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

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

                                   FORM 10-K
                      -----------------------------------

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

                  For the fiscal year ended December 31, 1997
                         Commission File Number 0-26314

                          JAMES RIVER BANKSHARES, INC.

    Virginia                                                      54-1740210

               1512 Holland Road Street, Suffolk, Virginia 23434

       Registrant's telephone number, including area code: (757) 539-0267

        Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $5.00
par value

         Indicate by check mark whether the  registrant  (1) has filed all
reports  required to be filed by Section 13 or 15(d) of the  Securities Exchange
Act of 1934 during the  preceding  12 months (or for such  shorter  period that
the registrant was required to file such reports),  and (2) has been subject to
such filing  requirements  for the past 90 days. Yes [X]  No [ ]

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K, or any
amendment to this Form 10-K. [ ]

         The aggregate market value of voting stock held by non-affiliates of
the registrant as of March 16, 1998: Common Stock - $62,897,471.

         The number of shares outstanding of the registrant's common stock as of
March 16. 1998:  3,680,470.

DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the Registrant's Annual Report to Shareholders' ("Annual
Report") are incorporated by reference in Part II of this Form 10-K. Portions of
the definitive Proxy Statement (the "1998 Proxy Statement") to be used in
connection with the 1998 Annual Meeting of Shareholders are incorporated by
reference in Part III of this Form 10-K.


<PAGE>


         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 it subsidiaries as of
December 31, 1997. In addition to historical information, the following
discussion contains forward looking statements that are subject to risks and
uncertainties that could cause the Company's actual results to differ materially
from those anticipated in these forward looking statements. These forward
looking statements include, but are not limited to, statements regarding the
Company's management of credit risk, credit policies generally, and allowances
for loan losses. Readers are cautioned not to place undue reliance on these
forward looking statements, which reflect management's analysis only as of the
date hereof.

                                     PART I

Item 1. Business

General

         James River is a Virginia bank holding company that commenced
operations June 1, 1995. James River was capitalized pursuant to a share
exchange ("Share Exchange") between Bank of Suffolk, a Virginia state chartered
bank ("BOS"), and James River Bank ("JRB"), also a Virginia state chartered
bank. In the Share Exchange, shareholders of BOS and JRB exchanged their shares
of common stock of BOS and JRB, respectively, for shares of James River Common
Stock. BOS and JRB became wholly owned subsidiaries of James River on May 31,
1995.

         In the first quarter of 1996, James River and its subsidiaries
consummated several significant transactions. First, in two separate
transactions that both closed on March 1, 1996, James River acquired Bank of
Isle of Wight, a Virginia state chartered bank in Smithfield, Virginia ("BIW")
and First Colonial Bank, FSB, a federal savings bank in Hopewell, Virginia
("FCB"). In the aggregate, these two transactions more than doubled James
River's total assets and net loans. JRB also consummated the acquisition of
three branch banking offices on March 23, 1996, one of which is located in the
City of Franklin, Virginia, and two of which are located in Courtland, Virginia,
in Southampton County. JRB assumed aggregate deposit liabilities of
approximately $34 million in connection with the branch acquisitions. In
addition, BOS purchased a branch bank facility in Suffolk and commenced
operations at this branch in June 1996. FCB also opened a new branch bank office
in Hopewell, Virginia in May, 1996. FCB assumed the lease on the property and
purchased selected equipment from the former tenant.

         As a result of the various transactions described above, James River
now has four operating bank subsidiaries with a total of 19 banking offices that
conduct operations from the Tidewater region of southeastern Virginia to the
tri-city areas of Hopewell, Petersburg and Colonial Heights in south-central
Virginia.

         Reported financial results in James River's Annual Report and Form 10-K
are as of December 31, 1997, and include the results of operations of James
River and all of its subsidiaries on a restated consolidated basis.


<PAGE>


Operations of James River's Banking Subsidiaries

         General. BOS was organized and chartered under the laws of the
Commonwealth of Virginia on January 11, 1967, and commenced operations on June
27, 1967. BOS is a member of the Federal Reserve System. BOS's deposits are
insured by the Bank Insurance Fund ("BIF"), which is a division of the FDIC. BOS
is subject to the supervision, examination and regulation of the Federal Reserve
and the Virginia Bureau of Financial Institutions ("BFI"). BOS provides a wide
range of financial services principally to individuals and to small and
medium-sized businesses, including individual and commercial demand and time
deposit accounts, commercial and consumer loans, travelers' checks, safe deposit
facilities, sales of United States Saving Bonds, collection items and official
checks. While BOS is authorized to provide trust services, it has elected not to
provide such services presently. BOS operates six full service banking offices
in the city of Suffolk, Virginia.

         JRB was organized and chartered under the laws of the Commonwealth of
Virginia on June 12, 1933, and commenced operations on that day. JRB is a member
of the Federal Reserve System. JRB's deposits are insured by the BIF. JRB is
subject to the supervision, examination, and regulation of the Federal Reserve
and the BFI. JRB provides a wide range of financial services similar to those
provided by BOS. JRB operates one full service banking office and one drive-up
facility in the town of Waverly, Virginia, one full service banking office in
Sussex, Virginia, one full service banking office in the city of Franklin,
Virginia, and one full service banking office and one drive-up facility in the
town of Courtland, Virginia.

         BIW was organized and chartered under the laws of the Commonwealth of
Virginia on August 10, 1971, and commenced operations on November 28, 1973. BIW
is a member of the Federal Reserve System. BIW's deposits are insured by the
BIF. BIW is subject to the supervision, examination, and regulation of the
Federal Reserve and the BFI. BIW provides a wide range of financial services
similar to those provided by BOS and JRB. BIW is authorized to provide trust
services, but does not currently do so. BIW operates one full service banking
office in the town of Smithfield, Virginia.

         FCB is a stock corporation that was incorporated under the laws of the
Commonwealth of Virginia in 1972. FCB commenced operations in 1975 as First
Colonial Savings and Loan Association and converted from a state chartered
association to a federal savings bank in 1990. FCB is a member of the Federal
Home Loan Bank of Atlanta. FCB's deposits are insured by the Savings Association
Insurance Fund ("SAIF") which is a division of the FDIC. FCB is subject to the
supervision, examination, and regulation of the Office of Thrift Supervision
("OTS"). FCB provides a wide range of financial services similar to those
provided by BOS, JRB and BIW. FCB operates in the Southside Virginia area from a
main office located in Hopewell, Virginia. Including the main office, FCB has
six full service branches located primarily in the tri-city area in Hopewell,
Colonial Heights, Chester, Dinwiddie, Petersburg and a mortgage division in
Prince George, Virginia. FCB has filed applications with regulatory authorities
to convert from a federal savings bank to a Virginia state chartered bank. If
these applications are approved, FCB will become subject to regulation by the
Federal Reserve and BFI to the same extent as James River's other banking
subsidiaries.

         Credit Policies. James River's banking subsidiaries employ extensive
written policies and procedures to enhance management of credit risk. This
process includes formulation of portfolio management strategy, guidelines for
underwriting standards and risk assessment, procedures for on-going
identification and management of credit deterioration, and regular portfolio
reviews to estimate loss exposure and to ascertain compliance with internal
policies.

         A major element of credit risk management is the diversification of
risk. The objective of each subsidiary is to maintain a diverse loan portfolio
to minimize the impact of any single event or set of circumstances.
Concentration parameters are based upon individual risk factors, policy
constraints, economic conditions, collateral, and products. James River's
subsidiaries generally do not make loans outside their market area unless the
borrower has an established relationship with the bank and conducts its
principal business operations within the bank's market area. Consequently, James
River's banking subsidiaries and their borrowers are directly affected by the
economic conditions prevailing in their respective market areas.

         The following table sets forth the composition of the loan portfolio of
James River's banking subsidiaries on a restated consolidated basis (by
percentage) for the five years ended December 31, 1997. Prior to 1995, amounts
reported below include FCB's applicable balances as of June 30 for the periods
indicated.


                          Loan Portfolio by Percentage
<TABLE>
<CAPTION>
                                                                 December 31,
                                          ----------------------------------------------------------
                                             1997        1996        1995        1994        1993
                                             ----        ----        ----        ----        ----
                                                                (dollars in thousands)
<S> <C>
            Commercial                          13.1%        9.7%       11.6%        8.9%      14.5%
            Real estate-commercial              19.2%        8.5%        7.6%       10.2%      10.7%
            Real estate-construction
              and land development               7.5%        6.0%        4.0%        2.4%       0.7%
            Real estate-mortgage                49.4%       64.8%       66.7%       63.9%      59.9%
            Agricultural                         1.8%        1.0%        0.6%        0.5%       0.7%
            Installment                          9.0%       10.0%        9.5%       14.1%      13.5%
                                          -----------------------------------------------------------
                Total Loans                    100.0%      100.0%      100.0%      100.0%     100.0%

            Total Loans                       263,219     243,104     208,143     174,225    159,055
                                          -----------------------------------------------------------
</TABLE>
         James River's service area provides lending opportunities to small
businesses, farmers, and a wide range of consumers. Most of the small business
are either retail or agribusiness companies. The loan portfolio set forth above
for James River's banking subsidiaries is 75.3% collateralized by first and
second deeds of trust on residential and commercial real estate. This heavy
collateralization by real estate requires an ascertainment of property values in
the service areas and lending on the appropriate loan-to-value ratios.

