SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

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

                   For the fiscal year ended December 31, 2000
                         Commission file number 0-24159

                     INDEPENDENT COMMUNITY BANKSHARES, INC.
                 (Name of Small Business Issuer in its Charter)

             Virginia                                            54-1696103
   (State or Other Jurisdiction                               (I.R.S. Employer
of Incorporation or Organization)                            Identification No.)

       111 West Washington Street
          Middleburg, Virginia                                      20117
(Address of Principal Executive Offices)                         (Zip Code)

                                 (703) 777-6327
                (Issuer's Telephone Number, Including Area Code)

         Securities registered under Section 12(b) of the Exchange Act:

                                                       Name of Each Exchange
     Title of Each Class                                on Which Registered
     -------------------                                -------------------

           None                                                n/a

         Securities registered under Section 12(g) of the Exchange Act:

                     Common Stock, par value $5.00 per share
                                (Title of Class)

            Check whether the issuer: (1) filed all reports required to be filed
by  Section  13 or 15(d) of the  Exchange  Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),  and
(2) has been subject to such filing requirements for past 90 days.
                                                            Yes   X    No
                                                                -----     -----

            Check if there is no disclosure of delinquent  filers in response to
Item 405 of  Regulation  S-B contained in this form,  and no disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

            The  issuer's  gross  income  for its most  recent  fiscal  year was
$22,878,000.

            The   aggregate   market   value  of  the   voting   stock  held  by
non-affiliates computed by reference to the closing sales price of such stock on
February 2, 2001 was approximately $28,815,572.  (The exclusion


<PAGE>

from such amount of the market value of the shares owned by any person shall not
be deemed an admission by the registrant that such person is an affiliate of the
registrant.)

            The number of  outstanding  shares of Common Stock as of February 2,
2001 was 1,739,247.


                       DOCUMENTS INCORPORATED BY REFERENCE

     Proxy Statement for the 2001 Annual Meeting of Shareholders - Part III



















                                      -2-
<PAGE>

                                TABLE OF CONTENTS

                                     PART I
                                     ------

                                                                            Page
                                                                            ----

ITEM 1.    DESCRIPTION OF BUSINESS........................................... 4

ITEM 2.    DESCRIPTION OF PROPERTY........................................... 8

ITEM 3.    LEGAL PROCEEDINGS................................................. 9

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE
              OF SECURITY HOLDERS............................................ 9

                                    PART II
                                    -------

ITEM 5.    MARKET FOR COMMON EQUITY AND RELATED
              STOCKHOLDER MATTERS............................................ 9

ITEM 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION AND RESULTS OF OPERATIONS........................... 10

ITEM 7.    FINANCIAL STATEMENTS............................................. 27

ITEM 8.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
              ON ACCOUNTING AND FINANCIAL DISCLOSURE........................ 28

                                   PART III
                                   --------

ITEM 9.    DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
              CONTROL PERSONS; COMPLIANCE WITH SECTION
              16(a) OF THE EXCHANGE ACT..................................... 28

ITEM 10.   EXECUTIVE COMPENSATION........................................... 28

ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
              OWNERS AND MANAGEMENT......................................... 28

ITEM 12    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................... 28

ITEM 13.   EXHIBITS, LIST AND REPORTS ON FORM 8-K........................... 28







                                      -3-
<PAGE>

                                     PART I
                                     ------

ITEM 1.     DESCRIPTION OF BUSINESS
            -----------------------

General

         Independent Community  Bankshares,  Inc. ("ICBI" or the "Company") is a
bank  holding  company that was  incorporated  under  Virginia law in 1993.  The
Company  owns all of the stock of its  subsidiaries,  The  Middleburg  Bank (the
"Bank") and The Tredegar Trust Company ("Tredegar"), both of which are chartered
under Virginia law.

         The  Bank  has four  full  service  branches  and one  limited  service
facility.  The  Bank  has  its  main  office  at  111  West  Washington  Street,
Middleburg,  Virginia  20117,  and has  offices in  Purcellville,  Leesburg  and
Ashburn, Virginia. The Bank opened for business on July 1, 1924.

         Tredegar has its main office at Riverfront  Plaza,  901 E. Byrd Street,
Suite 190,  Richmond,  Virginia  23219,  and branch  offices in  Middleburg  and
Williamsburg, Virginia. Tredegar opened for business in January 1994.

         The  Bank  serves  western  Loudoun   County.   Loudoun  County  is  in
northwestern  Virginia  and  included in the  Washington-Baltimore  Metropolitan
statistical  area.  Loudoun County's  population is  approximately  150,000 with
slightly over one-third of the population located in the Company's markets.  The
local  economy is driven by service  industries  requiring a higher skill level,
self-employed  individuals,  the equine industry and the independently  wealthy.
Tredegar  serves  primarily the greater  Richmond area including the counties of
Henrico,  Chesterfield,  Hanover,  Goochland  and  Powhatan,  as well as Loudoun
County.  However,  Tredegar does have customers  outside of its primary  market.
Richmond is the state capital of Virginia,  and the greater  Richmond area has a
population in excess of 800,000 people.

         The Company, through its subsidiaries,  offers a wide range of banking,
fiduciary and investment  management  services available to both individuals and
small  businesses.  The banking  services  include various types of checking and
savings deposit accounts, and the making of business, real estate,  development,
mortgage, home equity, automobile and other installment,  demand and term loans.
Also,  the Bank  offers  ATMs at all  locations,  internet  banking,  travelers'
checks,  money orders,  safe deposit rentals,  collections,  notary public, wire
services and other traditional bank services to its customers. Tredegar provides
a variety of investment  management and fiduciary  services  including trust and
estate  settlement.  Tredegar can also serve as escrow agent,  attorney-in-fact,
guardian of property or trustee of an IRA.

         The Bank has one  wholly  owned  subsidiary,  Middleburg  Bank  Service
Corporation.  Middleburg  Bank  Service  Corporation  is a partner  in a limited
liability company, Bankers Title Shenandoah, LLC, which sells title insurance to
its members.  Middleburg  Bank Service  Corporation has also invested in another
limited liability company, Virginia Bankers Insurance Center, LLC, which acts as
a broker for insurance sales for its member banks.

         As of December 31, 2000,  ICBI had a total of 111 full time  equivalent
employees.  The Company considers  relations with its employees to be excellent.
The Company's employees are not represented by a collective bargaining unit.



                                      -4-
<PAGE>

Competition

         ICBI  faces  significant  competition  for  both  loans  and  deposits.
Competition for loans comes from commercial banks, savings and loan associations
and savings banks,  mortgage banking  subsidiaries of regional commercial banks,
subsidiaries  of  national  mortgage  bankers,  insurance  companies,  and other
institutional lenders. Its most direct competition for deposits has historically
come from savings and loan  associations  and savings banks,  commercial  banks,
credit unions and other  financial  institutions.  Based upon total  deposits at
June 30, 2000 as reported  to the FDIC,  ICBI has the largest  share of deposits
among the banking organizations operating in Loudoun County, Virginia. ICBI also
faces  competition  for deposits from  short-term  money market mutual funds and
other corporate and government securities funds.

         Tredegar  competes  for  customers  and  accounts  with  banks,   other
financial   institutions   and  money  managers.   Even  though  many  of  these
institutions  have been engaged in the trust or investment  management  business
for a  considerably  longer period of time than Tredegar and have  significantly
greater  resources,  Tredegar has grown through its  commitment to quality trust
services and a local community approach to business.

Supervision and Regulation

         General.  As  a  bank  holding  company,  the  Company  is  subject  to
regulation under the Bank Holding Company Act of 1956, as amended,  the ("BHCA")
and the examination and reporting  requirements of the Board of Governors of the
Federal  Reserve System (the "Federal  Reserve  Board").  Under the BHCA, a bank
holding company may not directly or indirectly  acquire  ownership or control of
more than 5% of the voting shares or substantially all of the assets of any bank
or merge or  consolidate  with another bank  holding  company  without the prior
approval  of the  Federal  Reserve  Board.  The BHCA also  generally  limits the
activities of a bank holding company to that of banking, managing or controlling
banks,  or any other  activity  which is determined to be so closely  related to
banking or to managing or  controlling  banks that an  exception  is allowed for
those activities.

         As  a   state-chartered   commercial  bank,  the  Bank  is  subject  to
regulation,  supervision  and  examination  by the  Virginia  State  Corporation
Commission's  Bureau of Financial  Institutions.  It also subject to regulation,
supervision and examination by the Federal Reserve Board.  State and Federal law
also govern the activities in which the Bank engages,  the  investments it makes
and the aggregate  amount of loans that may be granted to one borrower.  Various
consumer and compliance laws and regulations also affect the Bank's operations.

         The earnings of the Company's subsidiaries,  and therefore the earnings
of  the  Company,  are  affected  by  general  economic  conditions,  management
policies,  changes  in state and  Federal  legislation  and  actions  of various
regulatory  authorities,  including  those  referred  to  above.  The  following
description summarizes the significant state and federal and state laws to which
the  Company,  the Bank and Tredegar  are  subject.  To the extent  statutory or
regulatory  provisions or proposals are described,  the description is qualified
in  its  entirety  by  reference  to  the  particular  statutory  or  regulatory
provisions or proposals.

         Payment of  Dividends.  The  Company  is a legal  entity  separate  and
distinct from its banking and other subsidiaries.  The majority of the Company's
revenues are from dividends paid to the Company by the Bank. The Bank is subject
to laws and  regulations  that  limit the  amount of  dividends  it can pay.  In
addition,  both the Company and its banking  subsidiaries are subject to various
regulatory  restrictions  relating  to  the  payment  of  dividends,   including
requirements  to  maintain  capital  at or above  regulatory  minimums.  Banking
regulators  have  indicated  that banking  organizations  should  generally  pay
dividends only if the organization's net income available to common shareholders
over the past  year has been



                                      -5-
<PAGE>

sufficient  to fully fund the  dividends  and the  prospective  rate of earnings
retention  appears  consistent  with the  organization's  capital  needs,  asset
quality and overall financial condition. The Company does not expect that any of
these laws,  regulations or policies will  materially  affect the ability of the
Bank to pay  dividends.  During  the year  ended  December  31,  2000,  the Bank
declared $1.5 million in dividends payable to the Company.

         Capital.  The Federal Reserve Board has issued  risk-based and leverage
capital guidelines applicable to banking organizations it supervises.  Under the
risk-based  capital  requirements,  the Company and the Bank are each  generally
required to maintain a minimum  ratio of total capital to  risk-weighted  assets
(including  certain  off-balance  sheet  activities,  such as standby letters of
credit) of 8%. At least half of the total  capital  must be  composed  of common
equity, retained earnings and qualifying perpetual preferred stock, less certain
intangibles   ("Tier  1  capital").   The   remainder  may  consist  of  certain
subordinated  debt,  certain hybrid capital  instruments,  qualifying  preferred
stock and a limited amount of the loan loss allowance  ("Tier 2 capital," which,
together with Tier 1 capital, composes "total capital").

         In  addition,   each  of  the  federal  bank  regulatory  agencies  has
established  minimum  leverage capital  requirements for banking  organizations.
Pursuant to these  requirements,  banking  organizations must maintain a minimum
ratio of Tier 1 capital to adjusted  average  quarterly assets equal to 3% to 5%
subject to federal  bank  regulatory  evaluation  of an  organization's  overall
safety and soundness.

         The  risk-based  capital or  standards  of the  Federal  Reserve  Board
explicitly  identify  concentrations  of credit risk and the risk  arising  from
non-traditional  activities, as well as an institution's ability to manage these
risks, as important  factors to be taken into account by the agency in assessing
an institution's  overall capital adequacy.  The capital guidelines also provide
that an institution's exposure to a decline in the economic value of its capital
due to  changes in  interest  rates be  considered  by the agency as a factor in
evaluating a banking organization's capital adequacy.

         Other  Safety  and  Soundness  Regulations.   There  are  a  number  of
obligations  and  restrictions  imposed  on bank  holding  companies  and  their
depository  institution  subsidiaries by Federal law and regulatory  policy that
are  designed  to reduce  potential  loss  exposure  to the  depositors  of such
depository  institutions  and  to  the  Federal  Deposit  Insurance  Corporation
("FDIC") insurance funds in the event the depository institution is insolvent or
is in danger of becoming  insolvent.  For  example,  under  requirements  of the
Federal  Reserve Board with respect to bank holding company  operations,  a bank
holding  company is required to serve as a source of  financial  strength to its
subsidiary  depository  institutions  and to commit  resources  to support  such
institutions in circumstances  where it might not do so otherwise.  In addition,
the  "cross-guarantee"  provisions  of Federal  law require  insured  depository
institutions under common control to reimburse the FDIC for any loss suffered or
reasonably  anticipated  by the FDIC as a result of the  insolvency  of commonly
controlled insured depository institutions or for any assistance provided by the
FDIC to  commonly  controlled  insured  depository  institutions  in  danger  of
failure.  The FDIC may decline to enforce the  cross-guarantee  provision  if it
determines  that a waiver  is in the best  interests  of the  deposit  insurance
funds. The FDIC's claim for reimbursement  under the cross guarantee  provisions
is superior to claims of shareholders of the insured  depository  institution or
its  holding  company  but is  subordinate  to  claims  of  depositors,  secured
creditors  and  nonaffiliated  holders  of  subordinated  debt  of the  commonly
controlled insured depository institutions.

         The Federal  banking  agencies  also have broad  powers  under  current
Federal  law to take  prompt  corrective  action to resolve  problems of insured
depository  institutions.  The extent of these  powers  depends upon whether the
institution   in  question   is  well   capitalized,   adequately   capitalized,
undercapitalized, significantly undercapitalized or critically undercapitalized,
as defined by the law. As of December  31,  2000,  the Company and the Bank were
classified as well capitalized.



                                      -6-
<PAGE>

         State banking  regulators also have broad  enforcement  powers over the
Bank,  including  the  power to  impose  fines  and  other  civil  and  criminal
penalties, and to appoint a conservator.

         Interstate  Banking  and  Branching.  Current  Federal  law  authorizes
interstate  acquisitions of banks and bank holding companies without  geographic
limitation.  Effective  June 1,  1998,  a bank  headquartered  in one  state was
authorized  to merge  with a bank  headquartered  in another  state,  as long as
neither of the states had opted out of such interstate merger authority prior to
such  date.  After  a bank  has  established  branches  in a  state  through  an
interstate  merger  transaction,  the bank may establish and acquire  additional
branches at any location in the state where a bank  headquartered  in that state
could have established or acquired  branches under  applicable  Federal or state
law.

         Gramm-Leach-Bliley Act of 1999. The Gramm-Leach-Bliley Act of 1999 (the
"Act") was signed into law on November 12, 1999. The Act covers a broad range of
issues,  including a repeal of most of the  restrictions on  affiliations  among
depository institutions,  securities firms and insurance companies.  Most of the
Act's  provisions  require  the  federal  bank  regulatory  agencies  and  other
regulatory bodies to adopt regulations to implement the Act, and for that reason
an assessment of the full impact on the Company of the Act must await completion
of that regulatory process.

         The Act  repeals  sections  20 and 32 of the  Glass-Stegall  Act,  thus
permitting unrestricted affiliations between banks and securities firms. The Act
also  permits  bank  holding  companies  to elect to  become  financial  holding
companies.  A financial  holding company may engage in or acquire companies that
engage in a broad range of financial services,  including securities  activities
such as underwriting,  dealing, brokerage,  investment and merchant banking; and
insurance  underwriting,  sales and brokerage  activities.  In order to become a
financial  holding  company,  the bank holding company and all of its affiliated
depository  institutions  must be  well-capitalized,  well-managed,  and have at
least a satisfactory Community Reinvestment Act rating.

         The Act  provides  that the states  continue to have the  authority  to
regulate insurance  activities,  but prohibits the states in most instances from
preventing or significantly  interfering with the ability of a bank, directly or
through   an   affiliate,   to  engage   insurance   sales,   solicitations   or
cross-marketing  activities.  Although the states  generally  must regulate bank
insurance  activities in a nondiscriminatory  manner, the states may continue to
adopt and enforce rules that specifically  regulate bank insurance activities in
certain areas identified in the Act. The Act directs the federal bank regulatory
agencies to adopt insurance consumer protection  regulations that apply to sales
practices, solicitations, advertising and disclosures.

         The Act  adopts a system  of  functional  regulation  under  which  the
Federal  Reserve  Board is  confirmed as the umbrella  regulator  for  financial
holding   companies,   but  financial  holding  company  affiliates  are  to  be
principally  regulated  by  functional  regulators  such as the FDIC  for  state
nonmember bank affiliates, the Securities and Exchange Commission for securities
affiliates  and state  insurance  regulators for insurance  affiliates.  The Act
repeals  the broad  exemption  of banks from the  definitions  of  "broker"  and
"dealer" for purposes of the  Securities  Exchange Act of 1934, as amended,  but
identifies a set of specific  activities,  including  traditional bank trust and
fiduciary  activities,  in  which a bank  may  engage  without  being  deemed  a
"broker",  and a set of  activities  in which a bank may  engage  without  being
deemed a "dealer".  The Act also makes conforming  changes in the definitions of
"broker" and "dealer" for  purposes of the  Investment  Company Act of 1940,  as
amended, and the investment Advisers Act of 1940, as amended.

         The Act contains  extensive  customer  privacy  protection  provisions.
Under these provisions,  a financial  institution must provide to its customers,
at the  inception of the customer  relationship  and  annually  thereafter,  the
institution's  policies and  procedures  regarding  the  handling of  customers'
nonpublic  personal  financial  information.  The Act provides that,  except for
certain  limited  exceptions,  an



                                      -7-
<PAGE>

institution  may not provide such personal  information  to  unaffiliated  third
parties unless the institution  discloses to the customer that such  information
may be so provided and the customer is given the  opportunity to opt out of such
disclosure.  An institution  may not disclose to a  non-affiliated  third party,
other than to a consumer  reporting  agency,  customer  account numbers or other
similar account identifiers for marketing  purposes.  The Act also provides that
the states may adopt  customer  privacy  protections  that are more  strict than
those  contained  in the Act. The Act also makes a criminal  offense,  except in
limited circumstances, obtaining or attempting to obtain customer information of
a financial nature by fraudulent or deceptive means.

         Tredegar. Tredegar operates as a trust subsidiary of the Company. It is
subject  to  supervision  and  regulation  by  the  Virginia  State  Corporation
Commission's Bureau of Financial Institutions and the Federal Reserve Board.

         State and federal  regulators have substantial  discretion and latitude
in the exercise of their  supervisory  and  regulatory  authority over Tredegar,
including  the  statutory  authority to  promulgate  regulations  affecting  the
conduct of business and the  operations of Tredegar.  They also have the ability
to exercise substantial remedial powers with respect to Tredegar in the event it
determines that Tredegar is not in compliance with  applicable  laws,  orders or
regulations  governing  its  operations,  is  operating  in an unsafe or unsound
manner, or is engaging in any irregular practices.


ITEM 2.     DESCRIPTION OF PROPERTY
            -----------------------

         The  headquarters  building  of the  Company  and the Bank,  which also
serves as a branch office for Tredegar, was completed in 1981 and is a two-story
building of brick construction,  with approximately  18,000 square feet of floor
space located at 111 West Washington  Street,  Middleburg,  Virginia 20117.  The
office operates nine teller windows, including three drive-up facilities and one
stand-alone automatic teller machine. The Bank owns the headquarters building.

         The  Purcellville  bank branch was purchased in 1994 and is a one-story
building with a basement of brick construction,  with approximately 3,000 square
feet of floor  space  located at 431 East Main  Street,  Purcellville,  Virginia
20132.  The office  operates  four  teller  windows,  including  three  drive-up
facilities and one drive-up automatic teller machine.  The Bank owns this branch
building.

         The  Leesburg  bank  branch was  completed  in 1997 and is a  two-story
building of brick  construction,  with approximately  6,000 square feet of floor
space located at 102 Catoctin Circle, S.E., Leesburg, Virginia 20175. The office
operates  five teller  windows,  including  three  drive-up  facilities  and one
drive-up automatic teller machine. The Bank also owns this branch building.

