[LOGO]    Virginia
          Commonwealth
          Financial
          Corporation



                               TABLE OF CONTENTS

          Financial Highlights                                2
          Message to Stockholders                             3
          Management's Discussion and Analysis                6
          Consolidated Financial Statements                  20
          Notes to Consolidated Financial Statements         25
          Independent Auditor's Report                       42
          Directors and Officers                             44
          Branch Locations                                   44


    Virginia Commonwealth Financial Corporation    1    1998 Annual Report

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                              FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
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                                                                 Years Ended December 31,
-------------------------------------------------------------------------------------------------------------
(Dollars in Thousands except per share data)      1998         1997         1996         1995         1994
-------------------------------------------------------------------------------------------------------------
<S>                                          <C>          <C>           <C>          <C>          <C>   
STATEMENT OF OPERATIONS
DATA:
Total Interest Income
  and Fees on Loans                           $  25,405    $   23,350    $  21,673    $  19,851    $  17,669
Total Interest Expense                           11,446        10,510       10,223        9,395        7,781
Net Interest Income                              13,959        12,840       11,451       10,457        9,888
Provision for Loan Losses                           831           491          490          341          225
Total Other Income                                2,684         1,792        1,453        1,353        1,156
Total Other Expense                               9,871         8,230        7,255        6,667        6,444
Net Income                                        4,191         4,150        3,710        3,386        3,128
                                            
PERFORMANCE RATIOS:                         
Return on Average Assets                          1.26%         1.38%        1.30%        1.27%        1.22%
Return on Average Equity                         10.60%        11.50%       11.06%       11.14%       10.99%
Net Interest Margin                               4.65%         4.68%        4.39%        4.21%        4.09%
Efficiency Ratio (1)                             55.61%        54.67%       54.52%       54.60%       56.27%
Equity to Assets Ratio                           11.62%        11.97%       11.80%       11.94%       10.99%
                                            
PER SHARE DATA:                             
Net Income                                   $    2.06     $    2.05     $   1.82     $   1.69     $   1.57
Cash Dividends                                     .78           .77          .69          .52          .51
Book Value                                       20.08         18.57        17.14        16.09        14.55
Market Price Per Share                           33.50         33.00        20.00        19.00        19.00
Cash Dividend Payout Ratio                       47.16%        43.95%       43.31%       42.09%       43.43%
                                            
BALANCE SHEET DATA:                         
Assets                                       $ 352,813     $ 315,707     $294,654     $274,417     $259,782
Deposits                                       306,515       268,480      253,233      234,347      220,242
Loans                                          217,682       189,377      164,341      147,191      126,778
Stockholders' Equity                            40,995        37,784       34,768       32,768       28,557
                                            
ASSET QUALITY RATIOS:                       
Total allowance for loan losses to          
  total loans outstanding                         1.04%         1.05%        1.13%        1.32%        1.51%
Non-performing assets to year-end           
  loans and other property owned                  0.65%         0.61%        0.72%        0.93%        1.49%
</TABLE>
                                            
1) Efficiency ratio is computed by dividing non-interest expense, net of
nonrecurring merger costs, by the sum of net interest income on a tax-equivalent
basis and non-interest income, net of securities gains and losses.

Note: The amounts previously reported for the periods have been retroactively
restated to reflect the merger of Second National Financial Corporation and
Virginia Heartland Bank to form Virginia Commonwealth Financial Corporation.

   Virginia Commonwealth Financial Corporation    2    1998 Annual Report

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                            MESSAGE TO STOCKHOLDERS

Dear Stockholder,

It is with great pleasure that Virginia Commonwealth Financial Corporation
shares with you our first annual report for the year ended December 31, 1998.
What a difference a year can make! In October, 1998 the affiliation with Second
Bank & Trust of Culpeper and Virginia Heartland Bank of Fredericksburg was
completed. This affiliation, through the common ownership of VCFC, brought
together two locally owned community banks with a history of being good
financial service providers to their respective communities, while consistently
providing solid returns to their stockholders. The combined entity, with nine
retail offices serving the counties of Culpeper, Orange, Madison, Rockingham,
Spotsylvania and the City of Fredericksburg, ended the year with assets of
$352.8 million. We have great anticipation for the revenue generation, cost
savings and synergies that we believe this affiliation will provide to the
organization, with our primary goals to enhance customer service and maximize
stockholder value.

           [graph]                                [graph]
          NET INCOME                         EARNINGS PER SHARE
        (in thousands)

        1994      $3,128                     1994          $1.57
        1995      $3,386                     1995          $1.69
        1996      $3,710                     1996          $1.82
        1997      $4,150                     1997          $2.05
        1998      $4,191                     1998          $2.06

[photograph]
William B. Young, Chairman of the Board and O. R. Barham, Jr., President.

     From a financial perspective, we are pleased to report that VCFC achieved
record earnings for the year on a combined basis, with earnings of $4.191
million, or $2.06 per share, compared to $4.150 million or $2.05 per share in
1997. Adjusting for after tax nonrecurring charges of $443 thousand associated
with the affiliation, net income was $4.634 million or $2.27 per share,
representing an 11.7% increase over $4.150 million or $2.05 per share for 1997.
Premerger earnings for the year ended December 31, 1998 produced a return on
average assets of 1.39% and return on average equity of 11.71%, compared to
prior year ratios of 1.38% and 11.50%, respectively.

     The improvement in net income in 1998 was the result of improvements in
both net interest income and noninterest income. Net interest income, on a tax
equivalent basis, increased $1.3 million or 9.9% to $14.511 million for the year
ended December 31, 1998. Mortgage, trust and investment services all were major
contributors to a 49.8% increase in noninterest income to $2.684 million for the
year ended December 31, 1998 compared to $1.792 million in 1997.

     Virginia community banking made a statement in 1998, with numerous de novo
institutions raising significant capital and many community banks improving
marketshare. No doubt the consummation of merger activities of the larger,
regional banks was a contributing

    Virginia Commonwealth Financial Corporation    3   1998 Annual Report

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factor. VCFC's two member banks experienced exceptional balance sheet growth in
1998, ending the year with overall asset growth of 11.7%, loan growth of 13.9%
and deposit growth of 14.1%. Our relatively new retail offices at Chancellor,
Fredericksburg, Harrisonburg and Lake of the Woods were significant contributors
to such growth.

     Community banking will continue to thrive if the focus on personal customer
relationships, local decision making and community support are maintained. These
are the community bank's competitive advantage. The organizational structure we
have selected maintains the name and reputations of our member banks. We firmly
believe that local bank autonomy is important in maintaining this competitive
advantage. The real challenge will be to continue to attract good employees, and
ensure that products and services meet the customer's needs in the new
millennium. With over $40.9 million in capital base, VCFC is well positioned to
improve its competitive advantage in a growing marketplace. We will continue


            [graph]                                [graph]
             ASSETS                          RETURN ON ASSETS
         (in millions)

        1994      $260                     1994          1.22%
        1995      $274                     1995          1.27%
        1996      $295                     1996          1.30%
        1997      $316                     1997          1.38%
        1998      $353                     1998          1.26%

[photograph] 
Virginia Commonwealth Financial Corporation Directors. Seated: William B. Young,
Chairman of the Board and O. R. Barham, Jr., President. Standing: Marshall D.
Gayheart, Jr., H. Wayne Parrish, W. Robert Jebson, Jr., Thomas F. Willliams,
Jr., and Taylor E. Gore. Not shown: Gregory L. Fisher.

to seek affiliations, which are economically feasible, with strong community
banks that wish to provide a higher level of banking services to their
communities while maintaining a sense of independence and local autonomy. In
addition, we will continue to add to our branch network, by de novo branching,
where we feel an underserved banking opportunity exists. This is the case with
our Orange branch scheduled to open in April of 1999.

     1998 brought the introduction of our Capital Manager Investment Account.
This account enables certain of our customers to automatically invest excess
cash overnight in one of several money market mutual funds sponsored by Goldman
Sachs Money Market Trust. This sweep product works directly with our customer's
checking account, providing competitive yields on excess funds overnight with an
integrated easy-to-read statement, which summarizes fund activity at month end.
To date, customer interest and acceptance has been good. We anticipate the
request for this product to grow during 1999.

     While significant capital was invested in technology projects in 1998, much
of our technology resources were allocated to addressing Year 2000. Our Year
2000 Committee has devoted significant man-hours to the development of a
comprehensive plan establishing action plans for identifying risks, testing
systems and equipment

    Virginia Commonwealth Financial Corporation    4   1998 Annual Report

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used by the Corporation, informing customers of the issues and risks,
implementing changes necessary to achieve Year 2000 and establishing a
contingency plan for operating if Year 2000 readiness issues cause important
systems to fail. Management has designed its plan to comply with the
requirements for Year 2000 efforts established by the Federal Reserve, the
Corporation's primary regulator. Management feels confident that VCFC will be
able to accomplish its Year 2000 goals and continue providing financial services
to the communities we serve into the new millennium.

     We want to thank each of our stockholders for your patience as we worked
through the many mailings and actions during 1998 in order for us to consummate
the affiliation. We also want to thank the boards of directors of each member
bank for their loyalty, dedication and vision throughout the year, and our
senior officers and employees for their hard work and dedication during the
merger process. We are excited by the initial chemistry


            [graph]                                [graph]
       EFFICIENCY RATIO                  RETURN ON AVERAGE EQUITY       

        1994      56.27%                   1994          10.99%
        1995      54.60%                   1995          11.14%
        1996      54.52%                   1996          11.06%
        1997      54.67%                   1997          11.50%
        1998      55.61%                   1998          10.60%


[photograph]
Second Bank & Trust Directors. Seated: Alan W. Myers, Taylor E. Gore, Chairman
of the Board; Harlean Smoot, and Joseph A. Troilo, Jr. Standing: Lewis P.
Armstrong, Robert Y. Button, Jr., O. R. Barham, Jr., President and CEO; Charles
K. Gyory, and Christopher J. Honenberger.

of this group, and look forward with anticipation to the many challenges ahead.

  Finally, we appreciate your continuing patronage, support and confidence. 1999
promises to be a year of many challenges and opportunities.

Cordially,

/s/ William B. Young
-----------------------------
William B. Young
Chairman and Chief Executive Officer

/s/ O.R. Barham, Jr.
-----------------------------
O.R. Barham, Jr.
President

[photograph] 
Virginia Heartland Bank Directors. Seated: Christopher M. Hallberg, H. Wayne
Parrish, and Thomas F. Williams, Jr. Standing: Edward V. Allison, Jr.,
President; Mark S. Gardner, and William B. Young, Chairman of the Board. Not
shown: Jerry W. Leonard.


    Virginia Commonwealth Financial Corporation    5   1998 Annual Report

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                     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, financial condition, liquidity and capital resources
of Virginia Commonwealth Financial Corporation (VCFC). This discussion and
analysis should be read in conjunction with "Selected Financial Data" and the
Consolidated Financial Statements and notes thereon presented elsewhere in this
report. Operating results include both of VCFC's banking subsidiaries, Second
Bank & Trust and Virginia Heartland Bank, combined for all periods presented.

     In addition to historical information, statements contained in this report
that are not historical facts may be construed as forward looking statements.
The forward-looking statements are subject to certain risks and uncertainties,
which could cause actual results to differ materially from historical results,
or those anticipated. Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect management's analysis only as of the
date thereof.

Overview

     In October, 1998 VCFC completed its affiliation with Virginia Heartland
Bank of Fredericksburg, Virginia, bringing together two locally owned community
banks. The combined entity, with nine retail offices serving the counties of
Culpeper, Orange, Madison, Rockingham, Spotsylvania and the City of
Fredericksburg, ended the year with assets of $352.8 million. In spite of
resources and costs associated with the affiliation, VCFC achieved record
earnings for the year on a combined basis with earnings of $4.191 million, or
$2.06 per share, compared to $4.150 million or $2.05 per share. Earnings before
after tax nonrecurring charges of $443 thousand associated with the affiliation
were $4.634 million or $2.27 per share, representing an 11.7% increase over
$4.150 million or $2.05 per share for 1997.

     The affiliation resulted in a stockholder base of roughly two million
shares outstanding. The affiliation was a tax free exchange of stock, and was
accounted for as a pooling of interests, resulting in the combination of
operating results for all periods presented herein.

     The Board of Directors and management of the resultant organization are of
the belief that the larger enterprise will be more diversified, better
positioned and more competitive. The potential for revenue enhancement via an
expanded array and cross-selling of financial services is as significant as the
opportunity to develop operational efficiencies, some of which will be initiated
in 1999. While significant resources were allocated to the completion of the
merger, VCFC benefited from improved performance in noninterest income divisions
and loan growth in the fourth quarter. Noninterest income grew 49.8% to $2.684
million for the year ended December 31, 1998 compared to $1.792 million for the
same period in 1997. Balance sheet growth was exceptional, with gross loans
receivable increasing $26.3 million or 13.9%, and deposits increasing $38
million or 14.2% for the year.

Results of Operations

     In spite of resources and costs associated with the merger, VCFC achieved
record earnings for the year, with earnings of $4.191 million, or $2.06 per
share, compared to $4.150 million or $2.05 per share. Earnings for the year
ended December 31, 1998 produced a return on average assets of 1.26% and return
on average equity of 10.60%, compared to prior year ratios of 1.38% and 11.50%,
respectively.

     Adjusting for after tax nonrecurring charges of $443 thousand associated
with the affiliation, net income was $4.634 million or $2.27 per share,
representing an 11.7% increase over $4.150 million or $2.05 per share for 1997.
Premerger earnings for the year ended December 31, 1998 produced a return on
average assets of 1.39% and return on average equity of 11.71%, compared to
prior year ratios of 1.38% and 11.50%, respectively.

     The improvement in net income in 1998 was the result of improvements in
both net interest income and noninterest income. Net interest income, on a
taxable equivalent basis, increased $1.317 million or 9.9% to $14.511 million
for the year ended December 31, 1998. Tax equivalent net interest income for
1997 was $13.194 million, an increase of $1.327 million or 11.2% from $11.867
million for 1996. Noninterest income increased 49.8% to $2.684 million for the
year ended December 31, 1998 compared to $1.792 million in 1997 and $1.453
million (23.3%) in 1996.

     Balance sheet growth was strong for the combined organization in 1998, with
total assets of $352.813 million at December 31, 1998, an increase of 11.8%,
total loans outstanding of $214.763 million, an increase of 13.9% and total
deposits of $306.515 million, an increase of 14.2%. An expanding economy, a
broader branch network, and significant consolidation of regional Virginia state
banks were contributing factors to this growth. New offices in Harrisonburg,
Lake of the Woods, Chancellor and the City of Fredericksburg were significant
contributors to the growth.

   Virginia Commonwealth Financial Corporation    6   1998 Annual Report

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                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     VCFC's efficiency ratio, a measure of the organization's ability to control
its operating (noninterest) expenses, increased to 55.61% in 1998, compared to
54.67% in 1997 and 54.52% in 1996. Expenses of the merger are excluded from the
computation of this ratio due to their nonrecurring nature. The increase in 1998
was primarily attributable to start-up costs associated with the aforementioned
new retail offices. It is anticipated that the Corporation will begin to see
some efficiencies in noninterest expenses as a result of the affiliation in 1999
in such areas as insurance, professional fees, back office related expenses and
taxes. However, no significant elimination of duplicate systems is anticipated
until the year 2000.

