U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
                                   (Mark One)

[X]      Annual report under Section 13 or 15(d) of the Securities  Exchange Act
         of 1934

For the fiscal year ended June 30, 1999

|_|      Transition report under Section 13 or 15(d) of the Securities  Exchange
         Act of 1934

For the transition period from                 to
                               ---------------    ---------------

Commission File Number:  0-24674
                         -------

                              SWVA BANCSHARES, INC.
--------------------------------------------------------------------------------
                 (Name of Small Business Issuer in Its Charter)

                       Virginia                                54-1721629
-------------------------------------------------           --------------------
         (State or Other Jurisdiction of                    (I.R.S. Employer
         Incorporation or Organization)                     Identification No.)

      302 Second Street, S.W., Roanoke, Virginia                 24011-1597
-------------------------------------------------           --------------------
         (Address of Principal Executive Offices)              (Zip Code)

                                 (540) 343-0135
                ------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)

Securities  registered  under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:

                     Common Stock, par value $0.10 per share
                     ---------------------------------------
                                (Title of Class)

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

         Check if there is no  disclosure  of  delinquent  filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained,  to the best of  registrant's  knowledge,  in definitive  proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10- KSB. [ ]

         State issuer's revenues for its most recent fiscal year.  $6.3 million

         The aggregate  market value of the voting stock held by  non-affiliates
computed by  reference  to the average bid and asked  prices of such stock as of
August 31, 1999, was $3.6 million.

         As of September 1, 1999,  the  registrant  had 423,612 shares of Common
Stock outstanding.

         Transitional Small Business Disclosure Format (check one)
Yes      No   X
    ---      ---

                       DOCUMENTS INCORPORATED BY REFERENCE

1.   Part II -- Portions of the  registrant's  Annual Report to Stockholders for
     the fiscal year ended June 30, 1999.

2.   Part III -- Portions of the registrant's Proxy Statement for Annual Meeting
     of Stockholders to be held on October 13, 1999.


<PAGE>



                                     PART I

         SWVA  Bancshares,  Inc.  (the  "Company")  may from  time to time  make
written or oral "forward- looking statements", including statements contained in
the Company's  filings with the  Securities and Exchange  Commission  (including
this annual  report on Form 10-KSB and the exhibits to the Form 10- KSB), in its
reports to stockholders and in other  communications  by the Company,  which are
made in good faith by the Company  pursuant to the "safe  harbor"  provisions of
the Private Securities Litigation Reform Act of 1995.

         These forward-looking statements involve risks and uncertainties,  such
as statements of the Company's plans,  objectives,  expectations,  estimates and
intentions,  that are subject to change based on various important factors (some
of which are beyond the Company's control). The following factors, among others,
could cause the Company's  financial  performance to differ  materially from the
plans,  objectives,  expectations,  estimates and  intentions  expressed in such
forward-looking statements: the strength of the United States economy in general
and  the  strength  of  the  local  economies  in  which  the  Company  conducts
operations;  the effects of, and changes in, trade, monetary and fiscal policies
and laws,  including  interest  rate  policies of the Board of  Governors of the
Federal  Reserve  System  (the  "FRB"),  inflation,  interest  rate,  market and
monetary fluctuations;  the timely development of and acceptance of new products
and services of the Company and the perceived  overall  value of these  products
and services by users,  including the features,  pricing and quality compared to
competitors'  products and  services;  the  willingness  of users to  substitute
competitors' products and services for the Company's products and services;  the
success of the  Company in  gaining  regulatory  approval  of its  products  and
services,  when required;  the impact of changes in financial services' laws and
regulations   (including  laws  concerning   taxes,   banking,   securities  and
insurance);  technological  changes;  disruption  in data  processing  caused by
computer  malfunctions  associated  with the Year  2000  problem,  acquisitions;
changes in consumer  spending and saving habits;  and the success of the Company
at managing these risks.

         The  Company  cautions  that  this  list of  important  factors  is not
exclusive.  The  Company  does  not  undertake  to  update  any  forward-looking
statement,  whether written or oral, that may be made from time to time by or on
behalf of the Company.

Item 1.  Description of Business.

Business of the Company

         SWVA   Bancshares,   Inc.  (the  "Company")  is  a   Virginia-chartered
corporation  organized in June of 1994 at the  direction  of Southwest  Virginia
Savings Bank, FSB (the "Bank") to acquire all of the capital stock that the Bank
issued  in its  conversion  from the  mutual  to stock  form of  ownership  (the
"Conversion").  On October 7, 1994, the Bank completed the Conversion and became
a wholly owned subsidiary of the Company. In connection with the Conversion, the
Company issued 570,590 shares of its Common Stock, par value $.10 per share (the
"Common  Stock").  The  Company is a unitary  savings and loan  holding  company
which, under existing laws, generally is not restricted in the types of business
activities  in which it may engage  provided  that the Bank  retains a specified
amount of its  assets in  housing-related  investments.  At June 30,  1999,  the
Company  had total  assets of $81.7  million  and  stockholders'  equity of $6.8
million.

         During the year ended June 30,  1996,  the Company  repurchased  27,400
shares of its  Common  Stock at an  aggregate  purchase  price of  approximately
$466,000. The amount repurchased represented approximately 4.5% of the Company's
total shares outstanding prior to the repurchase.

         During the year ended June 30,  1997,  the Company  repurchased  32,206
shares of its  Common  Stock at an  aggregate  purchase  price of  approximately
$495,000. The amount repurchased represented approximately 5.9% of the Company's
total shares outstanding prior to the repurchase.

                                        1

<PAGE>



         During the year ended June 30,  1998,  the Company  repurchased  14,097
shares of its  Common  Stock at an  aggregate  purchase  price of  approximately
$293,000. The amount repurchased represented approximately 2.8% of the Company's
total shares outstanding prior to the repurchase.

         During the year ended June 30,  1999,  the Company  repurchased  73,275
shares of its Common Stock at an aggregate  purchase price of approximately $1.2
million.  The  amount  repurchased  represented   approximately  14.75%  of  the
Company's total shares outstanding prior to the repurchase.


Business of the Bank

         General.  The Bank is primarily engaged in attracting deposits from the
general  public and using those funds to originate  real estate loans on one- to
four-family residences and, to a lesser extent,  construction,  multi-family and
non-residential  real estate  loans,  commercial  loans and consumer  loans.  In
addition,   the  Bank  invests  in  investment  securities  and  mortgage-backed
securities.  The Bank offers its  customers  both ARMs and  fixed-rate  mortgage
loans. ARMs are originated for retention in the Bank's portfolio. Generally, the
Bank sells fixed rate mortgage loans upon  origination in the secondary  market.
Depending on the level of prevailing  interest rates,  the Bank may retain fixed
rate mortgage loans in its portfolio.  Management of the Bank determines whether
to retain fixed rate mortgage loans in its portfolio on the basis of whether the
interest  rate  received  on  the  loan  would  possibly  be  beneficial  to the
profitability  of the Bank's loan  portfolio  over the average life of the loan.
All  commercial  and  consumer  loans are retained in the Bank's  portfolio  and
management  anticipates  that the  future  focus on  these  types of loans  will
generate  new  business  that will enable the Bank to reduce its  dependence  on
mortgage activity.

         The principal  sources of funds for the Bank's  lending  activities are
deposits and the amortization,  repayment and maturity of loans, investments and
mortgage-backed  securities.  The Bank's primary  sources of income are interest
and fees on loans,  interest on investments and  mortgage-backed  securities and
customer service fees. The Bank's primary expense is interest paid on deposits.

         Market Area. The Bank's primary market area consists of Roanoke County,
the City of Roanoke,  the City of Salem,  and the County of Botetourt.  The Bank
regards this area as its "basic"  lending  area,  but loans are also made in the
adjoining counties of Bedford and Franklin.

         The Bank's main office is located at 302 Second  Street,  S.W.,  in the
City of Roanoke, Virginia. The Bank has one branch office located in the City of
Roanoke.  The Bank has another  branch and a loan  production  office located in
Roanoke County, as well as branch offices in Vinton and Salem, Virginia.

         The Roanoke Valley is equidistant from New York and Atlanta,  230 miles
south of  Washington,  D.C.  and 250 miles  west of the Port of  Hampton  Roads,
Virginia.  The  population  in the Roanoke  Valley area has remained  relatively
stable over the past thirty  years and was  269,100  according  to the 1990 U.S.
Census.  The Roanoke  Valley  area enjoys a  diversified  economy  comprised  of
services, retail,  manufacturing,  government offices, finance,  insurance, real
estate, wholesale trade,  transportation,  public utilities,  construction,  and
agriculture.

         The  outlying  region of the Bank's  market area is rural in nature and
may represent  limited  opportunities  for lending and  investment  growth which
could adversely  affect the Bank's ability to achieve asset growth.  The Bank is
the only savings bank  headquartered  in the Roanoke  Valley area.  This area is
also served by branch offices of regional commercial banks and various community
banks and credit unions.