         The  Leesburg  limited  service  facility,  located  at 200 North  King
Street, was leased beginning April 1999. The leased space consists of 200 square
feet  with  one  teller  window  and a  stand-alone  automated  teller  machine.
Transactions  in  this  branch  are  limited  to  paying  and  receiving  teller
functions.  The  initial  term of this lease is five  years with two  additional
renewal  periods of five years each.  The annual lease expense  associated  with
this location is $5,400.

         The  Ashburn  bank  branch,  which is  leased,  opened in June 1999 and
consists of 3,400 rentable square feet at 20955  Professional  Plaza, Suite 100,
Ashburn,  Virginia  20147.  The office is a full service branch with five teller
windows,  three drive-up facilities and a drive-up automated teller machine. The
initial  term of the lease is 15 years with two five year renewal  options.  The
annual lease expense associated with this location is $68,000.



                                      -8-
<PAGE>

         The mortgage banking  department of the Bank leases office space at 203
Harrison  Street,  Leesburg,  Virginia 20175.  The space includes 1,822 rentable
square feet used primarily for mortgage  banking  operations and loan originator
office  space.  The initial  term of the lease is for five years with no renewal
options. The annual lease expense associated with this location is $35,000.

         Tredegar leases its main office in Richmond,  Virginia.  Rental expense
for this location totaled $44,000 in the fiscal year ended December 31, 2000. In
June 2000,  Tredegar leased additional  office space in Williamsburg,  Virginia.
The space  includes  approximately  500 square feet used  primarily for business
development and sales. The annual lease expense associated with this location is
$8,700.

         All of the Company's properties are in good operating condition and are
adequate for the Company's present and anticipated future needs.


ITEM 3.     LEGAL PROCEEDINGS
            -----------------

         There are no material pending legal proceedings to which the company is
a party or of which the property of the Company is subject.


ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
            ---------------------------------------------------

         No matters were submitted  during the fourth quarter of the fiscal year
covered by this report to a vote of security holders of the Company.


                                     PART II
                                     -------

ITEM 5.     MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
            --------------------------------------------------------

         Since September 15, 2000, the Company's  Common Stock has traded on the
Nasdaq SmallCap Stock Market under the symbol "ICBX". The Common Stock traded on
the OTC Bulletin Board from October 1997 to September 2000.

                           Market Price and Dividends
<TABLE>
<CAPTION>
                                                           Sales Price ($)         Dividends ($)
                                                           ---------------         -------------
                                                        High            Low
                                                        ----            ---
<S>                                                     <C>            <C>              <C>
1999:
      1st quarter............................           23.88          20.00            .17
      2nd quarter............................           24.00          23.25            .17
      3rd quarter............................           29.25          22.00            .17
      4th quarter............................           26.25          21.75            .17
2000:
      1st quarter............................           24.75          20.00            .21
      2nd quarter............................           24.50          18.00            .21
      3rd quarter............................           26.00          20.00            .21
      4th quarter............................           26.75          20.00            .21
</TABLE>



                                      -9-
<PAGE>

         ICBI  historically  has paid cash dividends on a quarterly  basis.  The
final determination of the timing, amount and payment of dividends on the Common
Stock is at the discretion of ICBI's Board of Directors and will depend upon the
earnings of ICBI and its  subsidiaries,  principally,  its subsidiary  bank, the
financial  condition  of ICBI and  other  factors,  including  general  economic
conditions and applicable  governmental  regulations  and policies.  ICBI or the
Bank has paid regular cash dividends for over 200 consecutive quarters.

         As of February 1, 2001, ICBI had 950 shareholders of record.


ITEM 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
            -----------------------------------------------------------
            AND RESULTS OF OPERATIONS
            -------------------------

         The  following   discussion   provides   information  about  the  major
components of the results of operations and financial condition,  liquidity, and
capital  resources  of ICBI.  This  discussion  and  analysis  should be read in
conjunction with the Company's  Consolidated  Financial  Statements and Notes to
Consolidated Financial Statements.

Overview

         ICBI is headquartered in Middleburg,  Virginia and has two wholly owned
subsidiaries,  the  Bank and  Tredegar.  The Bank is a  community  bank  serving
western Loudoun County, Virginia with four full service branches and one limited
service  facility.  Tredegar  is a  trust  company  headquartered  in  Richmond,
Virginia with a branch office in Middleburg, Virginia.

         In 2000,  ICBI continued to realize the benefit of high growth rates in
both assets and net earnings.  Results for 2000 were also favorably  affected by
the growth in revenues from Tredegar and the Bank's mortgage banking  operation.
By December  31, 2000 total  assets were $289.5  million,  an increase of 18.7%.
Total assets at December 31, 1999 were $243.9  million.  Loans,  net of unearned
income, grew 24.0% from $143.2 million at December 31, 1999 to $177.6 million at
December 31, 2000. Total deposits increased $20.8 million from $203.8 million at
December  31, 1999 to $224.6  million at December  31,  2000.  ICBI remains well
capitalized with  risk-adjusted core capital and total capital ratios well above
the regulatory minimums.  Asset quality measures also remained strong throughout
the year.

         ICBI is not  aware of any  current  recommendations  by any  regulatory
authorities that, if they were implemented,  would have a material effect on the
registrant's liquidity, capital resources or results of operations.

Results of Operations

Net Income

         Net income for 2000 was $4.2 million,  an increase of 18.6% over 1999's
net income of $3.6 million. Net income for 1999 was $3.6 million, an increase of
19.9% over 1998's net income of $3.0  million.  For 2000,  earnings  per diluted
share were $2.41 compared to $1.99 and $1.63 for 1999 and 1998, respectively.  A
repurchase  of common  stock in March 2000  effectively  increased  earnings per
diluted share by $.05.

         Return on average  assets (ROA) measures how  effectively  ICBI employs
its assets to produce net income.  ICBI  increased its ROA to 1.62% for the year
ended  December  31, 2000 from 1.60 % for the same period in 1999.  A stable net
interest margin, a 24.0% increase  non-interest  income as well as a



                                      -10-
<PAGE>

diminishing rate of increase in non-interest  expenses contributed to the growth
in the ROA. The ROA for 1998 was 1.54%. Return on average equity (ROE),  another
measure of earnings  performance,  indicates  the amount of net income earned in
relation to the total equity  capital  invested.  ROE increased to 17.5% for the
year  ended  December  31,  2000.  ROE was 15.5%  and 13.2% for the years  ended
December 31, 1998 and 1997, respectively.

             Average Balances, Income and Expenses, Yields and Rates
<TABLE>
<CAPTION>
                                                                            Years Ended December 31,
                                           -----------------------------------------------------------------------------------------
                                                        2000                          1999                          1998
                                           -----------------------------------------------------------------------------------------
                                            Average    Income/   Yield/   Average    Income/   Yield/   Average    Income/   Yield/
                                            Balance    Expense    Rate    Balance    Expense    Rate    Balance    Expense    Rate
                                           -----------------------------------------------------------------------------------------
                                                                              (Dollars in thousands)
<S>                                        <C>        <C>         <C>    <C>        <C>         <C>    <C>        <C>         <C>
Assets :
Securities:
   Taxable                                 $  46,838  $   3,334   7.12%  $  30,368  $   1,937   6.38%  $  31,657  $   1,804   5.70%
   Tax-exempt (1) (2)                         30,963      2,392   7.73%     30,291      2,264   7.47%     28,931      2,204   7.62%
                                           ---------  ---------          ---------  ---------          ---------  ---------
       Total Securities                    $  77,801  $   5,726   7.36%  $  60,659  $   4,201   6.93%  $  60,588  $   4,008   6.62%
Loans
   Taxable                                 $ 160,658  $  14,049   8.74%  $ 135,735  $  11,677   8.60%  $ 112,281  $  10,181   9.07%
   Tax-exempt                                    437         41   9.38%        371         26   7.01%        416         36   8.74%
                                           ---------  ---------          ---------  ---------          ---------  ---------
       Total Loans                         $ 161,095  $  14,090   8.75%  $ 136,106  $  11,703   8.60%  $ 112,697  $  10,217   9.07%
Federal Funds Sold                             2,800        170   6.07%      6,030        290   4.81%      3,842        211   5.49%
Interest on Money Market investments             512         40   7.81%      1,884         98   5.20%      1,817         90   4.95%
Interest Bearing Deposits in
      other financial institutions               104          4   3.85%         24          1   4.17%        134          7   5.22%
                                           ---------  ---------          ---------  ---------          ---------  ---------
       Total earning assets                $ 242,312  $  20,030   8.27%  $ 204,703  $  16,293   7.96%  $ 179,078  $  14,533   8.12%
Less:  allowances for loan losses             (1,595)                       (1,223)                       (1,044)
Total nonearning assets                       20,875                        18,979                        15,084
                                           ---------                     ---------                     ---------
Total assets                               $ 261,592                     $ 222,459                     $ 193,118
                                           =========                     =========                     =========

Liabilities (1):
Interest-bearing deposits:
    Checking                               $  32,461  $     295   0.91%  $  29,583  $     292   0.99%  $  23,853  $     306   1.28%
    Regular savings                           20,214        578   2.86%     19,000        570   3.00%     17,075        602   3.53%
    Money market savings                      42,852      1,162   2.71%     41,701      1,139   2.73%     34,195      1,002   2.93%
    Time deposits:
       $100,000 and over                      25,997      1,453   5.59%     21,965      1,094   4.98%     18,151        949   5.23%
       Under $100,000                         37,323      1,836   4.92%     35,707      1,703   4.77%     38,557      2,044   5.30%
                                           ---------  ---------          ---------  ---------          ---------  ---------
Total interest-bearing deposits            $ 158,847  $   5,324   3.35%  $ 147,956  $   4,798   3.24%  $ 131,831  $   4,903   3.72%

Federal Home Loan Bank Advances                9,186        584   6.36%         56          3   5.36%      1,319         70   5.31%
Securities sold under agreements
    to repurchase                             12,279        616   5.02%      5,863        253   4.32%      2,833        125   4.41%
Long-term debt                                 8,090        500   6.18%      5,000        281   5.62%      3,740        206   5.51%
Federal Funds Purchased                          286         17   5.94%        179         10   5.59%        146          9   6.16%
                                           ---------  ---------          ---------  ---------          ---------  ---------
       Total interest-bearing liabilities  $ 188,688  $   7,041   3.73%  $ 159,054  $   5,345   3.36%  $ 139,869  $   5,313   3.80%
Non-interest bearing liabilities
    Demand Deposits                           47,355                        39,154                        29,782
    Other liabilities                          1,329                         1,213                           997
                                           ---------                     ---------                     ---------
Total liabilities                          $ 237,372                     $ 199,421                     $ 170,648
Shareholders' equity                          24,220                        23,038                        22,470
                                           ---------                     ---------                     ---------

Total liabilities and shareholders' equity $ 261,592                     $ 222,459                     $ 193,118
                                           =========                     =========                     =========
Net interest income                                   $  12,989                     $  10,948                     $   9,220
                                                      =========                     =========                     =========
Interest rate spread                                              4.54%                         4.60%                         4.32%
Interest expense as a percent of
    average earning assets                                        2.91%                         2.61%                         2.97%
Net interest margin                                               5.36%                         5.35%                         5.15%
</TABLE>
    __________________
    (1) Income  and yields  are  reported  on tax  equivalent  basis  assuming a
        federal tax rate of 34%.
    (2) Income and yields  include  dividends on  preferred  bonds which are 70%
        excludable for tax purposes.



                                      -11-
<PAGE>

Net Interest Income

         Net interest  income  represents  the  principal  source of earnings of
ICBI. Net interest income is the amount by which interest generated from earning
assets exceeds the expense of funding those assets. Changes in volume and mix of
interest  earning  assets and  interest  bearing  liabilities,  as well as their
respective  yields  and  rates,  have a  significant  impact on the level of net
interest income.

         Net interest income on a fully  tax-equivalent  basis was $13.0 million
for the year ended  December  31,  2000.  This is an  increase of 18.6% over the
$10.9 million reported for the same period in 1999. Net interest income for 1999
increased 18.7% over the $9.2 million reported for 1998.

         The increase in net interest  income in 2000  resulted  primarily  from
continued  growth in average earning assets and  secondarily  from the increased
yield on earning  assets.  The increased yield on earning assets was offset by a
similar  increase  in the cost of  funding  therefore  the net  interest  margin
remained  virtually  the same for 2000.  The average  balance in the  securities
portfolio increased while the tax-equivalent  yield increased 43 basis points to
7.36%,  providing $1.5 million in additional interest income on a tax-equivalent
basis.  The  asset/liability  strategies  employed by management  influenced the
increase in the investment  portfolio  yield.  The average loan portfolio volume
increased  18.4% during 2000 providing $2.2 million in interest income while the
average  yield on the loan  portfolio  increased  15 basis  points  causing  the
interest income provided by the loan portfolio to increase by another $200,000.

         In 2000,  ICBI  experienced  marginal  growth in its  interest  bearing
checking,  savings  and money  market  accounts.  The 5.8%  average  increase in
balances  resulted in just  $34,000  additional  interest  expense.  The average
balances in  certificates of deposit  increased 9.8% while the interest  expense
associated with these deposits increased  $492,000.  The increase in the average
rate paid on  certificates  of deposit as well as the volume of  certificates of
deposit contributed equally to the increase in expense. ICBI's reliance on other
funding  sources,  such as the Federal  Home Loan Bank  advances,  increased  on
average  by $12.2  million  with a  related  increase  in  interest  expense  of
$800,000.  Total interest expense for 2000 was $7.0 million, an increase of $1.7
million  compared to 1999.  During the first quarter of 2000, ICBI borrowed $1.3
million from a correspondent  bank to repurchase 57,785 common shares.  Interest
expense related to this debt is included in long term debt interest  expense and
amounted to $76,000.

         The increase in net interest  income in 1999  resulted  primarily  from
continued  growth in the average  earning assets and reduction of funding costs.
The combination of these two factors contributed to the strengthening of the net
interest margin,  which increased 20 basis points to 5.35% for 1999. The average
balance  in  the   securities   portfolio   did  not  increase.   However,   the
tax-equivalent  yield  increased 31 basis points to 6.93%.  The  asset/liability
strategies  employed  by  management  caused  the  increase  in  the  securities
portfolio  yield. The average loan portfolio volume increased 20.8% during 1999,
providing $2.0 million in interest  income.  However,  average yield on the loan
portfolio decreased 47 basis points, causing the interest income provided by the
loan  portfolio  to decrease  by  $500,000.  The net effect to  interest  income
provided by the loan  portfolio  was an increase  $1.5  million in 1999.  Excess
deposit  growth over loan growth was placed in temporary  investments  including
federal funds sold and money market  investments.  The average balances in those
accounts  increased $2.1 million during 1999 and provided  $81,000 in additional
interest income.

         In 1999,  ICBI enjoyed  significant  growth in core  funding  deposits,
contributing  to the 48 basis  point  decrease  in cost of  funds.  Management's
strategy to continue  attracting  core deposits  resulted in a 20.2% increase in
checking,  savings and money market deposit  accounts and a $91,000  increase in
interest  expense.  The average  balances in certificates  of deposit  increased
$964,000 while the interest  expense  associated  with these deposits  decreased
$196,000.  ICBI's reliance on other funding sources



                                      -12-
<PAGE>

increased on average by $3.1 million with a related increase in interest expense
of $137,000.  Total interest  expense for 1999 was $5.3 million,  an increase of
$32,000 compared to 1998.

         The  following   table   analyzes   changes  in  net  interest   income
attributable to changes in the volume of interest-bearing assets and liabilities
compared to changes in interest rates. The change in interest due to both volume
and rate has been  allocated  to volume and rate  changes in  proportion  to the
relationship of the absolute  dollar amounts of the change in each.  Nonaccruing
loans are included in the average outstanding loans.

                            Volume and Rate Analysis
                             (Tax Equivalent Basis)
                            Years Ended December 31,
<TABLE>
<CAPTION>
                                                   --------------------------------------    ---------------------------------------
                                                                2000 vs. 1999                            1999 vs. 1998
                                                          Increase (Decrease) Due                    Increase (Decrease) Due
                                                                to Changes in:                            to Changes in:
                                                   --------------------------------------    ---------------------------------------
                                                     Volume         Rate          Total        Volume         Rate          Total
                                                     ------         ----          -----        ------         ----          -----
<S>                                                <C>           <C>           <C>           <C>           <C>           <C>
Earning Assets:
Securities:
    Taxable                                        $    1,151    $      246    $    1,397    $      (69)   $      202    $      133
    Tax-exempt                                             50            78           128           103           (43)           60
Loans:
    Taxable                                             2,179           193         2,372         1,990          (494)        1,496
    Tax-exempt                                              5            10            15            (4)           (6)          (10)
Federal funds sold                                       (235)          115          (120)          101           (22)           79
Interest on money market investments                     (187)          129           (58)            3             5             8
Interest bearing deposits in other
    financial institutions                                  3             -             3            (5)           (1)           (6)
                                                   ----------    ----------    ----------    ----------    ----------    ----------
     Total earning assets                          $    2,966    $      771    $    3,737    $    2,119    $     (359)   $    1,760

Interest-Bearing Liabilities:
Interest checking                                  $       18    $      (15)            3    $     (246)   $      232           (14)
Regular savings deposits                                   30           (22)            8            96          (128)          (32)
Money market deposits                                      31            (8)           23           199           (62)          137
Time deposits
    $100,000 and over                                     215           144           359           188           (43)          145
    Under $100,000                                         78            55           133          (145)         (196)         (341)
                                                   ----------    ----------    ----------    ----------    ----------    ----------
    Total interest bearing deposits                $      372    $      154    $      526    $       92    $     (197)   $     (105)
    Federal Home Loan Bank
        Advances                                          580             1           581           (68)            1           (67)
    Securities sold under agree-
      ment to repurchase                                  317            46           363           130            (2)          128
    Long-term debt                                        188            31           219            71             4            75
    Federal Funds Purchased                                 6             1             7             2            (1)            1
                                                   ----------    ----------    ----------    ----------    ----------    ----------
      Total interest bearing
         liabilities                               $    1,463    $      233    $    1,696    $      227    $     (195)   $       32

Change in net interest income                      $    1,503    $      538    $    2,041    $    1,892    $     (164)   $    1,728
                                                   ==========    ==========    ==========    ==========    ==========    ==========
</TABLE>

Provision for Loan Losses

         ICBI's loan loss  provision  during 2000 was  $400,000,  an increase of
$20,000  from 1999.  ICBI is  committed  to making  loan loss  provisions  which
maintain an allowance  that  adequately  reflects the risk  inherent in the loan
portfolio. This is more fully discussed in the "Asset Quality" section below.



                                      -13-
<PAGE>

Other Income

         Other income has been and will  continue to be an important  factor for
increasing profitability. Management recognizes this and continues to review and
consider areas where non-interest income can be increased. Other income includes
fees  generated  by the  mortgage  banking  department  of the  Bank  as well as
Tredegar.  Trust fee income increased 38.9% during 2000 to $1.6 million.  Strong
business  development  efforts  at  Tredegar  during  2000  resulted  in a 39.7%
increase in assets under management and  accountability.  Typically,  trust fees
are based upon a percentage  of the assets so that any increases in assets under
management and accountability result in a similar increase in fees. The mortgage
banking  department  contributed an additional $82,000 of fees on loans held for
sale  during  2000.  Growth  in  transaction   deposit  accounts  also  provided
additional  service  charge  and  fee  income.  The  service  charges  and  fees
associated with deposit accounts  increased 9.7% during 2000.  During 2000, ICBI
took $204,000 in losses in an investment portfolio restructuring to increase the
portfolio's  yield.  Total other income for 2000 was $3.5  million,  compared to
$2.9 million for 1998.

         Other income for 1999 increased 35.8% to $2.9 million from $2.2 million
in 1998. The increase is due primarily to the increase in trust fee income, fees
on loans held for sale and service charges on deposit  accounts.  In 1999, trust
fee income  increased to $1.1 million,  an increase of $293,000  over 1998.  The
Bank's mortgage banking  department was open for its first full year in 1999 and
contributed  $561,000 to other income by generating fees on loans held for sale.
Service  charges,  commission and fees on deposit accounts were $1.0 million for
1999,  an  increase of $160,000  over 1998.  The  increase in these fees was due
primarily to deposit growth.

