<TABLE>
<CAPTION>

Financial Highlights

                                                                       Percent
(Dollars in thousands, except per share data)  1998          1997       Change
------------------------------------------------------------------------------
<S>          <C>                          <C>           <C>             <C>
Earnings     Net Interest Income          $   15,929    $  15,410       3.37%
             Net Income                        4,309        3,805      13.25

Per Share    Net Income
              Basic                       $     1.16    $    1.04      11.54%
              Diluted                           1.14         1.02      11.76
             Dividends                          0.42         0.37      13.51
             Book Value at Period End          11.74        11.00       6.73

At Year      Loans, Net                   $  275,491    $ 260,476       5.76%
End          Securities                       89,017       83,025       7.22
             Total Earning Assets            391,175      364,060       7.45
             Total Assets                    419,820      390,076       7.63
             Total Deposits                  372,772      347,573       7.25
             Shareholders' Equity             43,703       40,384       8.22

Ratios       Return on Average Assets           1.06%        0.99%
             Return on Average Equity          10.18         9.82
             Allowance for Loan Losses to
              Loans, Net of Unearned Income     1.37         1.31
             Leverage Capital Ratio             9.84         9.68
</TABLE>

<PAGE>

Management's Discussion & Analysis of
Financial Condition & Results of Operations

  The following discussion is intended to assist readers in understanding and
evaluating the financial condition and results of operations of James River
Bankshares, Inc. ("James River" or the "Company") and its subsidiaries for the
periods presented. In addition to historical information, the following
discussion, as well as certain information appearing elsewhere in this report,
contains forward looking statements that are subject to risks and uncertainties
that could cause the Company's future results to differ materially from those
anticipated in such forward looking statements. These forward looking statements
include, but are not limited to, statements regarding management's goals to
improve profitability, make strategic acquisitions, prepare the Company for Year
2000, and other future plans, expectations, or goals. Risks and uncertainties
that may affect the financial condition and results of operations of the Company
include, but are not limited to, general economic and business conditions,
competition from banks and other financial service providers, new financial
products and services, risks inherent in making loans including repayment risks
and changing collateral values, changing trends in customer profiles,
technological changes, changes in laws and regulations applicable to James River
and its subsidiaries, and risk related to Year 2000, including the risks
associated with vendors and their suppliers and risks from customers. Although
James River believes that its expectations with respect to any forward looking
statements are based upon reasonable assumptions within the limits of its
knowledge of its business and operations, there can be no assurance that actual
results will not differ materially from any future results that may be expressed
or implied by forward looking statements.

EARNINGS PERFORMANCE

  James River's net income increased 13% in 1998 to $4.3 million. In 1997, net
income was $3.8 million. Diluted net income per share increased 12% in 1998 to
$1.14 from $1.02 in 1997. A 3% increase in net interest income and a 46%
increase in non-interest income contributed to the higher net income in 1998.
Partially offsetting these positive factors was a 6% increase in non-interest
expense in 1998.

  Higher net income in 1998 resulted in improved profitability ratios. The
return on average assets increased in 1998 to 1.06% from .99% in 1997. The
return on average shareholders' equity rose to 10.18% in 1998 from 9.82% in
1997. In addition, the Company's efficiency ratio showed improvement, declining
to 65.18% in 1998 from 67.18% in 1997. A decline in the effiency ratio is
considered positive as this ratio measures operating expenses as a percent of
income (tax-equivalent net interest income plus non-interest income).

  While encouraged by the progress demonstrated in 1998 in these measures of
profitability, management recognizes the need for further improvement. Growth
initiatives, such as the formation of a new mortgage company and the addition of
four new branch offices in 1998, are anticipated to contribute to long-term
future profitability, although no assurance can be given in this regard. Because
of start-up costs and initial operating expenses, these initiatives had a
negative effect on profitability in the fourth quarter of 1998 and are expected
to have a similar effect during a portion of 1999.

  Net income in 1997 of $3.8 million represented a 57% increase over 1996 net
income of $2.4 million. Diluted net income per share was $1.02 in 1997 compared
with $.65 in 1996. The increase in net income in 1997 was attributable partially
to $1.3 million of non-recurring expense in 1996 associated with the acquisition
of two bank subsidiaries and a one-time assessment by the Federal Deposit
Insurance Corporation. In addition, in 1996 the Company incurred expense related
to the opening of two new branch offices, the acquisition of three branches from
another financial institution, the formation of a new non-bank operations
support subsidiary, and the conversion of three bank subsidiaries to a new data
processing system. Excluding non-recurring expense from 1996, net income
improved 11% in 1997.

NET INTEREST INCOME

Net interest income is the difference between interest income and
interest expense and represents the Company's gross profit margin. In 1998, net
interest income increased 3% to $15.9 million from $15.4 million in 1997. Both
interest income and interest expense increased 4% in 1998 over 1997. The
increases in interest income and expense and net interest income were
attributable to growth in earning assets and interest bearing liabilities.

  The net interest margin represents tax-equivalent net interest income divided
by average earning assets and reflects the effective rate earned by the Company

<PAGE>

Management's Discussion & Analysis of
Financial Condition & Results of Operations

on its average earning assets. For comparative purposes, the income from
tax-exempt securities and loans is adjusted to a tax-equivalent basis, which
results in presenting such income on a comparable basis with fully taxable
income. In 1998, the Company's net interest margin decreased to 4.38% from 4.46%
in 1997. Yields on earning assets declined to 8.11% in 1998 from 8.24% in 1997,
while rates paid on interest-bearing liabilities decreased to 4.66% in 1998 from
4.67% in 1997. Thus, the decline in market interest rates, particularly in the
second half of 1998, had a stronger influence on the rates earned on loans and
other earning assets than on deposits and other interest-bearing liabilities.

  In 1997, net interest income increased 13% to $15.4 million from $13.7 million
in 1996. Interest income grew 9% in 1997, while interest expense increased only
5%. The increase in interest income was attributable partially to an 8% increase
in the loan portfolio.

  The net interest margin widened in 1997 to 4.46% from 4.24% in 1996. The
tax-equivalent yield on earning assets increased 17 basis points to 8.45% in
1997, while the cost of funds decreased 5 basis points to 4.67%. The two factors
that had the strongest influence on the net interest margin were the change in
the mix of earnings assets related to loan growth and a decrease in rates paid
on deposits.

PROVISION FOR LOAN LOSSES

  The provision for loan losses is the amount charged to expense that is
intended to maintain an adequate allowance, or reserve, for loan losses in the
future. The amount of the provision for loan losses in any given period is
dependent upon a variety of factors including the size, growth, and composition
of the loan portfolio, historical and expected loan loss experience, and an
analysis of the quality of the loan portfolio and general economic conditions.
In 1998, the Company increased its provision for loan losses to $507 thousand
from $439 thousand in 1997. In 1996, the provision was $491 thousand. The higher
provision in 1998 over 1997 reflected a 6% increase in the loan portfolio,
changes in the composition and risk characteristics of the portfolio, concerns
over the longevity of the economic expansion, and uncertainty over the possible
effects of Year 2000 issues on the ability of borrowers to meet their
obligations.

NON-INTEREST INCOME

  Non-interest income includes service charges and other related income from
services rendered by the Company. It also includes gains and losses realized
from the sale of securities, loans, and fixed assets and other income items. In
1998, non-interest income increased 46% to $2.7 million from $1.9 million in
1997. Service charges on deposit accounts increased 27% to $1.4 million in 1998
from $1.1 million in 1997. Gains realized on the disposition of securities
increased to $457 thousand in 1998 compared with $100 thousand in 1997. The
higher gains in 1998 resulted principally from the sale of certain equity
securities, which produced a gain of $439 thousand. In addition, other
non-interest income in 1998 included $128 thousand related to mortgage servicing
rights and $84 thousand from the sale of real estate.

  In 1997, non-interest income increased 14% to $1.9 million over $1.7 million
recorded in 1996. The increase was attributable primarily to an increase in
certain customer charges and fees. In addition, income from the disposition of
securities increased $59 thousand in 1997 over 1996.

NON-INTEREST EXPENSE

  Non-interest expense represents the overhead expenses of the Company. In 1998,
non-interest expense increased 6% to $12.3 million from $11.6 million in 1997.
Salaries and employee benefits increased 7%, occupancy expense increased 15%,
and other expense was 5% higher in 1998 compared with 1997. Equipment expense
decreased 3% in 1998. Overhead expense increases in 1998 were affected by the
formation of a mortgage company, the addition of four new branch offices, and
the completion of the Company's new administrative building. These factors are
expected to affect overhead expense and prior period comparisons in the first
three quarters of 1999. Income generated by the mortgage company and the
branches also will affect 1999 results of operations and prior period
comparisons.

  In 1997, non-interest expense increased $54 thousand, or .5%, to $11.6 million
from $11.5 million in 1996. Salaries and employee benefits increased 19%,
occupancy expense increased 7%, and equipment expense was 37% higher in 1997
compared with 1996. Substantially offsetting these increases was a 75% decrease
in other expense in 1997. This decrease was attributable to certain
non-recurring expense in 1996 as previously described related to acquisition
expenses, a Federal Deposit Insurance Corporation special assessment, the
addition and acquisition of branch offices, the start-up of an operations
support subsidiary, and computer related conversion costs.

INCOME TAXES

  Income tax expense in 1998 was $1.6 million, or 7% above $1.5 million recorded
in 1997. In 1996, income tax expense was $908 thousand. The increases in expense

<PAGE>

Management's Discussion & Analysis of
Financial Condition & Results of Operations

in 1998 and 1997 related primarily to higher taxable income. The effective tax
rates in 1998, 1997, and 1996 were 27.03%, 28.20%, and 27.32% respectively.

FINANCIAL CONDITION

  The Company's financial condition is measured in terms of its asset and
liability composition, asset quality, capital resources, and liquidity. At
December 31, 1998, total assets were $420 million, or 8% higher than the year
earlier total of $390 million. Average assets in 1998 of $405 million were 5%
above the year earlier average of $386 million. The addition of four branch
offices contributed to the growth of assets at year-end 1998.

LOANS

  Loans, net of unearned income, at year-end 1998 totaled $276 million, or 5%
above the year earlier total of $263 million. Loans averaged $273 million in
1998 and $259 million in 1997. Loan growth in 1998 was concentrated principally
in real estate loans and construction loans.

INVESTMENTS

  At December 31, 1998, investment securities totaled $89 million, or 7% above
the year earlier total of $83 million at December 31, 1997. In 1998, however,
investment securities averaged 7% lower than in 1997. The higher total at
year-end 1998 resulted from balance sheet growth late in the year and the
re-deployment of funds from short-term investments. In 1998, the portfolio
produced a tax-equivalent yield of 6.7% compared with 6.8% in 1997. At year-end,
92.1% of all securities were rated "A" or better or were issued by the U.S.
Government or its agencies.

DEPOSITS

  Total deposits increased 7% to $373 million at year-end 1998 compared with
$348 million one year earlier. Average deposits increased 4% in 1998 to $358
million compared with the 1997 average of $343 million. Interest checking, which
was $21 million higher, accounted for the greatest portion of the year-end
increase.

ASSET QUALITY

  The Company strives to maintain asset quality by emphasizing strong credit
underwriting and by monitoring the portfolio's repayment performance, among
other measures. The Company maintains an allowance for loan losses that it
believes is sufficient to absorb losses that might be incurred. In determining
the adequacy of the allowance for loan losses, management considers the size and
composition of the loan portfolio, historical loss experience, economic
conditions, the value and adequacy of collateral and guarantors, and the current
level of the allowance. In addition, consideration is given to potential losses
associated with non-accrual loans, impaired loans, and delinquent loans.
Management believes that the allowance for loan losses is maintained at a
sufficient level to provide for potential losses in the portfolio.

  At December 31, 1998, the allowance totaled $3.8 million, or 1.37% of loans.
The allowance totaled $3.5 million, or 1.31% of loans at the end of 1997. Net
loans charged off were $137 thousand in 1998 and $158 thousand in 1997. The
ratio of net charged off loans to average loans was .05% in 1998, .06% in 1997,
and .09% in 1996. Non-performing loans as a percent of total loans at year-end
were .14%, .34%, and .12% in 1998, 1997, and 1996, respectively. Additional
information concerning impaired loans and the allowance for loan losses is
contained in Note 4 of the Notes to Consolidated Financial Statements.

