<PAGE>

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

                                   FORM 10-Q
(Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

               For the quarterly period ended September 30, 1999

                                      or

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from __________________ to _________________

                        Commission File Number 0-25031


                       VIRGINIA CAPITAL BANCSHARES, INC.
-------------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)


Virginia                                                             54-1913168
-------------------------------------------------------------------------------
(State or other jurisdiction of                                (I.R.S. Employer
incorporation or organization)                              Identification No.)

400 George Street, Fredericksburg, Virginia                               22404
-------------------------------------------------------------------------------
(Address of principal executive offices)                             (Zip Code)

                                (540) 899-5500
-------------------------------------------------------------------------------
             (Registrant's telephone number, including area code)

                                Not Applicable
-------------------------------------------------------------------------------
  (Former name, former address and former fiscal year, if changes since last
                                    report)

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                                          Yes  X    No
                                                              ---      ---

                     APPLICABLE ONLY TO CORPORATE ISSUERS:

     Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 10,834,560 shares of common
stock, par value $0.01 per share, were outstanding as of November 5, 1999.
<PAGE>

                       Virginia Capital Bancshares, Inc.

                                   Form 10-Q

                   For the Quarter Ended September 30, 1999

                                     INDEX

<TABLE>
<CAPTION>
                                                                      Page
                                                                      ----
<S>                                                                  <C>
PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

     Consolidated Balance Sheets at
     September 30, 1999 (unaudited) and December 31, 1998..........     3

     Consolidated Statements of Income - For the Three
     Months Ended September 30, 1999 and 1998 and the
     Nine Months Ended September 30, 1999 and 1998 (unaudited).....     4

     Consolidated Statements of Changes in Stockholders' Equity -
     For the Nine Months Ended September 30, 1999 and 1998
      (unaudited)..................................................     5

     Consolidated Statements of Cash Flows - For the
     Nine Months Ended September 30, 1999 and 1998 (unaudited).....     6

     Notes to Consolidated Financial Statements....................     7


Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations.................................     9

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.   18

PART II: OTHER INFORMATION..........................................   18

Item 1.  Legal Proceedings..........................................   18
Item 2.  Changes in Securities and Use of Proceeds..................   18
Item 3.  Defaults Upon Senior Securities............................   18
Item 4.  Submission of Matters to a Vote of Security Holders........   18
Item 5.  Other Information..........................................   18
Item 6.  Exhibits and Reports on Form 8-K...........................   19

SIGNATURES.........................................................    20
</TABLE>
<PAGE>

PART I.  FINANCIAL INFORMATION

                       VIRGINIA CAPITAL BANCSHARES, INC.
                          Consolidated Balance Sheets
                            (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                            (Unaudited)
                                                                           September 30,      December 31,
                                                                                1999              1998
                                                                         -----------------  -----------------
<S>                                                                      <C>                <C>
Assets
Cash and cash equivalents (includes interest-bearing
  deposits of $22,433 in 1999; $114,963 in 1998)                                 $ 23,495           $115,734
Investment securities
   Held-to-maturity (fair value $775 in 1999; $1,003 in 1998)                         762                990
   Available-for-sale (cost $88,918 in 1999; $29,709 in 1998)                      88,083             30,381
Federal Home Loan Bank stock, restricted, at cost                                   3,613              3,539
Loans receivable, net                                                             419,468            411,791
Accrued interest receivable                                                         3,618              2,588
Foreclosed real estate, net                                                           674              1,177
Property and equipment, net                                                         3,640              3,587
Other assets                                                                        7,144              6,889
                                                                       -------------------------------------
               Total assets                                                      $550,497           $576,676
                                                                       =====================================

      Liabilities and Stockholders' Equity
Liabilities
Deposits                                                                         $356,954           $354,788
Official bank checks                                                                2,897             21,064
Advances from Federal Home Loan Bank                                                8,000              8,000
Advances from borrowers for taxes and insurance                                     2,530              1,048
Accrued expenses and other liabilities                                              7,079              6,570
                                                                       -------------------------------------
               Total liabilities                                                  377,460            391,470
                                                                       -------------------------------------

Stockholders' Equity
Preferred stock, 5,000,000 shares authorized, none issued                               -                  -
Common stock, $.01 par value, 75,000,000 shares authorized,
  issued and outstanding 10,885,800 at September 30, 1999 and
  11,404,800 at December 31, 1998                                                     109                114
Additional paid-in capital                                                        104,255            112,303
Common stock acquired by stock benefit plans                                      (15,784)            (8,920)
Retained earnings, substantially restricted                                        84,975             81,292
Accumulated other comprehensive income (loss)                                        (518)               417
                                                                       -------------------------------------
               Total stockholders' equity                                         173,037            185,206
                                                                       -------------------------------------

               Total liabilities and stockholders' equity                        $550,497           $576,676
                                                                       =====================================
</TABLE>

See accompanying notes to consolidated financial statements.