                                  Other Income
<TABLE>
<CAPTION>
                                                                           Year Ended December 31,
                                                                  --------------------------------------
                                                                     2000          1999          1998
                                                                  ----------    ----------    ----------
                                                                              (In thousands)
<S>                                                               <C>           <C>           <C>
         Service charges, commissions and fees                    $    1,180    $    1,076    $      916
         Trust fee income                                              1,594         1,148           855
         Fees on loans held for sale                                     643           561           241
         Other operating income                                          252           174           175
                                                                  ----------    ----------    ----------
              Noninterest income                                  $    3,669    $    2,959    $    2,187

         Profits (losses) on securities available for sale, net         (204)          (13)          (18)

                                                                  ----------    ----------    ----------
           Total noninterest income                               $    3,465    $    2,946    $    2,169
                                                                  ==========    ==========    ==========
</TABLE>

Other Expenses

         Improving  operating  efficiency  is  as  important  to  management  as
enhancing other income.  Total other expenses increased 18.8% or $1.5 million to
$9.6 million in 2000.  Salaries and employee benefits  increased $1.1 million or
23.2% due to additions of  management  and staff related to expanding the branch
network, increased trust operations and enhancing the internal infrastructure to
support a growing organization.  The current economy in Loudoun County, Virginia
is such that unemployment  rates hover around 1.0%, which increases the pressure
to provide competitive salary and benefit programs. This also contributed to the
increased  salary  and  benefit  cost for  both  2000 and  1999.  Occupancy  and
equipment  expense  increased  $159,000 or 15.7% to $1.2 million.  Occupancy and
equipment  expense for 2000  include a full year's  expense of the leases on two
new branch sites as well as an office for the mortgage banking  department.  The
Purcellville  branch was remodeled during 1999 to include interior  enhancements
and expanded  drive-through  capabilities,  and the related depreciation expense
also affected 2000  expenses.  These  investments  have  positioned the Bank for
future growth and productivity.  Advertising  expenses  increased  marginally to
$347,000 for 2000. Computer operations expense



                                      -14-
<PAGE>

decreased  3.9% to $298,000  during 2000.  Other  operating  expenses  increased
$293,000 to $2.1 million for 2000  compared to $1.8  million for 1999.  Expenses
associated with servicing an increased volume of accounts and transactions  such
as postage and printing have impacted other operating expenses in 2000.

         Other expenses increased 20.5% or $1.4 million to $8.0 million in 1999.
This increase resulted  primarily from a full year's expense of the new mortgage
banking department and the associated  expenses with opening two new branches in
1999.


                                 Other Expenses
<TABLE>
<CAPTION>
                                                       Years Ended December 31,
                                               ------------------------------------
                                                  2000         1999         1998
                                               ----------   ----------   ----------
                                                          (In thousands)
<S>                                            <C>          <C>          <C>
         Salaries and employee benefits        $    5,600   $    4,547   $    3,839
         Net occupancy and equipment expense        1,172        1,013          772
         Advertising                                  347          325          234
         Computer operations                          298          310          247
         Other operating expenses                   2,138        1,845        1,582
                                               ----------   ----------   ----------
           Total                               $    9,555   $    8,040   $    6,674
                                               ==========   ==========   ==========
</TABLE>

Income Taxes

         Reported  income tax expense was $1.5 million for 2000,  an increase of
$353,000  compared to $1.1 million for 1999. The effective tax rate for 2000 was
25.5% compared to 23.5% in 1999 and 22.4% in 1998. The increase in the effective
tax rate for 2000 was  influenced  by the  change  in the mix of the  investment
securities  portfolio as well as the increase in non-interest income. Note 11 of
the  Company's  Consolidated  Financial  Statements  provides  a  reconciliation
between the amount of income tax expense  computed  using the federal  statutory
rate and ICBI's  actual  income tax  expense.  Also  included  in Note 12 to the
Consolidated  Financial Statements is information  regarding the principal items
giving rise to deferred taxes for the three years ended December 31, 2000.

Market and Interest Rate Risk

         Market risk is the risk of loss in a financial  instrument arising from
adverse  changes  in market  rates or prices  such as  interest  rates,  foreign
currency  exchange  rates,  commodity  prices and equity prices.  ICBI's primary
market risk exposure is interest  rate risk,  though it should be noted that the
assets under  management  by Tredegar  are  affected by equity  price risk.  The
ongoing  monitoring  and  management  of this risk is an important  component of
ICBI's  asset/liability  management  process,  which  is  governed  by  policies
established by its Board of Directors  that are reviewed and approved  annually.
The Board of Directors delegates responsibility for carrying out asset/liability
management policies to the Asset/Liability Committee (ALCO) of the Bank. In this
capacity,   ALCO  develops   guidelines  and   strategies   that  govern  ICBI's
asset/liability management related activities,  based upon estimated market risk
sensitivity, policy limits and overall market interest rate levels and trends.

         Interest rate risk represents the sensitivity of earnings to changes in
market interest rates. As interest rates change, the interest income and expense
streams associated with ICBI's financial instruments also change,  affecting net
interest income, the primary component of ICBI's earnings. ALCO uses the results
of a detailed and dynamic simulation model to quantify the estimated exposure of
net interest  income to sustained  interest rate changes.  While ALCO  routinely
monitors  simulated  net interest



                                      -15-
<PAGE>

income  sensitivity over a rolling two-year horizon,  it also employs additional
tools to monitor potential longer-term interest rate risk.

         The simulation model captures the impact of changing  interest rates on
the  interest  income  received  and  interest  expense  paid on all  assets and
liabilities  reflected on ICBI's balance  sheet.  This  sensitivity  analysis is
compared to ALCO policy limits,  which specify a maximum tolerance level for net
interest  income  exposure  over a one year  horizon,  assuming no balance sheet
growth,  given both a 200 basis point (bp) upward and downward shift in interest
rates. A parallel and pro rata shift in rates over a 12 month period is assumed.
The  following  reflects  the range of ICBI's net  interest  income  sensitivity
analysis  during the fiscal  years of 2000 and 1999 as compared to the 10% Board
approved policy limit.

                                                       2000
         Rate Change                 Estimated Net Interest Income Sensitivity
         -----------                 -----------------------------------------

                                     High               Low             Average
                                     ----               ---             -------

          + 200 bp                  (2.04%)           (.19%)           (1.21%)
          - 200 bp                   2.47%             .99%             1.75%


                                                       1999
         Rate Change                 Estimated Net Interest Income Sensitivity
         -----------                 -----------------------------------------

                                     High               Low             Average
                                     ----               ---             -------

          + 200 bp                  (1.07%)            .15%              .09%
          - 200 bp                   1.66%            (.08%)             .64%


         Based on the averages presented in the tables above, had interest rates
increased 200 basis points (bp) in each year  independently,  then the effect to
net interest income of ICBI could have been on average a decrease of $147,000 in
2000 and an increase  of $9,000 in 1999.  If interest  rates had  decreased  200
basis points during fiscal years 2000 and 1999,  then the effect to net interest
income of the  banking  subsidiary  could have been on average  an  increase  of
$213,000 and $65,000, respectively.

         During May 2000, ICBI entered into two interest rate swap agreements to
assume  variable  market-indexed  interest  payments in exchange for  fixed-rate
interest  payments.  The  interest  rate  swap  was used to  offset  the cost of
offering a premium market rate on a promotional  retail  certificate of deposit.
ICBI raised $8.5 million in new deposits  during this three day  promotion.  The
terms of the  certificate  of deposit and the fixed portion of the interest rate
swap are  identical.  The  notional  principal  amount of  interest  rate  swaps
outstanding  was $8.5  million at December 31,  2000.  The original  term was 24
months. The  weighted-average  fixed payment rate was 7.0% at December 31, 2000.
Variable interest payments received are based on three-month  LIBOR. At December
31, 2000, the weighted average rate of variable  market-indexed interest payment
obligation to ICBI was 6.41%.  The effect of these  agreements  was to transform
the   certificates  of  deposit  (fixed  rate   liabilities)  to  variable  rate
certificates of deposit (liabilities).  The net income from these agreements was
$29,421 for the year ended December 31, 2000.

         The preceding  sensitivity analysis does not represent an ICBI forecast
and should not be relied upon as being indicative of expected operating results.
These hypothetical estimates are based upon numerous assumptions,  including the
nature  and  timing  of  interest  rate  levels  including  yield  curve  shape,
prepayments on loans and securities,  deposit decay rates,  pricing decisions on
loans  and  deposits,   reinvestment  or  replacement  of  asset  and  liability
cashflows,  and others.  While  assumptions  are



                                      -16-
<PAGE>

developed based upon current economic and local market  conditions,  ICBI cannot
make any assurances about predictive nature of these assumptions,  including how
customer preferences or competitor influences might change.

         Also, as market  conditions  vary from those assumed in the sensitivity
analysis,  actual results will also differ due to:  prepayment  and  refinancing
levels likely deviating from those assumed,  the varying impact of interest rate
change,  caps or floors on  adjustable  rate  assets,  the  potential  effect of
changing debt service levels on customers with adjustable rate loans,  depositor
early  withdrawals  and  product  preference  changes,  and other  internal  and
external  variables.  Furthermore,  the  sensitivity  analysis  does not reflect
actions  that ALCO  might  take in  response  to or  anticipation  of changes in
interest rates.

Financial Condition

         ICBI's  total assets were $289.5  million as of December  31, 2000,  up
$45.5  million or 18.7% from the $243.9  million  level at  December  31,  1999.
Securities  increased $13.8 million or 20.4% from 1999 to 2000.  Loans increased
by $34.0  million or 24.0% from 1999 to 2000,  while  deposits  increased  $20.8
million or 10.2% during the same period.  Borrowings  from the Federal Home Loan
Bank  increased $15 million  during 2000 to fund excess loan growth over deposit
growth.  It is anticipated  that the borrowings  from the Federal Home Loan Bank
will  continue  to rise  should  deposit  growth  not match loan  growth.  Total
shareholders'  equity at year end 2000 and 1999 was  $27.3  and  $23.1  million,
respectively.

Loans

         ICBI's loan portfolio is its largest and most  profitable  component of
earning assets, totaling 66.5% of average earning assets in 2000. ICBI continues
to emphasize loan portfolio growth and  diversification as a means of increasing
earnings while  minimizing  credit risk.  Loans,  net of unearned  income,  were
$177.6  million at December  31,  2000,  an increase of 24.0% from  December 31,
1999's total of $143.2 million. Proactive sales efforts, competitive pricing and
the branch network  supported the increase in loans during 2000. Loans increased
18.1% from $121.3 million at December 31, 1998 to $143.2 million at December 31,
1999. The loan to deposit ratio increased to 79.1% at December 31, 2000 compared
to 70.9% at December 31, 1999 and 70.2% at December 31, 1998.

                                 Loan Portfolio
<TABLE>
<CAPTION>
                                                                         December 31,
                                                --------------------------------------------------------------
                                                   2000         1999         1998         1997         1996
                                                ----------   ----------   ----------   ----------   ----------
                                                                        (In thousands)
<S>                                             <C>          <C>          <C>          <C>          <C>
Commercial, financial and agricultural          $   22,555   $   19,055   $   18,880   $   15,111   $   11,648
Real estate construction                            17,693       12,151        5,436        3,798        4,182
Real estate mortgage:
  Residential (1-4 family)                          81,545       61,062       55,595       45,231       41,246
  Home equity lines                                  5,973        4,382        3,617        3,165        2,614
  Non-farm, non-residential (1)                     38,812       36,361       28,643       26,054       24,774
  Agricultural                                         346          379        1,057        2,140        2,105
Consumer installment                                10,674        9,845        8,095        8,738        8,061
                                                ----------   ----------   ----------   ----------   ----------
    Total loans                                    177,598      143,235      121,323      104,237       94,630

Less unearned income                                     -            -            -           10           35
                                                ----------   ----------   ----------   ----------   ----------

Loans-net of unearned income                    $  177,598   $  143,235   $  121,323   $  104,227   $   94,595
                                                ==========   ==========   ==========   ==========   ==========
</TABLE>
__________________

(1) This category  generally  consists of commercial and industrial  loans where
    real estate constitutes a source of collateral.



                                      -17-
<PAGE>

         At December 31, 2000,  residential  real estate (1-4 family)  portfolio
loans  constituted  45.9% of the total  portfolio  and  increased  $20.5 million
during the year. Real estate  construction  loans consist  primarily of pre-sold
1-4  family  residential  loans  along  with a  marginal  amount  of  commercial
construction loans. Real estate construction loans increased to $17.7 million at
December 31, 2000 and represent  10.0% of the total loan  portfolio.  ICBI's one
time closing construction/permanent loan product competes successfully in a high
growth market like Loudoun County because ICBI is local and can respond  quickly
to inspections and construction draw requests.  Non-farm,  non-residential loans
are typically  owner-occupied  commercial buildings.  Non-farm,  non-residential
loans were 21.9% of the total loan  portfolio at December  31, 2000.  The branch
network  has  helped to  support  the loan  portfolio  diversification,  such as
increased  commercial real estate loans. Home equity lines and agricultural real
estate  loans were 3.4% and 0.2% of total loans,  respectively,  at December 31,
2000.

         ICBI's  commercial,  financial and agricultural loan portfolio consists
of secured and unsecured loans to small businesses.  At December 31, 2000, these
loans comprised 12.7% of the loan portfolio.  This portfolio  increased 18.4% in
2000 to $22.6 million. Consumer installment loans primarily consist of unsecured
installment credit and account for 6.0% of the loan portfolio.

         Consistent  with  its  focus  on  providing  community-based  financial
services,  ICBI  generally  does not extend loans outside its  principal  market
area.  ICBI's  market area for its lending  services  encompasses  Fauquier  and
Loudoun Counties, where it operates full service branches.

         ICBI's unfunded loan commitments  totaled $26.6 million at December 31,
2000 and $26.7  million at  December  31,  1999.  The  increase in the amount of
unfunded  commitments  is  attributed  in part to the  increase  in real  estate
construction  financing  as well as customer  demand for credit  line  products,
primarily home equity lines.

         At  December  31,  2000 ICBI had no  concentration  of loans in any one
industry in excess of 10% of its total loan portfolio.  However,  because of the
nature of ICBI's market, loan collateral is predominantly real estate.

         The following table reflects the maturity distribution of selected loan
categories:

                Remaining Maturities of Selected Loan Categories
                                December 31, 2000

                                        Commercial,        Real
                                       Financial and      Estate
                                        Agricultural   Construction
                                        ------------   ------------
                                          (Dollars in thousands)

            Within 1 year               $     10,439   $     14,744
                                        ------------   ------------
            Variable Rate:
              1 to 5 years                       216            420
              After 5 years                      987              -
                                        ------------   ------------
              Total                     $      1,203   $        420
                                        ------------   ------------
            Fixed Rate:
              1 to 5 years                     9,949          2,529
              After 5 years                      964              -
                                        ------------   ------------
              Total                     $     10,913   $      2,529
                                        ------------   ------------

            Total Maturities            $     22,555   $     17,693
                                        ============   ============



                                      -18-
<PAGE>

Asset Quality

         ICBI has policies and procedures designed to control credit risk and to
maintain the quality of its loan portfolio. These include underwriting standards
for new originations  and ongoing  monitoring and reporting of asset quality and
adequacy of the reserve  for loan  losses.  Total  nonperforming  assets,  which
consist of nonaccrual loans,  restructured loans and foreclosed  property,  were
$105,000 at December 31, 2000. This is a decrease of 80.2% from the December 31,
1999 balance of $530,000.  Nonperforming  assets at December 31, 1999  decreased
$79,000 from $609,000 at December 31, 1998.

Nonperforming Assets

         Loans are placed on nonaccrual  status when collection of principal and
interest is doubtful,  generally when a loan becomes 90 days past due. There are
three  negative  implications  for earnings  when a loan is placed on nonaccrual
status.  All  interest  accrued  but  unpaid  at the date the loan is  placed on
nonaccrual  status is either  deducted from interest  income or written off as a
loss.  Secondly,  accruals of interest are discontinued until it becomes certain
that both  principal  and interest can be repaid.  Finally,  there may be actual
losses that may require that  additional  provisions  for loan losses be charged
against earnings.  For real estate loans,  upon foreclosure,  the balance of the
loan is transferred to "Other Real Estate Owned" (OREO) and carried at the lower
of the  outstanding  loan balance or the fair market value of the property based
on current  appraisals and other current  market trends.  If a write down of the
OREO property is necessary at the time of foreclosure, the amount is charged-off
against the allowance for loan losses.  A review of the recorded  property value
is performed in conjunction with normal loan reviews,  and if market  conditions
indicate that the recorded value exceeds the fair market value, additional write
downs of the property value are charged directly to operations.

                              Nonperforming Assets
<TABLE>
<CAPTION>
                                                                              December 31,
                                                   ------------------------------------------------------------------
                                                      2000          1999          1998          1997          1996
                                                   ----------    ----------    ----------    ----------    ----------
                                                                                             (In thousands)
<S>                                                <C>           <C>           <C>           <C>           <C>
         Nonaccrual loans                          $      105    $      530    $      409    $      243    $       76
         Restructured loans                                 -             -             -             -             -
         Foreclosed property                                -             -           200             -             -
                                                   ----------    ----------    ----------    ----------    ----------

           Total nonperforming assets              $      105    $      530    $      609    $      243    $       76
                                                   ==========    ==========    ==========    ==========    ==========


         Allowance for loan losses
           to period end loans                          1.02%         1.01%         0.88%         0.93%         0.93%

         Allowance for loan losses
           to nonperforming assets                      1718%          274%          175%          401%         1163%

         Nonperforming assets to
           period end loans                             0.06%         0.37%         0.50%         0.23%         0.08%

         Net charge offs to
           average loans                                0.03%         0.02%         0.04%         0.09%         0.05%
</TABLE>

         During 2000 and 1999, approximately $14,000 and $12,000,  respectively,
in  additional  interest  income would have been  recorded if ICBI's  nonaccrual
loans had been current and in accordance with their original terms.



                                      -19-
<PAGE>

         At December 31, 2000, the Company had no potential problem loans.

         The  allowance  for loan  losses was 1,718% of  nonperforming  loans at
December 31, 2000.  At December 31, 1999 and 1998 the  allowance for loan losses
was 274% and 175% of nonperforming  loans.  Management  evaluates  nonperforming
loans relative to their collateral value and makes appropriate reductions in the
carrying value of those loans based on that review.

Allowance For Loan Losses

         The allowance for loan losses is an estimate of the amount that will be
adequate  to provide  for  potential  future  losses in ICBI's  loan  portfolio.
Management's  methodology  in evaluating  the adequacy of the allowance for loan
losses considers potential specific losses,  past loan loss experience,  as well
as the volume,  growth and composition of the loan portfolio.  General  economic
trends as well as any conditions  affecting individual borrowers may also affect
the  level of loan  losses.  The  allowance  is  periodically  examined  by bank
regulators  for  adequacy.  Examiners  take  into  account  factors  such as the
methodology  used to calculate  the  allowance  and the size of the allowance in
comparison to peer financial institutions.

         ICBI's Loan  Committee  and Board of  Directors  review  problem  loans
monthly,   including  their  effect  on  the  allowance  for  loan  losses.   In
management's  opinion,  the  allowance for loan losses is adequate to absorb the
current  estimated  risk  of  loss  in the  loan  portfolio.  ICBI's  management
continually  evaluates the adequacy of the allowance for loan losses and changes
in the provision are based on the analyzed inherent risk of the loan portfolio.