                                        2

<PAGE>



Lending Activities

         General.  The principal lending activity of the Bank is the origination
of  adjustable-rate  mortgage  loans,  fixed rate mortgage  loans and short-term
loans secured by one- to four-family residences. These fixed-rate and adjustable
rate loans are generally  underwritten to conform to standards  required for the
sale of such loans in the secondary  mortgage  market. A majority of these loans
are sold in the  secondary  market  at the time of  origination.  The Bank  also
originates  some  nonconforming  first mortgage loans to serve  community  needs
which are retained in the Banks's portfolio.  Adjustable-rate  mortgage ("ARMs")
loans  comprised  88.86% of total loans  outstanding  on June 30, 1999.  For the
fiscal  year ended June 30, 1999  adjustable-rate  loans  represented  16.49% of
total mortgage loan  originations.  The Bank also originates  nonresidential and
multi-family real estate loans as well as construction loans,  commercial loans,
home equity  loans and consumer  loans.  The Bank will focus on  increasing  its
commercial  and  consumer  lending in fiscal  2000.  These  loans  offer  income
enhancement  through  higher  yields and shorter  terms and tend to reprice on a
more frequent  basis than  long-term  mortgage  loans.  The Bank is making these
types of loans on what  management  believes  is a  conservatively  underwritten
basis. Going forward,  management intends to emphasize these types of lending to
meet the area's credit needs as well as provide the Bank with better  returns in
it's loan portfolio.

         The  following  table sets  forth the  composition  of the Bank's  loan
portfolio in dollar amounts and in percent of the  respective  portfolios at the
dates indicated.
<TABLE>
<CAPTION>
                                                                             At June 30,
                                             -----------------------------------------------------------------------------
                                                             1999                                  1998
                                             ------------------------------------- ---------------------------------------
                                                         Amount             Percent            Amount             Percent
                                                         ------             -------            ------             -------
                                                                           (Dollars in Thousands)
<S>                                                   <C>                 <C>               <C>                 <C>
Mortgage loans
  Residential, one to four family...........            $32,342              68.94%           $38,596              77.03%
  Residential, multifamily..................              4,187               8.92              4,033               8.05
  Nonresidential and land...................              2,071               4.41              2,513               5.02
  Construction..............................              4,024               8.58              2,980               5.95
Non-mortgage loans
  Consumer loans
    Secured personal........................              1,483               3.16                725               1.45
    Unsecured personal......................                 92                .20                 39                .08
    Auto....................................                177                .38                 34                .07
    Home Improvement........................                 38                .08                 35                .07
    Equity line.............................              2,316               4.94              1,023               2.04
    Other...................................                 80                .17                 59                .11
  Commercial
    Secured.................................                105                .22                 26                .05
    Unsecured...............................                  -                  -                 43                .08
                                                         ------           --------            -------           --------
      Total loans receivable................             46,915             100.00%            50,106             100.00%
                                                                          ========                              ========
Less
  Deferred loan fees........................                 42                                    71
  Undisbursed loans in process..............              1,087                                 1,617
  Allowance for credit losses...............                210                                   207
                                                        -------                               -------
  Loans receivable, net ....................            $45,576                               $48,211
                                                         ======                               =======
</TABLE>



                                        3

<PAGE>



         The  following  table  sets  forth  the  maturity  of the  Bank's  loan
portfolio at June 30, 1999. The table does not include  prepayments or scheduled
principal  repayments.  Prepayments and scheduled principal  repayments on loans
totaled  $25.1  million and $20.1  million,  for the fiscal years ended June 30,
1999 and 1998,  respectively.  ARMs are shown as maturing  based on  contractual
maturities.

<TABLE>
<CAPTION>
                                       Residential               Non-                     Consumer
                                           1-4       Multi-    residential                  and
                                      Real Estate(1) Family    and Land    Construction    Other    Total
                                      -------------- ------ ------------- ------------- ---------  ------

<S>                                        <C>     <C>            <C>      <C>           <C>     <C>
Amounts Due:
Within 3 months.......................      $    -  $     -       $    -     $   840      $  590  $ 1,430
3 months to 1 Year....................           7        -            -         849         100      956
                                            ------   ------        -----         ---         ---    -----
   Total due in one year or less......           7        -            -       1,689         690    2,386
                                            ------   ------        -----       -----        ----    -----

After 1 year:
  1 to 3 years........................         117        -            8       1,435         351    1,911
  3 to 5 years........................         413        -           99         900         289    1,701
  5 to 10 years.......................       3,127      990          601           -         392    5,110
  10 to 20 years......................       7,153    2,565        1,363           -       2,569   13,650
  Over 20 years.......................      21,525      632            -           -           -   22,157
                                            ------   ------        -----       -----       -----   ------
   Total due after one year...........      32,335    4,187        2,071       2,335       3,601   44,529
                                            ------    -----        -----       -----       -----   ------
   Total amount due...................     $32,342   $4,187       $2,071      $4,024      $4,291  $46,915
                                            ======    =====        =====       =====       =====   ======

Less:
Allowance for loan loss...............                                                                210
Loans in process......................                                                              1,087
Deferred loan fees....................                                                                 42
                                                                                                  -------
  Loans receivable, net...............                                                            $45,576
                                                                                                  =======
</TABLE>


         The  following  table sets forth the dollar  amount at June 30, 1999 of
all loans due after June 30, 2000, which have pre-determined  interest rates and
which have adjustable interest rates.


                                                      Adjustable
                                     Fixed Rates         Rates          Total
                                     -----------         -----          -----
                                                    (In Thousands)
Residential one- to four-family......   $ 7,566          $24,769        $32,335
Multi-family.........................     3,182            1,005          4,187
Nonresidential and land .............     1,658              413          2,071
Construction.........................     1,435              900          2,335
Consumer and other...................     1,285            2,316          3,601
                                        -------           ------         ------
  Total(1)...........................   $15,126          $29,403        $44,529
                                        =======           ======         ======


(1)      Before deductions for unearned discounts,  deferred loan costs, net and
         allowances for loan losses.

         One- to  Four-Family  Residential  Loans.  The Bank's  primary  lending
activity  consists of the  origination of one- to  four-family,  owner-occupied,
residential  mortgage  loans secured by property  located in the Bank's  primary
market area. At June 30, 1999,  the Bank had $32.3  million,  or 68.94%,  of its
loan portfolio  invested in these loans.  The Bank also offers home equity lines
of  credit  secured  by one- to  four-family  residential  properties  which are
discussed  below under "-- Consumer and Other Loans."  Management  believes that
this policy of focusing on one- to  four-family  lending has been  effective  in
contributing  to net interest  income while reducing credit risk by keeping loan
delinquencies and losses to a minimum.

                                        4

<PAGE>



         The Bank offers ARMs that adjust  every year and have terms of up to 30
years.  Generally,  the interest rate  adjustments  on ARMs are based on the one
year  Treasury  bill index.  These ARMs have interest rate floors of 6%, so that
the interest rate on such loans cannot adjust below such floors. However, during
the fiscal year ended June 30, 1999, the Bank  originated  some ARMs at interest
rates up to 1.00% below such floors,  although  the initial  rates are not below
the  Bank's  costs of  funds  and do not lead to  negative  amortization  of the
balance  on such  loans.  The ARMs  originated  for the Bank's  portfolio  carry
interest rate ceilings up to 5.00% above the initial interest rate on the loans.
The Bank considers the market factors and competitive  rates on loans as well as
its own cost of funds when determining the rates on the loans that it offers.

         The retention of ARMs in the Bank's  portfolio  greatly helps to reduce
the  Bank's  exposure  to  changes  in  interest  rates.   However,   there  are
unquantifiable  credit  risks which could  result from  potential  loan  payment
increases to the borrower as a result of the  repricing of ARMs.  It is possible
that during periods of rapidly  rising  interest  rates,  the risk of default on
ARMs may increase due to the upward adjustment of interest cost to the borrower.
Currently, the ARMs originated by the Bank provide for initial rates of interest
less than the fully  indexed  rates that would  prevail  were the index used for
repricing  applied  initially.  These  loans are  subject to  increased  risk of
delinquency  or  default  when  the  higher,  fully-  indexed  rate of  interest
subsequently comes into effect and replaces the lower initial rate.

         Generally, during periods of rising interest rates, the risk of default
on ARMs is  considered  to be greater  than the risk of default on a  fixed-rate
loan due to the upward  adjustment of interest  costs to the  borrower.  To help
reduce  such risk,  the Bank  qualifies  loans  above 80%  loan-to-value  at the
maximum second year rate, as opposed to the original  interest rate. ARMs may be
made at up to 95% of the loan to value ratio.  The Bank does not originate  ARMs
with negative amortization.

         The Bank also offers conventional  fixed-rate mortgage loans with terms
from 15 to 30 years.  A majority of the 15 to 30 year  fixed-rate  mortgages are
sold in the secondary mortgage market.

         Regulations  limit the amount which a savings  association  may lend in
relationship  to the  appraised  value of the real estate  securing the loan, as
determined  by an appraisal at the time of loan  origination.  Such  regulations
permit a maximum  loan-to-value  ratio of 100% for residential  property and 90%
for all other real estate loans. The Bank's lending policies, however, generally
limit  the  maximum  loan-to-value  ratio to 80% of the  appraised  value of the
property, based on an independent appraisal. When the Bank makes a mortgage loan
in excess of 80% of the  appraised  value or purchase  price,  private  mortgage
insurance  is  required  for at least the amount of the loan in excess of 80% of
the appraised value.

         The  loan-to-value   ratio,   maturity  and  other  provisions  of  the
residential  real  estate  loans made by the Bank  reflect  the policy of making
loans generally below the maximum limits permitted under applicable regulations.
The Bank requires an  independent  appraisal,  title  insurance or an attorney's
opinion, flood hazard insurance (if applicable), and fire and casualty insurance
on all properties securing real estate loans made by the Bank. The Bank reserves
the right to approve the selection of which title insurance  companies' policies
are acceptable to insure the real estate title in the loan transactions.

