<PAGE>

                    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 December 31, 2000
                          -----------------

                                       OR

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

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

Commission file number        1-10506
                       ------------------------------------------------------

                              Essex Bancorp, Inc.
                              -------------------
                (Name of small business issuer in its charter)

              Delaware                                     54-1721085
              --------                                     ----------
    (State or other jurisdiction of)                     (I.R.S. Employer
     incorporation or organization)                     Identification No.)

      Interstate Corporate Center
         Building 9, Suite 200
          Norfolk, Virginia                                     23502
          -----------------                                     -----
        (Address of principal                                 (Zip Code)
          executive offices)

Issuer's telephone number, including area code:  (757) 893-1300

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, Par Value $.01 Per Share           American Stock Exchange
--------------------------------------           -----------------------
            (Title of Class)                 (Exchange on Which Registered)

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

Check whether the issuer (1) has 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 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. [X]

Issuer's revenues for its most recent fiscal year were $24,782,606.

As of March 23, 2001, the aggregate market value of the voting stock held by
nonaffiliates of the registrant was approximately $1,347,034.  The aggregate
market value is computed with reference to the average bid and asked prices.
Shares of common stock held by each executive officer and director have been
excluded in that such persons may be deemed to be affiliates.  This
determination of affiliate status is not necessarily conclusive.

As of March 23, 2001, 1,060,642 shares of common stock ($.01 par value) were
outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Annual Report to Stockholders for the year ended December 31,
2000 are incorporated by reference into Parts I and II hereof.
Portions of the Proxy Statement for the Annual Meeting to be held on June 21,
2001 are incorporated by reference into Part III hereof.

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

                                       1
<PAGE>

                              Essex Bancorp, Inc.
                      Annual Report on Form 10-KSB for the
                          Year Ended December 31, 2000

                               Table of Contents
                               -----------------
<TABLE>
<CAPTION>


                                                                 Page
                                                                 ----
<S>         <C>                                                  <C>
Part I
------

Item 1      Description of Business............................     3
Item 2      Description of Properties..........................    36
Item 3      Legal Proceedings..................................    37
Item 4      Submission of Matters to a Vote of Security Holders    37


Part II
-------

Item 5      Market for Registrant's Common Equity and
              Related Stockholder Matters......................    37
Item 6      Management's Discussion and Analysis of
              Financial Condition and Results of Operations....    38
Item 7      Financial Statements...............................    38
Item 8      Changes in and Disagreements with Accountants
              on Accounting and Financial Disclosure...........    38


Part III
--------

Item 9      Directors and Executive Officers; Compliance
              With Section 16(a) of the Exchange Act...........    38
Item 10     Executive Compensation.............................    39
Item 11     Security Ownership of Certain Beneficial
              Owners and Management............................    40
Item 12     Certain Relationships and Related Transactions.....    40
Item 13     Exhibits and Reports on Form 8-K...................    41
</TABLE>

                                       2
<PAGE>

                                     PART I
                                     ------

Item 1.   Description of Business
          -----------------------

Organization and Background

    The following organizational chart depicts Essex Bancorp, Inc. and its
subsidiaries as of December 31, 2000.  It is intended to facilitate the readers'
understanding of the companies discussed in this report.  Following the chart is
a glossary of terms, which are used throughout this report.


                      Essex Bancorp, Inc. and Subsidiaries
                              Organizational Chart

                                |--------------|
                                | The Company  |
                                |--------------|
                                       |
                                       |
                                |------|-------|
                                |              |
                                |  The Bank    |
                                |--------------|
                                       |
                                       |
                        |--------------|---------------|
                        |                              |
                    |--------|--------|           |---------|--------|
                    |                 |           |                  |
                    |   First Title   |           |    Essex Home    |
                    |-----------------|           |------------------|
                                                            |
                                                            |
                                                  |---------|--------|
                                                  |                  |
                                                  |       EHADC      |
                                                  |------------------|



                Each company is owned 100% by its parent entity.

                                       3
<PAGE>

Defined Term            Formal Name
------------            -----------

Company                 Essex Bancorp, Inc.
EAC                     Essex Acquisition Corporation
Bank                    Essex Savings Bank, F.S.B.
Essex First             Essex First Mortgage, a division of the Bank
First Title             First Title Insurance Agency LLC
Essex Home              Essex Home Mortgage Servicing Corporation
EHADC                   E H Asset Disposition Corporation


    The Company is a Delaware corporation that was formed in 1994 to be a single
thrift holding company for the Bank, a federally-chartered savings bank which
operates (i) five retail banking branches located in North Carolina and Virginia
and (ii) Essex First, a division that engages in the origination and sale of
residential mortgage loans, the origination of residential construction loans to
individuals and builders and the participation in residential construction,
acquisition and development, and lot loans. The Company's other principal
operating subsidiary is Essex Home, a wholly-owned subsidiary of the Bank that
is engaged primarily in the servicing of mortgage loans owned by the Bank,
governmental agencies and third party investors.  At December 31, 2000, the
Company had total assets of $307.7 million, total liabilities of $285.8 million,
including total deposits of $242.6 million, and total shareholders' equity of
$21.9 million.

    On June 30, 1995, the Company and the Bank signed an Agreement and Plan of
Reorganization with Home Bancorp, Inc. ("Home Bancorp") and its wholly-owned
subsidiary Home Savings Bank, F.S.B. ("Home Savings"), a Norfolk, Virginia based
savings institution.  On September 15, 1995, the Company and the Bank merged
with Home Bancorp and Home Savings (the "Home Acquisition").  In exchange for
all of the outstanding stock of Home Bancorp, the stockholders of Home Bancorp
received 2,250,000 shares of nonvoting perpetual preferred stock of the Company
with an aggregate redemption and liquidation value of $15.0 million and warrants
to purchase 7,949,000 shares of the Company's common stock at a price of $0.9375
per share, which was the price of the Company's Common Stock as of June 30,
1995.  The warrants became exercisable in September 1998 and will expire in
September 2005.

    On May 29, 1998, the Company's shareholders approved an amendment of the
Company's Certificate of Incorporation whereby the Company's total authorized
capitalization increased to 30 million shares, consisting of 20 million shares
of common stock and 10 million shares of preferred stock.

    On February 1, 2001, the Company announced that its Board of Directors
unanimously decided to pursue a going-private transaction, which would be
subject to the recommendation and approval of a Special Committee.  If such a
transaction goes forward, it will also be subject to shareholder approval.  In a
going-private transaction, the Company would merge with a newly-formed
subsidiary and the Company's common shareholders would receive a cash payment
for their shares that would represent a premium over the current and recent
market prices for the shares.  The subsidiary, EAC, was incorporated in March
2001.  The Board of Directors believes that such a going-private transaction may
be the best way to provide liquidity and a return to the Company's common
shareholders.  Although there can be no assurances that the going-private
transaction will take place, the Board of Directors currently anticipates that
it may submit a proposal to the Company's shareholders for their approval at the
Company's annual meeting to be held on June 21, 2001.  If the going-private
transaction is approved, EAC will become the surviving holding company.

                                       4
<PAGE>

Business Strategy of the Company and the Bank

    General.  As of December 31, 2000, the Company is well-capitalized and
profitable on a core basis, experiencing relatively strong growth in retail
deposits and postured to be competitive within the geographic markets served and
the market niches pursued.  The Company's business strategy is to raise the core
earnings level through (i) continued asset growth, (ii) higher net interest
income through continued emphasis in a broader range of loan and deposit
products and (iii) enhanced noninterest revenues through increased cross-selling
and continued growth in mortgage lending and servicing activities.  The
Company's future business strategy is highly dependent on its ability to
increase capital through profitability and attracting new capital.  Therefore,
management views the going-private transaction as an important means of
enhancing the Company's flexibility to engage in strategic transactions.

    Enhancement of Bank Franchise.  The Bank continues its efforts to position
itself as a service-oriented community-based institution to compete against the
large regional/national banking companies whose orientation is towards larger
accounts, centralized operations and higher service fees.  To that end, the Bank
has introduced a wider range of consumer and mortgage loan products to attract
new business, maximize the potential of its existing customer base and enhance
yields.  The Company envisions further improving its franchise through
emphasizing growth at existing branches through increased cross-selling,
increasing market penetration in Tidewater and Richmond, Virginia and
Northeastern North Carolina, opening complementary branches, such as a new
branch site in Ashland, Virginia which opened in May 2000, and enhancing deposit
customers' access to account information through the Bank's telephone
information access system.

    Diversification of Loan Products.  The Company continues to emphasize the
origination and purchase of residential construction and consumer loans because
of the shorter-term nature of such loans and their higher yields available when
compared to permanent residential mortgage lending.  However, construction and
consumer lending is generally considered to involve a higher level of risk as
compared to single-family residential lending.  Notwithstanding the higher risk
aspect, the portfolio of residential construction loans has grown steadily since
the product's introduction in 1992 with negligible losses on two foreclosed
properties in 1999 and one foreclosed property in 1998 constituting the only
losses in this portfolio.  At this time, opportunities for consumer loan
origination are limited in the Bank's markets.  Therefore, the Bank continues to
review consumer portfolios in the secondary market that have acceptable credit
risk and yields.  For additional information, see "- Lending Activities -
Construction and Development Loans" and "- Consumer Loans."

    Maintenance of Asset Quality.  The Bank has a multi-faceted program designed
to control and continually monitor the credit risks inherent in the loan
portfolio. This program consists of, among other things, a structured loan
approval process including a loan committee, the periodic assessment of loan
classifications, an annual review of all commercial real estate and builder
relationships and the periodic evaluation of the adequacy of the general loan
loss allowance. By employing these processes and adhering to predetermined
underwriting procedures, management has been successful in reducing previously
unacceptable levels of delinquencies and nonperforming assets. As a result, the
 .24% ratio of nonperforming assets to total assets at December 31, 2000
surpasses the previous record of credit quality levels for the Company.

    Expansion of Subservicing Activities. In its efforts to generate fee income,
the Bank continues to pursue profitable residential mortgage loan servicing and
subservicing. Essex Home is an operating subsidiary of the Bank and is licensed
by the Federal National Mortgage Association ("Fannie Mae"), the Federal Home
Loan Mortgage Corporation ("Freddie Mac") and the Government National Mortgage
Association ("Ginnie Mae"). Essex Home also services and subservices loans for
approximately five private investors and 72 subservicing clients.

                                       5
<PAGE>

    Through various networking and referral opportunities, as well as
advertising and marketing efforts, Essex Home has attracted other financial
institutions and mortgage banking firms interested in outsourcing their loan
servicing function. By subservicing loans for others, the Bank will be able to
utilize more fully its available resources in a cost efficient and profitable
manner. At December 31, 2000, Essex Home's nonaffiliated servicing/subservicing
portfolio was 17,800 loans totaling $1.7 billion.

    Containment of Operating Expenses.  Historically, the Company's operating
expenses have been high relative to those of other savings institutions of
similar asset size. Significant reductions have been made in operating expenses
and the Company has achieved a level of operating expenses that is appropriate
considering the Company's activities in both loan origination and loan
servicing.  Nevertheless, management continues to evaluate the Bank's personnel
needs and operating requirements in order to identify areas where additional
measures may be taken to reduce costs. Although the Bank is committed to
achieving a lower level of operating expenses relative to the Bank's operations,
management recognizes that operating expenses will remain higher than much of
the Bank's peer group due to the relatively low level of assets of Essex Home.


DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY

    The following table presents for the periods indicated the total dollar
amount of interest from average interest-earning assets and the resultant yield,
as well as the interest expense on average interest-bearing liabilities,
expressed both in dollars and rates, and the net interest margin.


                           [intentionally blank]

                                       6
<PAGE>

<TABLE>
<CAPTION>


<S>                                       <C>       <C>       <C>      <C>       <C>       <C>      <C>       <C>       <C>
                                                     2000                        1999                          1998
                                          --------------------------   --------------------------   --------------------------
                                          Average             Yield/   Average             Yield/   Average             Yield/
                                          Balance   Interest  Rate     Balance   Interest  Rate     Balance   Interest  Rate
                                          --------  --------  ------   --------  --------  ------   --------  --------  ------
                                                                         (dollars in thousands)
Interest-earning assets:
  Loans (1).............................  $258,119   $21,131    8.19%  $215,897   $16,645    7.71%  $178,078   $14,608    8.20%
  Investment securities.................     4,408       301    6.82      4,523       259    5.74      3,902       226    5.79
  Mortgage-backed securities............       480        35    7.32        798        46    5.77      1,871       122    6.50
  Federal funds sold....................     1,157        72    6.20      1,365        67    4.90      2,069       111    5.37
  Other.................................     7,660       664    8.66      8,888       441    4.96      6,835       363    5.29
                                          --------   -------           --------   -------           --------   -------
    Total interest-earning assets.......   271,824    22,203    8.16    231,471    17,458    7.54    192,755    15,430    8.00
Cash....................................     5,895                        5,850                        4,615
Other, less allowance for loan losses...    14,818                       11,041                        9,866
                                          --------                      -------                        -----
    Total assets........................  $292,537                     $248,362                     $207,236
                                          ========                     ========                     ========

Interest-bearing liabilities:
  Time deposits.........................  $162,487     9,498    5.85%  $140,648     7,651    5.44%  $121,752     6,904    5.67%
  Other deposits........................    42,147     1,902    4.51     43,731     1,907    4.36     35,431     1,587    4.48
                                          --------   -------           --------   -------           --------   -------
    Total deposits......................   204,634    11,400    5.57    184,379     9,558    5.18    157,183     8,491    5.40
  Notes payable.........................         -         -       -          -         -       -          8         1    9.32
  FHLB advances.........................    48,723     3,132    6.43     29,233     1,583    5.42     21,553     1,230    5.71
  Other.................................       147        28   18.66        231        43   18.46        303        56   18.30
                                          --------   -------           --------   -------           --------   -------
    Total interest-bearing
    liabilities.........................   253,504    14,560    5.74    213,843    11,184    5.25    179,047     9,778    5.46
                                                     -------                      -------                      -------
Demand deposits.........................    16,618                       16,691                        9,504
Other...................................     3,718                        1,566                        3,589
                                          --------                     --------                     --------
  Total liabilities.....................   273,840                      232,100                      192,140

Shareholders' equity....................    18,697                       16,262                       15,096
                                          --------                     --------                     --------
  Total liabilities and
    shareholders' equity................  $292,537                     $248,362                     $207,236
                                          ========                     ========                     ========

Net interest earnings...................             $ 7,643                      $ 6,274                      $ 5,652
                                                     =======                      =======                      =======
Net interest spread.....................                        2.42%                        2.29%                        2.54%
                                                             =======                      =======                      =======
Net interest margin (2).................                        2.81%                        2.71%                        2.93%
                                                             =======                      =======                      =======
Average interest-earning assets
  to average interest-bearing
  liabilities...........................                      107.23%                      108.24%                      107.66%
                                                             =======                      =======                      =======
</TABLE>
(1) Nonaccrual loans and loans classified as held for sale are included in the
    average balance of loans.
(2) Net interest margin is net interest income divided by average interest-
    earning assets.

