forth through December 31, 1997,
the information concerning compensation for services rendered during the
Corporation's past three fiscal years to the Corporation and/or its subsidiaries
in all capacities paid to or accrued for the Chief Executive Officer, and any
other executive officer whose salary and bonus exceeded $100,000.00 for those
years.

6
<PAGE>

<TABLE>
<CAPTION>
Name of Individual Other All
and Capacities Cash Annual Other
in which served Year Salary Bonus/(1)/ Compensation/(2)/ Compensation/(3)/
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
R. W. Wilkinson 1997 $187,280 $69,304 $5,100 $33,335
President, Chief 1996 181,680 29,533 4,600 28,669
Executive Officer 1995 174,480 28,113 4,050 25,316
and Director of the
Corporation and Bluefield;
Chairman of the Board,
Wytheville

Byron K. Satterfield 1997 $ 95,680 $14,009 $3,900 $11,844
Director of the 1996 92,868 13,361 3,700 10,998
Corporation and 1995 89,280 12,637 2,850 9,731
Executive Vice President
and Trust Officer of
Bluefield
</TABLE>

(1) The amounts in the Bonus column include cash bonuses paid pursuant to a plan
approved by the Board of Directors covering officers and employees,
providing for cash bonus payments calculated on the basis of the interaction
between the Corporation's net income and a percentage of salary formula. The
interaction of the percentage of salary formula with net income produced a
progressive scale of bonus payments from 9.03% of the participant's salary
to 11.12% of the participant's salary depending upon whether the participant
was an employee or executive officer. Mr. Wilkinson received the following
amounts under this plan: 1997 - $21,137; 1996 - $20,603; and 1995 -
$19,803. Mr. Satterfield received the following amounts under this plan:
1997 - $10,795; 1996 - $10,528; and 1995 - $10,128. A similar bonus plan is
in effect for the fiscal year ending December 31, 1998. Additionally, under
a split-dollar life insurance arrangement, Mr. Wilkinson received the
following bonus amounts to be applied to the cost of insurance: 1997 -
$48,167; 1996 - $8,930; and 1995 - $8,310. Mr. Satterfield received the
following amounts under a similar split-dollar life insurance arrangement:
1997 - $3,214; 1996 - $2,833; and 1995 - $2,509.

(2) Includes amounts paid for services as a director.

(3) Includes amounts contributed by the Corporation pursuant to its qualified
401(k) retirement savings plan as follows: Mr. Wilkinson, 1997 - $4,750;
1996 - $4,220; and 1995 - $4,255; Mr. Satterfield, 1997 - $4,000; 1996 -
$4,200; and 1995 - $3,910. Additionally, the current dollar value of the
benefit to executive officers of the remainder of the premiums paid by the
Corporation under a split-dollar life insurance arrangement, projected on an
actuarial basis, is as follows: Mr. Wilkinson, 1997 - $28,585; 1996 -
$24,449; and 1995 - $21,061; Mr. Satterfield, 1997 - $7,844; 1996 - $6,798;
and 1995 - $5,821.

The Corporation provides certain personal benefits to officers not directly
related to job performance, such as personal use of automobiles and the portion
of club dues and fees which may be attributable to personal use. Management of
the Corporation has concluded that the aggregate amounts of such personal
benefits do not exceed the lesser of either $50,000 or 10% of total salary and
bonus for any individual officer.

7
<PAGE>

RETIREMENT SAVINGS PLAN

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 employee contributions were matched
by the Corporation at a rate of fifty percent (50%) of the employee contribution
for 1997.

PENSION PLAN

The Corporation and its subsidiaries have maintained a qualified,
noncontributory pension plan for which each year's accrued costs are funded by
the bank. This plan was amended January 1, 1989, to incorporate any new
subsidiaries which may become associated with the Corporation. Amounts are
accrued or set aside each fiscal year to provide fixed benefits to employees in
the event of retirement at a specified age after a specified number of years of
service. The amount of estimated annual benefits upon retirement assumes that
the employee will continue to be employed at his or her present compensation
until retirement at age 65. All employees who have attained the age of 20 2 and
who have been employed for at least six (6) months are eligible to participate.
Benefits are determined on an actuarial basis under a formula which takes into
consideration the participant's years of service and highest average earnings.
The cost of contributions to the plan is not included in the table contained
under the caption "EXECUTIVE COMPENSATION" because the regular actuaries of the
plan cannot readily calculate the amount of the contribution applicable to
individual members of the plan. Because of the present excess funded position
of the pension plan, no contributions have been made since 1985.

The table set forth below illustrates the estimated annual retirement
benefits payable to salaried employees, based on approximate current salary
levels, assuming retirement at age 65 on January 1, 1998.

<TABLE>
<CAPTION>
Average Annual Years of Service
Salary, Highest ------------------------------------------------------
Five Years 15 20 25 30 35 40
- --------------- ------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 15,000 $ 4,275 $ 5,700 $ 7,125 $ 8,550 $ 9,975 $ 11,400
25,000 7,125 9,500 11,875 14,250 16,625 19,000
35,000 9,975 13,300 16,625 19,950 23,275 26,600
45,000 12,825 17,100 21,375 25,650 29,925 34,200
55,000 15,675 20,900 26,125 31,350 36,575 41,800
65,000 18,525 24,700 30,875 37,050 43,225 49,400
75,000 21,375 28,500 35,625 42,750 49,875 57,000
85,000 24,225 32,300 40,375 48,450 56,525 64,600
95,000 27,075 36,100 45,125 54,150 63,175 72,200
105,000 29,925 39,900 49,875 59,850 69,825 79,800
115,000 32,775 43,700 54,625 65,550 76,475 87,400
125,000 35,625 47,500 59,375 71,250 83,125 95,000
135,000 38,475 51,300 64,125 76,950 89,775 102,600
145,000 41,325 55,100 68,875 82,650 96,425 110,200
150,000 42,750 57,000 71,250 85,500 99,750 114,000
155,000 44,175 58,900 73,625 88,350 103,075 117,800
160,000 45,600 60,800 76,000 91,200 106,400 121,000
</TABLE>

As of December 31, 1997, Mr. Wilkinson had 35 credited years of service and
Mr. Satterfield had 34 credited years of service under the pension plan.

8
<PAGE>

CERTAIN TRANSACTIONS

EXTENSIONS OF CREDIT

The Corporation, through its wholly-owned subsidiaries, has had, and expects
to have in the future, banking transactions in the ordinary course of its
business with some of its directors, officers, principal stockholders, and the
companies with which they are associated. All loans and commitments to extend
loans included in such transactions were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons. In the opinion of management, at
the time these credits were made they did not present more than normal risk of
collectibility or present other unfavorable circumstances.

INDEPENDENT AUDITORS

A proposal will be submitted at the Annual Meeting seeking the ratification of
the firm of Coopers & Lybrand L.L.P., Certified Public Accountants, as the
Corporation's independent auditors for the fiscal year ending December 31, 1998.
Coopers & Lybrand has served as the Corporation's independent auditors since
1993.

A representative of Coopers & Lybrand will be present at the Annual Meeting
with the opportunity to make a statement if they desire and will be available to
respond to questions of stockholders.

PROPOSAL TO APPROVE DIRECTOR STOCK OPTION PLAN

Summary of the Director Stock Option Plan

At its special meeting held on March 17, 1998, the Corporation's Board of
Directors unanimously approved the adoption of a Director Stock Option Plan (the
"Director Plan") and directed that the Director Plan be submitted to
shareholders for approval. The Director Plan provides for the granting of
options (individually referred to as "Stock Option") for up to 30,000 shares of
the Corporation's Common Stock. The Director Plan will become effective upon
approval of the shareholders of the Corporation at this Annual Meeting. The
Board believes that it is in the best interest of the Corporation and its
shareholders to attract and retain qualified and motivated management and that
the Director Plan will help the Corporation achieve this goal. The Director
Plan is not intended to qualify as a stock option plan under Section 422 of the
Internal Revenue Code of 1986, as amended, (the "Code" generally). West
Virginia Code Section 31-1-84 requires shareholder approval of the Director
Plan. The Director Plan is not subject to the Employee Retirement Income
Security Act of 1974 ("ERISA").

This section contains a summary of key terms of the Director Plan. The
complete Director Plan is attached hereto as Exhibit A. The summary description
of the Director Plan does not purport to be complete and is qualified in its
entirety by reference to the complete document attached hereto as Exhibit A.

9
<PAGE>

Purpose of the Director Plan

The Director Plan permits directors of the Board of the Corporation to acquire
and hold Common Stock of the Corporation and share in the growth of the value of
the Corporation, thereby reinforcing a mutuality of interest with shareholders.
In the opinion of the Board of Directors, the long-term success of the
Corporation is dependent upon the ability of the Corporation to attract and
retain outstanding individuals and to motivate their best efforts on behalf of
the Corporation's interest. The Board of Directors believes that the Director
Plan will be effective in providing the directors with a proprietary interest in
the business and consequently a greater incentive to promote the long-term
interests of the Corporation. Approximately twenty (20) individuals would be
eligible to participate in the Director Stock Option Plan.