                                       3
<PAGE>

                       VIRGINIA CAPITAL BANCSHARES, INC.
                 Consolidated Statements of Income (Unaudited)
                            (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                            Three Months Ended            Nine Months Ended
                                                              September 30,                 September 30,
                                                     ------------------------------------------------------------
                                                           1999           1998           1999           1998
                                                     ------------------------------------------------------------
<S>                                                    <C>            <C>            <C>            <C>
Interest income
Interest and fees on loans                                    $8,000         $8,294        $24,073        $25,151
Interest on investment securities                              1,706            717          5,197          2,104
                                                     ------------------------------------------------------------
     Total interest income                                     9,706          9,011         29,270         27,255
                                                     ------------------------------------------------------------

Interest expense
Deposits                                                       4,112          4,703         12,402         14,078
Advances and other borrowings                                    125            125            370            370
                                                     ------------------------------------------------------------
     Total interest expense                                    4,237          4,828         12,772         14,448
                                                     ------------------------------------------------------------

     Net interest income before provision for loan
      losses                                                   5,469          4,183         16,498         12,807

Provision for loan losses                                         45            146             90            415
                                                     ------------------------------------------------------------

     Net interest income after provision for loan
      losses                                                   5,424          4,037         16,408         12,392
                                                     ------------------------------------------------------------

Noninterest income
Fees and service charges                                          69             68            207            224
Securities gains                                                  73              -            250             52
Other                                                              4             17             27             58
                                                     ------------------------------------------------------------
     Total noninterest income                                    146             85            484            334
                                                     ------------------------------------------------------------

Noninterest expense
Compensation and benefits                                        992            757          2,793          2,219
Occupancy and equipment                                          209            186            608            529
Federal deposit insurance premium                                 51             57            163            174
Other                                                            986            340          2,363          1,487
                                                     ------------------------------------------------------------
     Total noninterest expense                                 2,238          1,340          5,927          4,409
                                                     ------------------------------------------------------------

Income before income taxes                                     3,332          2,782         10,965          8,317

Income taxes                                                   1,205          1,085          4,130          3,300
                                                     ------------------------------------------------------------
Net income                                                    $2,127         $1,697        $ 6,835        $ 5,017
                                                     ============================================================

Net income per share
Basic                                                           $.21              -           $.66              -
Diluted                                                         $.21              -           $.66              -
</TABLE>


See accompanying notes to consolidated financial statements.

                                       4
<PAGE>

                       VIRGINIA CAPITAL BANCSHARES, INC.
    Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
                            (Dollars in Thousands)


<TABLE>
<CAPTION>
                                                                     Common
                                                                     Stock          Retained      Accumulated
                                                    Additional      Acquired       Earnings,         Other
                                Preferred  Common     Paid-in       By Stock     Substantially   Comprehensive     Total
                                  Stock     Stock     Capital    Benefit Plans     Restricted    Income (Loss)    Equity
                                ---------  -------  -----------  --------------  --------------  --------------  ---------
<S>                             <C>        <C>      <C>          <C>             <C>             <C>             <C>
Balance, December 31, 1998          $   -    $114     $112,303        $ (8,920)        $81,292           $ 417   $185,206

Comprehensive income:
     Net income                         -       -            -               -           6,835               -      6,835
     Change in net unrealized
     gain (loss) on securities
     available-for-sale                 -       -            -               -               -            (935)      (935)
                              -------------------------------------------------------------------------------------------
Comprehensive income                                                                                                5,900
Dividends declared ($0.30 per
 share)                                 -       -            -               -          (3,152)              -     (3,152)

Shares acquired for stock
     benefit plans                      -       -            -          (7,396)              -               -     (7,396)
ESOP shares committed to
     be released                        -       -          113             253               -               -        366
Amortization of stock awards            -       -            -             279               -               -        279
Stock repurchases                       -      (5)      (8,161)              -               -               -     (8,166)
                              -------------------------------------------------------------------------------------------

Balance, September 30, 1999         $   -    $109     $104,255        $(15,784)        $84,975           $(518)  $173,037
                              ===========================================================================================

Balance, December 31, 1997          $   -    $  -     $      -        $      -         $79,896           $ 177   $ 80,073

Comprehensive income:
     Net income                         -       -            -               -           5,017               -      5,017
     Change in net unrealized
     gain on securities
     available-for-sale                 -       -            -               -               -              44         44
                              -------------------------------------------------------------------------------------------
Comprehensive income                                                                                                5,061
                              -------------------------------------------------------------------------------------------

Balance, September 30, 1998         $   -    $  -     $      -        $      -         $84,913           $ 221   $ 85,134
                              ===========================================================================================
</TABLE>



See accompanying notes to consolidated financial statements.