                                       7
<PAGE>

    The following table presents the extent to which changes in interest rates
and changes in volume of interest-related assets and liabilities have affected
the Company's interest income and expense during the periods indicated.  For
each category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (i) changes in volume (change
in volume multiplied by prior year rate), (ii) changes in rate (change in rate
multiplied by prior year volume), and (iii) total change in rate and volume.
The combined effect of changes in both rate and volume has been allocated
proportionately to the change due to rate and the change due to volume.
<TABLE>
<CAPTION>

                                       Increase (Decrease) From      Increase (Decrease) From
                                          1999 to 2000 Due to           1998 to 1999 Due to
                                     -----------------------------  ---------------------------
                                       Rate      Volume      Net     Rate     Volume     Net
                                     ---------  ---------  -------  -------  --------  --------
                                                       (dollars in thousands)
<S>                                  <C>        <C>        <C>      <C>      <C>       <C>
Interest income on:
   Loans (1)                            $1,078    $3,408   $4,486    $(920)   $2,957    $2,037
   Investment securities                    48        (6)      42       (2)       35        33
   Mortgage-backed securities               10       (21)     (11)     (13)      (63)      (76)
   Federal funds sold                       16       (11)       5       (9)      (35)      (44)
   Other interest-earning assets           291       (68)     223      (24)      102        78
                                        ------    ------   ------    -----    ------    ------
        Total interest income (2)        1,443     3,302    4,745     (968)    2,996     2,028
                                        ------    ------   ------    -----    ------    ------

Interest expense on:
   Time deposits                           604     1,243    1,847     (290)    1,037       747
   Other deposits                           65       (70)      (5)     (43)      363       320
   Notes payable                             -         -        -        -        (1)       (1)
   FHLB advances                           339     1,210    1,549      (65)      418       353
   Other interest-bearing
     liabilities                             -       (15)     (15)       -       (13)      (13)
                                        ------    ------   ------    -----    ------    ------
        Total interest expense           1,008     2,368    3,376     (398)    1,804     1,406
                                        ------    ------   ------    -----    ------    ------

        Net interest income             $  435    $  934   $1,369    $(570)   $1,192    $  622
                                        ======    ======   ======    =====    ======    ======
</TABLE>

  (1) Includes loans classified as held for sale.
  (2) Includes the amortization of premiums.

  The following table presents for the periods indicated the Company's return on
assets (net income divided by average total assets), return on equity (net
income divided by average equity) and equity to assets ratio (average equity
divided by average total assets).
<TABLE>
<CAPTION>

                                             Year Ended December 31,
                                          -----------------------------
                                           2000       1999         1998
                                           ----       ----         ----
<S>                                       <C>         <C>          <C>
   Return on average assets.........       1.32% (1)    .87% (2)    .49%
   Return on average equity.........      20.71% (1)  13.28% (2)   6.71%
   Equity to assets ratio...........       6.39%       6.55%       7.28%
   Dividend payout ratio............       0.00%       0.00%       0.00%
</TABLE>
(1) Net income for the year ended December 31, 2000 included a $2.7 million
    income tax benefit attributable primarily to the partial recognition of
    the Company's net operating loss carryforwards.  Excluding this benefit,
    the Company's return on assets and return on equity for the year ended
    December 31, 2000 were .40% and 6.25%, respectively.
(2) Net income for the year ended December 31, 1999 included a $1.4 million
    income tax benefit attributable primarily to the partial recognition of the
    Company's net operating loss carryforwards. Excluding this benefit, the
    Company's return on assets and return on equity for the year ended December
    31, 1999 were .31% and 4.74%, respectively.

                                       8
<PAGE>

Lending Activities

    General.  At December 31, 2000, the Company's net loan portfolio
(excluding loans classified as held for sale) totaled $265.9 million,
representing approximately 86.4% of its $307.7 million of total assets at that
date.  The principal categories of loans in the Company's portfolio are
residential real estate loans, which are secured by single-family (one-to-four
units) residences; loans and participation in loans for the construction of
single-family properties and for the acquisition and development of sites for
single-family communities; commercial real estate loans, which are secured by
multi-family (over five units) residential and commercial real estate;
commercial business loans; and consumer loans.  Substantially all of the
Company's mortgage loan portfolio consists of conventional mortgage loans, as
opposed to loans that are insured by the Federal Housing Administration ("FHA")
or partially guaranteed by the Veterans Administration ("VA").

    As a federally chartered savings institution, the Bank has general
authority to originate and purchase loans secured by real estate located
throughout the United States.  The Company currently originates substantially
all of its loans within Virginia and North Carolina.  Nevertheless, the Company
continues to purchase from time to time loans secured by properties located
outside of its market area and continues to hold a relatively diversified
portfolio.

    Federal regulations permit the Bank to invest without limitation in
residential mortgage loans and up to four times its capital in loans secured by
non-residential or commercial real estate.  The Bank is also permitted to invest
in secured and unsecured consumer loans in an amount not exceeding 35% of the
Bank's total assets; however, such 35% limit may be exceeded for certain types
of consumer loans, such as home equity, property improvement and education
loans.  In addition, the Bank is permitted to invest up to 20% of its total
assets in secured (by other than real estate) and unsecured loans for
commercial, corporate, business or agricultural purposes, provided that any
investments which in the aggregate total 10% may only be used for small business
loans.

    Since the enactment of the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA"), a savings institution generally may not make
loans to one borrower and related entities in an amount which exceeds 15% of its
unimpaired capital and surplus, although loans in an amount equal to an
additional 10% of unimpaired capital and surplus may be made to a borrower if
the loans are fully secured by readily marketable securities.  See "Regulation -
Regulation of the Bank - General."  At December 31, 2000, the Bank's limit on
loans-to-one borrower was approximately $2.9 million.  The loans-to-one borrower
limitation may restrict the Bank's ability to do business with certain existing
and potential customers.  Partially because of this limitation, the Bank has
increased its use of participations in order to expand its builder construction
loan program.  See "- Construction and Development Loans."

    The federal banking agencies adopted Interagency Guidance on Subprime
Lending ("Subprime Guidance"), dated March 1, 1999, on the safety and soundness
of subprime lending to borrowers with a credit history of higher-than-normal
default risks and loan losses.  The interagency advisory alerted subprime
lending institutions to: (1) provide adequate capital to cover additional risks
in their exposures; (2) establish a well-structured risk management program for
subprime lending operations; (3) evaluate underwriting criteria and the
performance of individual subprime loans or securitized loan pools acquired from
third-party originators and issuers; and (4) set up a due diligent loan
monitoring administration and sound collection system.  On February 23, 2001,
the federal banking agencies issued supplemental guidance to the Subprime
Guidance, which is intended to intensify the supervisory oversight of
institutions that target the subprime market through programs that employ
tailored marketing, underwriting standards and risk selection.  The Company's
primary lending activities are discussed below and do not include subprime
lending programs.

                                       9
<PAGE>

    Loan Portfolio Composition.  The following table sets forth information
concerning the Company's loan portfolio (excluding loans held for sale) by type
of loan at the dates indicated:
<TABLE>
<CAPTION>

                                                           December 31,
                                     ----------------------------------------------------------
                                          2000               1999                 1998
                                          ----               ----                 ----
                                        $        %        $          %          $         %
                                     --------  -----   --------   --------   --------   -------
                                                        (dollars in thousands)
<S>                                  <C>       <C>     <C>        <C>        <C>        <C>
Real estate:
 Single-family residential:
   First mortgages.................  $189,302   70.8%  $173,372       72.0%  $152,891    78.6%
   Second mortgages................     3,004    1.1      4,268        1.8      7,525     3.9
 Construction and development.......   55,436   20.7     42,477       17.7     19,430    10.0
 Commercial real estate.............    3,987    1.5      4,645        1.9      6,470     3.3
                                     --------  -----   --------      -----   --------   -----
   Total real estate loans.........   251,729   94.1    224,762       93.4    186,316    95.8

Commercial business loans..........     1,942     .7      1,626         .7      1,601      .8

Consumer loans:
 Other.............................    13,252    5.0     13,464        5.6      5,984     3.1
 Secured by deposits...............       674     .2        731         .3        621      .3
                                     --------  -----   --------      -----   --------   -----
   Total consumer loans............    13,926    5.2     14,195        5.9      6,605     3.4
                                     --------  -----   --------      -----   --------   -----

    Total loans....................   267,597  100.0%   240,583      100.0%   194,522   100.0%
                                               =====                 =====              =====
Less:
 Unearned loan fees and discounts..         2                 4                     9
 Allowance for loan losses.........     1,740             1,697                 1,845
                                     --------          --------              --------
                                        1,742             1,701                 1,854
                                     --------          --------              --------

    Net Loans......................  $265,855          $238,882              $192,668
                                     ========          ========              ========


                                                    1997               1996
                                                    ----               ----
                                                $           %        $           %
                                             -------      -----    ------      ------
Real estate:
 Single-family residential:
   First mortgages.................         $130,486       76.8%  $103,643       70.0%
   Second mortgages................            8,699        5.1     12,384        8.3
 Construction and development.......          16,583        9.8     17,190       11.6
 Commercial real estate.............           5,970        3.5      6,313        4.3
                                            --------       ----   --------     ------
   Total real estate loans.........          161,738       95.2    139,530       94.2

Commercial business loans..........            1,883        1.1      1,915        1.3

Consumer loans:
 Other.............................            5,426        3.2      5,828        3.9
 Secured by deposits...............              805         .5        842         .6
                                            --------      -----    -------     ------
   Total consumer loans............            6,231        3.7      6,670        4.5
                                            --------      -----    -------     ------

    Total loans....................          169,852      100.0%   148,115      100.0%
                                                          =====                 =====
Less:
 Unearned loan fees and discounts..               29                     8
  Allowance for loan losses........            2,382                 2,556
                                            --------              --------
                                               2,411                 2,564
                                            --------              --------

    Net Loans......................         $167,441              $145,551
                                            ========              ========
</TABLE>

                                       10
<PAGE>

    Total loans increased by an aggregate of $73.1 million or 37.6% from
December 31, 1998 to December 31, 2000 primarily due to the acquisition of $19.1
million and $31.3 million of first mortgage loans in 2000 and 1999,
respectively, and the acquisition of $2.3 million and $7.2 million of home
improvement loans in 2000 and 1999, respectively.  In addition, construction and
development loans increased $36.1 million since December 31, 1998.  Over the
three year period ended December 31, 2000, the Company has placed increased
emphasis on single-family first mortgage loans, which, together with
construction and development loans increased from 88.6% of total loans held for
investment at December 31, 1998 to 91.5% of total loans held for investment at
December 31, 2000.  The increased emphasis on participations in residential
construction and acquisition and development loans, particularly in 2000 and
1999, was strategically designed to draw upon the construction lending expertise
at Essex First.  Consumer loans increased from 3.4% of total loans held for
investment at December 31, 1998 to 5.2% of total loans held for investment at
December 31, 2000.  The Company increased its emphasis during the three-year
period on the origination and purchase of various types of consumer loans in
order to enable the Company to reposition its balance sheet to improve its net
interest income.  Single-family second mortgage loans, commercial real estate
loans and commercial business loans all declined as a percentage of total loans.

    The following table presents the maturity distribution and interest
sensitivity of selected loan categories (excluding residential mortgage and
consumer loans) at December 31, 2000.  Maturities are presented on a contractual
basis.  Loans having no stated schedule of repayments and no stated maturity are
reported as due in one year or less.  Scheduled contractual principal repayments
do not reflect the actual maturities of loans.
<TABLE>
<CAPTION>

                                         Commercial   Commercial
                           Construction  Real Estate   Business    Total
                           ------------  -----------  ----------  -------
                                       (dollars in thousands)
<S>                        <C>           <C>          <C>         <C>
Amounts due:
 One year or less               $55,238       $    -      $  321  $55,559
 After one year through
   five years                       198        2,937       1,621    4,756
 Beyond five years                    -        1,050           -    1,050
                                -------       ------      ------  -------
    Total                       $55,436       $3,987      $1,942  $61,365
                                =======       ======      ======  =======

Interest rate terms on
 amounts due after one
 year:
   Fixed                        $    15       $1,897      $  569  $ 2,481
                                =======       ======      ======  =======
   Adjustable                   $   183       $2,090      $1,052  $ 3,325
                                =======       ======      ======  =======
</TABLE>

    Origination, Purchase and Sale of Loans.  The Bank's branch network provides
full-service retail banking facilities, which has enabled the Bank to, among
other things, increase its (i) origination of both consumer and mortgage loans
directly through its branch network and (ii) deposit share in its primary
markets.