     The following table presents a quarterly summary of earnings components for
the last two years. In 1998, quarterly income declined in the third and fourth
quarters, primarily due to increased expenses associated with the merger. The
fourth quarter also reflects an increase in loan loss provisions and gains on
sale of securities available for sale. In 1997, stable earnings growth in each
quarter was attributed to improvement in net interest income and noninterest
income divisions.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
                                    Three Months Ended 1998                    Three Months Ended 1997
------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)     Dec. 31   Sep. 30    June 30     Mar. 31     Dec. 31    Sep. 30     June 30    Mar. 31
------------------------------------------------------------------------------------------------------------------
<S>                       <C>        <C>        <C>        <C>         <C>         <C>        <C>         <C>    
Interest income           $ 6,575    $ 6,475    $ 6,267    $ 6,088     $ 6,145     $ 5,932    $ 5,765     $ 5,508
Interest expense            2,942      2,946      2,810      2,748       2,720       2,675      2,589       2,526
------------------------------------------------------------------------------------------------------------------
Net interest income         3,633      3,529      3,457      3,340       3,425       3,257      3,176       2,982
Provision for loan losses     351        170        175        135         194         114         94          89
------------------------------------------------------------------------------------------------------------------
Net interest income after
  provision for loan losses 3,282      3,359      3,282      3,205       3,231       3,143      3,082       2,893
Other income                  797        670        677        540         570         549        287         385
Other expense               2,742      2,532      2,362      2,235       2,202       2,142      1,961       1,925
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Income before
  income taxes              1,337      1,497      1,597     1,510        1,599      1,550       1,408       1,353
Applicable income taxes       395        426        498       431          461        439         466         394
------------------------------------------------------------------------------------------------------------------
Net income                $   942    $ 1,071    $ 1,099    $1,079      $ 1,138     $1,111     $   942     $   959
------------------------------------------------------------------------------------------------------------------
Net income per share,
  basic and diluted       $  0.46    $  0.53    $  0.54    $ 0.53      $  0.56     $ 0.55     $  0.47     $  0.47
------------------------------------------------------------------------------------------------------------------
</TABLE>

Net Interest Income and Net Interest Margin

     Net interest income, on a taxable equivalent basis, increased $1.317
million or 9.9% to $14.511 million for the year ended December 31, 1998. Tax
equivalent net interest income for 1997 was $13.194 million, an increase of
$1.327 million or 11.2% from $11.867 million for 1996. This improvement can be
attributed to balance sheet growth and a stable net interest margin. Average
earning assets increased $30.455 million to $312.308 million at December 31,
1998, an increase of 11% over $281.853 million in 1997. Average earning assets
in 1997 increased 4.3% from $270.267 million in 1996.

     The increase in average earning assets can be attributed to loan and
securities growth funded with retail deposit growth. An expanding economy, a
broader branch network, and significant consolidation of regional Virginia state
banks were contributing factors to this growth. Average loans increased $20.993
million (11.8%) to $198.426 million in 1998 from $177.433 million in 1997, and
increased $20.246 million (12.9%) in 1997 from $157.187 million in 1996. Average
investment securities increased $3.779 million (3.9%) to $101.073 million in
1998 from $97.294 million in 1997, and decreased $4.701 million (4.61%) in 1997
from $102.005 million in 1996. Average deposits increased $21.475 million (9.5%)
to $248.177 million in 1998 from $226.702 million in 1997, and increased $8.367
million (3.8%) in 1997 from $218.335 million in 1996.

     The net interest margin is calculated as tax equivalent net interest income
divided by average earning assets, and represents the Corporation's net yield on
its earning assets. While significant reductions in the prime lending rate and
U.S. treasury rate curve during 1998 placed considerable pressure on VCFC's net
interest margin, improvement in the mix of earning assets offset much of this
impact. The net interest margin for year ended December 31, 1998 was 4.65%,
compared to 4.68% in 1997 and 4.39% in 1996. The following table sets forth
interest income on average earning assets, and related average yields, as well
as interest expense on average interest bearing liabilities and average rates
paid for the periods indicated.

   Virginia Commonwealth Financial Corporation    7   1998 Annual Report

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                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
                                       Year ended December 31, 1998        Year ended December 31, 1997
                                      ------------------------------      ------------------------------
                                        Average   Interest  Average         Average   Interest   Average
Dollars in thousands                    Balance   Inc/Exp    Rates          Balance    Inc/Exp    Rates
--------------------------------------------------------------------------------------------------------------
<S>                                    <C>        <C>        <C>           <C>        <C>        <C>  
Assets                                
Loans receivable, net                  $ 198,426  $ 18,748   9.45%         $ 177,433  $ 17,008   9.59%
Investment securities                                                     
  Taxable                                 82,182     5,068   6.17%            83,851     5,226   6.23%
  Tax exempt                              18,891     1,449   7.67%            13,443     1,074   7.99%
--------------------------------------------------------------------------------------------------------------
Total Investments                        101,073     6,517   6.45%            97,294     6,300   6.47%
Interest - bearing deposits                                               
  in other banks                             --        --      --                --        --      --
Federal funds sold                        12,809       691   5.39%             7,116       396    5.56%
--------------------------------------------------------------------------------------------------------------
Total Earning Assets                     312,308    25,956   8.31% Tax Eql.  281,843    23,704    8.41% Tax Eql.
Allowance for loan losses                 (2,143)                             (1,927)
Cash and due from banks                    8,190                               7,945
Bank premises and equipment                8,333                               7,540
Other assets                               7,357                               5,272
--------------------------------------------------------------------------------------------------------------
Total Assets                           $ 334,045                           $ 300,673
--------------------------------------------------------------------------------------------------------------
                             
Liabilities and Stockholders' Equity
Time and savings deposits
  Interest-bearing transaction
    accounts                           $  33,366  $    745   2.23%         $ 30,724   $    741   2.41%
  Money market deposit accounts           36,564     1,270   3.47%           33,981      1,227   3.61%
  Passbook savings accounts               28,978       886   3.06%           28,143        818   2.91%
  Certificates of deposit                                               
    (> $100,000)                          28,598     1,642   5.74%           23,363      1,338   5.73%
  Other certificates of deposit          120,671     6,697   5.55%          110,491      6,153   5.57%
--------------------------------------------------------------------------------------------------------------
Total Time and Savings Deposits          248,177    11,240   4.53%          226,702     10,277   4.53%
Federal funds purchased and                                             
  securities under agreement                                            
  to repurchase                            1,359        73   5.37%            1,867        106   5.68%
Note payable                                  34         2   5.88%      
Other borrowings                             416        21   5.05%              558         25   4.00%
Master notes                               2,798       109   3.90%            2,764        102   3.69%
--------------------------------------------------------------------------------------------------------------
Total Interest- Bearing Liabilities      252,784    11,445   4.53%          231,891     10,510   4.53%
Demand deposits                           39,158                             30,522
Other liabilities                          2,546                              2,157
--------------------------------------------------------------------------------------------------------------
Total Liabilities                        294,488                            264,570
Stockholders' equity                      39,557                             36,103
--------------------------------------------------------------------------------------------------------------
Total Liabilities and
Stockholders' Equity                   $ 334,045                          $ 300,673
--------------------------------------------------------------------------------------------------------------
Net interest income
  (tax equivalent)                                 $ 14,511                           $ 13,194
Average interest rate spread                                  3.78%                               3.88%
Interest expense as percentage of
  average earning assets                                      3.66%                               3.73%
Net interest margin                                           4.65%                               4.68%
--------------------------------------------------------------------------------------------------------------
</TABLE>

1) Income and yields are computed on a tax-equivalent basis using statutory
federal income tax rates, exclusive of the nondeductible interest expense. The
tax equivalent adjustment was $551,000, $422,000 and $417,000 in 1998, 1997 and
1996, respectively.

    Virginia Commonwealth Financial Corporation    8   1998 Annual Report

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                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS


<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
                                          Year ended December 31, 1996
                                        ---------------------------------
                                         Average     Interest     Average
Dollars in thousands                     Balance      Inc/Exp      Rates
---------------------------------------------------------------------------------
<S>                                    <C>           <C>           <C>  
Assets
Loans receivable, net                  $ 157,187     $ 15,313      9.74%
Investment securities
  Taxable                                 89,464        5,134      5.74%
  Tax exempt                              12,541        1,037      8.27%
---------------------------------------------------------------------------------
Total Investments                        102,005        6,171      6.05%
Interest - bearing deposits
  in other banks                           1,277           55      4.31%
Federal funds sold                         9,798          553      5.64%
---------------------------------------------------------------------------------
Total Earning Assets                     270,267       22,092      8.17% Tax Eql.

Allowance for loan losses                 (1,912)
Cash and due from banks                    7,041
Bank premises and equipment                6,440
Other assets                               4,069
---------------------------------------------------------------------------------
Total Assets                           $ 285,905
---------------------------------------------------------------------------------

Liabilities and Stockholders' Equity
Time and savings deposits
  Interest-bearing transaction
    accounts                           $  29,163     $    657      2.25%
  Money market deposit accounts           32,828        1,178      3.59%
  Passbook savings accounts               29,611          823      2.78%
  Certificates of deposit
    (> $100,000)                          21,043        1,226      5.83%
  Other certificates of deposit          105,690        6,049      5.72%
---------------------------------------------------------------------------------
Total Time and Savings Deposits          218,335        9,933      4.55%
Federal funds purchased and
  securities under agreement
  to repurchase                            1,199           61      5.09%
Note payable                               1,289          122      9.46%
Other borrowings                             547           24      4.39%
Master notes                               2,412           85      3.52%
---------------------------------------------------------------------------------
Total Interest- Bearing Liabilities      223,782       10,225      4.57%
Demand deposits                           26,758
Other liabilities                          1,809
---------------------------------------------------------------------------------
Total Liabilities                        252,349
Stockholders' equity                      33,556
---------------------------------------------------------------------------------
Total Liabilities and
Stockholders' Equity                   $ 285,905
--------------------------------------------------------------------------------
Net interest income
  (tax equivalent)                                   $ 11,867
Average interest rate spread                                       3.60%
Interest expense as percentage of
  average earning assets                                           3.78%
Net interest margin                                                4.39%
---------------------------------------------------------------------------------
</TABLE>

    Virginia Commonwealth Financial Corporation    9   1998 Annual Report

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                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Average Balances, Income and Expense, Yield and Rates

    Net interest is affected by both (1) changes in the interest rate spread
(the difference between the weighted average yield on interest-earning assets
and the weighted average cost of interest-bearing liabilities) and (2) changes
in volume (average balances of interest-earning assets and interest-bearing
liabilities).

    The following table sets forth certain information regarding changes in
interest income and interest expense of the Corporation for the years indicated.
For each category of interest-earning assets and interest-bearing liabilities,
information is provided regarding changes attributable to (1) changes in volume
of balances outstanding (changes in volume multiplied by prior period interest
rate) (2) changes in the interest earned or paid on the balances (changes in
rate multiplied by prior period volume) and (3) a combination of changes in
volume and rate allocated pro rata.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
                                                      Years ended December 31
----------------------------------------------------------------------------------------------------
                                            1998 vs 1997                     1997 vs 1996
                                         Increase (Decrease)              Increase (Decrease)
Dollars in thousands                      Due to changes in:               Due to changes in:
----------------------------------------------------------------------------------------------------
                                        Volume      Rate      Total     Volume      Rate       Total
----------------------------------------------------------------------------------------------------
<S>                                    <C>        <C>        <C>        <C>        <C>        <C>    
Earning Assets:
Loans                                  $ 1,949    $  (207)   $ 1,742    $ 1,894    $  (191)   $ 1,703
Securities:
  Taxable                                 (107)      (119)      (226)        42        118
                                                                                                  160
  Tax-exempt                               272        (26)       246         55        (30)        25
-----------------------------------------------------------------------------------------------------
  Total securities                         165       (145)        20         97         88        185
Interest-bearing deposits
  in other banks                          --         --         --          (55)      --          (55)
Federal funds sold                         307        (14)       293       (147)       (10)      (157)
-----------------------------------------------------------------------------------------------------
  Total earning assets                 $ 2,421    $  (366)   $ 2,055    $ 1,789    $  (113)   $ 1,676
-----------------------------------------------------------------------------------------------------

Interest-bearing Liabilities:
Time and savings deposits:
  Interest-bearing deposits            $   125    $  (120)   $     5    $    37    $    47    $    84
  Money market deposits                    113        (70)        43         42          7         49
  Savings deposits                          28         40         68        (49)        44         (5)
  Certificates of deposit:
   Certificates of $100,000
     or more                               298          6        304        135        (23)       112
   Certificates of less
     than $100,000                         562        (18)       544        263       (159)       104
-----------------------------------------------------------------------------------------------------
  Total time and savings deposits      $ 1,126    $  (162)   $   964    $   428    $   (84)   $   344
Federal funds purchased & under
  agreements to repurchase                 (28)        (5)       (33)        37          9         46
Notes payable                                2       --            2       (122)      --         (122)
Other short term borrowings                 (4)         7          3         14          5         19
-----------------------------------------------------------------------------------------------------
  Total interest-bearing liabilities   $ 1,096    $  (160)   $   936    $   357    $   (70)   $   287
-----------------------------------------------------------------------------------------------------
Change in net interest income          $ 1,325    $  (206)   $ 1,119    $ 1,432    $   (43)   $ 1,389
-----------------------------------------------------------------------------------------------------
</TABLE>


Note: The combined effect on interest due to changes in both volume and rate,
which cannot be separately identified, has been allocated proportionately to the
change due to volume and the change due to rate.


    Virginia Commonwealth Financial Corporation    10   1998 Annual Report

<PAGE>

                                     [logo]
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Interest Rate Sensitivity

    An important component of both earnings performance and liquidity is
management of interest rate sensitivity. Interest rate sensitivity reflects the
potential effect on net interest income of a movement in market interest rates.
VCFC is subject to interest rate sensitivity to the degree that its
interest-earning assets mature or reprice at a different time interval from that
of its interest-bearing liabilities.

    The Corporation uses a number of tools to manage its interest rate risk,
including simulating net interest income under various scenarios, monitoring the
present value change in equity under the same scenarios, and monitoring the
difference or gap between rate sensitive assets and rate sensitive liabilities
over various time periods. Management believes that rate risk is best measured
by simulation modeling.

    The earnings simulation model forecasts annual net income under a variety of
scenarios that incorporate changes in the absolute level of interest rates,
changes in the shape of the yield curve and changes in interest rate
relationships. Management evaluates the effects on net interest income and
present value equity under varying market rate assumptions.

    The Corporation monitors exposure to gradual change in rates of up to 200
basis points up or down over a rolling 12-month period. The Corporation's policy
limit for the maximum negative impact on net interest income, gap analysis and
change in equity from a gradual change in interest rates of 200 basis points
over 12 months is 15%. Management has maintained a risk position well within
these guideline levels during 1998.