SHAREHOLDERS' EQUITY AND CAPITAL RESOURCES

  Shareholders' equity at year-end 1998 was $43.7 million, or 8% higher than the
year earlier total of $40.4 million. In accordance with Statement of Financial
Accounting Standards (SFAS) No. 115, shareholders' equity includes an adjustment
for the increase in the market value of securities available for sale, net of
deferred taxes. The amounts were $804 thousand and $786 thousand at year-end
1998 and 1997, respectively. In 1998, shareholders' equity averaged $42.3
million, which was 9% above the 1997 average of $38.7 million.

  Federal banking law sets forth certain regulatory capital requirements that
apply to the Company and its banking subsidiaries. Within the framework
established by this law, the Company and its banking subsidiaries qualify for

<PAGE>

Management's Discussion & Analysis of
Financial Condition & Results of Operations

the classification "well capitalized," which is the highest regulatory
classification. At year-end 1998, the Company's regulatory capital ratios were
as follows: Tier 1 Capital to Risk Weighted Assets - 15.6%; Total Capital to
Risk Weighted Assets - 16.9%; and Tier 1 Capital to Quarterly Average Assets
(leverage ratio) - 9.8%. Additional information concerning regulatory capital
requirements is contained in Note 8 of the Notes to Consolidated Financial
Statements. At December 31, 1998 and 1997, the Company's equity to asset ratio
was 10.4%.

  The Company's common stock is traded on the NASDAQ Stock Market's National
Market System under the trading symbol JRBK. At December 31, 1998, the book
value of a share of common stock was $11.74 compared with the year earlier book
value of $11.00. Cash dividends paid on the Company's common stock totaled $1.6
million in 1998 and $1.4 million in 1997. In the fourth quarter of 1998, the
Company's board of directors increased the quarterly cash dividend 20% to $.12
per share from $.10 per share. On an annualized basis, the cash dividend
following the increase was $.48 per share.

LIQUIDITY AND MARKET RISK

  Liquidity in a banking company measures the ability of the company to generate
sufficient cash to meet its daily obligations, pay dividends to shareholders,
and to provide funds for customer's demands for loans and deposit withdrawals
without impairing profitability. To meet these needs, the Company maintains cash
reserves and readily marketable investment securities in addition to regular
fund flows provided from loan repayments and maturing securities. Funds also can
be obtained through increasing deposits or short-term borrowings and through the
banks' borrowing privileges at the Federal Reserve and the Federal Home Loan
Bank. In addition, the Company has a $1 million line of credit available. At
year-end 1998, the Company's federal funds sold and interest-bearing deposits
totaled $22.8 million, and securities with maturities of one year or less
totaled $6.0 million. The Company has no long term debt. Management believes
that its liquidity is adequate to meet its projected needs.

  A related concern of liquidity management is interest rate sensitivity.
Changes in interest rates may affect funding requirements, the liquidity of
certain assets, and, potentially, the income stream of the Company. The Company
currently uses traditional asset and liability management techniques to manage
its interest rate risk. As such, it monitors the difference, or gap, between the
volume of interest sensitive assets and liabilities that will mature or reprice
over various time intervals. At December 31, 1998, the Company had $80.7 million
more in liabilities than assets that mature or reprice within three months or
less, and, therefore, was in a liability sensitive position. In a period of
declining interest rates, this position could have a positive impact on the
Company's earnings. Conversely, in a rising rate environment a liability
sensitive position could adversely affect earnings. In either scenario, certain
repricing decisions are within management's discretion and can influence actual
results.

  Another method for measuring interest rate sensitivity is to analyze the
potential gain or loss in fair values of interest rate sensitive instruments.
The Company's analysis assumes a hypothetical interest rate shock of an
instantaneous change in interest rates of 200 basis points up and down. A
present value computation is used in determining the effect of the hypothetical
interest rate changes on the fair value of interest sensitive assets and
liabilities. Computations of prospective effects of these hypothetical interest
rate changes are based on many assumptions, including relative levels of market
interest rates, loan prepayments, and deposit decay. The results of the analyses
should not be relied upon as indicative of actual results. The computations do
not contemplate actions that could be undertaken by management in response to
changes in interest rates. In addition, certain shortcomings, which could affect
the actual values of interest sensitive assets and liabilities, are inherent in
this method of analysis. Given these and other limitations of the analysis, if
interest rates increased or decreased 200 basis points instantaneously, the net
fair value of interest sensitive instruments would decrease $5.4 million and
increase $5.2 million, respectively. The above analysis uses standard present
value methodology and makes assumptions regarding balance sheet growth and mix,
market interest rate levels, and pricing spreads based on instrument type.

  The Company is not engaged in investment strategies involving derivative
financial instruments. Asset and liability management is conducted without the

<PAGE>

Management's Discussion & Analysis of
Financial Condition & Results of Operations

use of forward-based contracts, options, swap agreements, or other synthetic
financial instruments.

BUSINESS COMBINATIONS

  On March 1, 1996, the Company acquired First Colonial Bank (previously First
Colonial Bank, FSB) and James River Bank/Colonial (previously Bank of Isle of
Wight) in separate transactions. The Company issued a total of 914,941 shares of
its common stock to the shareholders of the two companies. At March 1 1996,
First Colonial Bank had total assets of approximately $137 million and
shareholders' equity of approximately $8.3 million. At March 1, 1996, James
River Bank/Colonial had total assets of approximately $33 million and
shareholders' equity of approximately $3.3 million. Both acquisitions were
accounted for as pooling of interests transactions and are explained more fully
in Note 12 of the Notes to Consolidated Financial Statements.

  On February 17, 1999, the Company entered into a definitive merger agreement
with State Bank of Remington, Inc. ("State Bank"). Under the terms of the
agreement, State Bank would become a wholly owned subsidiary of the Company. The
merger agreement provides for the Comany to exchange 2.9 shares of its common
stock for each of the approximately 291,000 shares of State Bank common stock.
Among other conditions, the transaction is subject to shareholder and regulatory
approval. The merger is expected to qualify as a tax-free exchange and to be
accounted for as a pooling of interests.

ACCOUNTING RULE CHANGES

  In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". This Statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative information embedded in other contracts
(collectively referred to as derivatives), and hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
This Statement is effective for all fiscal quarters or fiscal years beginning
after June 15, 1999. Management will assess the impact, if any, on the Company's
financial statements.

  The American Institute of Certified Public Accountants ("AICPA") issued
Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-up
Activities," in April 1998. The SOP requires such costs to be expensed as
incurred, instead of being capitalized and amortized. It applies to start-up
activities and costs of organization of both development stage and established
operating entities, and it changes existing practice for some industries. The
SOP broadly defines start-up activities as those one-time activities that relate
to the opening of a new facility, introduction of a new product or service,
doing business in a new territory, initiating a new process in an existing
facility, doing business with a new class of customer or beneficiary, or
commencing some new operation. The SOP is effective for financial statements for
fiscal years beginning after December 15, 1998. It is not expected to materially
affect the Company's financial condition or results of operations.

  The AICPA issued SOP 98-1, "Accounting for Costs of Computer Software
Developed or Obtained for Internal Use." This SOP is effective for financial
statements for fiscal years beginning after December 15, 1998. The SOP requires
entities to capitalize certain internal-use software costs once certain criteria
are met. Generally, internal costs with respect to software configuration and
interface, coding, installation to hardware, testing (including parallel
processing), and data conversion costs allowing access of old data by new
systems should be capitalized. All other data conversion costs, training,
application maintenance, and ongoing support activities should be expensed. The
Company will adopt this SOP in 1999 and does not expect it to have a material
effect on the Company's financial condition or results of operations.

YEAR 2000 PROJECT

STATE OF READINESS

  In its evaluation of Year 2000 readiness, James River Bankshares and its
subsidiaries have examined their internal information technology systems,
environmental systems, and other non-information technology products and date
sensitive issues. In addition James River has communicated with suppliers and
significant customers to determine their state of readiness.

  James River's original Year 2000 Plan, which was approved in the fall of 1997
by the Board of Directors, detailed the phases involved in the management of the

<PAGE>

Management's Discussion & Analysis of
Financial Condition & Results of Operations

year 2000 project, and, with some modifications, James River is on target with
the original dates projected for each phase of the project. The Company's
management, its board of directors, and the management and boards of the
Company's subsidiary banks receive updates at least quarterly, and more
frequently as needed, regarding progress and activities related to the Year 2000
Plan. The phases and timetable for completion are described below.

     o    Awareness Phase-Completed third quarter 1997;
     o    Assessment Phase-Completed first quarter 1998;
     o    Renovation Phase-No significant renovation to existing systems
          expected;
     o    Validation Phase-Testing currently on-going, to be completed by first
          quarter 1999; and
     o    Implementation Phase-Completion no later than first quarter 1999.


  In the third quarter of 1998, James River, entered into an agreement with SBS
Data Services, Inc. under which SBS will perform the data processing function
for James River. The decision to outsource this function was a business decision
and was not driven by Year 2000 issues or concerns about our ability to process
in the new century. SBS provides data processing services to many other banking
companies and is subject to examination by Federal banking authorities. SBS
utilizes the same computer hardware and software used by James River and has
provided the Company with Year 2000 compliance certifications. The conversion
was completed in January 1999. Because of the timing of the conversion, testing
of the mainframe applications was delayed beyond year-end 1998 as scheduled.
James River and SBS have established a test plan in accordance with Federal
Financial Institutions Examination Council ("FFIEC") guidelines. The tests are
expected to be completed during the first quarter of 1999.

  In the validation phase currently in progress, testing has been performed or
is scheduled to be performed on the hardware and software for "mission critical"
systems and for all other software applications and hardware as well. Also,
testing is scheduled to be performed or has been performed on all environmental
systems, including security systems, heating and air conditioning units, and
vault timers, among others. Testing has been completed on all personal computers
and software applications. Such software testing included software for
processing new deposit accounts and loans, as well as merchant credit card
terminals. The testing did not result in any determinable Year 2000
difficulties. A review of vault mechanisms also has been completed. The review
determined that vault timers do not have embedded chips and are not dependent on
electrical or other sources of power. Consequently, no difficulty is expected
with the vaults. Reviews of security systems reveal that such systems have
battery back-up capabilities in the event of power failure. Battery testing will
be undertaken near year-end. In addition, ATM hardware is being evaluated for
Year 2000 readiness. Because of the age of some of the equipment, vendors have
been contacted to determine readiness.

  Several significant outside systems that James River is dependent upon are
provided by the Federal Reserve Bank of Richmond. Testing of these systems was
delayed as the result of an internal reorganization of the accounting and
operations functions to provide adequate testing of the systems that will be in
place at Year 2000. Testing on these applications began in the last week of
January 1999 and continued through mid-February. The testing revealed no
difficulties with processing in Year 2000.

  In addition, James River relies upon outside sources for investment securities
accounting and custodial services and stock transfer services. In each case,
James River has been provided with information regarding Year 2000 readiness and
plans testing of these services in the first quarter of 1999. James River also
relies upon SBS for disaster recovery services for its data processing at a
back-up facility. James River plans to conduct its own testing of the disaster
recovery capabilities in the first quarter of 1999.

  In 1998, James River's subsidiary banks completed an assessment of large
commercial loan customers for compliance with Year 2000 issues, and are
preparing a second written communication to all customers regarding the status
of the Company's Year 2000 efforts. James River is committed to customer
awareness for Year 2000. The Company's newsletter, as well as training sessions,
are utilized to keep employees informed. In addition, the Company initiated a
communications program directed at employees and customers that will provide
written information regarding Year 2000 issues and Company contact information
at each of the Company's locations.

<PAGE>

Management's Discussion & Analysis of
Financial Condition & Results of Operations

  James River's efforts to address Year 2000 issues are subject to guidelines
established by the FFIEC. Consequently, the Company's plan and its progress in
implementing that plan are subject to periodic examination by the Federal
Reserve Bank of Richmond.