         Commercial. Commercial loans represented 32.3% of James River's total
loan portfolio on December 31, 1997. $36.9 million, or 43.5%, of these loans
were secured by first and second deeds of trust on commercial real estate.
Commercial loans are used to purchase commercial real estate, to purchase
capital equipment, to support letters of credit and to fund inventory purchases.
To support all of the commercial business credits, borrowers' financials are
kept current and are analyzed to determine repayment through cash flows and
annual earnings. Because most of these businesses are small, principal owners
generally are asked to personally guarantee the credit.

         Agricultural. At December 31, 1997, agricultural loans totaled $4.8
million. These were all farm operating loans including loans secured by farm
equipment. Loans secured by farm equipment have annual payments and are part of
the loan portfolio with maturities of up to five years.

         Real Estate Construction and Land Development. Real estate construction
and land development loans amounted to $19.7 million or 7.5% of the loan
portfolio at December 31, 1997. Most of these loans were made to either
homeowners who were having their own home built or to contractors who were
building a residence under contract.

         Real Estate Mortgage. At December 31, 1997, 91.8% of the real estate
mortgages were residential mortgages on one to four family units. These loans
were either open ended adjustable rate mortgages ("ARMS"), amortized monthly,
predominately on a 20 year amortized basis, or closed end balloon loans, monthly
amortized and based on 15 or 20 year amortization. Both the ARMs and the
balloons have one, three or five year adjustable rates. Loan to value ratios are
consistently 75%. $12.4 million were real estate loans to individuals used for
farm purchases and multifamily residential properties. These loans are generally
handled by a loan specialist whose expertise is in the area of real estate
lending.

         Installment. On December 31, 1997, 9.0% of total loans were consumer
and installment loans. Installment loans include home improvement loans,
automobile loans and personal unsecured loans. James River's banking
subsidiaries, on consumer collaterized loans, generally use loan to value ratios
of 75%.

Loan Portfolio

         As described above, the portfolio of James River's banking subsidiaries
is comprised of commercial loans, agricultural loans, real estate loans, and
installment loans. Net loans consist of total loans minus the allowance for loan
losses, unearned discounts, and deferred loan fees. Net loans were $260.5
million at December 31, 1997, 8.1% more than net loans of $240.9 million at
December 31, 1996. The average balance of total loans as a percentage of average
earning assets was 72.1%, 67.4%, 66.0%, 61.0% and 59.3% for 1997, 1996, 1995,
1994 and 1993, respectively. James River's banking subsidiaries had no loans
outstanding to foreign countries or for highly leveraged transactions as of
December 31, 1997, 1996, 1995 or 1994.

         In the normal course of business, James River's banking subsidiaries
make various commitments and incur certain contingent liabilities which are
disclosed but not reflected in its financial statements. These commitments and
contingent liabilities include commitments to extend credit and standby letters
of credit. At December 31, 1997, commitments for standby letters of credit
totaled $1.6 million and commitments to extend credit were $40.1 million. At
December 31, 1996, commitments for standby letters of credit totaled $1.0
million and commitments to extend credit totaled $34.2 million.

         Interest income on installment, commercial, and real estate mortgage
loans is computed on the principal balance outstanding. Most loans carry an
interest rate tied to the base rate of James River's banking subsidiaries, which
is generally the Wall Street Journal prime rate.


<PAGE>


         The following table summarizes the composition of the loan portfolio at
the dates indicated for James River's banking subsidiaries. Prior to 1995,
amounts reported below include FCB's applicable balances as of June 30 for the
periods indicated.

<TABLE>
<CAPTION>
                                 Loan Portfolio

                                                                   December 31,
                                    -----------------------------------------------------------------------------
                                              1997           1996           1995           1994            1993
                                              ----           ----           ----           ----            ----
                                                                    (dollars in thousands)
<S> <C>
Commercial                           $       34,513      $  23,689      $  24,224    $    15,463     $   23,103

Real estate-commercial
                                             50,522         20,606         15,780          17,730        17,002
Real estate-construction
  and land development
                                             19,683         14,520          8,317           4,151         1,089
Real estate-mortgage
                                            130,055        157,605        138,851         111,403        95,231
Agricultural
                                              4,802          2,256          1,102             945         1,162
Installment
                                             23,644         24,428         19,869          24,533        21,468
                                    -----------------------------------------------------------------------------
  Total Loans
                                            263,219        243,104        208,143         174,225       159,055
Less:
  Allowance for loan
    losses
                                              3,457          3,176          2,891           2,691         2,258
  Unearned discount
                                                 25             38             60             122           226
  Deferred loan fees
                                                 50            169            159             106            76
                                    -----------------------------------------------------------------------------
    Net loans receivable                    259,687        239,721        205,033         171,306       156,495
Loans held for sale                             789
                                                             1,192          1,483           3,677         1,592
    Net loans                        $      260,476      $ 240,913      $ 206,516    $    174,983    $  158,087
                                    ===============      =========       =========     ==========     =========

</TABLE>
         Set forth below is information regarding the maturity of loans for
James River's banking subsidiaries at December 31, 1997:

<TABLE>
<CAPTION>
                                           Maturity Schedule of Loans

                                                                    December 31, 1997
                                               -------------------------------------------------------------
                                                                    Over One
                                                      One Year       through        Over Five        Total
                                                      or Less       Five Years        Years          Loans
                                                                    (Dollars in thousands)
<S> <C>
Commercial                                          $   8,016      $  18,490     $     8,007     $   34,513

Real estate-commercial
                                                        5,724         21,652          23,146         50,522
Real estate-construction
  and land development
                                                       12,773          6,116             794         19,683
Real estate-mortgage
                                                       19,769         20,959          89,327        130,055
Agricultural
                                                          975          2,791           1,036          4,802
Installment
                                                        4,367         17,989           1,288         23,644
                                                       ------        -------          ------        --------
  Total                                              $ 51,624       $ 87,997     $   123,598     $  263,219
                                                     ========       ========        =========      =========

Loans maturing after one year with
  predetermined rates
                                                                                                     109,649
Loans maturing after one year with
  variable rates
                                                                                                     101,946
                                                                                                     -------
  Total                                                                                          $   211,595
                                                                                                     =======

</TABLE>

Asset Quality

         James River's banking subsidiaries attempt to maintain the allowance
for loan losses at a sufficient level to provide for potential losses in the
loan portfolio. The provision for loan losses is determined periodically by
senior management and lending officers based upon consideration of several
factors, including changes in the character and size of the loan portfolio and
related loan loss experience, a review and examination of overall loan quality
which includes the assessment of problem loans, and an analysis of anticipated
economic conditions in the market area. In addition, bank regulatory agencies
that regularly review the loan portfolio as part of their examination process,
internal loan review personnel, and advice from James River's independent
accountants are considered in reviewing and assessing the adequacy of the
allowance for loan losses.


<PAGE>


         An analysis of the allowance for loan losses, including charge off
activity is presented below for James River's banking subsidiaries for the
periods indicated. The amounts reported below for 1994 and 1993 include FCB's
applicable balances as of June 30 for the periods indicated.