                                      -20-
<PAGE>

         The following table depicts the  transactions,  in summary form,  which
occurred to the allowance for loan losses in each year presented:

                            Allowance for Loan Losses
<TABLE>
<CAPTION>
                                                                       December 31,
                                              --------------------------------------------------------------
                                                 2000         1999         1998         1997         1996
                                              ----------   ----------   ----------   ----------   ----------
                                                                      (In thousands)
<S>                                           <C>          <C>          <C>          <C>          <C>
Balance, beginning of period                  $    1,453   $    1,064   $      974   $      884   $      866
  Loans charged off:
    Commercial, financial, and agricultural           61           26            8           42            6
    Real estate construction                           -            -            -            -            -
    Real estate mortgage                               -           29            -            -           79
    Consumer installment                              35           96           77           86           40
                                              ----------   ----------   ----------   ----------   ----------
      Total loans charged off                 $       96   $      151   $       85   $      128   $      125
                                              ----------   ----------   ----------   ----------   ----------
  Recoveries:
    Commercial, financial, and agricultural   $        6   $        7   $        1   $       12   $        5
    Real estate construction                           -            -            -            -            -
    Real estate mortgage                               -           79            6            7           26
    Consumer installment                              41           34           33           21           47
                                              ----------   ----------   ----------   ----------   ----------
      Total recoveries                        $       47   $      120   $       40   $       40   $       78
                                              ----------   ----------   ----------   ----------   ----------
Net charge offs (recoveries)                          49           31           45           88           47
Provision for loan losses                            400          420          135          178           65
                                              ----------   ----------   ----------   ----------   ----------
Balance, end of period                        $    1,804   $    1,453   $    1,064   $      974   $      884
                                              ==========   ==========   ==========   ==========   ==========

Ratio of allowance for loan losses
   to loans outstanding at end of period           1.02%        1.01%        0.88%        0.93%        0.93%

Ratio of net charge offs to average
   loans outstanding during period                 0.03%        0.02%        0.04%        0.09%        0.05%
</TABLE>

         The allowance for loan losses was $1.8 million at December 31, 2000, an
increase of $351,000  from $1.5 million at December 31, 1999.  The allowance was
$1.1 million at December 31, 1998.  In 2000,  ICBI's net  charge-offs  increased
$18,000 from the previous year's net charge-offs of $31,000.  Net charge-offs as
a  percentage  of  average  loans  were  0.03%  and  0.02%  for 2000  and  1999,
respectively.  The  provision for loan losses was $400,000 for 2000 and $420,000
for 1999.













                                      -21-
<PAGE>

         The  following  table shows the balance  and  percentage  of the ICBI's
allowance for loan losses allocated to each major category of loan:

                     Allocation of Allowance for Loan Losses
<TABLE>
<CAPTION>
                       Commercial, Financial,           Real Estate               Real Estate
                            Agricultural                Construction                Mortgage                   Consumer
                    ---------------------------  -------------------------  -------------------------  --------------------------
                     Allowance     Percent of     Allowance   Percent of     Allowance    Percent of     Allowance   Percent of
                        for          Loan in         for        Loan in         for        Loan in          For        Loan in
                        Loan       Category to       Loan     Category to      Loan      Category to       Loan      Category to
                       Losses      Total Loans      Losses    Total Loans     Losses     Total Loans      Losses     Total Loans
                    ---------------------------  -------------------------  -------------------------  --------------------------
                                                                            (In thousands)
<S>                    <C>           <C>            <C>          <C>           <C>          <C>            <C>          <C>
December 31,
     2000              $ 645         12.55%         $ 500        9.84%         $ 310        71.33%         $ 349        5.94%
     1999              $ 580         13.19%         $ 350        8.41%         $ 178        71.34%         $ 345        6.82%
     1998              $ 442         14.98%         $ 100        4.31%         $ 144        73.28%         $ 378        6.43%
     1997              $ 362         14.50%         $ 107        3.64%         $ 159        73.49%         $ 346        8.37%
     1996              $ 244         12.31%         $ 101        4.42%         $ 182        74.79%         $ 357        8.48%
</TABLE>

         ICBI  has  allocated  the  allowance  according  to the  amount  deemed
reasonably  necessary to provide for the  possibility  of losses being  incurred
within each of the above categories of loans. The allocation of the allowance as
shown in the table above should not be  interpreted  as an indication  that loan
losses in future years will occur in the same proportions or that the allocation
indicates  future loan loss trends.  Additionally,  the proportion  allocated to
each loan  category is not the total amount that may be available for the future
losses that could occur within such  categories  since the total  allowance is a
general allowance applicable to the total portfolio.

Securities

         ICBI  manages  its  investment  securities  portfolio  consistent  with
established  policies which include  guidelines for earnings,  rate sensitivity,
liquidity and pledging needs.  ICBI holds bonds issued from the  Commonwealth of
Virginia and its political  subdivisions with an aggregate book value and market
value of $3.8  million at December  31, 2000.  The  aggregate  holdings of these
bonds exceeded 10% of ICBI's shareholders' equity.

         ICBI accounts for securities under Financial Accounting Standards Board
(FASB) Statement No. 115, "Accounting for Certain Investments in Debt and Equity
Securities".  This standard  requires  classification  of investments into three
categories,  "held to maturity" (HTM), "available for sale" (AFS), or "trading",
as further defined in Note 1 to the Company's Consolidated Financial Statements.
ICBI does not maintain a trading  account and has  classified  no  securities in
this  category.  HTM  securities  are  required  to be carried on the  financial
statements  at  amortized  cost.  AFS  securities  are carried on the  financial
statements at fair value. The unrealized gains or losses, net of deferred income
taxes,  are reflected in shareholders'  equity.  The HTM  classification  places
restrictions on ICBI's ability to sell securities or to transfer securities into
the AFS  classification.  Since  ICBI  desires  the  flexibility  to  respond to
changing balance sheet needs through  investment  portfolio  management,  it has
chosen to classify only a small portion of its  portfolio in this  category.  At
December 31, 2000, 8.6 % of the portfolio was classified as HTM.

         FASB  Statement No. 133,  "Accounting  for Derivative  Instruments  and
Hedging  Activities",  requires  companies to record  derivatives on the balance
sheet as assets and liabilities,  measured at fair market value. Gains or losses
resulting from changes in the values of those derivatives would be accounted for
depending  on the use of the  derivative  and  whether  it  qualifies  for hedge
accounting.



                                      -22-
<PAGE>

However this statement also allowed,  upon adoption, a one time re-allocation of
securities  from HTM to AFS without  penalty to the company.  In December  1999,
ICBI adopted FASB  Statement No. 133 and elected to transfer  certain  municipal
securities  with a book  value and  market  value of $3.1  million  from the HTM
classification to the AFS classification.

         ICBI  holds in its  loan and  securities  portfolios  investments  that
adjust or float according to changes in "prime" lending rate. These holdings are
not  considered  speculative  but  instead  necessary  for good  asset/liability
management.

         The carrying  value of the  securities  portfolio  was $81.6 million at
December 31, 2000, an increase of $13.8 million or 20.4% from the carrying value
of $67.7 million at December 31, 1999. The market value of the AFS securities at
December 31, 2000 was $74.6 million.  The unrealized  gain on the AFS securities
was $1.3  million  and offset  slightly  by an  unrealized  loss of  $652,000 at
December 31, 2000.  The net market value gain at December 31, 2000 is reflective
of the  decrease  in  market  interest  rates.  The  unrealized  loss on the AFS
securities was $3.0 million at December 31, 1999.

                         Investment Securities Portfolio

         The  carrying  value  of  securities  held  to  maturity  at the  dates
indicated were:
<TABLE>
<CAPTION>
                                                                     December 31,
                                                         ------------------------------------
                                                            2000         1999         1998
                                                         ----------   ----------   ----------
                                                                    (In thousands)
<S>                                                      <C>          <C>          <C>
         U.S. Government securities                      $      250   $      250   $      502
         State and political subdivision obligations          6,657        7,433       12,182
         Mortgage-backed securities                              93          112          162
                                                         ----------   ----------   ----------
                                                         $    7,000   $    7,795   $   12,846
                                                         ==========   ==========   ==========
</TABLE>

            The carrying  value of  securities  available  for sale at the dates
indicated were:
<TABLE>
<CAPTION>
                                                                     December 31,
                                                         ------------------------------------
                                                            2000         1999         1998
                                                         ----------   ----------   ----------
                                                                    (In thousands)
<S>                                                      <C>           <C>         <C>
           U.S. Government securities                    $    3,072    $   4,824   $    2,678
           State and political subdivision obligations       27,961       22,261       18,189
           Mortgage-backed securities                        34,043       26,789       20,878
           Other securities                                   9,501        6,070        3,195
                                                         ----------   ----------   ----------
                                                         $   74,577    $  59,944   $   44,940
                                                         ==========    =========   ==========
</TABLE>








                                      -23-
<PAGE>

         The following table indicates the increased return  experienced by ICBI
by lengthening the maturity of the investment securities  portfolio.  Securities
with maturities  greater than five years total $57.3 million and have an average
yield greater than 7.0%.  The  securities  portfolio is managed first for proper
matching with interest  rate risk  guidelines  and  secondarily  for  investment
performance.

            Maturity Distribution and Yields of Investment Securities
                                December 31, 2000
                            Taxable-Equivalent Basis
<TABLE>
<CAPTION>
                                      Due in 1 year    Due after 1 year  Due after 5 years  Due after 10 years
                                         or less       through 5 years   through 10 years      and Equities           Total
                                   ------------------ ------------------ ------------------ ------------------ -------------------
                                    Amount     Yield   Amount     Yield   Amount     Yield   Amount     Yield   Amount     Yield
                                   ------------------ ------------------ ------------------ ------------------ -------------------
                                                                          (In thousands)
<S>                                <C>         <C>    <C>         <C>    <C>         <C>    <C>         <C>    <C>         <C>
Securities held for investment:
  U.S. Government securities       $       -      -   $       -      -   $       -      -   $     250   6.99%  $     250   6.99%
  Mortgage backed securities               4   7.61%         10   7.85%         13   8.04%         66   8.04%         93   8.00%
                                   ---------          ---------          ---------          ---------          ---------
  Total taxable                    $       4   7.61%  $      10   7.85%  $      13   8.04%  $     316   7.22%  $     343   7.26%
Tax-exempt securities (1)                820   7.41%      3,307   7.56%      2,530   7.77%          -   -          6,657   7.62%
                                   ---------          ---------          ---------          ---------          ---------
  Total                            $     824   7.41%  $   3,317   7.56%  $   2,543   7.78%  $     316   7.22%  $   7,000   7.61%
                                   ---------          ---------          ---------          ---------          ---------

Securities available for sale (2):
  U.S. Government securities       $      99   5.04%  $     799   7.08%  $   1,497   7.36%  $     677   6.66%  $   3,072   7.06%
  Mortgage backed securities           3,283   7.01%     10,110   6.97%      8,172   6.88%     12,478   6.82%     34,043   6.90%
  Other                                    -      -       3,525   7.43%      2,054   7.02%      1,364   7.64%      6,943   7.35%
  Corporate preferred                      -      -           -   -              -   -          2,452   7.64%      2,452   7.64%
                                   ---------          ---------          ---------          ---------          ---------
  Total taxable                    $   3,382   5.75%  $  14,434   6.19%  $  11,723   6.01%  $  16,971   7.29%  $  46,510   7.01%
Tax-exempt securities (1)                486   6.73%        392   7.62%      7,890   7.58%     17,896   7.67%     26,664   7.63%
                                   ---------          ---------          ---------          ---------          ---------
  Total                            $   3,868   5.75%  $  14,826   6.23%  $  19,613   6.64%  $  34,867   7.48%  $  73,174   7.24%
                                   ---------          ---------          ---------          ---------          ---------

Total securities                   $   4,692   5.94%  $  18,143   6.42%  $  22,156   7.01%  $  35,183   7.15%  $  80,174   7.27%
</TABLE>
_________________
(1) Yields on tax-exempt securities have been computed on a tax-equivalent basis
(2) Excludes  Federal Reserve Stock of $134,400 and Federal Home Loan Bank Stock
    of $1,268,800


Other Earning Assets

         ICBI's  average  investment  in  federal  funds  sold and money  market
investments  in 2000 were $2.8 million and $512,000,  a decrease of $3.2 million
and $1.4 million,  respectively.  Average  investments in federal funds sold and
money  market   investments   in  1999  were  $6.0  million  and  $1.9  million,
respectively.  Fluctuations  in federal funds sold and money market  investments
reflect excess deposit growth over loan growth as well as  management's  goal to
maximize asset yields while maintaining proper asset/liability structure.

Deposits

         Deposits  continue to be an important funding source and primary supply
of ICBI's growth.  ICBI's strategy has been to increase its core deposits at the
same time  controlling its cost of funds.  The maturation of the branch network,
as  well  as  the  increased  advertising  campaigns  have  contributed  to  the
significant  growth in  deposits  over the last  several  years.  By  monitoring
interest rates within the local market and then pricing the deposits  within the
range of the local  market,  ICBI has  developed a core base of deposits in each
branch.



                                      -24-
<PAGE>

         The following table is a summary of average  deposits and average rates
paid on those deposits:

                         Average Deposits and Rates Paid
<TABLE>
<CAPTION>
                                                                                   December 31,
                                                 -------------------------------------------------------------------------------
                                                            2000                       1999                       1998
                                                 -------------------------  -------------------------  -------------------------
                                                     Amount        Rate         Amount        Rate          Amount       Rate
                                                 -------------------------  -------------------------  -------------------------
                                                                                          (In thousands)

<S>                                              <C>                <C>     <C>                <C>     <C>                <C>
     Noninterest-bearing deposits                $      47,355        -     $      39,154        -     $      29,782        -
     Interest-bearing accounts:
         Interest checking                              32,461      0.91%          29,583      0.99%          23,853      1.28%
         Regular savings                                20,214      2.86%          19,000      3.00%          17,075      3.53%
         Money market accounts                          42,852      2.71%          41,701      2.73%          34,195      2.93%
         Time deposits:
             $ 100,000 and over                         25,997      5.59%          21,965      4.98%          18,151      5.23%
             Under $ 100,000                            37,323      4.92%          35,707      4.77%          38,557      5.30%
                                                 -------------              -------------              -------------
     Total interest-bearing deposits                   158,847      3.35%         147,956      3.24%        131,831       3.72%
                                                 -------------              -------------              -------------

         Total                                   $     206,202              $     187,110              $     161,613
                                                 =============              =============              =============

</TABLE>

         Average total deposits  increased 10.28% during 2000, 15.8% during 1999
and 10.5% during 1998. During 2000, the average balance of non-interest  bearing
deposits grew 20.9%.  The average balance in interest  checking and money market
accounts grew 9.7% and 2.8% during 2000.

         ICBI will  continue to fund assets  primarily  with  deposits  and will
focus on core deposit  growth as the primary  source of liquidity and stability.
ICBI  offers  individuals  and small to  medium-sized  businesses  a variety  of
deposit accounts,  including demand and interest checking, money market, savings
and time deposit accounts. ICBI neither purchases brokered deposits nor solicits
deposits from sources outside its primary market area.

         The  following  table is a  summary  of the  maturity  distribution  of
certificates  of deposit  equal to or greater  than  $100,000 as of December 31,
2000:

          Maturities of Certificates of Deposit of $100,000 and Greater
<TABLE>
<CAPTION>
                                    Within        Three to        Six to          Over                        Percent
                                    Three           Six           Twelve          One                         of Total
                                    Months         Months         Months          Year           Total        Deposits
                                 ------------   ------------   ------------   ------------   ------------   ------------
                                                                      (In thousands)

<S>                               <C>            <C>            <C>            <C>            <C>              <C>
         At December 31, 2000     $    7,482     $    9,512     $   14,134     $    3,853     $   34,981       15.6%
</TABLE>

Capital Resources and Dividends

         ICBI has an ongoing strategic  objective of maintaining a capital base,
which  supports  the  pursuit of  profitable  business  opportunities,  provides
resources to absorb  risks  inherent in its  activities  and meet or exceeds all
regulatory requirements.

         The  Federal  Reserve  has  established   minimum   regulatory  capital
standards  for bank holding  companies and state member  banks.  The  regulatory
capital  standards  categorize  assets  and  off-balance  sheet  items into four
categories which weight balance sheet assets  according to risk,  requiring more

                                      -25-
<PAGE>

capital for holding  higher risk assets.  The minimum ratio of qualifying  total
capital to  risk-weighted  assets is 8.0%, of which at least 4.0% must be Tier 1
capital,  composed of common equity and retained  earnings.  ICBI had a ratio of
risk-weighted  assets to total capital of 13.6% at December 31, 2000 compared to
14.8% at December 31, 1999. The ratio of risk-weighted  assets to Tier 1 capital
was 12.7% and 14.0% at  December  31, 2000 and 1999,  respectively.  Both ratios
exceed the minimum capital  requirements  adopted by the federal bank regulatory
agencies.

                               Analysis of Capital

                                                           December 31,
                                                     -----------------------
                                                        2000         1999
                                                     ----------   ----------

        Tier 1 Capital:
          Common stock                               $    8,696   $    8,895
          Capital surplus                                   556        1,293
          Retained earnings                              17,616       14,852
          Goodwill                                       (1,353)      (1,060)
                                                     ----------   ----------
          Total Tier 1 capital                       $   25,515   $   23,980
        Tier 2 Capital:
          Allowance for loan losses                       1,804        1,453
                                                     ----------   ----------
          Total Tier 2 capital                            1,804        1,453
          Total risk-based capital                   $   27,319   $   25,433
                                                     ==========   ==========

        Risk weighted assets                         $  201,096   $  171,324

        CAPITAL RATIOS:
          Tier 1 risk-based capital ratio                 12.7%        14.0%
          Total risk-based capital ratio                  13.6%        14.8%
          Tier 1 capital to average total assets           9.7%        10.8%


         ICBI's  equity to asset ratio  decreased  to 9.4% at December  31, 2000
compared to 9.5% at December  31,  1999.  The equity to asset ratio for December
31, 1998 was 11.1%. ICBI's net income retained during 2000 offset the effects of
continued  high  growth in assets  and the March 2000  stock  repurchase  on the
equity to asset ratio.

         The  primary  source  of  funds  for  dividends  paid  by  ICBI  to its
shareholders is the dividends received from its subsidiaries. Federal regulatory
agencies  impose  certain  restrictions  on the  payment  of  dividends  and the
transfer  of  assets  from the  banking  subsidiaries  to the  holding  company.
Historically,  these  restrictions  have not had an  adverse  impact  on  ICBI's
dividend policy, and it is not anticipated that they will in the future.

Liquidity

         Liquidity  represents  an  institution's  ability to meet  present  and
future  financial  obligations  through  either the sale or maturity of existing
assets or the  acquisition  of additional  funds through  liability  management.
Liquid assets include cash,  interest-bearing deposits with banks, federal funds
sold,  short-term  investments,  securities  classified as available for sale as
well as loans and  securities  maturing  within one year.  As a result of ICBI's
management  of liquid  assets and the  ability  to  generate  liquidity  through
liability  funding,   management   believes  ICBI  maintains  overall  liquidity
sufficient  to satisfy  its  depositors'  requirements  and meet its  customers'
credit needs.

         ICBI also maintains  additional  sources of liquidity through a variety
of borrowing  arrangements.  The Bank  maintains  federal funds lines with large
regional and money-center banking  institutions.  These



                                      -26-
<PAGE>

available lines total in excess of $8 million, of which none were outstanding at
December  31,  2000.  Federal  funds  purchased  during 2000  averaged  $286,000
compared to an average of $179,000  during 1999.  At December 31, 2000 and 1999,
the Bank had $14.3  million  and $10.8  million,  respectively,  of  outstanding
borrowings   pursuant  to   securities   sold  under   agreement  to  repurchase
transactions,  with  maturities  of one day.  The Bank has a credit  line in the
amount of $43 million at the Federal Home Loan Bank of Atlanta. This line may be
utilized for short and/or long-term borrowing.

         The Bank joined the  Federal  Home Loan Bank system in 1995 in order to
enter a program of long-term and short-term borrowing, which is restricted to be
invested  in  support of  residential  real  estate  loans.  In 1999,  long-term
borrowings from the Federal Home Loan Bank system were $5.0 million  maturing in
2003 with a call feature in 2000.

         At December 31, 2000,  cash,  interest-bearing  deposits with financial
institutions,  federal funds sold, short-term investments,  securities available
for sale,  loans and  securities  maturing  within  one year were 44.9% of total
deposits and liabilities.

Forward-Looking Statements

         Certain   information   contained  in  this   discussion   may  include
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. These forward-looking statements are generally identified by phrases
such as "the  Company  expects,"  "the  Company  believes"  or words of  similar
import.  Such  forward-looking   statements  involve  known  and  unknown  risks
including,  but not  limited  to,  changes  in  general  economic  and  business
conditions, interest rate fluctuations,  competition within and from outside the
banking  industry,  new  products  and  services in the banking  industry,  risk
inherent in making  loans such as  repayment  risks and  fluctuating  collateral
values,  problems with  technology  utilized by the Company,  changing trends in
customer profiles and changes in laws and regulations applicable to the Company.
Although  the  Company  believes  that  its  expectations  with  respect  to the
forward-looking statements are based upon reliable assumptions within the bounds
of its knowledge of its business and operations,  there can be no assurance that
actual  results,  performance  or  achievements  of the Company  will not differ
materially  from any future results,  performance or  achievements  expressed or
implied by such forward-looking statements.