    Mortgage Banking Activities. At December 31, 2000, Essex First conducted its
operations out of five offices, which are located in Norfolk, Richmond, Ashland
and Chester, Virginia, and Elizabeth City, North Carolina. Essex First also
accepts loan applications through the Bank's branch office in Emporia, Virginia.
During the years ended December 31, 2000, 1999 and 1998, Essex First originated
$44.6 million, $87.8 million and $98.8 million of loans (consisting primarily of
both permanent and construction/permanent loans secured by single-family
residential real estate and excluding builder loan advances). During the same
periods, $27.0 million, $32.1 million and $33.5 million of such loans,
respectively, were sold by Essex First to the Bank, with the remainder being
sold by Essex First primarily to other private investors in the secondary
market.

                                       11
<PAGE>

    Although Essex First currently originates the majority of the Bank's loan
product, Essex First was established primarily to increase the volume of loans
being originated for sale to private investors in the secondary market.  Such
loan sales generate fee income, while avoiding the interest rate and credit risk
associated with holding long-term fixed-rate mortgage loans in its portfolio.
Loans originated by Essex First for sale in the secondary market are originated
in accordance with terms, conditions and documentation prescribed by the Freddie
Mac, Fannie Mae and Ginnie Mae.  However, Essex First does not generally sell
mortgage loans to such agencies and, instead, sells loans to private investors
in the secondary market.  Consequently, loans originated by Essex First for sale
in the secondary market must also comply with any particular requirements of
such private investors.  Upon approval of a particular loan, Essex First
provides an independent title company or attorney instructions to close the
loan.  Loan proceeds are disbursed and funded at the closing by Essex First.
The loan documents are generally delivered to the private investor within 10
days of the closing and the price paid by the private investor for purchasing
the loan is generally remitted within five to 10 days after such delivery.
Although Essex First currently sells substantially all conventional loans
without recourse (so that losses incurred as a result of nonperformance with
respect to the loan become the responsibility of the purchaser of the loan as of
the date of the closing), Essex First has in the past occasionally sold
conventional loans in the secondary market with recourse, and may continue to
sell certain conventional loans in the secondary market with recourse.  As of
December 31, 2000, there were $1.7 million of loans outstanding, which were
previously originated and sold by Essex First in the secondary market with
first-payment default recourse.

    A majority of all residential mortgage loans originated by Essex First for
sale in the secondary market are sold with servicing released to third party
investors.  Substantially all of the loans originated by Essex First and not
sold with servicing released to third party investors are sold to the Bank,
which enables the Company to retain the servicing.  When loans are sold with
servicing rights released to the buyer, the Company recognizes current income
from receipt of servicing release fees.  For additional information, see "- Loan
Fee Income."

    Management of the Bank and Essex First believe that "pipeline risk," which
is created by offering loan applicants agreed-upon interest rates for a future
closing, is currently being minimized because Essex First's loan officers are
compensated in accordance with pricing guidelines which are based on the
purchase price received from the third party investors purchasing the loans.
Therefore, in most cases, the loan officer will lock-in a purchase price with
the third party investor simultaneously with making the rate commitment to the
borrower and eliminate any interest rate risk. If the loan is not locked-in
simultaneously with the commitment to the borrower, any market movement that
occurs prior to the third party investor locking-in the purchase price is
reflected in the loan officer's compensation and not absorbed by Essex First or
the Bank.

    Loan Purchases and Sales. The Bank purchases single-family mortgage loans
from Essex First, which generally have adjustable rates or a term to maturity of
seven  years or less. In addition, the Bank continues to purchase first
mortgage loans  secured by single-family residential properties from
selected financial institutions and mortgage banking companies in the
secondary market. Such loans generally consist of ARMs or fixed-rate loans
with terms of five, seven, or to a lesser extent, 15 years. Such loan
purchases are secured by properties located both both within and outside the
Bank's primary markets. During the years ended December 31, 2000, 1999 and 1998,
the Bank purchased $21.3 million, $38.5 million and $32.3 million of loans,
respectively, from various nonaffiliated financial institutions and mortgage
banking companies in the secondary market. In addition, during the years ended
December 31, 2000 and 1999, the Company's construction, acquisition and
development, and lot loan participations increased $17.6 million and $20.8
million, respectively.


                                       12
<PAGE>

    At December 31, 2000, 1999 and 1998, loans classified by the Company as held
for sale amounted to $1.1 million, $917,000 and $4.5 million, respectively.
Except for loans originated for sale in the secondary market by Essex First, it
is generally management's intention to hold originated and purchased loans for
investment. Under certain circumstances, however, the Company may sell loans
originally acquired for investment in order to address needs regarding
liquidity, regulatory capital, interest rate risk, or other objectives.

    Loan Servicing.  Essex Home services or subservices residential real estate
loans owned by the Bank as well as for other private mortgage investors.  Loan
servicing includes collecting and remitting loan payments, accounting for
principal and interest, making advances to cover delinquent payments, making
inspections as required of mortgaged premises, contacting delinquent mortgagors,
supervising foreclosures and property dispositions in the event of unremedied
defaults and generally administering the loans.  Funds that have been escrowed
by borrowers for the payment of mortgage related expenses, such as property
taxes and hazard and mortgage insurance premiums, are maintained in noninterest-
bearing accounts at the Bank or at nonaffiliated banks if so required by the
mortgage investors.

    Essex Home receives fees for servicing and/or subservicing mortgage loans.
These fees serve to compensate Essex Home for the costs of performing the
servicing/subservicing function.  Other sources of loan servicing revenues
include late charges and other ancillary fees.  Servicing and subservicing fees
are collected by Essex Home out of the monthly mortgage payments made by
borrowers.  For additional information concerning Essex Home and its servicing
and subservicing portfolio, see "- Loan Fee Income."

    Real Estate Lending Standards.  All financial institutions are required to
adopt and maintain comprehensive written real estate lending policies that are
consistent with safe and sound banking practices.  These lending policies must
reflect consideration of the Interagency Guidelines for Real Estate Lending
Policies adopted by the federal banking agencies, including the OTS ("Lending
Guidelines").  The Lending Guidelines set forth, pursuant to the mandates of the
Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"),
uniform regulations prescribing standards for real estate lending.  In 1999, the
regulatory agencies issued a joint release of Interagency Guidelines on High LTV
Residential Real Estate Lending, which provides guidance on how financial
institutions should manage high loan-to-value ("LTV") residential real estate
loan programs and how they should be treated under the Lending Guidelines.  Real
estate lending is defined as extensions of credit secured by liens on interests
in real estate or made for the purpose of financing the construction of a
building or other improvements to real estate, regardless of whether a lien has
been taken on the property.

    The policies must address certain lending considerations set forth in the
Lending Guidelines, including supervisory LTV limits, loan portfolio management,
loan administration procedures and underwriting standards.  These policies must
also be appropriate to the size of the institution and the nature and scope of
its operations, and must be reviewed and approved by the institution's board of
directors at least annually.  The LTV ratio, which is the total amount of credit
to be extended divided by the appraised value of the property at the time the
credit is originated, must be established for each category of real estate
loans.  If not a first lien, the lender must include all senior liens when
calculating this ratio.  The Lending Guidelines, among other things, establish
the following supervisory LTV limits: raw land (65%); land development (75%);
construction of commercial, multi-family and nonresidential properties (80%);
improved property (85%); and permanent one-to-four family residential (owner
occupied) and home equity loans (no maximum ratio; however any LTV ratio in
excess of 90% should require appropriate credit enhancement in the form of
mortgage insurance or readily marketable collateral).  The Company's loan
underwriting guidelines with respect to LTV ratios are no less stringent than
the Lending Guidelines set forth above.


                                       13
<PAGE>

    Single-Family Residential Real Estate Loans.  At December 31, 2000, $189.3
million or 70.8% of the Company's total loans held for investment consisted of
permanent loans secured by first liens on single-family residential real estate,
as compared to $173.4 million or 72.0% at December 31, 1999. While the total
balance of these loans increased in 2000, the decline in the concentration of
such loans in the Bank's portfolio occurred because the slowdown in originations
during the rising interest rate environment throughout 2000 impeded the
replenishment of this segment of the portfolio, which had been reduced by
significant refinancings during 1999 and 1998. These refinancings reflected
borrowers' preferences for lower fixed rate loans with terms to maturity of over
seven years. The Company generally sells such loans in the secondary market as
market conditions permit.

    In recent years, the Company has been emphasizing for its portfolio single-
family residential mortgage adjustable-rate loans, which provide for periodic
adjustments to the interest rate.  These loans have up to 30-year terms and
interest rates which adjust annually in accordance with a designated index after
a specified period has elapsed.  Depending on the loan product selected by the
borrower, this period can range from one year to seven years.  In order to be
competitive and generate production, the ARMs offered by the Company provide for
initial rates of interest below the rates that would prevail when the index used
for repricing is applied.  However, the Company underwrites certain loans (i.e.,
ARMs with 95% LTV) on a basis that is no less stringent than the underwriting
guidelines of the Fannie Mae.  The Company has not engaged in the practice of
using a cap on the payments that could allow the loan balance to increase rather
than decrease, resulting in negative amortization.  Approximately 69.9% of the
permanent single-family residential loans in the Company's loan portfolio held
for investment at December 31, 2000 had adjustable interest rates.

    The Company continues to originate long-term, fixed-rate loans in order to
provide a full range of products to its customers, but generally only under
terms, conditions and documentation that permit their sale in the secondary
market.  Currently, fixed-rate single-family residential loans with terms to
maturity of seven years or less are generally retained in the Company's
portfolio while fixed-rate single-family residential loans with terms to
maturity of over seven years are generally sold in the secondary market as
market conditions permit.  At December 31, 2000, approximately 30.1% of the
permanent single-family residential loans held by the Company for investment
consisted of loans that provide for fixed rates of interest in excess of five
years.  Although these loans provide for repayments of principal over a fixed
period of up to 30 years, it is the Company's experience that such loans remain
outstanding for a substantially shorter period of time.

    The Company is generally permitted to lend up to 100% of the appraised value
of the real property securing a residential loan (referred to as the LTV ratio);
however, if the amount of a residential loan originated or refinanced exceeds
90% of the appraised value, the Company is required by federal regulations to
obtain appropriate credit enhancement in the form of either mortgage insurance
or readily marketable collateral.  Pursuant to underwriting guidelines adopted
by the Board of Directors, the Company will lend up to 95% of the appraised
value of the property securing an owner-occupied single-family residential loan,
and generally requires borrowers to obtain private mortgage insurance on loans
that have a principal amount that exceeds 80% of the appraised value of the
security property.  The extent of coverage is dependent upon the LTV ratio at
the time of origination.

    The Company generally requires title insurance in order to secure the
priority of its mortgage lien, as well as fire and extended coverage casualty
insurance in order to protect the properties securing its residential and other
mortgage loans. Borrowers may be required to advance funds, with each monthly
payment of principal and interest, to a loan escrow account from which the
Company makes disbursements for items such as real estate taxes, hazard
insurance premiums and mortgage insurance premiums as they become due.
Substantially all of



                                       14
<PAGE>

the properties securing all of the Company's mortgage loans originated or closed
by the Bank and/or Essex First are appraised by independent appraisers that
conform to guidelines established pursuant to FIRREA and regulations promulgated
there under.

    Home equity line of credit loans have a maximum commitment of five years,
which may be extended within the sole discretion of the Bank, and the interest
rate is set at the Bank's prime rate plus a margin.  The Company will lend up to
a 90% LTV ratio and the loan can be secured by a primary or subordinate mortgage
on the property.  The Company will originate the loan even if another
institution holds the first mortgage.

    Construction and Development Loans.  Construction and development lending
activities generally are limited to the Company's primary market, with
particular emphasis in the greater Richmond, Virginia market, the Tidewater,
Virginia area and counties in northeastern North Carolina.  More recently, the
Company has expanded its construction lending presence into the Raleigh, North
Carolina, Northern Virginia and Maryland markets.  At December 31, 2000,
construction and development loans, including participations, amounted to $55.4
million or 20.7% of the Company's total loans held for investment.

    The Company offers construction loans to individual borrowers as well as to
local real estate builders, contractors and developers for the purpose of
constructing single-family residences.  Substantially all of the Company's
construction lending to individuals is originated on a construction/permanent
("C/P") mortgage loan basis.  C/P loan originations are made by Essex First loan
officers or through the wholesale C/P lending program, which is a network of 99
approved brokers.  C/P loans are made to individuals who hold a contract with a
licensed general contractor to construct their personal residence.  The
construction phase of the loan currently provides for monthly payments on an
interest only basis at a designated prime rate (plus 100 basis points) for up to
six months.  Upon completion of construction, the loan converts to a permanent
loan at either an adjustable or fixed interest rate, consistent with the
Company's policies with respect to residential real estate financing.  Essex
First's construction loan department approves the proposed contractors and
administers the loan during the construction phase.  The Company's C/P loan
program has been successful due to its ability to offer borrowers a single
closing and, consequently, reduced costs.  At December 31, 2000, the Company's
C/P portfolio included 41 C/P loans with an aggregate principal balance of $3.4
million (and an additional $5.3 million was subject to legally binding
commitments but had not been advanced as of such date).

    The Company also offers construction loans to real estate builders,
contractors and developers for the construction of single-family residences on
both a presold and speculative basis.  Construction loans to builders generally
have a three-year note with annual renewals throughout the term, with payments
being made monthly on an interest only basis (generally, at 75 basis points to
200 basis points over a designated prime rate).  Upon application, credit review
and analysis of personal and corporate financial statements, the Company will
grant builders lines of credit up to designated amounts.  The Company will
generally limit the number of homes that may be built by any individual builder
or developer on a speculative basis depending on the builder's financial
strength and total exposure to other lenders.  The Company has expanded its
builder construction loan portfolio to include participations, which allows the
Bank to leverage its capital in markets where Essex First does not have a mature
builder construction presence.  At December 31, 2000, the Company's
participations in construction loans totaled $24.3 million.  The Company intends
to pursue more participation arrangements in the future.  During 2000, the
Company also increased its activity in real estate acquisition and development
loans through participation arrangements.  At December 31, 2000, the Company's
acquisition and development loan portfolio included eight loans with an
aggregate principal balance of $5.0 million.