Common Stock Available

The total number of shares of Common Stock that may be issued under the
Director Plan shall not exceed in the aggregate thirty thousand (30,000) shares,
which shares may be in whole or in part, as the Board shall from time to time
determine, authorized but unissued shares of Common Stock.

Eligibility for Participation

Only non-employee directors may participate in the Director Plan.

Commencement of Participation

A participating director begins participation in the Director Plan on the date
subsequent to the date elected or appointed as a non-employee director (or, for
current non-employee directors on the date subsequent to the effective date of
the plan) when he shall be granted options under the Director Plan.

Option Agreement

Each Stock Option granted under the Director Plan will be evidenced by an
Option Agreement between the Corporation and the non-employee director. These
agreements will contain the terms on which the option can be exercised.

Option Price

The option price for purchasing a share of Common Stock will be the fair
market value of the Common Stock on the date the option is granted.

"Fair Market Value" means the value of Common Stock (i) if listed on an
established Common Stock exchange, based on its price on such exchange at the
close of business on the date in question; (ii) if traded on a reasonably active
basis but not listed on an established Common Stock exchange, based on its price
as reflected on the NASDAQ Interdealer Quotation System of the National
Association of Securities Dealers, Inc. at the close of business on the date in
question; or (iii) if the Common Stock is not traded on any United States
securities exchange but is traded on any formal over-the-counter quotation
system in general use in the United States, the value per share shall be the
mean of the closing prices reported on the last five (5) business days prior to
the date of grant on which the Common Stock is traded.

The Corporation's Common Stock is not traded on a securities exchange.
Accordingly, at this time, the market value of Pocahontas stock will be based on

10
<PAGE>

the mean of the closing prices reported on the last five (5) business days prior
to the date of grant on which Common Stock traded. As of March 16, 1998, the
fair market value of the Corporation's Common Stock as defined above was $20.50
per share.

The option price can be paid by cash, certified check, or by surrender of
previously acquired shares of Common Stock with a fair market value on the date
surrendered equal to the exercise price.

Option Expiration

Each Stock Option will automatically expire after ten (10) years, unless a
shorter expiration term is granted by the Board. No Stock Option may be
exercised by any person after expiration.

Option Termination

Unless otherwise provided in the terms of an option, each Stock Option will
terminate automatically three months after a non-employee director terminates
service as a member of the Board, unless such termination occurs as a result of
permanent disability or death. In the event of permanent disability, the non-
employee director shall become one hundred percent (100%) vested in any Stock
Option he has been granted under the Plan as of that date, and he may exercise
the otherwise exercisable Stock Option; provided, however, that in all events
the Stock Option shall terminate if not exercised within one (1) year of the
termination from the Board due to permanent disability.

In the event of death, any Stock Options the non-employee director has been
granted under the Plan shall become one hundred percent (100%) vested, and may
be exercised during the period the Stock Option would have been exercisable if
the deceased non-employee director had not died and had remained a Board member,
by the person or persons (including his estate) to whom his rights under such
Stock Option shall have passed by will or by laws of descent and distribution.

Administration

The Director Plan is administered by the Executive Committee of the Board of
Directors. Under the Director Plan the Board reserves the right to administer
the Plan at its discretion. The Executive Committee has discretion, subject to
the express provisions of the plan to: (i) to determine the directors to whom
options may be granted; (ii) to determine the time or times when options may be
granted; (iii) to determine the purchase price of the Common Stock covered by
each option; (iv) to determine the number of shares to be subject to each
option; (v) to determine when an option may be exercised and whether in whole or
in installments as the result of a Vesting schedule triggered by the passage of
time or the attainment of performance goals set by the Committee and approved by
the Board; (vi) to prescribe, amend, or rescind rules and regulations relating
to the Plan; (vii) to determine any other terms and provisions and any related
amendments of the individual Non Qualified Stock Option Agreements, which need
not be identical for each Participating Director, including such terms and
provisions and amendment as shall be required in the judgment of the Committee
to conform to any change in any law or regulation applicable thereto, and with
particular regard to any changes in or effect of the Code and the regulations
thereunder; and (viii) to make all other determinations deemed necessary or
advisable for the administration of the Plan.

11
<PAGE>

Director Plan Effective Date

The Director Plan is effective on the date of its approval by the shareholders
of the Corporation.

Director Plan Expiration

The Director Plan will automatically terminate at the tenth anniversary of the
date of shareholder approval of the Director Plan. The term of Stock Options
granted before such tenth anniversary may continue beyond that date.

Amendment and Termination of the Director Plan

The Board of Directors may at any time amend or terminate the Director Plan.
Among other things, the Board may (a) increase the maximum number of shares to
which options may be granted, subject to approval by the shareholders; (b)
increase the period during which options may be granted or options may be
exercised; or (c) provide for the administration of the Plan in a manner which
may avoid, without the consent of the director to whom any option shall
theretofore shall have been granted, adversely affecting the rights of such
director under such grant. Amendments may not alter the outstanding options
without the consent of the optionee.

Registration of Common Stock

The Corporation will register the shares issued under the Director Plan under
applicable federal and state securities law.

Option Grants

The Executive Committee will award options to directors of the company. The
options will be nonassignable and nontransferable. All options are subject to
all terms of the Director Plan, including but not limited to, those related to
employment status, change in corporate structure, restrictions on exercise and a
vesting schedule for options awarded.

Federal Income Tax Consequences

The Director Plan permits the Corporation to grant non-statutory Stock options
(options that do not meet the stock option requirements under Section 422 of the
Code). Options granted under the Director Plan, which are non-statutory, may be
taxed to the participant depending on the provisions of such options when
granted, exercised, disposed of or when any restrictions placed thereon lapse.
The Corporation will be treated as having paid compensation to the participant
and generally may deduct the same at the time at which and in the same amount in
which the participant is considered to have realized compensation, except as may
be limited under Section 280G of the Code relating to golden parachute payments
exceeding $1 million.

12
<PAGE>

DECISIONS AS OF THE DATE HEREOF. ALL OF THE FOREGOING ARE SUBJECT TO CHANGE AND
ANY SUCH CHANGE COULD AFFECT THE CONTINUING VALIDITY OF THE DISCUSSION. PLAN
PARTICIPANTS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCES TO THEM, INCLUDING THE EFFECT OF FOREIGN, STATE, AND LOCAL TAXES.

Resale of Common Stock by Director Plan Participants

Participants who exercise options and receive the Corporation's Common Stock
under the Director Plan may resell the Common Stock received without restriction
if they are not affiliates of the Corporation. Those participants who are
affiliates will be subject to the resale provisions of Rule 144 under the
Securities Act of 1933, as amended.

Change in Control Provisions

If any participant is involuntarily removed from Board membership within
twelve (12) months after a change in control (as defined in the Director Plan),
all options granted shall become immediately exercisable regardless of the
number of years that have passed since the date of grant. Generally, a change in
control occurs if any individual, firm, corporation or other entity (other than
current shareholders of the Corporation as of the date of the Director Plan is
adopted) separately or with affiliates, increases its ownership to more than 25%
of the Corporation's issued and outstanding Common Stock. A change in control
does not include any such accumulation which a majority of the Board declares,
for reasons in its sole discretion, not to be a change in control.

Considerations For and Against the Proposal

In the opinion of the Board of Directors of the Corporation, the long-term
success of the Corporation is dependent upon its ability to attract and retain
outstanding individuals and to motivate their best efforts on behalf of the
Corporation's interests. Consequently, the Board of Directors believes that
both the Corporation and its shareholders benefit by providing non-employee
directors of the Corporation the option to acquire shares of the Corporation's
Common Stock.

Under the Director Plan, shares may be purchased by participants at an option
price fixed on the date the options are awarded. Generally, the options would
later be exercised by the participant only if the market price at the time of
the exercise exceeds the option price. Thus the participant may acquire the
Corporation's Common Stock at a price below its market value. At the time of
its exercise, therefore, the Corporation experiences slight dilution in its
earnings per share to the extent that the book value of the Corporation's Common
Stock exceeds the option price.

Vote Required

An affirmative vote of the holders of a majority of the outstanding shares of
the Corporation's Common Stock is required to adopt the Director Plan. Shares
voted "Abstain" and shares not voted will have the same effect as if the shares
were voted "Against" approval of the plan.

The Corporation's Board of Directors recommend, by the vote indicated above,
that the shareholders vote FOR the adoption of the Director Stock Option Plan
---
discussed above.