THE COSTS TO ADDRESS THE COMPANY'S
YEAR 2000 ISSUES

  At this stage, James River has incurred no material incremental costs related
to Year 2000. Research still supports the belief that any costs for meeting the
Year 2000 requirements will be insignificant. The Company's projections for this
project stand at $50,000, which is unchanged from the Company's previous
estimate. In addition, a non-cash charge of approximately $61,000 will be
incurred in 1999 to maintain back-up computer capabilities.

THE RISKS OF THE COMPANY'S
YEAR 2000 ISSUES

  James River is subject to a variety of Year 2000 risks for which there are no
means to measure, test, or control. One such risk is that suppliers or vendors
upon whom James River depends will not be Year 2000 ready. James River also is
subject to difficulties experienced by local governments and businesses and
those on a state or national level that could have ramifications upon the
Company and/or that of significant customers or suppliers.

  Another significant risk to the Company for Year 2000 is the failure of one or
more business entities that have considerable loan volume with one or more of
our subsidiary banks. To assess that risk, James River recently completed a
survey of its large commercial loan customers to determine their ability to
continue successfully past the century date change. Preliminary results of this
process showed no significant risks. James River will continue to analyze those
customers and their efforts to comply with the requirements of Year 2000 for
their business systems. Loan agreements allow the subsidiary banks to monitor
these businesses and their financial performance to ensure their on-going
preparedness for Year 2000.

THE COMPANY'S CONTINGENCY PLANS

  James River continues to evaluate contingency plans with respect to the Year
2000. The manual processing of teller work as well as other transactions such as
loan payments, general ledger entries, etc. will be the focus of the Company's
contingency plan. In 1999, the Company will evaluate the need for training to
implement this aspect of the contingency plan. In addition, the disaster
recovery plans of each subsidiary will be reviewed in 1999 in terms of Year 2000
issues. Also, in conjunction with its decision to enter into the data processing
agreement with SBS, James River decided to retain and maintain its current
mainframe computer as part of its contingency back-up plan.

  Another issue that the subsidiary banks will address is the adequacy of
liquidity and related security concerns. Through various media, the public has
been cautioned to maintain above normal levels of cash. To meet expected cash
requirements and other liquidity needs, the subsidiary banks plan to establish
borrowing privileges at the Federal Reserve and the Federal Home Loan Bank. In
conjunction with the anticipated above normal cash needs, the Company and the
subsidiary banks are reviewing insurance coverage and security measures that may
be necessary.

<PAGE>

Five Year Financial Summary

<TABLE>
<CAPTION>
(Dollars in thousands, except per share data)
Years ended December 31,            1998           1997           1996          1995           1994
----------------------------------------------------------------------------------------------------
<S>                              <C>            <C>           <C>           <C>           <C>
INCOME STATEMENT DATA
  Interest Income                $  30,641      $ 29,607      $  27,224     $  22,797     $   20,605
  Interest Expense                  14,712        14,197         13,560        11,137          9,714
----------------------------------------------------------------------------------------------------
  Net Interest Income               15,929        15,410         13,664        11,660         10,891
  Provision for Loan Losses            507           439            491           342            593
----------------------------------------------------------------------------------------------------
  Net Interest Income after
    Provision for Loan Losses       15,422        14,971         13,173        11,318         10,298
  Non-Interest Income                2,745         1,885          1,655         1,240          1,808
  Non-Interest Expense              12,262        11,557         11,503         8,319          7,538
----------------------------------------------------------------------------------------------------
  Income Before Income Taxes         5,905         5,299          3,325         4,239          4,568
  Income Taxes                       1,596         1,494            908         1,146          1,066
----------------------------------------------------------------------------------------------------
  Net Income                     $   4,309     $   3,805      $   2,417     $   3,093     $    3,502
----------------------------------------------------------------------------------------------------

PER SHARE DATA*
  Net Income - Basic             $    1.16     $     1.04     $    0.66     $    0.85     $     1.01
  Net Income - Diluted                1.14           1.02          0.65          0.84           1.00
  Cash Dividends                      0.42           0.37          0.35          0.29           0.25
  Book Value at Period End           11.74          11.00         10.20         10.04           9.02
  Tangible Book Value at Period End  11.53          10.78          9.45         10.00           8.97

BALANCE SHEET DATA
  Total Assets                  $  419,820     $ 390,076      $ 381,608     $ 326,280     $  306,148
  Loans, Net                       275,491       260,476        240,913       206,516        174,983
  Securities                        89,017        83,025        103,486        85,974         97,003
  Deposits                         372,772       347,573        342,332       287,364        270,906
  Shareholders' Equity              43,703        40,384         37,603        36,885         32,473

PERFORMANCE RATIOS
  Return on Average Assets            1.06%         0.99%          0.67%         1.01%          1.19%
  Return on Average Shareholders'
    Equity                           10.18          9.82           6.71          8.97          11.15
  Efficiency Ratio                   65.18         67.18          77.79         65.56          63.04
  Net lnterest Margin                 4.38          4.46           4.24          4.20           4.08

CREDIT QUALITY RATIOS
  Allowance for Loan Losses to
    Non-Performing Loans            981.28%        385.40%     1,091.41%        388.05%        165.60%
  Allowance for Loan Losses to
    Non-Performing Assets           585.17         235.17        687.45         385.98         126.87
  Allowance for Loan Losses to
    Year-End Loans, Net of
    Unearned Income                   1.37           1.31          1.30           1.38           1.51
  Net Charged-off Loans to Average
    Loans, Net of Unearned Income     0.05           0.06          0.09           0.06           0.09

CAPITAL AND LIQUIDITY RATIOS
  Leverage                            9.84%          9.68%         9.68%         11.78%         11.38%
  Risk Based:
    Tier 1 Capital                   15.62          14.71         16.05          22.17          20.12
    Total Capital                    16.88          15.96         17.30          23.42          21.73
  Average Loans to
    Average Deposits                 76.30          75.43         71.02          71.48          65.20
  Average Shares Outstanding*
    Basic                        3,703,458      3,675,201     3,676,034      3,656,148      3,477,177
    Diluted                      3,789,155      3,733,214     3,737,057      3,702,564      3,488,631
-----------------------------------------------------------------------------------------------------
</TABLE>

* Restated to reflect three-for-two stock split in the form of a stock dividend
in November 1997.

<PAGE>

Report of Independent Auditors

The Board of Directors and Shareholders
James River Bankshares, Inc.
Suffolk, Virginia

  We have audited the accompanying consolidated balance sheets of James River
Bankshares, Inc. and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the years in the three year period ended December 31, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

  In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of James River
Bankshares, Inc. and subsidiaries as of December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the years in the
three year period ended December 31, 1998, in conformity with generally accepted
accounting principles.

/s/ GOODMAN & COMPANY, L.L.P.
-------------------------------
GOODMAN&COMPANY, L.L.P.
Certified Public Accountants


131 Temple Lake Drive, Suite One
Colonial Heights, Virginia 23834
January 28, 1999, except for Notes 1 and 17,
as to which the date is February 17, 1999.

<PAGE>

Consolidated Balance Sheets

<TABLE>
<CAPTION>
(Dollars in thousands, except per share data)
December 31,                                                              1998              1997
----------------------------------------------------------------------------------------------------
<S>                                                                    <C>               <C>
ASSETS

Cash and due from banks                                                $   14,268        $   14,087
Interest bearing deposits with banks                                       12,031             2,720
Federal funds sold                                                         10,809            14,382
Securities available-for-sale, at fair value                               80,155            71,952
Securities held-to-maturity, at amortized cost (fair value
   approximates $9,090 and $11,244 at
   December 31, 1998 and 1997)                                              8,862            11,074
Loans, net of allowance for loan losses                                   271,892           259,687
Loans held for sale, net                                                    3,599               789
Accrued interest receivable                                                 2,970             2,939
Premises and equipment, net                                                10,137             7,480
Intangible assets, net                                                      2,342             2,503
Other assets                                                                2,755             2,463
----------------------------------------------------------------------------------------------------
                                                                       $  419,820        $  390,076
----------------------------------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES
   DEPOSITS:
   NON-INTEREST BEARING                                                $   46,805        $   46,490
   INTEREST BEARING                                                       325,967           301,083
----------------------------------------------------------------------------------------------------
     TOTAL DEPOSITS                                                       372,772           347,573
   ACCRUED INTEREST PAYABLE                                                   810               752
   OTHER LIABILITIES                                                        2,535             1,367
----------------------------------------------------------------------------------------------------
     TOTAL LIABILITIES                                                    376,117           349,692
----------------------------------------------------------------------------------------------------

SHAREHOLDERS' EQUITY
   PREFERRED STOCK, $5 PAR VALUE PER SHARE
     (2,000,000 SHARES AUTHORIZED; NONE ISSUED)                                 -                 -
   COMMON STOCK, $5 PAR VALUE PER SHARE (10,000,000
     SHARES AUTHORIZED; 3,721,348 AND 3,672,557 SHARES
     ISSUED AND OUTSTANDING AT DECEMBER 31, 1998 AND
     1997, RESPECTIVELY)                                                   18,607            18,363
   ADDITIONAL PAID-IN-CAPITAL                                               3,878             3,572
   RETAINED EARNINGS                                                       20,414            17,663
   ACCUMULATED OTHER COMPREHENSIVE INCOME                                     804               786
----------------------------------------------------------------------------------------------------
     TOTAL SHAREHOLDERS' EQUITY                                            43,703            40,384
----------------------------------------------------------------------------------------------------
                                                                       $  419,820        $  390,076
----------------------------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

<PAGE>
<TABLE>
<CAPTION>

Consolidated Statements of Income

(Dollars in thousands, except per share data)
Years Ended December 31,                                 1998              1997             1996
---------------------------------------------------------------------------------------------------
<S>                                                    <C>              <C>               <C>
Interest income
   Loans                                               $  24,447        $   23,473        $  20,449
   Investment securities:
    Taxable                                                3,888             4,414            4,980
    Exempt from federal income taxes                       1,197             1,184            1,285
   Federal funds sold and other                            1,109               536              510
----------------------------------------------------------------------------------------------------
      Total interest income                               30,641            29,607           27,224
----------------------------------------------------------------------------------------------------
Interest expense
   Deposits                                               14,665            14,157           13,531
   Federal funds purchased and other                          47                40               29
----------------------------------------------------------------------------------------------------
      Total interest expense                              14,712            14,197           13,560
----------------------------------------------------------------------------------------------------

Net interest income                                       15,929            15,410           13,664

Provision for loan losses                                    507               439              491
----------------------------------------------------------------------------------------------------

Net interest income after provision for
    loan losses                                           15,422            14,971           13,173
----------------------------------------------------------------------------------------------------

Non-interest income
   Service charges on deposit accounts                     1,399             1,099            1,089
   Other fees and commissions                                478               482              362
   Net realized gains on disposition
    of securities                                            457               100               41
   Other income                                              411               204              163
----------------------------------------------------------------------------------------------------
      Total non-interest income                            2,745             1,885            1,655
----------------------------------------------------------------------------------------------------
Non-interest expense
   Salaries and employee benefits                          6,673             6,232            5,254
   Occupancy expense                                         871               756              704
   Equipment                                                 906               932              680
   Other expense                                           3,812             3,637            4,865
----------------------------------------------------------------------------------------------------
      Total non-interest expense                          12,262            11,557           11,503
----------------------------------------------------------------------------------------------------

Income before income taxes                                 5,905             5,299            3,325

Provision for income taxes                                 1,596             1,494              908
----------------------------------------------------------------------------------------------------

Net income                                             $   4,309        $    3,805        $   2,417
----------------------------------------------------------------------------------------------------

Net income per common share
   Basic                                               $    1.16        $     1.04        $    0.66
   Diluted                                             $    1.14        $     1.02        $    0.65
----------------------------------------------------------------------------------------------------

Weighted average number of shares
   outstanding during the year
   Basic                                               3,703,458         3,675,201        3,676,034
   Diluted                                             3,789,155         3,733,214        3,737,057
----------------------------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

<PAGE>

Consolidated Statements of Shareholders' Equity

(Dollars in thousands, except share data)
Years Ended December 31, 1998, 1997 and 1996