                                       15
<PAGE>

    At December 31, 2000, the Company's builder construction loan portfolio
included 116 loans to 45 different builders with an aggregate principal balance
of $12.1 million (and an additional $5.7 million was subject to legally binding
commitments but had not been advanced as of such date).  Of this $12.1 million
of builder loans, approximately $9.4 million consisted of construction loans for
which there were no contracts for sale as of December 31, 2000.

    The Company intends to maintain its involvement in construction lending.
Such loans afford the Company the opportunity to increase the interest rate
sensitivity of its loan portfolio. Construction lending is generally considered
to involve a higher level of risk as compared to single-family residential
lending, due to the concentration of principal in a limited number of loans and
borrowers and the effects of general economic conditions on real estate
developers and managers. Moreover, a construction loan can involve additional
risks because of the inherent difficulty in estimating both a property's value
at completion of the project and the estimated cost (including interest) of the
project. The nature of these loans is such that they are generally more
difficult to evaluate and monitor. In addition, speculative construction loans
to a builder are not necessarily pre-sold and thus pose a greater potential risk
to the Company than construction loans to individuals on their personal
residences.

    The Company has taken steps to minimize the foregoing risks by, among other
things, limiting its construction lending primarily to residential properties.
In addition, the Company has adopted underwriting guidelines which impose
stringent LTV (80% during the construction phase with respect to single-family
residential real estate), debt service and other requirements for loans which
are believed to involve higher elements of credit risk, by limiting the
geographic area in which the Company will do business and by working with
builders and participating financial institutions with whom it has established
relationships or knowledge thereof.

    Commercial Real Estate Loans. The Company has also originated mortgage loans
secured by multi-family residential and commercial real estate. At December 31,
2000, $4.0 million or 1.5% of the Company's total loans held for investment
consisted of such loans.

    Commercial real estate loans originated by the Company are primarily secured
by office buildings, retail stores, warehouses and general purpose industrial
space.  Commercial real estate loans also include multi-family residential
loans, substantially all of which are secured by small apartment buildings.  At
December 31, 2000, $805,000 or 20.2% of the Company's total commercial real
estate loans were comprised of multi-family residential loans.

    Commercial real estate lending entails different and significant risks when
compared to single-family residential lending because such loans typically
involve large loan balances to single borrowers and because the payment
experience on such loans is typically dependent on the successful operation of
the project or the borrower's business.  These risks can also be significantly
affected by supply and demand conditions in the local market for apartments,
offices, warehouses or other commercial space.  The Company attempts to minimize
its risk exposure by limiting the extent of its commercial lending.  In
addition, LTV ratios on the Company's commercial real estate loans are currently
limited to 80% or lower.  As part of the criteria for underwriting commercial
real estate loans, the Company generally imposes a specified debt coverage ratio
(the ratio of net cash from operations before payment of debt service to debt
service).  It is also the Company's general policy to seek additional protection
to mitigate any weaknesses identified in the underwriting process, which may be
provided via mortgage insurance, secondary collateral and/or personal guarantees
from the principals of the borrower.

    Commercial Business Loans.  From time to time, and in connection with its
community bank activities, the Company has originated secured or unsecured loans
for commercial, corporate, business and agricultural purposes.  At December 31,
2000, $1.9 million or .7% of the



                                       16
<PAGE>

Company's total loans held for investment consisted of commercial business
loans. The Company's commercial business loans consist primarily of loans and
lines of credit secured by various equipment, machinery and other corporate
assets.

    Consumer Loans. Subject to restrictions contained in applicable federal laws
and regulations, the Company is authorized to make loans for a wide variety of
personal or consumer purposes. The Company continues to emphasize the
origination and purchase of consumer loans in order to provide a full range of
financial services to its customers and because such loans generally have
shorter terms and higher interest rates than mortgage loans. At this time,
however, opportunities for consumer loan origination are limited in the Bank's
markets. Therefore, the Bank continues to review consumer portfolios in the
secondary market that have acceptable credit risks and yields. At December 31,
2000, $13.9 million or 5.2% of the Company's total loans held for investment
consisted of consumer loans. The consumer loans offered by the Company include
home improvement, automobile loans, boat and recreational vehicle loans, mobile
home loans, loans secured by deposit accounts and unsecured personal loans.

    Consumer loans generally have shorter terms and higher interest rates than
mortgage loans and generally involve more credit risk than mortgage loans
because of the type and nature of the collateral and, in certain cases, the
absence of collateral.  In addition, consumer lending collections are dependent
on the borrower's continuing financial stability, and thus are more likely to be
adversely affected by job loss, divorce, illness and personal bankruptcy.  In
many cases, any repossessed collateral for a defaulted consumer loan will not
provide an adequate source of repayment of the outstanding loan balance because
of improper repair and maintenance of the underlying security.  The remaining
deficiency may not warrant further substantial collection efforts against the
borrower.

    Loan Fee Income.  In addition to interest earned on loans, the Company
receives income through servicing of loans, unamortized loan fees in connection
with loan sales and fees in connection with loan modifications, late payments,
prepayments and miscellaneous services related to its loans.  Income from these
activities varies from period to period with the volume and types of loans made
and competitive conditions.

    In connection with its loan origination activities, the Company often
charges loan origination fees that are calculated as a percentage of the amount
borrowed. The Company generally charges a borrower on a single-family home loan
a loan origination fee based on the principal amount of the loan, with the
actual amount being dependent upon, among other things, the interest rate and
market conditions at the time the loan application is taken. These fees are in
addition to appraisal and other fees paid by the borrower to the Company at the
time of the application. The Company's policy is to defer all loan origination
fees net of direct origination costs and amortize those fees over the
contractual lives of the related loans. Amortization of loan fees is included in
interest income. Nevertheless, the predominant portion of the Company's loans
are originated for resale and, consequently, related net loan fees are
recognized as mortgage banking income upon consummation of the loan sales.

    When loans are sold with servicing rights released to the buyer, the Company
also recognizes current income from receipt of servicing release fees in
addition to receiving a premium or deducting a discount based on the market
value of the loan, which is dependent upon, among other things, the interest
rate and market conditions at the time the sales price is locked-in with the
buyer. Sales prices for loans originated for resale are generally locked-in with
a buyer at the time of origination in order to minimize the Company's interest
rate risk. For additional information regarding the Company's servicing assets,
see Note 14 of the Notes to Consolidated Financial Statements on pages 32 and 33
of the 2000 Annual Report to Stockholders, which is attached hereto as Exhibit
13 and incorporated herein by reference.



                                       17
<PAGE>

    Through Essex Home, the Company services loans that are owned by the Bank
and other investors. At December 31, 2000, approximately 19,900 loans with
unpaid principal balances of $1.9 billion were serviced or subserviced by Essex
Home as compared to approximately 18,200 loans with unpaid principal balances of
$1.7 billion as of December 31, 1999. The Company intends to further increase
its servicing volume through the negotiation of new subservicing contracts
(generally for two year terms) and the acquisition of servicing rights.

    There are risks associated with the acquisition of servicing rights because
their value (i.e., future servicing revenues) is dependent upon the underlying
loans being serviced.  The Company amortizes its mortgage servicing rights in
proportion to, and over the period of, the estimated future net servicing
revenues of the underlying mortgage loans, taking into consideration market-
based prepayment estimates.  However, there can be no assurance that impairments
will not be required in future periods if prepayment activity exceeds current
expectations.

Asset Quality

    Delinquent Loans.  The following table sets forth information concerning the
principal balances and percent of the total loan portfolio held for investment
represented by delinquent loans at the dates indicated:
<TABLE>
<CAPTION>

                                              December 31,
                          ---------------------------------------------------
                                2000             1999              1998
                          ---------------   ---------------   ---------------
                          Amount  Percent   Amount  Percent   Amount  Percent
                          ------  -------   ------  -------   ------  -------
                                        (dollars in thousands)
<S>                       <C>     <C>       <C>     <C>       <C>     <C>
30-59 days..............  $  524   .20%     $  703    .29%    $  662   .34%
60-89 days (1)..........     156   .06         564    .23         46   .02
90 or more days (2).....     561   .21         736    .31      1,166   .60
                          ------   ---      ------    ---     ------   ---
                          $1,241   .47%     $2,003    .83%    $1,874   .96%
                          ======   ===      ======    ===     ======   ===
</TABLE>
(1) Includes $148,000 of loans that were in nonaccrual status at December 31,
    1999.
(2) There were no loans 90 days or more past due accruing interest at December
    31, 2000, 1999 or 1998.

    Nonperforming Assets.  All loans are reviewed on a regular basis and are
placed in nonaccrual status based on the loan's delinquency status, an
evaluation of the related collateral, and the borrower's ability to repay the
loan.  Generally, loans past due more than 90 days are placed in nonaccrual
status; however, in instances where the borrower has demonstrated an ability to
make timely payments, loans past due more than 90 days are returned to an
accruing status.  Such loans may be returned to accruing status, even though the
loans have not been brought fully current, provided two criteria are met: (i)
all principal and interest amounts contractually due (including arrearages) are
reasonably assured of repayment within a reasonable period, and (ii) there is a
sustained period of repayment performance (generally a minimum of six months) by
the borrower.  When a loan is placed in nonaccrual status, interest accruals
cease and uncollected accrued interest is reversed and charged against current
income.  Additional interest income on such loans is recognized only when
received.  Consumer loans generally are charged-off or fully reserved for when
the loan becomes over 120 days delinquent.

    In certain circumstances, for reasons related to a borrower's financial
difficulties, the Company may grant a concession to the borrower that it would
not otherwise consider.  Such restructuring of troubled debt may include a
modification of loan terms and/or a transfer of assets (or equity interest) from
the borrower to the Company.

    If a foreclosure action is instituted with respect to a particular loan and
the loan is not reinstated, paid in full or refinanced, the property is sold at
a foreclosure sale in which the



                                       18
<PAGE>

Company may participate as a bidder. If the Company is the successful bidder,
the acquired property is classified as foreclosed property until it is sold.
Properties acquired in settlement of loans are initially recorded at fair value
less estimated costs to sell. Valuations are periodically performed by
management, and an allowance for losses is established by a charge to operations
if the carrying value of a property exceeds its fair market value less the
estimated costs to sell. Costs incurred in connection with ownership of the
property, including interest on senior indebtedness, are expensed to the extent
not previously allowed for in calculating fair value less estimated costs to
sell. Costs relating to the development or improvement of the property are
capitalized to the extent these costs increase fair value less estimated costs
to sell. Sales of foreclosed properties are recorded under the accrual method of
accounting. Under this method, a sale is not recognized unless the buyer has
assumed the risks and rewards of ownership, including an adequate cash down
payment. Until the contract qualifies as a sale, all collections are recorded as
deposits.



                             [intentionally blank]

                                       19
<PAGE>

    The following table sets forth information regarding nonperforming assets
held by the Company at the dates indicated (dollars in thousands):
<TABLE>
<CAPTION>

                                                               December 31,
                                              ----------------------------------------------
                                                   2000            1999          1998
                                                  -----            ----          ----
                                                      % of            % of            % of
                                                      Total           Total           Total
                                              Amount  Loans   Amount  Loans   Amount  Loans
                                              ------  -----   ------  -----   ------  -----
<S>                                           <C>     <C>     <C>     <C>     <C>     <C>
Nonaccrual loans, net:
 Single-family residential..................  $  316    .12%  $  350    .14%  $  697    .36%
 Construction...............................       -      -        -      -        -      -
 Commercial.................................      61    .02      377    .16      328    .17
 Consumer...................................     184    .07      157    .07      141    .07
                                              ------   ----   ------  -----   ------  -----
  Total nonaccrual loans....................     561    .21      884    .37    1,166    .60

Accruing loans 90 days or more past due.....       -      -        -      -        -      -

Troubled debt restructurings................       -      -        -      -       98    .05
                                              ------   ----   ------  -----   ------  -----
  Total nonperforming loans.................     561    .21      884    .37    1,264    .65

Foreclosed properties, net..................     188    .07      446    .19      571    .29
                                              ------   ----   ------  -----   ------  -----

  Total nonperforming assets................  $  749    .28%  $1,330    .56%  $1,835    .94%
                                              ======   ====   ======  =====   ======  =====

Nonperforming loans to total loans..........            .21%            .37%            .65%
Nonperforming assets to total assets........            .24             .48             .79
Allowance for loan losses to total loans....            .65             .71             .95
Allowance for loan losses to nonaccrual
 loans......................................         301.56          182.88          158.23
Allowance for loan losses to nonperforming
 loans......................................         301.56          182.88          145.97

                                                   1997           1996
                                                   ----           ----
                                                      % of            % of
                                                      Total           Total
                                              Amount  Loans   Amount  Loans
                                              ------  -----   ------  -----
Nonaccrual loans, net:
 Single-family residential..................  $1,203    .71%  $2,513   1.70%
 Construction...............................     133    .08      220    .15
 Commercial.................................     132    .08       22    .01
 Consumer...................................      88    .05      153    .10
                                              ------   ----   ------  -----
  Total nonaccrual loans....................   1,556    .92    2,908   1.96

Accruing loans 90 days or more past due.....      21    .01       30    .02

Troubled debt restructurings................     209    .12      223    .15
                                              ------   ----   ------  -----
  Total nonperforming loans.................   1,786   1.05    3,161   2.13

Foreclosed properties, net..................   1,512    .89    2,054   1.39
                                              ------   ----   ------  -----

  Total nonperforming assets................  $3,298   1.94%  $5,215   3.52%
                                              ======   ====   ======  =====

Nonperforming loans to total loans..........           1.05%           2.13%
Nonperforming assets to total assets........           1.69            2.99
Allowance for loan losses to total loans....           1.40            1.73
Allowance for loan losses to nonaccrual
 loans......................................         153.09           87.90
Allowance for loan losses to nonperforming
 loans......................................         133.37           80.86
</TABLE>



                                       20
<PAGE>

    For additional information about the Company's nonperforming assets, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Financial Condition - Nonperforming Assets" on page 2 and Notes 8
and 9 of the Notes to Consolidated Financial Statements on pages 26 through 28
of the 2000 Annual Report to Stockholders, which is attached hereto as Exhibit
13 and incorporated herein by reference.