13
<PAGE>

PROPOSAL TO APPROVE OFFICER STOCK OPTION PLAN

At its special meeting held on March 17, 1998, the Corporation's Board of
Directors unanimously approved the adoption of an Officer Stock Option Plan (the
"Officer Plan") and directed that the Officer Plan be submitted to shareholders
for approval. The Officer Plan provides for the granting of options
(individually referred to as "Stock Option") for up to 170,000 shares of the
Corporation's Common Stock. The Officer Plan will become effective upon
approval of the shareholders of the Corporation at this Annual Meeting. The
Corporation's Board believes that it is in the best interest of the Corporation
and its shareholders to attract and retain qualified and motivated management
and that the Officer Plan will help the Corporation achieve this goal. The
Officer Plan is not intended to qualify as a stock option plan under Section 422
of the Internal Revenue Code of 1986, as amended, (the "Code" generally). West
Virginia Code Section 31-1-84 requires shareholder approval of the Officer Plan.
The Officer Plan is not subject to the Employee Retirement Income Security Act
of 1974 ("ERISA").

This section contains a summary of key terms of the Officer Plan. The
complete Officer Plan is attached hereto as Exhibit B. The summary description
of the Officer Plan does not purport to be complete and is qualified in its
entirety by reference to the complete document attached hereto as Exhibit B.

Purpose of the Officer Plan

The Officer Plan permits officers of the Board of the Corporation and its
subsidiaries to acquire and hold Common Stock of the Corporation and share in
the growth of the value of the Corporation, thereby reinforcing a mutuality of
interest with shareholders. In the opinion of the Board of Directors, the long-
term success of the Corporation is dependent upon the ability of the Corporation
to attract and retain outstanding individuals and to motivate their best efforts
on behalf of the Corporation's interest. The Board of Directors believes that
the Officer Plan will be effective in providing its officers with a proprietary
interest in the business and consequently a greater incentive to promote the
long-term interests of the Corporation. Approximately ten (10) individuals
would be eligible to participate in the Officer Stock Option Plan.

Common Stock Available

The total number of shares of Common Stock that may be issued under the
Officer Plan shall not exceed in the aggregate one hundred seventy thousand
(170,000) shares, which shares may be in whole or in part, as the Board shall
from time to time determine, authorized but unissued shares of Common Stock.

Eligibility for Participation

Only officers of the Corporation and its subsidiaries may participate in the
Officer Plan.

14
<PAGE>

Option Agreement

Each Stock Option granted under the Officer Plan will be evidenced by an
Option Agreement between the Corporation and the officer. These agreements will
contain the terms on which the option can be exercised.

Option Price

The option price for purchasing a share of Common Stock will be the fair
market value of the Common Stock on the date the option is granted.

The Corporation's Common Stock is not traded on a securities exchange.
Accordingly, at this time, the market value of the Corporation's stock will be
based on the mean of the closing prices reported on the last five (5) business
days prior to the date of grant on which Common Stock traded. As of March 16,
1998, the Fair Market Value of the Corporation's Common Stock as defined above
was $20.50 per share.

The option price can be paid by cash, certified check, or by surrender of
previously acquired shares of Common Stock with a fair market value on the date
surrendered equal to the exercise price.

Option Expiration

Each Stock Option will automatically expire after ten (10) years, unless a
shorter expiration term is granted by the Board. No Stock Option may be
exercised by any person after expiration.

Option Termination

Unless otherwise provided in the terms of an option, each Stock Option will
terminate automatically three months after the termination of the officer's
employment with Pocahontas, unless such termination occurs as a result of
retirement, permanent disability, or death.

In the event of retirement, a participating officer will become one hundred
percent (100%) vested in any Stock Option he or she has been granted under the
Officer Plan. Such Officer may exercise the Stock Option anytime within six
months of retirement.

In the event of permanent disability, to the extent that the Officer would
have been entitled to exercise the option immediately prior to the disability,
such option may be exercised during the period the option could have been
exercised if the director had not been disabled; provided, however, that in all
events such option shall terminate within one (1) year of the termination from
the Board due to disability.

In the event of death, to the extent the Officer would have been entitled to
exercise the option immediately prior to his or her death, such option may be
exercised during the period the option would have been exercisable if the
deceased director had

15
<PAGE>

not died, by the person or persons to whom his or her rights shall have passed
by will or by laws of descent and distribution.

Administration

The Officer Plan is administered by Executive Committee of the Board. Under
the Officer Plan, the Board reserves the right to administer the Plan at its
discretion. The Executive Committee has discretion, subject to the express
provisions of the plan to: (i) to determine the directors to whom options may be
granted; (ii) to determine the time or times when options may be granted; (iii)
to determine the purchase price of the Common Stock covered by each option; (iv)
to determine the number of shares to be subject to each option; (v) to determine
when an option may be exercised and whether in whole or in installments as the
result of a vesting schedule triggered by the passage of time or the attainment
of performance goals set by the Committee and approved by the Board; (vi) to
prescribe, amend, or rescind rules and regulations relating to the Plan; (vii)
to determine any other terms and provisions and any related amendments of the
individual Non Qualified Stock Option Agreements, which need not be identical
for each Participating Officer, including such terms and provisions and
amendment as shall be required in the judgment of the Committee to conform to
any change in any law or regulation applicable thereto, and with particular
regard to any changes in or effect of the Code and the regulations thereunder;
and (viii) to make all other determinations deemed necessary or advisable for
the administration of the Plan.

Officer Plan Effective Date

The Officer Plan is effective on the date of its approval by the shareholders
of the Corporation.

Officer Plan Expiration

The Officer Plan will automatically terminate at the tenth anniversary of the
date of shareholder approval of the Officer Plan. The term of Stock Options
granted before such tenth anniversary may continue beyond that date.

Amendment and Termination of the Officer Plan

The Board of Directors may at any time amend or terminate the Officer Plan.
Among other things, the Board may (a) increase the maximum number of shares to
which options may be granted, subject to approval by the shareholders; (b)
increase the period during which options may be granted or options may be
exercised; or (c) provide for the administration of the Plan in a manner which
may avoid, without the consent of the director to whom any option shall
theretofore shall have been granted, adversely affecting the rights of such
director under such grant. Amendments may not alter the outstanding options
without the consent of the optionee.

Registration of Common Stock

The Corporation will register the shares issued under the Officer Plan under
applicable federal and state securities law.

Option Grants

The Executive Committee will award options to officers of the company. The
options will be nonassignable and nontransferable. All options are subject to
all terms of the Officer Plan, including but not limited to, those related to
employment status,

16
<PAGE>

change in corporate structure, restrictions on exercise and a vesting schedule
for options awarded.

Federal Income Tax Consequences

The Officer Plan permits the Corporation to grant non-statutory Stock options
(options that do not meet the stock option requirements under Section 422 of the
Code). Options granted under the Officer Plan, which are non-statutory, may be
taxed to the participant depending on the provisions of such options when
granted, exercised, disposed of or when any restrictions placed thereon lapse.
The Corporation will be treated as having paid compensation to the participant
and generally may deduct the same at the time at which and in the same amount in
which the participant is considered to have realized compensation, except as may
be limited under Section 280G of the Code relating to golden parachute payments
exceeding $1 million.

THE FEDERAL INCOME TAX DISCUSSION SET FORTH IN THIS SECTION IS INCLUDED FOR
GENERAL INFORMATION ONLY AND DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OR
LISTING OF ALL POTENTIAL TAX CONSEQUENCES. THE DISCUSSION DOES NOT ADDRESS THE
TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCALITY, OR FOREIGN
JURISDICTION. THE DISCUSSION IS BASED UPON THE INTERNAL REVENUE CODE OF 1986,
AS AMENDED, TREASURY REGULATIONS THEREUNDER, AND ADMINISTRATIVE RULINGS AND
COURT DECISIONS AS OF THE DATE HEREOF. ALL OF THE FOREGOING ARE SUBJECT TO
CHANGE AND ANY SUCH CHANGE COULD AFFECT THE CONTINUING VALIDITY OF THE
DISCUSSION. PLAN PARTICIPANTS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES TO THEM, INCLUDING THE EFFECT OF FOREIGN, STATE, AND
LOCAL TAXES.

Resale of Common Stock by Officer Plan Participants

Participants who exercise options and receive the Corporation's Common Stock
under the Officer Plan may resell the Common Stock received without restriction
if they are not affiliates of Pocahontas. Those participants who are affiliates
will be subject to the resale provisions of Rule 144 under the Securities Act of
1933, as amended.

Change in Control Provisions

If any participant is terminated involuntarily from employment with the
Corporation within twelve (12) months after a change in control (as defined in
the Officer Plan), all options granted shall become immediately exercisable
regardless of the number of years that have passed since the date of grant.
Generally, a change in control occurs if any individual, firm, corporation or
other entity (other than current shareholders of the Corporation as of the date
the Officer Plan is adopted) separately or with affiliates, increases its
ownership to more than twenty-five percent (25%) of the Corporation's issued and
outstanding Common Stock. A change in control does not include any such
accumulation which a majority of the Board declares, for reasons in its sole
discretion, not to be a change in control.