<TABLE>
<CAPTION>

                            Allowance for Loan Losses

                                                                  December 31,
                             -----------------------------------------------------------------------------
                                      1997           1996            1995           1994           1993
                                      ----           ----            ----           ----           ----
                                                           (dollars in thousands)
<S> <C>
Balance, beginning of
  period                         $    3,176      $    2,891      $   2,691     $    2,258       $   1,821

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

Less charge offs:
  Commercial                             12              17             71             25             107
  Installment                           167             152             73             56              92
  Real estate                            70             133             64            169              55
                             -----------------------------------------------------------------------------
                             -----------------------------------------------------------------------------
    Total charge offs                   249             302            208            250             254
                             -----------------------------------------------------------------------------

Plus recoveries:
  Commercial                             58              10             23             30              40
  Installment                            30              15             57             26              22
  Real estate                             3              71              4             34              36
                             -----------------------------------------------------------------------------
    Total recoveries                     91              96             84             90              98
                             -----------------------------------------------------------------------------

Net charge offs                         158             206            124            160             156
                             -----------------------------------------------------------------------------

Provision for loan losses               439             491            341            593             593
                             -----------------------------------------------------------------------------

Adjustment to conform
  fiscal year                             -               -            (17)              -               -
                             -----------------------------------------------------------------------------

Balance end of period            $    3,457      $    3,176      $   2,891     $    2,691       $   2,258

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

Allowance for loan losses
to period end total loans              1.31%           1.30%          1.38%          1.51%           1.41%

Allowance for loan losses
to nonaccrual loans                  385.40        1,091.41         388.05         165.60           99.91


Average total loans                 258,988         228,009        191,650        169,096         158,391

Net charge offs
to average loans                       0.06%           0.09%          0.06%          0.09%           0.10%

</TABLE>

<PAGE>


         A breakdown of the allowance for loan losses for James River's banking
subsidiaries at the periods indicated is provided in the following table;
however, management of James River does not believe that the allowance for loan
losses can be fragmented by category with any precision that would be useful to
investors. The breakdown of the allowance for loan losses is based primarily
upon those factors discussed above in computing the allowance for loan losses as
a whole. Because all of these factors are subject to change, the breakdown is
not necessarily indicative of the category of future loan losses. The amounts
reported below for 1994 and 1993 include FCB's applicable balances as of June 30
for the periods indicated.

<TABLE>
<CAPTION>
                             Allocation of Allowance for Loan Losses in Dollars

                                                                  December 31,
                             -----------------------------------------------------------------------------
                                        1997           1996            1995           1994           1993
                                        ----           ----            ----           ----           ----
                                                            (dollars in thousands)
<S> <C>
Commercial                       $      846       $     625     $      516      $     902      $      670

Real estate-commercial                1,161           1,152          1,004            790             680
Real estate-construction
  and land development                   85              84             75              8              17
Real estate-mortgage                    808             852            950            658             571
Agricultural                            176              21             22             92              95
Installment                             381             442            324            241             225
                             -----------------------------------------------------------------------------
Total allowance for
  loan losses                    $    3,457       $   3,176     $    2,891      $   2,691      $    2,258

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

</TABLE>

         The following table sets forth the composition of the loan portfolio of
James River's banking subsidiaries on a consolidated basis (by percentage) for
the five years ended December 31, 1997. The amounts reported below for 1994 and
1993 include FCB's applicable balances as of June 30 for the periods indicated.

<TABLE>
<CAPTION>

                             Amount of Loans to Gross Loans by Percentages

                                                            December 31,
                             -----------------------------------------------------------------------------
                                       1997           1996            1995           1994           1993
                                       ----           ----            ----           ----           ----
<S> <C>
Commercial                            13.1%            9.7%          11.6%           8.9%           14.5%
Real estate-commercial                19.2%            8.5%           7.6%          10.2%           10.7%
Real estate-construction
  and land development                 7.5%            6.0%           4.0%           2.4%            0.7%
Real estate-mortgage                  49.4%           64.8%          66.7%          63.9%           59.9%
Agricultural                           1.8%            1.0%           0.6%           0.5%            0.7%
Installment                            9.0%           10.0%           9.5%          14.1%           13.5%
                             -----------------------------------------------------------------------------
    Total loans                      100.0%          100.0%         100.0%         100.0%          100.0%
                             -----------------------------------------------------------------------------
</TABLE>

<PAGE>



         The following table details information concerning nonaccrual,
restructured and past due loans, as well as foreclosed assets for James River's
banking subsidiaries, for the dates indicated. The amounts reported below for
1994 and 1993 include FCB's applicable balances as of June 30 for the periods
indicated.

<TABLE>
<CAPTION>


                                     Non-performing Assets

                                                            December 31,
                             -----------------------------------------------------------------------------
<S>  <C>
                                    1997             1996            1995           1994           1993
                                    ----             ----            ----           ----           ----
                                                            (dollars in thousands)
Nonaccrual loans               $     897       $     291      $       745    $     1,625     $      2,260
Foreclosed assets                    573             171                4            496              591
                             -----------------------------------------------------------------------------
  Total non-performing
    assets                     $   1,470       $     462      $       749    $     2,121     $     2,851
                             -----------------------------------------------------------------------------
Loans past due 90 or
  more days accruing
  inter                        $     431       $     857      $       683    $       203     $       623
Non-performing loans
  to total loans, at
  period end                        0.34%           0.12%            0.36%          0.91%           1.41%
Non-performing loans
  to period end loans
  and foreclosed assets             0.34%           0.12%            0.36%          0.91%           1.40%
  </TABLE>


         As of December 31, 1997, loans 30 days or more delinquent for James
River's banking subsidiaries totaled $7.7 million, which includes those
non-performing loans above that have possible credit problems and cause
management to have concerns about the borrowers' continuing ability to comply
with existing repayment terms. Of these potential problem loans, $6.7 million
are secured by security interests in real estate.

         The Company adopted Statement of Financial Accounting Standards
("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan," on January
1, 1995. Under this standard, 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. 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.

         The recorded investments in impaired loans requiring an allowance for
loan losses as determined in accordance with SFAS No. 114 was $2,017,000,
$3,137,000 and $1,600,000 at December 31, 1997, 1996 and 1995, respectively. The
impaired loans at December 31, 1997, consist of $227,000 of commercial, $818,000
real estate-commercial, $386,000 real estate mortgage, and $586,000 agricultural
loans. The impaired loans at December 31, 1996, consisted of $1,871,000 of
commercial and $1,266,000 real estate-commercial loans. The impaired loans at
December 31, 1995, consisted of $76,000 of commercial and $1,524,000 real
estate-commercial loans. All of the impaired loans at December 31, 1997, 1996
and 1995, were measured using the fair value of collateral method. The portion
of the allowance for loan losses allocated to the impaired loan balance was
$423,000, $558,000 and $170,000 at December 31, 1997, 1996 and 1995,
respectively.

Investments

         The carrying value of the investment portfolio of James River and its
subsidiaries was $83.0 million at December 31, 1997, compared to $103.5 million
at December 31, 1996. The average balance of the investment portfolio decreased
$10.3 million or 10.1% in 1997 compared to 1996. The average balance of the
portfolio increased 14.1%, or $12.6 million, in 1996.

         Since 1992, management of BOS, JRB, BIW and FCB has made adjustments in
the mix of the investment portfolio by moving investments from U.S. Treasury and
federal agencies to tax-exempt state and political subdivisions. U.S. Treasury
and federal agency securities now account for 52.4% of the investments compared
to 31.1% in state and political subdivisions.

         At December 31, 1997, 1996, and 1995, there was no obligation of any
issuer in the investment portfolio, exclusive of obligations of the U.S.
Government or U.S. agencies and corporations, which in the aggregate exceeded
10% of shareholders' equity.

         The market value of James River and its subsidiaries Held-to-Maturity
securities was 101.5% and 100.2% of carrying value at years ended December 31,
1997 and 1996, respectively.

         The following table summarizes the carrying values of securities for
James River and its subsidiaries for the dates indicated.

<TABLE>
<CAPTION>
                                            Securities Portfolio

                                                                 December 31,
                                                  ----------------------------------------------
<S> <C>
                                                       1997           1996           1995
                                                       ----           ----           ----
                                                                  (dollars in thousands)
U. S. Treasury and other government agencies       $   43,535     $    62,576     $    43,551
State and political subdivisions                       25,789          26,712          26,828
Other securities                                       13,701          14,198          15,595
                                                  ----------------------------------------------
    Total Securities                               $   83,025     $   103,486     $    85,974
                                                  ----------------------------------------------

</TABLE>


<PAGE>


         The following table sets forth the maturity distribution and weighted
average yields of the investment portfolio of James River and it subsidiaries at
December 31, 1997. The weighted average yields are calculated on the basis of
book value of the investments portfolio and on the interest income of
investments adjusted for amortization of premium and accretion of discount.
Yields on tax-exempt investments have been computed on a tax equivalent basis
assuming a federal tax rate of 34%.