         While one- to  four-family  residential  real estate loans are normally
originated with 15-30 year terms,  such loans typically  remain  outstanding for
substantially  shorter  periods.  This is because  borrowers  often prepay their
loans in full upon sale of the property  pledged as security or upon refinancing
the original loan. In addition,  substantially  all of the mortgage loans in the
Bank's loan portfolio  contain  due-on-sale  clauses providing that the Bank may
declare the unpaid amount due and payable upon the sale of the property securing
the loan. The Bank enforces these due-on-sale clauses to the extent permitted by
law.

                                        5

<PAGE>



Thus, average loan maturity is a function of, among other factors,  the level of
purchase and sale activity in the real estate market,  prevailing interest rates
and the interest rates payable on outstanding loans.

         Multi-Family  and  Non-residential  Real Estate Loans.  The Bank in the
past has originated  non-residential  real estate and multi-family  loans.  This
type of lending  represents  a small  portion of the Bank's  lending  activities
although  management  anticipates  growth  in  the  respective  portfolio  as we
actively  seek quality  projects.  There were $300,000 in  non-residential  real
estate loans originated  during the fiscal year ended June 30, 1999.  During the
same period, the bank originated $781,000 in multi-family loans.

         Non-residential real estate loans consist of permanent loans secured by
small office buildings,  churches,  shopping centers, and other  non-residential
buildings.  Non-residential  real  estate  and  multi-family  secured  loans are
generally  originated  in  amounts  up to  75%  of the  appraised  value  of the
property.  Such appraised value is determined by an independent  appraiser which
has been  previously  approved  by the Bank.  Multi-family  loans are  generally
secured by apartment buildings of 36 or fewer units.

         Non-residential  real  estate  and  multi-family  loans  are  generally
originated  on  an  adjustable-rate  basis  with  the  interest  rate  adjusting
annually.  Some of these  loans have an  interest  rate that is fixed for two to
three  years and then  adjusts  annually.  The Bank also  makes  some fixed rate
non-residential real estate and multi-family mortgages.

         Loans secured by multi-family and non-residential real estate generally
involve a greater  degree of risk than one- to  four-family  mortgage  loans and
carry larger loan balances.  This  increased  credit risk is a result of several
factors,  including the  concentration of principal in a limited number of loans
and borrowers,  the effects of general  economic  conditions on income producing
properties and the increased difficulty of evaluating and monitoring these types
of loans.  Furthermore,  the repayment of loans secured by  non-residential  and
multi-family real estate is typically dependent upon the successful operation or
management of the related real estate project. If the cash flow from the project
is reduced,  the borrower's ability to repay the loan may be impaired.  The Bank
seeks to minimize these risks in a variety of ways,  including limiting the size
of such loans and strictly scrutinizing the financial condition of the borrower,
the quality of the collateral  and the  management of the property  securing the
loan. The Bank may also obtain  personal  guarantees.  Substantially  all of the
properties  securing the Bank's  non-residential  and  multi-family  real estate
loans are inspected by the Bank's lending personnel before the loan is made. The
Bank generally obtains appraisals on each property in accordance with applicable
regulations.  At June 30, 1999, the largest non-residential or multi-family real
estate loan had a balance of $1.1 million and was secured by  multi-family  real
estate and was performing. See "-- Loans to One Borrower."

         Construction   Lending.   The  Bank  engages  in  construction  lending
involving loans to qualified  borrowers for  construction of one- to four-family
residential  properties and, on a limited basis,  involving  non-residential and
multi-family properties. These properties are located in the Bank's market area.

         Construction  loans are made to builders on a speculative  basis and to
owners  for  construction  of their  primary  residence.  Loans for  speculative
housing construction are made to area builders after a background check has been
made.  The  Bank  usually  will  have  no  more  than  four  construction  loans
outstanding  at any time to any single  builder.  Construction  loans on one- to
four-family properties are generally limited to a maximum loan-to-value ratio of
80%  and  have  a  maximum  maturity  of  12  months.   Construction   loans  on
non-residential  and multi-family  properties are generally limited to a maximum
loan-to-value  ratio of 75% and  have a  maximum  maturity  of 18  months.  Loan
proceeds are disbursed in increments as construction progresses and only after a
physical  inspection  of the  project is made by a  representative  of the Bank.
Accrued interest on loan  disbursements  is paid monthly.  At June 30, 1999, the
Bank had $2.3  million  in  construction  loans  outstanding  to  builders  on a
speculative basis, with

                                        6

<PAGE>



$552,000  in loans in  process  (funds  being  held for  construction  progress)
outstanding and attributed to these loans.

         Construction  loans to owners have either fixed or adjustable rates and
are  underwritten  in  accordance  with the same terms and  requirements  as the
Bank's permanent  mortgages on existing  properties except that the builder must
qualify as an approved  contractor by the Bank, and the loans generally  provide
for disbursement of loan proceeds in stages during the construction  period.  An
approved  contractor is one who has been approved by a title  insurance  company
that will insure the Bank against  mechanics'  liens or whose credit,  financial
statements and experience have been approved by the Bank. Borrowers are required
to  pay  accrued  interest  on  the  outstanding   balance  monthly  during  the
construction  phase.  At June  30,  1999,  there  was  $658,000  outstanding  in
construction  loans to owners  with  $289,000  outstanding  in loans in  process
allocated  to  these  projects.   There  were  $553,000  in  construction  loans
originated on nonresidential and multi-family  properties during the fiscal year
ended June 30, 1999.

         Construction  financing  is  generally  considered  to involve a higher
degree of risk of loss than  long-term  financing  on  improved,  occupied  real
estate.  Risk of loss on a  construction  loan is  dependent  largely  upon  the
accuracy  of the initial  estimate  of the  property's  value at  completion  of
construction  or  development  and the estimated  cost  (including  interest) of
construction. During the construction phase, a number of factors could result in
delays and cost  overruns.  If the  estimate of  construction  cost proves to be
inaccurate,  it may be necessary for the Bank to advance funds beyond the amount
originally  committed to permit completion of the construction.  If the estimate
of value proves to be inaccurate, the Bank may be confronted, at or prior to the
maturity of the loan,  with  collateral  having a value which is insufficient to
assure full repayment. As a result of the foregoing,  construction lending often
involves the  disbursement  of substantial  funds with repayment  dependent,  in
part,  on the success of the  project.  If the Bank is forced to  foreclose on a
property prior to or at completion  due to a default,  there can be no assurance
that the Bank will be able to recover all of the unpaid  balance of, and accrued
interest on, the loan as well as related foreclosure and holding costs. The Bank
has sought to minimize this risk by limiting  construction  lending to qualified
borrowers in the Bank's  market area and by limiting the number of  construction
loans outstanding at any time.

         Consumer  and  Other  Loans.  The Bank  views  consumer  lending  as an
important  component of its lending  operations because consumer loans generally
have  shorter  terms and higher  yields,  thus  reducing  exposure to changes in
interest  rates.  In addition,  the Bank believes that offering  consumer  loans
helps to expand and create stronger ties to its customer base. Consequently, the
Bank has increased its consumer  lending by marketing  home equity loans and all
other types of consumer loans to existing and potential  customers.  Regulations
permit  federally-chartered  savings  associations to make secured and unsecured
consumer loans up to 35% of the Bank's assets. In addition, the Bank has lending
authority  above  the  35%  limit  for  certain  consumer  loans,  such  as home
improvement loans and loans secured by savings accounts.

         Consumer  loans  consist  of  personal  secured  and  unsecured  loans,
automobile,  boat and recreational  vehicle loans,  savings account loans,  home
improvement and home equity loans.

         The Bank also offers a home equity line of credit, which is a revolving
line of credit secured by a first or second mortgage, and which is accessible to
the  customer  by either  writing a check or  requesting  an advance at a branch
office of the Bank. The rate on such loans is adjustable monthly.

         The  underwriting  standards  employed by the Bank for  consumer  loans
include a determination of the applicant's payment history on other debts and an
assessment of ability to meet existing  obligations and payments on the proposed
loan. In addition,  the stability of the applicant's monthly income from primary
employment is considered during the underwriting  process.  Creditworthiness  of
the applicant is of primary

                                        7

<PAGE>



consideration;  however,  the underwriting process also includes a comparison of
the value of the security, if any, in relation to the proposed loan amount.

         The  Bank  is  allowed  to  make  secured  and   unsecured   loans  for
nonresidential,  corporate,  business and agricultural  purposes  (including the
issuance  of letters of credit)  secured  by real  estate,  business  equipment,
inventories,  accounts  receivable and cash equivalents in amounts not exceeding
10% of the Bank's assets.  Non-real  estate  commercial  lending by the Bank has
been limited,  however,  it has significant focus in our forward game plan as we
expand our loan  product  offerings.  These  loans have  generally  been made to
building  contractors  and small  business  operations.  Letters of credit  have
mostly been provided to contractors for use in land development.  The letters of
credit have generally been secured by real estate and generally contain personal
guarantees of the principals of the borrowing entity.

         The aggregate amount of commercial  business loans  outstanding may not
exceed  20% of the  Bank's  assets,  and  amounts in excess of 10% of such total
assets may be used only for small business loans. As of June 30, 1999,  $105,000
or 0.22% of the Bank's loan  portfolio was  categorized  as commercial  business
loans.