Considerations For and Against the Proposal

In the opinion of the Board of Directors of the Corporation, the long-term
success of the Corporation is dependent upon its ability to attract and retain
outstanding individuals and to motivate their best efforts on behalf of the
Corporation's interests. Consequently, the Board of Directors believes that
both the Corporation and its shareholders benefit by providing officers of the
Corporation the option to acquire shares of the Corporation's Common Stock.

17
<PAGE>

Under the Officer Plan, shares may be purchased by participants at an option
price fixed on the date the options are awarded. Generally, the options would
later be exercised by the participant only if the market price at the time of
the exercise exceeds the option price. Thus the participant may acquire the
Corporation's Common Stock at a price below its market value. At the time of
its exercise, therefore, the Corporation experiences slight dilution in its
earnings per share to the extent that the book value of the Corporation's Common
Stock exceeds the option price.

Vote Required

An affirmative vote of the holders of a majority of the outstanding shares of
the Corporation's Common Stock is required to adopt the Officer Plan. Shares
voted "Abstain" and shares not voted will have the same effect as if the shares
were voted "against" approval of the plan.

Pocahontas' Board of Directors recommend, by the vote indicated above, that
the shareholders vote FOR the adoption of the Officer Stock Option Plan
---
discussed above.

OTHER BUSINESS

The Board of Directors and management of the Corporation are not aware of any
other matters not referred to in the enclosed Proxy which may be brought before
the Annual Meeting. However, if any matter other than the election of
directors, the ratification of the selection of independent auditors or matters
incident thereto should properly come before the Annual Meeting, the persons
named in the enclosed proxy will vote such proxy in accordance with their
judgment on such matters. As of the date of the preparation of this Proxy
Statement, no stockholder has submitted to management any proposal to be acted
upon at the Annual Meeting.

1999 ANNUAL MEETING-PROPOSALS OF STOCKHOLDERS

Any stockholder who intends to present a proposal at the Corporation's Annual
Meeting, to be held in April 1999, must submit the proposal to its principal
executive office at P. O. Box 1559, Bluefield, West Virginia 24701, (304) 325-
8181, on or before December 31, 1998, for inclusion in the Corporation's Proxy
Statement and form of Proxy for the Annual Meeting. All stockholders' proposals
should be sent by registered mail return receipt requested.

FINANCIAL INFORMATION

A COPY OF THE CORPORATION'S 1997 ANNUAL REPORT TO STOCKHOLDERS ACCOMPANIES
THIS PROXY STATEMENT. ADDITIONAL COPIES OF THE 1997 ANNUAL REPORT MAY BE
OBTAINED FREE OF CHARGE FROM J. RONALD HYPES, TREASURER, POCAHONTAS BANKSHARES
CORPORATION, P. O. BOX 1559, BLUEFIELD, WEST VIRGINIA 24701, (304) 325-8181.

THE CORPORATION WILL FILE ITS ANNUAL REPORT ON FORM 10-K WITH THE SECURITIES
AND EXCHANGE COMMISSION. A COPY OF THE ANNUAL REPORT ON FORM 10-K MAY BE
OBTAINED FROM THE CORPORATION AT THE ADDRESS INDICATED ABOVE.

B. L. JACKSON, JR.
CHAIRMAN OF THE BOARD

R. W. WILKINSON, PRESIDENT
AND CHIEF EXECUTIVE OFFICER

Bluefield, West Virginia
March 30, 1998

18
<PAGE>

Exhibit A

POCAHONTAS BANKSHARES CORPORATION
1998 DIRECTOR STOCK OPTION PLAN

Witnesseth this 1998 DIRECTOR STOCK OPTION PLAN dated as of the ___ day of
___________, 1998, by POCAHONTAS BANKSHARES CORPORATION ("Corporation"), a West
Virginia corporation:

1. PURPOSE OF PLAN. This 1998 Director Stock Option Plan (Plan) is
established to provide selected non-employee Directors of the Corporation
(Participating Directors) with the opportunity to be granted Non Qualified
Stock Options under the Plan while maintaining the Participating Director's
status as a "disinterested person" within the meaning of Rule 16b-
3(c)(ii)(i) promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended. The Corporation has adopted
this Plan to attract and retain qualified Directors and motivate Directors
to work on behalf of the Corporation to increase shareholder value.

All Non Qualified Stock Options granted to Participating Directors shall be
subject to the terms and conditions set forth in this Plan.

2. REFERENCES, CONSTRUCTION, AND DEFINITIONS. Unless otherwise indicated, all
references made in this Plan shall be to articles, sections and subsections
of this Plan. This Plan shall be construed in accordance with the laws of
the state of West Virginia. The headings and subheadings in this Plan have
been inserted for convenience of reference only and are to be ignored in
construction of the provisions of this Plan. In the construction of this
Plan, the masculine shall include the feminine and the singular the plural,
wherever appropriate. The following terms (in alphabetical order) shall
have the meanings set forth opposite such terms for purposes of this Plan:

(a) "Board" means the Board of Directors of the Corporation.

(b) "Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday on which the Corporation's Common Stock is available for
purchase or sale.

(c) "Change of Control" means the accumulation by any individual, firm,
corporation, or other entity (other than current shareholders of the
Corporation as of the date this Plan is adopted; the Corporation or
any subsidiary; any profit-sharing, employee stock ownership, or other
employee benefit plans of the Corporation; or any trustee or fiduciary
with respect to any such plan when acting in such capacity),
separately or in combination with any affiliates or associates, of an
increase in its ownership that results in an ownership interest of
more than twenty-five percent (25%) of the outstanding shares of the
Common Stock. The Change of Control shall not include any such
accumulation which a majority of the Board, under appropriate meeting
requirements, declares, for reasons in its sole discretion, not to be
a Change of Control for purposes of this Plan. The date of a Change
of Control shall be deemed to be the actual date of accumulation for,
if such date is not necessarily determinable, the date on which the
majority of the Board members meeting as described above, shall
determine was the date as of which the Corporation had reason to know
of the accumulation.

19
<PAGE>

(d) "Code" means the Internal Revenue Code of 1986, as amended from time
to time.

(e) "Committee" means the Executive Committee of the Board as constituted
from time to time in accordance with Section 4(a); provided, however,
that if the Committee shall not be in existence, the term "Committee"
shall mean the Board.

(f) "Common Stock" means the common stock ($1.25 par value) of the
Corporation.

(g) "Corporation" means Pocahontas Bankshares Corporation, a West Virginia
banking corporation.

(h) "Date of Grant" means the date on which an option is granted under the
Plan.

(i) "Director" means a member of the Board or a member of the board of
directors of a subsidiary bank of the Corporation.

(j) "Effective Date" means the date on which the Plan is approved by the
shareholders of the Corporation.

(k) "Fair Market Value" means the value of Common Stock (i) if listed on
an established stock exchange, based on its price on such exchange at
the close of business on the date in question; (ii) if traded on a
reasonably active basis but not listed on an established stock
exchange, based on its price as reflected on the NASDAQ Inter-dealer
Quotation System of the National Association of Securities Dealers,
Inc. at the close of business on the date in question; or (iii) if the
Common Stock is not traded on any United States securities exchange
but is traded on any formal over-the-counter quotation system in
general use in the United States, the value per share shall be the
mean of the closing prices reported on the last five (5) Business Days
prior to the date of grant on which the Common Stock traded.

(l) "Non Qualified Stock Option" means an option to purchase a share or
shares of Common Stock which is not of the type described in Section
422(b) or 423(b) of the Code.

(m) "Non Qualified Stock Option Agreement" means, with respect to each
option granted to a Participating Director, the written agreement to
be entered into by the Corporation and the Participating Director, as
provided in Section 6 hereof.

(n) "Participating Director" means a non-employee Director who has been
granted options under the Plan

(o) "Plan" means this 1998 Director Stock Option Plan.

(p) "Reorganization" means any statutory merger, statutory consolidation,
sale of all or substantially all of the assets of the Corporation or
its subsidiaries, or sale, pursuant to an agreement with the
Corporation, of securities of the Corporation pursuant to which the
Corporation is or becomes a wholly-owned subsidiary of another entity
after the effective date of the transaction.

(q) "Reorganization Agreement" means a written plan or agreement regarding
the terms and implementation of a Reorganization.

20
<PAGE>

(r) "Vest" or "Vesting" means the date, event, or act prior to which an
option, in whole or in part, is not exercisable, and as a consequence
of which the option, in whole or in part, becomes exercisable for the
first time.

3. STOCK SUBJECT TO PLAN. Subject to the provisions of Section 6, there shall
be reserved for issuance or transfer upon the exercise of options to be
granted from time to time under the Plan an aggregate of thirty thousand
(30,000) shares of Common Stock, which shares may be in whole or in part,
as the Board shall from time to time determine, authorized and unissued
shares of Common Stock, or issued shares of Common Stock which shall have
been reacquired by the Corporation. If any option granted under the Plan
shall expire, terminate, or be canceled for any reason without having been
exercised in full, the unpurchased shares subject thereto shall again be
available for purposes of the Plan.