<TABLE>
<CAPTION>

                                            Maturities of Investments

                                                                              December 31, 1997
                                                            ----------------------------------------------
<S> <C>
                                                                                             Weighted
                                                              Amortized         Fair          average
                                                                 Cost          Value           yield
                                                                            (Dollars in thousands)
U.S. Treasury securities
  One year or less                                           $    3,395    $     3,405         5.54%
  After one year to five years                                    6,500          6,608         5.68%
  After five years to ten years                                   2,002          2,053         5.75%
  After ten years                                                     -              -
                                                               --------        -------
    Total                                                        11,897         12,066         5.65%
                                                               --------        -------
Federal agency securities
  One year or less                                                3,695          3,676         6.65%
  After one year to five years                                   19,149         19,167         5.93%
  After five years to ten years                                   7,714          7,681         6.58%
  After ten years                                                   955            945         6.63%
                                                               --------        -------
    Total                                                        31,513         31,469         6.30%
                                                               --------        -------
State and political subdivisions securities
  One year or less                                                2,051          2,058         6.06%
  After one year to five years                                    9,585          9,787         6.32%
  After five years to ten years                                  12,476         12,784         6.65%
  After ten years                                                 1,133          1,186         6.97%
                                                               --------        -------
    Total                                                        25,245         25,815         6.49%
                                                               --------        -------
Federal Reserve Bank Stock and other Equity Stock
  One year or less                                                    -              -
  After one year to five years                                        -              -
  After five years to ten years                                       -              -
  After ten years                                                 2,488          2,993         7.10%
                                                               --------        -------
    Total                                                         2,488          2,993         7.10%
                                                               --------        -------
Other securities
  One year or less                                                  249            250         5.89%
  After one year to five years                                      613            624         6.25%
  After five years to ten years                                     248            250         6.35%
  After ten years                                                 9,584          9,728         7.04%
                                                               --------        -------
    Total                                                        10,694         10,852         6.95%
                                                               --------        -------
  Total securities                                               81,837         83,195         6.29%
                                                               --------        -------
  Unrealized gain on securities available-for-sale                1,188              -
                                                               --------        -------
  Total securities at period end                             $   83,025    $    83,195
                                                               --------        -------


</TABLE>
<PAGE>


Deposits

         James River's banking subsidiaries primarily use deposits to fund their
loans and investments portfolio. Since the end of 1995, as demonstrated below,
James River's banking subsidiaries have continued to experience deposit growth,
especially in interest bearing checking, non-interest bearing checking, and time
deposits. Average balances in total deposits increased from $259.3 million in
1994 to $268.1 million in 1995, a growth of $8.8 million or 3.4%. For the
comparable period ending December 31, 1996, average total deposits increased
$52.9 million or 19.7%. Approximately 60% of the increase in average total
deposits in 1996 was attributable to the deposit base purchased by JRB in the
Franklin and Courtland branches. For the period ending December 31, 1997,
average total deposits increased $22.2 million, or 6.9%.

         James River's banking subsidiaries offer individuals and
small-to-medium-sized businesses a variety of deposit services. These accounts,
including checking, savings, money market, and certificates of deposit, are
obtained primarily from the communities which James River's banking subsidiaries
service. Management believes that this provides a stable core deposit base. The
following table details the average amount of, and the average rate paid on, the
following primary deposit categories for James River's banking subsidiaries for
the periods indicated. Prior to 1996, amounts reported below include FCB's
applicable balances as of June 30 for the periods indicated.

<TABLE>
<CAPTION>
                                             Average Deposits and Average Rates Paid

                                                         Years ended December 31,
                                  --------------------------------------------------------------------------
                                           1997                      1996                    1995
                                  -----------------------  ------------------------  -----------------------
<S> <C>
                                   Average     Average       Average     Average       Average    Average
                                   Balance      Rate         Balance      Rate         Balance      Rate
                                                           (Dollars in thousands)

Interest-bearing deposits:
  Checking                         $  37,023       2.56%    $   36,242       2.67%    $   29,480      3.09%
  Money market savings                23,391       3.22%        23,035       3.31%        20,842      3.63%
  Regular savings                     48,601       3.35%        47,613       3.42%        44,751      3.51%
  Certificates of deposit:
    $100,000 and over                 29,396       4.59%        24,834       5.61%        17,920      5.51%
    Under $100,000                   165,010       5.75%       155,254       5.66%       126,091      5.45%
                                  ----------               -----------                ----------

Total interest-bearing deposits      303,421       4.67%       286,978       4.72%       239,084      4.64%
Non-interest bearing                  39,789                    34,059                    29,035
                                  ----------               -----------                ----------
Total deposits                     $ 343,210       4.12%    $  321,037       4.22%    $  268,119      4.14%
                                  ==========               ===========                ==========

</TABLE>


<PAGE>


         The following is a summary of the maturity distribution of certificates
of deposit in amounts of $100,000 or more for James River's banking subsidiaries
as of December 31, 1997:

           Maturities of CDs of $100,000 or More at December 31, 1997

                                           Amount                  Percent
                                          -------                  -------
                                               (Dollars in thousands)
Three months or less                   $        6,776                20.6%
Over three months to twelve months             14,003                42.6%
Over twelve months                             12,089                36.8%
                                       --------------               ------
 Total                                 $       32,868               100.0%
                                       ==============               ======


         Certificates of deposit in amounts of $100,000 or more at December 31,
1997 and 1996 were $32.9 million and $26.1 million, respectively. The balance of
$32.9 million at December 31, 1997, represented 16.9% of total certificates of
deposit. The December 31, 1996 amount represents 13.9% of the total certificates
of deposit balance of $187.9 million at that date.

         James River's banking subsidiaries do not accept brokered deposits, and
all large certificates of deposit are community based.

Short-Term Borrowings

         James River's banking subsidiaries occasionally find it necessary to
purchase federal funds on a short-term basis due to fluctuations in loan and
deposit levels. James River's banking subsidiaries have several arrangements
pursuant to which they may purchase funds. The only borrowings of James River's
banking subsidiaries involve the purchase and sale of federal funds, and is
often an intercompany borrowing. Set forth below are short term borrowings for
James River's banking subsidiaries at the periods indicated. Prior to 1996,
amounts reported below include FCB's applicable balances for the periods
indicated.

                              Short-Term Borrowings
<TABLE>
<CAPTION>

                                                                Years ended December 31,
                                                   --------------------------------------------------
<S> <C>
                                                       1997            1996             1995
                                                       ----            ----             ----
                                                               (dollars in thousands)
Average daily amount of short-term borrowings
  outstanding during the period                   $      620      $       396      $       750
Weighted average interest rate on average
  daily short-term borrowings                           6.45%            5.81%            6.13%
Maximum outstanding short-term borrowings
  outstanding at any month end                         4,000            4,456            5,316
Short-term borrowings outstanding at period end   $        -      $         -      $         -

</TABLE>

<PAGE>


         The following tables illustrate average balances of total
interest-earning assets and total interest-bearing liabilities for James River
and its subsidiaries for the period indicated, showing the average distribution
of assets, liabilities, shareholders' equity, and the related income, expense,
and corresponding weighted average yields and costs. The average balances used
for the purposes of these tables and other statistical disclosures were
calculated by using the daily average balances. Amounts reported below for 1995
include FCB's applicable balances for the year ended June 30.



                                     RATE AND VOLUME ANALYSIS

<TABLE>
<CAPTION>
                                               Years ended December 31,
                         ----------------------------------------------------------------
                             1997 compared to 1996            1996 compared to 1995
                         -------------------------------   ------------------------------
                                        Change Due To:                   Change Due To:
                          Increase    -----------------     Increase     ----------------
                         (Decrease)   Rate      Volume     (Decrease)     Rate     Volume
                         ----------   -----     ------      --------      ----     ------
<S> <C>
Interest income:
  Securities:
    U.S. Treasury         $  (193)   $    7   $   (200)    $   (564)   $    11   $   (575)
    Federal agency            229        (2)       231          755       (131)       886
    State and political
      subdivisions           (137)      (11)      (126)         126        (92)       218
    Federal Reserve stock      32        16         16           18          8         10
    Other equity securities  (651)       (4)      (647)         336        (63)       399
                          -------     -----     ------       ------     ------     ------
      Total Securities       (720)        6       (726)         671       (267)       938
                          -------     -----     ------       ------     ------     ------
Loans:
  Commercial                1,353      (110)     1,463        2,241        112      2,129
  Real estate-construction    579       (42)       621          912         65        847
  Real estate-mortgage        564       277        287          605        261        344
  Installment                 542       (45)       587          237        306        (69)
                          -------     -----     ------       ------     ------     ------
     Total Loans            3,038        80      2,958        3,995        744      3,251
                          -------     -----     ------       ------     ------     ------
  Interest bearing deposits
    in other banks             16       (25)        41          146        (41)       187
  Federal funds sold           10        19         (9)        (115)        26       (141)
                          -------     -----     ------       ------     ------     ------
    Total money market
     investments               26        (6)        32           31        (15)        46
                          -------     -----     ------       ------     ------     ------

    Total interest income   2,344        80      2,264        4,697        462      4,235
                          -------     -----     ------       ------     ------     ------

Interest expense:
  Interest bearing deposits:
    Checking                  (17)      (38)        21           54       (155)       209
    Money market savings       (9)      (21)        12            6        (74)        80
    Regular savings            (1)      (35)        34           58        (42)       100
    Certificates of deposit:
     $100,000 and over        (44)     (300)       256          404         23        381
     Under $100,000           691       139        552        1,924        336      1,588
                          -------     -----     ------       ------     ------     ------
       Total interst bearing
         deposits             620      (255)       875        2,446         88      2,358
                          -------     -----     ------       ------     ------     ------

Federal funds purchased        17         4         13          (23)        (2)       (21)
                          -------     -----     ------       ------     ------     ------
Total interest expense        637      (251)       888        2,423         86      2,337
                          -------     -----     ------       ------     ------     ------
Net interest income      $  1,707   $   331    $ 1,376    $   2,274     $  375   $  1,899
                          =======     =====     ======       ======     ======     =======
</TABLE>



<PAGE>


         The following table describes the impact on the interest income of
James River and its subsidiaries resulting from changes in average balances and
average rates for the periods indicated. The change in interest due to both
volume and rate has been allocated to volume and rate changes in proportion to
the relationship of the absolute dollar amounts of the change in each.