    The following tables present the Corporation's present value change in
equity under various rate scenarios as of December 31, 1998 and 1997.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
                                                                  Current
1998                            Minus 200 pts.  Minus 100 pts.   Fair Value    Plus 100 pts.   Plus 200 pts.
(Dollars in thousands)
------------------------------------------------------------------------------------------------------------
<S>                              <C>             <C>             <C>             <C>              <C>      
Securities                       $ 106,582       $ 104,752       $ 102,639       $  99,802        $  96,884
  Market value change                3,943           2,114            --            (2,837)          (5,755)
Loans receivable                   227,050         224,520         221,756         218,639          215,367
  Market value change                5,294           2,764            --            (3,117)          (6,389)
Total rate sensitive assets        333,632         329,272         324,395         318,441          312,251
Other assets                        22,079          22,079          22,079          22,079           22,079
Total assets                       355,711         351,351         346,474         340,520          334,330

Deposits
Rate sensitive                     265,698         261,651         257,716         253,890          250,167
  Market value change                7,982           3,935            --            (3,827)          (7,549)
Non rate sensitive                  45,530          44,233          42,997          41,814           40,685
  Market value change                2,533           1,238            --            (1,182)          (2,312)
Total liabilities                  311,228         305,884         300,713         295,704          290,852
------------------------------------------------------------------------------------------------------------

Present Value Equity             $  44,483       $  45,467       $  45,761       $  44,816        $  43,478
------------------------------------------------------------------------------------------------------------
Market Value Change              $  (1,278)      $    (294)      $    --         $     945        $   2,283
------------------------------------------------------------------------------------------------------------
Percentage Change                   -2.79%          -0.64%               0%           2.07%            4.99%
------------------------------------------------------------------------------------------------------------
</TABLE>

    Virginia Commonwealth Financial Corporation    11   1998 Annual Report

<PAGE>

                                     [logo]
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
                                                                  Current
1997                           Minus 200 pts.   Minus 100 pts.   Fair Value    Plus 100 pts.    Plus 200 pts.
(Dollars in thousands)
------------------------------------------------------------------------------------------------------------
<S>                              <C>             <C>             <C>             <C>              <C>      
Securities                       $ 100,749       $  98,975       $  97,030       $  94,710        $  92,368
  Market value change                3,719           1,945            --            (2,231)          (4,661)
Loans receivable                   196,553         193,759         190,937         187,932          184,945
  Market value change                5,617           2,822            --            (3,005)          (5,991)
Total rate sensitive assets        297,302         292,734         287,967         282,642          277,313
Other assets                        21,931          21,931          21,931          21,931           21,931
Total assets                       319,233         314,665         309,898         304,573          299,244

Deposits
Rate sensitive                     240,708         237,041         233,476         230,009          226,637
  Market value change                7,232           3,565            --            (3,467)          (6,839)
Non rate sensitive                  34,385          33,431          32,521          31,652           30,819
  Market value change                1,864             911            --              (870)          (1,702)
Total liabilities                  275,093         270,472         265,997         261,661          257,456
-----------------------------------------------------------------------------------------------------------
Present Value Equity             $  44,140       $  44,193       $  43,901       $  42,912        $  41,788
-----------------------------------------------------------------------------------------------------------
Market Value Change              $     239       $     292       $    --         $     989        $   2,113
-----------------------------------------------------------------------------------------------------------
Percentage Change                     0.54%           0.67%              0%           2.25%            4.81%
------------------------------------------------------------------------------------------------------------
</TABLE>

Noninterest Income

    Noninterest income consists of earnings generated primarily from service
charges on deposit accounts, fiduciary income from trust operations, commissions
on investment sales and gains on the sale of mortgage loans in the secondary
market. Each major component noninterest income exhibited growth in 1998, with
significant increases recorded in fees from investment sales, trust and mortgage
operations. The Corporation's noninterest income increased 49.8% to $2.684
million for the year ended December 31, 1998 compared to $1.792 million in 1997
and $1.453 million (23.3%) in 1996.

    The mortgage division, driven by an active refinance market, generated fees
of $554 thousand on gross originations of $36.058 million, compared to fees of
$128 thousand on originations of $18.038 million in 1997, and fees of $45
thousand on originations of $10.815 million in 1996. The Corporation's fee
income from trust operations totaled $520 thousand, compared to fees of $409
thousand in 1997 and $371 thousand in 1996. An overall increase in Trust
accounts managed and greater market values for trust assets accounted for the
gains in each period. The investment services division generated $148 thousand
in gross commissions, compared to $77 thousand in 1997, its first full year of
operations.

Noninterest Expense

    Noninterest expenses for 1998 were $9.871 million, compared to $8.230
million in 1997 and $7.255 million in 1996, respectively. The increase in 1998
compared to 1997 of $1.641 million or 19.9% was attributable to several factors,
the most significant of which was $443 thousand in merger and restructuring
costs associated with the merger. Excluding such merger costs, noninterest
expenses increased 14.6%, with personnel costs associated with management and
branch hirings and commissions paid for loan production accounting for much of
this increase.

    The increase in 1997 compared to 1996 of $975 thousand or 13.4% was
attributable to several factors including a higher salary base, marketing and
supplies associated with the opening of four new branches, as well as increased
expenditures for professional services and technology related costs.


    Virginia Commonwealth Financial Corporation    12   1998 Annual Report

<PAGE>

                                     [logo]
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Provision for Loan Losses

    Provisions for loan losses are charged to income to bring the total
allowance for loan losses to a level deemed appropriate by management of the
Corporation based on such factors as historical experience, the volume and type
of lending conducted, and the amount of nonperforming assets for each member
bank. Other considerations include regulatory policies and general economic
conditions.

    The provision for loan losses for 1998 amounted to $831 thousand, an
increase of $340 thousand or 69.2% compared to $491 thousand in 1997. The
provisions for 1997 and 1996 were constant, with $490 thousand recorded in 1996.
The increase reflects a conscious effort to maintain the allowance on an
increasing loan portfolio. The Company had net charge-offs of $555 thousand in
1998, compared to $354 thousand for 1997 and $591 thousand in 1996. While net
charge-offs showed an increase in 1998, the ratio of such charge-offs to average
loans outstanding increased only eight basis points to .28% in 1998 compared to
1997.

    Management believes the allowance is adequate to absorb losses inherent in
the loan portfolio. With anticipated additional growth in the loan portfolio,
management anticipates a continuation of allowance provisions recorded in 1998
to maintain the level of the allowance account as a percentage of gross loans
receivable. The Corporation does not anticipate that such provisions will have a
material adverse impact on the results of operations in future periods.


ANALYSIS OF FINANCIAL CONDITION

Loan Portfolio

    Gross loans as of December 31, 1998, were $214.763 million increasing 13.9%
from $188.473 million in 1997. The increase in loans was due principally to
growth in our commercial lending portfolio, particularly through our
Harrisonburg and Fredericksburg markets. The Corporation's member banks provide
funds for business expansion, equipment, receivables, inventory, working capital
and other financing needs in various aspects of commercial and agricultural
operations. In its lending activities, the Bank utilizes lines of credit and
commercial term loans in its portfolio. At December 31, 1998, off balance sheet
unused loan commitments and standby letters of credit amounted to $44.824
million. These commitments may be secured or unsecured. On December 31, 1998,
VCFC had no concentration of loans to any one industry in excess of 10% of its
loan portfolio.

    VCFC's combined loan portfolio at December 31, 1998 was comprised of loans
secured primarily by real estate. Residential real estate loans consist of fixed
rate loans that have contractual maturities of one, three, or five years with
balloon payments, and are secured by first liens on real estate, and adjustable
rate mortgages are also offered. The Bank's historically have limited their real
estate lending to its market area and have applied conservative loan standards
which have, management believes, insured the quality of the loan portfolio. VCFC
also makes real estate construction loans generally for residential and
commercial construction purposes and for local construction projects with
acceptable take out commitments. Real estate construction loans currently
offered by the Banks generally have six month to nine month terms. Construction
loans outstanding total $20.330 million at December 31, 1998. VCFC also offers
various types of installment loans including automobile, home improvement,
equipment and personal loans.

    Virginia Commonwealth Financial Corporation    13   1998 Annual Report

<PAGE>

                                     [logo]
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS


    The following tables set forth the makeup and certain maturity information
for the loan portfolio at December 31, 1998.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                                                             December 31
----------------------------------------------------------------------------------------------
(Dollars in thousands)                   1998       1997        1996        1995       1994
----------------------------------------------------------------------------------------------
<S>                                   <C>         <C>        <C>         <C>        <C>     
Real estate loans
  Construction                        $ 20,330    $20,892    $  9,737    $  9,240   $ 10,724
  Mortgage                             150,268    126,566     116,534     102,759     86,061
Commercial loans                        17,680     17,779      18,202      16,360     14,221
Installment loans                       22,504     19,980      18,189      17,129     14,078
Other loans                              3,981      3,256       3,685       3,862      3,771
----------------------------------------------------------------------------------------------
Total loans before deduction of
  unearned income                      214,763    188,473     166,347     149,350    128,855
Less: unearned income                     (195)      (129)       (134)       (185)      (129)
----------------------------------------------------------------------------------------------
Total loans before allowance
  for loan losses                      214,568    188,344     166,213     149,165    128,726
Less: allowance for loan losses         (2,286)    (2,010)     (1,873)     (1,974)    (1,952)
----------------------------------------------------------------------------------------------
Net loans                              212,282    186,334     164,340     147,191    126,774
Loans held for sale                      5,400      3,044          --          --         --
----------------------------------------------------------------------------------------------
  Total loans                         $217,682    $189,378   $164,340    $147,191   $126,774
----------------------------------------------------------------------------------------------
</TABLE>


    Information regarding the interest sensitivity of the loan portfolio at
December 31, 1998 is presented below:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
                                                After one but
                                       One year but less than   After       Total
(Dollars in thousands)                  or less  five years  five years
----------------------------------------------------------------------------------
<S>                                   <C>         <C>        <C>         <C>     
Real estate loans                     $ 45,169    $74,670    $ 50,330    $170,169
Commercial loans                         9,054      6,439       2,007      17,500
Installment loans                        2,845     18,387       1,170      22,402
Other loans                              1,014      1,004       1,963       3,981
----------------------------------------------------------------------------------
Net loans (1)(2)                        58,082    100,500      55,470     214,052
Loans held for sale                      5,400                              5,400
----------------------------------------------------------------------------------
  Total loans                         $ 63,482    $100,500   $ 55,470    $219,452
----------------------------------------------------------------------------------
</TABLE>

(1) Excluding nonaccrual loans and before deduction of unearned income or the
allowance for loan losses. Includes loans classified as impaired under FASB 114.

(2) Includes $138.580 million in fixed rate loans and $5.328 million in
adjustable rate loans with a maturity greater than one year.

Asset Quality

    Each of VCFC's member banks has a formal loan review program that regularly
reviews loans and assigns credit ratings or classifications based on estimated
risk. Activities of the loan review program are reviewed with the Board of
Directors.

    VCFC generally places loans on nonaccrual status when a loan becomes 90 days
past due as to principal and interest, or when, in the opinion of management,
principal or interest is not likely to be paid in accordance with the terms of
the obligation. Real estate acquired by the member banks as a result of
foreclosure or in-substance foreclosure is classified as other real estate owned
(OREO). Such real estate is initially recorded at the lower of cost or fair
value less estimated selling costs. Further losses are recorded as charges to
operations if management determines value of the OREO has deteriorated, or
expenses associated with maintaining such property have been incurred. VCFC's
OREO at December 31, 1998 amounted to $759 thousand, and consisted primarily of
residential real estate properties and building lots.


    Virginia Commonwealth Financial Corporation    14   1998 Annual Report

<PAGE>

                                     [logo]
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS


    Nonperforming assets amounted to $1.432 million or .65% of loans and other
assets at December 31, 1998, compared to $1.179 million or .61% of loans and
other assets at December 31, 1997.

    The allowance for loan losses at December 31, 1998 amounted to $2.286
million compared to $2.010 million for 1997. The allowance for loan losses
represents 160% of nonperforming assets at December 31, 1998. The allowance for
loan losses as a percentage of net loans amounted to 1.04% at December 31, 1998
compared to 1.05% at December 31, 1997. This decrease was primarily attributable
to a 13.9% increase in gross loans in 1998.

    The following table provides an analysis of the allowance for loan losses
for the past five years.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                                                             December 31
----------------------------------------------------------------------------------------------
(In thousands)                             1998      1997       1996         1995       1994
----------------------------------------------------------------------------------------------
<S>                                           <C>       <C>       <C>       <C>       <C>   
Allowance for loan losses, January 1          $2,010    $1,873    $1,974    $1,952    $1,897
Loans charged off:
  Commercial                                     286        97       203       185       108
  Real estate                                      7      --        --        --          41
  Installment                                    354       339       449       180        91
--------------------------------------------------------------------------------------------
  Total loans charged off                        647       435       652       365       240
--------------------------------------------------------------------------------------------
Recoveries:
  Commercial                                       2        18         9        13         2
  Real estate                                   --        --        --        --          10
  Installment                                     90        64        52        33        58
--------------------------------------------------------------------------------------------
  Total recoveries                                92        81        61        46        70
--------------------------------------------------------------------------------------------
Net charge offs                                  555       354       591       319       170
  Provision for loan losses                      831       491       490       341       225
--------------------------------------------------------------------------------------------
Allowance for loan losses, December 31        $2,286    $2,010    $1,873    $1,974    $1,952
--------------------------------------------------------------------------------------------
Ratio of allowance for loan losses to
  total loans outstanding at end of year ..     1.04%     1.05%     1.13%     1.32%     1.60%
--------------------------------------------------------------------------------------------
Ratio of net charge offs (recoveries) to
  average loans outstanding during the year     0.28%     0.20%     0.38%     0.23%     0.14%
--------------------------------------------------------------------------------------------
</TABLE>


    The following table reflects the composition of nonperforming assets for the
past five years.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
                                                             December 31
------------------------------------------------------------------------------------------------
(Dollars in thousands)                     1998         1997       1996         1995       1994
------------------------------------------------------------------------------------------------
<S>                                       <C>         <C>         <C>         <C>         <C>   
Non-accrual loans                         $  673      $  719      $  783      $1,262      $1,562
Other property owned                         759         460         411         129         268
------------------------------------------------------------------------------------------------
Total non-performing assets               $1,432      $1,179      $1,194      $1,391      $1,830
------------------------------------------------------------------------------------------------
Loans past due 90 days                                                                  
  accruing interest                       $  349      $  229      $1,112      $  963      $  302
------------------------------------------------------------------------------------------------
Allowance for loan losses to                                                            
  non-accrual loans                       339.67%     279.55%     239.21%     156.42%     124.97%
------------------------------------------------------------------------------------------------
Non-performing assets to year-end                                                       
  loans and other property owned            0.65%       0.61%       0.72%       0.93%       1.49%
------------------------------------------------------------------------------------------------
</TABLE>


    Virginia Commonwealth Financial Corporation    15   1998 Annual Report

<PAGE>

                                     [logo]
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Securities

    Investment securities and securities available for sale totaled $104.943
million and comprised 29.74% of total assets at December 31, 1998, as compared
with $98.963 million and 31.35% of assets at December 31, 1997.

    Despite a significant shift downward in the U.S. treasury curve, the
Corporation yield on its securities portfolio declined slightly in 1998, with
the portfolio yielding 6.45% in 1998 compared to 6.47% in 1997. The Corporation
attempts to maintain diversity in its portfolio, maintain durations that are
consistent with its asset/liability management policy and holds a significant
allocation of securities in states and political subdivisions that provide tax
benefits.

    The following table includes information with respect to the Corporation's
securities portfolio at December 31, 1998.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
                                                 December 31, 1998 (1)
------------------------------------------------------------------------------------
                                1 Year      1 - 5      5 - 10     Over 10
(In thousands)                  or Less     Years       Years      Years      Total
------------------------------------------------------------------------------------
<S>                           <C>         <C>         <C>         <C>       <C>     
U. S. Agency Securities:
  Amortized cost              $  2,499    $ 19,551    $  7,000    $   --    $ 29,050
  Fair value                     2,501      19,663       7,026        --      29,190
  Weighted average yield          5.97%       5.89%       6.18%     0.00%       5.96%
Mortgage-backed Securities:
  Amortized cost              $     --    $  1,582    $ 14,264    $1,478    $ 17,324
  Fair value                        --       1,601      14,322     1,518      17,441
  Weighted average yield          0.00%       6.09%       6.26%     6.82%       6.30%
U. S. Treasury Securities:
  Amortized cost              $ 11,493    $  9,529    $     --    $   --    $ 21,022
  Fair value                    11,551       9,767          --        --      21,318
  Weighted average yield          6.06%       6.19%       0.00%     0.00%       6.12%
Corporate Bonds:
  Amortized cost              $  1,000    $  7,572    $  1,026    $   --    $  9,598
  Fair value                     1,000       7,581       1,047        --       9,628
  Weighted average yield          6.07%       6.19%       6.17%      0.00%      6.17%
Municipal Bonds:
  Amortized cost              $    890    $  7,630    $ 16,238    $  691    $ 25,449
  Fair value                       911       7,864      16,737       737      26,249
  Weighted average yield          9.67%       7.17%       6.92%     7.98%       7.12%
Equity Securities:
  Amortized cost              $     --    $    495    $     --    $   --    $    495
  Fair value                        --         495          --        --         495
  Weighted average yield          0.00%       6.50%       0.00%     0.00%       6.50%
Other Investments:
  Amortized cost              $     --    $  1,357    $     --    $   --    $  1,357
  Fair value                        --       1,357          --        --       1,357
  Weighted average yield          0.00%       3.17%       0.00%     0.00%       3.17%
Total Securities:
  Amortized cost              $ 15,882    $ 47,716    $ 38,528    $2,169    $104,295
  Fair value                    15,963      48,328      39,132     2,255     105,678
  Weighted average yield          6.25%       6.14%       6.52%     7.19%       6.32%
</TABLE>

(1) Yields on tax-exempt securities have been computed on a tax-equivalent
basis.