<TABLE>
<CAPTION>
                                                                                         ACCUMULATED
                                         SHARES OF                                           OTHER
                                          COMMON    COMMON     ADDITIONAL    RETAINED    COMPREHENSIVE
                                           STOCK     STOCK   PAID-IN-CAPITAL EARNINGS       INCOME      TOTAL
--------------------------------------------------------------------------------------------------------------
<S>                                      <C>        <C>         <C>           <C>          <C>         <C>
Balance - December 31, 1995              2,448,693  $12,244     $  3,447      $20,487      $    707    $36,885
Comprehensive income:
 Net income                                      -        -            -        2,417             -      2,417
 Change in unrealized gains and
  losses on securities available-for-sale,
  net of taxes                                   -        -            -            -          (445)     (445)
Transfer of held-to-maturity securities
 to available-for-sale, net of taxes,
 in conjunction with business
 combinations                                    -        -            -            -           (99)      (99)
--------------------------------------------------------------------------------------------------------------
   Total comprehensive income                    -        -            -            -             -      1,873
--------------------------------------------------------------------------------------------------------------
Common stock issued                          9,257       46           74            1             -        121
Cash dividends declared ($0.35 per
 share)                                          -        -            -       (1,276)            -     (1,276)
--------------------------------------------------------------------------------------------------------------

Balance - December 31, 1996              2,457,950   12,290        3,521       21,629           163     37,603
Comprehensive income:
 Net income                                      -        -            -        3,805             -      3,805
 Change in unrealized gains and
  losses on securities available-for-sale,
  net of taxes                                   -        -            -            -           623        623
--------------------------------------------------------------------------------------------------------------
   Total comprehensive income                    -        -            -            -             -      4,428
--------------------------------------------------------------------------------------------------------------
Common stock issued                          1,699        9           27            -             -         36
ESOP termination                           (18,352)     (92)           -         (281)            -       (373)
Stock options exercised                      7,783       39           27            -             -         66
Cash paid in lieu of fractional
 shares                                       (209)      (1)          (3)           -             -         (4)
Cash dividends declared ($0.37 per
 share)                                          -        -            -       (1,372)            -     (1,372)
Stock split effected in the form
 of a stock dividend                     1,223,686    6,118            -       (6,118)            -          -
--------------------------------------------------------------------------------------------------------------

Balance - December 31, 1997              3,672,557   18,363        3,572       17,663           786     40,384
Comprehensive income:
 Net income                                      -        -            -        4,309             -      4,309
 Change in unrealized gains and
  losses on securites available-for-sale,
  net of taxes                                   -        -            -            -            18         18
--------------------------------------------------------------------------------------------------------------
   Total comprehensive income                    -        -            -            -             -      4,327
--------------------------------------------------------------------------------------------------------------
Common stock issued                          1,681        9           26            -             -         35
Stock options exercised                     47,110      235          280            -             -        515
Cash dividends declared ($0.42 per
 share)                                          -        -            -       (1,558)            -     (1,558)
--------------------------------------------------------------------------------------------------------------

Balance - December 31, 1998              3,721,348  $18,607     $  3,878      $20,414      $    804    $43,703
--------------------------------------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

<PAGE>

Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
(In thousands)
Years Ended December 31,                                 1998              1997             1996
---------------------------------------------------------------------------------------------------
<S>                                                    <C>               <C>              <C>
Cash flows from operating activities
    Net income                                         $   4,309         $   3,805        $   2,417
    Adjustments to reconcile net income to net cash
      provided by operating activities:
        Provision for loan losses                            507               439              491
        Depreciation and amortization                      1,227             1,248              857
        Gain on disposition of securities                   (457)             (100)             (41)
        Gain on sale of loans                                (63)              (32)             (56)
        Gain on sale of fixed assets                         (84)                -                -
        Changes in:
          Loans held for sale                             (2,747)              435              291
          Interest receivable                                (31)              185             (346)
          Other assets                                      (416)               65             (989)
          Interest payable                                    58               140              193
          Other liabilities                                  449               307             (552)
---------------------------------------------------------------------------------------------------
      Net cash provided by operating activities            2,752             6,492            2,265
---------------------------------------------------------------------------------------------------

Cash flows from investing activities
    Proceeds from dispositions of available-
      for-sale securities                                 32,233            25,473           29,666
    Purchase of available-for-sale securities            (39,962)           (5,136)         (49,341)
    Redemption of held-to-maturity securities              2,211             1,391            2,631
    Purchase of held-to-maturity securities                    -              (255)          (1,235)
    Net increase in loans                                (12,808)          (20,841)         (35,123)
    Purchase of property and equipment                    (3,555)             (335)          (2,475)
    Proceeds from sale of property and equipment             138               360                -
    Net cash and cash equivalents received
      in acquisition of branches                               -                 -           30,484
---------------------------------------------------------------------------------------------------
      Net cash provided by (used in)
        investing activities                             (21,743)              657          (25,393)
---------------------------------------------------------------------------------------------------

Cash flows from financing activities
    Cash dividends paid                                   (1,558)           (1,372)          (1,276)
    Net increase in deposits                              25,199             5,241           20,633
    Issuance of stock                                        550               102              126
    Common stock repurchased                                   -              (373)               -
    Purchase of fractional shares                              -                (4)              (5)
    Proceeds from short-term borrowings                      719                 -                -
---------------------------------------------------------------------------------------------------
      Net cash provided by financing activities           24,910             3,594           19,478
---------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and
    cash equivalents                                       5,919            10,743           (3,650)

Cash and cash equivalents - beginning                     31,189            20,446           24,096
---------------------------------------------------------------------------------------------------

Cash and cash equivalents - ending                     $  37,108         $  31,189        $  20,446
---------------------------------------------------------------------------------------------------

Cash paid during the year for:
    Interest                                           $  14,745         $  14,057        $  13,366
---------------------------------------------------------------------------------------------------
    Income taxes                                       $   1,837         $   1,426        $   1,449
---------------------------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

<PAGE>

Notes to Consolidated Financial Statements

NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  James River Bankshares, Inc. ("the Company") is a Virginia multi-bank holding
company headquartered in Suffolk, Virginia that commenced operations June 1,
1995. The Company owns James River Bank, Waverly, Virginia; Bank of Suffolk,
Suffolk, Virginia; First Colonial Bank, Hopewell, Virginia; James River
Bank/Colonial, Smithfield, Virginia (collectively the "Banking Subsidiaries");
and Family Finance Corporation, a consumer loan company, Family Finance of
Virginia, Inc., a consumer equity lender, and James River Support, Inc., an EDP
operation center. In addition, James River Bank owns Mortgage Company of James
River, Inc., which is a residential mortgage loan company formed in the fourth
quarter of 1998. The Banking Subsidiaries operate twenty-four banking offices in
southeastern Virginia. The Company's primary source of revenue is providing
loans to customers who are predominantly small and middle-market businesses and
individuals.

PRINCIPLES OF CONSOLIDATION AND
BASIS OF PRESENTATION

  The consolidated financial statements include the accounts of James River
Bankshares, Inc. and its wholly-owned subsidiaries. All intercompany
transactions and balances have been eliminated in the consolidation. The
consolidation has been prepared using the pooling of interests method of
accounting. All information included in the financial statements has been
combined as if mergers had occurred at the earliest date presented. Certain
previously reported amounts have been reclassified to conform to current
presentations.

POOLING OF INTERESTS TRANSACTIONS

  Effective March 1, 1996, in two separate transactions, the Company merged with
First Colonial Bank, FSB, a federal-chartered savings bank, and Bank of Isle of
Wight (renamed James River Bank/Colonial in 1998), a Virginia state-chartered
bank. Each of the 1,244,895 outstanding shares of First Colonial Bank, FSB
common stock was converted to .4816 shares of the Company's stock, and each of
the 78,850 outstanding shares of Bank of Isle of Wight common stock was
converted to four shares of the Company's stock.

CASH AND CASH EQUIVALENTS

  For the purpose of presentation in the statements of cash flows, cash and cash
equivalents are defined as those amounts included in the balance sheet captions,
cash and due from banks, interest bearing deposits with banks, and Federal funds
sold.

  The Company is required to maintain reserves with the Federal Reserve Bank.
The aggregate daily average reserves required for the final reporting period in
the years ended December 31, 1998 and 1997 were $1,436,000 and $1,153,000,
respectively.

INVESTMENT SECURITIES

  Investment securities are classified into three categories: held-to-maturity,
available-for-sale and trading. Securities that management has both the intent
and ability to hold to maturity are classified as securities held-to-maturity
and are carried at cost, adjusted for amortization of premium or accretion of
discount using the interest method. Securities that may be sold prior to
maturity for asset/liability management purposes, or that may be sold in
response to changes in interest rates, changes in prepayment risk, to increase
regulatory capital or other similar factors are classified as securities
available-for-sale and carried at fair value with any adjustments to fair value,
after tax, reported as a separate component of shareholders' equity. The Company
has no trading securities. Declines in the fair value of individual
held-to-maturity and available-for-sale securities below their cost that are
other than temporary, if any, are included in earnings as realized losses.

  Interest and dividends on securities, including the amortization of premiums
and the accretion of discounts, are reported as interest and dividends on
securities using the interest method. Gains and losses on the sale of securities
are recorded on the trade date and are calculated using the specific
identification method.

LOANS HELD FOR SALE

  Mortgage loans originated and intended for sale in the secondary market are
carried at the lower of cost or estimated market value in the aggregate. Net
unrealized losses are recognized through a valuation allowance by charges to
income.

LOANS

  Loans that management has the intent and ability to hold for the foreseeable
future or until maturity or pay-off generally are stated at their outstanding
unpaid principal balances net of any deferred fees or costs on originated loans,
or unamortized premiums or discounts on purchased loans. Interest income is
accrued on the unpaid principal balance. Discounts and premiums are amortized to
income using the interest method. Loan origination fees, net of certain direct
origination costs, are deferred and recognized as an adjustment of the yield
(interest income) on the related loans.

  Loans, including impaired loans, are generally classified as non-accrual if
they are past due as to maturity or payment of principal or interest for a
period of more than 90 days, unless such loans are well secured and in the
process of collection. If a loan or a portion of a loan is classified as

<PAGE>

Notes to Consolidated Financial Statements

doubtful or is partially charged off, the loan is classified as non-accrual.
Loans that are on a current payment status or past due less than 90 days may
also be classified as non-accrual if repayment in full of principal and/or
interest is in doubt. Loans may be returned to accrual status when all principal
and interest amounts contractually due (including arrearage) are reasonably
assured of repayment.

  While a loan is classified as non-accrual and the future collectibility of the
recorded loan balance is doubtful, collections of interest and principal
generally are applied as a reduction to principal outstanding. When the future
collectibility of the recorded loan balance is expected, interest income may be
recognized on a cash basis.

ALLOWANCE FOR LOAN LOSSES

  The allowance for loan losses is established through charges to earnings in
the form of a provision for loan losses. The adequacy of the allowance for loan
losses is periodically evaluated by the Company in order to maintain the
allowance at a level that is sufficient to absorb probable credit losses.
Management's evaluation of the adequacy of the allowance is based on a review of
the Company's historical loss experience, known and inherent risks in the loan
portfolio, including adverse circumstances that may affect the ability of the
borrower to repay interest and/or principal, the estimated value of collateral,
and an analysis of the levels and trends of delinquencies, charge-offs, and the
risk ratings of the various loan categories. Such factors as the level and trend
of interest rates and the condition of the national and local economies also are
considered. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Company's allowance for
losses on loans. Such agencies may require the Company to recognize additions to
the allowance based on their judgments of information available to them at the
time of their examination.

  A loan is considered impaired, based on current information and events, if it
is probable that the Company will be unable to collect the scheduled payments of
principal or interest when due according to the contractual terms of the loan
agreement. The measurement of impaired loans is based generally on the present
value of expected future cash flows discounted at the historical effective
interest rate, except that all collateral-dependent loans are measured for
impairment based on the fair value of the collateral. Increases and decreases in
the allowance due to changes in the measurement of impaired loans, if
applicable, are included in the provision for loan losses. Loans continue to be
classified as impaired unless they are brought fully current and the collection
of scheduled interest and principal is considered probable.