         Consumer  and  commercial  loans  entail  greater  credit  risk than do
residential mortgage loans,  particularly in the case of consumer and commercial
loans which are unsecured or secured by assets that depreciate rapidly, which in
the  case of  consumer  loans  include  automobiles,  mobile  homes,  boats  and
recreational  vehicles  and in the case of  commercial  loans  include  business
equipment,  inventories  and  accounts  receivable.  In such cases,  repossessed
collateral  for a  defaulted  consumer  or  commercial  loan may not  provide an
adequate  source  of  repayment  for the  outstanding  loan  and  the  remaining
deficiency often does not warrant further substantial collection efforts against
the borrower.  In  particular,  amounts  realizable  on the sale of  repossessed
automobiles or business  equipment may be  significantly  reduced based upon the
condition  of the  collateral  and the lack of demand  for used  automobiles  or
business equipment.

         Loan Solicitation,  Approval and Processing. The Bank's sources of loan
applications are referrals from existing or past customers, real estate brokers,
call-in and walk-in  customers,  builders and the result of  advertising.  Going
forward, mortgage originators,  branch managers, consumer and commercial lenders
will be proactive in solicitation of new business.

         Specified  officers have  individual loan authority for approval of all
types of credit.  A combination  of the  President  and two other  officers have
authority up to and  including  $250,000.  The  management  loan  committee  has
authority up to and including  $500,000.  All contruction  loans, all letters of
credit, and lines of credit over $25,000 must be approved by the management Loan
Committee.  The  Board of  Directors  Loan  Committee  has  authority  up to and
including  $750,000.  All credits over $750,000 must be approved by the Board of
Directors.  The Bank uses Office of Thrift Supervision (the "OTS") guidelines as
to legal loan limits.

         All loan  authorities  represent total direct and indirect  obligations
owing to Bank to include  unfunded  commitments  and to exclude  debt on primary
residence  secured by First Deed of Trust to the Bank. Debt on primary residence
secured by First Deed of Trust to the Bank is included in total  liability recap
for determination on limit to loans to one borrower.

         The Bank uses  independent  fee  appraisers on all real estate  related
transactions.  Each fee appraiser  used must be state  licensed or certified and
approved by the Bank's  Board of  Directors.  It is the Bank's  policy to obtain
title insurance or an attorney's opinion and certification of title and fire and
casualty  insurance  for all  mortgage  loans.  Flood  insurance is required for
properties located in flood zones.


                                        8

<PAGE>



         Loan Originations,  Purchase, Sales and Repayments. The following table
sets forth the Bank's loan originations, sales, and principal repayments for the
periods indicated.


                                                     Year Ended June 30,
                                                 ---------------------------
                                                  1999                1998
                                                --------            --------
                                                      (In Thousands)
Total gross loans receivable at
  beginning of period........................... $50,106            $52,884

Loans originated:
  One- to four-family residential...............  38,319             27,544
  Multi-family residential......................     781                100
  Non-residential and land......................     300                567
  Construction loans............................   4,713              3,391
  Consumer loans................................   1,796                526
                                                  ------             ------
    Total loans originated......................  45,909             32,128
                                                  ------             ------

Loans purchased:
  One- to four-family residential...............       -                 28
  Multi-family residential......................       -                  -
  Non-residential and land......................   1,313                315
                                                  ------            -------
  Total loans purchased.........................   1,313                343
                                                  ------            -------

Loans sold...................................... (30,742)           (19,796)
                                                 -------            -------

Other loan activity:
  Loan principal repayments..................... (25,125)           (20,061)
  Other (net)...................................   5,454              4,608
                                                 -------            -------
  Net other loan activity....................... (19,671)           (15,453)
                                                 -------            -------

  Total gross loans receivable at
    end of period............................... $46,915            $50,106
                                                 =======            =======



         Loan  Purchases  and Sales.  Prior to 1990 the  Bank's  loan sales were
insignificant.  Any loans  sold  were  individual  loans  with  other  financial
institutions.  The Bank began  originating loans to sell in the secondary market
in 1990. In March 1992, the Bank opened a loan  production  office separate from
its  banking  facilities  to  concentrate  more  activity  for loan sales in the
secondary  market.  The Bank originates  mostly fixed-rate loans for sale in the
secondary  market.  These  loans  include  15  to  30  year,  80%  loan-to-value
conventional  loans (the portion of the loans above 80% are insured with private
mortgage  insurance),  Federal  Housing  Administration  ("FHA")  and  Veteran's
Administration  ("VA") loans.  The Bank uses standard Federal Home Loan Mortgage
Corporation("FHLMC")/Federal     National    Mortgage    Association    ("FNMA")
documentation for its conventional loans.

         Currently,  the Bank sells loans to other  lenders who sell directly to
FHLMC, FNMA and Government  National  Mortgage  Association  ("GNMA").  The Bank
sells the majority of its loans with  servicing  released.  These loans are sold
without recourse.


         Loan Commitments. The Bank issues loan commitments for 60 days or less.
No points are normally  charged for these  commitments.  The Bank will  consider
extended  commitment periods and may charge fees based on the length and type of
commitment. At June 30, 1999, the Bank had $2.5 million of

                                        9

<PAGE>



commitments  to  finance  real  estate  acquisitions  and  construction  and had
contracted to sell $486,000 of such loans.

         Loan  Processing and Servicing  Fees. In addition to interest earned on
loans,  the Bank recognizes fees and service charges which consist  primarily of
fees  charged  for loan  originations  and loans  serviced  for  others and late
charges.  The Bank  recognized loan servicing fees of $6,000 for the fiscal year
ended June 30,  1999.  As of June 30, 1999,  the Bank had no loan fees  deferred
under  GAAP.  As of June 30,  1999,  loans  serviced  for the  Virginia  Housing
Development  Authority  ("VHDA")  totaled  $800,000 and loans serviced for FHLMC
totaled $292,000.

         Loans to One  Borrower.  Savings  associations  are subject to the same
limits as those  applicable to national banks,  which under current  regulations
limit loans-to-one  borrower in an amount equal to 15% of unimpaired capital and
retained income on an unsecured  basis and an additional  amount equal to 10% of
unimpaired  capital  and  retained  income  if the loan is  secured  by  readily
marketable collateral  (generally,  financial  instruments,  not real estate) or
$500,000, whichever is higher. The amount is calculated according to the capital
at the time of the loan and may differ  from  current  calculations.  The Bank's
maximum  loan-to-one  borrower limit was  approximately  $981,000 as of June 30,
1999.

         The Bank's  largest group of loans to one borrower at June 30, 1999 was
$1.1 million which consisted of loans secured by apartment buildings. The second
largest  group of loans to one borrower was  $995,000  which  consisted of loans
secured by duplex  apartment  buildings.  The next largest group of loans to one
borrower was $983,000  which  consisted of loans  secured by single family homes
for sale and developed building lots.

         Loan  Delinquencies.  Loans past due more than 90 days are individually
examined  for  potential  losses and the ultimate  collectibility  of funds due.
Loans are deemed to have no loss exposure if the value of the property  securing
the loan exceeds the  receivable  balance on the loan or collection is probable.
Such loans are kept on an accruing status pending monthly review. Loans that are
deemed  to  contain  a  potential  loss  exposure  to the  Bank  are  placed  on
non-accrual  status  by the Bank  and all  interest  past  due on such  loans is
reserved.  Specific reserves are established to recognize losses on non-accruing
loans on a case-by-case basis.

         Real estate  acquired by the Bank as a result of foreclosure or by deed
in lieu of foreclosure  is classified as foreclosed  real estate until such time
as it is sold. When  foreclosed  real estate is acquired,  it is recorded at the
lower of fair value or cost. Valuations are periodically performed by management
and  subsequent  charges  to income  are taken  when it is  determined  that the
carrying value of the property  exceeds the fair value less  estimated  costs to
sell.


                                       10

<PAGE>



         Non-Performing  Assets.  The  following  table sets  forth  information
regarding  loans which are 90 days or more  delinquent  but on which the Bank is
accruing  interest at the dates  indicated.  At June 30,  1999,  the Bank had no
loans accounted for on a non-accrual basis and no restructured  loans within the
meaning of SFAS 15.
<TABLE>
<CAPTION>
                                                                         At June 30,
                                                                     -----------------
                                                                      1999       1998
                                                                     ------     ------
                                                                       (In Thousands)

<S>                                                                  <C>     <C>
Accruing loans which are contractually past due 90 days or more:
Mortgage loans:
  Permanent loans secured by one-to four- family dwelling units ...   $ 61    $   102
  All other mortgage loans ........................................      -          -
                                                                      ----    -------
Total .............................................................   $ 61    $   102
                                                                      ====    =======
Total non-accruing loans past due 90 days or more .................   $  -      $   -
                                                                      ----    -------
Foreclosed real estate ............................................   $  -    $     -
                                                                      ----    -------
Total non-performing assets .......................................   $  -    $     -
                                                                      ====    =======
Total non-performing loans past due 90 days or more to total loans     .00%       .00%
Total non-performing loans past due 90 days or more to total assets    .00%       .00%
                                                                      ====    =======
Total non-performing assets to total assets .......................    .00%       .00%
                                                                      ====    =======
</TABLE>


         Classified Assets. The Office of Thrift Supervision ("OTS") regulations
provide for a classification  system for problem assets of insured  institutions
which  covers all problem  assets.  Under this  classification  system,  problem
assets of insured  institutions are classified as "substandard,"  "doubtful," or
"loss." An asset is considered  "substandard" if it is inadequately protected by
the  current net worth and paying  capacity of the obligor or of the  collateral
pledged,  if  any.  "Substandard"  assets  include  those  characterized  by the
"distinct  possibility" that the insured institution will sustain "some loss" if
the deficiencies are not corrected.  Assets classified as "doubtful" have all of
the  weaknesses  inherent  in those  classified  "substandard,"  with the  added
characteristic  that the weaknesses  present make  "collection or liquidation in
full," on the basis of currently existing facts,  conditions and values, "highly
questionable and improbable."  Assets  classified as "loss" are those considered
"uncollectible"  and of such  little  value  that  their  continuance  as assets
without the  establishment  of a specific loss reserve is not warranted.  Assets
designated  "special  mention" by management  are assets  included on the Bank's
internal  watch list  because of potential  weakness but which do not  currently
warrant classification in one of the aforementioned categories.