    Virginia Commonwealth Financial Corporation    16   1998 Annual Report

<PAGE>

                                     [logo]
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Deposits

    The Corporation had significant deposit growth in 1998. Deposits at December
31, 1998 amounted to $306.515 million, an increase of $38.035 million or 14.2%
over $268.480 million in 1997. Funds provided by the increase in deposits
allowed the Corporation to fund its loan growth with retail deposits, limit the
use of higher cost borrowings and better leveraged its capital base in 1998.
Noninterest bearing deposits increased by $10.175 million or 28.9% in 1998,
which helped offset the higher cost associated with an increase of $14.9 million
in certificates of deposit. The over all cost of deposit funds remained constant
in 1998 compared to 1997 at 4.53%, and decreased slightly from 4.55% in 1996.

    The following table illustrates average outstanding deposits and rates paid.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                                                 Years Ended December 31,
----------------------------------------------------------------------------------------------
                                        1998                1997                 1996
----------------------------------------------------------------------------------------------
(Dollars in thousands)           Amount      Rate     Amount     Rate     Amount      Rate
----------------------------------------------------------------------------------------------
<S>                             <C>        <C>      <C>       <C>        <C>         <C>  
Non-interest-bearing
  demand accounts                $39,158       --    $30,522      --      $26,758        --
Interest-bearing accounts:
  Interest checking               33,366     2.23%    30,724    2.41%      29,163      2.25%
  Money market                    36,564     3.47%    33,981    3.61%      32,828      3.59%
  Regular savings                 28,978     3.06%    28,143    2.91%      29,611      2.78%
  Time deposits:
   Less than $100,000            120,671     5.55%   110,491    5.57%     105,690      5.72%
   $100,000 and over              28,598     5.74%    23,363    5.73%      21,043      5.83%
----------------------------------------------------------------------------------------------
Total interest-bearing           248,177     4.53%   226,702    4.53%     218,335      4.55%
----------------------------------------------------------------------------------------------
Total average deposits          $287,335            $257,224             $245,093
----------------------------------------------------------------------------------------------
</TABLE>

Maturities of Time Deposits of $100,000 and Over

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                                   Within            3 - 6             6 - 12         Over 12
(Dollars in thousands)            3 Months          Months             Months         Months
----------------------------------------------------------------------------------------------
<S>                               <C>              <C>                <C>             <C>     
At December 31, 1998              $4,474           $ 2,875            $9,217          $ 12,466
</TABLE>


GENERAL

Capital Adequacy

    Management seeks to maintain a capital structure that will maintain a level
of capital that ensures the Corporation will meet regulatory requirements for a
"well-capitalized" institution and absorb potential losses. In achieving this
goal, management recognizes the need to obtain proper leveraging of its capital
base to maximize shareholder value.

    Stockholders' equity as of December 31, 1998 of $40.995 million increased
$3.211 million or approximately 8.5% from $37.784 million in 1997. The
Corporation had a ratio of risk-weighted assets to total capital of 18.37% and
20.31% at December 31, 1998 and 1997, and a ratio of risk-weighted assets to
Tier I capital of 17.39% and 19.28% in 1998 and 1997, respectively.


    Virginia Commonwealth Financial Corporation    17   1998 Annual Report

<PAGE>

                                     [logo]
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Liquidity

    Liquidity is identified as the ability to generate or acquire sufficient
amounts of cash when needed and at reasonable cost to accommodate withdrawals,
payments of debt, and increased loan demand. These events may occur daily or
other short-term intervals in the normal operation of the business. Experience
helps management predict time cycles in the amount of cash required. In
assessing liquidity, management gives consideration to relevant factors
including stability of deposits, quality of assets, economy of market served,
concentrations of business and industry, competition, and the Corporation's
overall financial condition. The Corporation's primary source of liquidity are
cash, due from banks, fed funds sold and securities in the available for sale
portfolio. In addition, the member banks have substantial lines of credit from
correspondent banks and access to the Federal Reserve discount window and
Federal Home Loan Bank of Atlanta to support liquidity as conditions dictate.

    The Corporation has no brokered deposits. Certificates of deposit in
denominations of $100 thousand or more represent 9.47% of total deposits
primarily from established core depositors.

    In the judgment of management, the Corporation maintains the ability to
generate sufficient amounts of cash to cover normal requirements and any
additional needs which may arise, within realistic limitations.

New Accounting Pronouncements

    In June, 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities," which is
required to be adopted in years beginning after June 15, 1999. The Statement
permits early adoption as of the beginning of any fiscal quarter after its
issuance. The Corporation has not determined whether to adopt the new statement
early. The Statement will require the Corporation to recognize all derivatives
on the balance sheet at fair value. Derivatives that are not hedges must be
adjusted to fair value through income. If the derivative is a hedge, depending
on the nature of the hedge, changes in fair value of derivatives will either be
offset against the change in the fair value of the hedged assets, liabilities,
or firm commitments through earnings or recognized in other comprehensive income
until the hedged item is recognized in earnings. The ineffective portion of a
derivative's change in fair value will be immediately recognized in earnings.

    Because the Corporation does not utilize derivatives as defined, management
does not anticipate that the adoption of the new Statement will have a
significant effect on VCFC's earnings or financial position.

    In October, 1998, the FASB issued Statement No. 134, "Accounting for
Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking Enterprise," an amendment of FASB Statement
No. 65. Statement 65, as amended requires that, after securitization of a
mortgage loan as held for sale, an entity engaged in mortgage banking activities
classify the resulting mortgage-backed security as a trading security. This
statement further amends Statement 65 to require that after the securitization
of mortgage loans held for sale, an entity engaged in mortgage banking
activities classify the resulting mortgage-backed securities or other retained
interests based on ability and intent to sell or hold those investments. This
statement is effective for 1999.

    Because the Corporation does participate in securitization as defined,
management does not anticipate that the adoption of the new Statement will have
a significant effect on VCFC's earnings or financial position.

Year 2000

    In 1997, management of the Corporation created a steering committee and
established a Y2K Plan to prevent or mitigate adverse effects of the Y2K issue
on the Corporation and its customers. Goals of the Y2K Plan include identifying
risks, testing data processing and other systems and equipment used by the
Corporation, informing customers of Y2K issues and risks, establishing a
contingency plan for operating if Y2K issues cause important systems or
equipment to fail, implementing changes necessary to achieve Y2K compliance, and
verifying that these changes are effective. The Board of Directors reviews
progress under the plan each quarter.

    Management designed the Y2K Plan to comply with the requirements for Y2K
efforts established by the Federal Reserve, the primary federal regulator of the
Corporation. The Federal Reserve also has performed Y2K examinations of the
Corporation's Y2K Plan and the Corporation's progress in implementing the plan.
Federal regulations prevent banks from disclosing the results of Y2K
examinations by banking regulators. The examinations do not represent approval
or certification of a bank or bank holding company's Y2K plans or efforts.

    Virginia Commonwealth Financial Corporation    18   1998 Annual Report

<PAGE>

                                     [logo]
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS


    The Corporation continues to implement the Y2K Plan. The Corporation has met
its Y2K goals to date and believes that it will continue to meet the goals of
the Y2K Plan. By December 31, 1998, the Corporation had performed risk
assessments, had assessed the Y2K preparedness of suppliers of data processing
services to the Corporation and of large customers, had implemented its customer
awareness program, had begun developing its Y2K contingency plan, and was in the
process of implementing necessary changes in hardware and software. Some
additional steps must be taken to achieve Y2K compliance, including some steps
that may not yet be identified. Elements of the Y2K Plan, such as risk
assessments, customer communications, and testing of systems and equipment, are
processes that are ongoing. The Y2K contingency plan calls for the Corporation
to manually process bank transactions and to use other data processing methods,
in the event that Y2K efforts of the Corporation and its data services providers
are not successful. The Corporation must assure that the computer systems it
uses to process transactions are Y2K ready in order to avoid these disruptions.

    Management believes that the cost of resolving Y2K issues related to the
Corporation's computer programs and those used by its suppliers of significant
data processing services will not be material to the Corporation's business,
operations, liquidity, capital resources, or financial condition, based on
information developed to date and communications from data processing suppliers.
The Corporation expects that its total cash outlay for Y2K compliance in 1998
and future years will be less than $250,000. This amount includes approximately
$200,000 in costs of software and equipment upgrades or replacements and $50,000
in miscellaneous expenses, including training, consulting, and testing costs.
Approximately $125,000 of these costs were incurred in 1998.

    The Corporation expects that the total effect on net income, after tax
deductions, of these Y2K expenditures and the accelerated writeoff of replaced
software and equipment will be less than $100,000, and that the effect on net
income for the year ended December 31, 1998 of these costs was approximately
$25,000. These amounts do not include allocations of compensation and other
costs of the Corporation's regular personnel. The Corporation is funding its Y2K
expenditures through continuing operations.

    The Corporation continues to assess its risk from other environmental
factors over which it has little direct control, such as electrical power
supply, and voice and data transmission. Because of the nature of these external
factors, however, the Corporation is not actively engaged in any repair,
replacement, or testing efforts for these services. Based on its current
assessments and remediation plans, which are based in part on certain
representations of third-party services, the Corporation does not expect that it
will experience a significant disruption of its operations as a result of the
change to the new millennium. Although the Corporation has no reason to conclude
that a failure will occur, the most reasonably likely worst-case Year 2000
scenario would entail a disruption or failure of the Corporation's power
suppliers' or voice and data transmission supplier's capability to provide power
or data transmission services to a Computer system or a facility. If such a
failure were to occur, the Corporation would implement a contingency plan. While
it is impossible to quantify the impact of such a scenario, the most reasonable
likely worst-case scenario would entail diminishment of service levels, some
customer inconvenience, and additional, as yet understood, costs associated with
the implementation of the contingency plan.

    Although the Corporation has completed an assessment of Y2K effects on its
current commercial lending and other customers, the actual effects on
individual, corporate and governmental customers of the Corporation and on
governmental authorities that regulate the Corporation and its subsidiaries, and
any resulting consequences to the Corporation, cannot be determined with any
assurance. The Corporation's belief that it will achieve Y2K compliance are
based on a number of assumptions and on statements made by third parties, and
are subject to uncertainty. The Corporation also is not able to predict the
effects, if any, on the Corporation, financial markets or society in general of
the public's reaction to Y2K. Because of this uncertainty and reliance upon
assumptions and statements of third parties, the Corporation cannot be assured
that the results of its Y2K Plan will be achieved. Management believes, however,
that the Corporation will be able to accomplish its Y2K goals and be able to
continue providing financial services to its customers into the next Century.

    Virginia Commonwealth Financial Corporation    19    1998 Annual Report

<PAGE>
                                     [logo]
                           Consolidated Balance Sheets
                           December 31, 1998 and 1997

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                                                                 1998                  1997
----------------------------------------------------------------------------------------------
<S>                                                         <C>                 <C>         
Assets
Cash and due from banks                                     $  9,764,707        $ 10,461,974
Federal funds sold                                             5,916,598           4,511,492
Securities (market value: 1998, $105,678,026;
  1997, $99,627,525)                                         104,943,459          98,962,999
Loans held for sale                                            5,399,884           3,043,853
Loans, net                                                   212,281,978         186,333,594
Bank premises and equipment, net                               9,232,997           7,825,865
Interest receivable                                            2,536,007           2,538,455
Other real estate owned                                          758,901             460,077
Other assets                                                   1,978,513           1,568,365
----------------------------------------------------------------------------------------------
      Total assets                                          $352,813,044        $315,706,674
----------------------------------------------------------------------------------------------

Liabilities and Stockholders' Equity
Liabilities
  Deposits:
    Noninterest-bearing demand deposits                     $ 45,370,092        $ 35,194,783
    Savings and interest-bearing demand deposits             105,856,672          92,929,218
    Time deposits                                            155,287,997         140,355,868
----------------------------------------------------------------------------------------------
      Total deposits                                        $306,514,761        $268,479,869
  Federal funds purchased and securities sold under
    agreement to repurchase                                    1,305,031           3,301,037
  Other short-term borrowings                                  1,081,406           3,838,000
  Interest payable                                             1,206,833           1,103,584
  Other liabilities                                            1,609,849           1,200,360
  Note payable                                                   100,000                  --
  Commitments and contingent liabilities                              --                  --
----------------------------------------------------------------------------------------------
      Total liabilities                                     $311,817,880        $277,922,850
----------------------------------------------------------------------------------------------

Stockholders' Equity
Preferred stock, no par value, 1,000,000 shares authorized,
  no shares issued and outstanding                          $         --        $         --
Common stock, par value $2.50 per share; 3,000,000 shares
  authorized; 1998, 2,041,764 shares issued and outstanding;
  1997, 2,034,245 shares issued and outstanding                5,104,411           5,085,613
Capital surplus                                                7,738,492           7,467,554
Retained earnings                                             27,724,435          25,125,926
Accumulated other comprehensive income                           427,826             104,731
----------------------------------------------------------------------------------------------
      Total stockholders' equity                            $ 40,995,164        $ 37,783,824
----------------------------------------------------------------------------------------------
      Total liabilities and stockholders' equity            $352,813,044        $315,706,674
----------------------------------------------------------------------------------------------
</TABLE>

See Notes to Consolidated Financial Statements.