  When a loan or portion of a loan is determined to be uncollectible, the
portion deemed uncollectible is charged against the allowance and subsequent
recoveries, if any, are credited to the allowance.

PREMISES AND EQUIPMENT

  Land is carried at cost. Premises, furniture and equipment, and leasehold
improvements are carried at cost, less accumulated depreciation and amortization
computed principally by the straight-line method. Net gains and losses on
disposal or retirement of premises and equipment are included in other income.

REAL ESTATE OWNED

  Real estate acquired in settlement of loans is initially recorded at estimated
fair value at the date of foreclosure. Subsequent to foreclosure, the carrying
value of real estate owned is reduced when it exceeds fair value minus estimated
costs to sell. Costs relating to improvement of the property are capitalized,
while holding costs of the property are charged to expense in the period
incurred.

  Other real estate acquired and held for sale is stated at the lower of cost or
net realizable value. Valuations are periodically performed by management, and
an allowance for losses is established by a charge to income if the carrying
value of a property exceeds its estimated net realizable value.

INTANGIBLE ASSETS

  Intangible assets are amortized using accelerated methods over their estimated
periods of benefit.

INCOME TAXES

  The Company files a consolidated tax return. The provision for income taxes
reflects tax expense incurred as a consolidated group. The expense is allocated
among the members of the consolidated group in accordance with an intercompany
agreement for tax expense. Income taxes are provided for the tax effects of the
transactions reported in the consolidated financial statements and consist of
taxes currently due plus deferred taxes related primarily to differences between
the basis of investment securities, deferred loan fees, allowance for loan
losses, accumulated depreciation and deferred compensation for financial and
income tax reporting. The deferred tax assets and liabilities represent the
future tax return consequences of those differences, which will either be
taxable or deductible when the assets and liabilities are recovered or settled,
and the deferred tax asset or liability created by the difference in market
value and carrying value of available-for-sale securities.

EARNINGS PER COMMON SHARE

  The Company adopted SFAS No. 128, "Earnings per Share," on December 31, 1997.
This Statement establishes standards for computing and presenting earnings per
share (EPS). This Statement supersedes standards previously set in APB Opinion

<PAGE>

Notes to Consolidated Financial Statements

No. 15, "Earnings per Share." The Statement requires dual presentation of basic
and diluted EPS on the face of the income statement, and it requires a
reconciliation of the numerator and denominator of basic EPS with the numerator
and denominator of the diluted EPS computation.

  Basic EPS excludes dilution and is computed by dividing income available to
common shareholders by the weighted-average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity.

  This Statement is effective for financial statements issued for periods ending
after December 15, 1997. In accordance with the requirements of the Statement,
all prior period EPS data have been restated to reflect the change in reporting
requirements.

  On September 25, 1997, the Board of Directors declared a 3-for-2 stock split
effected in the form of a 50% stock dividend, which was distributed on November
7, 1997. Accordingly, the average number of shares outstanding and per share
amounts for earnings, dividends declared, and book value have been restated for
all periods presented to give effect to the split.

USE OF ESTIMATES

 The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

  Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for losses on loans and the
valuation of real estate acquired in connection with foreclosures or in
satisfaction of loans. In connection with the determination of the allowances
for losses on loans and foreclosed real estate, management obtains independent
appraisals for significant properties. While management uses available
information to recognize losses on loans and foreclosed real estate, future
additions to the allowance may be necessary based on changes in local economic
conditions and other factors.

COMPREHENSIVE INCOME

  On January 1, 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting and displaying
comprehensive income and its components. Comprehensive income is displayed in
the Company's Consolidated Statements of Changes in Shareholders' Equity. The
Company's comprehensive income includes net income and net unrealized gains or
losses on available-for-sale securities. The adoption of SFAS No. 130 had no
effect on the Company's net income or shareholders' equity.

SEGMENT INFORMATION

  SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," establishes standards for reporting information about a company's
operating segments. For calendar year companies, this reporting is first
required in 1998. Although financial condition and results of operations for
each subsidiary bank are continually monitored, management believes that its
Banking Subsidiaries have products, services, and economic prospects so similiar
that segment information is not currently relevant.

<PAGE>

Notes to Consolidated Financial Statements

NOTE 2 - INVESTMENT SECURITIES

  The carrying amount of securities and their approximate fair values at
December 31 were as follows:

<TABLE>
<CAPTION>

                                                  Gross        Gross
                                    Amortized   Unrealized   Unrealized    Fair
    (In thousands)                    Cost        Gains        Losses      Value
----------------------------------------------------------------------------------
<S>                                <C>          <C>           <C>         <C>
    Available-for-Sale Securities:

    December 31, 1998
    U.S. Government and
      agency securities             $49,738      $   566      $    93      $50,211
    State and municipal securities   25,543          716            8       26,251
    Other debt securities               609           15            -          624
    Equity securities                 3,047           26            4        3,069
----------------------------------------------------------------------------------
                                    $78,937      $ 1,323      $   105      $80,155
----------------------------------------------------------------------------------

    December 31, 1997
    U.S. Government and
      agency securities             $43,410      $   330      $   205      $43,535
    State and municipal securities   23,756          562           17       24,301
    Other debt securities             1,110           14            -        1,124
    Equity securities                 2,488          504            -        2,992
----------------------------------------------------------------------------------
                                    $70,764      $ 1,410      $   222      $71,952
----------------------------------------------------------------------------------

    Held-to-Maturity Securities:

    December 31, 1998
    State and municipal securities  $ 1,490      $    45      $     -      $ 1,535
    Other debt securities             7,372          183            -        7,555
----------------------------------------------------------------------------------
                                    $ 8,862      $   228      $     -      $ 9,090
----------------------------------------------------------------------------------

    December 31, 1997
    State and municipal securities  $ 1,490      $    26      $     -      $ 1,516
    Other debt securities             9,584          174           30        9,728
----------------------------------------------------------------------------------
                                    $11,074      $   200      $    30      $11,244
----------------------------------------------------------------------------------
</TABLE>

  Equity securities include restricted investments of $2,398,000 and $1,932,000
at December 31, 1998 and 1997, respectively. These securities do not have a
readily determinable fair value and lack a market. Therefore, they are carried
at cost and periodically evaluated for impairment.

  The scheduled maturities of securities held-to-maturity and securities
available-for-sale at December 31, 1998 were as follows:

<TABLE>
<CAPTION>
                                     Securities Held-to-Maturity      Securities Available-for-Sale
                                     --------------------------       ----------------------------
                                     Amortized            Fair          Amortized           Fair
(In thousands)                         Cost              Value            Cost              Value
---------------------------------------------------------------------------------------------------
<S>                                 <C>               <C>               <C>              <C>
    Due in one year or less         $        -        $         -       $     5,910      $    5,955
    Due from one to five years           1,055              1,082            42,288          42,964
    Due from five to ten years             435                453            18,794          19,181
    Due after ten years                  7,372              7,555             8,898           8,986
    Equity securities                        -                  -             3,047           3,069
---------------------------------------------------------------------------------------------------
                                    $     8,862       $     9,090       $    78,937      $   80,155
---------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

Notes to Consolidated Financial Statements

  Investment securities with a carrying amount of approximately $16,019,000 at
December 31, 1998 and $15,174,000 at December 31, 1997 were pledged to secure
public deposits.

  Gross realized gains and losses on dispositions of securities
available-for-sale were as follows:

<TABLE>
<CAPTION>
    (In thousands)
    Available-for-Sale                 1998        1997         1996
--------------------------------------------------------------------------------
<S>                                 <C>           <C>         <C>
    Gross realized gains            $  474        $ 165       $   103
    Gross realized losses              (17)         (65)          (62)
--------------------------------------------------------------------------------
       Net realized gain            $  457        $ 100       $    41
--------------------------------------------------------------------------------
</TABLE>

  In connection with the business combination of the Company and First Colonial
Bank, FSB, First Colonial Bank, FSB transferred most of its investment portfolio
from the held-to-maturity category to available-for-sale on March 1, 1996, in
order to maintain the Company's existing interest rate risk position and credit
risk policy. The transfer consisted of the entire investment portfolio of U.S.
Government agency and corporation obligations (except mortgage-backed
securities). The transfers are shown separately on the consolidated statement of
changes in shareholders' equity, as follows:

<TABLE>
<CAPTION>
    (In thousands)
<S>                                                                 <C>
    Fair market value at date of transfer                           $ 9,095
    Amortized cost                                                    9,245
--------------------------------------------------------------------------------
      Unrealized loss                                                  (150)
--------------------------------------------------------------------------------
    Related income tax effect                                            51
--------------------------------------------------------------------------------
      Net decrease to shareholders' equity                          $   (99)
--------------------------------------------------------------------------------
</TABLE>

NOTE 3 - COMPONENTS OF COMPREHENSIVE INCOME

  Comprehensive income consists of the following for the years ended December
31:

<TABLE>
<CAPTION>
    (In thousands)                     1998            1997           1996
--------------------------------------------------------------------------------
<S>                                 <C>             <C>            <C>
    Net income                      $  4,309        $  3,805       $   2,417
    Other comprehensive income            18             623            (544)
--------------------------------------------------------------------------------
                                    $  4,327        $  4,428       $   1,873
--------------------------------------------------------------------------------
</TABLE>

  The components of other comprehensive income and related tax effects for the
years ended December 31 are as follows:

<TABLE>
<CAPTION>
    (In thousands)                         1998         1997           1996
--------------------------------------------------------------------------------
<S>                                      <C>           <C>          <C>
    Unrealized gains (losses) on
     available-for-sale-securities       $  487        $  852       $  (695)
    Transfer of held-to-maturity
     securities to available-for-sale         -            -            (99)
    Reclassification adjustment for
     gains realized in income               457           100            41
--------------------------------------------------------------------------------
    Net unrealized gains (losses)            30           952          (835)

    Tax effect                               12           329          (291)
--------------------------------------------------------------------------------
    Net-of-tax-amount                    $   18        $  623       $  (544)
--------------------------------------------------------------------------------
</TABLE>

<PAGE>

Notes to Consolidated Financial Statements

NOTE 4 - LOANS RECEIVABLE

Loans receivable are summarized below:

<TABLE>
<CAPTION>
  (In thousands)                                      1998             1997
--------------------------------------------------------------------------------
<S>                                               <C>               <C>
    Commercial                                    $    33,266       $   34,513
    Real estate - commercial                           49,495           50,522
    Real estate - construction                         24,838           19,683
    Real estate - mortgage                            141,484          130,055
    Agricultural                                        2,536            4,802
    Installment                                        23,988           23,644
--------------------------------------------------------------------------------
      Total loans                                     275,607          263,219
    Less:
      Allowance for loan losses                        (3,827)          (3,457)
      Unearned discount                                   (17)             (25)
      Deferred loan (fees) expenses                       129              (50)
--------------------------------------------------------------------------------
    Net loans receivable                          $   271,892       $  259,687
      Loans held for sale                               3,599              789
--------------------------------------------------------------------------------
                                                  $   275,491       $  260,476
--------------------------------------------------------------------------------
</TABLE>

  The allowance for loan losses is summarized below:

<TABLE>
<CAPTION>
                                              1998          1997          1996
--------------------------------------------------------------------------------
<S>                                       <C>            <C>           <C>
    Balance - beginning of year           $  3,457       $  3,176      $  2,891
    Provision charged to operations            507            439           491
    Charge-offs                               (254)          (249)         (302)
    Recoveries                                 117             91            96
--------------------------------------------------------------------------------

    Balance - end of year                 $  3,827       $  3,457      $  3,176
--------------------------------------------------------------------------------
</TABLE>

  The recorded investment in impaired loans requiring an allowance for loan
losses as determined in accordance with SFAS No. 114, "Accounting by Creditors
for Impairment of a Loan," as amended by SFAS No. 118, "Accounting by Creditors
for Impairment of a Loan-Income Recognition and Disclosures," was $1,408,000 and
$2,017,000 at December 31, 1998 and 1997, respectively. The portion of the
allowance for loan losses allocated to the impaired loan balance was $162,000
and $423,000 at December 31, 1998 and 1997, respectively. The recorded
investment in impaired loans that do not have a portion of the allowance for
loan losses allocated was $660,000 and $385,000 at December 31, 1998 and 1997,
respectively. For the year ended December 31, 1998, the average recorded
investment in impaired loans was $1,524,000, and interest income recognized on
impaired loans was $149,000. For the year ended December 31, 1997, the average
recorded investment in impaired loans was $2,346,000, and interest income
recognized on impaired loans was $199,000. For the year ended December 31, 1996,
the average recorded investment in impaired loans was $3,250,000, and interest
income recognized on impaired loans was $151,000.