Recent Accounting Pronouncements

         There are no recent accounting  pronouncements that will have an effect
on ICBI.


ITEM 7.     FINANCIAL STATEMENTS
            --------------------

         The following  financial  statements are filed as a part of this report
following Item 13 below:

         Independent Auditor's Report
         Consolidated Balance Sheets as of December 31, 2000 and 1999
         Consolidated Statements of Income for the Years Ended December 31,
            2000, 1999, and 1998
         Consolidated Statements of Changes in Shareholders' Equity for the
         Years Ended December 31, 2000, 1999, and 1998  Consolidated
         Statements of Cash Flows for the Years Ended December 31, 2000,
            1999, and 1998
         Notes to Consolidated Financial Statements




                                      -27-
<PAGE>

ITEM 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
            ------------------------------------------------
            ACCOUNTING AND FINANCIAL DISCLOSURE
            -----------------------------------

         There  were  no  changes  in  or  disagreements   with  accountants  on
accounting and financial disclosure during the last two fiscal years.


                                    PART III
                                    --------

ITEM 9.     DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
            -------------------------------------------------------------
            COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
            -------------------------------------------------

         Pursuant to General  Instruction  E(3) of Form 10-KSB,  the information
contained under the headings  "Election of Directors,"  "Executive  Officers Who
Are Not Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance"
in the Company's  Proxy Statement for the 2001 Annual Meeting of Shareholders is
incorporated herein by reference.


ITEM 10.    EXECUTIVE COMPENSATION
            ----------------------

         Pursuant to General  Instruction  E(3) of Form 10-KSB,  the information
contained under the headings "Director Compensation,"  "Executive Compensation,"
"Stock  Options," and  "Employment  Agreements" in the Company's Proxy Statement
for the 2001 Annual Meeting of Shareholders is incorporated herein by reference.


ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
            --------------------------------------------------------------

         Pursuant to General  Instruction  E(3) of Form 10-KSB,  the information
contained  under the headings  "Security  Ownership of Management" and "Security
Ownership of Certain Beneficial Owners" in the Company's Proxy Statement for the
2001 Annual Meeting of Shareholders is incorporated herein by reference.


ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
            ----------------------------------------------

         Pursuant to General  Instruction  E(3) of Form 10-KSB,  the information
contained  under the heading  "Transactions  with  Management"  in the Company's
Proxy  Statement for the 2001 Annual  Meeting of  Shareholders  is  incorporated
herein by reference.


ITEM 13.    EXHIBITS, LIST AND REPORTS ON FORM 8-K
            --------------------------------------

      (a)   Exhibits.

            3.1    Articles  of  Incorporation  of  the  Company   (restated  in
                   electronic   format),   attached   as  Exhibit   3.1  to  the
                   Registration   Statement  on  Form  S-4,   Registration   No.
                   333-24523,  filed with the  Commission  on April 4, 1997 (the
                   "Form S-4"), incorporated herein by reference.



                                      -28-
<PAGE>

            3.2    Bylaws of the  Company,  attached  as Exhibit 3.2 to the Form
                   S-4, incorporated herein by reference.

            10.1   Employment  Agreement,  dated as of January 1, 1998,  between
                   the Company and Joseph L. Boling, attached as Exhibit 10.1 to
                   the Company's Annual Report on Form 10-KSB for the year ended
                   December 31, 1998, incorporated herein by reference.

            10.2   Independent  Community  Bankshares,  Inc.  1997 Stock  Option
                   Plan, as amended, attached as Exhibit 4.3 to the Registration
                   Statement on Form S-8, Registration No. 333-93447, filed with
                   the Commission on December 22, 1999,  incorporated  herein by
                   reference.

            10.3   Agreement  and Plan of  Reorganization  dated as of August 9,
                   1999, between Gilkison Patterson  Investment  Advisors,  Inc.
                   ("GPIA"), the Company and Tredegar,  attached as Exhibit 10.1
                   to the  Company's  Quarterly  Report on Form  10-QSB  for the
                   period  ended   September  30,  1999  (the  "Form   10-QSB"),
                   incorporated   herein  by  reference.

            10.4   Shareholder  Agreement  dated as of August 9,  1999,  between
                   Robert C. Gilkison, James H. Patterson, the Company and GPIA,
                   attached  as Exhibit  10.2 to the Form  10-QSB,  incorporated
                   herein by reference.

            10.5   Stock Purchase  Agreement dated as of August 9, 1999, between
                   Robert  C.  Gilkison,  James H.  Patterson  and the  Company,
                   attached  as Exhibit  10.3 to the Form  10-QSB,  incorporated
                   herein by reference.

            21     Subsidiaries of the Registrant.

            23     Consent of Yount, Hyde & Barbour, P.C.

      (b)   Reports on Form 8-K.

                  No reports on Form 8-K were  filed by the  Company  during the
            last quarter of the period covered by this report.











                                      -29-
<PAGE>










                     INDEPENDENT COMMUNITY BANKSHARES, INC.

                              Middleburg, Virginia

                                FINANCIAL REPORT

                                DECEMBER 31, 2000


<PAGE>





                                 C O N T E N T S


                                                                        Page


INDEPENDENT AUDITOR'S REPORT ON THE
  CONSOLIDATED FINANCIAL STATEMENTS                                         1

FINANCIAL STATEMENTS

  Consolidated balance sheets                                               2

  Consolidated statements of income                                         3

  Consolidated statements of changes in shareholders' equity                4

  Consolidated statements of cash flows                               5 and 6

  Notes to consolidated financial statements                             7-31












<PAGE>

                  [LETTERHEAD OF YOUNT, HYDE & BARBOUR, P.C.]



                          INDEPENDENT AUDITOR'S REPORT










To the Board of Directors
Independent Community Bankshares, Inc.
Middleburg, Virginia


         We  have  audited  the  accompanying  consolidated  balance  sheets  of
Independent Community Bankshares,  Inc. and Subsidiaries as of December 31, 2000
and  1999,  and the  related  consolidated  statements  of  income,  changes  in
shareholders'  equity and cash flows for the years ended December 31, 2000, 1999
and 1998.  These financial  statements are the  responsibility  of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.


         We conducted our audits in accordance with generally  accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.


         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects,  the financial position of Independent
Community  Bankshares,  Inc. and  Subsidiaries as of December 31, 2000 and 1999,
and the  results of their  operations  and their cash flows for the years  ended
December  31,  2000,  1999 and  1998,  in  conformity  with  generally  accepted
accounting principles.


                                             /s/ Yount, Hyde & Barbour, P.C.


Winchester, Virginia
January 24, 2001









                                       1
<PAGE>

                     INDEPENDENT COMMUNITY BANKSHARES, INC.
                           Consolidated Balance Sheets
                           December 31, 2000 and 1999
                      (In Thousands, Except for Share Data)

<TABLE>
<CAPTION>
             Assets                                                     2000           1999
                                                                    ------------   ------------
<S>                                                                 <C>            <C>
Cash and due from banks                                             $      7,352   $      8,037
Interest-bearing deposits in banks                                            79             87
Temporary investments:
  Federal funds sold                                                       8,600         12,139
  Other money market investments                                           1,116            293
Securities (fair value:  2000, $81,718; 1999, $67,745)                    81,577         67,739
Loans held for sale                                                        2,131          1,232
Loans, net of allowance for loan losses of $1,804 in 2000
   and $1,453 in 1999                                                    175,794        141,782
Bank premises and equipment, net                                           6,349          6,285
Accrued interest receivable and other assets                               6,463          6,331
                                                                    ------------   ------------
         Total assets                                               $    289,461   $    243,925
                                                                    ============   ============

   Liabilities and Shareholders' Equity

Liabilities
  Deposits:
    Noninterest-bearing demand deposits                             $     56,980   $     44,900
    Savings and interest-bearing demand deposits                          96,275         97,208
    Time deposits                                                         71,385         61,729
                                                                    ------------   ------------
         Total deposits                                             $    224,640   $    203,837

  Securities sold under agreements to repurchase                          14,321         10,811
  Long-term debt                                                          21,300          5,000
  Accrued interest and other liabilities                                   1,929          1,202
  Commitments and contingent liabilities                                      --             --
                                                                    ------------   ------------
         Total liabilities                                          $    262,190   $    220,850
                                                                    ------------   ------------

Shareholders' Equity
  Common stock, par value $5 per share, authorized
    10,000,000 shares; issued 2000, 1,739,247 shares;
    issued  1999, 1,778,994 shares                                  $      8,696   $      8,895
  Capital surplus                                                            556          1,293
  Retained earnings                                                       17,616         14,852
  Accumulated other comprehensive income (loss)                              403         (1,965)
                                                                    ------------   ------------
         Total shareholders' equity                                 $     27,271   $     23,075
                                                                    ------------   ------------

         Total liabilities and shareholders' equity                 $    289,461   $    243,925
                                                                    ============   ============
</TABLE>


See Notes to Consolidated Financial Statements.



                                       2
<PAGE>

                     INDEPENDENT COMMUNITY BANKSHARES, INC.
                        Consolidated Statements of Income
                  Years Ended December 31, 2000, 1999 and 1998
                    (In Thousands, Except for Per Share Data)
<TABLE>
<CAPTION>
                                                                            2000          1999          1998
                                                                         ----------    ----------    ----------
<S>                                                                      <C>           <C>           <C>
 Interest and Dividend Income
  Interest and fees on loans                                             $   14,076    $   11,694    $   10,205
  Interest on investment securities:
    Taxable interest income                                                      25            36            70
    Interest income exempt from federal income taxes                            354           536           618
  Interest and dividends on securities available for sale:
    Taxable interest income                                                   3,055         1,731         1,616
    Interest income exempt from federal income taxes                          1,167           893           717
    Dividends                                                                   318           243           252
  Interest on deposits in banks                                                   4             1             7
  Interest on federal funds sold                                                170           290           211
  Interest on other money market investments                                     40            98            89
                                                                         ----------    ----------    ----------
         Total interest and dividend income                              $   19,209    $   15,522    $   13,785
                                                                         ----------    ----------    ----------

Interest Expense
  Interest on deposits                                                   $    5,324    $    4,798    $    4,903
  Interest on securities sold under agreements to repurchase                    633           263           134
  Interest on FHLB borrowings                                                   584             3            70
  Interest on long-term debt                                                    500           281           206
                                                                         ----------    ----------    ----------
         Total interest expense                                          $    7,041    $    5,345    $    5,313
                                                                         ----------    ----------    ----------

         Net interest income                                             $   12,168    $   10,177    $    8,472

  Provision for loan losses                                                     400           420           135
                                                                         ----------    ----------    ----------

         Net interest income after provision
            for loan losses                                              $   11,768    $    9,757    $    8,337
                                                                         ----------    ----------    ----------

Noninterest Income
  Service charges, commissions and fees                                  $    1,180    $    1,076    $      916
  Trust fee income                                                            1,594         1,148           855
  Fees on loans held for sale                                                   643           561           241
  (Losses) on securities available for sale, net                               (204)          (13)          (18)
  Other                                                                         252           174           175
                                                                         ----------    ----------    ----------
         Total noninterest income                                        $    3,465    $    2,946    $    2,169
                                                                         ----------    ----------    ----------

Noninterest Expenses
  Salaries and employees' benefits                                       $    5,600    $    4,547    $    3,839
  Net occupancy and equipment expense                                         1,172         1,013           772
  Advertising                                                                   347           325           234
  Computer operations                                                           298           310           247
  Other operating expenses                                                    2,138         1,845         1,582
                                                                         ----------    ----------    ----------
         Total noninterest expenses                                      $    9,555    $    8,040    $    6,674
                                                                         ----------    ----------    ----------

         Income before income taxes                                      $    5,678    $    4,663    $    3,832

  Income tax expense                                                          1,450         1,097           857
                                                                         ----------    ----------    ----------

         Net income                                                      $    4,228    $    3,566    $    2,975
                                                                         ==========    ==========    ==========

Earnings per Share, basic                                                $     2.43    $     2.00    $     1.65
                                                                         ==========    ==========    ==========
Earnings per Share, diluted                                              $     2.41    $     1.99    $     1.63
                                                                         ==========    ==========    ==========
</TABLE>

 See Notes to Consolidated Financial Statements.


                                       3
<PAGE>

                     INDEPENDENT COMMUNITY BANKSHARES, INC.
           Consolidated Statements of Changes in Shareholders' Equity
                  Years Ended December 31, 2000, 1999 and 1998
                        (In Thousands, Except Share Data)
<TABLE>
<CAPTION>
                                                                                            Accumulated
                                                                                               Other
                                                                                               Compre-       Compre-
                                                         Common     Capital     Retained       hensive       hensive
                                                         Stock      Surplus     Earnings    Income (Loss)     Income       Total
                                                        --------    --------    --------    -------------    --------    --------
<S>                                                     <C>         <C>         <C>         <C>              <C>         <C>
Balance, December 31, 1997                              $  9,063    $  1,948    $ 10,874    $        (199)               $ 21,686
  Comprehensive income:
    Net income - 1998                                         --          --       2,975               --    $  2,975       2,975
    Other comprehensive income net of tax:
      Unrealized holding gains arising during the
        period (net of tax, $189)                             --          --          --               --         366          --
      Reclassification adjustment (net of tax, $6)            --          --          --               --          12          --
                                                                                                             --------
      Other comprehensive income (net of tax, $195)           --          --          --              378    $    378         378
                                                                                                             --------
  Total comprehensive income                                  --          --          --               --    $  3,353          --
                                                                                                             ========
  Cash dividends - 1998 ($0.75 per share)                     --          --      (1,353)              --                  (1,353)
  Purchase of common stock (33,600 shares)                  (168)       (655)         --               --                    (823)
                                                        --------    --------    --------    -------------                --------
Balance, December 31, 1998                              $  8,895    $  1,293    $ 12,496    $         179                $ 22,863
  Comprehensive income:
    Net income - 1999                                         --          --       3,566               --       3,566       3,566
    Other comprehensive income net of tax:
      Unrealized holding losses arising during the
        period (net of tax, $1,100)                           --          --          --               --      (2,153)         --
      Reclassification adjustment (net of tax, $4)            --          --          --               --           9          --
                                                                                                             --------
      Other comprehensive income (net of tax, $1,104)         --          --          --           (2,144)     (2,144)     (2,144)
                                                                                                             --------
  Total comprehensive income                                  --          --          --               --       1,422          --
                                                                                                             ========
  Cash dividends - 1999 ($0.68 per share)                     --          --      (1,210)              --                  (1,210)
                                                        --------    --------    --------    -------------                --------
Balance, December 31, 1999                              $  8,895    $  1,293    $ 14,852    $      (1,965)               $ 23,075
  Comprehensive income:
    Net income - 2000                                         --          --       4,228               --    $  4,228       4,228
    Other comprehensive income net of tax:
      Unrealized holding gains arising during the
        period (net of tax, $1,150)                           --          --          --               --       2,233          --
      Reclassification adjustment (net of tax, $69)           --          --          --               --         135          --
                                                                                                             --------
      Other comprehensive income (net of tax, $1,219)         --          --          --            2,368    $  2,368       2,368
                                                                                                             --------
  Total comprehensive income                                  --          --          --               --    $  6,596          --
                                                                                                             ========
  Cash dividends - 2000 ($0.84 per share)                     --          --      (1,464)              --                  (1,464)
  Purchase of common stock (57,785 shares)                  (289)     (1,038)         --               --                  (1,327)
  Issuance of common stock (18,038 shares)                    90         301          --               --                     391
                                                        --------    --------    --------    -------------                --------
Balance, December 31, 2000                              $  8,696    $    556    $ 17,616    $         403                $ 27,271
                                                        ========    ========    ========    =============                ========
</TABLE>


See Notes to Consolidated Financial Statements.



                                       4
<PAGE>

                   INDEPENDENT COMMUNITY BANKSHARES, INC.
                   Consolidated Statements of Cash Flows
                Years Ended December 31, 2000, 1999 and 1998
                               (In Thousands)

<TABLE>
<CAPTION>
                                                                         2000               1999                1998
                                                                    ---------------    ---------------    ---------------
<S>                                                                 <C>                <C>                <C>
Cash Flows from Operating Activities
  Net income                                                        $         4,228    $         3,566    $         2,975
  Adjustments to reconcile net income to net cash
    provided by (used in) operating activities:
      Depreciation                                                              645                605                514
      Amortization                                                               64                 60                 79
      Provision for loan losses                                                 400                420                135
      Net loss on securities available for sale                                 204                 13                 18
      Net (gain) on sale of assets                                               (7)                (5)                --
      Net loss on the sale of other real estate                                  --                  5                 --
      Discount accretion and premium amortization
        on securities, net                                                      (20)                64                194
      Deferred income tax (benefit)                                            (180)              (186)               (16)
      Origination of loans held for sale                                    (34,837)           (30,744)           (11,948)
      Proceeds from sales of loans held for sale                             33,938             34,184              7,276
      Changes in assets and liabilities:
        (Increase) in other assets                                           (1,058)            (1,372)              (125)
        Increase (decrease) in other liabilities                                846                (71)               113
                                                                    ---------------    ---------------    ---------------
          Net cash provided by (used in)
            operating activities                                    $         4,223    $         6,539    $          (785)
                                                                    ---------------    ---------------    ---------------

Cash Flows from Investing Activities
  Proceeds from maturity, principal paydowns
    and calls of investment securities                                          772              1,905              3,496
  Proceeds from maturity, principal paydowns
    and calls of securities available for sale                                4,527              5,300              9,164
  Proceeds from sale of securities
    available for sale                                                       16,581              1,988              9,887
  Purchase of securities available for sale                                 (32,316)           (22,473)           (16,276)
  Proceeds from sale of equipment                                                 7                131                 --
  Purchases of bank premises and equipment                                     (709)            (1,164)              (839)
  Net (increase) in loans                                                   (34,412)           (21,942)           (17,341)
  Proceeds from the sale of other real estate                                    --                195                 --
                                                                    ---------------    ---------------    ---------------
          Net cash used in
            investing activities                                    $       (45,550)   $       (36,060)   $       (11,909)
                                                                    ---------------    ---------------    ---------------
</TABLE>


See Notes to Consolidated Financial Statements.



                                       5
<PAGE>

                   INDEPENDENT COMMUNITY BANKSHARES, INC.
                    Consolidated Statements of Cash Flows
                                 (Continued)
                Years Ended December 31, 2000, 1999 and 1998
                               (In Thousands)
<TABLE>
<CAPTION>
                                                                        2000            1999            1998
                                                                    ------------    ------------    ------------
<S>                                                                 <C>             <C>             <C>
Cash Flows from Financing Activities
  Net increase in noninterest-bearing and interest-
    bearing demand deposits and savings accounts                    $     11,147    $     24,798    $     18,005
  Net increase (decrease) in certificates of deposit                       9,656           6,359          (1,880)
  Increase (decrease) in securities sold under agreements
    to repurchase                                                          3,510           8,282            (518)
  Proceeds from long-term debt                                            37,200              --           5,000
  Payments on long-term debt                                             (20,900)             --              --
  (Decrease) in short-term borrowings                                         --          (1,000)         (1,800)
  Purchase of common stock                                                (1,327)             --            (823)
  Net proceeds from issuance of common stock                                  34              --              --
  Cash dividends paid                                                     (1,402)         (1,175)         (1,086)
                                                                    ------------    ------------    ------------
    Net cash provided by
      financing activities                                          $     37,918    $     37,264    $     16,898
                                                                    ------------    ------------    ------------
    Increase (decrease) in cash and
      cash equivalents                                                    (3,409)          7,743    $      4,204

Cash and Cash Equivalents
  Beginning                                                               20,556          12,813           8,609
                                                                    ------------    ------------    ------------
  Ending                                                                  17,147          20,556    $     12,813
                                                                    ------------    ------------    ------------
Supplemental Disclosures of Cash Flow Information
  Cash payments for:
    Interest paid to depositors                                     $      5,833    $      5,073    $      5,040
    Interest paid on short-term obligations                                  445              10               9
    Interest paid on long-term debt                                          500             276             235
                                                                    ------------    ------------    ------------
                                                                    $      6,778    $      5,359    $      5,284
                                                                    ============    ============    ============

    Income taxes                                                    $      1,557    $      1,287    $        835
                                                                    ============    ============    ============

Supplemental Disclosure of Noncash Transactions
  Issuance of common stock for contingent payment under
    terms of acquisition of subsidiary                              $        357    $         --    $         --
                                                                    ============    ============    ============
  Unrealized gain on securities available for sale                  $      3,587    $      3,248    $        573
                                                                    ============    ============    ============
  Loan balances transferred to foreclosed properties                $         --    $         --    $        200
                                                                    ============    ============    ============
</TABLE>

See Notes to Consolidated Financial Statements.