    Virginia Commonwealth Financial Corporation    20    1998 Annual Report

<PAGE>

                                     [logo]
                        Consolidated Statements of Income
                  Years Ended December 31, 1998, 1997 and 1996

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                                                     1998             1997           1996
----------------------------------------------------------------------------------------------
<S>                                              <C>             <C>             <C>        
Interest Income
  Interest and fees on loans                     $18,690,900     $16,951,013     $15,248,215
  Interest on investment securities:
    Taxable                                        1,035,189       1,118,820         842,368
    Nontaxable                                       866,066         709,316         659,983
  Interest and dividends on securities 
    available for sale:
      Taxable                                      3,940,833       4,105,621       4,291,402
      Nontaxable                                      89,550            --              --
      Dividends                                       92,330          68,532          23,988
  Interest income on federal funds sold              690,528         396,453         552,979
  Interest on deposits in banks                         --              --            54,523
----------------------------------------------------------------------------------------------
        Total interest income                    $25,405,396      $23,349,755     $21,673,458
----------------------------------------------------------------------------------------------

Interest Expense
  Interest on deposits                           $11,241,167      $10,276,990     $9,931,852
  Interest on federal funds purchased
    and securities sold under agreement
    to repurchase                                     73,077         106,317          60,781
  Interest on other short-term borrowings            130,062         126,737         108,393
  Interest on note payable                             2,088            --           121,858
----------------------------------------------------------------------------------------------
        Total interest expense                   $11,446,394      $10,510,044     $10,222,884
----------------------------------------------------------------------------------------------
        Net interest income                      $13,959,002      $12,839,711     $11,450,574
Provision for loan losses                            831,107         491,000         489,500
----------------------------------------------------------------------------------------------
        Net interest income after
          provision for loan losses              $13,127,895      $12,348,711     $10,961,074
----------------------------------------------------------------------------------------------

Other Income
  Service charges on deposit accounts            $ 1,077,828      $1,012,899      $  961,731
  Fees for trust services                            519,818         408,620         371,065
  Investment fee income                              148,019          77,065           1,155
  Other operating income                             229,462         197,519         160,542
  Gains (losses) on sales of securities 
    available for sale                               237,094          (3,741)        (32,375)
  (Losses) on sale of other real estate owned        (82,342)        (28,669)        (54,943)
  Fees on mortgage loans sold                        553,697         128,083          45,359
----------------------------------------------------------------------------------------------
        Total other income                       $ 2,683,576      $1,791,776      $1,452,534
----------------------------------------------------------------------------------------------

Other Expenses
  Compensation and employee benefits             $ 5,262,828      $4,529,167      $4,114,642
  Net occupancy expense                              718,299         593,537         502,931
  Supplies and equipment expenses                  1,205,439       1,106,543         887,297
  Merger and merger related expenses                 443,000            --              --
  Other operating expenses                         2,241,557       2,000,828       1,750,440
----------------------------------------------------------------------------------------------
        Total other expenses                     $ 9,871,123      $8,230,075      $7,255,310
----------------------------------------------------------------------------------------------
        Income before income taxes               $ 5,940,348      $5,910,412      $5,158,298
Income tax expense                                 1,749,828       1,760,121       1,448,466
----------------------------------------------------------------------------------------------
        Net income                               $ 4,190,520      $4,150,291      $3,709,832
Earnings per Share, basic and
  assuming dilution                              $      2.06      $     2.05      $     1.82
----------------------------------------------------------------------------------------------
</TABLE>

See Notes to Consolidated Financial Statements.

    Virginia Commonwealth Financial Corporation    21    1998 Annual Report

<PAGE>

                                     [logo]
           Consolidated Statements of Changes in Stockholders' Equity
                  Years Ended December 31, 1998, 1997 and 1996


<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                        Accumulated Other
                                             Common       Capital          Retained      Comprehensive Comprehensive
                                              Stock       Surplus          Earnings          Income        Income         Total
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>            <C>             <C>             <C>             <C>            <C>         
Balance, December 31, 1995               $  5,091,446   $  6,482,553    $ 21,212,297    $    (18,401)   $         --   $ 32,767,895
Net income                                         --             --       3,709,832              --       3,709,832      3,709,832
Other comprehensive income net of tax:
    Unrealized holding losses arising
      during the period, net of tax
      of $(84,822)                                 --             --              --              --        (164,654)            --
    Add reclassification adjustment,
      net of tax of $11,008                        --             --              --              --          21,367             --
                                                                                                        ------------
    Other comprehensive income                     --             --              --        (143,287)       (143,287)      (143,287)
                                                                                                        ------------
    Comprehensive income                           --             --              --              --    $  3,566,545
                                                                                                        ============
Cash dividends                                     --             --      (1,394,054)             --                     (1,394,054)
Issuance of common stock under
  dividend reinvestment plan                   38,601        251,432              --              --                        290,033
Acquisition of common stock                   (58,620)      (404,074)             --              --                       (462,694)
-----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996               $  5,071,427   $  6,329,911    $ 23,528,075    $   (161,688)   $         --   $ 34,767,725
Net income                                         --             --       4,150,291              --       4,150,291      4,150,291
Other comprehensive income net of tax:
  Unrealized holding gains arising
    during the period,
    net of tax of $135,975                         --             --              --              --         263,950             --
  Add reclassification adjustment,
    net of tax of $1,272                           --             --              --              --           2,469             --
                                                                                                        ------------
  Other comprehensive income                       --             --              --         266,419         266,419        266,419
                                                                                                        ------------
  Comprehensive income                             --             --              --              --    $  4,416,710
                                                                                                        ============      
Cash dividends                                     --             --      (1,552,440)             --                     (1,552,440)
Issuance of common stock under
  dividend reinvestment plan                   36,425        293,313              --              --                        329,738
Acquisition of common stock                   (22,239)      (155,670)             --              --                       (177,909)
Discretionary transfer                             --      1,000,000      (1,000,000)             --                             --
-----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997               $  5,085,613   $  7,467,554    $ 25,125,926    $    104,731    $         --   $ 37,783,824
Net income                                         --             --       4,190,520              --       4,190,520      4,190,520
Other comprehensive income net of tax:
    Unrealized holding gains arising
      during the period,
      net of tax of $247,055                       --             --              --              --         479,577             --
    Less reclassification adjustment,
      net of tax of ($80,612)                      --             --              --              --        (156,482)            --
                                                                                                        ------------
    Other comprehensive income                     --             --              --         323,095         323,095        323,095
                                                                                                        ------------
    Comprehensive income                           --             --              --              --    $  4,513,615             --
                                                                                                        ============
Cash dividends                                     --             --      (1,592,011)             --                     (1,592,011)
Issuance of common stock under
  dividend reinvestment plan                   18,798        270,938              --              --                        289,736
-----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998               $  5,104,411   $  7,738,492    $ 27,724,435    $    427,826                   $ 40,995,164
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>


See Notes to Consolidated Financial Statements.

    Virginia Commonwealth Financial Corporation    22    1998 Annual Report

<PAGE>

                                     [logo]
                      Consolidated Statements of Cash Flows
                  Years Ended December 31, 1998, 1997 and 1996


<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                                                     1998            1997           1996
----------------------------------------------------------------------------------------------
<S>                                             <C>              <C>            <C>         
Cash Flows from Operating Activities
  Net income                                    $  4,190,520     $ 4,150,291    $  3,709,832
  Adjustments to reconcile net income to net
    cash provided by operating activities:
      Depreciation                                   778,514         696,008         624,652
      Provision for loan losses                      831,107         491,000         489,500
      Deferred tax expense (benefit)                (139,573)        (76,769)         93,942
      Pension (income) expense                          --            33,291         (24,762)
      Loss on other real estate owned                 82,342          28,669          54,943
      (Gain) on sale of equipment                       --           (12,988)           --
      (Gain) loss on sale of securities 
        available for sale                          (237,094)          3,741          32,375
      Fees on loans sold                            (553,697)       (128,083)        (45,539)
      Proceeds from sale of mortgage loans        48,928,802      20,449,244      10,860,908
      Purchase of loans for sale                 (48,375,105)    (20,321,161)    (10,815,369)
      Amortization of security premiums and
        accretion of discounts, net                   65,006         (20,438)        (56,615)
      Amortization of organization expenses           14,400           2,800            --
      Changes in assets and liabilities:
        (Increase) decrease in interest receivable     2,448          54,760         (91,203)
        (Increase) decrease in other assets         (436,123)        411,387        (389,952)
        Increase in interest payable                 103,249          61,328          82,743
        Increase in other liabilities                409,489         161,951         192,274
----------------------------------------------------------------------------------------------
          Net cash provided by operating 
            activities                          $  5,664,285     $ 5,985,031    $  4,717,729
----------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
  Decrease in interest-bearing deposits 
    in other banks                              $      --        $     --       $  2,254,764
  Proceeds from sale of securities 
    available for sale                            12,030,105       5,497,656       5,966,508
  Proceeds from maturities and principal
    payments of investment securities              5,157,187       8,925,000       7,988,601
  Proceeds from maturities and principal
    payments of securities available for sale     37,838,957      18,353,449      34,071,985
  Purchase of investment securities              (11,483,544)    (12,111,542)    (11,347,040)
  Purchase of securities available for sale      (48,861,539)    (19,329,415)    (38,037,449)
  Proceeds from sale of fixed assets                     --            16,903             --
  Purchase of premises and equipment              (2,185,646)     (1,305,231)     (1,942,577)
  Additions to other real estate                     (65,001)            --               --
  Increase in cash surrender value 
    of life insurance                                (15,295)       (92,354)         (82,578)
  Proceeds from sale of other real estate            431,777         137,900         193,712
  Net (increase) in loans                        (29,883,464)    (25,742,908)    (18,172,829)
----------------------------------------------------------------------------------------------
         Net cash (used in) investing 
           activities                           $(37,036,463)   $(25,650,542)   $(19,106,903)
----------------------------------------------------------------------------------------------
</TABLE>

See Notes to Consolidated Financial Statements.

    Virginia Commonwealth Financial Corporation    23    1998 Annual Report

<PAGE>
                                     [logo]
                Consolidated Statements of Cash Flows (Continued)
                  Years Ended December 31, 1998, 1997 and 1996


<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                                                     1998            1997           1996
----------------------------------------------------------------------------------------------
<S>                                             <C>               <C>            <C>
Cash Flows from Financing Activities
  Net increase in demand, money market and
    savings deposits                             $24,972,100      $6,355,625     $ 5,412,794
  Net increase in certificates of deposit         13,062,792       8,890,981      13,473,726
  Net increase (decrease) in federal funds 
    purchased and securities sold under 
    agreement to repurchase                       (1,996,006)      2,101,037            --
  Net increase (decrease) in other 
    short-term borrowings                         (2,756,594)        389,146         730,900
  Principal payments on note payable                    --               --       (1,675,000)
  Issuance of note payable                           100,000             --              --
  Issuance of common stock - dividend
    reinvestment plan                                289,736         329,738         290,033
  Acquisition of common stock                           --          (177,909)       (462,694)
  Cash dividends paid                             (1,592,011)     (1,552,440)     (1,394,054)
----------------------------------------------------------------------------------------------
       Net cash provided by financing activities $32,080,017     $16,336,178     $16,375,705
----------------------------------------------------------------------------------------------
            Increase (decrease) in cash and cash
                equivalents                      $   707,839      $(3,329,333)   $ 1,986,531

Cash and Cash Equivalents
  Beginning                                       14,973,466      18,302,799      16,316,268
----------------------------------------------------------------------------------------------
  Ending                                         $15,681,305      $14,973,466    $18,302,799
----------------------------------------------------------------------------------------------

Supplemental Disclosures of Cash Flow
  Information
    Cash payments for:
      Interest                                   $11,343,145      $10,453,157    $10,126,963
----------------------------------------------------------------------------------------------
      Income taxes                               $ 2,034,540      $1,448,693      $1,502,277
----------------------------------------------------------------------------------------------

Supplemental Schedule of Noncash
  Investing Activities
    Other real estate acquired in settlement
      of loans                                   $   747,942      $  215,297      $  643,073
----------------------------------------------------------------------------------------------
    Unrealized gain (loss) on securities
      available for sale                         $   489,538      $  403,666      $ (217,102)
----------------------------------------------------------------------------------------------
    Other real estate disposed of through
      loan proceeds                              $      --        $     --        $  108,338
----------------------------------------------------------------------------------------------
</TABLE>

See Notes to Consolidated Financial Statements.

    Virginia Commonwealth Financial Corporation    24    1998 Annual Report

<PAGE>

                                     [logo]
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1.   Summary of Significant Accounting Policies

General

    Virginia Commonwealth Financial Corporation (the "Corporation") is a
Virginia multi-bank holding company headquartered in Culpeper, Virginia. The
Corporation owns Second Bank & Trust and its subsidiary, Second Services Company
as well as Virginia Heartland Bank and its subsidiary, Virginia Heartland
Service Corporation. Second Bank & Trust and Virginia Heartland Bank jointly own
VHB Mortgage Company. Virginia Heartland Bank and its subsidiary were merged
into the Corporation in a pooling of interests transaction consummated on
October 9, 1998, which is more fully described in Note 2 to the Consolidated
Financial Statements. Concurrent with the merger, Second National Financial
Corporation changed its name to Virginia Commonwealth Financial Corporation. The
consolidated statements include the accounts of the Corporation and its
wholly-owned subsidiaries. All significant intercompany accounts have been
eliminated.

    The Corporation, through its member banks, provide a full array of banking
services through nine retail offices serving the counties of Culpeper, Orange,
Madison, Rockingham, Spotsylvania and the City of Fredericksburg. Among such
services are those traditionally offered by banks including commercial and
consumer demand and time deposit accounts, mortgage, commercial and consumer
loans and a network of automated transaction locations including thirteen ATM's
and phone banking. Nontraditional banking services include a full array of trust
and investment services.

Basis of Presentation

    The accounting and reporting policies of the Corporation conform to
generally accepted accounting principles and to accepted practice within the
banking industry. The following is a description of the more significant of
those policies and practices.

Risks and Uncertainties

    In its normal course of business, the Corporation encounters two significant
types of risk: economic and regulatory. There are three main components of
economic risk: interest rate risk, credit risk and market risk. The Corporation
is subject to interest rate risk to the degree that its interest-bearing
liabilities mature or reprice more rapidly or on a different basis than its
interest-earning assets. Credit risk is the risk of default on the Corporation's
loan portfolio that results from the borrowers' inability or unwillingness to
make contractually required payments. Market risk reflects changes in the value
of collateral underlying loans receivable and the valuation of real estate held
by the Corporation.

     The determination of the allowance for loan losses and the valuation of
real estate are based on estimates that are particularly susceptible to
significant changes in the economic environment and market conditions.
Management believes that, as of December 31, 1998, the allowance for loan losses
and the valuation of real estate are adequate based on information currently
available. A worsening or protracted economic decline or substantial increase in
interest rates, would increase the likelihood of losses due to credit and market
risks and could create the need for substantial increases to the allowance for
loan losses.

    The Corporation is subject to the regulations of various regulatory agencies
which can change significantly from year to year. In addition, the Corporation
undergoes periodic examinations by regulatory agencies which may subject it to
further changes based on the regulators' judgments about information available
to them at the time of their examinations.

Securities

    Securities are classified in three categories and accounted for as follows:

    a. Securities Held to Maturity

       Securities classified as held to maturity are those debt securities the
       Corporation 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 Corporation intends to hold for an indefinite period
       of time, but not necessarily to maturity. Any decision to sell a security
       classified as available

    Virginia Commonwealth Financial Corporation    25    1998 Annual Report

<PAGE>

                                     [logo]
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

       for sale would be based on various factors, including significant
       movements in interest rates, changes in the maturity mix of the
       Corporation'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 stockholders' 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.

    c. Trading Securities

       Trading securities, which are generally held for the short term in
       anticipation of market gains, are carried at fair value. Realized and
       unrealized gains and losses on trading account assets are included in
       interest income on trading account securities. The Corporation had no
       trading securities at December 31, 1998 and 1997.

Loans

    Loans are shown on the balance sheets net of unearned discounts and the
allowance for loan losses.

    Interest is computed by methods which result in level rates of return on
principal. Loans are charged off when in the opinion of management they are
deemed to be uncollectible after taking into consideration such factors as the
current financial condition of the customer and the underlying collateral and
guarantees.

    Impairment of loans that have been separately identified for evaluation is
to be measured based on the present value of expected future cash flows or,
alternatively, the observable market price of the loans or the fair value of the
collateral. However, for those loans that are collateral dependent (that is, if
repayment of those loans is expected to be provided solely by the underlying
collateral) and for which management has determined foreclosure is probable, the
measure of impairment is to be based on the fair value of the collateral.