                                       5
<PAGE>

                       VIRGINIA CAPITAL BANCSHARES, INC.
               Consolidated Statements of Cash Flows (Unaudited)
                            (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                                For the Nine Months
                                                                                Ended September 30,
                                                                           ------------------------------
                                                                                  1999          1998
                                                                           ------------------------------
Cash flows from operating activities
<S>                                                                       <C>            <C>
     Net income                                                                   $ 6,835          $5,017
     Adjustments to reconcile net income to net cash provided
     by operating activities
         Depreciation                                                                 317             260
         Provision for loan losses                                                     90             415
         Provision for loss on real estate owned                                        -             (92)
         Premium/discount on investment securities                                   (157)             (4)
         Amortization of loan discounts and fees                                       81             326
         ESOP expense                                                                 365               -
         Stock award expense                                                          279               -
         Gain on sale of securities                                                  (250)            (52)
         (Increase) decrease in accrued interest receivable                        (1,030)             33
         Increase in other assets                                                    (266)         (2,031)
         Increase in other liabilities                                                509             352
                                                                           ------------------------------
           Net cash provided by operating activities                                6,773           4,224
                                                                           ------------------------------
Cash flows from investing activities
          Proceeds from redemption of securities available-for-sale                 7,750           9,015
          Purchase of FHLB stock                                                      (74)            (91)
          Purchases of securities available-for-sale                              (67,116)         (5,244)
          Principal payments on mortgaged-backed securities
          held-to-maturity                                                            291             237
          Loan originations and principal payments, net                            (7,848)         (4,420)
          Purchases of equipment                                                     (374)           (226)
          Proceeds from sale of real estate owned                                   1,591           2,364
                                                                           ------------------------------
            Net cash provided by (used in) investing activities                   (65,780)          1,635
                                                                           ------------------------------
Cash flows from financing activities
          Net increase (decrease) in savings accounts                               7,051          (1,672)
          Net decrease in official bank checks                                    (18,167)           (748)
          Net increase (decrease) in certificates of deposit                       (4,885)          2,001
          Increase in advances by borrowers for taxes and insurance                 1,482           1,714
          Cash dividends paid                                                      (3,151)              -
          Purchase of common stock for stock benefit plans                         (7,396)              -
          Stock repurchases                                                        (8,166)              -
                                                                           ------------------------------
            Net cash provided by (used in) financing activities                   (33,232)          1,295
                                                                           ------------------------------

Net increase (decrease) in cash and cash equivalents                              (92,239)          7,154

Cash and cash equivalents at beginning of period                                  115,734          11,287
                                                                           ------------------------------

Cash and cash equivalents at end of period                                       $ 23,495         $18,441
                                                                           ==============================
</TABLE>

See accompanying notes to consolidated financial statements.

                                       6
<PAGE>

                       VIRGINIA CAPITAL BANCSHARES, INC.
                  Notes to Consolidated Financial Statements
                              SEPTEMBER 30, 1999


1.   The consolidated financial statements include the accounts of Virginia
     Capital Bancshares, Inc. (the "Company") and its wholly-owned subsidiary
     Fredericksburg Savings Bank (the "Bank"). All material intercompany
     transactions and accounts have been eliminated. In the opinion of
     management, the accompanying unaudited consolidated financial statements
     contain all adjustments (consisting only of normal recurring accruals)
     necessary to present fairly the financial position of the Company as of
     September 30, 1999, and the results of its operations for each of the
     periods presented. The results of operations for the interim periods
     presented are not necessarily indicative of the results of operations that
     may be expected for all of 1999.

          Certain information and note disclosures normally included in
     financial statements prepared in accordance with generally accepted
     accounting principles have been condensed or omitted, pursuant to the rules
     and regulations of the Securities and Exchange Commission. These unaudited
     consolidated financial statements should be read in conjunction with the
     audited consolidated financial statements and notes thereto included in the
     Company's Annual Report to stockholders on Form 10-K for the year ended
     December 31, 1998.

2.   The following is a reconciliation of the denominators of the basic and
     diluted earnings per share computations.

<TABLE>
<CAPTION>
                                                           Three Months Ended           Nine Months Ended
                                                           September 30, 1999          September 30, 1999
                                                    --------------------------------------------------------
<S>                                                   <C>                           <C>
Net income                                                      $     2,127                $     6,835
                                                    ========================================================

Basic:
Weighted average shares outstanding                              11,311,365                 11,373,313
Less:  Unallocated/unearned shares held by
           stock benefit plans                                   (1,197,811)                (1,008,072)
Add:   ESOP shares released or committed
           to be released                                             5,740                     15,401
                                                    --------------------------------------------------------


Weighted average shares outstanding - basic                      10,119,294                 10,380,642
                                                    ========================================================

Earnings per share - basic                                      $       .21                $       .66
                                                    ========================================================
<CAPTION>
                                                          Three Months Ended          Nine Months Ended
                                                          September 30, 1999          September 30, 1999
                                                    -------------------------------------------------------
<S>                                                   <C>                          <C>
Diluted:

Net Income                                                      $     2,127               $     6,835
                                                    =======================================================

Basic weighted average shares outstanding                        10,119,294                10,380,642
Add effect of dilutive instruments:
  Restricted stock awards                                            42,814                    14,271
  Stock options                                                      26,178                     8,726
                                                    =======================================================

Dilutive weighted average shares outstanding                     10,188,286                10,403,639
                                                    =======================================================
Earnings per share - diluted                                    $       .21               $       .66
                                                     =======================================================
</TABLE>

3.   On June 29, 1999, the Company's Board of Directors granted options to
     officers and directors to acquire 912,386 shares of the Company's stock at
     an exercise price of $15.3125 per share. Additionally, the Board awarded
     364,953 shares of restricted stock to officers and directors with a fair
     value of $15.3125 per share. These stock options and awards vest over a
     five-year period commencing July 1, 1999. Common stock acquired by stock
     benefit plans at September 30, 1999 includes 866,765 shares for the
     Employee Stock Ownership Plan, acquired in the Bank's conversion, and
     456,192 shares for the Stock-Based Incentive Plan, acquired in the third
     quarter 1999.