  Mortgage loans serviced for others are not included in the consolidated
balance sheets. The unpaid principal balances of these loans at December 31,
1998, 1997, and 1996 were $18,969,000, $28,814,000, and $23,474,000,
respectively.

  Non-cash additions to real estate owned were $254,000 and $436,000 for the
years ended December 31, 1998 and 1997, respectively.

NOTE 5 - RELATED PARTIES

  The Company has had and expects to have in the future, lending transactions in
the ordinary course of its business with directors, officers, principal
shareholders, and their associates, on substantially the same terms, including
interest rates and collateral on loans, as those prevailing at the same time for
comparable transactions with others. Such extensions of credit do not involve
more than the normal risk of collectibility or present other unfavorable
features. The aggregate amount of loans to such individuals as of December 31,
1998 and 1997 was $8,756,000 and $8,935,000, respectively. During 1998, new
loans to such related parties amounted to $5,702,000 and repayments amounted to
$5,881,000. The amount of deposits from related parties held by the Company at
December 31, 1998 and 1997 were $8,487,000 and $8,645,000, respectively.

<PAGE>

Notes to Consolidated Financial Statements

NOTE 6 - PREMISES AND EQUIPMENT

  Major classifications of premises and equipment are summarized as follows:

<TABLE>
<CAPTION>
    (In thousands)                                        1998         1997
------------------------------------------------------------------------------
<S>                                                    <C>          <C>
    Land                                               $    2,228   $    1,432
    Buildings                                               7,113        5,216
    Furniture and equipment                                 5,877        5,069
------------------------------------------------------------------------------
                                                           15,218       11,717
    Accumulated depreciation and amortization              (5,081)      (4,237)
------------------------------------------------------------------------------
    Net book value                                     $   10,137   $    7,480
------------------------------------------------------------------------------
</TABLE>

NOTE 7 - DEPOSITS

   Deposits are summarized as follows:

<TABLE>
<CAPTION>
    (In thousands)                                        1998         1997
------------------------------------------------------------------------------
<S>                                                    <C>          <C>
    Non-interest bearing demand                        $   46,805   $   46,490
    Interest bearing demand                                58,187       37,380
    Money market                                           20,600       22,154
    Savings                                                44,037       47,130
    Time deposits $100,000 and greater                     34,307       32,868
    Other time deposits                                   168,836      161,551
------------------------------------------------------------------------------
                                                       $  372,772   $  347,573
------------------------------------------------------------------------------
<CAPTION>


  The scheduled maturities of time deposits at December 31, 1998 and 1997, were
as follows:

    (In thousands)                                    1998            1997
-------------------------------------------------------------------------------
    Less than one year                             $  131,742      $  119,764
    One to five years                                  70,416          73,963
    Over five years                                       985             692
-------------------------------------------------------------------------------
                                                   $  203,143      $  194,419
-------------------------------------------------------------------------------
</TABLE>

NOTE 8 - COMMITMENTS, CONTINGENT LIABILITIES AND
LEGAL PROCEEDINGS

COMMITMENTS AND STANDBY LETTERS OF CREDIT

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

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

<PAGE>

Notes to Consolidated Financial Statements

  The following table summarizes the Company's off-balance sheet financial
instruments by type as of December 31, 1998 and 1997.

<TABLE>
<CAPTION>
  (In thousands)                                      1998              1997
--------------------------------------------------------------------------------
<S>                                                <C>               <C>
    Commitments to extend credit:
      Commercial real estate                       $   10,555        $    9,763
      Commercial                                       22,524            11,320
      Real estate mortgage                             19,185            15,085
      Other                                            12,800             3,890
--------------------------------------------------------------------------------
                                                   $   65,064        $   40,058
-------------------------------------------------------------------------------
    Standby letters of credit                      $    1,714        $    1,629
-------------------------------------------------------------------------------

</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, and includes
unutilized credit card lines. 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
majority of commitments to extend credit have terms up to one year with variable
interest rates. There are no significant fixed rate commitments. Management
evaluates each customer's credit worthiness in determining the amount of
collateral to obtain. Collateral held varies but may include accounts
receivable, inventory, property, plant and equipment, and real estate.

  Standby letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support the financing needs of the Company's commercial
customers, and have varying terms. The credit risk involved in issuing letters
of credit is essentially the same as that involved in extending loan facilities
to customers.

CONCENTRATIONS OF CREDIT RISK

  Concentrations of credit risk (whether on or off balance sheet) arising from
financial instruments may exist in relation to certain groups of customers. A
group concentration arises when a number of counterparties have similar economic
characteristics that would cause their ability to meet contractual obligations
to be similarly affected by changes in economic or other conditions. The Company
does not have significant exposure to any individual customer or counterparty.
However, the Company's loan portfolio is comprised of credit extensions
principally to customers in the Central and Southeastern areas of Virginia. Most
of these customers are also depositors of the Company.

  Loans secured by real estate are approximately 79% and 75% of total loans at
year-end 1998 and 1997, respectively. Approximately 61% and 60% of these real
estate loans in 1998 and 1997, respectively, are secured by 1-4 family
residential real estate. Commercial and standby letters of credit are granted
primarily to commercial borrowers.

OPERATING LEASES

  The Company has several noncancellable operating leases for branch offices.
The expirations of these leases range from one to fifteen years. Rent expense
charged to operations under operating lease agreements totaled $136,000,
$95,000, and $81,000 in 1998, 1997, and 1996, respectively.

  Future minimum rentals are as follows:

<TABLE>
<S>                        <C>               <C>
  (In thousands)           1999              $     127
                           2000                    120
                           2001                    120
                           2002                    120
                           2003                    121
                     Thereafter                    296
     --------------------------------------------------------
             Total minimum lease payments    $     904
     --------------------------------------------------------
</TABLE>

LEGAL PROCEEDINGS

  There were no material legal proceedings other than ordinary routine
litigation incidental to the business at December 31, 1998.

CREDIT AVAILABILITY

  At December 31, 1998, the Company's Banking Subsidiaries had $29,240,000
available under lines of credit with the Federal Home Loan Bank. In addition,
the Company has a $1,000,000 line of credit with another financial institution,
which had a zero balance at December 31, 1998.

<PAGE>

Notes to Consolidated Financial Statements

NOTE 9 - SHAREHOLDERS' EQUITY

  At December 31, 1998, the Company had three qualified incentive stock-based
compensation plans. The Company applies APB Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations in accounting for its
plan. Accordingly, no compensation cost has been recognized for its plans. The
effect of applying SFAS No. 123 for pro-forma disclosures is not likely to be
representative of the effects on basic and diluted earnings per share for future
years. However, had compensation cost for the Company's plans been determined
based on the fair value at the grant dates for awards under those plans
consistent with the method prescribed by SFAS No. 123, the Company's net income
and earnings per share would have been as follows:

<TABLE>
<CAPTION>


(Dollars in thousands, except per share data)                1998             1997            1996
<S>                                     <C>            <C>              <C>               <C>

-----------------------------------------------------------------------------------------------------
Net income - basic and diluted          As reported    $      4,309     $     3,805      $     2,417
                                        Pro-forma      $      4,109     $     3,645      $     2,241
-----------------------------------------------------------------------------------------------------
Basic earnings per share                As reported    $       1.16     $      1.04      $      0.66
                                        Pro-froma      $       1.11     $      0.99      $      0.61
-----------------------------------------------------------------------------------------------------
Diluted earnings per share              As reported    $       1.14     $       1.02     $      0.65
                                        Pro-forma      $       1.08     $      0.98      $      0.60
-----------------------------------------------------------------------------------------------------
</TABLE>



  Under the 1996 Stock Option Plan, the Company may grant options to its
employees up to 10 percent of the issued and outstanding common stock of the
Company at any time. Under this plan, the exercise price of each option equals
the market price of the Company's stock on the date of the grant, and an
option's maximum term is 10 years with 20 percent of the options becoming
exerciseable annually beginning one year following the date of grant. The
Company's other two plans were plans of subsidiaries prior to joining the
Company, and granting of options under both plans has been terminated. The
options for the three plans are vested upon the commencement date of the
exercise periods.

  Stock option transactions are summarized below:

<TABLE>
<CAPTION>


                                      Weighted                    Weighted                  Weighted
                                       Average                     Average                   Average
                                      Exercise                    Exercise                  Exercise
                                        Price                       Price                     Price
                           1998       Per Share       1997        Per Share      1996       Per Share
--------------------------------------------------------------------------------------------------------
<S>                       <C>           <C>          <C>           <C>           <C>          <C>

Options outstanding -
  beginning of year:      255,458     $  11.88      267,058       $  11.68      91,845     $    7.41
Granted                    37,500        21.45            -              -     187,500         13.53
Exercised                 (47,110)       13.10      (11,000)          5.94     (11,270)         6.78
Lapsed                     (4,980)       13.53         (600)         10.20      (1,017)        11.08
-------------------------------------------------------------------------------------------------------
Options outstanding -
  end of year             240,868     $  13.52      255,458       $  11.88     267,058     $   11.68
-------------------------------------------------------------------------------------------------------
Options exercisable -
  end of year             107,428     $  10.74      104,708       $   9.51      76,558     $    7.07
-------------------------------------------------------------------------------------------------------

</TABLE>


  The weighted average fair value of options granted was $5.29 and $4.70 in 1998
and 1996, respectively. Fair value is estimated using the Black-Scholes option
pricing model with the following assumptions:

<TABLE>
<CAPTION>


                                                         1998              1997             1996
-------------------------------------------------------------------------------------------------
    <S>                                                  <C>                               <C>

    Dividend yield                                       2.2%                -              2.0%
    Expected life                                       5 years              -             5 years
    Expected volatility                                   24%                -               37%
    Risk-free interest rate                              5.5%                -              6.2%
-------------------------------------------------------------------------------------------------

</TABLE>
<PAGE>

Notes to Consolidated Financial Statements

  The following table summarizes information about stock options outstanding at
December 31, 1998:

<TABLE>
<CAPTION>


                           Options Outstanding                           Options Exercisable
---------------------------------------------------    ----------------------------------------
                                         Weighted       Weighted                      Weighted
                                          Average        Average                       Average
        Exercise                         Remaining      Exercise                      Exercise
         Prices          Number         Contractual       Price         Number          Price
        Per Share      Outstanding     Life (years)     Per Share     Exercisable     Per Share
-----------------------------------------------------------------------------------------------
    <S>     <C>           <C>                <C>        <C>             <C>          <C>


    $       7.27          48,005             3         $    7.27        48,005       $  7.27
    $      13.45          27,505             8         $   13.45        10,315       $ 13.45
    $      13.56         127,858             8         $   13.56        49,108       $ 13.56
    $      21.45          37,500            10         $   21.45             -       $     -
-----------------------------------------------------------------------------------------------
    $ 7.27-21.45         240,868             7         $   13.52       107,428       $ 10.74
-----------------------------------------------------------------------------------------------

</TABLE>


REGULATORY MATTERS

      The Company is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and, possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Company's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the
Company and its Banking Subsidiaries must meet specific capital guidelines that
involve quantitative measures of assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting practices. The
capital amounts and classification also are 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 Company and its Banking Subsidiaries 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 (as defined), and of Tier 1 capital (as
defined) to average assets (as defined). Management believes, as of December 31,
1998, that the Company meets all capital adequacy requirements to which it is
subject.

      As of September 30, 1998, the most recent notification, the Federal
Reserve Bank of Richmond categorized the Company and its Banking Subsidiaries as
well capitalized under the regulatory framework for prompt corrective action. To
be categorized as well capitalized, the Company and its Banking Subsidiaries
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 has changed the institution's category.