    Classified Assets.  Federal regulations require that each insured savings
institution classify its assets on a regular basis.  In addition, in connection
with examinations of insured institutions, federal examiners have authority to
identify problem assets and, if appropriate, classify them.  There are three
classifications for problem assets: "substandard," "doubtful" and "loss."
Substandard assets have one or more defined weaknesses and are characterized by
the distinct possibility that the insured institution will sustain some loss if
the deficiencies are not corrected.  Doubtful assets have the weaknesses of
substandard assets with the additional characteristic that the weaknesses make
collection or liquidation in full on the basis of currently existing facts,
conditions and values questionable, and there is a high possibility of loss.  An
asset classified as loss is considered uncollectible and of such little value
that continuance as an asset of the institution is not warranted.  Another
category designated "special mention" also must be established and maintained
for assets which do not currently expose an insured institution to a sufficient
degree of risk to warrant classification as substandard, doubtful or loss.
Assets classified as substandard or doubtful require the institution to
establish general allowances for loan losses.  If an asset or portion thereof is
classified as loss, the insured institution must either establish specific
allowances for loan losses in the amount of 100% of the portion of the asset
classified loss, or charge-off such amount.  General loss allowances established
to cover possible losses related to assets classified substandard or doubtful
may be included in determining an institution's risk-based capital, while
specific valuation allowances for loan losses do not qualify as regulatory
capital.

    In addition to the nonperforming assets discussed above, at December 31,
2000, the Company had classified for regulatory and internal purposes an
additional $1.9 million of assets, $1.6 million of which were classified
substandard, $19,000 of which were classified doubtful and $339,000 of which
were classified loss.

    Classified assets at December 31, 2000 included a $1.3 million commercial
loan.  The components of this credit are (i) a commercial real estate loan of
$896,000 as of December 31, 2000, which was originated in October 1987 in the
amount of $1.0 million for the purpose of refinancing a mini-storage/office
facility (76 mini-storage units and 38 office units) located in Virginia Beach,
Virginia, and (ii) a line of credit in the amount of $600,000 with an
outstanding balance of $414,000 as of December 31, 2000.  The Company occupies
approximately 12,000 square feet of the office facility.  The lease payments
largely service the principal and interest on the two loans.  The term of the
lease coincides with the maturity of the loans, which are scheduled to mature on
December 31, 2001.  The Company has advised the borrower that the Company will
not renew the lease for the office facility beyond December 31, 2001.
Therefore, the Company, with the borrower's consent, is currently facilitating
marketing the property to prospective tenants.  In addition to the office
facility, the Bank and its subsidiaries leased nine of the mini-storage units as
of December 31, 2000.  The property was last appraised in November 1992 for
$915,000.  As of December 31, 2000, the Bank had established a $300,000 specific
reserve with respect to the loans and the remaining $1.0 million was classified
as substandard.

    Allowance for Losses on Loans and Foreclosed Properties.  An allowance for
loan losses is maintained at a level that management considers adequate to
provide for probable losses based upon an evaluation of the inherent risks in
the loan portfolio.  This evaluation incorporates charge-off history and loan
classification status into a loss migration analysis in order to arrive at an
estimate of the required allowance for loan losses.  The allowance is increased
by provisions for loan losses that are charged against income.  While management
uses the best information



                                       21
<PAGE>

available to make such evaluations, future adjustments to the allowance may be
necessary if economic conditions differ substantially from the assumptions used
in making the evaluations. For additional information, see Notes 8 and 9 of the
Notes to Consolidated Financial Statements on pages 26 through 28 of the 2000
Annual Report to Stockholders, which is attached hereto as Exhibit 13 and
incorporated herein by reference.

    The following table sets forth information concerning the activity in the
Company's allowance for loan losses during the years indicated:
<TABLE>
<CAPTION>

                                                             Year Ended December 31,
                                              ----------------------------------------------------
                                                2000       1999       1998       1997       1996
                                              --------   --------   --------   --------   --------
                                                              (dollars in thousands)
<S>                                           <C>        <C>        <C>        <C>        <C>
Loans, net of unearned fees and discounts:
  Year-end..................................  $267,595   $240,579   $194,513   $169,823   $148,107
  Average outstanding during period.........   257,082    212,354    172,760    156,217    216,803

Allowance for loan losses:
  Balance, beginning of year................  $  1,697   $  1,845   $  2,382   $  2,556   $  5,251
  Provision for loan losses.................       740        149         13        113      1,411
                                              --------   --------   --------   --------   --------
                                                 2,437      1,994      2,395      2,669      6,662
  Charge-offs, net of recoveries (1):
   Commercial (2)...........................       256         65         40       (366)     2,892
   Real estate - mortgage...................       144          9        288        535        894
   Real estate - land.......................        (1)       (14)       133          -          -
   Consumer.................................       298        237         89        118        320
                                              --------   --------   --------   --------   --------
    Total (2)...............................       697        297        550        287      4,106
                                              --------   --------   --------   --------   --------
  Balance, end of year......................  $  1,740   $  1,697   $  1,845   $  2,382   $  2,556
                                              ========   ========   ========   ========   ========

Ratio of net charge-offs to average
 outstanding loans (2)......................       .27%       .14%       .32%       .18%      1.89%
Allowance for loan losses to year-end
 total nonperforming loans..................    301.56%    182.88%    145.97%    133.37%     80.86%
Allowance for loan losses to year-end
 loans, net of unearned fees and discounts..       .65%       .71%       .95%      1.40%      1.73%
</TABLE>
  (1) Except as noted in (2) below, recoveries of prior loan charge-offs were
      not significant for the periods presented.

  (2) Charge-offs during 1997 include a $329,000 recovery on a loan guarantee
      associated with a Richmond, Virginia multi-family loan and a $39,000
      recovery associated with claims against the estate of a deceased borrower.
      Excluding the impact of these recoveries, the ratio of net charge-offs to
      average outstanding loans for 1997 was .42%.  Charge-offs during 1996
      include the $2.8 million write-off of a Richmond, Virginia multi-family
      loan.  Excluding the impact of this charge-off, the ratio of net charge-
      offs to average outstanding loans for 1996 was .59%.



                                       22
<PAGE>

     The following table sets forth information concerning the allocation of the
Company's allowance for loan losses by loan categories at the dates indicated.
<TABLE>
<CAPTION>

                                                                  December 31,
                             ---------------------------------------------------------------------------------------
                                  2000             1999              1998             1997              1996
                                  ----             ----              ----             ----              ----
                             Amount  Percent  Amount   Percent  Amount   Percent  Amount   Percent  Amount   Percent
                             ------  -------  ------   -------  ------   -------  ------   -------  ------   -------
                                                             (dollars in thousands)
<S>                         <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>
Residential mortgage         $  437    92.6%   $  632    91.5%   $  855    92.5%   $1,139    91.7%   $1,636   89.9%
Commercial (1)                  518     2.2       576     2.6       560     4.1       545     4.6       505    5.6
Consumer                        541     5.2       489     5.9       285     3.4       254     3.7       299    4.5
Unallocated                     244       -         -       -       145       -       444       -       116      -
                             ------   -----    ------   -----    ------   -----    ------   -----    ------  -----
                             $1,740   100.0%   $1,697   100.0%   $1,845   100.0%   $2,382   100.0%   $2,556  100.0%
                             ======   =====    ======   =====    ======   =====    ======   =====    ======  =====
</TABLE>
(1) Includes commercial real estate and commercial business loans.

    The Company also maintains an allowance for losses on foreclosed properties.
The following table sets forth information concerning the activity in the
Company's allowance for losses on foreclosed properties during the periods
indicated:
<TABLE>
<CAPTION>

                                 Year Ended December 31,
                                 -----------------------

                                  2000    1999    1998
                                  ----    ----    ----
                                  (dollars in thousands)
<S>                               <C>     <C>     <C>
Balance at beginning of year....  $  34   $ 114   $ 155
Provision for losses on
 foreclosed properties..........     96      14     126
                                  -----   -----   -----
                                    130     128     281
Charge-offs, net of recoveries..   (125)    (94)   (167)
                                  -----   -----   -----
Balance at end of year..........  $   5   $  34   $ 114
                                  =====   =====   =====

</TABLE>

Investment Activities

    Mortgage-Backed Securities. The Company's mortgage-backed securities include
collateralized mortgage obligations ("CMOs"), which include securities issued by
entities that have qualified under the Internal Revenue Code (the "Code") as
Real Estate Mortgage Investment Conduits ("REMICs"). CMOs and REMICs
(collectively, CMOs) have been developed in response to investor concerns
regarding the uncertainty of cash flows associated with the prepayment option of
the underlying mortgagor and are typically issued by government agencies,
government sponsored enterprises and special purpose entities, such as trusts,
corporations or partnerships, established by financial institutions or other
similar institutions. A CMO can be collateralized by loans or securities that
are insured or guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae. In contrast
to pass-through mortgage-backed securities, in which cash flow is received pro
rata by all security holders, the cash flow from the mortgages underlying a CMO
is segmented and paid in accordance with a predetermined priority to investors
holding various CMO classes. By allocating the principal and interest cash flows
from the underlying collateral among the separate CMO classes, different classes
of bonds are created, each with its own stated maturity, estimated average life,
coupon rate and prepayment characteristics.

    Mortgage-backed securities generally increase the quality of the Company's
assets by virtue of the insurance or guarantees that back them, are more liquid
than individual mortgage loans and may be used to collateralize borrowings or
other obligations of the Company.

                                       23
<PAGE>

    The following table sets forth the activity in the Company's mortgage-
backed securities portfolio during the periods indicated:

<TABLE>
<CAPTION>

                                 At or For the Year Ended December 31,
                                 -------------------------------------
                                        2000     1999     1998
                                        ----     ----     ----
                                        (dollars in thousands)
    <S>                                 <C>     <C>      <C>
    Balance at beginning of year....    $ 480   $1,456   $1,905
    Repayments......................        -     (974)    (448)
    Amortization....................        -       (2)      (1)
                                        -----   ------   ------
    Balance at end of year..........    $ 480   $  480   $1,456
                                        =====   ======   ======

    Weighted average coupon at end
     of year........................     7.65%    6.65%    5.90%
                                        =====   ======   ======
</TABLE>

    The Company's investment in mortgage-backed securities at December 31, 2000
consists solely of a Fannie Mae guaranteed adjustable rate REMIC.  The Company's
mortgage-backed securities are carried in accordance with accounting principles
generally accepted in the United States of America.  See Note 7 of the Notes to
Consolidated Financial Statements on page 25 of the 2000 Annual Report to
Stockholders, which is attached hereto as Exhibit 13 and incorporated herein by
reference.

    Investment Securities.  Federally-chartered savings institutions have
authority to invest in various types of liquid assets, including United States
Treasury obligations, securities of various Federal agencies and of state and
municipal governments, certificates of deposit at federally-insured banks and
savings and loan associations, certain bankers' acceptances and Federal funds.
Subject to various restrictions, federally-chartered savings institutions may
also invest a portion of their assets in commercial paper, corporate debt
securities and mutual funds, the assets of which conform to the investments that
federally-chartered savings institutions are otherwise authorized to make
directly.

    The Bank's investment securities portfolio is managed by the Treasurer of
the Bank in accordance with a comprehensive investment policy which addresses
strategies, types and levels of allowable investments and which is reviewed and
approved by the Board of Directors on an annual basis and by the Asset and
Liability Management Committee as circumstances warrant. The Bank currently
emphasizes lending activities in order to increase the weighted average yield on
the Bank's interest-earning assets. The Bank's investment securities are carried
in accordance with accounting principles generally accepted in the United States
of America. See Note 6 of the Notes to Consolidated Financial Statements on page
25 of the 2000 Annual Report to Stockholders, which is attached hereto as
Exhibit 13 and incorporated herein by reference.

    The following table sets forth certain information relating to the Company's
investment securities held for investment at the dates indicated:
<TABLE>
<CAPTION>

                                              December 31,
                          ----------------------------------------------------
                                 2000             1999              1998
                                 ----             ----              ----
                          Carrying  Market  Carrying  Market  Carrying  Market
                           Value    Value    Value    Value    Value    Value
                          --------  ------  --------  ------  --------  ------
                                           (dollars in thousands)
<S>                       <C>       <C>     <C>       <C>     <C>       <C>
U.S. Government agency
 securities (1).........    $1,760  $1,781    $2,750  $2,713    $2,750  $2,704
FHLB stock..............     2,765   2,765     2,230   2,230     1,549   1,549
                            ------  ------    ------  ------    ------  ------
  Total (2).............    $4,525  $4,546    $4,980  $4,943    $4,299  $4,253
                            ======  ======    ======  ======    ======  ======
</TABLE>
  (1) The $1.8 million of U.S. Government agency securities held for investment
      at December 31, 2000 consists of a $1.0 million fixed-rate FHLB note
      maturing in 2003 and a $750,000 fixed-rate FHLB note maturing in 2002.

  (2) Does not include investment securities classified as available for sale
      that consisted of a $21,000 $19,000 and $18,000 investment in a money
      market mutual fund at December 31, 2000, 1999 and 1998, respectively.




                                       24
<PAGE>

    Information regarding the carrying values, contractual maturities and
weighted average yield of the Company's investment securities held for
investment (excluding FHLB stock) at December 31, 2000 is presented below. FHLB
stock is neither a debt nor an equity security because its ownership is
restricted and it lacks a market. FHLB stock can be sold at its par of $100 per
share only to the FHLBs or to another member institution.
<TABLE>
<CAPTION>

                                       One Year   After One to   After Five to   Over 10
                                        or Less    Five Years       10 Years     Years      Total
                                       ---------  -------------  --------------  ------    -------
                                                        (dollars in thousands)
<S>                                    <C>        <C>            <C>             <C>       <C>
  U.S. Government agency securities..    $    -         $1,760      $    -        $   -     $1,760
                                         ======         ======      ======        =====     ======
  Weighted average yield.............         -%          6.03%          -%           -%      6.03%
                                         ======          =====      ======        =====     ======

</TABLE>

Sources of Funds

    General.  Deposits are the primary source of the Company's funds for lending
and other investment purposes.  In addition to deposits, the Company derives
funds from loan principal repayments, prepayments, advances from the FHLB and
other borrowings.  Loan repayments are a relatively stable source of funds,
while deposits inflows and outflows are significantly influenced by general
interest rates and money market conditions.  Borrowings may be used on a short-
term basis to compensate for reductions in the availability of funds from other
sources.  They may also be used on a longer term basis for general business
purposes, including market risk management.