  Average Balances, Interest Income and Expenses, and Average Yields and Rates

<TABLE>
<CAPTION>
                                                                         Years Ended December 31,
                                      ----------------------------------------------------------------------------------------------
                                                     1997                          1996                            1995
                                      -------------------------------  ------------------------------  -----------------------------
                                                 Interest                        Interest                        Interest
                                      Average     Income/   Average     Average   Income/   Average     Average  Income/   Average
                                      Balance     Expense  Yield/rate   Balance   Expense  Yield/rate   Balance  Expense  Yield/rate
                                      -------     -------  ----------   -------   -------  ----------   -------  -------  ----------
<S> <C>
Assets:
Interest bearing assets:
  Securities:
   U.S. Treasury                     $  12,317   $    784    6.37%      $  15,496  $   977   6.30%   $  24,719  $  1,541   6.23%
   Federal agency                       40,317      2,546    6.31%         36,669    2,317   6.32%      23,302     1,562   6.70%
   State and political subdivisions     25,075      1,916    7.64%         26,709    2,053   7.69%      24,000     1,927   8.03%
   Federal reserve stock                 1,732        123    7.10%          1,476       91   6.17%       1,292        73   5.65%
   Other securities                     12,185        839    6.89%         21,538    1,490   6.92%      16,002     1,154   7.21%
                                      --------    -------                --------   ------            --------   -------
     Total Securities                   91,626      6,208    6.78%        101,888    6,828   6.80%      89,315     6,257   7.01%
                                      --------    -------                --------   ------            --------   -------

Loans:
   Commercial                           66,152      5,959    9.01%         50,209    4,606   9.17%      26,424     2,365   8.95%
   Real estate-construction             17,580      1,678    9.54%         11,230    1,099   9.79%       2,031       187   9.21%
   Real estate-mortgage                146,564     12,876    8.79%        143,227   12,312   8.60%     139,139    11,707   8.41%
   Installment                          28,692      3,104   10.82%         23,343    2,562  10.98%      24,056     2,325   9.66%
                                      --------    -------                --------   ------            --------   -------
    Total Loans                        258,988     23,617    9.12%        228,009   20,579   9.03%     191,650    16,584   8.65%
                                      --------    -------                --------   ------            --------   -------
   Interest bearing deposits in
    other banks                          2,161        163    7.54%          1,690      147   8.70%           9         1  11.11%
   Federal funds sold                    6,488        373    5.75%          6,653      363   5.46%       9,426       478   5.07%
                                      --------    -------                --------   ------            --------   -------
    Total money market investments       8,649        536    6.20%          8,343      510   6.11%       9,435       479   5.08%
                                      --------    -------                --------   ------            --------   -------
    Total interest-earning assets/
      total interest income            359,263     30,361    8.45%        338,240   28,017   8.28%     290,400    23,320   8.03%
                                      --------    -------                --------   ------            --------   -------
   Non-interest earning assets:
    Cash and due from banks             12,743                             11,608                        9,262
    Other assets                         8,729                              7,315                        4,062
    Less: Allowance for loan losses     (3,379)                            (3,033)                      (2,801)
    Fixed assets                         8,477                              6,918                        5,084
                                      --------                           --------                     --------
    Total non-interest earning assets   26,570                             22,808                       15,607
                                      --------                           --------                     --------
      Total Assets                    $385,833                           $361,048                     $306,007
                                      ========                           ========                     ========
 Liabilities and shareholders' equity
 Interest bearing liabilities:
  Interest bearing deposits:
  Checking                            $ 37,023  $     949    2.56%       $ 36,242  $   966   2.67%    $ 29,480   $   912   3.09%
  Money market savings                  23,391        753    3.22%         23,035      762   3.31%      20,842       756   3.63%
  Regular savings                       48,601      1,626    3.35%         47,613    1,627   3.42%      44,751     1,569   3.51%
  Certificates of deposit:
  $100,000 and over                     29,396      1,348    4.59%         24,834    1,392   5.61%      17,920       988   5.51%
  Under $100,000                       165,010      9,481    5.75%        155,254    8,790   5.66%     126,091     6,866   5.45%
                                      --------    -------                --------   ------            --------   -------
   Total interest bearing deposits     303,421     14,157    4.67%        286,978   13,537   4.72%     239,084    11,091   4.64%
 Federal funds purchased                   620         40    6.45%            396       23   5.81%         750        46   6.13%
                                      --------    -------                --------   ------            --------   -------
  Total interest bearing liabilities/
       total interest expense          304,041     14,197    4.67%        287,374   13,560   4.72%     239,834    11,137   4.64%
                                      --------    -------                --------   ------            --------   -------

  Non-interest bearing liabilities:
   Demand deposits                      39,789                             34,059                       29,035
   Other liabilities                     3,267                              3,579                        2,645
                                      --------                           --------                     --------
     Total non-interest liabilities     43,056                             37,638                       31,680
                                      --------                           --------                     --------
      Total liabilities                347,097                            325,012                      271,514
  Shareholders' equity                  38,736                             36,036                       34,493
                                      --------                           --------                     --------
   Total Liabilities and
     Shareholders'equity              $385,833                           $361,048                     $306,007
                                      ========                           ========                     ========
Interest spread                                              3.78%                           3.56%                          3.39%
Net interest income/net interest
   margin                                        $16,164     4.50%                 $14,457   4.28%               $12,183    4.20%
                                                 =======                           =======                       =======
</TABLE>

(1) Tax equivalent adjustments (using 34% federal income tax rates) have been
    made in calculating the yields on tax-free loans and investments.
(2) For the purposes of these computations, nonaccruing loans are included in
    the daily average loan amounts outstanding.
(3) Daily average balances are calculated using the aggregate daily average
    balances on a monthly basis.
(4) The yield/rate of the investment securities is computed using the amortized
    cost basis.

<PAGE>


Interest Sensitivity

         An important element of both earnings performance and liquidity is
management of the interest sensitivity gap. The interest sensitivity gap is the
difference between interest-sensitive assets and interest-sensitive liabilities
in a specific time interval. The gap can be managed by repricing assets or
liabilities, by selling investments held for sale, by replacing an asset or
liability at maturity, or by adjusting the interest rate during the life of an
asset or liability. Matching the amounts of assets and liabilities repricing in
the same time interval helps to hedge the interest rate risk and minimize the
impact on net interest income in periods of rising or falling interest rates.

         James River's banking subsidiaries evaluate interest sensitivity risk
and then formulate guidelines regarding asset generation and pricing, funding
sources and pricing, and off-balance sheet commitments in order to decrease
sensitivity risk. These guidelines are based upon management's outlook regarding
future interest rate movements, the state of the regional and national economy,
and other financial and business risk factors.

         On December 31, 1997, James River and it subsidiaries had $59.1 million
more in liabilities than assets that repriced within three months or less and
was, therefore, in a liability-sensitive position. Positive gaps can affect
earnings adversely in a period of falling rates, while negative gaps can
adversely impact earnings in a period of rising rates. To reduce the impact of
shifts in prevailing interest rates, $110.6 million of the loan portfolio of
James River's banking subsidiaries at December 31, 1997, had a repricing
frequency of less than one year. Moreover, as of December 31, 1997, James River
and its banking subsidiaries collectively held $72.0 million in investments held
as "Available for Sale" which could be sold quickly to meet any special funding
needs.


<PAGE>


         The following table illustrates the interest sensitivity gap position
of James River and its subsidiaries as of December 31, 1997. This table presents
a position that existed at one particular day, that changes continually, and
that is not necessarily indicative of James River's position at any other time.