                                       7
<PAGE>

                        PART I:  FINANCIAL INFORMATION
                       VIRGINIA CAPITAL BANCSHARES, INC.
                              SEPTEMBER 30, 1999

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

General

     Virginia Capital Bancshares, Inc. ("the Company") is the holding company
for Fredericksburg Savings Bank ("the Bank"). The Company is headquartered in
Fredericksburg, Virginia and its principal business currently consists of the
operations of the Bank. The Bank's results of operations are dependent primarily
on net interest income, which is the difference between the income earned on its
loan and investment portfolios and its cost of funds, consisting of the interest
paid on deposits and borrowings. Results of operations are also affected by the
Bank's provision for loan losses and fees and other service charges. The Bank's
noninterest expense principally consists of compensation and employee benefits,
office occupancy and equipment expense, federal deposit insurance premiums, the
cost of foreclosed real estate operations, data processing, advertising and
business promotion and other expenses. Results of operations are also
significantly affected by general economic and competitive conditions,
particularly changes in interest rates, government policies and actions of
regulatory authorities. Future changes in applicable law, regulations or
government policies may materially impact the Bank.

Forward-Looking Statements

     This Quarterly Report on Form 10-Q contains certain forward-looking
statements which are based on certain assumptions and describe future plans,
strategies and expectations of the Company. These forward-looking statements are
generally identified by use of the words "believe," "expect," "intend,"
"anticipate," "estimate," "project," or similar expressions.  The Company's
ability to predict results or the actual effect of future plans or strategies is
inherently uncertain.  Factors which could have a material adverse effect on the
operations of the Company and the subsidiaries include, but are not limited to,
changes in:  interest rates, general economic conditions, legislative/regulatory
changes, monetary and fiscal policies of the U.S. Government, including policies
of the U.S. Treasury and the Federal Reserve Board, the quality or composition
of the loan or investment portfolios, demand for loan products, deposit flows,
competition, demand for financial services in the Company's market area and
accounting principles and guidelines.  These risks and uncertainties should be
considered in evaluating forward-looking statements and undue reliance should
not be placed on such statements. The Company does not undertake -- and
specifically disclaims any obligation -- to publicly release the result of any
revisions which may be made to any forward-looking statements to reflect events
or circumstances after the date of such statements or to reflect the occurrence
of anticipated or unanticipated events.

                                       8
<PAGE>

Comparison of Financial Condition at September 30, 1999 and December 31, 1998

     The Company's assets totaled $550.5 million at September 30, 1999, a
decrease of  $26.2 million, or 4.5% from total assets of $576.7 million at
December 31, 1998.  Assets decreased in the first quarter of 1999 due to the
return of excess funds received from the public offering of stock completed in
December 1998. Assets decreased in the third quarter of 1999 with the Company's
purchase of 456,192 shares of common stock for its Stock-Based Incentive Plan
Trust and the Company's repurchase of 519,000 shares of common stock.  Dividends
of $.30 per share were paid totaling $3.4 million during the first nine months
of 1999.  Stockholders' equity of $173 million represented 31.43% of total
assets.

     Loans.  Net loans receivable increased $7.7 million to $419.5 million at
September 30, 1999 from $411.8 million at December 31, 1998.  One-to-four family
mortgage loans increased $6.0 million to $371.3 million at September 30, 1999
from $365.3 million at December 31, 1998.  Consumer loans increased $1.5 million
to $10.5 million at September 30, 1999 from $9.1 million at December 31, 1998.

     Allowance for Loan Losses.   The allowance for loan losses remained
constant at $5.7 million at September 30, 1999 and December 31, 1998.  At
September 30, 1999, the allowance for loan losses provided coverage of 96.80% of
total nonperforming loans of $5.9 million, an increase from 93.69% of total
nonperforming loans of $6.1 million at December 31, 1998.  The adequacy of the
allowance for loan losses is evaluated monthly by management based upon a review
of significant loans, with particular emphasis on nonperforming and delinquent
loans that management believes warrant special attention.  Management considers
the allowance for loan losses adequate at September 30, 1999 to cover losses
inherent in the loan portfolio.

     Investment Securities.  Investment securities classified as available-for-
sale totaled $88.1 million at September 30, 1999, a net increase of $57.7
million from $30.4 million at December 31, 1998.  The following tables set forth
certain information regarding the amortized cost and fair value of the Company's
available-for-sale securities at September 30, 1999.