    The Corporation considers all consumer installment loans and residential
mortgage loans to be homogeneous loans. These loans are not subject to the above
impairment provisions. A loan is considered impaired when it is probable that
the Corporation will be unable to collect all principal and interest amounts
according to the contractual terms of the loan agreement. Factors involved in
determining impairment include, but are not limited to, expected future cash
flows, financial condition of the borrower, and the current economic conditions.
A performing loan may be considered impaired, if the factors above indicate a
need for impairment. A loan on nonaccrual status may not be impaired if in the
process of collection or there is an insignificant shortfall in payment. An
insignificant delay of less than 30 days or a shortfall of less than 5% of the
required principal and interest payment generally does not indicate an
impairment situation, if in management's judgment the loan will be paid in full.
Loans that meet the regulatory definitions of doubtful or loss generally qualify
as an impaired loan. Charge-offs for impaired loans occur when the loan, or
portion of the loan is determined to be uncollectible, as is the case for all
loans.

    Loans are placed on nonaccrual when a loan is specifically determined to be
impaired or when principal or interest is delinquent for 90 days or more. Any
unpaid interest previously accrued on those loans is reversed from income.
Interest income generally is not recognized on specific impaired loans unless
the likelihood of further loss is remote. Interest payments received on such
loans are applied as a reduction of the loan principal balance. Interest income
on other nonaccrual loans is recognized only to the extent of interest payments
received.

Allowance for Loan Losses

    The allowance for loan losses is maintained at a level which, in
management's judgement, is adequate to absorb credit losses inherent in the loan
portfolio. The amount of the allowance is based on management's evaluation of
the collectibility of the loan portfolio, credit concentrations, trends in
historical loss experience, specific impaired loans, and economic conditions.
Allowances for impaired loans are generally determined based on collateral
values or the present value of estimated cash flows. The allowance is increased
by a provision for loan losses, which is charged to expense and reduced by
charge-offs, net of recoveries. Changes in the allowances relating to impaired
loans are charged or credited to the provision for loan losses. Because of
uncertainties inherent in the estimation process, management's estimate of
credit losses inherent in the loan portfolio and the related allowance may
change in the near term.

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. Net
unrealized losses are recognized through a valuation allowance by charges to
income.

    Virginia Commonwealth Financial Corporation    26    1998 Annual Report

<PAGE>

                                     [logo]
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Bank Premises and Equipment

    Premises and equipment are stated at cost less accumulated depreciation and
amortization. Premises and equipment are depreciated over their estimated useful
lives; leasehold improvements are amortized over the lives of the respective
leases or the estimated useful life of the leasehold improvement, whichever is
less. Depreciation and amortization are recorded on the straight-line method.

    Costs of maintenance and repairs are charged to expense as incurred. Costs
of replacing structural parts of major units are considered individually and are
expensed or capitalized as the facts dictate.

Income Taxes

    Deferred taxes are provided on a liability method whereby deferred tax
assets are recognized for deductible temporary differences, operating loss
carryforwards, and tax credit carryforwards. Deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
bases. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of the changes in tax laws and rates on
the date of enactment.

Retirement Plans

    The Corporation has a noncontributory, defined benefit pension plan covering
certain employees meeting certain age and service requirements. The Corporation
computes the net periodic pension cost of the plan in accordance with FASB No.
87, "Employers' Accounting for Pensions."

    In 1998, the Corporation adopted Statement of Financial Accounting Standards
No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits." This pronouncement does not change the measurement or recognition of
amounts recognized in the Corporation's financial statements applicable to its
defined benefit plan. Statement No. 132 revises the existing disclosure
requirements by standardizing the disclosure requirements for pensions requiring
certain additional information on changes in the benefit obligations and fair
values of plan assets, and eliminating certain disclosures.

Earnings Per Share

    Earnings per common share has been computed on the basis of the
weighted-average number of common shares outstanding during each period
presented.

    Weighted average shares were 2,038,186, 2,027,193 and 2,034,583 for the
years ended 1998, 1997 and 1996, respectively. The Corporation had no potential
common stock as of December 31, 1998, 1997 and 1996.

Nonrefundable Loan Fees and Costs

    Loan origination and commitment fees are being deferred and amortized as an
adjustment of the related loan's yield.

Cash and Cash Equivalents

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

Trust Division

    Securities and other property held by the Trust Division in a fiduciary or
agency capacity are not assets of the Corporation and are not included in the
accompanying consolidated financial statements.

Other Real Estate

    Real estate acquired through foreclosure is carried at the lower of cost or
fair market value less estimated selling costs.

Advertising

    The Corporation follows the policy of charging the costs of advertising to
expense as incurred. Advertising expense of $189,735, $190,890 and $90,222 were
incurred in 1998, 1997 and 1996, respectively.

    Virginia Commonwealth Financial Corporation    27    1998 Annual Report

<PAGE>

                                     [logo]
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

Comprehensive Income

    As of January 1, 1998, the Corporation adopted FASB No. 130, "Reporting
Comprehensive Income." FASB No. 130 establishes new rules for the reporting and
display of comprehensive income and its components; however, the adoption of
this statement had no impact on the Corporation's net income or stockholders'
equity. FASB No. 130 requires other comprehensive income to include unrealized
gains (losses) on available for sale securities, which prior to adoption were
reported separately in stockholders' equity. The December 31, 1997 and 1996
financial statements have been reclassified to conform to the requirements of
FASB No. 130.

Note 2.  Business Combination

    On October 9, 1998, Second National Financial Corporation (SNFC) effected a
business combination with Virginia Heartland Bank (VHB) by exchanging 533,716
shares of its common stock for all of the stock of VHB. The principal business
of VHB is community banking. On the effective date of the business combination,
SNFC changed its name to Virginia Commonwealth Financial Corporation. The
combination has been accounted for as a pooling of interests and, accordingly,
all prior financial statements have been restated to include VHB. The results of
operations of the separate companies for periods prior to the combination are
summarized as follows:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------
                                          Total        Total        Net
(thousands)                               Assets       Income      Income
----------------------------------------------------------------------------
<S>                                      <C>          <C>         <C>
Nine months ended September 30, 1998:
  SNFC                                   $ 239,437    $14,283     $2,586
  VHB                                      104,480      6,353        664

Year ended December 31, 1997:
  SNFC                                   $ 222,070    $17,136     $3,245
  VHB                                       93,740      7,938        906
</TABLE>

    In connection with the business combination, the Corporation recorded after
tax changes to noninterest expenses of $443,000 (22(cent) per share) for direct
and merger related costs. Merger transaction costs consisted primarily of fees
for investment bankers, attorneys, accountants and financial printers. Merger
related costs consisted of adjustments to supplemental retirement benefits for
certain senior officers.

Note 3.   Cash and Due From Banks

    The Corporation is required to maintain reserve balances with the Federal
Reserve Bank. For the final weekly reporting period in the years ended December
31, 1998 and 1997, the aggregate amounts of daily average required balances were
approximately $1,581,000 and $1,774,000, respectively.

    Virginia Commonwealth Financial Corporation    28    1998 Annual Report

<PAGE>

                                     [logo]
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 4.  Securities

    The amortized cost and fair value of securities being held to maturity as of
December 31, 1998 and 1997, are as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                            Gross        Gross
                             Amortized    Unrealized   Unrealized     Fair
                               Cost         Gains       (Losses)      Value
--------------------------------------------------------------------------------
<S>                          <C>            <C>         <C>         <C>
1998
Obligations of states and
  political subdivisions     $22,057,578    $739,706     $ (5,139)  $22,792,145
--------------------------------------------------------------------------------

1997
U.S. Government agencies     $20,040,630    $166,266     $(13,379)  $20,193,517
Obligations of states and
  political subdivisions      14,919,710     515,180       (3,541)  15,431,349
--------------------------------------------------------------------------------
                             $34,960,340    $681,446     $(16,920)  $35,624,866
--------------------------------------------------------------------------------
</TABLE>

    The amortized cost and market value of securities being held to maturity as
of December 31, 1998, by contractual maturity are shown below.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------
                                                Amortized            Fair
                                                  Cost               Value
------------------------------------------------------------------------------
<S>                                           <C>                <C>        
Due in one year or less                       $  889,814         $   910,375
Due after one year through five years          6,601,616           6,810,672
Due after five years through ten years        13,875,083          14,333,992
Due after ten years                              691,065             737,106
------------------------------------------------------------------------------
                                              $22,057,578        $22,792,145
------------------------------------------------------------------------------
</TABLE>

    The amortized cost and fair value of securities available for sale as of
December 31, 1998 and 1997, are as follows:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
                                                  Gross         Gross
                                    Amortized   Unrealized    Unrealized     Fair
                                      Cost         Gains       (Losses)      Value
---------------------------------------------------------------------------------------
<S>                                <C>            <C>          <C>         <C>
1998
U.S. Treasury securities           $21,021,627    $ 296,032    $    --     $21,317,659
U.S. Government agencies            29,050,265      188,057      (48,030)   29,190,292
State and political subdivisions     3,391,123       65,699         --       3,456,822
Corporate bonds                      9,598,522       76,374      (46,849)    9,628,047
Mortgage-backed securities          17,323,949      155,133      (38,197)   17,440,885
Equity securities                      495,000           --         --         495,000
Other                                1,357,176           --         --       1,357,176
---------------------------------------------------------------------------------------
                                   $82,237,662    $ 781,295    $(133,076)  $82,885,881
                                
1997                      
U.S. Treasury securities           $18,946,358    $  84,384    $  (5,572)  $19,025,170
U.S. Government agencies            29,988,787       60,982     (127,225)   29,922,544
State and political subdivisions     1,008,630           --         --       1,008,630
Corporate bonds                      3,502,325        8,605         --       3,510,930
Mortgage-backed securities           9,715,620      137,510         --       9,853,130
Equity securities                      278,504           --         --         278,504
Other                                  403,751           --         --         403,751
---------------------------------------------------------------------------------------
                                   $63,843,975    $ 291,481    $(132,797)  $64,002,659
---------------------------------------------------------------------------------------
</TABLE>

    Virginia Commonwealth Financial Corporation    29    1998 Annual Report

<PAGE>

                                     [logo]
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     The amortized cost and fair value of securities available for sale as of
December 31, 1998, by contractual maturity are shown below.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------
                                           Amortized         Fair
                                              Cost           Value
-----------------------------------------------------------------------
<S>                                       <C>             <C>        
Due in one year or less                   $14,992,047     $15,051,560
Due after one year through five years      38,177,302      38,562,953
Due after five years through ten years     10,387,188      10,473,307
Other                                       1,357,176       1,357,176
Mortgage-backed securities                 17,323,949      17,440,885
-----------------------------------------------------------------------
                                          $82,237,662     $82,885,881
-----------------------------------------------------------------------
</TABLE>

     As  permitted  under FASB No.  115,  Virginia  Heartland  Bank  transferred
securities  from  the  held to  maturity  category  to the  available  for  sale
category. These securities had an amortized cost of $19,504,568 and resulting in
an unrealized gain of $225,557.

     There were no sales of  securities  being held to maturity  during 1998 and
1997.

     Proceeds from sales of securities  available for sale during 1998, 1997 and
1996 were  $12,030,105,  $5,497,656,  and  $5,966,508.  Gross  realized gains of
$239,828,  $-0- and $-0- and gross realized losses of $2,734, $3,741 and $32,375
were recognized on those sales.

     Securities  with amortized cost of $17,619,198  and $21,863,933 at December
31, 1998 and 1997, respectively,  were pledged to secure public deposits and for
other purposes.

Note 5.  Loans

    Major classifications of loans are as follows:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------
                                                         December 31,
----------------------------------------------------------------------------
(thousands)                                           1998          1997
----------------------------------------------------------------------------
<S>                                                <C>            <C>
Real estate loans:
  Construction and land development                $ 20,330       $ 20,892
  Farm land                                           1,143          1,297
  1-4 family residential                             85,086         78,184
Multifamily nonresidential and junior liens          64,039         47,085
Loans to farmers (except secured by real estate)        144            455
Commercial and industrial loans                      17,536         17,324
Consumer and installment loans                       22,504         19,980
All other loans                                       3,981          3,256
----------------------------------------------------------------------------
      Total loans                                  $214,763       $188,473
Less:  Allowance for loan losses                      2,286          2,010
      Unearned loan fees                                195            129
----------------------------------------------------------------------------
      Loans, net                                   $212,282       $186,334
----------------------------------------------------------------------------
</TABLE>

    Virginia Commonwealth Financial Corporation    30    1998 Annual Report

<PAGE>

                                     [logo]
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 6.  Allowance for Loan Losses

    Changes in the allowance for loan losses were as follows:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
                                                    December 31,
-------------------------------------------------------------------------------
(thousands)                             1998            1997            1996
-------------------------------------------------------------------------------
<S>                                   <C>              <C>             <C>   
Balance at beginning of year          $ 2,010          $1,873          $1,974
Recoveries                                 92              81              61
Provision for loan losses                 831             491             490
Charge-offs                              (647)           (435)           (652)
-------------------------------------------------------------------------------
Balance at end of year                $ 2,286          $2,010          $1,873
-------------------------------------------------------------------------------
</TABLE>

     Information about impaired loans as of and for the years ended December 31,
1998 and 1997 is as follows:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------
                                             1998                1997
-------------------------------------------------------------------------
<S>                                       <C>                 <C>
Impaired loans for which an
  allowance has been provided              $378,117            $680,666
Impaired loans for which no
  allowance has been provided               233,792             258,890
-------------------------------------------------------------------------
Total impaired loans                       $611,909            $939,556
-------------------------------------------------------------------------
Allowance provided for
  impaired loans, included in
  the allowance for loan losses            $ 85,626            $178,964
-------------------------------------------------------------------------
Average balance in impaired loans          $530,559            $986,275
-------------------------------------------------------------------------
Interest income recognized                 $ 41,371            $ 74,551
-------------------------------------------------------------------------
</TABLE>

    Nonaccrual loans excluded from impaired loan disclosure under FASB 114
amounted to $386,618 and $256,883 at December 31, 1998 and 1997. If interest on
these loans had been accrued, such income would have approximated $85,235 and
$40,953, respectively.

Note 7.  Related Party Transactions

    The Securities and Exchange Commission requires disclosure of loans which
exceed $60,000 to Executive Officers and Directors of the Corporation or to
their associates. Such loans were made on substantially the same terms as those
prevailing for comparable transactions with similar risk. At December 31, 1998
and 1997, these loans totaled $3,327,019 and $3,246,671, respectively. During
1998, total principal additions were $4,728,806 and total principal payments
were $4,648,458.

Note 8. Bank Premises and Equipment, Net 

     Premises and equipment are summarized as follows:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
                                                            December 31,
-----------------------------------------------------------------------------
                                                      1998          1997
-----------------------------------------------------------------------------
<S>                                              <C>            <C>        
Bank premises                                    $ 6,659,649    $ 5,993,540
Leasehold improvements                               970,248        970,248
Furniture and equipment                            5,212,623      4,521,655
Construction in progress                             829,574             --
-----------------------------------------------------------------------------
                                                 $13,672,094    $11,485,443
Less accumulated depreciation and amortization     4,439,097      3,659,578
-----------------------------------------------------------------------------
                                                 $ 9,232,997    $ 7,825,865
-----------------------------------------------------------------------------
</TABLE>

     Depreciation  and amortization  expense amounted to $778,514,  $696,008 and
$624,652 for 1998, 1997 and 1996, respectively.

    Virginia Commonwealth Financial Corporation    31    1998 Annual Report

<PAGE>

                                     [logo]
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9.  Deposits

    The aggregate amount of jumbo time deposits, each with a minimum of
$100,000, was approximately $29,032,739 and $26,965,661 at December 31, 1998 and
1997, respectively.