4. ADMINISTRATION

(a) The Plan shall be administered by a Committee, comprised of members
who satisfy the criteria set forth in Section 4(b).

(b) The Board shall authorize the Executive Committee to administer the
Plan.

In the event the Board elects to administer the Plan, the Board shall
have the power and authority otherwise delegated to the Committee in
this Plan document and all acts to be performed by the Committee under
this Plan shall be performed by the Board.

(1) to determine the Participating Directors to whom options may be
granted;

(2) to determine the time or times when options may be granted;

(3) to determine the purchase price of the Common Stock covered by
each option;

(4) to determine the number of shares to be subject to each option;

(5) to determine when an option may be exercised and whether in whole
or in installments as the result of a Vesting schedule triggered
by the passage of time or the attainment of performance goals set
by the Committee and approved by the Board;

(6) to prescribe, amend, or rescind rules and regulations relating to
the Plan;

(7) to determine any other terms and provisions and any related
amendments of the individual Non Qualified Stock Option
Agreements, which need not be identical for each Participating
Director, including such terms and provisions and amendments as
shall be required in the judgment of the Committee to conform to
any change in any law or regulation applicable thereto, and with
particular regard to any changes in or effect of the Code and the
regulations thereunder; and

(8) to make all other determinations deemed necessary or advisable
for the administration of the Plan.

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<PAGE>

5. PARTICIPATION.

(a) Eligibility for Participation. Only non-employee Directors may
participate in this Plan. The Committee's determination of an
individual's eligibility for participation shall be final and binding.

(b) Commencement of Participation. A Participating Director shall
commence participation in the Plan on the date subsequent to the date
elected or appointed as a non-employee Director (or, for current non-
employee Directors on the date subsequent to the effective date of
this Plan) when he shall be granted options under this Plan. A
Director who is an employee at election or appointment and who
thereafter ceases to be an employee shall commence participation in
this Plan on the date he shall be granted options under this Plan.

(c) Termination of Participation. A Participating Director's
participation in this Plan shall terminate on the earlier of (i) the
date the Participating Director's term as a Director expires or is
otherwise terminated for any reason, or (ii) on the date the
Participating Director becomes an employee.

6. OPTION GRANTS AND LIMITS

(a) Nothing contained in the Plan or in any resolution adopted or to be
adopted by the Board shall constitute the granting of any option
hereunder. The granting of an option pursuant to the Plan shall take
place only when a written Non Qualified Stock Option Agreement shall
have been duly executed and delivered by or on behalf of the
Corporation and the Participating Director (or his duly authorized
attorney-in-fact) in whom such option is to be granted.

(b) During the Participating Director's lifetime, any option granted under
this Plan shall be exercisable only by the Participating Director or
any guardian or legal representative of the Participating Director,
and the option shall not be transferable except, in case of the death
of the Participating Director, by will or the laws of descent and
distribution, nor shall the option be subject to attachment,
execution, or other similar process. In the event of (i) any attempt
by the Participating Director to alienate, assign, pledge,
hypothecate, or otherwise dispose of the option, except as provided in
this Plan, or (ii) the levy of any attachment, execution, or similar
process upon the rights or interests conferred by the option, the
Corporation may terminate the option by notice to the Participating
Director and upon such notice the option shall become null and void.

(c) Each Non Qualified Stock Option Agreement shall include a Vesting
schedule describing the date, event, or act upon which an option shall
Vest, in whole or in part, with respect to all or a specified portion
of the shares covered by such option. This condition shall not impose
upon the Corporation any obligation to retain the Participating
Director as a member of the Board or subsidiary boards for any period.

(d) Options shall be limited to Non Qualified Stock Options.

7. OPTION PRICES. The option price to be paid by the Participating Director
to the Corporation for each share purchased upon the exercise of the option
shall be not less than the Fair Market Value of the share on the date the
option is

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<PAGE>

granted. In no event may an option be granted under the Plan if
the option price per share is less than the par value of a share.

8. EXERCISE OF OPTIONS.

(a) A Participating Director may exercise any option granted under this
Plan with respect to all or any part of the number of shares then
exercisable under the terms of his written Non Qualified Stock Option
Agreement by giving the Committee written notice of intent to
exercise. The notice of exercise shall specify the number of shares
to be purchased under the option and the date of exercise.

(b) Each option granted under the Plan shall be exercisable only during a
term established by the Committee as set forth in the applicable Non
Qualified Stock Option Agreement. In no event shall the term of the
option extend beyond ten (10) years from the date of grant of the
option.

(c) Full payment of the option price for the shares purchased shall be
made by the Participating Director on or before the exercise date
specified in the notice of exercise. Payment of the purchase price of
any shares with respect to which the option is being exercised shall
be (i) cash, (ii) certified check to the order of the Corporation, or
(iii) shares of Common Stock of the Corporation valued at the Fair
Market Value on such Business Day as the option or portion thereof is
exercised.

(d) The Corporation shall not be required to deliver certificates for such
shares until full payment of the option price has been made. On or as
soon as is practicable after the exercise date specified in the
Participating Director's notice and upon full payment of the option
price, the Corporation shall cause to be delivered to the
Participating Director a certificate or certificates for the shares
then being purchased (out of previously unissued Common Stock or
reacquired Common Stock, as the Corporation may elect). The exercise
of the option and the resulting obligation of the Corporation to
deliver Common Stock shall, however, be subject to the condition that
the listing, registration, or qualification of the option or the
shares upon any securities exchange or under any state or federal law,
or the consent, or approval of any governmental regulatory body shall
have been effected or obtained free of any conditions not acceptable
to the Committee.

(e) If the Participating Director fails to pay for any of the shares
specified in such notice or fails to accept delivery of the shares,
his right to purchase such shares may be terminated by the
Corporation. The date specified in the Participating Director's
notice as the date of exercise shall be deemed the date of exercise of
the option, provided that payment in full for the shares to be
purchased upon such exercise shall have been received by such date.

(f) The holder of an option shall not have any of the rights of a
stockholder with respect to the shares subject to the option until
such shares shall be issued or transferred to him upon the exercise of
his option.

(g) Notwithstanding the foregoing, any shares that may be purchased as of
the Effective Date, pursuant to the terms of any option granted prior
to the Effective Date, shall continue thereafter to be purchasable
pursuant to the exercise of such option.

9. TERMINATION, DISABILITY, OR DEATH OF OPTION HOLDER. The ability to
exercise options under this Plan shall be conditioned as follows:

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<PAGE>

(a) Exercise During and After Board Membership. Unless otherwise provided
in the terms of an option, an option may be exercised by the
Participating Director while he is a member of the Board and has
maintained since the date of the grant of the option continuous status
as a Director. An option granted pursuant to this Plan may not be
exercised more than three (3) months following the termination of the
Participating Director's membership on the Board of the Corporation or
its subsidiaries for any reason other than (i) permanent disability
described in subsection (b) below, or (ii) death as described in
subsection (c) below.

(b) Exercise Upon Permanent Disability. Unless otherwise provided in the
terms of an option, if a Participating Director's continuous Board
membership shall terminate by reason of a permanent disability (as
determined by the Participating Director's establishing to the
Committee his disability as defined in Code Section 22(e)(3) of the
Code, as amended from time to time), the Participating Director shall
become one hundred percent (100%) Vested in any Option he has been
granted under the Plan as of that date, and he may exercise the
otherwise exercisable Option; provided, however, that in all events
the Option shall terminate if not exercised within one (1) year of the
termination from the Board due to permanent disability.

(c) Exercise Upon Death. Unless otherwise provided in the terms of an
option, if a Participating Director's continuous Board membership
shall terminate by reason of his death, any Options he has been
granted under the Plan shall become one hundred percent (100%) Vested,
and may be exercised during the period the option would have been
exercisable if the deceased Participating Director had not died and
had remained a Board member, by the person or persons (including his
estate) to whom his rights under such option shall have passed by will
or by laws of descent and distribution.

10. ADJUSTMENTS.

(a) In the event that the outstanding shares of Common Stock are hereafter
increased or decreased or changed into or exchanged for a different
number or kind of shares or other securities of the Corporation or of
another corporation, by reason of a recapitalization,
reclassification, stock split-up, combination of shares or dividend,
or other distribution payable in capital stock, appropriate adjustment
shall be made by the Committee in the number and kind of shares for
which options may be granted under the Plan. In addition, the
Committee shall make appropriate adjustment in the number and kind of
shares as to which outstanding options, or portions thereof then
unexercised, shall be exercisable, to the end that the proportionate
interest of the holder of the option shall, to the extent practicable,
be maintained as before the occurrence of such event. Such adjustment
in outstanding options shall be made without change in the total price
applicable to the unexercised portion of the option but with a
corresponding adjustment in the option price per share.