<TABLE>
<CAPTION>
                                                Amortized       Estimated
                                                   Cost         Fair Value
                                            --------------------------------
<S>                                           <C>             <C>
U.S. Treasury and agency obligations                 $40,769         $40,257
Corporate securities                                  35,826          35,071
State and local municipal bonds                        5,524           5,492
Equity securities                                      2,931           3,989
Mutual fund                                            1,368           1,327
Dual index consolidated bonds                          2,500           1,947
                                            --------------------------------
                                                     $88,918         $88,083
                                            ================================
</TABLE>

Maturities of available-for-sale securities at September 30, 1999, are as
follows:

<TABLE>
<CAPTION>
                                                Amortized       Estimated
                                                   Cost         Fair Value
                                            --------------------------------
<S>                                           <C>             <C>
Mutual fund                                          $ 1,368         $ 1,327
Equity securities                                      2,931           3,989
Due in one year or less                               11,325          11,313
Due after one year through five years                 70,156          68,868
Due after five years through ten years                 3,039           2,484
Due after ten years                                       99             102
                                            --------------------------------
                                                     $88,918         $88,083
                                            ================================
</TABLE>

     Deposits.  Total deposits increased $2.2 million from $354.8 million at
December 31, 1998 to $357.0 million at September 30, 1999.  Checking accounts
increased $1.6 million in the first nine months of 1999.

                                       9
<PAGE>

Comparison of Operating Results for the Three Months Ended September 30, 1999
and 1998 and for the Nine Months Ended September 30, 1999 and 1998

     General.   Net income for the three months ended September 30, 1999
increased $430,000 to $2.1 million compared to net income of $1.7 million for
the three months ended September 30, 1998.  The increase in net income during
the three-month period ended September 30, 1999 resulted primarily from a $1.3
million increase in net interest income partially offset by increases in non-
interest expenses and income taxes of $898,000 and $120,000 respectively.  Net
income for the nine months ended September 30, 1999 increased $1.8 million to
$6.8 million compared to net income of $5.0 million for the nine months ended
September 30, 1998.  The increase in net income during the nine month period
ended September 30, 1999 resulted primarily from a $3.7 million increase in net
interest income partially offset by increases in non-interest expenses and
income taxes of $1.5 million and $830,000, respectively.

     Interest Income.   Interest income for the three months ended September 30,
1999 increased $695,000 to $9.7 million, from $9.0 million for the comparable
period in 1998.  Interest on mortgage loans, the largest component of interest
income, decreased $278,000 from $8.0 million for the three months ended
September 30, 1998 to $7.8 million for the three months ended September 30,
1999. The decrease in interest on mortgage loans was the result of a decline in
the average yield on mortgage loans of 27 basis points from 7.91% to 7.64%.  The
decrease in interest on mortgage loans was offset by an increase in interest on
overnight and short-term deposits and investment securities of $1.0 million. The
$1.0 million increase was the result of an increase in the average balance of
overnight and short-term deposits from $14.4 million for the three month period
ended September 30, 1998 to $30.9 million for the three month period ended
September 30, 1999, and, an increase in the average balance of investment
securities from $33.4 million for the three month period ended September 30,
1998 to $92.5 million for the three month period ended September 30, 1999.

     Interest income for the nine months ended September 30, 1999 increased $2.0
million, from $27.3 million for the nine month period ended September 30, 1998
to $29.3 million for the nine month period ended September 30, 1999.  Interest
on mortgage loans decreased $1.1 million while interest on overnight and short-
term deposits and investment securities increased $3.1 million during this
period.  The decrease in interest on mortgage loans was the result of a decline
in the average yield on mortgage loans of 38 basis points from 8.10% to 7.72%.
The $3.1 million increase in interest on overnight and short-term deposits and
investment securities was the result of an increase in the average balance of
overnight and short-term deposits from $14.6 million for the nine month period
ended September 30, 1998 to $57.1 million for the nine month period ended
September 30, 1999, and, an increase in the average balance of investment
securities from $33.9 million for the nine month period ended September 30, 1998
to $73.8 million for the nine month period ended September 30, 1999.

     Interest Expense.  Interest expense was $4.2 million for the three months
ended September 30, 1999, a decrease of $591,000 from $4.8 million for the three
months ended September 30, 1998. This decrease is attributable to a $22.0
million decrease in average deposits from $375.2 million for the third quarter
of 1998 to $353.2 million for the third quarter of 1999, and, a decrease of 35
basis points in the rates paid on these deposits from 5.01% to 4.66%.  The
decrease in deposit accounts was due in part to withdrawals made to purchase the
Company's common stock in connection with the Bank's conversion.

                                       10
<PAGE>

     For substantially the same reasons, interest expense decreased $1.7 million
from $14.5 million for the nine month period ended September 30, 1998 to $12.8
million for the same period ended September 30, 1999.

     Net Interest Income.  Net interest income for the third quarter of 1999 was
$5.5 million or 30.74% higher than the $4.2 million reported for the third
quarter of 1998.  The net interest margin for the third quarter 1999 was 4.05%
compared to 3.61% for the third quarter of 1998. These increases primarily
resulted from investment of proceeds from the successful completion of the
mutual to stock conversion in December of 1998.

     For substantially the same reason, net interest income was higher for the
nine month period ended September 30, 1999.  During the first nine months of
1999, net interest income increased $3.7 million from the same period last year.