    At December 31, 1998, the scheduled maturities of time deposits are as
follows:

      1999                               $93,470,560
      2000                                35,100,047
      2001                                11,159,936
      2002                                 6,833,819
      2003                                 8,710,829
      2004 and thereafter                     12,806
  ----------------------------------------------------
                                        $155,287,997
  ----------------------------------------------------

Note 10.  Other Borrowings

    Federal funds purchased and securities sold under agreements to repurchase
generally mature within one to four days from the transaction date. Second Bank
& Trust has an agreement with the Federal Reserve Bank where it can borrow funds
deposited by customers. This agreement calls for variable interest and is
payable on demand. U. S. Government securities are pledged as collateral. The
maximum amount available under this agreement is $1,000,000. The balance
outstanding as of December 31, 1998 and 1997 was $227,405 and $1,000,000,
respectively.

    Other short-term borrowings consists of Master Promissory Notes with
Corporate customers. These notes bear a variable interest rate and are payable
on demand.

Note 11.  Note Payable

    Second Bank & Trust issued a note payable, secured by property in Orange,
Virginia with a face amount of $100,000. The note is payable in two annual
installments of $50,000 beginning on January 2, 1999. The note bears interest of
6% per annum. At December 31, 1998, the unpaid balance of this note payable was
$100,000. Aggregate maturities are as follows:


     1999                                 $ 50,000
     2000                                   50,000
  ---------------------------------------------------
                                          $100,000
  ---------------------------------------------------

Note 12.  Employee Benefit Plans

    Second Bank & Trust maintains a profit sharing plan for all eligible
employees. Amounts charged to operations were $225,000, $205,000 and $175,000 in
1998, 1997 and 1996, respectively.

    Eligible employees of Second Bank & Trust also participate in an Employee
Stock Ownership Plan (ESOP) and 401(k) Plan. Contributions to these plans are
determined by the Board of Directors in accordance with Internal Revenue Service
regulations. Such contributions are limited to a percentage of the annual
compensation of all employees covered by the plans. The Bank's cash contribution
to the ESOP was $63,027, $64,420 and $54,965 in 1998, 1997 and 1996,
respectively. The Bank's cash contribution to the 401(k) Plan was $62,973,
$45,980 and $45,869 in 1998, 1997 and 1996, respectively.

     Eligible employees of Virginia Heartland Bank participate in a 401(k) plan.
Contributions to the plan are determined by the Bank's Board of Directors in
accordance with Internal Revenue Service regulations. The Bank's contribution to
the 401(k) plan was $49,185, $46,663 and $43,935 in 1998, 1997 and 1996,
respectively.

    Second Bank & Trust also has a noncontributory, defined benefit pension plan
covering substantially all employees. The benefits are based on years of service
and level of compensation. The Corporation's funding policy is to contribute
annually the maximum amount that can be deducted for federal income tax
purposes. Contributions are intended to provide not only for benefits attributed
to service to date but also for those expected to be earned in the future.

    Virginia Commonwealth Financial Corporation    32    1998 Annual Report

<PAGE>

                                     [logo]
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     Information about the plan follows:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                                                                      1998          1997
----------------------------------------------------------------------------------------------
<S>                                                               <C>            <C>
Change in Benefit Obligation
  Benefit obligation, beginning                                   $2,494,895     $ 2,429,721
  Service cost                                                        64,747          55,962
  Interest cost                                                      167,832         162,952
  Actuarial loss                                                     260,261          53,377
  Benefits paid                                                     (198,020)       (207,117)
----------------------------------------------------------------------------------------------
  Benefit obligation, ending                                      $2,789,715      $2,494,895
----------------------------------------------------------------------------------------------

Change in Plan Assets
  Fair value of plan assets, beginning                            $3,309,339      $2,821,152
  Actual return on plan assets                                       899,666         695,304
  Benefits paid                                                     (198,020)       (207,117)
----------------------------------------------------------------------------------------------
  Fair value of plan assets, ending                               $4,010,985      $3,309,339
----------------------------------------------------------------------------------------------

  Funded status                                                   $1,221,270      $  814,444
  Unrecognized net actual gain                                      (991,794)       (593,652)
  Unrecognized net obligation at transition                         (215,013)       (258,016)
  Unrecognized prior service cost                                    519,123         566,855
----------------------------------------------------------------------------------------------
  Accrued benefit included in other assets                         $ 533,586      $  529,631
----------------------------------------------------------------------------------------------
</TABLE>



<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                                                     1998             1997            1996
----------------------------------------------------------------------------------------------
<S>                                                <C>             <C>             <C>
Components of Net Periodic Benefit Cost
  Service cost                                     $  64,747       $  55,962       $  71,878
  Interest cost                                      167,832         162,952         116,064
  Expected return on plan assets                    (224,843)       (190,352)       (217,433)
  Amortization of prior service cost                  47,732          47,732          47,732
  Amortization of net obligation at transition       (43,003)        (43,003)        (43,003)
  Recognized net actuarial gain                      (16,420)           --              --
----------------------------------------------------------------------------------------------
  Net periodic benefit cost (income)               $  (3,955)      $  33,291       $ (24,762)
----------------------------------------------------------------------------------------------
Weighted-Average Assumptions
  as of December 31
  Discount rate                                         7.00%           7.00%           7.00%
  Expected return on plan assets                        7.00%           7.00%           7.00%
  Rate of compensation increase                         5.00%           5.00%           5.00%
</TABLE>

Note 13.  Deferred Compensation

    Virginia Heartland Bank has entered into a deferred compensation agreement
with the Corporation's Chairman which provides benefits payable at age sixty, or
upon his later retirement from the Corporation. The Bank also has a deferred
compensation agreement with the President which provides benefits payable at age
sixty-five. Under both agreements, circumstances may permit payments to be made
to surviving spouses. The present value of the estimated liability under the
agreements is being accrued using a discount rate of 10% and 7.5%, respectively,
ratably over the remaining years to the date when the employees are first
eligible for the benefits. The deferred compensation charged to expense totaled
$150,682, $39,128 and $64,421 for the three years ended December 31, 1998,
respectively.

    Virginia Commonwealth Financial Corporation    33    1998 Annual Report

<PAGE>

                                     [logo]
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    Second Bank and Trust has a deferred compensation plan whereby certain
senior officers as selected by the Board of Directors may defer receipt of a
certain amount of pre-tax income and cash incentive compensation. The Bank
provides a matched contribution of 5% of base salary for the President, and as
determined from time to time by the Board for other executives. The deferred
compensation charged to expense totaled $7,250, $6,750 and $-0- for the three
years ended December 31, 1998, respectively.

 Note 14.  Income Taxes
 
   Net deferred tax assets consist of the following components as of December
31, 1998 and 1997:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                                                                  1998                1997
----------------------------------------------------------------------------------------------
<S>                                                            <C>                <C>
Deferred tax assets:
  Reserve for loan losses                                       $483,497           $ 413,525
  Unearned loan fees                                                  --              52,901
  Nonaccrual loan interest                                        18,667              27,504
  Deferred compensation                                          205,706             123,500
  Prepaid insurance commission                                    17,067              14,957
  Other                                                           28,159               1,182
----------------------------------------------------------------------------------------------
                                                                $753,096           $ 633,569
----------------------------------------------------------------------------------------------
Deferred tax liabilities:
  Accrued pension asset                                         $180,037           $ 180,037
  Premises and equipment                                         185,311             209,086
  Securities available for sale                                  220,393              53,953
  Other                                                           12,978               9,249
----------------------------------------------------------------------------------------------
                                                                $598,719           $ 452,325
----------------------------------------------------------------------------------------------
                                                                $154,377           $ 181,244
----------------------------------------------------------------------------------------------
</TABLE>

    The provision for income taxes charged to operations for the years ended
December 31, 1998, 1997 and 1996, consists of the following:


<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                                                     1998              1997          1996
----------------------------------------------------------------------------------------------
<S>                                               <C>              <C>            <C>       
Current tax expense                               $1,889,401       $1,836,890     $1,354,524
Deferred tax expense (benefit)                      (139,573)        (76,769)         93,942
----------------------------------------------------------------------------------------------
                                                  $1,749,828       $1,760,121     $1,448,466
----------------------------------------------------------------------------------------------
</TABLE>

    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, 1998, 1997 and 1996, due to the following:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                                                     1998              1997          1996
----------------------------------------------------------------------------------------------
<S>                                               <C>             <C>             <C>       
Computed "expected" tax expense                   $2,019,718      $2,009,540      $1,753,821
  Increase (decrease) in income
    taxes resulting from:
      Tax exempt interest income                    (323,852)       (251,519)       (240,051)
      Merger costs                                   108,970            --              --
      Other, net                                     (55,008)          2,100         (65,304)
----------------------------------------------------------------------------------------------
                                                  $1,749,828      $1,760,121      $1,448,466
----------------------------------------------------------------------------------------------
</TABLE>

    Virginia Commonwealth Financial Corporation    34    1998 Annual Report

<PAGE>

                                     [logo]
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 Note 15.   Commitments and Contingent Liabilities

    Virginia Heartland Bank rents its principal location in Fredericksburg from
a related party under an operating lease. In 1997, the Bank exercised a renewal
option extending the expiration period to March 31, 2008. The annual rent under
the renewal option is $60,900 with annual increases of 3% per year for each year
of the renewal term commencing April 1, 1999. The Bank has an additional
ten-year renewal option that remains unexercised under the terms of the lease.

    Virginia Heartland Bank also leases a branch site in Spotsylvania County.
The lease requires monthly lease payments of $2,892 during the first five years,
$3,167 per month during the next five years, and $3,298 per month during the
remaining twenty years. The lease expires on January 31, 2026.

    Total rent expense was $91,558, $76,700 and $53,567 for 1998, 1997 and 1996,
respectively, and was included in occupancy expense.

    The following is a schedule by year of future minimum lease requirements
required under the long-term noncancellable lease agreements:

               1999                                  $ 96,970
               2000                                   101,863
               2001                                   103,788
               2002                                   105,769
               2003                                   107,811
              ------------------------------------------------
                 Total                               $516,201

    The Corporation continues to implement its Year 2000 (Y2K) Plan. The issue
is whether computer systems will properly recognize date-sensitive information
when the year changes to 2000. The Corporation has met its Y2K goals to date and
believes that it will continue to meet the goals of the Y2K Plan. At December
31, 1998, the Corporation had performed risk assessments, assessed the Y2K
preparedness of suppliers of data processing services to the Corporation and of
large customers, had implemented its customer awareness program, had begun
developing its Y2K contingency plan, and was in the process of implementing
necessary changes in hardware and software. Some additional steps must be taken
to achieve Y2K compliance, including some steps that may not yet be identified.

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

    See Note 18 with respect to financial instruments with off-balance-sheet
risk.

 Note 16.   Restrictions on Transfers to Parent

    Transfers of funds from the banking subsidiaries to the Parent Corporation
in the form of loans, advances and cash dividends, are restricted by federal and
state regulatory authorities. During 1998, the banking subsidiaries transferred
$2,200,000 to the Parent Corporation as working capital. As of December 31, 1998
the aggregate amount of additional unrestricted funds which could be transferred
from the banking subsidiaries to the Parent Corporation without prior regulatory
approval totalled $3,890,749 or 9.5% of the consolidated net assets.

Note 17. Dividend Reinvestment Plan

    The Corporation has in effect a Dividend Reinvestment Plan which provides an
automatic conversion of dividends into common stock for enrolled stockholders.
It is based on the stock's fair market value on each dividend record date, and
allows for voluntary contributions to purchase stock.

Note 18.  Financial Instruments With Off-Balance-Sheet Risk

    The Corporation is party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers. 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 Corporation has in particular classes of financial
instruments.

    Virginia Commonwealth Financial Corporation    35    1998 Annual Report

<PAGE>

                                     [logo]
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


    The Corporation'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 Corporation 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 Corporation's exposure
to off-balance-sheet risk as of December 31, 1998 and 1997, is as follows:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
                                                  1998              1997
-------------------------------------------------------------------------------
<S>                                           <C>                <C>
Financial instruments whose contract 
  amounts represent credit risk:
    Commitments to extend credit              $42,543,440        $35,571,236
    Standby letters of credit                 $ 2,280,097        $ 2,329,703
</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 Corporation evaluates each customer's
credit worthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Corporation 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.

    Standby letters of credit are conditional commitments issued by the
Corporation 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 Corporation holds property, inventory and bank deposits as collateral
supporting those commitments for which collateral is deemed necessary.

    The Corporation maintains cash accounts in other commercial banks. The
amount on deposit with correspondent institutions at December 31, 1998, exceeded
the insurance limits of the Federal Deposit Insurance Corporation by $3,095,304.

Note 19.  Disclosures About Fair Value of Financial Instruments

    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 and marketable equity securities held for investment
purposes, fair values are based on quoted market prices or dealer quotes. For
other securities held as investments, fair value equals quoted market price, if
available. If a quoted market price is not available, fair value is estimated
using quoted market prices for similar securities.

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.

Loans Held for Sale

    The fair value of loans held for sale is estimated based on commitments into
which individual loans will be delivered.

    Virginia Commonwealth Financial Corporation    36    1998 Annual Report

<PAGE>

                                     [logo]
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deposit Liabilities

    The fair value of demand deposits, savings accounts, and certain money
market deposits is the amount payable on demand at the reporting date. The fair
value of fixed-maturity certificates of deposit is estimated using market rates
for deposits of similar remaining maturities.

Short-Term Borrowings

    The carrying amounts of federal funds purchased, borrowings under repurchase
agreements, and other short-term borrowings maturing within 90 days approximate
their fair values. Fair values of other short-term borrowings are estimated
using discounted cash flow analyses based on the Corporation's current
incremental borrowing rates for similar types of borrowing arrangements.

Off-Balance-Sheet Financial Instruments

    The fair value of commitments to extend credit is estimated using the fees
currently charged to enter 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 stand-by 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, 1998 and 1997, the carrying amounts and fair values of loan
commitments and stand-by letters of credit were immaterial.

     The estimated fair values of the Corporation's financial instruments are as
follows:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
                                            1998                      1997
-------------------------------------------------------------------------------------
                                    Carrying       Fair      Carrying        Fair
(thousands)                          Amount        Value      Amount         Value
-------------------------------------------------------------------------------------
<S>                                <C>          <C>           <C>          <C>
Financial assets:
  Cash and short-term investments  $ 15,681     $ 15,681      $ 14,973     $ 14,973
  Securities                        104,943      105,678        98,963       99,628
  Loans held for sale                 5,400        5,400         3,044        3,044
  Loans, net                        206,882      208,615       186,334      187,139
-------------------------------------------------------------------------------------
      Total financial assets       $332,906     $335,374      $303,314     $304,784
-------------------------------------------------------------------------------------

Financial liabilities:
  Deposits                         $306,515     $292,885      $268,480     $254,836
  Other borrowings                    2,486        2,491         7,139        7,139
-------------------------------------------------------------------------------------
      Total financial liabilities  $309,001     $295,376      $275,619     $261,975
-------------------------------------------------------------------------------------
</TABLE>

Note 20.  Regulatory Matters

    The Corporation is 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 Corporation's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the
Corporation must meet specific capital guidelines that involve quantitative
measures of the Corporation's assets, liabilities, and certain off-balance-sheet
items as calculated under regulatory accounting practices. The Corporation's
capital amounts and classification are also subject to qualitative judgments by
the regulators about components, risk weightings, and other factors.

    Quantitative measures established by regulation to ensure capital adequacy
require the Corporation to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier 1 capital (as defined in the regulations) to
risk-weighted assets, and of Tier 1 capital to average assets. Management
believes, as of December 31, 1998, that the Corporation meets all capital
adequacy requirements to which it is subject.

    Virginia Commonwealth Financial Corporation    37    1998 Annual Report

<PAGE>

                                     [logo]
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    As of December 31, 1998, the most recent notification from the Federal
Reserve Bank categorized the Corporation as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, the Corporation 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.