                                       Interest Sensitivity Analysis
<TABLE>
<CAPTION>

                                                                 December 31, 1997
                                                              Maturity or Repricing In:
                                               --------------------------------------------------------------
<S> <C>
                                                  3 Months        4-12         1-5          Over
                                                  or Less        Months       Years        5 Years
                                                  -------        ------       -----        -------
                                                                 (Dollars in thousands)
Interest-sensitive assets:
  Loans                                        $    71,935  $    38,690  $    104,660  $    47,934
  Securities                                         2,376        7,013        36,180       37,456
  Federal Funds sold                                14,382            -             -            -
                                                ----------  -----------  ------------   ----------
    Total interest-sensitive assets            $    88,693  $    45,703  $    140,840  $    85,390
                                                ==========   ==========   ===========   ==========
  Cumulative interest-sensitive assets         $    88,693  $   134,396  $    275,236  $   360,626
                                                ==========   ==========   ===========   ==========

Interest-sensitive liabilities:
  NOW accounts                                 $    37,380  $         -  $          -  $         -
  Regular savings                                   47,130            -             -            -
  Certificates of deposit                           41,082       78,682        73,963           692
  Money market savings                              22,154            -             -             -
                                                   -------      -------       -------       -------
 Total interest-sensitive liabilities          $   147,746  $    78,682  $     73,963  $        692
                                                   =======      =======       =======       =======
  Cumulative interest-sensitive liabilities    $   147,746  $   226,428  $    300,391  $    301,083
                                                   =======      =======       =======       =======
  Period gap                                   $  (59,053)  $  (32,979)  $     66,877  $     84,698
                                                   =======      =======       =======       =======
  Cumulative gap                               $  (59,053)  $  (92,032)  $   (25,155)  $     59,543
                                                   =======      =======       =======       =======
  Ratio of cumulative interest-sensitive
    assets to interest-sensitive
    liabilities                                     60.03%       59.35%        91.63%       119.78%
  Ratio of cumulative gap to total assets           (0.15)       (0.24)        (0.06)          0.15

</TABLE>

<PAGE>


Return on Equity and Assets

         The following table summarizes ratios for James River and its
subsidiaries considered to be significant indicators of James River's
profitability and financial condition during the periods indicated:

                                Return on Equity and Assets

                                                 Years ended December 31,
                                      ------------------------------------------
                                           1997            1996           1995
                                           ----            ----           ----

Return on average assets                   0.99%          0.67%           1.01%
Return on average equity                   9.82%          6.71%           8.97%
Dividend payout ratio                     36.05%         52.80%          33.40%
Average equity to average asset ratio     10.04%          9.98%          11.27%

Market Area and Competition

         James River has four operating bank subsidiaries with a total of 19
banking offices that conduct operations from the Tidewater region of
southeastern Virginia to the tri-city areas of Hopewell, Petersburg and Colonial
Heights in south-central Virginia. All of James River's subsidiaries operate in
highly competitive environments, competing for deposits and loans with other
financial institutions, many of which possess greater financial resources than
those available to James River's subsidiaries. Certain of these institutions
have higher lending limits than James River's subsidiaries and may provide
various services for their customers which James River's subsidiaries do not
offer directly to their customers. In addition, there can be no assurance that
other financial institutions, with substantially greater resources than James
River's subsidiaries, will not establish operations in their respective service
areas.

Supervision and Regulation of James River's Banking Subsidiaries

         James River's subsidiaries are subject to state and federal banking
laws and regulations which impose specific requirements or restrictions and
provide for general regulatory oversight with respect to virtually all aspects
of their operations. The following is a brief summary of certain statutes and
regulations affecting James River's banking subsidiaries. This summary is
qualified in its entirety by reference to the particular statutory and
regulatory provisions referred to below, and it is not intended to be an
exhaustive description of all laws applicable to the business of James River's
subsidiaries. Any change in applicable laws or regulations may have a material
adverse effect on the business and prospects of James River.

         State Chartered Banks. BOS, JRB, and BIW (the "Bank Subsidiaries") are
all state-chartered banks organized under Virginia law. They are also members of
the Federal Reserve System and, therefore, are supervised and examined by the
Federal Reserve, their primary federal regulator. The Federal Reserve and BFI
conduct regular examinations of the Bank Subsidiaries, reviewing the adequacy of
their allowance for loan losses, quality of loans and investments, propriety of
management practices, compliance with laws and regulations and other aspects of
their operations. In addition to these regular examinations, the Bank
Subsidiaries must furnish the Federal Reserve with quarterly reports containing
detailed financial statements and schedules. The Federal Deposit Insurance
Corporation ("FDIC"), which provides deposit insurance, also has authority to
examine and regulate the Bank Subsidiaries.

         Federal and state banking laws and regulations govern all areas of the
operations of the Bank Subsidiaries, including maintenance of cash reserves,
loans, mortgages, maintenance of minimum capital, payment of dividends, and
establishment of branch offices. Federal and state bank regulatory agencies also
have the general authority to eliminate dividends paid by insured banks if such
payment is deemed to constitute an unsafe or unsound practice. The Federal
Reserve has authority to impose penalties, initiate civil administrative
actions, and take other steps to prevent the Bank Subsidiaries from engaging in
unsafe or unsound practices. In this regard, the Federal Reserve has adopted
capital adequacy requirements applicable to its member banks. See "Supervision
and Regulation of James River - Capital Requirements" below.

         Federal Savings Banks. As a federally chartered savings bank, FCB is
subject to regulation, supervision, and periodic examination by the Office of
Thrift Supervision ("OTS") and the FDIC. The regulations of these agencies
govern most aspects of FCB's business and operations. FCB's deposits are insured
by the SAIF and administered by the FDIC to the maximum amount permitted by law,
which is currently $100,000 per depositor in most cases. See "Supervision and
Regulation of James River - Deposit Insurance" below.

         The primary regulator for federal and state savings institutions is now
the OTS, an office in the United States Department of the Treasury. The Director
of the OTS is responsible for the examination and supervision of all savings
institutions. The OTS has authority to issue regulations, conduct examinations
and supervise the operation of savings institutions. The OTS regulatory scheme
is comprehensive and governs, among other things, capital requirements, equity
investments, affordable housing, liquidity, securities issuances, the form of
savings instruments issued by savings institutions, certain aspects of a savings
association's lending activities, including appraisal requirements, maximum loan
amounts, private mortgage insurance coverage, lending authority and
nondiscriminatory lending practices. OTS regulations also restrict transactions
between savings institutions and affiliated parties which are deemed to be a
conflict of interest under the regulations. In addition, the OTS' consent is
required prior to any major corporate reorganization, including a merger.

         FCB has filed applications with regulatory authorities to convert from
a federal savings bank to a Virginia state chartered bank. If these applications
are approved, FCB will become subject to regulation by the Federal Reserve and
BFI to the same extent as James River's other banking subsidiaries.

Supervision and Regulation of James River

         General. As a bank holding company, James River is subject to state and
federal banking and bank holding company laws and regulations which impose
specific requirements or restrictions and provide for general regulatory
oversight with respect to virtually all aspects of its operations.

         Bank Holding Companies. As a bank holding company registered under the
Bank Holding Company Act ("BHC Act"), James River is subject to regulation by
the Federal Reserve. The Federal Reserve has jurisdiction under the BHC Act to
approve any bank or non-bank acquisition, merger or consolidation proposed by a
bank holding company.

         The Federal Reserve may require a bank holding company to serve as a
source of financial strength to its subsidiary depository institutions and to
commit resources to support such institutions in circumstances where it might
not do so absent such policy. In addition, the "cross-guarantee" provisions of
the federal law require insured depository institutions under common control to
reimburse the FDIC for any loss suffered or reasonably anticipated by either the
Savings Association Insurance Fund ("SAIF") or the Bank Insurance Fund ("BIF")
as a result of the default of a commonly controlled insured depository
institution or for any assistance provided by the FDIC to a commonly controlled
insured depository institution in danger of default. The FDIC's claim for
damages is superior to claims of shareholders of the insured depository
institution or its holding company but is subordinate to claims of depositors,
secured creditors and holders of subordinated debt (other than affiliates) of
the commonly controlled insured depository institutions.

         James River is registered under the bank holding company laws of
Virginia. Accordingly, James River and its subsidiaries are also subject to
regulation and supervision by the BFI.

         Savings and Loan Holding Companies. Since James River's acquisition of
FCB, James River has been a savings and loan holding company under federal law
in addition to being a bank holding company. For a discussion of the supervision
and regulation of FCB as a federal savings bank, see "Supervision and Regulation
of James River's Banking Subsidiaries - Federal Savings Banks" above. As also
discussed above, FCB has filed applications with regulatory authorities to
convert from a federal savings bank to a Virginia state chartered bank. If these
applications are approved, James River will no longer be a savings and loan
holding company.