     Provision for Loan Losses.   The provision for loan losses decreased from
$146,000 for the third quarter of 1998 to $45,000 for the third quarter of 1999.
The provision for loan losses decreased from $415,000 for the first nine months
of 1998 to $90,000 for the first nine months of 1999. This decrease is primarily
the result of a decrease in net charge-offs from $198,000 for the first nine
months of 1998 to $89,000 for the first nine months of 1999.  Management
assesses the adequacy of the allowance for loan losses based on evaluating known
and inherent risks in the loan portfolio and upon management's continuing
analysis of the factors underlying the quality of the loan portfolio. While
management believes that, based on information currently available, the
allowance for loan losses is sufficient to cover losses inherent in its loan
portfolio at this time, no assurance can be given that the level of the
allowance for loan losses will be sufficient to cover future possible loan
losses incurred by the Company or that future adjustments to the allowance for
loan losses will not be necessary if economic and other conditions differ
substantially from the economic and other conditions used by management to
determine the current level of the allowance for loan losses.  Management may in
the future increase the level of the allowance for loan losses as a percentage
of total loans and non-performing loans in the event it increases the level of
commercial real estate, multifamily, or consumer lending as a percentage of its
total loan portfolio. In addition, various regulatory agencies, as an integral
part of their examination process, periodically review the allowance for loan
losses.  Such agencies may require the Company to provide additions to the
allowance based upon judgements different from management.

     A summary of activity in the allowance for loan losses follows:

<TABLE>
<CAPTION>
                                                            Three Months Ended            Nine Months Ended
                                                              September 30,                 September 30,
                                                     ------------------------------------------------------------
                                                           1999           1998           1999           1998
                                                     ------------------------------------------------------------
<S>                                                    <C>            <C>            <C>            <C>
Balance at beginning of period                                $5,692         $5,639         $5,684         $5,478
Provision for loan losses                                         45            146             90            415

  Loans charged off:
    Mortgage loans                                                52             70             88            149
    Consumer loans                                                 -             23             32             52
                                                     ------------------------------------------------------------
        Total charge-offs                                         52             93            120            201
  Recoveries                                                       -              3             31              3
                                                     ------------------------------------------------------------

Balance at end of period                                      $5,685         $5,695         $5,685         $5,695
                                                     ============================================================
</TABLE>

                                       11
<PAGE>

     Noninterest Expense.  Total noninterest expense increased $898,000 to $2.2
million for the three months ended September 30, 1999, compared to $1.3 million
for the three months ended September 30, 1998.  The compensation and benefits
expense increase of $235,000 includes the Fredericksburg Savings Bank Employee
Stock Ownership Plan (ESOP) contribution made in the three months ended
September 30, 1999.  Because this plan was established in December 1998, there
was no expense related to this plan in the third quarter of 1998.  Benefit costs
are anticipated to increase in future years based on current actuarial estimates
and the existence of the ESOP.  A new marketing program, ATM installation, the
establishment of the stock-based compensation plan, and costs associated with
being a public company resulted in increases in other noninterest expenses in
the third quarter of 1999 compared to the third quarter of 1998.  The Company's
efficiency ratio increased to 39.83% for the three months ended September 30,
1999 compared to 31.40% for the three months ended September 30, 1998, primarily
due to the increase in noninterest expenses. The Company's efficiency ratio may
increase in the future with increased ESOP benefit costs and costs related to
the stock-based compensation plans.

     For substantially the same reasons, noninterest expense increased $1.5
million to $5.9 million for the nine month period ended September 30, 1999,
compared to $4.4 million for the same period ended September 30, 1998.  The
Company's efficiency ratio increased to 34.90% for the nine months ended
September 30, 1999 compared to 33.55% for the nine months ended September 30,
1998.

Key performance ratios are as follows:

<TABLE>
<CAPTION>
                                                          At or For the Three Months
                                                              Ended September 30,
                                                       ---------------------------------
                                                             1999             1998
                                                       ----------------  ---------------
<S>  <C>                                               <C>               <C>
     Return on average assets                                     1.53%            1.42%
     Return on average equity                                     4.69%            8.05%
     Net interest margin                                          4.05%            3.61%
     Total noninterest expense to average assets                  1.61%            1.13%
     Efficiency ratio                                            39.83%           31.40%
</TABLE>

                                       12
<PAGE>

Liquidity and Capital Resources

     The Bank's primary sources of funds are deposits, principal and interest
payments on loans, mortgage-backed and investment securities and FHLB advances.
While maturities and scheduled amortization of loans are predictable sources of
funds, deposit flows and mortgage prepayments are greatly influenced by general
interest rates, economic conditions and competition.  The Bank has continued to
maintain the required levels of liquid assets as defined by OTS regulations.
This requirement of the OTS, which may be varied at the direction of the OTS
depending upon economic conditions and deposit flows, is based upon a percentage
of deposits and short-term borrowings.  The Bank's currently required liquidity
ratio is 4.00%.  At September 30, 1999, the Bank's liquidity ratio was 19.78%.
Management's current strategy is to maintain liquidity as close as possible to
the minimum regulatory requirement and to invest any excess liquidity in higher
yielding interest-earning assets. The ratio is higher than desired at this time
due to the recent infusion of funds from the Company's public offering.  The
Bank manages its liquidity position and demands for funding primarily by
investing excess funds in short-term investments and utilizing FHLB advances in
periods when the Bank's demands for liquidity exceed funding from deposit
inflows.