         When  an  insured  institution  classifies  problem  assets  as  either
substandard or doubtful,  it may establish general  allowances for credit losses
in an amount deemed prudent by  management.  General  allowances  represent loss
allowances which have been established to recognize the inherent risk associated
with lending activities,  but which, unlike specific  allowances,  have not been
allocated to particular problem assets. When an insured  institution  classifies
problem  assets as  "loss,"  it is  required  either  to  establish  a  specific
provision for losses equal to 100% of that portion of the asset so classified or
to  charge  off  such  amount.   An   institution's   determination  as  to  the
classification  of its  assets  and the amount of its  valuation  allowances  is
subject  to  review  by the  OTS,  which  may  recommend  the  establishment  of
additional  general or  specific  loss  allowances.  A portion  of general  loss
allowances  established to cover possible losses related to assets classified as
substandard  or  doubtful  may  be  included  in  determining  an  institution's
regulatory  capital,  while  specific  valuation  allowances  for credit  losses
generally do not qualify as regulatory capital.

                                       11

<PAGE>



         The following table provides further  information  regarding the Bank's
classified assets and allowances for credit losses at June 30, 1999.


                                                  (In Thousands)
          Special Mention...................            $  -
          Substandard.......................             179
          Doubtful assets...................               4
          Loss assets.......................               -
          General loss allowance............             210
          Specific loss allowance...........               -
          Charge-offs.......................              10


         All loans  classified as substandard and were on single family mortgage
loans. The doubtful loan is on an unsecured consumer loan.

         Foreclosed Real Estate. Real estate acquired by the Bank as a result of
foreclosure,  judgment  or by  deed  in lieu of  foreclosure  is  classified  as
foreclosed  real  estate  until it is sold.  When  property  is  acquired  it is
recorded  at the lower of the cost or fair  value.  The Bank held no  foreclosed
real estate at June 30, 1999.

         Allowances for Credit Losses.  The Bank provides  valuation  allowances
for estimated losses from uncollectible loans.  Management's periodic evaluation
of the adequacy of the allowance for credit losses is based on loss  experience,
known and inherent risk in the  portfolio,  prevailing  market  conditions,  and
management's  judgment as to collectibility.  The allowance for credit losses is
increased  by  charges  to  earnings  and  decreased  by  charge-offs   (net  of
recoveries).

         The following  table sets forth the Bank's  allowance for credit losses
and related ratios.

<TABLE>
<CAPTION>

                                                                  At June 30,
                                                             ---------------------
                                                               1999         1998
                                                             --------    ---------
                                                             (Dollars in Thousands)

<S>                                                         <C>          <C>
Total loans ..............................................   $ 46,915     $ 50,106
                                                             ========     ========

Allowance balances (at beginning of period) ..............   $    207     $    217
Provision ................................................         13           33
Net Charge-offs ..........................................        (10)         (43)
                                                             --------     --------
Allowance balance (at end of period) .....................   $    210     $    207
                                                             ========     ========

Allowance for credit losses as a percentage of total loans        .45%         .41%
                                                             ========     ========

</TABLE>


                                       12

<PAGE>



         Allocation of Allowance for Loan Losses. The following table sets forth
the allocation of the Bank's  allowance for loan losses by loan category and the
percent of loans in each category to total loans  receivable,  net, at the dates
indicated.  The  portion  of the loan  loss  allowance  allocated  to each  loan
category  does not  represent  the total  available  for future losses which may
occur  within  the loan  category  since the  total  loan  loss  allowance  is a
valuation reserve applicable to the entire loan portfolio.
<TABLE>
<CAPTION>
                                                                At June 30,
                                       -----------------------------------------------------------
                                               1999                           1998
                                       ----------------------------  -----------------------------
                                                     Percent of                     Percent of
                                                    Loans in Each                  Loans in Each
                                                     Category to                    Category to
                                        Amount       Total Loans      Amount        Total Loans
                                        ------       -----------      ------        -----------
                                                    (Dollars in Thousands)
<S>                                     <C>            <C>            <C>              <C>
Residential, one-four family.....        $ 145           68.94%        $ 142             77.03%
Residential, multifamily.........           19            8.92            20              8.05
Nonresidential and land..........            9            4.41            16              5.02
Construction.....................           18            8.58            14              5.95
Consumer.........................           18            8.93            14              3.82
Commercial.......................            1            0.22             1              0.13
                                          ----          ------          ----            ------
                                         $ 210          100.00%        $ 207            100.00%
                                           ===          ======           ===            ======
</TABLE>

Investment and Mortgage-backed Securities Activities

         Investment  Securities.  The Bank is required under federal regulations
to maintain a minimum amount of liquid assets which may be invested in specified
short-term  securities  and certain  other  investments.  The Bank has generally
maintained  a liquidity  portfolio  well in excess of  regulatory  requirements.
Liquidity  levels may be  increased or  decreased  depending  upon the yields on
investment  alternatives and upon management's judgment as to the attractiveness
of the  yields  then  available  in  relation  to  other  opportunities  and its
expectation of future yield levels,  as well as  management's  projections as to
the short-term  demand for funds to be used in the Bank's loan  origination  and
other  activities.  At June 30,  1999,  the Bank  had an  investment  securities
portfolio  of  approximately  $30.1  million,   consisting   primarily  of  U.S.
government and agency  obligations,  interest bearing deposits,  FHLB stock, and
marketable  equity  securities.  The Bank will  continue  to seek  high  quality
investment  securities  for  liquidity  purposes.  The Bank seeks  high  quality
investment securities up to 30 years in maturity.

         Effective July 1, 1994, the Bank adopted Financial Accounting Standards
Board Statement 115 ("FASB 115"),  "Accounting  for certain  Investments in Debt
and Equity  Securities,"  which resulted in the  reclassification  of investment
securities  and  mortgage-backed  securities  into those which are available for
sale and those which are intended to be held to maturity. The unrealized gain or
loss on the securities classified as available for sale, along with those of the
marketable  equity  securities,  are recognized,  net of the expected income tax
effect, as a separate component of retained earnings.

         Beginning  in 1992,  the Bank  expanded  its  investment  portfolio  to
incorporate ARM Mutual Funds,  primarily  short-term  investments.  These funds,
which  primarily  invest in  adjustable  rate  mortgage-backed  securities,  are
available  for sale and  marked  to  market  at the end of each  month  with all
adjustments  in value  reported to the Board of Directors  monthly.  At June 30,
1999, the Bank had no funds in the ARM Mutual Funds.

                                       13

<PAGE>



         Mortgage-backed   Securities.  The  Bank  has  in  the  past  purchased
mortgage-backed  securities  guaranteed by participation  certificates issued by
the FHLMC and secured by interests in pools of conventional mortgages originated
by the  Bank.  These  mortgage  backed  securities  are  classified  as "held to
maturity".

         Mortgage-backed   securities  are  secured  by  interest  in  pools  of
conventional  mortgages or government  backed mortgage loans originated by other
mortgage lenders.  The Bank may purchase  mortgage-backed  securities from FNMA,
GNMA and FHLMC and generally classifies them as "available for sale". During the
year  ended  June  30,   1999,   the  Bank   purchased   $6.5  million  in  GNMA
mortgage-backed securities.

         Mortgage-backed  securities  provide for monthly  payments of principal
and interest and  generally  have  contractual  maturities  ranging from five to
thirty years.  However, due to expected repayment terms being significantly less
than the underlying  mortgage loan pool  contractual  maturities,  the estimated
lives of these securities could be significantly shorter.

         As of  June  30,  1999,  mortgage-backed  securities  amounted  to $9.6
million or 11.69% of total assets.

Investment and Mortgage-Backed Securities Portfolio

         The  following  table  sets  forth  the  carrying  value of the  Bank's
investment  securities  portfolio,   short-term  investments,  FHLB  stock,  and
mortgage backed and related securities at the dates indicated. At June 30, 1999,
the fair value of the Bank's investment portfolio was $31.7 million.