(b) In the event of the dissolution or liquidation of the Corporation, any
option under the Plan shall terminate as of a date to be fixed by the
Committee, provided that not less than thirty (30) days' written
notice of the date so fixed shall be given to each Participating
Director, and each such Participating Director shall have the right
during such period to exercise any of his options as to all or any
part of the shares covered thereby including shares as to which such
options would not otherwise be exercisable by reason of an
insufficient lapse of time.

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<PAGE>

(c) In the event of a Reorganization in which the Corporation is not the
surviving or acquiring corporation, or in which the Corporation is or
becomes a wholly-owned subsidiary of another corporation after the
effective date of the Reorganization, then

(1) if there is no Reorganization Agreement, or if the Reorganization
Agreement does not specifically provide for the change,
conversion, or exchange of shares under outstanding and
unexercised stock options for securities of another corporation,
then the Committee shall take such action, and the options shall
terminate, as provided in subparagraph (b) of this Section 10 or

(2) if there is a Reorganization Agreement and if the Reorganization
Agreement specifically provides for the change, conversion, or
exchange of shares under outstanding and unexercised stock
options for securities of another corporation, then the Committee
shall adjust the shares under the Plan, if the Reorganization
Agreement makes specified provision for such adjustment, in a
manner not inconsistent with the provisions of the Reorganization
Agreement for the adjustment, change, conversion, or exchange of
such stock and such options.

(d) Adjustments and determinations under this Section 10 shall be made by
the Committee, whose decisions as to what adjustments or
determinations shall be made, and the extent thereof, shall be final,
binding, and conclusive.

11. CHANGE OF CONTROL. Notwithstanding any other Plan provisions or grant
term, if any Participating Director is involuntarily removed from Board
membership with the Corporation within twelve (12) months after a Change of
Control, all options granted hereunder shall become exercisable regardless
of the number of years that have passed since the Date of Grant.

12. AMENDMENT AND TERMINATION. Unless the Plan shall theretofore have been
terminated as hereinafter provided, it shall terminate on, and no option
shall be granted thereunder after the tenth (10th) anniversary of the
Effective Date. The Board may terminate the Plan or make such modifications
or amendments thereof as it shall deem advisable, or to conform to any
change in any law or regulation applicable thereto, including (a)
increasing the maximum number of shares to which options may be granted
under the Plan, subject to shareholder approval, (b) increasing the periods
during which options may be granted or options may be exercised, or (c)
providing for the administration of the Plan in a manner which may avoid,
without the consent of the Participating Director to whom any option shall
theretofore have been granted, adversely affecting the rights of such
Participating Director under such grant.

13. RESTRICTIONS ON ISSUING SHARES. The transfer of a share of Common Stock
upon the exercise of each option shall be subject to the condition that if
at any time the Corporation shall determine in its discretion that the
satisfaction of withholding tax or other withholding liabilities, or that
the listing, registration or qualification of any shares otherwise
deliverable upon any securities exchange or under any state or federal law,
or that the consent or approval of any regulatory body, is necessary or
desirable as a condition of, or in connection with, such transfer of shares
pursuant thereto, then in any such event, such transfer shall not be
effective unless such withholding, listing, registration, qualification,
consent, or approval shall have been effected or obtained under conditions
acceptable to the Corporation.

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<PAGE>

14. USE OF PROCEEDS. The proceeds received from the sale of Common Stock
pursuant to the exercise of options granted under the Plan shall be added
to the Corporation's general funds and used for general corporate purposes.

15. INDEMNIFICATION OF COMMITTEE. In addition to such other rights of
indemnification as they may have as members of the Board or as members of
the Committee, the members of the Committee shall be indemnified by the
Corporation against all costs and expenses reasonably incurred by them in
connection with any action, suit, or proceeding to which they or any of
them may be party by reason of any action taken or failure to act under or
in connection with the Plan, or any option and against all amounts paid by
them in settlement thereof (provided such settlement is approved by legal
counsel selected by the Corporation) or paid by them in satisfaction of a
judgment in any such action, suit, or proceeding, except a judgment based
upon a finding of bad faith. Upon the institution of any such action,
suit, or proceeding, a Committee member shall notify the Corporation in
writing, giving an opportunity, at its own expense, to handle and defend
the same before such Committee member undertakes to handle it on his own
behalf.

16. EFFECTIVENESS OF THE PLAN. The Plan shall become effective as of the
Effective Date. Options may be granted to Participating Directors prior to
such date, but the ability to exercise all such options from such grant
shall be conditioned upon such approval and advice.

17. MISCELLANEOUS.

(a) Board Membership Not Affected. Neither the granting of an option nor
its exercise shall be construed as granting to the Participating
Director any right with respect to continuance of his membership on
the Board of the Corporation or its subsidiaries.

(b) Notice. Any notice to the Corporation provided for in this instrument
shall be addressed to it in care of its Treasurer at its principal
office in West Virginia, and any notice to the Participating Director
shall be addressed to the Participating Director at the current
address shown on the payroll records of the Corporation. Any notice
shall be deemed to be duly given if and when properly addressed and
posted by registered or certified mail, postage prepaid.

CORPORATION:

_____________________________

By: _______________________________

Title: _______________________________ (CORPORATE SEAL)

Attest: _______________________________

Title: _______________________________

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<PAGE>

Exhibit B

POCAHONTAS BANKSHARES CORPORATION
1998 OFFICER STOCK OPTION PLAN

Witnesseth this 1998 OFFICER STOCK OPTION PLAN dated as of the ___ day of
___________, 1998, by POCAHONTAS BANKSHARES CORPORATION ("Corporation"), a West
Virginia corporation:

1. PURPOSE OF PLAN. The purpose of this 1998 Officer Stock Option Plan (Plan)
is to further the success of the Corporation and its subsidiaries by making
stock of the Corporation available for purchase by officers of the
Corporation or its subsidiaries through stock option grants. The Plan
provides an additional incentive to such officers to continue in the
Corporation's service and give them a greater interest as stockholders in
the success of the Corporation.

2. REFERENCES, CONSTRUCTION, AND DEFINITIONS. Unless otherwise indicated, all
references made in this Plan shall be to articles, sections, and
subsections of this Plan. This Plan shall be construed in accordance with
the laws of the state of West Virginia. The headings and subheadings in
this Plan have been inserted for convenience of reference only and are to
be ignored in construction of the provisions of this Plan. In the
construction of this Plan, the masculine shall include the feminine and the
singular the plural, wherever appropriate. The following terms (in
alphabetical order) shall have the meanings set forth opposite such terms
for purposes of this Plan:

(a) "Board" means the Board of Directors of the Corporation.

(b) "Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday on which the Corporation's Common Stock is available for
purchase or sale.

(c) "Change of Control" means the accumulation by any individual, firm,
corporation, or other entity (other than current shareholders of the
Corporation as of the date this Plan is adopted; the Corporation or
any subsidiary; any profit-sharing, employee stock ownership, or other
employee benefit plans of the Corporation; or any trustee or fiduciary
with respect to any such plan when acting in such capacity),
separately or in combination with any affiliates or associates, of an
increase in its ownership that results in an ownership interest of
more than twenty-five percent (25%) of the outstanding shares of the
Common Stock. The Change of Control shall not include any such
accumulation which a majority of the Board, under appropriate meeting
requirements, declares, for reasons in its sole discretion, not to be
a Change of Control for purposes of this Plan. The date of a Change
of Control shall be deemed to be the actual date of accumulation or,
if such date is not necessarily determinable, the date on which the
majority of the Board members meeting as described above, shall
determine was the date on which the Corporation had reason to know of
the accumulation.

(d) "Code" means the Internal Revenue Code of 1986, as amended from time
to time.

(e) "Committee" means the Executive Committee of the Board as constituted
from time to time in accordance with Section 4(a); provided, however,
that if

27
<PAGE>

the Committee shall not be in existence, the term "Committee" shall
mean the Board.

(f) "Common Stock" means the common stock ($1.25 par value) of the
Corporation.

(g) "Corporation" means Pocahontas Bankshares Corporation, a West
Virginia banking corporation.

(h) "Date of Grant" means the date on which an option is granted under the
Plan.

(i) "Effective Date" means the date on which the Plan is approved by the
shareholders of the Corporation.

(j) "Fair Market Value" means the value of Common Stock (i) if listed on
an established stock exchange, based on its price on such exchange at
the close of business on the date in question; (ii) if traded on a
reasonably active basis but not listed on an established stock
exchange, based on its price as reflected on the NASDAQ Inter-dealer
Quotation System of the National Association of Securities Dealers,
Inc. at the close of business on the date in question; or (iii) if the
Common Stock is not traded on any United States securities exchange
but is traded on any formal over-the-counter quotation system in
general use in the United States, the value per share shall be the
mean of the closing prices reported on the last five (5) Business Days
prior to the date of grant on which the Common Stock traded.

(k) "Non Qualified Stock Option" means an Option which is not of the type
described in Section 422(b) or 423(b) of the Code.

(l) "Option" means an option to purchase a share or shares of the
Corporation's $1.25 par value Common Stock.