     The Company's most liquid assets are cash and cash equivalents and
securities available-for-sale.  The levels of these assets are dependent on the
Bank's operating, financing, lending and investing activities during any given
period.  At September 30, 1999, the Company's cash and cash equivalents and
securities available-for-sale totalled $111.6 million, or 20.3% of the Company's
total assets.

     The Bank has other sources of liquidity if a need for additional funds
arises.  At September 30, 1999, the Bank had $8.0 million in advances
outstanding from the FHLB and, had an additional overall borrowing capacity from
the FHLB of $37.0 million.  Depending on market conditions, the pricing of
deposit products and FHLB advances, the Bank may utilize FHLB borrowings to fund
asset growth.

     At September 30, 1999, the Bank had commitments to fund loans and unused
outstanding lines of credit, unused standby letters of credit and undisbursed
proceeds of construction mortgages totaling $32.2 million.  The Bank anticipates
that it will have sufficient funds available to meet its current loan
origination commitments.  Certificate accounts, including IRA and Keogh
accounts, which are scheduled to mature in less than one year from September 30,
1999, totalled $184.6 million. Based upon experience, management believes the
majority of maturing certificates of deposit will remain with the Bank.  In
addition, management of the Bank believes that it can adjust the rates offered
on certificates of deposit to retain deposits in changing interest rate
environments. In the event that a significant portion of these deposits are not
retained by the Bank, the Bank would be able to utilize FHLB advances to fund
deposit withdrawals, which would result in an increase in interest expense to
the extent that the average rate paid on such advances exceeds the average rate
paid on deposits of similar duration.

     At September 30, 1999, the Bank exceeded all minimum regulatory capital
requirements. The following table sets forth in terms of dollars and percentages
the OTS tangible, leverage and risk-based capital requirements, and the Bank's
actual amounts and percentages at September 30,1999:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
                                 Capital       Required       Actual       Actual        Excess       Excess
                               Requirement      Percent      Capital       Percent      Capital       Percent
---------------------------------------------------------------------------------------------------------------
<S>                          <C>              <C>          <C>           <C>          <C>           <C>
Tangible                             $ 7,881          1.5      $144,572        27.51      $136,691        26.01
---------------------------------------------------------------------------------------------------------------
Leverage                              21,018          4.0       144,572        27.51       123,554        23.51
---------------------------------------------------------------------------------------------------------------
Risk-based                            25,995          8.0       148,645        45.75       122,650        37.75
---------------------------------------------------------------------------------------------------------------
</TABLE>

                                       13
<PAGE>

Year 2000 Compliance

     As the year 2000 approaches, an important business issue has emerged
regarding how existing application software programs and operating systems can
accommodate this date value.  Many existing application software products use
two-digit date fields to designate a year.  As the century date change occurs,
date sensitive systems may recognize the Year 2000 as 1900 or not at all.  This
inability to recognize or properly treat the Year 2000 may cause erroneous
results, ranging from system malfunctions to incorrect or incomplete processing.

     The Company and the Bank have been identifying and remediating potential
problems which are associated with the "Year 2000" issues since late 1997.  The
Bank conducted a comprehensive review of its computer systems in September 1997
to identify applications that could be affected by the Year 2000 issue, and
developed an implementation plan to address the issue.  The Company has fully
remedied its in house accounting system, loan tracking system and other software
programs identified as mission critical by the Company.  All of the hardware
associated with these systems has been checked by the Company internally, as
well as by an independent computer company, and found to be Year 2000 compliant.

     The Bank's data processing is performed under agreements with BISYS, Inc.
("BISYS"), a nationwide financial service bureau, and consequently the Bank
identified BISYS as its primary mission critical service provider.  BISYS has
informed the Bank in writing that all reprogramming efforts have been completed
as of September 30, 1998.  Based on this information, the Bank believes BISYS
has demonstrated to be Year 2000 compliant as of December 31, 1998.  The Board
of Directors has approved the Bank's Year 2000 Business Recovery Contingency
Plan which is being tested on a monthly basis.

     Through September 30, 1999, the Bank has incurred  $193,000 in costs
related to Year 2000 consisting primarily of hardware and software replacements
that have upgraded the Bank's computer systems in addition to addressing Year
2000.  Management does not expect these costs to have a significant impact on
the Bank's financial position or results of operations.  However, there can be
no assurance that the vendors' systems will be Year 2000 compliant;
consequently, the Bank could incur incremental costs to convert to another
vendor.

     During the fourth quarter of 1999 and first quarter of 2000, the Bank
expects to incur additional expense for bank branch security, BISYS business
continuity services, and certain opportunity costs as a result of maintaining a
higher than normal level of cash which will not earn interest.  This cash
position is in place to cover potential Year 2000 related deposit withdrawals.
Costs for these additional services are estimated to be $50,000.

                                       14
<PAGE>

     The Bank has determined that Year 2000 non-compliance by any individual
loan customer would have no material impact on the Bank.  The risks associated
with the Year 2000 issue, however, could go beyond the Bank's own ability to
solve Year 2000 problems.  Should suppliers of critical services fail in their
efforts to be Year 2000 compliant, it could have significant adverse financial
results for the Bank.  The Bank's risk management strategy for its mission-
critical systems focuses on its highest priority system, BISYS, the financial
service bureau.