<TABLE>
<CAPTION>
                                                                              1999                          1998
                                                                   ---------------------------  ---------------------
                                                                           Amortized    Fair    Amortized   Fair
                                                                              Cost      Value     Cost      Value
                                                                              ----      -----     ----      -----
                                                                                    (Dollars in Thousands)
<S>                                                                         <C>       <C>       <C>       <C>
Available for sale securities:
  US Government & Agency Bonds ...........................................   $12,000   $11,476   $ 9,750   $ 9,812
  Federal Home Loan Bank
            of Atlanta Stock .............................................       600       600       961       961
  FNMA mortgage-backed securities ........................................       681       700     1,324     1,369
  GNMA mortgage-backed securities ........................................     8,591     8,412     9,509     9,490
  Municipal Bonds ........................................................     2 442     2,346       930       936
                                                                             -------   -------   -------   -------
                                                                              24,314    23,534    22,474    22,568
                                                                             -------   -------   -------   -------
Held to maturity securities:
  Interest-bearing deposits (1) ..........................................     7,878     7,878     7,840     7,840
  FHLMC participation certificates .......................................       283       292       318       327
                                                                             -------   -------   -------   -------
                                                                               8,161     8,170     8,158     8,167
                                                                             -------   -------   -------   -------
                                      Total investment securities ........   $32,475   $31,704   $30,632   $30,735
                                                                             =======   =======   =======   =======
</TABLE>

---------------------
(1) Includes time and overnight deposits which are also cash equivalents.

                                       14

<PAGE>



         The  following  table  sets forth  certain  information  regarding  the
carrying values, weighted average yields and maturities of the Bank's investment
portfolio at June 30, 1999.

<TABLE>
<CAPTION>
                             One Year or Less    One to Five Years  More than Five Years Total Investment Portfolio
                            ------------------- ------------------- -------------------- ---------------------------
                             Amortized  Average Amortized  Average  Amortized  Average   Amortized  Average    Fair
                               Cost      Yield    Cost      Yield     Cost      Yield      Cost      Yield     Value
                            ----------- ------- ---------- -------- ---------- --------- --------- --------- --------
                                       (Dollars in Thousands)

<S>                           <C>         <C>    <C>         <C>    <C>          <C>     <C>         <C>    <C>
Interest-bearing deposits..   $ 7,581     5.55%  $   297     5.68%  $      -         -%   $ 7,878     5.55%  $ 7,878
US Government &
 agency bonds..............         -        -         -        -     12,000      6.92     12,000     6.92    11,476
Mortgage-backed
  securities...............         -        -         -        -      9,555      7.15      9,555     7.15     9,404
FHLB Stock.................       600     7.50         -        -          -         -        600     7.50       600
Municipal Bonds............         -        -         -        -      2,442      4.66      2,442     4.66     2,346
                              -------   ------   -------   ------    -------      ----    -------    -----   -------
  Total....................   $ 8,181     5.69%  $   297     5.68%  $ 23,997      6.78%   $32,475     5.69%  $31,704
                              =======   ======   =======   ======    =======     =====    =======    =====   =======
</TABLE>


Sources of Funds

    General.  The  major  source  of the  Bank's  funds  for  lending  and other
investment  purposes are  deposits,  amortization  and  prepayment  of loans and
mortgage-backed securities,  maturities of investment securities and operations.
Scheduled  loan principal  repayments  are a relatively  stable source of funds,
while  deposit  inflows and  outflows  and loan  prepayments  are  significantly
influenced by general  interest rates and market  conditions.  The Bank has also
utilized advances from the FHLB of Atlanta.

    Deposits. Customer deposits are attracted principally from within the Bank's
primary  market  area  through  the  offering  of a broad  selection  of deposit
instruments including  noninterest-bearing  demand deposit accounts,  negotiable
order of withdrawal  ("NOW")  accounts,  regular  savings,  money market deposit
accounts,  term certificate  accounts,  individual  retirement accounts ("IRAs")
with fixed and variable  rates of interest and club  accounts.  Deposit  account
terms vary according to the minimum balance required,  the time period the funds
must remain on deposit and the interest rate.

    The interest  rates paid by the Bank on deposits are set at the direction of
the asset/liability committee which consists of senior management.  The interest
rates on deposit  account  products are  determined by evaluating  the following
factors: (I) the Bank's anticipated need for cash and the timing of that desired
cash  flow;   (ii)  the  interest   rates  offered  by  other  local   financial
institutions,  and the degree of competition the Bank wishes to maintain;  (iii)
the cost of borrowing  from other  sources  versus the cost of  acquiring  funds
through customer deposits;  and (iv) the Bank's  anticipation of future economic
conditions and related interest rates.

    The Bank relies primarily on its service and longstanding  relationship with
customers to obtain  deposits and does not accept brokered  deposits.  It is the
intent of the Bank's  management to increase  deposits  through  advertising and
marketing.  Products  emphasized  are  checking  accounts  and  certificates  of
deposit.

    Noninterest-bearing  demand  deposit  accounts,  NOW accounts,  money market
accounts, regular savings and club accounts constituted $18.6 million, or 30.02%
of the Bank's deposit portfolio at June 30, 1999. At that date,  certificates of
deposit constituted $43.5 million or 69.98% of the deposit portfolio,  including
certificates  of deposit  with  principal  amounts of  $100,000  or more,  which
constituted $5.6

                                       15

<PAGE>



million or 9.09% of the deposit portfolio.  The Bank generally negotiates retail
rates for certificates of deposit of $95,000 or more.

    The  following  table sets  forth the  distribution  of the  Bank's  deposit
accounts for the periods  indicated and the weighted  average  interest rates on
each category presented.

<TABLE>
<CAPTION>
                                                                           At June 30,
                                       -----------------------------------------------
                                                         1999                                      1998
                                       ----------------------------------------  ----------------------
                                                                     Weighted                                  Weighted
                                                         Percent      Average                     Percent       Average
                                                        of Total      Nominal                    of Total       Nominal
                                          Amount        Deposits       Rate         Amount       Deposits        Rate
                                          ------        --------       ----         ------       --------        ----
                                                                     (Dollars in Thousands)
Demand accounts:
<S>                                         <C>                 <C>          <C>    <C>                   <C>            <C>
  Noninterest-bearing demand deposit..        $1,284              2.07%        .00%   $    953             1.40%          .00%
  NOW.................................         5,434              8.75        1.49      4,768             6.98          1.74
  Money market........................         3,233              5.21        2.52      3,168             4.64          2.96
  Regular savings.....................         8,626             13.89        3.00      7,421            10.87          3.00
  Club................................            62              0.10        2.00         60             0.08          2.00
                                              ------             -----                 ------            -----
     Total............................        18,639             30.02                 16,370            23.97
                                              ------             -----                 ------            -----

  Certificate accounts:
  Fixed rates of interest:
     7 to 91 days.....................            87              0.14        3.00         87             0.12          3.00
     Over 91 to 180 days..............         2,505              4.03        3.99      2,920             4.28          4.65
     Over 181 to 365 days.............        15,121             24.35        4.63     23,491            34.40          5.53
     Over 1 year to 3 years...........        11,506             18.53        5.09     12,162            17.81          5.33
     Over 3 years and up..............           254               .41        5.15        250              .37          5.19
     Other............................         7,475             12.04        5.24      6,133             8.98          5.55
Variable rates of interest
     Up to 1 year.....................             -               .00         .00          -              .00           .00
     Over 1 year......................         6 229             10.03        4.79      6,532             9.57          5.42
Negotiable rate.......................           278               .45        5.05        343              .50          5.56
                                              ------            ------                 ------           ------
         Total........................        43,455             69.98                 51,918            76.03
                                              ------            ------                 ------           ------
         Total deposits...............       $62,094            100.00%       4.07%   $68,288           100.00%         4.70%
                                              ======            ======                 ======           ======
</TABLE>


         The  following  table  sets forth the  amount  and  maturities  of time
deposits at June 30, 1999.


                                           Amount Due
                           -------------------------------------------------
                                                          After
                           June 30,   June 30, June 30,  June 30,
                             2000       2001      2002     2003     Total
                           -------   -------   -------   -------   -------
                                               (In Thousands)

3.00-4.00% .............   $ 1,489   $  --     $  --     $  --     $ 1,489
4.01-5.00% .............    19,935     3,094       320        18    23,367
5.01-6.00% .............    17,597       756        10        36    18,399
6.01-7.00% .............       200      --        --        --         200
                           -------   -------   -------   -------   -------
  Total ................   $39,221   $ 3,850   $   330   $    54   $43,455
                           =======   =======   =======   =======   =======




                                       16

<PAGE>




         The following table indicates the amount of the Bank's  certificates of
deposit  and  other  time  deposits  $100,000  or more by time  remaining  until
maturity as of June 30, 1999.



                                              Certificates
                                               of Deposits
                                             (In Thousands)
Within three months.........................      $1,662
Three through six months....................       1,053
Six through twelve months...................       2,585
Over twelve months..........................         344
                                                  ------
                                                  $5,644
                                                  ======


         Borrowings.  Deposits  are the  primary  source of funds of the  Bank's
lending and investment  activities and for its general  business  purposes.  The
Bank may also obtain  advances from the FHLB of Atlanta to supplement its supply
of lendable funds and to use for investment  activities.  Advances from the FHLB
of Atlanta  would  typically  be secured by a pledge of the Bank's  stock in the
FHLB of Atlanta  and a portion of the Bank's  first  mortgage  loans and certain
other  assets.  The Bank,  if the need arises,  may also access the FRB discount
window to supplement its supply of lendable funds and to meet deposit withdrawal
requirements.  At June 30,  1999,  the Bank had  $12.0  million  in  outstanding
advances  from  FHLB.  The Bank had a  $375,000  outstanding  balance  on a note
payable to the Company as of June 30, 1999.