         Capital Requirements. The Federal Reserve, the Office of the
Comptroller of the Currency and the FDIC have issued substantially similar
risk-based and leverage capital guidelines applicable to United States banking
organizations. In addition, those regulatory agencies may from time to time
require that a banking organization maintain capital above the minimum levels
because of its financial condition or actual or anticipated growth. Under the
risk-based capital requirements of these federal bank regulatory agencies, James
River and its subsidiaries are required to maintain a minimum ratio of total
capital to risk-weighted assets of at least 8%. At least half of the total
capital is required to be "Tier 1 capital," which consists principally of common
and certain qualifying preferred shareholders' equity, less certain intangibles
and other adjustments. The remainder, "Tier 2 capital," consists of a limited
amount of subordinated and other qualifying debt (including certain hybrid
capital instruments) and a limited amount of the general loan loss allowance.
The Tier 1 and total capital to risk-weighted asset ratios of James River as of
December 31, 1997 were 14.7% and 16.0%, respectively, exceeding the minimums
required.

         In addition, each of the federal regulatory agencies has established a
minimum leverage capital ratio (Tier 1 capital to average tangible assets).
These guidelines provide for a minimum ratio of 3% for banks and bank holding
companies that meet certain specified criteria, including that they have the
highest regulatory examination rating and are not contemplating significant
growth or expansion. All other institutions are expected to maintain a leverage
ratio of at least 100 to 200 basis points above the minimum. The leverage ratio
of James River as of December 31, 1997, was 9.7%. The guidelines also provide
that banking organizations experiencing internal growth or making acquisitions
will be expected to maintain strong capital positions substantially above the
minimum supervisory levels, without significant reliance on intangible assets.

         The following table sets forth in detail the various capital ratios of
James River and its subsidiaries on a consolidated basis at the dates indicated.

                                      Analysis of Capital

                                                      December 31,
                                      ----------------------------------------
                                           1997            1996           1995
                                           ----            ----           ----
                                                  (Dollars in thousands)

Tier 1 Capital:
  Common stock                         $    18,363   $    12,290    $    12,243
  Additional Paid Capital                    3,572         3,521          3,447
  Retained earnings                         17,663        21,629         20,487
  Less:  Goodwill                          (2,504)       (2,750)          (160)
                                           -------       -------        -------
    Total Tier 1 capital              $     37,094   $    34,690    $    36,017
                                           =======       =======        =======
Tier 2 Capital:
  Allowance for loan losses                  3,151         2,702          2,030
  Allowable long-term debt                       -             -              -
                                           -------       -------        -------
    Total Tier 2 capital              $      3,151   $     2,702    $     2,030
                                           =======       =======        =======
Total Risk-Based Capital              $     40,245   $    37,392    $    38,047
                                           =======       =======        =======
Risk-weighted assets                  $    252,115   $   216,158    $   162,438

Capital Ratios:
  Tier 1 risk-based capital ratio            14.71%        16.05%         22.17%
  Total risk-based capital ratio             15.96%        17.30%         23.42%
  Tier 1 capital to average adjusted
      total assets                            9.68%         9.68%         11.78%


         Deposit Insurance. The deposits of the Company's banking subsidiaries
are insured up to $100,000 per insured depositor (as defined by law and
regulation) by the FDIC through the SAIF and the BIF. The SAIF and the BIF are
administered and managed by the FDIC. As insurer, the FDIC is authorized to
conduct examinations of and to require reporting by SAIF and BIF-insured
institutions. FIRREA also authorizes the FDIC to prohibit any SAIF and
BIF-insured institution from engaging in any activity that the FDIC determines
by regulation or order to pose a serious threat to the SAIF and BIF. The FDIC
also has the authority to initiate enforcement actions against savings
institutions, after first giving the OTS an opportunity to take such action.

         Through the SAIF, the FDIC insures deposits at savings institutions
such as FCB, and through the BIF, the FDIC insures deposits at other financial
institutions (principally commercial banks, state-chartered banks such as BOS,
JRB and BIW, and certain federally chartered savings banks).

         Section 38 of the Federal Deposit Insurance Act, as amended by the
Federal Deposit Insurance Corporation Improvement Act ("FDICIA"), requires that
the federal banking agencies establish five capital levels for insured
depository institutions - "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" and, "critically
undercapitalized" - and requires or permits such agencies to take certain
supervisory actions as an insured institution's capital level falls. The Company
has been notified by the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") that it is classified as a "well capitalized"
institution for this purpose.

         Governmental Monetary Policies and Economic Controls. James River and
its banking subsidiaries are affected by monetary policies of regulatory
authorities, including the Federal Reserve, which regulates the national money
supply in order to mitigate recessionary and inflationary pressures. Among the
techniques available to the Federal Reserve are engaging in open market
transactions in United States Government securities, changing the discount rate
on bank borrowings, and changing reserve requirements against bank deposits.
These techniques are used in varying combinations to influence the overall
growth of bank loans, investments and deposits. Their use may also affect
interest rates charged on loans or paid on deposits. The effect of governmental
policies on the earnings of James River cannot be predicted.

Employees

         At December 31, 1997, James River and its subsidiaries had the
equivalent of 182 full time employees. None of its employees is represented by
any collective bargaining unit. James River considers relations with its
employees to be good.

Certain Executive Officers

         Information regarding certain executive officers is contained in the
1998 Proxy Statement. Set forth below is information regarding Donald W. Fulton,
Jr., James River's Senior Vice President and Chief Financial Officer.

Name                                Age              Business Experience
----                                ---             -------------------
Donald W. Fulton, Jr.               51      For the preceding five years, Mr.
                                            Fulton was an executive officer of
                                            Jefferson Bankshares, Inc. of
                                            Charlottesville, Virginia as its
                                            Vice President Investor Relations.
                                            Jefferson Bankshares was acquired by
                                            Wachovia Corporation on October 31,
                                            1998. From that date through
                                            December 31, 1998, Mr. Fulton was
                                            employed by Wachovia on merger
                                            transition activities pertaining to
                                            financial reporting, corporate
                                            communications, and corporate
                                            securities matters.

Year 2000 Issue

         James River and its subsidiaries have undertaken a variety of measures
to ensure that hardware and software systems will be century date compliant.
James River has established a project plan, completed a hardware and software
inventory, and developed a preliminary impact assessment. James River has
initiated contacts with vendors for specific product compliance confirmation.
The Company also has outlined a plan for testing each system. Testing of primary
software applications will be conducted in conjunction with regularly scheduled
testing and is not expected to result in material additional costs. The testing
phase is expected to be completed by year-end 1998. In addition to efforts to
ensure readiness of internal systems, the Company's bank subsidiaries have
informed all retail and commercial customers of the need to address the Year
2000 issue. In 1997, the Company's plan and its progress in implementing that
plan were reviewed by the Federal Reserve in its regular examination process.
Based upon the results of the preliminary impact assessment and information
provided by vendors, management believes that its plan for determining century
date compliance is adequate and that the Company will not incur significant
incremental costs to achieve compliance.


Item 2.  Properties

         James River's headquarters are located at 1512 Holland Road, Suffolk,
Virginia. The headquarters are owned by BOS. James River does not have any
interest in any other properties other than those owned or leased by its
subsidiaries. James River's four banking subsidiaries collectively own 16 of
their 19 branch banking offices and lease the land for three offices.

Item 3.  Legal Proceedings

         In the course of its operation, James River and its subsidiaries are
parties to various legal proceedings. James River does not believe that the
outcome of these lawsuits, individually or in the aggregate, will have a
material adverse effect on James River's business, financial position or results
of operations.


Item 4.  Submission of Matters to a Vote of Security Holders

         No matters were submitted to James River's shareholders for a vote
during the fourth quarter of the year ended December 31, 1997.


<PAGE>


                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Shareholder Matters

         The information included under "Market Price for Common Stock"
appearing on page 44 of the Annual Report is incorporated herein by reference.


Item 6.  Selected Consolidated Financial Data

        The information included under "Five Year Financial Summary" appearing
on page 14 of the Annual Report is incorporated herein by reference.

Item 7.  Management's Discussion and Analysis of Financial Condition and Results
of Operations

         The information included under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" appearing on pages 8 through 13
of the Annual Report is incorporated herein by reference.


Item 7a.  Quantitative and Qualitative Disclosures About Market Risk

         The information captioned "Liquidity and Market Risk" appearing on
pages 11 and 12 of "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in the Annual Report is incorporated herein by
reference.


Item 8.  Financial Statements and Supplementary Data

         (a)    The Financial Statements and the notes thereto appearing on
                pages 16 through 41 of the Annual Report are incorporated herein
                by reference.

         (b)  Unaudited quarterly financial information for the Company is
              contained in Note 16 on page 41 of the Financial Statements
              included in the Annual Report and is incorporated herein by
              reference. The quarterly financial information in the Annual
              Report is presented on a restated basis and reflects consolidated
              results of operations of BOS, JRB, FCB and BIW for the periods
              presented.