(m) "Option Agreement" means the written agreement to be entered into by
the Corporation and the Participant, as provided in Section 6 hereof.

(n) "Participant" means any officer of the Corporation or its subsidiaries
designated by the Committee and approved by the Board to receive a
stock option grant pursuant to this Plan.

(o) "Plan" means this 1998 Officer Stock Option Plan.

(q) "Reorganization Agreement" means a written plan or agreement regarding
the terms and implementation of a Reorganization.

(r) "Term" means the period during which a particular Option may be
exercised in accordance with Section 8(b) hereof.

(s) "Vest" or "Vesting" means the date, event, or act prior to which an
Option, in whole or in part, is not exercisable, and as a consequence
of which the Option, in whole or in part, becomes exercisable for the
first time.

28
<PAGE>

3. STOCK SUBJECT TO PLAN. Subject to the provisions of Sections 6, 7, and 8,
there shall be reserved for issuance or transfer upon the exercise of
Options to be granted from time to time under the Plan an aggregate of one
hundred seventy thousand (170,000) shares of Common Stock, which shares may
be in whole or in part, as the Board shall from time to time determine,
authorized and unissued shares of Common Stock, or issued shares of Common
Stock which shall have been reacquired by the Corporation. If any Option
granted under the Plan shall expire, terminate, or be canceled for any
reason without having been exercised in full, the unpurchased shares
subject thereto shall again be available for the purposes of the Plan.

4. ADMINISTRATION.

(a) The Plan shall be administered by a Committee, comprised of members
who satisfy the criteria set forth in Section 4(b).

(b) The Board shall authorize the Executive Committee to administer the
Plan.

(1) to determine Participants to whom Options may be granted;

(2) to determine the time or times when Options may be granted;

(3) to determine the purchase price of the Common Stock covered by
each Option grant;

(4) to determine the number of shares to be subject to each Option;

(5) to determine when an Option may be exercised and whether in whole
or in installments as the result of a Vesting schedule triggered
by the passage of time or the attainment of performance goals set
by the Committee and approved by the Board;

(6) to prescribe, amend, or rescind rules and regulations relating to
the Plan;

(7) to determine any other terms and provisions and any related
amendments to the individual Option Agreements, which need not be
identical for each Participant, including such terms and
provisions and amendments as shall be required in the judgment of
the Committee to conform to any change in any law or regulation
applicable thereto, and with particular regard to any changes in
or effect of the Code and the regulations thereunder; and

(8) to make all other determinations deemed necessary or advisable
for the administration of the Plan.

5. PARTICIPATION. Options may be granted to officers employed by the
Corporation or its subsidiaries. In determining the officers to whom
Options may be granted and the number of shares to be covered by each
grant, the Committee may take into account the nature of the services
rendered by the respective officers,

29
<PAGE>

their present and potential contributions to the Corporation's success, and
such other factors as the Committee in its discretion shall deem relevant.
Options may be granted to officers who currently hold corporate stock or
who hold or have held Options under this Plan.

6. OPTION GRANTS AND LIMITS.

(a) Nothing contained in the Plan or in any resolution adopted or to be
adopted by the Board shall constitute the granting of any Option
hereunder. The granting of an Option pursuant to the Plan shall take
place only when a written Option Agreement shall have been duly
executed and delivered by or on behalf of the Corporation and the
officer (or his duly authorized attorney-in-fact) in whom such Option
is to be granted.

(b) During the Participant's lifetime, any Option granted under this Plan
shall be exercisable only by the Participant or any guardian or legal
representative of the Participant, and the Option shall not be
transferable except, in case of the death of the Participant, by will
or the laws of descent and distribution, nor shall the Option be
subject to attachment, execution, or other similar process. In the
event of (i) any attempt by the Participant to alienate, assign,
pledge, hypothecate, or otherwise dispose of the Option, except as
provided in this Plan, or (ii) the levy of any attachment, execution,
or similar process upon the rights or interests conferred by the
Option, the Corporation may terminate the Option by notice to the
Participant and upon such notice the Option shall become null and
void.

(c) Each Option Agreement shall include a Vesting schedule describing the
date, event, or act upon which an Option shall Vest, in whole or in
part, with respect to all or a specified portion of the shares covered
by such Option. This condition shall not impose upon the Corporation
any obligation to retain the Participant in its employ for any period.

(d) Options shall be limited to Non Qualified Stock Options.

7. OPTION PRICES. The Option price to be paid by the Participant to the
Corporation for each share purchased upon the exercise of the Option shall
be not less than the Fair Market Value of the share on the date the Option
is granted. In no event may an Option be granted under the Plan if the
Option price per share is less than the par value of a share.

8. EXERCISE OF OPTIONS.

(a) A Participant may exercise any Option granted under this Plan with
respect to all or any part of the number of shares then exercisable
under the terms of his written Option Agreement by giving the
Committee written notice of intent to exercise. The notice of
exercise shall specify the number of shares to be purchased under the
Option and the date of exercise.

(b) Each Option granted under the Plan shall be exercisable only during a
Term established by the Committee as set forth in the applicable
Option Agreement. In no event shall the Term of the Option extend
beyond ten (10) years from the date of grant of the Option.

(c) Full payment of the Option price for the shares purchased shall be
made by the Participant on or before the exercise date specified in
the notice of exercise. Payment of the purchase price of any shares
with respect to

30
<PAGE>

which the Option is being exercised shall be (i) cash, (ii) certified
check to the order of the Corporation, or (iii) shares of Common Stock
of the Corporation valued at the Fair Market Value on such Business
Day as the Option or portion thereof is exercised.

(d) The Corporation shall not be required to deliver certificates for such
shares until full payment of the Option price has been made. On or as
soon as is practicable after the exercise date specified in the
Participant's notice and upon full payment of the Option price, the
Corporation shall cause to be delivered to the Participant a
certificate or certificates for the shares then being purchased (out
of previously unissued Common Stock or reacquired Common Stock, as the
Corporation may elect). The exercise of the Option and the resulting
obligation of the Corporation to deliver Common Stock shall, however,
be subject to the condition that the listing, registration, or
qualification of the Option or the shares upon any securities exchange
or under any state or federal law, or the consent, or approval of any
governmental regulatory body shall have been effected or obtained free
of any conditions not acceptable to the Committee.

(e) If the Participant fails to pay for any of the shares specified in
such notice or fails to accept delivery of the shares, his right to
purchase such shares may be terminated by the Corporation. The date
specified in the Participant's notice as the date of exercise shall be
deemed the date of exercise of the Option, provided that payment in
full for the shares to be purchased upon such exercise shall have been
received by such date.

(f) The holder of an Option shall not have any of the rights of a
stockholder with respect to the shares subject to the Option until
such shares shall be issued or transferred to him upon the exercise of
his Option.

(g) Notwithstanding the foregoing, any shares that may be purchased as of
the Effective Date, pursuant to the terms of any Option granted prior
to the Effective Date, shall continue thereafter to be purchasable
pursuant to the exercise of such Option.

9. TERMINATION, DISABILITY, OR DEATH OF OPTION HOLDER. The ability to
exercise Options under this Plan shall be conditioned as follows:

(a) Exercise During and After Employment. Unless otherwise provided in
the terms of an Option, an Option may be exercised by the Participant
while he is an employee and has maintained since the date of the grant
of the Option continuous status as an employee. An Option granted
pursuant to this Plan may not be exercised more than three (3) months
following the termination of the Participant's employment with the
Corporation or its subsidiaries for any reason other than (i)
retirement described in subsection (b) below, (ii) permanent
disability described in subsection (c) below, or (iii) death as
described in subsection (d) below.

(b) Exercise Upon Retirement. Unless otherwise provided in the terms of
an Option, if a Participant's continuous employment shall terminate by
reason of his retirement, at a retirement date authorized by the
Committee, from the Corporation or its subsidiaries, a retired
Participant shall become one hundred percent (100%) Vested in any
Option he has been granted under the Plan as of that date, and he may
exercise the otherwise exercisable Option anytime within six (6)
months of his retirement date.

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<PAGE>

(c) Exercise Upon Permanent Disability. Unless otherwise provided in the
terms of an Option, if a Participant's continuous employment shall
terminate by reason of a permanent disability (as determined by the
Participant's establishing to the Committee his disability as defined
in Code Section 22(e)(3) of the Code, as amended from time to time),
then to the extent that the Participant would have been entitled to
exercise the Option immediately prior to that disability, such Option
of the disabled Participant may be exercised during the period the
Option could have been exercised if the Participant had not been
permanently disabled and had remained in continuous employment;
provided, however, that in all events the Option shall terminate if
not exercised within one (1) year of the termination of employment due
to permanent disability.