Competition

         The  Bank  encounters  strong  competition  both in the  attraction  of
deposits  and  origination  of real  estate  and other  loans.  Competition  for
deposits comes  primarily  from numerous  credit  unions,  commercial  banks and
savings  institutions  with offices in the Bank's market area.  Competition  for
loans comes primarily from branches of commercial  banks and mortgage  companies
that operate in the areas which  comprise the Bank's primary market area. Due to
their  size,  many of the  Bank's  competitors  possess  greater  financial  and
marketing  resources.  The  Bank  competes  for  savings  accounts  by  offering
depositors  competitive interest rates and a high level of personal service. The
Bank competes for loans  primarily  through the interest  rates and loan fees it
charges and the efficiency and quality of services it provides  borrowers,  real
estate brokers and contractors.

         Thrift  institutions  can offer a wide range of services to the public,
such as demand  deposits,  trust services and consumer and  commercial  lending.
These  factors,  combined  with  increasingly  sophisticated  depositors,   have
dramatically increased competition for savings dollars among thrift institutions
and other types of  investment  entities,  as well as with  commercial  banks in
regard to loans,  checking  accounts and other types of financial  services.  In
addition, large conglomerates and investment banking firms compete in the market
for financial services.


                                       17

<PAGE>



Subsidiary Activity

         The Bank is  permitted  to invest up to 2% of its assets in the capital
stock of, or secured or unsecured  loans to,  subsidiary  corporations,  with an
additional  investment  of 1% of  assets  when  such  additional  investment  is
utilized primarily for community development  purposes.  Under such limitations,
as of June 30, 1999, the Bank was authorized to invest up to approximately  $1.7
million in the stock of, or loans to,  service  corporations  (based upon the 2%
limitation). As of June 30, 1999, the net book value of the Bank's investment in
its service corporation was approximately $21,000.

         The Bank has one subsidiary,  Southwest  Virginia Service  Corporation,
Inc.  which was  incorporated  in 1975 in the  Commonwealth  of Virginia  and is
engaged in the sale of annuities,  credit life and  disability  insurance to the
borrowers of the Bank. The income from this subsidiary was $5,000 for the fiscal
year ended June 30, 1999.

Employees

         As of June 30, 1999, the Bank had 38 full-time  employees.  None of the
Bank's  employees are  represented by a collective  bargaining  group.  The Bank
believes that its relationship with its employees is good.

Regulation

         Set  forth  below is a brief  description  of  certain  laws  which are
related to the regulation of the Company and the Bank. The following description
does not purport to be complete and is qualified in its entirety by reference to
all applicable laws and regulations.

Company Regulation

         General.  The  Company is a unitary  savings and loan  holding  company
subject to  regulatory  oversight by the OTS. The Company files reports with the
OTS and is subject to regulation and  examination  by the OTS. In addition,  the
OTS has enforcement  authority over the Company and its non- savings association
subsidiaries,  should such subsidiaries be formed, which also permits the OTS to
restrict or prohibit  activities that are determined to be a serious risk to the
subsidiary  savings  association.  This  regulation  and  oversight  is intended
primarily  for the  protection  of the  depositors  of the  Bank and not for the
benefit of stockholders of the Company.

         Qualified  Thrift  Lender Test.  As a unitary  savings and loan holding
company, the Company generally is not subject to activity restrictions, provided
the Bank  satisfies  the Qualified  Thrift  Lender  ("QTL") test. If the Company
acquires  control of another savings  association as a separate  subsidiary,  it
would become a multiple savings and loan holding company,  and the activities of
the  Company  and any of its  subsidiaries  (other  than the  Bank or any  other
savings association  insured by the Savings  Association  Insurance Fund (SAIF")
would become subject to restrictions applicable to bank holding companies unless
such  other  associations  each also  qualify  as a QTL and were  acquired  in a
supervisory acquisition.


                                       18

<PAGE>



Bank Regulation

         General. As a federally  chartered,  SAIF-insured  savings association,
the Bank is subject to extensive  regulation by the OTS and the Federal  Deposit
Insurance  Corporation (the "FDIC").  Lending  activities and other  investments
must comply with various federal statutory and regulatory requirements. The Bank
is also subject to certain reserve requirements promulgated by the FRB.

         The OTS, in conjunction with the FDIC,  regularly examines the Bank and
prepares  reports for the  consideration of the Bank's Board of Directors on any
deficiencies that are found in the Bank's  operations.  The Bank's  relationship
with its depositors and borrowers is also regulated to a great extent by federal
and state law,  especially in such matters as the ownership of savings  accounts
and the form and content of the Bank's mortgage documents.

         The Bank must file  reports  with the OTS and the FDIC  concerning  its
activities  and  financial  condition,   in  addition  to  obtaining  regulatory
approvals  prior to entering into certain  transactions  such as mergers with or
acquisitions  of other savings  institutions.  This  regulation and  supervision
establishes a comprehensive  framework of activities in which an institution can
engage and is intended  primarily for the protection of the SAIF and depositors.
The  regulatory  structure  also  gives  the  regulatory  authorities  extensive
discretion in connection with their  supervisory and enforcement  activities and
examination  policies,  including policies with respect to the classification of
assets and the  establishment  of adequate  loan loss  reserves  for  regulatory
purposes.  Any change in such regulations,  whether by the OTS, the FDIC, or the
U.S. Congress could have a material adverse impact on the Company, the Bank, and
their operations.

         Insurance of Deposit Accounts.  The Bank's deposit accounts are insured
by the SAIF to a maximum of $100,000 for each insured  member (as defined by law
and  regulation).  Insurance  of deposits may be  terminated  by the FDIC upon a
finding that the institution has engaged in unsafe or unsound  practices,  is in
an unsafe or unsound  condition  to  continue  operations  or has  violated  any
applicable law, regulation,  rule, order or condition imposed by the FDIC or the
institution's primary regulator.

         As a member of the SAIF, the Bank paid an insurance premium to the FDIC
equal to a minimum  of 0.23% of its  total  deposits.  The FDIC  also  maintains
another insurance fund, the Bank Insurance Fund ("BIF"), which primarily insures
commercial  bank  deposits.  Effective  September 30, 1995, the FDIC lowered the
insurance  premium of BIF insured deposits to a range of between 0.04% and 0.31%
of deposits with the result that most commercial banks would pay the lowest rate
of 0.04%.  Effective  January 1, 1996, the annual insurance premium for most BIF
members was lowered to $2,000.  These  reductions in insurance  premiums for BIF
members placed SAIF members at a competitive disadvantage to BIF members.

         Effective  September  30,  1996,  federal  law was revised to mandate a
one-time  special  assessment on SAIF members such as the Bank of  approximately
 .657% of deposits  held on March 31, 1995.  The Savings Bank recorded a $355,000
pre-tax expense for this assessment at September 30 1996.  Beginning  January 1,
1997,  the deposit  insurance  assessment  for most SAIF  members was reduced to
approximately  .065% of  deposits  on an annual  basis  through the end of 1999.
During this same  period,  BIF members will be assessed  approximately  .013% of
deposits.  After 1999,  assessments for BIF and SAIF members may be the same. It
is expected that these continuing assessments for both SAIF and BIF members will
be used

                                       19

<PAGE>



to repay  outstanding  Financing  Corporation bond  obligations.  As a result of
these changes, beginning January 1, 1997, the rate of deposit insurance assessed
the Bank declined by approximately 70%.

         Regulatory  Capital  Requirements.   OTS  capital  regulations  require
savings institutions to meet three capital standards: (1) tangible capital equal
to 1.5% of total adjusted  assets,  (2) a leverage ratio (core capital) equal to
at least 3% of total adjusted assets, and (3) a risk-based  capital  requirement
equal to 8.0% of total risk-weighted assets.

         Dividend and Other Capital  Distribution  Limitations.  OTS regulations
require  the  Bank  to  give  the OTS 30 days  advance  notice  of any  proposed
declaration of dividends to the Company, and the OTS has the authority under its
supervisory  powers to prohibit  the payment of  dividends  to the  Company.  In
addition,  the Bank may not declare or pay a cash  dividend on its capital stock
if the effect of the dividend would be to reduce the  regulatory  capital of the
Bank  below the amount  required  for the  liquidation  account  established  in
connection with the Conversion.
         OTS regulations  impose  limitations upon all capital  distributions by
savings  institutions,  such  as  cash  dividends,  payments  to  repurchase  or
otherwise acquire its shares, payments to shareholders of another institution in
a  cash-out  merger,  and  other  distributions   charged  against  capital.  An
institution  that exceeds all capital  requirements  before and after a proposed
capital  distribution  and has not been advised by the OTS that it is in need of
more than the  normal  supervision  can,  after  prior  notice to the OTS,  make
capital  distributions  during a  calendar  year equal to its net income to date
during the calendar  year plus  retained net income for the preceding two years.
Any additional capital  distributions  require prior regulatory approval. In the
event the Bank's capital fell below its requirements or the OTS notified it that
it was in need of more than  normal  supervision,  the  Bank's  ability  to make
capital  distributions could be further restricted.  In addition,  the OTS could
prohibit  a  proposed  capital  distribution  by any  institution,  which  would
otherwise  be  permitted  by the  regulation,  if the OTS  determines  that such
distribution would constitute an unsafe or unsound practice.


         Qualified Thrift Lender Test. Savings institutions must meet a QTL test
or the definition of a domestic building and loan association under Section 7701
of the Internal Revenue Code (the "Code").  If the Bank maintains an appropriate
level of qualified  thrift  investments  (primarily  residential  mortgages  and
related  investments,   including  certain   mortgage-related   securities)  and
otherwise  qualifies as a QTL or a domestic  building and loan  association,  it
will continue to enjoy full borrowing  privileges from the FHLB of Atlanta.  The
required  percentage of qualified thrift  investments is 65% of assets while the
Code requires investments of 60% of assets.