<PAGE>

Notes to Consolidated Financial Statements

      The Company's actual and required capital amounts and ratios as of
December 31, 1998 and 1997, are presented in the table.

<TABLE>
<CAPTION>

                                                                                                    To be Well
                                                                                                    Capitalized
                                                                          For Capital               Prompt Corrective
(Dollars in thousands)                             Actual              Adequacy Purposes            Action Provisions
                                                   ------              -----------------            -----------------
December 31, 1998                               Amount   Ratio         Amount      Ratio            Amount      Ratio
<S>                                           <C>        <C>           <C>        <C>              <C>          <C>

Total Capital (to Risk-Weighted Assets):
 Consolidated                                 $ 43,924   16.9%         $ 20,821   >=8.0%           $ N/A        >= N/A%
 Bank of Suffolk                                13,987   19.1             5,866     8.0              7,332        10.0
 James River Bank                                8,631   14.1             4,910     8.0              6,138        10.0
 James River Bank/Colonial                       3,723   14.4             2,070     8.0              2,588        10.0
 First Colonial Bank                            12,734   12.5             8,143     8.0             10,179        10.0

Tier 1 Capital (to Risk-Weighted Assets)
  Consolidated                                 $40,663   15.6%         $ 10,411   >=4.0%           $  N/A       >= N/A%
  Bank of Suffolk                               13,069   17.8             2,933     4.0              4,399         6.0
  James River Bank                               7,862   12.8             2,455     4.0              3,683         6.0
  James River Bank/Colonial                      3,412   13.2             1,035     4.0              1,553         6.0
  First Colonial Bank                           11,460   11.3             4,072     4.0              6,107         6.0

Tier 1 Capital (to Average Assets)
  Consolidated                                $ 40,663    9.8%         $ 16,535   >=4.0%           $  N/A       >= N/A%
  Bank of Suffolk                               13,069   11.3             4,645     4.0              5,807         5.0
  James River Bank                               7,862    8.6             3,657     4.0              4,571         5.0
  James River Bank/Colonial                      3,412    8.5             1,611     4.0              2,014         5.0
  First Colonial Bank                           11,460    7.0             6,523     4.0              8,154         5.0

</TABLE>


<TABLE>
<CAPTION>


                                                                                     To be Well
                                                                                     Capitalized
                                                              For Capital         Prompt Corrective
                                         Actual            Adequacy Purposes      Action Provisions
                                         ------            -----------------      -----------------
December 31, 1997                    Amount  Ratio           Amount   Ratio         Amount  Ratio
---------------------------------------------------------------------------------------------------
<S>                                <C>        <C>        <C>       <C>            <C>        <C>

Total Capital (to Risk-Weighted Assets):
  Consolidated                     $ 40,245   16.0%      $ 20,169   >=8.0%        $  N/A     >= N/A%
  Bank of Suffolk                    13,258   18.2          5,843     8.0            7,303     10.0
  James River Bank                   10,565   18.4          4,599     8.0            5,749     10.0
  James River Bank/Colonial           3,413   16.0          1,705     8.0            2,132     10.0
  First Colonial Bank                11,959   12.3          7,801     8.0            9,751     10.0

Tier 1 Capital (to Risk-Weighted Assets)
  Consolidated                     $ 37,094   14.7%      $ 10,085   >=4.0%        $  N/A    >= N/A%
  Bank of Suffolk                    12,343   16.9          2,921     4.0            4,382     6.0
  James River Bank                    9,815   17.1          2,300     4.0            3,450     6.0
  James River Bank/Colonial           3,146   14.8            853     4.0            1,279     6.0
  First Colonial Bank                10,739   11.0          3,900     4.0            5,851     6.0

Tier 1 Capital (to Average Assets)
  Consolidated                     $ 37,094    9.7%      $ 15,433   >=4.0%        $  N/A    >= N/A%
  Bank of Suffolk                    12,343   11.6          4,249     4.0            5,311     5.0
  James River Bank                    9,815   11.0          3,655     4.0            4,568     5.0
  James River Bank/Colonial           3,146    8.3          1,521     4.0            1,901     5.0
  First Colonial Bank                10,739    7.2          5,992     4.0            7,490     5.0

</TABLE>

<PAGE>

Notes to Consolidated Financial Statements

<TABLE>
<CAPTION>

NOTE 10 - INCOME TAXES

  The significant components of the provision for income taxes for the years ended December 31 were as follows:
(In thousands)                                             1998              1997            1996
------------------------------------------------------------------------------------------------------
<S>                                                        <C>         <C>                 <C>

Current tax provision:
    Federal                                                $ 1,613      $     1,426        $     875
    State                                                       32               89               14
------------------------------------------------------------------------------------------------------
                                                             1,645            1,515              889
Deferred tax provision                                         (49)             (21)              19
------------------------------------------------------------------------------------------------------
                                                           $ 1,596      $     1,494        $     908
------------------------------------------------------------------------------------------------------

   The reasons for the differences between the statutory federal income tax
rates and the effective tax rates are summarized as follows:

                                                           1998              1997            1996
-----------------------------------------------------------------------------------------------------
Federal statutory income tax rates                         34.00%            34.00%          34.00%
State income taxes                                          0.54              1.65            0.47
Tax-exempt interest income                                 (6.86)            (7.26)         (12.14)
 Nondeductible merger costs                                   -                 -             5.10
Other                                                      (0.65)            (0.19)          (0.11)
-----------------------------------------------------------------------------------------------------
                                                           27.03%            28.20%          27.32%
-----------------------------------------------------------------------------------------------------

   The significant components of deferred income tax assets and liabilities as of December
31 consist of the following:

(In thousands)                                                              1998              1997
-----------------------------------------------------------------------------------------------------
Deferred tax assets:
    Allowance for loan losses                                           $     1,202        $   1,105
    Deferred compensation                                                       248              191
    Other                                                                        23               27
------------------------------------------------------------------------------------------------------
        Total deferred tax assets                                             1,473            1,323
------------------------------------------------------------------------------------------------------
Deferred tax liabilities:
    Depreciation                                                                285              285
    Deferred loan fees                                                          258              156
    Dividends on FHLB/FHLMC stock                                               110              122
    Unrealized gain on AFS securities                                           414              402
    Discount accretion on securities                                             49               45
    Other                                                                        45               33
-------------------------------------------------------------------------------------------------------
         Total deferred tax liabilities                                       1,161            1,043
-------------------------------------------------------------------------------------------------------
Net deferred income tax asset                                                   312              280
Less valuation allowance                                                        (14)             (19)
-------------------------------------------------------------------------------------------------------
                                                                        $       298       $      261
-------------------------------------------------------------------------------------------------------

</TABLE>


  Included in retained earnings is $1,082,000 at December 31, 1998 and 1997 for
which no provision for income taxes has been made. This represents allocations
of income to bad debt deductions for tax purposes only in years prior to 1988
related to First Colonial Bank and its subsidiaries. Since the Company does not
intend to use the reserves for purposes other than to absorb its tax bad debt
losses, deferred income taxes have not been provided on such reserves. The
approximate amount of unrecognized tax liability allocated with these historical
additions is $411,000. For years after 1988, deferred income taxes have been
provided

<PAGE>

Notes to Consolidated Financial Statements

on the difference between tax and book bad debt deductions in accordance with
SFAS 109, "Accounting for Income Taxes." If the amounts that qualify as
deductions for federal income tax purposes only are used for purposes other than
bad debt losses or operations losses, they will be subject to federal income tax
at the then current corporate rate.

NOTE 11 - RETIREMENT PLANS
  The Company has a defined contribution plan with 401(K) features, which covers
substantially all employees who have completed six months of service. Employees
may contribute up to 15% of their salaries, and the Company matches 50% of the
first 4% and 25% of the next 4% of employee contributions. Additional
contributions can be made by the Company at the discretion of the Board of
Directors. Prior to joining the Company, each of the Company's subsidiaries had
qualified retirement plans for the future benefit of their employees. All of
these plans, which consisted of defined benefit, defined contribution, employee
stock ownership and 401(k) plans, were terminated. Costs of these plans included
in salaries and employee benefits in the consolidated statements of income are
as follows:


<TABLE>
<CAPTION>

    (In thousands)                                       1998               1997             1996
----------------------------------------------------------------------------------------------------
<S>                                                   <C>              <C>               <C>

    Defined contribution/401(k) plan                  $      342        $      405        $      171
    Defined benefit plan - terminated effective
      December 31, 1995                               $        -        $        -        $       10
    Employee stock ownership plan -
      terminated effective May 31, 1996               $        -        $        -        $       56

</TABLE>



  The Company has entered into deferred compensation agreements providing
retirement for certain officers and employees. Vested benefits under the
agreements are payable in installments over a ten or fifteen year period upon
death or retirement. The present value of the liabilities for the benefits is
being accrued over the expected term of active service of the employees. The
deferred compensation expense for the officers and employees was $116,000,
$104,000 and $59,327 for the years ended December 31, 1998, 1997 and 1996,
respectively.

NOTE 12 - OTHER EXPENSES
  The following items shown in the other expense category are disclosed because
their amounts exceed one percent of total income for the years ended December
31:

<TABLE>
<CAPTION>


    (In thousands)                                        1998              1997             1996
---------------------------------------------------------------------------------------------------
    <S>                                                 <C>               <C>              <C>

    Deposit insurance premiums                          $    111          $    112         $  1,028
    Directors' fees                                     $    341          $    363         $    379
    Merger expenses                                     $      -          $      -         $    530

</TABLE>



<PAGE>

Notes to Consolidated Financial Statements


NOTE 13 - PARENT COMPANY

  The Parent Company, in the ordinary course of business, provides its
subsidiaries with certain centralized management services and staff support. The
cost of these services is allocated to each subsidiary based on analyses of the
services rendered and on analyses of each subsidiary's total assets and net
income.

  The primary source of funds for the dividends paid by the Company is dividends
received from its subsidiaries. Each of the Banking Subsidiaries is subject to
certain restrictions on the amount of dividends that it may declare without
prior regulatory approval. The following is a summary that, based upon these
restrictions, the various Banking Subsidiaries could have declared at December
31, 1998:                  (In thousands)
                           Bank of Suffolk              $  1,055,000
                           James River Bank             $          -
                           First Colonial Bank          $  2,445,000
                           James River Bank/Colonial    $    330,000

  In 1998, the Company sought and received approval from the Federal Reserve
Bank for James River Bank to pay dividends to the Company in excess of its
regulatory limit. Accordingly, in years 1999 and 2000, any dividends paid to the
Company by James River Bank must be approved by the Federal Reserve Bank.
  The parent company's condensed balance sheets as of December 31, 1998 and
1997, and the related condensed statements of income and cash flows for each of
the years in the three year period ended December 31, 1998, are as follows:

<TABLE>
<CAPTION>


CONDENSED BALANCE SHEETS
    (In thousands)                                                        1998              1997
-------------------------------------------------------------------------------------------------
    <S>                                                                <C>               <C>

    ASSETS
      Cash and due from banks                                          $    1,598        $      430
      Securities available-for-sale                                           194               798
      Investments in subsidiaries:
        Bank                                                               38,847            39,010
        Bank-related                                                        1,641               461
      Other assets                                                          1,772               191
---------------------------------------------------------------------------------------------------
                                                                       $   44,052        $   40,890
---------------------------------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
      Liabilities                                                      $      349        $      506
      Shareholders' equity                                                 43,703            40,384
---------------------------------------------------------------------------------------------------
                                                                       $   44,052        $   40,890
---------------------------------------------------------------------------------------------------

</TABLE>

<PAGE>

Notes to Consolidated Financial Statements

<TABLE>
<CAPTION>


CONDENSED STATEMENTS OF INCOME
    (In thousands)                                        1998              1997             1996
----------------------------------------------------------------------------------------------------
    <S>                                             <C>                <C>                <C>


    Income
      Dividends from bank subsidiaries               $      4,822       $     2,733       $    2,399
      Management fees from subsidiaries:
        Bank                                                1,308               964              633
        Bank-related                                           50                13                -
      Interest income                                           2                 2                2
      Other income                                            474                74                -
----------------------------------------------------------------------------------------------------
       Total income                                         6,656             3,786            3,034

    Expenses
      Salaries and benefits                                 1,010               559              345
      Directors fees                                          128               140              158
      Other expense                                           672               472              934
----------------------------------------------------------------------------------------------------
       Total expense                                        1,810             1,171            1,437
----------------------------------------------------------------------------------------------------
    Income before income taxes and equity in
      undistributed net income of subsidiaries              4,846             2,615            1,597

    Income tax benefit                                         17                44               71
----------------------------------------------------------------------------------------------------
      Income before equity in undistributed
       net income of subsidiaries                           4,863             2,659            1,668

    Equity in undistributed net income of
      subsidiaries (1)                                       (554)            1,146              749
----------------------------------------------------------------------------------------------------

    Net income                                       $      4,309       $     3,805       $    2,417
----------------------------------------------------------------------------------------------------

(1) Amount in parentheses represents the excess of dividends declared by the
subsidiaries to the Parent over the net income of the subsidiaries.