     Because the Company depends substantially on its computer systems and those
of third parties, the failure of these systems to be Year 2000 compliant could
cause substantial disruption of the Company's business and could have a material
adverse financial impact on the Company.  Failure to resolve Year 2000 issues
presents the following risks to the Company, which it believes reflects its most
reasonably likely worst-case scenario: the Company could lose customers to other
financial institutions, resulting in a loss of revenue, if the Company's third-
party service bureau is unable to properly process customer transactions;
governmental agencies, such as the Federal Reserve Bank of Richmond, and
correspondent institutions could fail to provide funds to the Company, which
could materially impair the Company's liquidity and affect the Company's ability
to fund loans and deposit withdrawals; concern on the part of depositors that
Year 2000 issues could impair access to their deposit account balances could
result in the Company experiencing deposit outflows before December 31, 1999;
and the Company could incur increased personnel costs if additional staff is
required to perform functions that inoperative systems would have otherwise
performed.

     There can be no assurances that the Company's Year 2000 plan will
effectively address the Year 2000 issue, that the Company's estimates of the
timing and costs of completing the plan will ultimately be accurate or that the
impact of any failure of the Company or its third-party vendors and service
providers to be Year 2000 compliant will not have a material adverse effect on
the Company's business, financial condition or results of operations.

     The Company has developed and tested a Year 2000 Business Recovery
Contingency Plan that calls for the Company to resort to manual processing of
transactions until the computer systems resume operation.  The Year 2000
Business Recovery Contingency Plan is being tested on a monthly basis.  As part
of this plan, the Bank has included a Cash and Liquidity Management Policy to
address its customers anticipated cash needs beginning in September 1999.
Internally, the Company will continue to make changes to its contingency plan as
circumstances may warrant.

     The Bank will continue to concentrate on customer awareness and monthly
testing of its business recovery plan.  In 1999, the Bank made available to its
customers a Y2K checklist and Y2K preparedness and scam alert brochures and
disclosed its Y2K Readiness Disclosure on its internet web site.

     This disclosure is a Year 2000 Readiness disclosure as defined in the Year
2000 Information and Disclosure Act.

                                       15
<PAGE>

Pending Legislation

     Pending legislation designed to modernize the regulation of the financial
services industry expands the ability of bank holding companies to affiliate
with other types of financial services companies such as insurance companies and
investment banking companies.  However, the legislation provides that companies
that acquire control of a single savings association after May 4, 1999 (or that
filed an application for that purpose after that date) are not entitled to the
unrestricted activities formerly allowed for a unitary savings and loan holding
company.  Rather, these companies will have authority to engage in the
activities permitted "a financial holding company" under the new legislation,
including insurance and securities-related activities, and the activities
currently permitted for multiple savings and loan holdings companies, but
generally not in commercial activities.  The authority for unrestricted
activities is grandfathered for unitary savings and loan holding companies, such
as the Company, that existed prior to May 4, 1999.  However, the authority for
unrestricted activities would not apply to any company that acquired the
Company.

                                       16
<PAGE>

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
          ----------------------------------------------------------

     As of September 30, 1999, there have been no material changes in
information regarding quantitative and qualitative disclosures about market risk
from the information presented as of December 31, 1998 in the Company's Annual
Report on Form 10-K.

                          PART II.  OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS.
          -----------------

     Neither the Company nor the Bank are involved in any pending legal
proceedings other than routine legal proceedings occurring in the ordinary
course of business, which in the aggregate involve amounts which are believed by
management to be immaterial to the financial condition and results of the
operation of the Company and the Bank.

ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS.
          -----------------------------------------

     None.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES.
          -------------------------------

     None.

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

     None.

ITEM 5.   OTHER INFORMATION.
          -----------------

     None.

                                       17
<PAGE>

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K ((S)249.308 OF THIS CHAPTER).
          -------------------------------------------------------------

     (a)  Exhibits

<TABLE>
<S>  <C>
3.1  Amended and Restated Articles of Incorporation of Virginia Capital
     Bancshares, Inc.
3.2  Amended and Restated Bylaws of Virginia Capital Bancshares, Inc.
4.1  Draft Stock Certificate of Virginia Capital Bancshares, Inc.(1)
27.0 Financial Data Schedule
</TABLE>

     (b)  Reports on Form 8-K

     On August 27, 1999, the Company filed a Form 8-K in regard to its August
27, 1999 press release announcing that the Company had received regulatory
clearance to repurchase up to 5% of its outstanding common stock.

____________________
(1)  Incorporated herein by reference into this document from the Exhibits to
     Form S-1, Registration Statement and amendments thereto, initially filed on
     September 11, 1998, Registration No. 33-63309.

                                       18
<PAGE>

                                   SIGNATURE

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


                              VIRGINIA CAPITAL BANCSHARES, INC.


Dated:  November 15, 1999     By:   /s/ Samuel C. Harding
                                    ----------------------
                                    Samuel C. Harding, Jr.
                                    President
                                    (principal executive officer)

Dated:  November 15, 1999     By:   /s/ Peggy J. Newman
                                    -------------------
                                    Peggy J. Newman
                                    Executive Vice President, Treasurer
                                      and Secretary
                                    (principal financial and accounting officer)

                                       19