(d) Exercise Upon Death. Unless otherwise provided in the terms of an
Option, if a Participant's continuous employment shall terminate by
reason of his death, then to the extent that the Participant would
have been entitled to exercise the Option immediately prior to his
death, such Option of the deceased Participant may be exercised during
the period the Option would have been exercisable if the deceased
Participant had not died and had remained in employment, by the person
or persons (including his estate) to whom his rights under such Option
shall have passed by will or by laws of descent and distribution.

10. ADJUSTMENTS.

(a) In the event that the outstanding shares of Common Stock are hereafter
increased or decreased or changed into or exchanged for a different
number or kind of shares or other securities of the Corporation or of
another corporation, by reason of a recapitalization,
reclassification, stock split-up, combination of shares or dividend or
other distribution payable in capital stock, appropriate adjustment
shall be made by the Committee in the number and kind of shares for
which Options may be granted under the Plan. In addition, the
Committee shall make appropriate adjustment in the number and kind of
shares as to which outstanding Options, or portions thereof then
unexercised, shall be exercisable, to the end that the proportionate
interest of the holder of the Option shall, to the extent practicable,
be maintained as before the occurrence of such event. Such adjustment
in outstanding Options shall be made without change in the total price
applicable to the unexercised portion of the Option but with a
corresponding adjustment in the Option price per share.

(b) In the event of the dissolution or liquidation of the Corporation, any
Option under the Plan shall terminate as of a date to be fixed by the
Committee, provided that not less than thirty (30) days' written
notice of the date so fixed shall be given to each Participant, and
each such Participant shall have the right during such period to
exercise any of his Options as to all or any part of the shares
covered thereby including shares as to which such Options would not
otherwise be exercisable by reason of an insufficient lapse of time.

(1) if there is no Reorganization Agreement or if the Reorganization
Agreement does not specifically provide for the change,
conversion, or exchange of shares under outstanding and
unexercised stock Options

32
<PAGE>

for securities of another corporation, then the Committee shall
take such action, and the Options shall terminate, as provided in
subparagraph (b) of this Section 10; or

(2) if there is a Reorganization Agreement and if the Reorganization
Agreement specifically provides for the change, conversion, or
exchange of shares under outstanding and unexercised stock
Options for securities of another corporation, then the Committee
shall adjust the shares under the Plan, if the Reorganization
Agreement makes specified provision for such adjustment, in a
manner not inconsistent with the provisions of the Reorganization
Agreement for the adjustment, change, conversion, or exchange of
such stock and such Options.

11. CHANGE OF CONTROL. Notwithstanding any other Plan provisions or grant
term, if any Participant is terminated involuntarily from employment with
the Corporation within twelve (12) months after a Change of Control, all
Options granted hereunder shall become exercisable regardless of the number
of years that have passed since the Date of Grant.

12. AMENDMENT AND TERMINATION. Unless the Plan shall theretofore have been
terminated as hereinafter provided, it shall terminate on, and no Option
shall be granted thereunder after the tenth (10th) anniversary of the
Effective Date. The Board may terminate the Plan or make such
modifications or amendments thereof as it shall deem advisable, or to
conform to any change in any law or regulation applicable thereto,
including (a) increasing the maximum number of shares to which Options may
be granted under the Plan, subject to shareholder approval, (b) changing
the class of employees eligible to be granted Options, subject to
shareholder approval, (c) increasing the periods during which Options may
be granted or Options may be exercised, or (d) providing for the
administration of the Plan in a manner which may avoid, without the consent
of the Participant to whom any Option shall theretofore have been granted,
adversely affecting the rights of such Participant under such grant.

13. RESTRICTIONS ON ISSUING SHARES. The transfer of a share of Common Stock
upon the exercise of each Option shall be subject to the condition that if
at any time the Corporation shall determine in its discretion that the
satisfaction of withholding tax or other withholding liabilities, or that
the listing, registration or qualification of any shares otherwise
deliverable upon any securities exchange or under any state or federal law,
or that the consent or approval of any regulatory body, is necessary or
desirable as a condition of, or in connection with, such transfer of shares
pursuant thereto, then in any such event, such transfer shall not be
effective unless such withholding, listing, registration, qualification,
consent, or approval shall have been effected or obtained under conditions
acceptable to the Corporation.

14. USE OF PROCEEDS. The proceeds received from the sale of Common Stock
pursuant to the exercise of Options granted under the Plan shall be added
to the Corporation's general funds and used for general corporate purposes.

33
<PAGE>

any action, suit, or proceeding to which they or any of them may be party
by reason of any action taken or failure to act under or in connection with
the Plan, or any Option and against all amounts paid by them in settlement
thereof (provided such settlement is approved by legal counsel selected by
the Corporation) or paid by them in satisfaction of a judgment in any such
action, suit, or proceeding, except a judgment based upon a finding of bad
faith. Upon the institution of any such action, suit, or proceeding, a
Committee member shall notify the Corporation in writing, giving an
opportunity, at its own expense, to handle and defend the same before such
Committee member undertakes to handle it on his own behalf.

16. EFFECTIVENESS OF THE PLAN. The Plan shall become effective as of the
Effective Date. Options may be granted to Participants prior to such date,
but the ability to exercise all such Options from such grant shall be
conditioned upon such approval and advice.

17. MISCELLANEOUS.

(a) Employment Not Affected. Neither the granting of an Option nor its
exercise shall be construed as granting to the Participant any right
with respect to continuance of his employment with the Corporation or
its subsidiaries. Except as may otherwise be limited by a written
agreement between the Corporation or its subsidiaries and the
Participant, the right of the Corporation or its subsidiaries to
terminate at will the Participant's employment with it at any time
(whether by dismissal, discharge, retirement, or otherwise) is
specifically reserved by the Corporation or its subsidiaries as the
employer or on behalf of the employer (whichever the case may be) and
acknowledged by the Participant.

(b) Notice. Any notice to the Corporation provided for in this instrument
shall be addressed to it in care of its Treasurer at its principal
office in West Virginia, and any notice to the Participant shall be
addressed to the Participant at the current address shown on the
payroll records of the Corporation. Any notice shall be deemed to be
duly given if and when properly addressed and posted by registered or
certified mail, postage prepaid.

CORPORATION:

_____________________________

By: _______________________________

Title: _______________________________ (CORPORATE SEAL)

Attest: _______________________________

Title: _______________________________

34
<PAGE>

PROXY SOLICITED BY BOARD OF DIRECTORS FOR
ANNUAL MEETING OF STOCKHOLDERS OF
POCAHONTAS BANKSHARES CORPORATION

The undersigned stockholder(s) of POCAHONTAS BANKSHARES CORPORATION, hereby
appoints and constitutes CHARLES A. PETERS, C. E. RICHNER, BYRON K. SATTERFIELD
AND WALTER L. SOWERS, or any one of them, but if more than one present, a
majority of them present, to act as lawful attorney or proxy of the
undersigned, with the power of substitution for and in the name, place and
stead of the undersigned, to vote at the Annual Meeting of Stockholders of the
Corporation to be held on April 21, 1998, at Fincastle Country Club, Route 720,
Double Gates, Bluefield, Virginia, at 11:00 a. m. or any adjournment thereof,
for the following purposes and upon any other matters that may come before the
meeting or any adjournment thereof, with all the powers the undersigned would
possess if personally present, hereby revoking all previous proxies:

1. To elect fourteen (14) directors of the Corporation for terms of one year,
and until their successors are elected and qualified.

[_] FOR all nominees listed below [_] WITHHOLD AUTHORITY
(except as marked to the You may withhold authority to vote for
contrary below) any nominee by lining through or
otherwise striking out his name.

<TABLE>
<S> <C> <C> <C>
Paul Cole, Jr. Harold L. Miller John C. Shott J. Brookins Taylor, M. D.
Eustace Frederick Charles A. Peters Scott H. Shott Frank. W. Wilkinson
B. L. Jackson, Jr. C. E. Richner Walter L. Sowers R. W. Wilkinson
Robert M. Jones, M.D. Byron K. Satterfield
</TABLE>

2. To ratify the selection of the firm of Coopers & Lybrand L.L.P., Certified
Public Accountants, as independent auditors of the Corporation for the
fiscal year ending December 31, 1998.
[_] FOR [_] AGAINST [_] ABSTAIN
(Continued and to be signed on reverse side)
<PAGE>

3.To approve the 1998 Director Stock Option Plan.
[_] FOR [_] AGAINST [_] ABSTAIN
4.To approve the 1998 Officer Stock Option Plan.
[_] FOR [_] AGAINST [_] ABSTAIN
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly be brought before the meeting or any adjournment
thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED RATABLY FOR PROPOSAL 1 AND WILL BE VOTED FOR PROPOSALS 2, 3 AND
4.

Dated this .................., 1998

...................................
Signature

...................................
Signature
(When signing as an attorney,
administrator, trustee or
guardian, please give full title
as such. If a corporation, please
sign in full corporate name by
President or other authorized
officer. If a partnership, please
sign in partnership name by
authorized person. For joint
accounts, each joint owner should
sign.)

(Please date and sign exactly as name(s) appear on the share certificate.)