</TABLE>

<PAGE>

Notes to Consolidated Financial Statements

<TABLE>
<CAPTION>


CONDENSED STATEMENTS OF CASH FLOWS
    (In thousands)                                       1998              1997             1996
---------------------------------------------------------------------------------------------------
    <S>                                              <C>               <C>              <C>

    Operating activities:
      Net income                                      $     4,309       $     3,805      $    2,417
      Adjustments:
        Depreciation                                           29                16               7
        Gain on sale of securities                           (439)              (65)              -
        Equity in undistributed net income of
          subsidiaries                                        554            (1,147)           (749)
        Change in other assets                                (94)              (17)             81
        Change in other liabilities                            10               294              73
---------------------------------------------------------------------------------------------------
        Net cash provided by operations                     4,369             2,886           1,829
---------------------------------------------------------------------------------------------------
    Investing activities:
      Purchase of property and equipment                   (1,239)               (9)             (8)
      Proceeds from sale of securities                        745               175               -
      Purchase of available-for-sale securities              (198)                -             (87)
      Capitalization of subsidiaries                       (1,501)           (1,150)           (600)
---------------------------------------------------------------------------------------------------
        Net cash used in investing activities              (2,193)             (984)           (695)
---------------------------------------------------------------------------------------------------
    Financing activities:
      Cash dividends paid                                  (1,558)           (1,372)         (1,275)
      Common stock issued                                     550                98             121
      Common stock repurchased                                  -              (373)              -
---------------------------------------------------------------------------------------------------
        Net cash used in financing activities              (1,008)           (1,647)         (1,154)
---------------------------------------------------------------------------------------------------
    Net increase (decrease) in cash and
      cash equivalents                                      1,168               255             (20)

    Cash and cash equivalents - beginning                     430               175             195
---------------------------------------------------------------------------------------------------

    Cash and cash equivalents - ending                $     1,598       $       430      $      175
---------------------------------------------------------------------------------------------------
</TABLE>



NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS
  Management uses its best judgment in estimating the fair value of the
Company's financial instruments; however, there are inherent weaknesses in any
estimation technique. Therefore, for substantially all financial instruments,
the fair value estimates herein are not necessarily indicative of the amounts
the Company could have realized in a sales transaction on the dates indicated.
The estimated fair value amounts have been measured as of year end, and have not
been reevaluated or updated for purposes of these consolidated financial
statements subsequent to those respective dates. As such, the estimated fair
values of these financial instruments subsequent to the respective reporting
dates may be different than the amounts reported at each year end.

  The following information should not be interpreted as an estimate of the fair
value of the Company since a fair value calculation is only provided for a
limited portion of its assets. Due to a wide range of valuation techniques and
the degree of subjectivity used in making the estimates, comparisons between the
Company's disclosures and those of other companies may not be meaningful. The
following methods and assumptions were used to estimate the fair values of the
Company's financial instruments at December 31, 1998 and 1997.

<PAGE>

Notes to Consolidated Financial Statements


FINANCIAL INSTRUMENTS VALUED AT CARRYING VALUE

  The carrying amounts of cash and cash equivalents approximate their fair
value. The carrying amounts of accrued interest receivable and payable
approximate their fair values.

AVAILABLE-FOR-SALE AND HELD-TO-MATURITY SECURITIES

  Fair values for securities, excluding restricted equity securities, are based
on available quoted market prices. If quoted market prices are unavailable, fair
values are based on quoted market prices of comparable instruments. For unquoted
securities for which no comparable instruments exist, the reported fair value is
estimated on the basis of cost, book or appraised value as deemed appropriate by
management. Available-for-sale securities are carried at their aggregate fair
value.

LOANS

   For variable rate commercial loans that reprice frequently (within a
relatively short time frame) and have no significant change in credit risk, fair
values are based on carrying values. Residential first mortgages are based on
quoted market prices of similar loans. Fair values for certain junior mortgage
loans, consumer installment loans, credit-card loans, and other consumer loans
are estimated using discounted cash flows models. The discount rates are based
on current market interest rates for similar types of loans. Fair values for
commercial real estate and commercial loans that do not reprice or do not mature
within relatively short time frames are estimated using discounted cash flow
analysis. The discount rates used are those currently being offered for loans
with similar terms to borrowers of similar credit quality. Fair values for
impaired loans are estimated using discounted cash flow analysis or underlying
collateral values, where applicable.

DEPOSITS

   The fair values of demand deposits and deposits with no defined maturity are
taken to be the amount payable on demand at the reporting date. The fair values
for fixed-maturity deposits are estimated using discounted cash flow models
based on rates currently offered for the relevant product types with similar
remaining maturities.

SHORT-TERM BORROWNGS

The carrying amounts of short-term borrowings approximate their fair values.

The carrying amount in the table below is the amount at which the financial
instruments are reported in the financial statements.

<TABLE>
<CAPTION>


                                                   1998                                  1997
                                        -------------------------         ---------------------------
                                        CARRYING           FAIR            CARRYING           FAIR
(IN THOUSANDS)                           AMOUNT            VALUE            AMOUNT            VALUE
------------------------------------------------------------------------------------------------------
<S>                                 <C>                  <C>              <C>           <C>

Assets
  Cash and due from banks              $  14,268           $  14,268        $  14,087      $  14,087
  Interest bearing deposits
    with banks                            12,031              12,031            2,720          2,720
  Federal funds sold                      10,809              10,809           14,382         14,382
  Investment securities                   89,017              89,245           83,025         83,196
  Loans                                  275,491             283,424          260,476        265,923
  Interest receivable                      2,970               2,970            2,939          2,939
-----------------------------------------------------------------------------------------------------
                                       $ 404,586           $ 412,747        $ 377,629      $ 383,247
-----------------------------------------------------------------------------------------------------


Liabilities
    Non-interest bearing
      deposits                         $  46,805           $ 46,805         $  46,490       $ 46,490
    Interest bearing deposits            325,967            327,162           301,083        303,301
    Short-term borrowings                    719                719                 -              -
    Interest payable                         810                810               752            752
----------------------------------------------------------------------------------------------------
                                       $ 374,301           $375,496         $ 348,325       $350,543
----------------------------------------------------------------------------------------------------

</TABLE>

<PAGE>


NOTE 15 - EARNINGS PER SHARE RECONCILIATION
  The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share computations.

<TABLE>
<CAPTION>

(Dollars in thousands, except per share data)             1998             1997             1996
--------------------------------------------------------------------------------------------------
    <S>                                              <C>               <C>              <C>

    Net Income (Numerator, Basic and Diluted)         $     4,309       $     3,805     $    2,417

    Basic average shares outstanding (Denominator)          3,703             3,675          3,676

      Basic net income per share                      $      1.16       $      1.04     $     0.66
--------------------------------------------------------------------------------------------------

    Effect of dilutive securities:

    Basic average shares outstanding                        3,703             3,675          3,676
    Effect of stock options                                    86                58             61
---------------------------------------------------------------------------------------------------
    Diluted average shares outstanding (Denominator)        3,789             3,733          3,737

      Diluted net income per share                    $      1.14       $      1.02      $    0.65
--------------------------------------------------------------------------------------------------

NOTE 16 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

(Dollars in thousands, except per share data)                  1998
---------------------------------------------------------------------------------------------------
                                        First            Second             Third           Fourth
                                       Quarter           Quarter           Quarter          Quarter
                                       -------           -------           -------          -------
    <S>                               <C>             <C>                <C>             <C>

    Interest income                   $   7,502       $      7,757       $    7,691       $    7,691
    Net interest income               $   3,922       $      4,084       $    3,966       $    3,957
    Net income                        $   1,330       $      1,091       $    1,021       $      867
    Basic Earnings per share          $    0.36       $       0.30       $     0.27       $     0.23
    Diluted Earnings per share        $    0.35       $       0.29       $     0.27       $     0.23

                                                               1997
----------------------------------------------------------------------------------------------------
                                        First            Second             Third           Fourth
                                       Quarter           Quarter           Quarter          Quarter
                                       -------           -------           -------          -------

    Interest income                   $   7,136       $      7,393       $    7,508       $    7,570
    Net interest income               $   3,650       $      3,854       $    3,924       $    3,982
    Net income                        $     876       $        908       $      968       $    1,053
    Basic Earnings per share          $    0.24       $       0.25       $     0.26       $     0.29
    Diluted Earnings per share        $    0.24       $       0.24       $     0.26       $     0.28

</TABLE>


NOTE 17 - SUBSEQUENT EVENT

  On February 17, 1999, the Company entered into a definitive merger agreement
with State Bank of Remington, Inc. ("State Bank") under which State Bank would
become a wholly owned subsidiary of the Company. The agreement provides for
State Bank shareholders to recieve 2.9 shares of the Company's common stock for
each outstanding share of State Bank's common stock. At December 31, 1998, State
Bank had approximately 291,000 shares of common stock outstanding. The
transaction is expected to qualify as a tax-free exchange and to be accounted
for as a pooling of interests. The merger is subject, among other conditions, to
shareholder and regulatory approvals.

<PAGE>

General Information



EXECUTIVE OFFICE
1514 Holland Road
P.O. Box 440
Suffolk, Virginia 23439-0440

REQUESTS FOR INFORMATION
Deborah R. Scott, Administrative Assistant
(757) 934-8100, Fax (757) 934-8612

FORM 10-K
A form 10-K Report filed with the Securities and Exchange Commission is
available to shareholders without charge upon written request.

STOCK TRANSFER AGENT
First Union National Bank of North Carolina
1525 W. W.T. Harris Blvd., Building 3C3
Charlotte, North Carolina 28288-1154

STOCK LISTING
The common stock of James River Bankshares, Inc. is traded on the NASDAQ Stock
Market's National Market System under the symbol JRBK.

MARKET PRICE FOR COMMON STOCK
The following table sets forth the high, low, and closing sales prices of the
Common Stock as reported by the NASDAQ Stock Market's National Market System for
the periods listed. Sales prices have been restated to reflect the Company's
three-for-two stock split effected in the form of a 50% stock dividend in
November 1997. The Common Stock is thinly traded. On February 28, 1999, there
were approximately 1,732 shareholders of record.

<TABLE>
<CAPTION>


       1998                                      Sales Prices
----------------------------------------------------------------------------------------------
                          HIGH               LOW              CLOSING         DIVIDENDS
----------------------------------------------------------------------------------------------
<S>                       <C>               <C>              <C>               <C>

Fourth Quarter            19.50             16.50             17.50             $0.12
Third Quarter             24.00             17.50             18.25             $0.10
Second Quarter            26.00             21.50             22.00             $0.10
First Quarter             23.00             19.63             21.25             $0.10

       1997
----------------------------------------------------------------------------------------------
                          HIGH               LOW              CLOSING         DIVIDENDS
----------------------------------------------------------------------------------------------
Fourth Quarter            21.00             16.83             21.00             $0.10
Third Quarter             18.17             15.00             16.00             $0.09
Second Quarter            15.17             13.33             15.17             $0.09
First Quarter             14.17             13.17             13.33             $0.09

</TABLE>


(Reflects changes through February 28, 1999)