    Deposits.  Deposits obtained through bank branch offices of the Company have
traditionally been the principal source of the Company's funds for use in
lending and for other general business purposes.  The Company's current deposit
products include regular passbook and statement savings accounts, negotiable
order of withdrawal ("NOW") accounts, money market accounts, fixed-rate, fixed-
maturity certificates of deposit ranging in terms from 90 days to 60 months and
individual retirement accounts.  A significant component of total noninterest-
bearing deposits is derived from mortgage loan servicing related escrow deposits
maintained by Essex Home at the Bank.  The balance of these accounts has
increased proportionately with the increase in the servicing volume at Essex
Home.

    The Bank's deposits are currently obtained primarily from residents in its
primary market area.  The principal methods currently used by the Company to
attract deposit accounts include offering a wide variety of services and
accounts and competitive interest rates.  The Company utilizes traditional
marketing methods to attract new customers and savings deposits, including print
media advertising.  Currently, the Company does not advertise for retail
deposits outside of its local market area or utilize the services of deposit
brokers.  Management estimates that as of December 31, 2000, deposit accounts
totaling $4.5 million or 1.9% of the Bank's total deposits were held by
nonresidents of Virginia or North Carolina.  These out-of-market deposits
include jumbo certificates of deposits owned largely by financial institutions,
which totaled $593,000 at December 31, 2000, and represented a decline from the
$692,000 of such certificates at December 31, 1999.  These jumbo certificates of
deposit were obtained through the posting of deposit rates on national
computerized bulletin boards at no cost to the Company and were not obtained
through deposit brokers.



                                       25
<PAGE>

    The following table sets forth the average balances and rates of the
Company's deposits for the periods indicated:
<TABLE>
<CAPTION>

                                             Year Ended December 31,
                                ------------------------------------------------
                                      2000             1999             1998
                                      ----             ----             ----
                                Average          Average          Average
                                Balance   Rate   Balance   Rate   Balance   Rate
                                --------  ----   --------  ----   --------  ----
                                              (dollars in thousands)
<S>                             <C>       <C>    <C>       <C>    <C>       <C>
Noninterest-bearing deposits..  $ 16,618     -%  $ 16,691     -%  $  9,504     -%
Passbook savings..............     4,938  3.50      4,753  3.49      4,225  3.49
NOW accounts..................     5,707  2.82      5,179  2.81      4,361  2.81
Money market accounts.........    31,502  4.98     33,799  4.72     26,845  4.91
Certificates of deposit:
 Consumer.....................   114,179  5.91     74,211  5.43     51,747  5.68
 Mini-jumbo...................    31,301  5.71     50,483  5.45     55,524  5.65
 Jumbo........................    17,007  5.96     15,954  5.44     14,481  5.73
                                --------         --------         --------
                                $221,252         $201,070         $166,687
                                ========         ========         ========
</TABLE>
    The following table shows the Company's certificates of deposit of $100,000
or more outstanding at the dates indicated:
<TABLE>
<CAPTION>

                                  December 31,
                            --------------------------
                              2000     1999     1998
                              ----     ----     ----
                              (dollars in thousands)
<S>                         <C>      <C>      <C>
3 months or less..........  $ 5,132  $ 4,698  $ 3,914
Over 3 through 6 months...    6,126    5,988    5,002
Over 6 through 12 months..    9,060    6,696    7,698
Over 12 months............   12,867   10,946    6,072
                            -------  -------  -------
 Total....................  $33,185  $28,328  $22,686
                            =======  =======  =======
</TABLE>

    The ability of the Company to attract and maintain deposits and the
Company's cost of funds on these deposit accounts have been, and will continue
to be, significantly affected by economic and competitive conditions.

    Borrowings. The Bank is a member of the FHLB System, which consists of 12
regional FHLBs subject to supervision and regulation by the Federal Housing
Finance Board. The FHLBs provide a central credit facility primarily for member
institutions. The Bank, as a member of the FHLB of Atlanta, is required to hold
shares of common stock in that FHLB in an amount at least equal to 1% of the
aggregate principal amount of its unpaid residential mortgage loans and
mortgage-backed securities, 3/10 of 1% of total assets at the end of the
calendar year, or 5% of its advances (borrowings) from the FHLB, whichever is
greater. The Bank had a $2.8 million investment in stock of the FHLB at December
31, 2000, which was in compliance with this requirement.



                                       26
<PAGE>

    The following table presents certain information regarding the Company's
FHLB advances at the dates and for the periods indicated:
<TABLE>
<CAPTION>

                                   At or For the Year Ended December 31,
                                  --------------------------------------
                                    2000         1999            1998
                                  -------       -------         -------
                                          (dollars in thousands)
<S>                               <C>           <C>             <C>
Balance at end of period........  $41,000       $44,600         $24,908
Weighted average interest rate
 at end of period...............     6.55%         4.72%           5.89%
Maximum amount outstanding
 at any month's end.............  $55,300       $44,600         $30,975
Average amount outstanding
 during the period..............  $48,723       $29,233         $21,553
Weighted average interest rate
 during the period..............     6.43%         5.42%           5.71%
</TABLE>
     The outstanding FHLB advances at December 31, 2000 mature in 2001.

     Other Liabilities.  As of December 31, 2000 and 1999, other liabilities of
the Company included a $703,000 obligation to the Company's Chief Executive
Officer resulting from the exercise of his stock appreciation rights in November
1997.  A determination has not yet been made as to the date and method of
payment to satisfy this obligation.


Competition

    The Company faces strong competition both in attracting deposits and making
real estate and other loans.  A major reform hurdle was eliminated with the
passage of financial modernization legislation in 1999 that made it possible for
all financial services to be sold in concert, which coupled with the evolution
of the Internet as a marketing and delivery mechanism for financial products and
services, will impact how effectively the Company competes in the future.  The
Company introduced a web site in 1999 to promote its products and services to a
broad base of consumers through the Internet.  While the Company's plans for the
near term do not include expansion into online banking, the Company is assessing
the viability of online banking within the context of the market characteristics
of its customer base.

    The Company's most direct competition for deposits has historically come
from other savings institutions, credit unions and commercial banks located in
Virginia and North Carolina, including many large financial institutions, which
have greater financial and marketing resources available to them.  In addition,
the Company has faced additional significant competition for investors' funds
from short-term money market securities and other corporate and government
securities.  The ability of the Company to attract and retain deposits depends
not only on its ability to provide a rate of return, liquidity and risk
comparable to that offered by competing investment opportunities, but also on
the Company's ability to promote these products by remote access.

     The Company experiences strong competition for real estate and other loans
principally from other savings institutions, commercial banks, mortgage banking
companies, insurance companies and other institutional lenders.  The Company
competes for loans principally through the interest rates and loan fees it
charges and the efficiency and quality of services it provides borrowers.



                                       27
<PAGE>

Employees

    As of December 31, 2000, the Company employed 134 full-time-equivalent
employees.

Regulation of the Company

    General. The Company, as a registered savings and loan holding company
within the meaning of the Home Owners' Loan Act ("HOLA"), is subject to
regulation by the Office of Thrift Supervision ("OTS") and is subject to various
reporting and other requirements of the Securities and Exchange Commission (the
"Commission"). As a subsidiary of a savings and loan holding company, the Bank
is subject to certain restrictions in its dealings with the Company and
affiliates thereof.

    Activities Restrictions.  As a unitary savings and loan holding company (a
holding company that owns only one savings association subsidiary) that was
operating prior to the enactment of the Gramm-Leach-Bliley Act, there are
generally no restrictions on the activities in which the Company can engage.
However, if the Director of the OTS determines that there is reasonable cause to
believe that the continuation by a savings and loan holding company of an
activity constitutes a serious risk to the financial safety, soundness or
stability of its subsidiary savings association, the Director may impose such
restrictions as deemed necessary to address such risk, including limiting (i)
payment of dividends by the savings association, (ii) transactions between the
savings association and its affiliates and (iii) any activities of the savings
association that might create a serious risk that the liabilities of the holding
company and its affiliates may be imposed on the savings association.
Notwithstanding the above rules as to permissible business activities of unitary
savings and loan holding companies, if the savings association subsidiary of
such a holding company fails to meet a qualified thrift lender ("QTL") test,
then such unitary holding company also shall become subject to the activities
restrictions applicable to multiple savings and loan holding companies and,
unless the savings association requalifies as a QTL within one year thereafter,
shall register as, and become subject to, the restrictions applicable to, a bank
holding company.  See "- Regulation of the Bank - Qualified Thrift Lender Test."

    Limitations on Transactions with Affiliates. Transactions between savings
associations and any affiliate are governed by Sections 23A and 23B of the
Federal Reserve Act. An affiliate of a savings association is any company or
entity that controls, is controlled by or is under common control with the
savings association. In a holding company context, the parent holding company of
a savings association (such as the Company) and any companies that are
controlled by such parent holding company are affiliates of the savings
association. Generally, Sections 23A and 23B (i) limit the extent to which the
savings association or its subsidiaries may engage in "covered transactions"
with any one affiliate to an amount equal to 10% of such association's capital
stock and surplus, and contain an aggregate limit on all such transactions with
all affiliates to an amount equal to 20% of such capital stock and surplus and
(ii) require that all such transactions be on terms substantially the same, or
at least as favorable, to the association or subsidiary as those provided to a
non-affiliate. The term "covered transaction" includes the making of loans,
purchase of assets, issuance of a guarantee and similar other types of
transactions between a savings institution and its subsidiaries and an
affiliate. In addition to the restrictions imposed by Sections 23A and 23B, no
savings association may (i) loan or otherwise extend credit to an affiliate,
except for any affiliate which engages only in activities which are permissible
for bank holding companies or (ii) purchase or invest in any stocks, bonds,
debentures, notes or similar obligations of any affiliate, except for affiliates
which are subsidiaries of the savings association.



                                       28
<PAGE>

    In addition, Sections 22(h) and (g) of the Federal Reserve Act place
restrictions on loans to executive officers, directors and principal
stockholders.  Under Section 22(h), loans to a director, an executive officer
and to a greater than 10% stockholder of a savings association, and certain
affiliated interests of either, may not exceed, together with all other
outstanding loans to such person and affiliated interests, the association's
loans to one borrower limit (generally equal to 15% of the institution's
unimpaired capital and surplus).  Section 22(h) also requires that loans to
directors, executive officers and principal stockholders be made on terms
substantially the same as offered in comparable transactions to other persons
unless the loans are made pursuant to a benefit or compensation program that (i)
is widely available to employees of the institution and (ii) does not give
preference to any director, executive officer or principal stockholder, or
certain affiliated interests of either, over other employees of the savings
institution.  Section 22(h) also requires prior board approval for certain
loans.  In addition, the aggregate amount of extensions of credit by a savings
association to all insiders cannot exceed the association's unimpaired capital
and surplus.  Furthermore, Section 22(g) places additional restrictions on loans
to executive officers.  At December 31, 2000, the Bank was in compliance with
the above restrictions.

    Restrictions on Acquisitions. Except under limited circumstances, savings
and loan holding companies are prohibited from acquiring, without prior approval
of the Director of the OTS, (i) control of any other savings association or
savings and loan holding company or substantially all the assets thereof or (ii)
more than 5% of the voting shares of a savings association or holding company
thereof which is not a subsidiary. Except with the prior approval of the
Director of the OTS, no director or officer of a savings and loan holding
company or person owning or controlling by proxy or otherwise more than 25% of
such company's stock, may acquire control of any savings association, other than
a subsidiary savings association, or of any other savings and loan holding
company.

Regulation of the Bank

    General. The Bank, as a federally chartered savings bank, is subject to
comprehensive examination by the OTS, as its chartering authority and primary
regulator, and by the Federal Deposit Insurance Corporation ("FDIC"), which
administers the Savings Association Insurance Fund ("SAIF"), which insures the
Bank's deposits to the maximum extent permitted by law. The Bank is a member of
the Federal Home Loan Bank of Atlanta ("FHLB"), which is one of 12 regional
banks comprising the Federal Home Loan Bank System. The Bank is further subject
to regulations of the Board of Governors of the Federal Reserve System ("Federal
Reserve Board") governing reserves required to be maintained against deposits
and certain other matters.

    The OTS has extensive authority over the operations of savings associations.
As part of this authority, savings associations are required to file periodic
reports with the OTS and are subject to periodic examinations by the OTS and the
FDIC. The most recent safety and soundness examination of the Bank was conducted
by the OTS during the first quarter of 2001.

    The investment and lending authority of savings associations are prescribed
by federal laws and regulations and they are prohibited from engaging in any
activities not permitted by such laws and regulations.  Those laws and
regulations generally are applicable to all federally chartered savings
associations and may also apply to state-chartered savings associations.  Such
regulation and supervision is primarily intended for the protection of
depositors.

    FIRREA imposed limitations on the aggregate amount of loans that a savings
association could make to any one borrower, including related entities. See "-
Lending Activities - General" for a discussion of such limitations.

                                       29
<PAGE>

    The OTS's enforcement authority over all savings associations and their
holding companies was substantially enhanced by FIRREA. This enforcement
authority includes, among other things, the ability to assess civil money
penalties, to issue cease and desist or removal orders and to initiate
injunctive actions. In general, these enforcement actions may be initiated for
violations of laws and regulations and unsafe or unsound practices. Other
actions or inactions may provide the basis for enforcement action, including
misleading or untimely reports filed with the OTS. FIRREA significantly
increased the amount of and grounds for civil money penalties. FIRREA requires,
except under certain circumstances, public disclosure of final enforcement
actions by the OTS.