                                       6
<PAGE>

                     INDEPENDENT COMMUNITY BANKSHARES, INC.

                   Notes to Consolidated Financial Statements


Note 1.        Nature of Banking Activities and Significant Accounting Policies

               Independent   Community   Bankshares'  banking  subsidiary,   The
               Middleburg  Bank,  grants  commercial,  financial,  agricultural,
               residential  and  consumer  loans  to  customers  principally  in
               Loudoun County and Fauquier County,  Virginia. The loan portfolio
               is well diversified and generally is  collateralized by assets of
               the customers. The loans are expected to be repaid from cash flow
               or proceeds  from the sale of selected  assets of the  borrowers.
               The Tredegar Trust Company,  a non-banking  subsidiary,  offers a
               comprehensive  range  of  fiduciary  and  investment   management
               services to individuals and businesses.

               The accounting and reporting  policies of the Company  conform to
               generally accepted accounting principles and to accepted practice
               within the banking industry.

                  Principles of Consolidation

                      The  consolidated   financial  statements  of  Independent
                      Community   Bankshares,    Inc.   and   its   wholly-owned
                      subsidiaries,  The  Middleburg  Bank,  The Tredegar  Trust
                      Company and Middleburg Bank Service  Corporation,  include
                      the   accounts  of  all  four   companies.   All  material
                      intercompany   balances   and   transactions   have   been
                      eliminated in consolidation.

                  Securities

                      Investments are accounted for as follows:

                      a.   Securities Held to Maturity

                           Securities  classified  as held to maturity are those
                           debt  securities  the Company has both the intent and
                           ability to hold to maturity  regardless of changes in
                           market  conditions,  liquidity  needs or  changes  in
                           general  economic  conditions.  These  securities are
                           carried at cost adjusted for  amortization of premium
                           and  accretion of discount,  computed by the interest
                           method over their contractual lives.

                      b.   Securities Available for Sale

                           Securities classified as available for sale are those
                           debt and equity  securities  that the Company intends
                           to hold for an  indefinite  period  of time,  but not
                           necessarily  to  maturity.  Any  decision  to  sell a
                           security  classified  as available  for sale would be
                           based  on  various  factors,   including  significant
                           movements in interest rates,  changes in the maturity
                           mix  of  the   Company's   assets  and   liabilities,
                           liquidity needs,  regulatory capital  considerations,
                           and other similar factors.  Securities  available for
                           sale are carried at fair value.  Unrealized  gains or
                           losses are  reported as  increases  or  decreases  in
                           shareholders' equity, net of the related deferred tax
                           effect.  Realized gains or losses,  determined on the
                           basis of the cost of specific  securities  sold,  are
                           included in earnings.





                                       7
<PAGE>

                   Notes to Consolidated Financial Statements


                           Purchase  premiums and  discounts  are  recognized in
                           interest  income using the  interest  method over the
                           terms of the  securities.  Declines in the fair value
                           of held to maturity and available for sale securities
                           below  their  cost that are  deemed to be other  than
                           temporary  are  reflected  in  earnings  as  realized
                           losses.  Gains and  losses on the sale of  securities
                           are  recorded  on the trade  date and are  determined
                           using the specific identification method.

                  Loans Held for Sale

                      Mortgage  loans  originated  and  intended for sale in the
                      secondary  market  are  carried  at the  lower  of cost or
                      estimated market value in the aggregate.

                  Loans

                      The Company grants mortgage, commercial and consumer loans
                      to customers.  A substantial portion of the loan portfolio
                      is represented by mortgage loans throughout Loudoun County
                      and  Fauquier  County,   Virginia.   The  ability  of  the
                      Company's  debtors to honor their  contracts  is dependent
                      upon the real estate and general  economic  conditions  in
                      this area.

                      Loans that  management  has the intent and ability to hold
                      for the  foreseeable  future or until  maturity or pay-off
                      generally  are  reported  at  their   outstanding   unpaid
                      principal  balances  less the  allowance  for loan losses.
                      Interest  income  is  accrued  on  the  unpaid   principal
                      balance.

                      The accrual of interest on mortgage and  commercial  loans
                      is discontinued at the time the loan is 90 days delinquent
                      unless  the  credit  is  well-secured  and in  process  of
                      collection.  Personal  loans are typically  charged off no
                      later  than 180 days past  due.  In all  cases,  loans are
                      placed on nonaccrual or  charged-off at an earlier date if
                      collection   of  principal   or  interest  is   considered
                      doubtful.

                      All interest  accrued but not collected for loans that are
                      placed on  nonaccrual  or charged off is reversed  against
                      interest income.  The interest on these loans is accounted
                      for on  the  cash-basis  or  cost-recovery  method,  until
                      qualifying  for return to accrual.  Loans are  returned to
                      accrual status when all the principal and interest amounts
                      contractually  due are brought current and future payments
                      are reasonably assured.

                  Allowance for Loan Losses

                      The allowance for loan losses is established as losses are
                      estimated to have  occurred  through a provision  for loan
                      losses  charged  to  earnings.  Loan  losses  are  charged
                      against  the  allowance  when   management   believes  the
                      uncollectibility   of  a  loan   balance   is   confirmed.
                      Subsequent  recoveries,   if  any,  are  credited  to  the
                      allowance.





                                       8
<PAGE>

                   Notes to Consolidated Financial Statements


                      The  allowance  for loan losses is  evaluated on a regular
                      basis  by  management  and  is  based  upon   management's
                      periodic  review  of the  collectibility  of the  loans in
                      light of historical  experience,  the nature and volume of
                      the loan portfolio, adverse situations that may affect the
                      borrower's  ability  to  repay,  estimated  value  of  any
                      underlying  collateral and prevailing economic conditions.
                      This evaluation is inherently  subjective,  as it requires
                      estimates that are susceptible to significant  revision as
                      more information becomes available.

                      A loan is  considered  impaired  when,  based  on  current
                      information  and events,  it is probable  that the Company
                      will be  unable  to  collect  the  scheduled  payments  of
                      principal   or  interest   when  due   according   to  the
                      contractual   terms   of  the  loan   agreement.   Factors
                      considered by management in determining impairment include
                      payment status,  collateral  value, and the probability of
                      collecting  scheduled principal and interest payments when
                      due. Loans that  experience  insignificant  payment delays
                      and payment  shortfalls  generally  are not  classified as
                      impaired.   Management   determines  the  significance  of
                      payment  delays and payment  shortfalls on a  case-by-case
                      basis,  taking into consideration all of the circumstances
                      surrounding  the  loan  and the  borrower,  including  the
                      length  of the  delay,  the  reasons  for the  delay,  the
                      borrower's  prior  payment  record,  and the amount of the
                      shortfall in relation to the principal and interest  owed.
                      Impairment  is  measured  on a  loan  by  loan  basis  for
                      commercial  and  construction  loans by either the present
                      value of  expected  future  cash flows  discounted  at the
                      loan's  effective  interest  rate,  the loan's  obtainable
                      market price,  or the fair value of the  collateral if the
                      loan is collateral dependent.

                      Large  groups of  smaller  balance  homogeneous  loans are
                      collectively  evaluated for impairment.  Accordingly,  the
                      Company does not separately  identify  individual consumer
                      and residential loans for impairment disclosures.

                  Loan Fees and Costs

                      Loan origination and commitment fees and direct loan costs
                      are being recognized as collected and incurred. The use of
                      this method of recognition  does not produce  results that
                      are  materially  different  from results  which would have
                      been  produced  if such costs and fees were  deferred  and
                      amortized as an adjustment of the loan yield over the life
                      of the related loan.

                  Bank Premises and Equipment

                      Bank  premises  and  equipment  are  stated  at cost  less
                      accumulated  depreciation.  Depreciation  of property  and
                      equipment  is computed  principally  on the  straight-line
                      method over the following estimated useful lives:

                                                                  Years
                                                                 -------

                           Buildings and improvements            31.5-39
                           Furniture and equipment                  3-10




                                       9
<PAGE>

                   Notes to Consolidated Financial Statements


                      Maintenance  and repairs of  property  and  equipment  are
                      charged  to   operations   and  major   improvements   are
                      capitalized. Upon retirement, sale or other disposition of
                      property   and   equipment,   the  cost  and   accumulated
                      depreciation  are eliminated from the accounts and gain or
                      loss is included in operations.

                  Other Real Estate

                      Real  estate  acquired  by  foreclosure  is carried at the
                      lower of cost or fair market value less an  allowance  for
                      estimated  selling  expenses on the future  disposition of
                      the property.

                  Goodwill

                      Goodwill is amortized using the straight-line  method over
                      20 years.

                  Income Taxes

                      Deferred  income tax assets and liabilities are determined
                      using the balance sheet method. Under this method, the net
                      deferred tax asset or liability is determined based on the
                      tax effects of the temporary  differences between the book
                      and tax bases of the  various  balance  sheet  assets  and
                      liabilities  and gives current  recognition  to changes in
                      tax rates and laws.

                  Earnings Per Share

                      Basic earnings per share  represents  income  available to
                      common stockholders divided by the weighted-average number
                      of common shares  outstanding  during the period.  Diluted
                      earnings per share reflects  additional common shares that
                      would have been  outstanding if dilutive  potential common
                      shares  had  been  issued,  as well as any  adjustment  to
                      income  that  would  result  from  the  assumed  issuance.
                      Potential  common shares that may be issued by the Company
                      relate  solely  to  outstanding  stock  options,  and  are
                      determined using the treasury stock method.

                  Cash and Cash Equivalents

                      For  purposes  of  reporting  cash  flows,  cash  and cash
                      equivalents  include cash on hand, amounts due from banks,
                      other  temporary   investments  and  federal  funds  sold.
                      Generally,  federal  funds  are  purchased  and  sold  for
                      one-day periods.

                  Use of Estimates

                      The preparation of financial statements in conformity with
                      generally   accepted   accounting    principles   requires
                      management to make estimates and  assumptions  that affect
                      the  reported   amounts  of  assets  and  liabilities  and
                      disclosure of  contingent  assets and  liabilities  at the
                      date of the financial  statements and the reported amounts
                      of revenues  and  expenses  during the  reporting  period.
                      Actual results could differ from those estimates. Material
                      estimates that are particularly susceptible to significant
                      change in the near term relate to the determination of the
                      allowance for loan losses and deferred taxes.



                                       10
<PAGE>

                   Notes to Consolidated Financial Statements


                  Advertising Costs

                      The Company  follows  the policy of charging  the costs of
                      advertising to expense as incurred.

                  Comprehensive Income

                      Accounting  principles  generally  require that recognized
                      revenue,  expenses,  gains and losses be  included  in net
                      income.   Although   certain   changes   in   assets   and
                      liabilities,  such  as  unrealized  gains  and  losses  on
                      available for sale securities,  are reported as a separate
                      component of the equity section of the balance sheet, such
                      items,   along   with  net  income   are   components   of
                      comprehensive income.

                  Derivative Financial Instruments

                      As part of the Company's asset/liability  management,  the
                      Company uses interest  rate swaps to modify  interest rate
                      characteristics   of  various   balance  sheet   accounts.
                      Derivatives  that are used as part of the  asset/liability
                      management  process  are  linked  to  specific  assets  or
                      liabilities and have high correlation between the contract
                      and the  underlying  item being hedged,  both at inception
                      and throughout  the hedge period.  Swaps are accounted for
                      on the "accrual" method.  Under that method,  the interest
                      component  associated with the contract is recognized over
                      the life of the contract in net interest income.












                                       11
<PAGE>

                   Notes to Consolidated Financial Statements


Note 2.        Securities

               Amortized  costs and fair  values  of  securities  being  held to
               maturity  as of  December  31,  2000 and 1999 are  summarized  as
               follows:

<TABLE>
<CAPTION>
                                                                    Gross         Gross
                                                     Amortized    Unrealized    Unrealized       Fair
                                                        Cost        Gains        (Losses)        Value
                                                     ----------   ----------    ----------    ----------
                                                                            2000
                                                     ---------------------------------------------------
                                                                       (In Thousands)
<S>                                                  <C>          <C>           <C>           <C>
               U.S. Treasury securities
                 and obligations of U.S.
                 Government corporations
                 and agencies                        $      250   $       --    $       (5)   $      245
               Obligations of states and
                 political subdivisions                   6,657          146            --         6,803
               Mortgage-backed securities                    93           --            --            93
                                                     ----------   ----------    ----------    ----------
                                                     $    7,000   $      146    $       (5)   $    7,141
                                                     ==========   ==========    ==========    ==========
</TABLE>

<TABLE>
<CAPTION>
                                                                            1999
                                                     ---------------------------------------------------
                                                                       (In Thousands)
<S>                                                  <C>          <C>           <C>           <C>
               U.S. Treasury securities
                 and obligations of U.S.
                 Government corporations
                 and agencies                        $      250   $       --    $      (25)   $      225
               Obligations of states and
                 political subdivisions                   7,433           40            (8)        7,465
               Mortgage-backed securities                   112           --            (1)          111
                                                     ----------   ----------    ----------    ----------
                                                     $    7,795   $       40    $      (34)   $    7,801
                                                     ==========   ==========    ==========    ==========
</TABLE>


               The  amortized  cost and fair value of  securities  being held to
               maturity as of  December  31, 2000 by  contractual  maturity  are
               shown below. Maturities may differ from contractual maturities in
               mortgage-backed  securities because the mortgages  underlying the
               securities  may  be  called  or  repaid  without  any  penalties.
               Therefore,  these  securities  are not  included in the  maturity
               categories in the following maturity summary.
<TABLE>
<CAPTION>
                                                                                Amortized       Fair
                                                                                  Cost          Value
                                                                                ----------    ----------
                                                                                    (In Thousands)
<S>                                                                             <C>           <C>
               Due in one year or less                                          $      821    $      822
               Due after one year through five years                                 3,307         3,357
               Due after five years through 10 years                                 2,529         2,624
               Due after 10 years                                                      250           245
               Mortgage-backed securities                                               93            93
                                                                                ----------    ----------
                                                                                $    7,000    $    7,141
                                                                                ==========    ==========
</TABLE>


                                       12
<PAGE>

                   Notes to Consolidated Financial Statements


               Amortized costs and fair values of securities  available for sale
               as of December 31, 2000 and 1999, are summarized as follows:
<TABLE>
<CAPTION>
                                                                         Gross        Gross
                                                          Amortized    Unrealized   Unrealized      Fair
                                                            Cost         Gains       (Losses)       Value
                                                          ----------   ----------   ----------    ----------
                                                                                 2000
                                                          --------------------------------------------------
                                                                            (In Thousands)
<S>                                                       <C>          <C>          <C>           <C>
               U.S. Treasury securities and
                 obligations of U.S. Government
                 corporations and agencies                $    3,064   $       36   $      (28)   $    3,072
               Obligations of states and
                 political subdivisions                       27,699          550         (288)       27,961
               Mortgage-backed securities                     33,764          415         (136)       34,043
               Corporate preferred                             2,498          154         (200)        2,452
               Other                                           6,943          106           --         7,049
                                                          ----------   ----------   ----------    ----------
                                                          $   73,968   $    1,261   $     (652)   $   74,577
                                                          ==========   ==========   ==========    ==========
</TABLE>
<TABLE>
<CAPTION>
                                                                         Gross        Gross
                                                          Amortized    Unrealized   Unrealized      Fair
                                                            Cost         Gains       (Losses)       Value
                                                          ----------   ----------   ----------    ----------
                                                                                 1999
                                                          --------------------------------------------------
                                                                            (In Thousands)
<S>                                                       <C>          <C>          <C>           <C>
               U.S. Treasury securities and
                 obligations of U.S. Government
                 corporations and agencies                $    4,958   $        2   $     (136)   $    4,824
               Obligations of states and
                 political subdivisions                       23,721            3       (1,463)       22,261
               Mortgage-backed securities                     27,730           --         (941)       26,789
               Corporate preferred                             2,989            9         (395)        2,603
               Other                                           3,514           --          (47)        3,467
                                                          ----------   ----------   ----------    ----------
                                                          $   62,912   $       14   $   (2,982)   $   59,944
                                                          ==========   ==========   ==========    ==========
</TABLE>











                                       13
<PAGE>

                   Notes to Consolidated Financial Statements


               The  amortized  cost and fair value of  securities  available for
               sale as of December 31, 2000, by  contractual  maturity are shown
               below.  Maturities  may differ  from  contractual  maturities  in
               corporate and  mortgage-backed  securities because the securities
               and mortgages  underlying  the securities may be called or repaid
               without  any  penalties.  Therefore,  these  securities  are  not
               included in the maturity  categories  in the  following  maturity
               summary.
<TABLE>
<CAPTION>
                                                               Amortized       Fair
                                                                  Cost         Value
                                                              -----------    ----------
                                                                    (In Thousands)
<S>                                                           <C>            <C>
               Due in one year or less                        $       585    $      585
               Due after one year through five years                1,768         1,797
               Due after five years through 10 years                9,447         9,587
               Due after 10 years                                  18,963        19,064
               Mortgage-backed securities                          33,764        34,043
               Corporate preferred                                  2,498         2,452
               Other                                                6,943         7,049
                                                              -----------    ----------
                                                              $    73,968    $   74,577
                                                              ===========    ==========
</TABLE>

               Proceeds from sales of securities available for sale during 2000,
               1999  and  1998  were  $16,581,000,  $1,988,000  and  $9,887,000,
               respectively.  Gross gains of $22,574,  $0 and $101,567 and gross
               losses of $227,218,  $13,000 and $119,855  were realized on those
               sales, respectively.

               The carrying value of securities pledged to qualify for fiduciary
               powers,  to secure public monies as required by law and for other
               purposes  amounted to $24,491,000 and $14,814,000 at December 31,
               2000 and 1999, respectively.

               As  permitted  under SFAS No.  133,  "Accounting  for  Derivative
               Instruments  and Hedging  Activities,"  the  Company  transferred
               securities held to maturity with a book value of $3,114,000 and a
               market value of $3,117,000 to securities available for sale as of
               October 1, 1999.





                                       14
<PAGE>

                   Notes to Consolidated Financial Statements


Note 3.        Loans, Net
<TABLE>
<CAPTION>
                                                                                      December 31,
                                                                               -------------------------
                                                                                  2000            1999
                                                                               ----------     ----------
                                                                                     (In Thousands)
<S>                                                                            <C>            <C>
               Mortgage loans on real estate:
                  Construction and land development                            $   17,693     $   12,151
                  Secured by farmland                                                 346            379
                  Secured by 1-4 family residential                                87,518         65,444
                  Other real estate loans                                          38,812         36,361
               Loans to farmers (except secured by real estate)                     1,307          1,438
               Commercial loans                                                    21,248         17,617
               Loans to individuals for personal expenditures                      10,505          9,694
               All other loans                                                        169            151
                                                                               ----------     ----------
                                 Total loans                                   $  177,598     $  143,235
               Less:  Allowance for loan losses                                     1,804          1,453
                                                                               ----------     ----------
                                 Net loans                                     $  175,794     $  141,782
                                                                               ==========     ==========
</TABLE>

Note 4.        Allowance for Loan Losses
<TABLE>
<CAPTION>
                                                                  2000          1999          1998
                                                               ----------    ----------    ----------
                                                                           (In Thousands)
<S>                                                            <C>           <C>           <C>
               Balance, beginning                              $    1,453    $    1,064    $      974
               Provision charged to operating expense                 400           420           135
               Recoveries                                              47           120            40
               Loan losses charged to the allowance                   (96)         (151)          (85)
                                                               ----------    ----------    ----------
                                                               $    1,804    $    1,453    $    1,064
                                                               ==========    ==========    ==========
</TABLE>
               There  were  no  loans   recognized  for  impairment  under  FASB
               Statement No. 114 as of December 31, 2000.