     The Corporation's actual capital amounts and ratios are also presented in
the table. No deduction was made from capital for interest rate risk.


<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                                                                           To Be Well
                                                                        Capitalized Under
                                                       For Capital      Prompt Corrective
                                    Actual          Adequacy Purposes   Action Provisions
----------------------------------------------------------------------------------------------
(Amount in Thousands)           Amount    Ratio     Amount     Ratio    Amount   Ratio
----------------------------------------------------------------------------------------------
<S>                            <C>        <C>      <C>         <C>     <C>        <C>
As of December 31, 1998:
  Total Capital (to Risk
    Weighted Assets):
      Consolidated             $42,854    18.37%   >$18,660    >8.0%           N/A
      Second Bank & Trust      $28,446    17.79%   >$12,792    >8.0%   >$15,991   >10.0%
      Virginia Heartland Bank  $10,180    14.69%    >$5,543    >8.0%    >$6,929   >10.0%
  Tier 1 Capital (to Risk
    Weighted Assets):
      Consolidated             $40,568    17.39%    >$9,330    >4.0%           N/A
      Second Bank & Trust      $26,900    16.82%    >$6,396    >4.0%    >$9,594    >6.0%
      Virginia Heartland Bank  $ 9,440    13.62%    >$2,772    >4.0%    >$4,157    >6.0%
  Tier 1 Capital (to
    Average Assets):
      Consolidated             $40,568    12.14%   >$13,370    >4.0%           N/A
      Second Bank & Trust      $26,900    11.30%    >$9,522    >4.0%   >$11,903    >5.0%
      Virginia Heartland Bank  $ 9,440     8.76%    >$4,311    >4.0%    >$5,398    >5.0%

As of December 31, 1997:
  Total Capital (to Risk
    Weighted Assets):
      Consolidated             $39,689    20.31%   >$15,633    >8.0%           N/A
      Second Bank & Trust      $26,694    20.07%   >$10,641    >8.0%   >$13,302    >10.0%
      Virginia Heartland Bank  $ 9,471    15.50%    >$4,954    >8.0%    >$6,192    >10.0%
  Tier 1 Capital (to Risk
    Weighted Assets):
      Consolidated             $37,679    19.28%    >$7,817    >4.0%           N/A
      Second Bank & Trust      $25,333    19.04%    >$5,321    >4.0%    >$7,981    >6.0%
      Virginia Heartland Bank  $ 8,890    14.55%    >$2,477    >4.0%    >$3,715    >6.0%
  Tier 1 Capital (to
    Average Assets):
      Consolidated             $37,679    12.26%   >$12,294    >4.0%           N/A
      Second Bank & Trust      $25,333    11.64%    >$8,706    >4.0%   >$10,883    >5.0%
      Virginia Heartland Bank  $ 8,890     9.91%    >$3,588    >4.0%    >$4,486    >5.0%
</TABLE>

    Virginia Commonwealth Financial Corporation    38    1998 Annual Report

<PAGE>

                                     [logo]
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 21.  Parent Corporation Only Financial Statements

Virginia Commonwealth Financial Corporation (Parent Corporation Only)
Balance Sheets
December 31, 1998 and 1997

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
                                                         1998            1997
----------------------------------------------------------------------------------
<S>                                                  <C>            <C>
Assets
Cash held in subsidiary banks                         $2,669,818     $ 1,520,833
Securities available for sale                          1,526,453       2,008,630
Investment in subsidiaries                            36,750,027      34,282,034
Income taxes receivable                                   64,000          45,535
Accrued interest receivable                               28,542          21,035
Due from subsidiaries                                    854,000       2,753,757
Other assets                                              10,317              --
----------------------------------------------------------------------------------
      Total assets                                   $41,903,157     $40,631,824
----------------------------------------------------------------------------------

Liabilities and Stockholders' Equity
Liabilities
  Short-term borrowings                               $  854,000     $ 2,838,000
  Other liabilities                                       53,993          10,000
----------------------------------------------------------------------------------
      Total liabilities                               $  907,993     $ 2,848,000
----------------------------------------------------------------------------------

Stockholders' Equity
  Preferred stock                                     $       --     $        --
  Common stock                                         5,104,411       5,085,613
  Capital surplus                                      7,738,492       7,467,554
  Retained earnings                                   27,724,435      25,125,926
  Accumulated other comprehensive income                 427,826         104,731
----------------------------------------------------------------------------------
      Total stockholders' equity                     $40,995,164     $37,783,824
----------------------------------------------------------------------------------
      Total liabilities and stockholders' equity     $41,903,157     $40,631,824
----------------------------------------------------------------------------------
</TABLE>

    Virginia Commonwealth Financial Corporation    39    1998 Annual Report

<PAGE>

                                     [logo]
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Virginia Commonwealth Financial Corporation (Parent Corporation Only)
Statements of Income
Years Ended December 31, 1998, 1997 and 1996

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                                                    1998             1997            1996
----------------------------------------------------------------------------------------------
<S>                                               <C>             <C>             <C>
Income
  Dividends from subsidiaries                     $2,200,000      $4,853,656      $1,185,209
  Interest and dividends on securities
    available for sale:
      Taxable                                         12,015            --                --
      Nontaxable                                      78,551            --                --
      Dividends                                        6,250            --                --
  Interest from subsidiaries                         148,209         150,281         127,083
  Gain on sale of securities                          10,924            --                --
----------------------------------------------------------------------------------------------
                                                  $2,455,949      $5,003,937      $1,312,292
----------------------------------------------------------------------------------------------
Expenses
  Interest                                        $  109,431      $  101,530      $   84,846
  Merger expenses                                    189,808            --                --
  Miscellaneous                                      146,309          68,396          57,737
----------------------------------------------------------------------------------------------
                                                  $  445,548      $  169,926      $  142,583
----------------------------------------------------------------------------------------------
        Net income before income tax
            benefit and undistributed
            equity in subsidiaries                $2,010,401      $4,834,011      $1,169,709
Income tax benefit                                    64,000          45,535          36,238
----------------------------------------------------------------------------------------------
        Net income before undistributed 
          (distributed) equity in subsidiaries    $2,074,401      $4,879,546      $1,205,947
Undistributed (distributed) equity 
  in subsidiaries                                  2,116,119        (729,255)      2,503,885
----------------------------------------------------------------------------------------------
        Net income                                $4,190,520      $4,150,291      $3,709,832
----------------------------------------------------------------------------------------------
</TABLE>

    Virginia Commonwealth Financial Corporation    40    1998 Annual Report

<PAGE>

                                     [logo]
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Virginia Commonwealth Financial Corporation (Parent Corporation Only)
Statements of Cash Flows
Years Ended December 31, 1998, 1997 and 1996

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                                                    1998             1997            1996
----------------------------------------------------------------------------------------------
<S>                                              <C>              <C>             <C>       
Cash Flows from Operating Activities
  Net income                                     $ 4,190,520      $4,150,291      $3,709,832
  Adjustments to reconcile net income to
    net cash provided by operating activities:
      Accretion of discounts on securities
        purchased, net                                 2,800             --               --
      Gain on sale of securities                     (10,924)            --               --
      Distributed (undistributed) earnings 
        of subsidiaries                           (2,116,119)        729,255      (2,503,885)
      (Increase) in income taxes receivable          (18,465)         (9,297)         (3,861)
      (Increase) decrease in due from subsidiaries 1,854,222        (105,985)       (203,216)
      (Increase) in interest receivable               (7,507)        (21,035)             --
      (Increase) in other assets                     (10,317)             --              --
      Increase in other liabilities                   35,364          10,000              --
----------------------------------------------------------------------------------------------
        Net cash provided by operating activities $3,919,574      $4,753,229       $ 998,870
----------------------------------------------------------------------------------------------

Cash Flows from Investing Activities
  Purchase of securities available for sale      $(2,266,470)    $(2,008,630)      $     --
  Proceeds from sale of securities available 
    for sale                                       1,782,156             --              --
  Proceeds from calls of securities available 
    for sale                                       1,000,000             --              --
----------------------------------------------------------------------------------------------
         Net cash provided by (used in)
           investing activities                  $   515,686     $(2,008,630)      $     --
----------------------------------------------------------------------------------------------

Cash Flows from Financing Activities
  Cash dividends paid                            $(1,592,011)     $(1,343,595)    $(1,185,209)
  Net increase (decrease) in 
    short-term borrowings                         (1,984,000)        (32,000)         359,000
  Issuance of common stock - dividend
    reinvestment plan                                289,736         329,738          290,033
  Acquisition of common stock                           --          (177,909)        (462,694)
----------------------------------------------------------------------------------------------
        Net cash (used in) financing activities  $(3,286,275)    $(1,223,766)      $ (998,870)
----------------------------------------------------------------------------------------------
        Increase in cash and cash equivalents    $ 1,148,985     $ 1,520,833       $     --

Cash and Cash Equivalents
  Beginning                                        1,520,833             --              --
----------------------------------------------------------------------------------------------
  Ending                                         $ 2,669,818      $1,520,833       $     --
----------------------------------------------------------------------------------------------

Supplemental Schedule of Noncash
  Investing Activities, unrealized gain
  on securities available for sale               $    25,382      $      --        $     --
----------------------------------------------------------------------------------------------
</TABLE>

    Virginia Commonwealth Financial Corporation    41    1998 Annual Report

<PAGE>

                                     [logo]
                          INDEPENDENT AUDITOR'S REPORT

 [logo]
Yount, Hyde & Barbour, P.C.
Certified Public Accountants
     and Consultants

 
To the Stockholders and Directors
Virginia Commonwealth Financial Corporation
Culpeper, Virginia


    We have audited the accompanying consolidated balance sheets of Virginia
Commonwealth Financial Corporation and Subsidiaries as of December 31, 1998 and
1997, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the three years ended December 31, 1998.
These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the 1997 and 1996 financial
statements of Virginia Heartland Bank which was pooled with Virginia
Commonwealth Financial Corporation in 1998, as explained in Note 2 to the
consolidated financial statements, which statements are included in the restated
1997 and 1996 financial statements and reflect total assets and revenue
constituting 29.7% and 21.8%, respectively in 1997 and 29.6% and 22.9%
respectively, in 1996 of the related consolidated totals. Those statements were
audited by other auditors whose report has been furnished to us, and our opinion
for 1997 and 1996 insofar as it relates to the amounts included for Virginia
Heartland Bank, is based solely upon the report of the other auditors.

    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 and the report of other auditors provide a reasonable
basis for our opinion.

    In our opinion, based upon our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Virginia Commonwealth Financial
Corporation and Subsidiaries as of December 31, 1998 and 1997, and the results
of their operations and their cash flows for the three years ended December 31,
1998, in conformity with generally accepted accounting principles.

/s/ Yount, Hyde & Barbour, P.C.
---------------------------------
Winchester, Virginia
January 15, 1999

    Virginia Commonwealth Financial Corporation    42    1998 Annual Report

<PAGE>

                                     [logo]
                   Virginia Commonwealth Financial Corporation

OFFICERS                                               

William B. Young, Chairman & Chief Executive Officer           
Jeffrey W. Farrar, Senior Vice President & Chief Financial Officer
O.R. Barham, Jr., President
Edward V. Allison, Jr., Senior Vice President & Secretary

DIRECTORS

O.R. Barham, Jr.              W. Robert Jebson, Jr.     Gregory L. Fisher   
Marshall D. Gayheart, Jr.     Thomas F. Williams, Jr.   Taylor E. Gore 

H. Wayne Parrish 
William B. Young

SECOND BANK & TRUST

OFFICERS
Taylor E. Gore, Chairman of the Board
O.R. Barham, Jr., President & Chief Executive Officer
Jeffrey W. Farrar, Senior Vice President & Chief Financial Officer
Richard G. Frank, Senior Vice President & Senior Lender
J. Quintin Mullins, Senior Vice President & Trust Officer
George L. Pulliam, Senior Vice President & Marketing & Products Director
Georgia M. Willis, Senior Vice President & Manager of Branch Administration
Ann E.C. Homan, Vice President
Charles A. Martorana, Vice President
David  W. Meadows, Vice President
John E. Meyer, Vice President
Jerry L. Raines, Vice President
Donna H. Rosson, Vice President
George J. Sutorka, Vice President
Edward M. Woodward, Vice President
Kathleen A. Brew, Assistant Vice President
William T. "Tripp" Butler, III, Assistant Vice President
Katie S. Gardner, Assistant Vice President & Controller
Richard T. Harrington, Assistant Vice President
Joseph K. Leake, Consumer Loan Officer
Peggy P. Mocarski, Assistant Vice President
Timothy B. Morris, Investment Representative
G. William Morton, IV, Assistant Vice President
William L. Pierce, Jr., Assistant Vice President & Trust Officer
C. M. Ponton, Assistant Vice President
Sallie E. Slaughter, Assistant Vice President
W. Scott Thompson, Assistant Vice President & Trust Officer
Connie M. Aylor, Branch Officer
Patricia A. Banks, Branch Officer
Joanna G. Cook, Branch Officer
Karen C. Ingram, Branch Officer
Leslie A. Whalen, Branch Officer
Steve A. Grayson, Assistant Cashier
Julia E. McMann, Assistant Cashier
Denise L. Whetzel, Assistant Cashier

DIRECTORS

Alan W. Myers
Taylor E. Gore, Chairman of the Board
Harlean Smoot
Joseph A. Troilo, Jr.
Lewis P. Armstrong
Robert Y. Button, Jr.
O. R. Barham, Jr., President and CEO
Charles K. Gyory
Christopher J. Honenberger

MADISON ADVISORY BOARD

James W. Aylor
Thomas J. Weaver
Lucian W. Clore
James C. Graves
Donald R. Eddins

HARRISONBURG ADVISORY BOARD

Donald L. Lemish
Janet T. Wendelken
Dean M. Nichols
Karen W. Wigginton
D. Kenneth Patterson
Edward M. Young

VIRGINIA HEARTLAND BANK

OFFICERS

William B. Young, Chairman & Chief Executive Officer
Edward V. Allison, Jr., President
Joyce H. Bledsoe, Assistant Secretary & Branch Officer
Gordon R. (Pete) Humes, Commercial Banking Officer
Margie L. Markham, Commercial Loan Officer
Christy F. Quesenbery, Operations & Compliance Officer
Darrell G. Swanigan, Commercial Loan Officer

DIRECTORS

William B. Young, Chairman
Edward V. Allison, Jr.
Mark S. Gardner
Christopher M. Hallberg
Jerry W. Leonard
H. Wayne Parrish


    Virginia Commonwealth Financial Corporation    43    1998 Annual Report

<PAGE>

                                     [logo]
                                     [photo]

Virginia Heartland Bank
4700 Harrison Road
Fredericksburg, Virginia 22408
540-898-1110

1016 Charles Street
Fredericksburg, Virginia 22401
540-373-9700

5996 Plank Road
Fredericksburg, Virginia 22407
540-768-6065

Second Bank & Trust

Culpeper:
102 South Main Street
Culpeper, Virginia 22701
540-825-4800

231 Southgate Shopping Center
Culpeper, Virginia 22701
540-825-4890

717 James Madison Highway
Culpeper, Virginia 22701
540-825-4897

Madison:
U.S. Business Rt. 29 North
Madison, Virginia 22727
540-948-6811

Locust Grove:
36801 Goodwin Drive
Locust Grove, Virginia 22801
540-972-0642

Harrisonburg:
390 University Boulevard
Harrisonburg, Virginia 22801
540-434-8495

Orange:
134-136 West Main Street
Orange, Virginia 22960
540-672-7860


           [photo]
Harrisonburg Branch -- Opened in 1998


           [photo]
Chancellor Branch -- Opened in 1997

    Virginia Commonwealth Financial Corporation    44    1998 Annual Report