    Insurance of Accounts. The deposits of the Bank are insured up to $100,000
per insured member (as defined by law and regulation) by the SAIF administered
by the FDIC and are backed by the full faith and credit of the United States
Government. As insurer, the FDIC is authorized to conduct examinations of, and
to require reporting by, FDIC-insured institutions. It also may prohibit any
FDIC-insured institution from engaging in any activity the FDIC determines by
regulation or order to pose a serious threat to the FDIC. The FDIC also has the
authority to initiate enforcement actions against savings associations, after
giving the OTS an opportunity to take such action.

    The FDIC may terminate the deposit insurance of any insured depository
institution, including the Bank, if it determines after a hearing that the
institution has engaged or is engaging in unsafe or unsound practices, is in an
unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, order or any condition imposed by an agreement with
the FDIC. It also may suspend deposit insurance temporarily during the hearing
process for the permanent termination of insurance, if the institution has no
tangible capital. If insurance of accounts is terminated, the accounts at the
institution at the time of the termination, less subsequent withdrawals, shall
continue to be insured for a period of six months to two years, as determined by
the FDIC. Management is aware of no existing circumstances that could result in
termination of the Bank's deposit insurance.

    Under FDIC regulations, institutions are assigned to one of three capital
groups for insurance premium purposes - "well capitalized," "adequately
capitalized" and "undercapitalized" - which are defined in the same manner as
the regulations establishing the prompt corrective action system under Section
38 of the Federal Deposit Insurance Act ("FDIA"), as discussed under "- Prompt
Corrective Action" below. These three groups are then divided into subgroups
that are based on supervisory evaluations by the institution's primary federal
regulator, resulting in nine assessment classifications.

    Both the SAIF and the Bank Insurance Fund ("BIF"), the deposit insurance
fund that covers most commercial bank deposits, are statutorily required to be
recapitalized to a ratio of 1.25% of insured reserve deposits.  The BIF
previously achieved the required reserve ratio, and as a result, the FDIC
reduced the average deposit insurance premium paid by BIF-insured banks to a
level substantially below the average premium paid by savings institutions.
Banking legislation was enacted in 1996 to eliminate the premium differential
between SAIF-insured institutions and BIF-insured institutions.  The legislation
provided that all insured depository institutions with SAIF-assessable deposits
as of March 31, 1995 pay a special one-time assessment to recapitalize the SAIF.
Pursuant to this legislation, the FDIC promulgated a rule that established the
special assessment necessary to recapitalize the SAIF at 65.7 basis points of
SAIF-assessable deposits held by affected institutions as of March 31, 1995.
However, as a result of the Bank's financial condition, on November 8, 1996, the
FDIC notified the Bank that its application for exemption had been approved.  As
a result, the Bank was exempt from paying the special one-time assessment (which
would have amounted to $1.8 million).  Instead, the Bank paid its assessments
through 1999 at the assessment rate schedule in effect as of June 30, 1995.  The
Bank's annual assessment for deposit insurance was 26 basis points of insured

                                       30
<PAGE>

deposits during 1999, but a rate of three basis points of insured deposits (the
assessment rate otherwise charged to "well capitalized" savings institutions
such as the Bank) became effective for the Bank on January 1, 2000.  In
addition, insured depository institutions began paying in 1997 a portion of the
interest due annually on the Financing Corporation ("FICO") bonds issued in the
1980s to provide funding for the SAIF.  Accordingly, an additional assessment
approximating 5.9 basis points was added to the regular SAIF assessment during
1999.  Effective January 1, 2000, the FICO assessment rate for the SAIF began to
be assessed at the same rate as the BIF, effectively reducing the Bank's FICO
assessment to approximately two basis points.

    Another component of the SAIF recapitalization plan provided for the merger
of the SAIF and the BIF on January 1, 1999, provided no insured depository
institution was a savings association on that date.  The merger of the SAIF and
the BIF did not occur on such date because there continue to be savings
associations.  Such a merger of the SAIF and the BIF may occur in the future if
legislation containing such a provision is enacted.  If legislation is enacted
which requires the Bank to convert to a bank charter, the Company would become a
bank holding company.  The Company does not believe that its activities would be
materially affected in the event that it was required to become a bank holding
company.

    Regulatory Capital Requirements.  OTS capital regulations require savings
institutions to satisfy minimum capital standards:  risk-based capital
requirements, a leverage requirement and a tangible capital requirement.
Savings institutions must meet each of these standards in order to be deemed in
compliance with OTS capital requirements.  In addition, the OTS may require a
savings institution to maintain capital above the minimum capital levels.

    All savings institutions are required to meet a minimum risk-based capital
requirement of total capital (core capital plus supplementary capital) equal to
8% of risk-weighted assets (which includes the credit risk equivalents of
certain off-balance sheet items).  In calculating total capital for purposes of
the risk-based requirement, supplementary capital may not exceed 100% of core
capital.  Under the leverage requirement, the most highly-rated institutions
must maintain a minimum Tier 1 leverage ratio of 3%, with all other institutions
required to maintain a minimum leverage ratio of 4%.  A savings institution is
also required to maintain tangible capital in an amount at least equal to 1.5%
of its adjusted total assets.

    At December 31, 2000, the Bank's actual capital ratios and the minimum
requirements under FIRREA were as follows (dollars in thousands):
<TABLE>
<CAPTION>

                                                  Minimum
                                  Actual        Requirement   Excess
                              ---------------  -------------  -------
<S>                           <C>      <C>     <C>      <C>   <C>
  Tangible capital            $18,425   6.07%  $ 4,549  1.5%  $13,876
  Core or leverage capital     18,425   6.07    12,132  4.0     6,291
  Risk-based capital           19,561  10.34    15,136  8.0     4,425
</TABLE>

    For further information regarding the Bank's actual capital ratios and
minimum requirements under FDICIA, see Note 19 of the Notes to Consolidated
Financial Statements on pages 37 and 38 of the 2000 Annual Report to
Stockholders, which is attached hereto as Exhibit 13 and incorporated herein by
reference. At December 31, 2000, the Bank exceeded all of its capital
requirements under FDICIA.

    The foregoing capital requirements are viewed as minimum standards by the
OTS, and most institutions are expected to maintain capital levels above the
minimum. In addition, the OTS regulations provide that minimum capital levels
higher than those provided in the regulations may be established by the OTS for
individual savings institutions, upon a determination that the savings
institution's capital is or may become inadequate in view of its circumstances.
The OTS regulations provide that higher individual minimum regulatory capital

                                       31
<PAGE>

requirements may be appropriate in circumstances where, among others: (i) a
savings institution has a high degree of exposure to interest rate risk,
prepayment risk, credit risk, concentration of credit risk, certain risks
arising from nontraditional activities, or similar risks or a high proportion of
off-balance sheet risk, (ii) a savings institution is growing, either internally
or through acquisitions, at such a rate that supervisory problems are presented
that are not dealt with adequately by OTS regulations and (iii) a savings
institution may be adversely affected by activities or condition of its holding
company, affiliates, subsidiaries or other persons or savings institutions with
which it has significant business relationships. The Bank is not subject to any
such individual minimum regulatory capital requirement.

    Prompt Corrective Action.  Under Section 38 of the FDIA, as added by the
FDICIA, each federal banking agency was required to implement a system of prompt
corrective action for institutions that it regulates.  Under the regulations
adopted by the OTS, an institution is deemed to be (i) "well capitalized" if it
has total risk-based capital of 10.0% or more, has a Tier I risk-based capital
ratio of 6.0% or more, has a Tier I leverage capital ratio of 5.0% or more and
is not subject to any order or final capital directive to meet and maintain a
specific capital level for any capital measure, (ii) "adequately capitalized" if
it has a total risk-based capital ratio of 8.0% or more, a Tier I risk-based
capital ratio of 4.0% or more and a Tier I leverage capital ratio of 4.0% or
more (3.0% under certain circumstances) and does not meet the definition of
"well capitalized," (iii) "undercapitalized" if it has a total risk-based
capital ratio that is less than 8.0%, a Tier I risk-based capital ratio that is
less than 4.0% or a Tier I leverage capital ratio that is less than 4.0% (3.0%
under certain circumstances), (iv) "significantly undercapitalized" if it has a
total risk-based capital ratio that is less than 6.0%, a Tier I risk-based
capital ratio that is less than 3.0% or a Tier I leverage capital ratio that is
less than 3.0% and does not meet the definition of "critically
undercapitalized," and (v) "critically undercapitalized" if it has a ratio of
tangible equity to total assets that is equal to or less than 2.0%.  Section 38
of the FDIA and the regulations promulgated thereunder also specify
circumstances under which a federal banking agency may reclassify a well
capitalized institution as adequately capitalized and may require an adequately
capitalized institution or an undercapitalized institution to comply with
supervisory actions as if it were in the next lower category (except that the
FDIC may not reclassify a significantly undercapitalized institution as
critically undercapitalized).  At December 31, 2000, the Bank was considered a
"well capitalized" institution under the prompt corrective action provisions of
FDIA.

    Liquidity Requirements. All savings associations are required to maintain an
average daily balance of liquid assets (including cash, certain time deposits
and savings accounts, bankers' acceptances, certain government obligations and
certain other investments) equal to a certain percentage of the sum of its
average daily balance of net withdrawable deposit accounts and borrowings
payable in one year or less. The liquidity requirement may vary from time to
time (between 4% and 10%) depending upon economic conditions and savings flows
of all savings associations. At the present time, the required minimum liquid
asset ratio is 4%. The Bank has consistently exceeded such regulatory liquidity
requirement and, at December 31, 2000, had a liquidity ratio of 8.23%.

    Qualified Thrift Lender Test. All savings associations are required to meet
a QTL test set forth in Section 10(m) of HOLA and regulations of the OTS there
under in order to avoid certain restrictions on their operations. A savings
association that does not meet the QTL test set forth in the HOLA and
implementing regulations must either convert to a bank charter or comply with
the following restrictions on its operations: (i) the association may not engage
in any new activity or make any new investment, directly or indirectly, unless
such activity or investment is permissible for a national bank, (ii) the
branching powers of the association shall be restricted to those of a national
bank, (iii) the association shall not be eligible to obtain any advances from
its FHLB and (iv) payment of dividends by the association shall be subject to
the rules regarding payment of dividends by a national bank. Upon the expiration
of three years from the date the

                                       32
<PAGE>

association ceases to be a QTL, it must cease any activity and not retain any
investment not permissible for a national bank and immediately repay any
outstanding FHLB advances (subject to safety and soundness considerations).

    Under applicable regulations, any savings institution is a QTL if (i) it
qualifies as a domestic building and loan association under Section 7701(a)(19)
of the Code (which generally requires that at least 60% of the institution's
assets constitute housing-related and other qualifying assets) or (ii) at least
65% of the institution's "portfolio assets" (as defined) consist of certain
housing and consumer-related assets on a monthly average basis in at least nine
out of every 12 months.  At December 31, 2000, the Bank was in compliance with
the QTL test.

    Restrictions on Capital Distributions.  OTS regulations govern capital
distributions by savings associations, which include cash dividends, stock
redemptions or repurchases, cash-out mergers, interest payments on certain
convertible debt and other transactions charged to the capital account of a
savings association to make capital distributions.

    In January 1999, the OTS amended its capital distribution regulation to
bring such regulations into greater conformity with the other bank regulatory
agencies. Under the regulation, certain savings associations would not be
required to file with the OTS. Specifically, savings associations that would be
well capitalized following a capital distribution would not be subject to any
requirement for notice or application unless the total amount of all capital
distributions, including any proposed capital distribution, for the applicable
calendar year would exceed an amount equal to the savings association's net
income for that year to date plus the savings association's retained net income
for the preceding two years. Because the Bank is a subsidiary of the Company,
the Bank is required to provide notice to the OTS of its intent to make a
capital distribution, unless an application is otherwise required.

    Federal Home Loan Bank System.  The Bank is a member of the FHLB of Atlanta,
which is one of 12 regional FHLBs that administers the home financing credit
function of savings associations.  Each FHLB serves as a reserve or central bank
for its members within its assigned region.  It is funded primarily from
proceeds derived from the sale of consolidated obligations of the FHLB System.
It makes loans to members (i.e., advances) in accordance with policies and
procedures established by the Board of Directors of the FHLB.

    As a member, the Bank is required to purchase and maintain stock in the FHLB
in an amount at least equal to 1% of its aggregate unpaid residential mortgage
loans, home purchase contracts or similar obligations, 3/10 of 1% of total
assets at the end of the calendar year, or 5% of its advances from the FHLB,
whichever is greater.  At December 31, 2000, the Bank had $2.8 million in FHLB
stock, which was in compliance with this requirement.

    Federal Reserve System.  The FRB requires all depository institutions to
maintain reserves against their transaction accounts (primarily NOW and Super
NOW checking accounts) and non-personal time deposits.  At December 31, 2000,
the Bank was in compliance with applicable requirements.   However, because
required reserves must be maintained in the form of vault cash or a noninterest-
bearing account at a Federal Reserve Bank, the effect of this reserve
requirement is to reduce an institution's earning assets.