Item 9.  Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

         Not applicable.


<PAGE>


                                    PART III

         The information required by Part III, Items 10, 11, 12 and 13 has been
incorporated herein by reference to the Company's 1998 Proxy Statement as set
forth below in accordance with General Instruction G(3) of Form 10-K.

Item 10.  Directors and Executive Officers of the Registrant

         Information relating to directors and executive officers of the Company
and compliance with Section 16(a) of the Securities Exchange Act of 1934 is set
forth in the sections entitled "Election of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance" in the Company's 1998 Proxy Statement
and is incorporated herein by reference.

Item 11.  Executive Compensation

         Information regarding compensation of officers and directors of the
Company is set forth in the sections entitled "Election of Directors" and
"Executive Compensation" in the Company's 1998 Proxy Statement and is
incorporated herein by reference.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

         Information regarding ownership of the Company's Common Stock is set
forth in the section entitled "Security Ownership of Management and Certain
Beneficial Owners" in the Company's 1998 Proxy Statement and is incorporated
herein by reference.

Item 13.  Certain Relationships and Related Transactions

         Information regarding certain relationships and related transactions
with the Company is set forth in the section entitled "Certain Relationships and
Related Transactions" in the Company's 1998 Proxy Statement and is incorporated
herein by reference.


<PAGE>


                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

         (a)      The following documents are filed as part of this report:

                  1. The following consolidated financial statements of the
                  Company at December 31, 1997 and 1996 and for the three years
                  ending December 31, 1997, 1996 and 1995, and the auditors'
                  report thereon are incorporated by reference to the pages
                  indicated in the Annual Report:

                          Consolidated Financial Statements           Page
                          ---------------------------------           ----
                  Consolidated Balance Sheets                          16
                  Consolidated Statements of Income                    17
                  Consolidated Statements of Shareholders' Equity      18
                  Consolidated Statements of Cash Flows                19
                  Notes to Consolidated Financial Statements           20
                  Report of Independent Auditors                       15

                  2. Financial Statement Schedules - None.

                  3. The exhibits listed on the accompanying Exhibit Index are
                  filed or incorporated by reference as part of this Form 10-K
                  and such Exhibit Index is incorporated herein by reference.

         (b) Reports on Form 8-K - None.

         (c) The exhibits listed on the accompanying Exhibit Index are filed or
         incorporated by reference as part of this Form 10-K and such Exhibit
         Index in incorporated herein by reference.

         (d) Financial Statements excluded from Annual Report pursuant to Rule
         14(a)-3(b) - Not applicable.


<PAGE>


                                   Signatures

         In accordance with Section 13 of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, in the City of
Suffolk, State of Virginia, on March 27, 1998.

                                                  JAMES RIVER BANKSHARES, INC.



                                                  By: /s/ Harold U. Blythe
                                                  ---------------------------
                                                  Harold U. Blythe, President

         In accordance with the Exchange Act, this Report has been signed by the
following persons in the capacities and on the dates stated. Each person, in so
signing, also makes, constitutes and appoints Harold U. Blythe and Glenn T.
McCall and each of them individually, his true and lawful attorney-in-fact in
his place and stead, with full power of substitution, to execute and cause to be
filed with the Securities and Exchange Commission, any and all amendments to
this Report, including any exhibits or other documents filed in connection
therewith.

  Signature                       Title                             Date


/s/ G. P. Jackson              Chairman of The Board              March 26, 1998
--------------------------
G. P. Jackson                  Director


/s/ Bruce B. Gray              Vice Chairman of The               March 26, 1998
--------------------------
Bruce B. Gray                  Board and Director


/s/ Harold U. Blythe           President and Chief Executive      March 26, 1998
--------------------------
Harold U. Blythe               Officer, Director


/s/ Donald W. Fulton, Jr.      Senior Vice President and          March 26, 1998
--------------------------
Donald W. Fulton, Jr.          Chief Financial Officer


/s/ Glenn T. McCall            Senior Vice President and          March 26, 1998
--------------------------
Glenn T. McCall                Director


/s/ James E. Butler, Jr.       Director                           March 26, 1998
--------------------------
James E. Butler, Jr.


/s/ Elmon T. Gray              Director                           March 26, 1998
--------------------------
Elmon T. Gray


/s/ Ben P. Kanak               Director                           March 26, 1998
--------------------------
Ben P. Kanak


/s/ John A. Ramsey, Jr.        Director                           March 26, 1998
--------------------------
John A. Ramsey, Jr.


/s/ Robert E. Spencer, Jr.     Director                           March 26, 1998
--------------------------
Robert E. Spencer, Jr.


/s/ E. V. Stephenson, Jr.      Director                           March 26, 1998
--------------------------
E. V. Stephenson, Jr.


/s/ James C. Stewart           Director                           March 26, 1998
--------------------------
James C. Stewart


<PAGE>


                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
                                                                                            Sequential
Exhibit                                                                                         Page
  No.                                              Description                                 Number
  ---                                              -----------                                 ------
  <S> <C>
  *2.1   Agreement and Plan of Reorganization dated November  21, 1994 (Incorporated             -
         by reference to the Registrant's Registration Statement of Form S-4,
         Commission File No. 33-88322, previously filed with the Commission on
         January 6, 1995).
  *2.2   First Colonial Bank Agreement and Plan of Merger dated June 30, 1995, as                -
         amended (Incorporated by reference to the Registrant's Registration Statement
         on Form S-4, Commission File No. 33-99254, previously filed with the
         Commission on November 13, 1995).
  *2.3   Bank of Isle of Wight Agreement and Plan of Merger dated June 30, 1995                  -
         (Incorporated by reference to the Registrant's Registration Statement on Form
         S-4, Commission File No. 33-99254, previously filed with the Commission on
         November 13, 1995).
  *3.1   Articles of Incorporation of James River Bankshares, Inc. (Incorporated by              -
         reference to the Registrant's Registration Statement on Form S-4, Commission
         File No. 33-88322, previously filed with the Commission on January 6, 1995.)
  *3.2   Amended and Restated Bylaws of James River Bankshares, Inc. (Incorporated by            -
         reference to the Registrant's Form 10-K/A, Commission File No. 0-26314,
         previously filed with the Commission on August 12, 1996).
  *4     Form of Common Stock certificate of James River Bankshares, Inc. (Incorporated          -
         by reference to the Registrant's Registration Statement on Form S-4, Commission
         File No. 33-88322, previously filed with the Commission on January 6, 1995).
  *10.1  Agreement between The Bank of Waverly and First Union National Bank,
         dated - November 13, 1995, regarding branch acquisitions (Incorporated
         by reference to the Registrant's Registration Statement on Form S-4,
         Commission File No. 33-99254, previously filed with the Commission on
         December 22, 1995).
  *10.2  Employment Agreement between James River Bankshares, Inc. and Harold U. Blythe          -
         dated July 18, 1995 (Incorporated by reference to Amendment No. 1 to the
         Registrant's Registration Statement on Form S-4, Commission File No. 33-99254,
         previously filed with the Commission on     December 22, 1995).
  *10.3  Employment Agreement between James River Bankshares, Inc. and Glenn T. McCall           -
         dated July 18, 1995 (Incorporated by reference to Amendment No. 1 to the
         Registrant's Registration Statement on Form S-4, Commission File No. 33-99254,
         previously filed with the Commission on December 22, 1995).
  *10.4  Employment Agreement between First Colonial Bank and James C. Stewart
         dated - February 29, 1996 (Incorporated by reference to the
         Registrant's Form 10-K, Commission File No. 0-26314, previously filed
         with the Commission on April 15, 1996).
  *10.5  Employment Agreement between Bank of Isle of Wight and Robert E. Spencer, Jr.           -
         dated February 29, 1996 (Incorporated by reference to the Registrant's Form 10-K,
         Commission File No. 0-26314, previously filed with the Commission on April 15, 1996).
***10.6  Employment Agreement between James River Bankshares, Inc. and Donald W.
         Fulton, Jr. dated January 1, 1998.
***13    Annual Report to security holders.                                                      -
  *21    List of Subsidiaries.   (Incorporated by reference to the Registrant's Form 10-K,       -
         Commission File No. 0-26314, previously filed with the Commission on April 15, 1996.)
***23.1  Consent of Goodman & Company, L.L.P.
***27.1  Financial Data Schedule
-------------------------------------------------------------------------------------------------------------------
</TABLE>

*        (Not filed herewith. In accordance with Rule 12b-32 of the General
         Rules and Regulations under the Securities Exchange Act of 1934, the
         exhibit is incorporated by reference.)
***      Filed herewith.