               Impairment  of loans having  recorded  investments  of $67,000 at
               December 31, 1999 has been  recognized  in  conformity  with FASB
               Statement No. 114. The total allowance for loan losses related to
               these loans was $67,000 on December 31, 1999. No interest  income
               on  impaired  loans was  recognized  in 2000,  1999 or 1998.  The
               average  recorded  investment in impaired loans during 2000, 1999
               and 1998 was $15,000, $75,000 and $47,000, respectively.

               Nonaccrual  loans  excluded from impaired loan  disclosure  under
               FASB 114  amounted to $105,000  and $464,000 at December 31, 2000
               and  1999,  respectively.  If  interest  on these  loans had been
               accrued,  such income would have approximated $14,000 and $12,000
               for 2000 and 1999, respectively.



                                       15
<PAGE>

                   Notes to Consolidated Financial Statements


Note 5.        Bank Premises and Equipment, Net

               Bank premises and equipment consists of the following:
<TABLE>
<CAPTION>
                                                                  2000         1999
                                                               ----------   ----------
                                                                    (In Thousands)
<S>                                                            <C>          <C>
               Land                                            $    1,526   $    1,516
               Banking facilities                                   3,894        3,894
               Furniture, fixtures and equipment                    4,341        4,169
               Construction in progress and deposits
                 on equipment                                         576           66
                                                               ----------   ----------
                                                               $   10,337   $    9,645
               Less accumulated depreciation                        3,988        3,360
                                                               ----------   ----------
                                                               $    6,349   $    6,285
                                                               ==========   ==========
</TABLE>

               Depreciation expense was $645,000,  $605,000 and $514,000 for the
               years ended December 31, 2000, 1999 and 1998, respectively.


Note 6.        Deposits

               The aggregate amount of jumbo time deposits,  each with a minimum
               denomination  of  $100,000,  was  approximately  $34,981,000  and
               $26,654,000 in 2000 and 1999, respectively.

               At December 31, 2000,  the scheduled  maturities of time deposits
               (in thousands) are as follows:

                     2001                                    $ 52,918
                     2002                                      13,899
                     2003                                       3,838
                     2004                                         453
                     2005 and thereafter                          277
                                                             --------
                                                             $ 71,385
                                                             ========

Note 7.        Borrowings

               The  Company  has a  $43,000,000  line of credit with the Federal
               Home Loan Bank of Atlanta.  The  Company has pledged  real estate
               loans and  Federal  Home Loan Bank stock as  collateral  on these
               borrowings.   Borrowings   from  FHLB  totaled   $20,000,000  and
               $5,000,000 at December 31, 2000 and 1999,  maturing through 2005.
               The interest rate on the outstanding  principal ranges from 5.85%
               to 6.87% at December 31,  2000.  Interest  only is payable  until
               maturity.



                                       16
<PAGE>

                   Notes to Consolidated Financial Statements


               The  Company  has an  additional  $8,000,000  in lines of  credit
               available from other institutions at December 31, 2000.

               At December 31, 2000,  the Company had  floating  rate  long-term
               debt  totaling  $1,300,000  and maturing on March 31,  2003.  The
               floating rate is based on the 30-day LIBOR plus 115 basis points.
               The interest  rate ranged from 7.15% to 7.77%  during  2000.  The
               contractual  maturities of long-term debt are as follows (dollars
               in thousands):

                           2001                       $        195
                           2002                                260
                           2003                                845
                                                      ------------
                                                      $      1,300
                                                      ============

Note 8.        Stock Option Plan

               The Company  sponsors a stock  option  plan,  which  provides for
               granting of both incentive and  nonqualified  stock  options.  As
               permitted under generally accepted accounting principles,  grants
               under the plan are accounted for following the  provisions of APB
               Opinion No. 25 and its related interpretations.  All options were
               granted  at  fair  value  at  date  of  grant.  Accordingly,   no
               compensation cost has been recognized for grants made to date. In
               determining the pro forma amounts below,  the value of each grant
               is   estimated   at  the  grant  date  using  the   Black-Scholes
               option-pricing   model,   with  the  following   weighted-average
               assumptions  for grants in 2000 and 1999:  dividend  rate of .20%
               and .22%;  risk-free interest rates of 5.35% and 6.50%;  expected
               lives of 10 years;  and expected  price  volatility of 17.96% and
               15.97%.  Options  granted  in 1998  are  included  with  the 1999
               calculations to correspond with shareholder  approval of the plan
               in 1999.  Had  compensation  cost for the  plan  been  determined
               consistent   with  FASB  Statement  No.  123,   "Accounting   for
               Stock-Based  Compensation," the Company's net income and earnings
               per share  would  have been  reduced to the  following  pro forma
               amounts:

                                                     2000             1999
                                                  ----------       ----------
                                           (In Thousands, Except Per Share Data)

               Net Income:     As Reported        $    4,228       $    3,566
                               Pro Forma          $    3,911       $    3,189

               Basic EPS:      As Reported        $     2.43       $     2.00
                               Pro Forma          $     2.25       $     1.79

               Diluted EPS:    As Reported        $     2.41       $     1.99
                               Pro Forma          $     2.23       $     1.78





                                       17
<PAGE>

                   Notes to Consolidated Financial Statements


                Options outstanding at December 31, 2000 and 1999 are summarized
                as follows:
<TABLE>
<CAPTION>
                                                         2000                   1999
                                                 --------------------   ---------------------
                                                             Weighted               Weighted
                                                             Average                Average
                                                             Exercise               Exercise
                                                 Shares       Price      Shares       Price
                                                 -------   ----------   -------    ----------
<S>                                              <C>       <C>           <C>       <C>
               Outstanding at
                 beginning of year               121,825   $    21.13    86,000    $    19.46
               Granted                            31,000        21.66    37,825         24.70
               Exercised                              --           --        --            --
               Forfeited                              --           --    (2,000)        17.00
                                                 -------                -------
               Outstanding at end
                 of year                         152,825   $    21.15   121,825    $    21.13
               Options exercisable
                 at year end                     116,749   $    20.69    82,681    $    19.69
               Weighted average
                 fair value of options
                 granted during the
                 year                                      $     9.20              $    11.53
</TABLE>

               As of December 31, 2000, options  outstanding and exercisable are
               summarized as follows:
<TABLE>
<CAPTION>
                                 Options Outstanding             Options Exercisable
                         ------------------------------------  -----------------------
                                       Weighted     Weighted                 Weighted
              Range of                 Remaining     Average                 Average
              Exercise      Shares    Contractual   Exercise      Shares     Exercise
              Prices     Outstanding     Life        Price     Exercisable    Price
             ---------   -----------  ----------- -----------  -----------   ---------
<S>          <C>            <C>           <C>     <C>              <C>       <C>
             $   17.00      52,000        6.9     $   17.00        52,000    $   17.00
                 27.00       1,000        7.3         27.00         1,000        27.00
                 23.50      31,000        8.0         23.50        27,342        23.50
                 24.50       6,825        9.0         24.50         6,825        24.50
                 24.75      31,000        9.7         24.75        19,054        24.75
                 21.25      31,000       10.0         21.25        10,528        21.25
                         ----------                            -----------
                           152,825                $   21.15       116,749    $   20.69
                         ==========                            ===========
</TABLE>








                                       18
<PAGE>

                   Notes to Consolidated Financial Statements


Note 9.        Employee Benefit Plans

               The Company has a  noncontributory,  defined benefit pension plan
               covering substantially all full-time employees. The Company funds
               pension  costs in accordance  with the funding  provisions of the
               Employee  Retirement  Income Security Act.  Information about the
               plan follows:
<TABLE>
<CAPTION>
                                                                      2000           1999           1998
                                                                   ----------     ----------     ----------
                                                                                (In Thousands)
               Change in Benefit Obligation
<S>                                                                <C>            <C>            <C>
                 Benefit obligation, beginning of year             $    2,002     $    1,766     $    1,747
                 Service cost                                             215            180            126
                 Interest cost                                            150            132            148
                 Plan amendments                                         (350)             -              -
                 Actuarial loss (gain)                                    (33)           (62)           508
                 Benefits paid                                           (122)           (14)          (763)
                                                                   ----------     ----------     ----------
                 Benefit obligation, end of year                   $    1,862     $    2,002     $    1,766
                                                                   ==========     ==========     ==========

               Change in Plan Assets
                 Fair value of plan assets, beginning of year      $    1,751     $    1,385     $    1,841
                 Actual return on plan assets                             269            191            (17)
                 Employer contributions                                   151            189            324
                 Benefits paid                                           (122)           (14)          (763)
                                                                   ----------     ----------     ----------
                 Fair value of plan assets, ending                 $    2,049     $    1,751     $    1,385
                                                                   ==========     ==========     ==========

                 Funded status                                     $      183     $     (251)    $     (384)
                 Unrecognized net actuarial loss                          463            648            825
                 Unrecognized net obligation at transition                (32)           (36)           (40)
                 Unrecognized prior service cost                         (200)           167            183
                                                                   ----------     ----------     ----------
                 Prepaid benefit cost included in other assets     $      414     $      528     $      584
                                                                   ==========     ==========     ==========

               Components of Net Periodic
                 Benefit Cost
                   Service cost                                    $      215     $      180     $      126
                   Interest cost                                          150            132            148
                   Expected return on plan assets                        (140)          (111)          (175)
                   Amortization of prior service cost                      17             17             17
                   Amortization of net obligation
                     at transition                                         (4)            (4)            (4)
                   Recognized net actuarial loss                           22             32              -
                                                                   ----------     ----------     ----------
                     Net periodic benefit cost                     $      260     $      246     $      112
                                                                   ==========     ==========     ==========

               Weighted-Average Assumptions
                 as of December 31
                   Discount rate                                        7.50%          7.50%          7.50%
                   Expected return on plan assets                       9.00%          9.00%          9.00%
                   Rate of compensation increase                        5.00%          5.00%          5.00%
</TABLE>



                                       19
<PAGE>

                   Notes to Consolidated Financial Statements


               A deferred  compensation  plan was adopted for the  President and
               Chief  Executive  Officer.  Benefits  are to be paid  in  monthly
               installments  for 15 years  following  retirement  or death.  The
               agreement  provides that if employment is terminated  for reasons
               other  than  death or  disability  prior to age 65, the amount of
               benefits would be reduced. The deferred  compensation expense for
               2000, 1999 and 1998, based on the present value of the retirement
               benefits, was $20,368, $19,036 and $17,143. The plan is unfunded.
               However,  life  insurance  has been  acquired  on the life of the
               employee in an amount sufficient to discharge the obligation.


Note 10.       Income Taxes

               Net deferred tax assets  (liabilities)  consist of the  following
               components as of December 31, 2000 and 1999:
<TABLE>
<CAPTION>
                                                                       2000           1999
                                                                    ----------     ----------
                                                                         (In Thousands)
<S>                                                                 <C>            <C>
               Deferred tax assets:
                 Allowance for loan losses                          $      498     $      379
                 Deferred compensation                                      42             36
                 Loss on capital assets                                     42             40
                 Other                                                     - -             22
                 Securities available for sale                             - -          1,012
                                                                    ----------     ----------
                                                                    $      582     $    1,489
                                                                    ----------     ----------
               Deferred tax liabilities:
                 Property and equipment                             $      258     $      294
                 Prepaid pension costs                                     138            177
                 Securities available for sale                             207            - -
                                                                    ----------     ----------
                                                                    $      603     $      471
                                                                    ----------     ----------
                                                                    $      (21)    $    1,018
</TABLE>

               The  provision  for income taxes  charged to  operations  for the
               years ended  December  31,  2000,  1999 and 1998  consists of the
               following:
<TABLE>
<CAPTION>
                                                             2000          1999          1998
                                                          ----------    ----------    ----------
                                                                      (In Thousands)

<S>                                                       <C>           <C>           <C>
               Current tax expense                        $    1,630    $    1,283    $      873
               Deferred tax (benefit)                           (180)         (186)          (16)
                                                          ----------    ----------    ----------
                                                          $    1,450    $    1,097    $      857
                                                          ==========    ==========    ==========
</TABLE>




                                       20
<PAGE>

                   Notes to Consolidated Financial Statements


               The income tax  provision  differs  from the amount of income tax
               determined by applying the U.S. federal income tax rate to pretax
               income for the years ended December 31, 2000,  1999 and 1998, due
               to the following:
<TABLE>
<CAPTION>
                                                                2000          1999          1998
                                                             ----------    ----------    ----------
                                                                         (In Thousands)
<S>                                                          <C>           <C>           <C>
               Computed "expected" tax expense               $    1,931    $    1,585    $    1,303
               (Decrease) in income taxes
                 resulting from:
                   Tax-exempt interest income                      (466)         (486)         (410)
                   Other, net                                       (15)           (2)          (36)
                                                             ----------    ----------    ----------
                                                             $    1,450    $    1,097    $      857
                                                             ==========    ==========    ==========
</TABLE>

Note 11.       Related Party Transactions

               The Company  has had,  and may be expected to have in the future,
               banking  transactions  in the  ordinary  course of business  with
               directors,  principal  officers,  their  immediate  families  and
               affiliated  companies  in which they are  principal  stockholders
               (commonly  referred  to as related  parties),  on the same terms,
               including  interest rates and collateral,  as those prevailing at
               the time for comparable  transactions with others.  These persons
               and  firms  were  indebted  to the  Company  for  loans  totaling
               $3,027,000   and  $3,233,000  at  December  31,  2000  and  1999,
               respectively.   During  2000,  total  principal   additions  were
               $421,000 and total principal payments were $627,000.


Note 12.       Contingent Liabilities and Commitments

               In the normal course of business,  there are outstanding  various
               commitments and contingent  liabilities,  which are not reflected
               in the accompanying  financial  statements.  The Company does not
               anticipate any material loss as a result of these transactions.

               See  Note  16  with   respect  to  financial   instruments   with
               off-balance-sheet risk.

               The  Company  must  maintain a reserve  against  its  deposits in
               accordance  with Regulation D of the Federal Reserve Act. For the
               final  weekly  reporting  period in the years ended  December 31,
               2000 and 1999,  the aggregate  amount of daily  average  required
               reserves was approximately $25,000.







                                       21
<PAGE>

                   Notes to Consolidated Financial Statements


Note 13.       Earnings Per Share

               The following shows the weighted average number of shares used in
               computing  earnings per share and the effect on weighted  average
               number of shares of diluted  potential  common  stock.  Potential
               dilutive common stock has no effect on income available to common
               stockholders.
<TABLE>
<CAPTION>
                                                       2000                        1999                       1998
                                             ------------------------    ------------------------   ------------------------
                                                              Per                         Per                        Per
                                                             Share                       Share                      Share
                                               Shares        Amount        Shares        Amount      Shares         Amount
                                             ---------     ----------    ---------     ----------   ---------     ----------
<S>                                          <C>           <C>           <C>           <C>          <C>           <C>
               Basic EPS                     1,741,000     $     2.43    1,779,000     $     2.00   1,803,000     $     1.65
                                                           ----------                  ----------                 ----------
               Effect of dilutive
                 securities:
                   Stock options                11,000                      16,000                     18,000
                                             ---------                   ---------                  ---------
                   Diluted EPS               1,752,000     $     2.41    1,795,000     $     1.99   1,821,000     $     1.63
                                             =========     ==========    =========     ==========   =========     ==========
</TABLE>

               In 2000 and 1999,  stock options  representing  69,825 and 37,825
               shares,  respectively,  were not included in the  calculation  of
               earnings per share because they would have been antidilutive.


Note 14.       Retained Earnings

               Transfers  of funds  from the  banking  subsidiary  to the Parent
               Company in the form of loans,  advances  and cash  dividends  are
               restricted  by federal and state  regulatory  authorities.  As of
               December 31, 2000,  the aggregate  amount of  unrestricted  funds
               which could be transferred from the Company's subsidiaries to the
               Parent  Company,  without  prior  regulatory  approval,   totaled
               $5,001,000 or 18.3% of the total consolidated net assets.


Note 15.       Financial Instruments With Off-Balance-Sheet Risk and Credit Risk

               The   Company   is  a  party  to   financial   instruments   with
               off-balance-sheet  risk in the normal  course of business to meet
               the  financing  needs  of its  customers  and to  reduce  its own
               exposure to  fluctuations  in  interest  rates.  These  financial
               instruments  include  commitments  to extend  credit and  standby
               letters of credit. Those instruments involve, to varying degrees,
               elements of credit and interest rate risk in excess of the amount
               recognized in the balance sheet. The contract or notional amounts
               of those  instruments  reflect  the  extent  of  involvement  the
               Company has in particular classes of financial instruments.




                                       22
<PAGE>

                   Notes to Consolidated Financial Statements


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

               A summary of the  contract  or notional  amount of the  Company's
               exposure to  off-balance-sheet  risk as of December  31, 2000 and
               1999, is as follows:
<TABLE>
<CAPTION>
                                                                 2000           1999
                                                              ----------     ----------
                                                                   (In Thousands)
<S>                                                           <C>            <C>
               Financial instruments whose contract
                 amounts represent credit risk:
                   Commitments to extend credit               $   26,611     $   26,725
                   Standby letters of credit                       2,058          1,328
</TABLE>

               Commitments to extend credit are agreements to lend to a customer
               as long as there is no violation of any condition  established in
               the contract.  Commitments  generally have fixed expiration dates
               or other  termination  clauses and may require  payment of a fee.
               Since many of the  commitments  are  expected  to expire  without
               being drawn upon, the total commitment amounts do not necessarily
               represent future cash  requirements.  The Company  evaluates each
               customer's credit worthiness on a case-by-case  basis. The amount
               of collateral  obtained,  if deemed necessary by the Company upon
               extension of credit,  is based on management's  credit evaluation
               of the  counterparty.  Collateral  held  varies  but may  include
               accounts  receivable,  inventory,  property  and  equipment,  and
               income-producing commercial properties.

               Unfunded  commitments  under lines of credit are  commitments for
               possible future extensions of credit to existing customers. Those
               lines of  credit  may not be drawn  upon to the  total  extent to
               which the Company is committed.

               Standby letters of credit are conditional  commitments  issued by
               the Company to guarantee the performance of a customer to a third
               party.  Those  guarantees are primarily  issued to support public
               and private borrowing  arrangements,  including commercial paper,
               bond  financing,  and  similar  transactions.   The  credit  risk
               involved in issuing  letters of credit is essentially the same as
               that involved in extending  loan  facilities  to  customers.  The
               Company  holds  real  estate  as  collateral   supporting   those
               commitments for which collateral is deemed necessary.  The extent
               of collateral  held for those  commitments  at December 31, 2000,
               varies  from  0  percent  to  100  percent;  the  average  amount
               collateralized is 73.5 percent.

               The Company has approximately $4,364,000 in deposits in financial
               institutions  in excess of amounts insured by the Federal Deposit
               Insurance Corporation (FDIC) at December 31, 2000.

               The Company has utilized  derivative  instruments  in the form of
               interest rate swaps during the year 2000. Interest rate swaps are
               contracts  in  which a  series  of  interest  flows  in a  single
               currency  are   exchanged   over  a  prescribed   period.   These
               transactions  involve both credit and market  risk.  The notional
               amounts are amounts on which calculations and payments are




                                       23
<PAGE>

                   Notes to Consolidated Financial Statements


               based.  The  notional  amounts  are  not  exchanged  and  do  not
               represent  direct  credit  exposure.  Direct  credit  exposure is
               limited to the net difference  between the calculated  amounts to
               be received and paid, if any.

               During May 2000, the Company  entered into two interest rate swap
               agreements to assume variable market-indexed interest payments in
               exchange for fixed-rate  interest payments (interest rate swaps).
               The notional  principal amount of interest rate swaps outstanding
               was  $8,525,000  at  December  31,  2000.  The  original  term to
               maturity was 24 months. The  weighted-average  fixed payment rate
               was  7.0%  at  December  31,  2000.  Variable  interest  payments
               received are based on  three-month  LIBOR.  At December 31, 2000,
               the  weighted  average rate of variable  market-indexed  interest
               payment obligations to the Company was 6.41%. The effect of these
               agreements  was to transform  fixed rate  liabilities to variable
               rate  liabilities.  The net  income  from  these  agreements  was
               $29,941 for the  twelve-month  period  ended  December  31, 2000,
               which was charged to income as it accrues.