         Federal Reserve System. The FRB requires all depository institutions to
maintain  non-interest  bearing  reserves  at  specified  levels  against  their
transaction accounts (primarily checking,  NOW, and Super NOW checking accounts)
and non-personal time deposits.

Item 2. Description of Property.

         (a)  Properties.

         The Bank  conducts  its  business  through a main  office,  four branch
offices and one loan  origination  office.  The Bank  believes  that the current
facilities are adequate to meet the present and immediately foreseeable needs of
the Bank.

                                       20

<PAGE>




         The Bank obtains rental income through the leasing of space in its main
office building.  During the fiscal year ended June 30, 1999, such rental income
was $102,000.

         In the opinion of the management of the Bank, all properties listed are
adequately covered by insurance.

         (b) Investment  Policies.  See "Item 1.  Description of Business" above
for a general  description of the Bank's investment  policies and any regulatory
or Board of  Directors'  percentage  of  assets  limitations  regarding  certain
investments.  All of the Bank's investment policies are reviewed and approved by
the Board of Directors of the Bank,  and such  policies,  subject to  regulatory
restrictions (if any), can be changed without a vote of stockholders. The Bank's
investments are primarily acquired to produce income.

                  (1)  Investments  in Real Estate or  Interests in Real Estate.
See  "Item  1.  Description  of  Business  --  Lending   Activities,"  "Item  1.
Description  of  Business  --  Regulation  --  Bank  Regulation"  and  "Item  2.
Description of Property -- (a) Properties" above.

                  (2)  Investments  in  Real  Estate  Mortgages.  See  "Item  1.
Description  of  Business -- Lending  Activities"  and "Item 1.  Description  of
Business -- Regulation -- Bank Regulation."

                  (3)  Investments  in  Securities  of or  Interests  in Persons
Primarily  Engaged  in Real  Estate  Activities.  See  "Item 1.  Description  of
Business -- Lending  Activities," "Item 1. Description of Business -- Regulation
--  Bank  Regulation"  and  "Item  1.  Description  of  Business  --  Subsidiary
Activity."

         (C)  Description of Real Estate and Operating Data.

         Not Applicable.

Item 3. Legal Proceedings.

         The Bank, from time to time, is a party to ordinary routine litigation,
which arises in the normal course of business,  such as claims to enforce liens,
condemnation  proceedings  on  properties  in  which  the  Bank  holds  security
interests,  claims involving the making and servicing of real property loans and
other issues incident to the business of the Bank. In the opinion of management,
the resolution of these lawsuits would not have a material adverse effect on the
financial condition or results of operations of the Bank or the Company.

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

         No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year ended June 30, 1999.


                                       21

<PAGE>


                                     PART II

Item  5.  Market for Common Equity and Related Stockholder Matters.

         The  information  contained  under the section  captioned  "Stock Price
Information"  on page 1of the Company's  Annual Report to  Stockholders  for the
fiscal year ended June 30, 1999 (the "Annual Report"), is incorporated herein by
reference.

Item  6.  Management's  Discussion  and  Analysis  or  Plan  of  Operation.  The
information  contained in the section  captioned  "Management's  Discussion  and
Analysis of Financial  Condition and Results of  Operations" on pages 6 and 7 of
the Annual Report is incorporated herein by reference.

Item  7.  Financial Statements.


         The  following  report and  financial  statements  of the  Company  are
incorporated by reference from the Annual Report.

Report of Independent Auditors

Statement of Financial Condition as of the Fiscal Years Ended
  June 30, 1999 and 1998

Statement of Operations for the Fiscal Years Ended
  June 30, 1999, 1998 and 1997

Statement of Changes in Stockholders' Equity for the Fiscal Years Ended June 30,
  1999, 1998 and 1997

Statement of Cash Flows for the Fiscal Years
  Ended June 30, 1999, 1998 and 1997

Notes to Financial Statements

         The remaining  information appearing in the Annual Report is not deemed
to be filed as part of this report, except as expressly provided herein.

Item  8.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure.

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


                                       22

<PAGE>

                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.

         The information  contained under the section  captioned  "Proposal I --
Election of  Directors"  in the  Company's  definitive  proxy  statement for the
Company's  Annual  Meeting of  Stockholders  to be held on October 13, 1999 (the
"Proxy Statement") is incorporated herein by reference.

         Additional information concerning executive officers is included in the
Proxy Statement in the section  captioned  "Section 16(a)  Beneficial  Ownership
Reporting Compliance."

Item 10.  Executive Compensation.

         The  information  contained  in the  section  captioned  "Proposal I --
Election of  Directors  --  Executive  Compensation"  in the Proxy  Statement is
incorporated herein by reference.
Item 11.  Security Ownership of Certain Beneficial Owners and Management.

         (a)      Security Ownership of Certain Beneficial Owners

                  Information  required by this item is  incorporated  herein by
                  reference  to the section  captioned  "Voting  Securities  and
                  Principal Holders Thereof" in the Proxy Statement.

         (b)      Security Ownership of Management

                  Information  required by this item is  incorporated  herein by
                  reference  to the  chart  in  the  section  captioned  "Voting
                  Securities  and  Principal  Holders  Thereof" and to the first
                  chart in the  section  captioned  "Proposal  I --  Election of
                  Directors" in the Proxy Statement.

         (c)      Management of the Company knows of no arrangements,  including
                  any pledge by any person of  securities  of the  Company,  the
                  operation of which may at a subsequent date result in a change
                  in control of the Company.

Item 12.  Certain Relationships and Related Transactions.

         The  information  required  by this  item  is  incorporated  herein  by
reference  to the section  captioned  "Proposal I --  Election of  Directors  --
Certain Relationships and Related Transactions" in the Proxy Statement.


                                       23

<PAGE>



Item 13. Exhibits, List and Reports on Form 8-K.
<TABLE>
<CAPTION>
         (a)      Exhibits
                 <S>     <C>
                   3.1     Articles of Incorporation of SWVA Bancshares, Inc.*
                   3.2     Bylaws of SWVA Bancshares, Inc.**
                  10.1     Consultant Agreement with B. L. Rakes
                  10.2     Employment Agreement with D. W. Shilling
                  10.3     Employment Agreement with Barbara C. Weddle
                  10.4     Supplemental Executive Retirement Plan for B.L. Rakes***
                  10.5     Supplemental Executive Retirement Plan for Barbara C. Weddle***
                  10.6     1994 Stock Option Plan****
                  10.7     Management Stock Bonus Plan****
                  10.8     1998 Directors Stock Compensation Plan*****
                  10.9     Payment and Release Agreement with B. L. Rakes
                  10.10    Stock Option Agreement with B. L. Rakes
                  13       Annual Report to Stockholders for the fiscal year ended June 30, 1999
                  21       Subsidiaries of the Registrant***
                  23       Consent of Cherry Bekaert & Holland L.L.P.
                  27       Financial Data Schedule
</TABLE>

*     Incorporated by reference to Exhibit 3.1 of the Registration Statement  on
      Form S-1 (SEC File No. 33-80434) filed with the SEC on June 17, 1994.

**    Incorporated by reference to Exhibit 3.2 of the Registrant's  Form  10-QSB
      (SEC File No. 0-24674) filed with the SEC for the fiscal quarter ended
      December 31, 1997.

***   Incorporated  by  reference  to the identically  numbered  exhibit  to the
      Registrant's Form 10-KSB (SEC File No. 0-24674) filed with the SEC for the
      fiscal year ended June 30, 1995.

****  Incorporated  by  reference  to the  identically  numbered  exhibit to the
      Registrant's  Form 10-KSB (SEC File No. 0-24674) for the fiscal year ended
      June 30, 1997.

***** Incorporated by reference to Exhibit 10.1 of the  Registrant's Form 10-QSB
      (SEC File No.  0-24674)  filed  with the SEC for the fiscal quarter  ended
      March 31, 1998.

         (b)      In the last quarter of the fiscal year ended June 30, 1999, no
                  reports on Form 8-K were filed by the Registrant with the SEC.





<PAGE>


                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                              SWVA BANCSHARES, INC.



                                  By:      /s/ D. W. Shilling
                                           -------------------------------------
                                           D. W. Shilling
                                           President, Chief Executive Officer,
                                           Chief Financial Officer, and Director
                                           (Duly Authorized Representative)

         Pursuant to the  requirement  of the  Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities indicated as of September 27, 1999.

<TABLE>
<CAPTION>

<S>                                        <C>
/s/ Barbara C. Weddle                       /s/ D. W. Shilling
-----------------------------------         --------------------------------------------
Barbara C. Weddle                           D. W. Shilling
Senior Vice President and Secretary         President, Chief Executive Officer,
                                            Chief Financial Officer, and Director
                                            (Principal Executive and Financial Officer)


/s/ Mary G. Staples                         /s/ B. L. Rakes
-----------------------------------         --------------------------------------------
Mary G. Staples                             B. L. Rakes
Principal Accounting Officer                Chairman of the Board



/s/ F. Courtney Hoge                        /s/ James H. Brock
-----------------------------------         --------------------------------------------
F. Courtney Hoge                            James H. Brock
Director                                    Director



/s/ Glen C. Combs                           /s/ Michael M. Kessler
-----------------------------------         --------------------------------------------
Glen C. Combs                               Michael M. Kessler
Director                                    Director

</TABLE>