               At   December   31,   2000,   interest   rate   swaps   used  for
               other-than-trading  purposes modify the interest rate exposure in
               the Company's interest-bearing deposits.


Note 16.       Fair Value of Financial Instruments and Interest Rate Risk

               The following  methods and assumptions  were used to estimate the
               fair value of each class of financial instruments for which it is
               practicable to estimate that value:

                  Cash and Short-Term Investments

                  For those  short-term  instruments,  the carrying  amount is a
                  reasonable estimate of fair value.

                  Securities

                  For securities held for investment  purposes,  fair values are
                  based on quoted market prices or dealer quotes.

                  Loans Held for Sale

                  Fair values of loans held for sale are based on commitments on
                  hand from investors or prevailing market prices.

                  Loans

                  For  variable-rate  loans that reprice  frequently and with no
                  significant  change in credit  risk,  fair values are based on
                  carrying  values.   The  fair  values  for  other  loans  were
                  estimated using discounted cash flow analyses,  using interest
                  rates currently being offered.

                  Accrued Interest

                  The  carrying  amounts of accrued  interest  approximate  fair
                  values.


                                       24
<PAGE>

                   Notes to Consolidated Financial Statements


                  Deposits and Borrowings

                  The fair  value of  demand  deposits,  savings  accounts,  and
                  certain money market  deposits is the amount payable on demand
                  at the reporting  date. For all other deposits and borrowings,
                  the fair value is determined  using the  discounted  cash flow
                  method.  The  discount  rate was  equal to the rate  currently
                  offered on similar products.

                  Off-Balance-Sheet Financial Instruments

                  The fair value of  commitments  to extend  credit is estimated
                  using  the  fees  currently  charged  to  enter  into  similar
                  agreements,  taking into  account the  remaining  terms of the
                  agreements   and  the  present   credit   worthiness   of  the
                  counterparties.  For fixed-rate loan  commitments,  fair value
                  also  considers  the  difference  between  current  levels  of
                  interest  rates and the  committed  rates.  The fair  value of
                  standby  letters of credit is based on fees currently  charged
                  for similar  agreements or on the estimated  cost to terminate
                  them  or   otherwise   settle   the   obligations   with   the
                  counterparties at the reporting date. At December 31, 2000 and
                  1999,  the carrying  amounts of loan  commitments  and standby
                  letters of credit approximated fair values.

                  Fair  values  for   off-balance-sheet   derivative   financial
                  instruments,  for other-than-trading  purposes, are based upon
                  quoted market prices.

                  The estimated fair values,  and related carrying  amounts,  of
                  the Company's financial instruments are as follows:
<TABLE>
<CAPTION>
                                                                      2000                 1999
                                                              -------------------   -------------------
                                                              Carrying    Fair      Carrying    Fair
                                                               Amount     Value      Amount     Value
                                                              --------   --------   ---------  --------
                                                                           (In Thousands)
<S>                                                           <C>        <C>        <C>        <C>
                  Financial assets:
                     Cash and short-term investments          $ 17,147   $ 17,147   $ 20,556   $ 20,556
                     Securities                                 81,577     81,718     67,739     67,745
                     Loans held for sale                         2,131      2,131      1,232      1,230
                     Loans                                     175,794    174,522    141,782    141,436
                     Accrued interest receivable                 1,736      1,736      1,310      1,310

                  Financial liabilities:
                     Deposits                                 $224,640   $224,938   $203,837   $204,009
                     Securities sold under agreements
                       to repurchase                            14,321     14,321     10,811     10,811
                     Long-term debt                             21,300     20,999      5,000      4,805
                     Accrued interest payable                      853        853        500        500

                  Off-balance-sheet derivative financial
                    instruments:
                      Other-than-trading assets:
                        Interest rate swaps                   $    --   $    174   $     --   $     --
</TABLE>

                                       25
<PAGE>

                   Notes to Consolidated Financial Statements


               The Company  assumes  interest  rate risk (the risk that  general
               interest  rate  levels  will  change)  as a result of its  normal
               operations.  As a  result,  the  fair  values  of  the  Company's
               financial  instruments  will  change  when  interest  rate levels
               change and that change may be either  favorable or unfavorable to
               the Company.  Management  attempts to match  maturities of assets
               and  liabilities  to the extent  believed  necessary  to minimize
               interest   rate  risk.   However,   borrowers   with  fixed  rate
               obligations   are  less   likely  to  prepay  in  a  rising  rate
               environment   and  more  likely  to  prepay  in  a  falling  rate
               environment. Conversely, depositors who are receiving fixed rates
               are more likely to  withdraw  funds  before  maturity in a rising
               rate  environment  and less  likely  to do so in a  falling  rate
               environment.  Management  monitors rates and maturities of assets
               and  liabilities  and attempts to minimize  interest rate risk by
               adjusting  terms of new loans and  deposits  and by  investing in
               securities  with  terms  that  mitigate  the  Company's   overall
               interest rate risk.


Note 17.       Capital Requirements

               The  Company  and the  Bank are  subject  to  various  regulatory
               capital   requirements   administered   by  the  federal  banking
               agencies.  Failure  to  meet  minimum  capital  requirements  can
               initiate certain mandatory - possibly additional  discretionary -
               actions by regulators  that, if  undertaken,  could have a direct
               material effect on the Company's and Bank's financial statements.
               Under capital  adequacy  guidelines and the regulatory  framework
               for prompt corrective  action, the Company and the Bank must meet
               specific capital guidelines that involve quantitative measures of
               the Company's  and the Bank's  assets,  liabilities,  and certain
               off-balance-sheet items as calculated under regulatory accounting
               practices.  The  capital  amounts  and  classification  are  also
               subject  to  qualitative   judgments  by  the  regulators   about
               components, risk weightings, and other factors. Prompt corrective
               action provisions are not applicable to bank holding companies.

               Quantitative measures established by regulation to ensure capital
               adequacy  require the  Company  and the Bank to maintain  minimum
               amounts  and ratios  (set forth in the table  below) of total and
               Tier 1 capital to risk-weighted  assets, and of Tier 1 capital to
               average  assets.  Management  believes,  as of December 31, 2000,
               that  the  Company  and  the  Bank  meet  all  capital   adequacy
               requirements to which it is subject.

               As of December 31, 2000,  the most recent  notification  from the
               Federal  Reserve Bank  categorized  the Bank as well  capitalized
               under the regulatory  framework for prompt corrective  action. To
               be categorized as well capitalized,  an institution must maintain
               minimum total risk-based,  Tier 1 risk-based, and Tier 1 leverage
               ratios as set forth in the  table.  There  are no  conditions  or
               events since that  notification  that  management  believes  have
               changed the institution's category.




                                       26
<PAGE>

                   Notes to Consolidated Financial Statements


               The Company's and the Bank's  actual  capital  amounts and ratios
               are also presented in the table.
<TABLE>
<CAPTION>
                                                                                                           Minimum
                                                                                                         To Be Well
                                                                           Minimum                    Capitalized Under
                                                                           Capital                    Prompt Corrective
                                           Actual                        Requirement                   Action Provisions
                                ---------------------------     ---------------------------      ---------------------------
                                   Amount          Ratio           Amount          Ratio             Amount         Ratio
                                -----------     -----------     -----------     -----------      -----------     -----------
                                                                        (In Thousands)
<S>                             <C>                  <C>        <C>              <C>             <C>
As of December 31, 2000:
  Total Capital (to Risk
    Weighted Assets):
      Consolidated              $    27,319          13.6%      >= $ 16,088      >=    8.0%                  N/A
      The Middleburg Bank       $    22,889          11.6%      >= $ 15,735      >=    8.0%      >= $ 19,669    >=   10.0%
  Tier 1 Capital (to Risk
    Weighted Assets):
      Consolidated              $    25,515          12.7%      >= $  8,044      >=    4.0%                  N/A
      The Middleburg Bank       $    21,085          10.7%      >= $  7,868      >=    4.0%      >= $ 11,802    >=    6.0%
  Tier 1 Capital (to
    Average Assets):
      Consolidated              $    25,515           9.7%      >= $ 10,487      >=    4.0%                  N/A
      The Middleburg Bank       $    21,085           8.3%      >= $ 10,190      >=    4.0%      >= $ 12,738    >=    5.0%

As of December 31, 1999:
  Total Capital (to Risk
    Weighted Assets):
      Consolidated              $    25,433          14.8%      >= $ 13,706      >=    8.0%                  N/A
      The Middleburg Bank       $    18,531          11.9%      >= $ 13,393      >=    8.0%      >= $ 16,741    >=   10.0%
  Tier 1 Capital (to Risk
    Weighted Assets):
      Consolidated              $    23,980          14.0%      >= $  6,853      >=    4.0%                  N/A
      The Middleburg Bank       $    18,531          11.1%      >= $  6,696      >=    4.0%      >= $ 10,044    >=    6.0%
  Tier 1 Capital (to
    Average Assets):
      Consolidated              $    23,980          10.8%      >= $  8,907      >=    4.0%                  N/A
      The Middleburg Bank       $    18,531           8.6%      >= $  8,645      >=    4.0%      >= $ 10,807    >=    5.0%

</TABLE>




                                       27
<PAGE>

                   Notes to Consolidated Financial Statements


Note 18.       Proposed Acquisition

               On August 9,  1999,  the  Company  purchased  one  percent of the
               issued  and  outstanding  capital  stock  of  Gilkison  Patterson
               Investment Advisors,  Inc. ("GPIA"),  an investment advisory firm
               based in Alexandria,  Virginia. In addition, the Company acquired
               the right to purchase all of the remaining authorized, issued and
               outstanding  shares  of GPIA  capital  stock on or after  July 1,
               2001.  The  consideration  for the shares  and the merger  option
               consisted   of  $2.26   million  in  cash  and  other   non-stock
               consideration.  Upon exercise of the merger  option,  the Company
               will purchase all the remaining issued and outstanding  shares of
               GPIA  capital  stock for an  additional  $3.8 million in cash and
               shares of the  Company's  common  stock,  and GPIA will be merged
               into the Company's  wholly-owned  subsidiary,  the Tredegar Trust
               Company.



















                                       28
<PAGE>

                   Notes to Consolidated Financial Statements


 Note 19.      Condensed Financial Information - Parent Corporation Only

                         INDEPENDENT COMMUNITY BANKSHARES, INC.
                                (Parent Corporation Only)

                                     Balance Sheets
                               December 31, 2000 and 1999

<TABLE>
<CAPTION>
         Assets                                                          2000           1999
                                                                     ------------   ------------
                                                                            (In Thousands)
<S>                                                                  <C>            <C>
Cash on deposit with subsidiary bank                                 $         53   $          2
Money market fund                                                             169             24
Securities available for sale                                               2,452          2,205
Investment in subsidiaries, at cost, plus
  equity in undistributed net income                                       22,978         17,962
Note receivable                                                             1,000          1,000
Goodwill                                                                    1,353          1,060
Other assets                                                                1,500          1,602
                                                                     ------------   ------------

               Total assets                                          $     29,505   $     23,855
                                                                     ============   ============

         Liabilities and Shareholders' Equity

Liabilities
  Note payable to subsidiary                                         $        500   $          -
  Long-term debt                                                            1,300              -
  Other liabilities                                                           434            780
                                                                     ------------   ------------
              Total liabilities                                      $      2,234   $        780
                                                                     ------------   ------------

Shareholders' Equity
  Common stock                                                       $      8,696   $      8,895
  Capital surplus                                                             556          1,293
  Retained earnings                                                        17,616         14,852
  Accumulated other comprehensive income (loss)                               403         (1,965)
                                                                     ------------   ------------
               Total shareholders' equity                            $     27,271   $     23,075
                                                                     ------------   ------------

               Total liabilities and shareholders' equity            $     29,505   $     23,855
                                                                     ============   ============
</TABLE>







                                       29
<PAGE>

                   Notes to Consolidated Financial Statements


                     INDEPENDENT COMMUNITY BANKSHARES, INC.
                            (Parent Corporation Only)

                              Statements of Income
                  Years Ended December 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                                                  2000          1999          1998
                                                               ----------    ----------    ----------
                                                                           (In Thousands)
<S>                                                            <C>           <C>           <C>
Income
  Dividends from subsidiaries                                  $    1,500    $    1,865    $    2,586
  Dividends from investments                                          224           178           197
  Interest on money market                                              6            48            33
  Interest from loan to GPIA                                           80            32            --
  Management fees from GPIA                                            77            40            --
  (Losses) on securities available
    for sale, net                                                      (5)           (5)          (29)
                                                               ----------    ----------    ----------
          Total income                                         $    1,882    $    2,158    $    2,787
                                                               ----------    ----------    ----------

Expenses
  Salaries and employee benefits                               $      123    $      132    $       --
  Amortization                                                         64            60            80
  Legal and professional fees                                          65            42            32
  Printing and supplies                                                 9            42            23
  Directors fees                                                       34            34            --
  Interest expense on loan from subsidiary                             40            17            --
  Interest expense other                                               76            --            --
  Other                                                               156            27            73
                                                               ----------    ----------    ----------
          Total expenses                                       $      567    $      354    $      208
                                                               ----------    ----------    ----------

          Income before allocated tax benefits and
             undistributed income of subsidiaries              $    1,315    $    1,804    $    2,579

Income tax (benefit)                                                  (34)          (20)          (16)
                                                               ----------    ----------    ----------

          Income before equity in undistributed
            income of subsidiaries                             $    1,349    $    1,824    $    2,595

Equity in undistributed income of subsidiaries                      2,879         1,742           380
                                                               ----------    ----------    ----------

          Net income                                           $    4,228    $    3,566    $    2,975
                                                               ==========    ==========    ==========
</TABLE>



                                       30
<PAGE>

                   Notes to Consolidated Financial Statements


                   INDEPENDENT COMMUNITY BANKSHARES, INC.
                         (Parent Corporation Only)

                          Statements of Cash Flows
                Years Ended December 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                                                  2000          1999          1998\
                                                               ----------    ----------    ----------
                                                                           (In Thousands)
<S>                                                            <C>           <C>           <C>
Cash Flows from Operating Activities
  Net income                                                   $    4,228    $    3,566    $    2,975
  Adjustments to reconcile net income to net cash
    provided by operating activities:
      Amortization                                                     64            60            80
      Undistributed earnings of subsidiaries                       (2,879)       (1,742)         (380)
      Loss on sale of securities available for sale                     5             5            29
      (Increase) in other assets                                      (19)       (1,433)          (21)
      Increase (decrease) in other liabilities                         92           548           (37)
                                                               ----------    ----------    ----------
          Net cash provided by
            operating activities                               $    1,491    $    1,004    $    2,646
                                                               ----------    ----------    ----------

Cash Flows from Investing Activities
  Purchase of securities available for sale                    $       --    $     (399)   $   (1,275)
  Proceeds from sale of securities available
    for sale                                                          100           201         1,218
  Increase in note receivable                                          --        (1,000)            -
                                                               ----------    ----------    ----------
          Net cash provided by (used in)
            investing activities                               $      100    $   (1,198)   $      (57)
                                                               ----------    ----------    ----------

Cash Flows from Financing Activities
  Proceeds from long-term debt                                 $    1,300    $       --    $       --
  Purchase of common stock                                         (1,327)           --          (823)
  Net proceeds from sale of common stock                               34            --            --
  Cash dividends paid                                              (1,402)       (1,175)       (1,086)
                                                               ----------    ----------    ----------
          Net cash (used in)
            financing activities                               $   (1,395)   $   (1,175)   $   (1,909)
                                                               ----------    ----------    ----------

          Increase (decrease) in cash and
            cash equivalents                                   $      196    $   (1,369)   $      680

Cash and Cash Equivalents
  Beginning                                                            26         1,395           715
                                                               ----------    ----------    ----------

  Ending                                                       $      222    $       26    $    1,395
                                                               ==========    ==========    ==========

Supplemental Disclosure of Noncash Transactions,
  issuance of common stsock for contingent payment under
  terms of acquisition of subsidiary                           $      357    $       --    $       --
                                                               ==========    ==========    ==========
</TABLE>




                                       31
<PAGE>

                                   SIGNATURES

            In accordance  with Section 13 or 15(d) of the  Securities  Exchange
Act of 1934, as amended,  the registrant  caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                                       INDEPENDENT COMMUNITY
                                         BANKSHARES, INC.



Date:  March 15, 2001                  By:    /s/ Joseph L. Boling
                                           -------------------------------------
                                           Joseph L. Boling
                                           President and Chief Executive Officer


            In  accordance  with the Exchange  Act,  this report has been signed
below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
               Signature                                      Title                             Date
               ---------                                      -----                             ----
<S>                                          <C>                                           <C>

         /s/ Joseph L. Boling                    Chairman of the Board, President          March 15, 2001
---------------------------------------             and Chief Executive Officer
           Joseph L. Boling                                and Director
                                                   (Principal Executive Officer)

         /s/ Alice P. Frazier                    Senior Vice President and Chief           March 15, 2001
---------------------------------------      Financial Officer (Principal Financial
            Alice P. Frazier                         and Accounting Officer)


                                                             Director                      March 15, 2001
---------------------------------------
          Howard M. Armfield


                                                             Director                      March 15, 2001
---------------------------------------
         Childs Frick Burden


        /s/ J. Lynn Cornwell, Jr.                            Director                      March 15, 2001
---------------------------------------
         J. Lynn Cornwell, Jr.


        /s/ William F. Curtis                                Director                      March 15, 2001
---------------------------------------
          William F. Curtis


                                                             Director                      March 15, 2001
---------------------------------------
          Robert C. Gilkison

<PAGE>

               Signature                                      Title                             Date
               ---------                                      -----                             ----


       /s/ C. Oliver Iselin, III                             Director                      March 15, 2001
---------------------------------------
         C. Oliver Iselin, III


          /s/ Thomas W. Nalls                                Director                      March 15, 2001
---------------------------------------
            Thomas W. Nalls


          /s/ John C. Palmer                                 Director                      March 15, 2001
---------------------------------------
            John C. Palmer


                                                             Director                      March 15, 2001
---------------------------------------
             John Sherman


         /s/ Millicent W. West                               Director                      March 15, 2001
---------------------------------------
           Millicent W. West


         /s/ Edward T. Wright                                Director                      March 15, 2001
---------------------------------------
           Edward T. Wright

</TABLE>



<PAGE>

                                INDEX TO EXHIBITS

Number                              Document
------                              --------

 3.1     Articles of Incorporation  of Independent  Community  Bankshares,  Inc.
         (the "Company")  (restated in electronic  format),  attached as Exhibit
         3.1 to  the  Registration  Statement  on  Form  S-4,  Registration  No.
         333-24523, filed with the Commission on April 4, 1997 (the "Form S-4"),
         incorporated herein by reference.

 3.2     Bylaws  of the  Company,  attached  as  Exhibit  3.2 to the  Form  S-4,
         incorporated herein by reference.

 10.1    Employment Agreement,  dated as of January 1, 1998, between the Company
         and Joseph L. Boling,  attached as Exhibit 10.1 to the Company's Annual
         Report  on  Form  10-KSB  for  the  year  ended   December   31,  1998,
         incorporated herein by reference.

 10.2    Independent  Community  Bankshares,  Inc.  1997 Stock Option  Plan,  as
         amended,  attached as Exhibit 4.3 to the Registration Statement on Form
         S-8, Registration No. 333-93447,  filed with the Commission on December
         22, 1999, incorporated herein by reference.

 10.3    Agreement  and Plan of  Reorganization  dated  as of  August  9,  1999,
         between Gilkison Patterson  Investment  Advisors,  Inc.  ("GPIA"),  the
         Company and The Tredegar Trust Company, attached as Exhibit 10.1 to the
         Company's  Quarterly  Report  on  Form  10-QSB  for  the  period  ended
         September  30,  1999  (the  "Form  10-QSB"),   incorporated  herein  by
         reference.

 10.4    Shareholder  Agreement  dated as of August 9, 1999,  between  Robert C.
         Gilkison, James H. Patterson, the Company and GPIA, attached as Exhibit
         10.2 to the Form 10-QSB, incorporated herein by reference.

 10.5    Stock Purchase  Agreement dated as of August 9, 1999, between Robert C.
         Gilkison, James H. Patterson and the Company,  attached as Exhibit 10.3
         to the Form 10-QSB, incorporated herein by reference.

 21      Subsidiaries of the Registrant.

 23      Consent of Yount, Hyde & Barbour, P.C.