    Financial Modernization.  On November 12, 1999, the Gramm-Leach-Bliley Act
(the "Act") of 1999, financial modernization legislation, was signed into law.
The Act amends numerous banking laws including, but not limited to, (i)
repealing Sections 20 and 32 of the Banking Act of 1933 (Glass-Steagall Act),
which prohibited bank affiliations with securities firms, and amending the Bank
Holding Company Act of 1956 to allow affiliations between insured depository
institutions and any "financial" company, (ii) streamlining the supervision of
bank holding companies, including the creation of "financial holding companies"
as described

                                       33
<PAGE>

below, (iii) clarifying national banks' authorization to conduct financial
activities through subsidiaries, (iv) restricting the sale of existing unitary
thrift holding companies to financial companies and limiting the granting of new
unitaries charters to financial companies, (v) permitting federal savings
associations converting to national or state banks to retain the term "federal"
in their names and (vi) repealing the SAIF special reserve for return to the
general reserve. Further, the Act established (i) "financial holding companies"
to engage in, through affiliates, insurance and securities underwriting,
merchant banking, portfolio investment and title insurance activities, (ii) the
National Association of Registered Agents and Brokers to set uniform licensing
and qualification standards for insurance producers on a multistate basis, (iii)
terms and conditions for a mutual insurance company to reorganize into a mutual
holding company, (iv) the scope of bank disclosure and sharing of customers'
non-public information with nonaffiliated third parties with an opt-out
provision, (v) federal criminal penalties for individuals seeking to obtain
customer financial information through fraud or deceit by pretext calling and
(vi) that all banking agencies must use "plain language" in proposed and final
rulemaking after January 1, 2000.

    Specifically, Title V of the Act contains the most comprehensive financial
consumer privacy restrictions ever written into federal law.  Banks and all
other institutions dealing in financial products and services are required to
have a privacy policy and to disclose it to their customers.  They also must
give customers the right to "opt out" of having nonpublic personal information
shared with certain unaffiliated third parties.  The privacy provisions impose
new administrative and regulatory burdens.  Further, the Act states that if
state law affords greater consumer protections than federal law in the area of
third-party information sharing, the state law will supersede federal law.  The
Bank has introduced its privacy principles on the Company's Internet web site
and the Company's board of directors has adopted a corporate policy on the
privacy and accuracy of personal customer information.

    Safety and Soundness.  The federal banking regulatory agencies have jointly
implemented Interagency Guidelines Establishing Standards for Safety and
Soundness ("Guidelines") for all insured depository institutions relating to
internal controls, information systems and internal audit systems, loan
documentation, credit underwriting, interest rate risk exposure, asset growth,
and compensation, fees, benefits, and employment contracts and other
compensation arrangements of executive officers, employees, directors and
principal stockholders of insured depository institutions.  The federal banking
regulatory agencies have also adopted asset quality and earnings standards
within the Guidelines.  At December 31, 2000, the Bank was in compliance with
the Guidelines.

Taxation

    Federal Taxation. The Company and its subsidiaries are subject to those
rules of federal income taxation generally applicable to corporations under the
Code. The Company and its principal subsidiary, the Bank, as members of an
affiliated group of corporations within the meaning of Section 1504 of the Code,
file a consolidated federal income tax return, which has the effect of
eliminating or deferring the tax consequences of intercompany transactions and
distributions, including dividends, in the computation of consolidated taxable
income.

    In addition to regular corporate income tax, corporations are subject to an
alternative minimum tax, which generally is equal to 20% of alternative minimum
taxable income (taxable income, increased by certain tax preference items and
determined with adjustments to certain regular tax items). The adjustments that
are generally applicable include an amount equal to a percentage of the amount
by which a financial institution's adjusted current earnings (generally
alternative minimum taxable income computed without regard to this adjustment
and prior to reduction for alternative tax net operating losses) exceeds its
alternative minimum taxable

                                       34
<PAGE>

income without regard to this adjustment. Alternative minimum tax paid can be
credited against regular tax due in later years. See Note 13 of the Notes to
Consolidated Financial Statements on pages 30 through 32 of the 2000 Annual
Report to Stockholders, which is attached hereto as Exhibit 13 and incorporated
herein by reference.

    State Taxation.  The Commonwealth of Virginia imposes a tax at the rate of
6.0% on the combined "Virginia taxable income" of the Bank and its subsidiaries.
Virginia taxable income is equal to federal taxable income with certain
adjustments.  Significant modifications include the subtraction from federal
taxable income of interest or dividends on obligations or securities of the
United States that are exempt from state income taxes, and a recomputation of
the bad debt reserve deduction on reduced modified taxable income.

    Because the Bank conducts business in North Carolina, it is subject to an
annual corporate income tax of 7.75% of its federal taxable income as computed
under the Code, subject to certain prescribed adjustments.  In addition to the
state corporate income tax, the Bank is subject to an annual state franchise
tax, which is imposed at a rate of .15% applied to the greater of the respective
entity's (i) capital stock, surplus, and undivided profits, (ii) investments in
tangible property in North Carolina or (iii) appraised valuation of property in
North Carolina.

    Furthermore, the Company is separately subject to an annual state franchise
tax in Delaware.


                             [intentionally blank]

                                       35
<PAGE>

Item 2.    Description of Properties
           -------------- ----------

    The following table sets forth information with respect to offices of the
Company and its subsidiaries as of December 31, 2000.
<TABLE>
<CAPTION>

                                                     Lease          Date         Total         Net Book
                                     Owned/     Expiration Date   Acquired/      Office        Value at
Location                            Leased     Including Options   Leased     Square Ft. (1)  12/31/00 (2)
---------------------------------  ---------   -----------------  ---------  ---------------  ------------
<S>                                <C>         <C>                <C>        <C>             <C>
The Company
Executive Office:
Interstate Corporate Center         Leased         01/31/02           10/96      7,328           $  6,457
Building 9, Suite 200
Norfolk, VA  23502

The Bank
Main Office:
400 W. Ehringhaus Street             Owned                -           11/78      3,805            165,916
Elizabeth City, NC  27906

Branch Offices:
520 South Main Street                Owned                -           05/86      6,517            641,913
Emporia, VA  23847

1401 Gaskins Road                    Owned                -           09/98      6,782            628,633
Richmond, VA  23233

9695 Sliding Hill Road               Owned                -           08/98      3,150            845,704
Ashland VA 23005

2825 Godwin Boulevard                Owned                -           04/98      3,245            727,476
Suffolk, VA  23434

Essex First
Interstate Corporate Center         Leased         01/31/02           10/96      5,554                  -
Building 9, Suite 200
Norfolk, VA  23502

1401 Gaskins Road                   Leased (3)            -           09/98      3,078                  -
Richmond, VA  23233

9695 Sliding Hill Road              Leased (3)            -           05/00        750                  -
Ashland, VA  23005

2430 Southland Drive, 3rd Floor     Leased         09/01/01           06/93      2,000                  -
Chester, VA  23831

400 W. Ehringhaus Street            Leased (3)            -           07/94        750                  -
Elizabeth City, NC  27906

Essex Home
2420 Virginia Beach Blvd.           Leased         12/31/01           12/91     11,950                  -
Virginia Beach, VA  23454
</TABLE>


(1)  Total office square feet excludes leased common area.
(2)  Consists of the net book value of land and buildings if owned, or leasehold
     improvements if leased.
(3)  Leased from the Bank.

                                       36
<PAGE>

Item 3.   Legal Proceedings
          -----------------

    The Company and its subsidiaries are involved in routine legal
proceedings occurring in the ordinary course of business, which in the aggregate
are believed by management to be immaterial to the financial condition of the
Company.


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

    No matters were submitted to a vote of the stockholders of the Company
through the solicitation of proxies, or otherwise, during the fourth quarter of
the year ended December 31, 2000.


                                    PART II
                                    -------


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

    The Common Stock is currently traded on the American Stock Exchange ("AMEX")
under the symbol "ESX." The information contained on page 42 of the 2000 Annual
Report to Stockholders, which is attached hereto as Exhibit 13, under the
caption "Stock Price Information," is incorporated herein by reference. As a
company listed on the AMEX, the Company is subject to the AMEX rules regarding
continued listing, and does not fully satisfy those continued listing
guidelines. Accordingly, there can be no assurance that the listing of the
Common Stock on the AMEX will be continued. In this regard, however, the Company
believes that its recently improved operating results will favorably impact the
AMEX's evaluation. In any event, if the going-private transaction is completed,
the Company's Common Stock will no longer be listed on AMEX.

    As of March 23, 2001, there were 1,060,642 shares of Common Stock
outstanding, which were held by approximately 1,420 persons.  The number of
persons holding shares of Common Stock reflects an estimate of the number of
persons or entities holding their stock in nominee or "street" name through
various brokerage firms or other entities.

Dividends

    The Company's ability to pay dividends on the Common Stock will depend
primarily on the receipt of dividends from the Bank.  While the Company and the
Bank are not operating under any supervisory agreements, the Bank must seek a
letter of nonobjection from the OTS prior to making dividend payments to the
Company.

    In connection with the Home Acquisition, the Company issued 2,250,000
shares of nonvoting perpetual preferred stock with an aggregate redemption and
liquidation value of $15.0 million in exchange for all of the outstanding stock
of Home Bancorp.  The preferred stock is redeemable at the option of the
Company.  The 2,125,000 shares of Series B preferred stock bear a cumulative
annual dividend rate of 9.5% (based on redemption value) and the 125,000 shares
of Series C preferred stock bear a cumulative annual dividend rate of 8.0%
(based on redemption value).  The Series C preferred stock is senior to Series B
preferred stock with respect to the payment of dividends, and the holders of the
Series C preferred stock may, in their discretion, from time to time in whole or
in part, elect to convert such shares of Series C preferred stock into a like
amount of Series B preferred stock.  At December 31, 2000, dividends and accrued
interest thereon in arrears on the Series B and Series C preferred stock were
$8,915,932 and $425,964, respectively.

                                       37
<PAGE>

    Also in connection with the Home Acquisition, the stockholders of Home
Bancorp received warrants to purchase 7,949,000 shares of Common Stock at a
price of $0.9375 per share, which was the price of the Common Stock as of June
30, 1995.  The warrants became exercisable beginning in September 1998 and will
expire in September 2005.


Item 6.  Management's Discussion and Analysis of Financial Condition and Results
         -----------------------------------------------------------------------
         of Operations
         -------------

    The information contained on pages 1 through 13 of the 2000 Annual Report to
Stockholders, which is attached hereto as Exhibit 13, under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" is incorporated herein by reference.


Item 7.  Financial Statements
         --------------------

    The consolidated balance sheets of the Company as of December 31, 2000 and
1999 and the related consolidated statements of operations, shareholders' equity
and cash flows for each of the years in the two-year period ended December 31,
2000, along with the related notes to consolidated financial statements and the
reports of KPMG LLP and PricewaterhouseCoopers LLP, independent accountants, are
incorporated herein by reference from pages 14 through 41 of the Company's 2000
Annual Report to Stockholders, which is attached hereto as Exhibit 13.


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

    On October 4, 2000, the Registrant dismissed PricewaterhouseCoopers LLP as
its independent accountants and engaged KPMG LLP as the Registrant's certifying
accountants. The Registrant's audit committee of the board of directors
participated in and approved the decision to change accountants. The Registrant
reported the change in accountants in a Form 8-K filed with the Commission on
October 10, 2000.


                                    PART III
                                    --------


Item 9.  Directors and Executive Officers of the Registrant; Compliance with
         -------------------------------------------------------------------
         Section 16(a) of the Exchange Act
         ---------------------------------

    Information regarding the directors of the Company is included in the
Company's Proxy Statement for the Annual Meeting to be held on June 21, 2001
under the heading "Information with Respect to Continuing Directors," and the
information included therein is incorporated herein by reference.

                                       38
<PAGE>

    Set forth below is information with respect to the executive officers of
the Company and its subsidiaries that do not serve as directors of the Company.
<TABLE>
<CAPTION>

                  Name       Age                 Title
                  ----       ---                 -----
<S>                          <C>  <C>
Earl C. McPherson             47  President of Essex First and Executive
                                  Vice President of Loan Production and
                                  Secondary Marketing of the Bank

Roy H. Rechkemmer, Jr.        38  Senior Vice President of Finance and Treasurer
                                  of the Company and the Bank

Mary-Jo Rawson                47  Senior Vice President and Chief Accounting
                                  Officer of the Company and the Bank
</TABLE>

    Earl C. McPherson. Mr. McPherson presently serves as President of Essex
First and as Executive Vice President of Loan Production and Secondary Marketing
of the Bank. Mr. McPherson served as director, President and Chief Executive
Officer of Essex First Mortgage Corporation until its merger with the Bank on
December 31, 1998. Mr. McPherson served as President of Essex Industrial Loan
Association/Virginia Beach from January 1992 through May 1992. From January 1990
through December 1991, Mr. McPherson served as President of Mortgage Centers,
Inc. ("MCI"). Prior to his employment with MCI, Mr. McPherson served as
Divisional, Regional, and Training Director for Security Pacific Financial
Services, Inc. Mr. McPherson has a Bachelor of Arts from the University of
Richmond. Mr. McPherson also attended the American Financial Services
Association Management program at the University of North Carolina at Chapel
Hill.

    Roy H. Rechkemmer, Jr. Mr. Rechkemmer presently serves as Senior Vice
President of Finance and Treasurer of the Company and the Bank. Mr. Rechkemmer
also serves as chairman of the Bank's Asset and Liability Management Committee,
manager of the Bank's investment portfolio and administrator of the Bank's
branches. Mr. Rechkemmer received a Bachelor of Science Degree in Finance from
the University of Wisconsin-La Crosse in 1985 and is a Chartered Financial
Analyst. He has been employed by the Bank and subsidiaries since 1987.

    Mary-Jo Rawson.  Ms. Rawson presently serves as Senior Vice President and
Chief Accounting Officer of the Company and the Bank.  Prior to her employment
with the Company, Ms. Rawson served in various accounting officer positions at
NationsBank Corporation and its predecessor institution C&S/Sovran.  Ms.
Rawson's primary responsibilities emphasized regulatory reporting and accounting
policies and procedures.  At the time of her departure from NationsBank in 1992,
Ms. Rawson was a Senior Vice President and the controller of the Bankcard
Division.  Ms. Rawson received a Bachelor of Science Degree in Business
Administration from Old Dominion University in 1976.

    Information regarding compliance with Section 16(a) of the Securities
Exchange Act is included in the Company's Proxy Statement for the Annual Meeting
to be held on June 21, 2001 under the heading "Compliance with Section 16(a) of
the Exchange Act," and the information included therein is incorporated herein
by reference.


Item 10.  Executive Compensation
          ----------------------

    Information regarding compensation of executive officers and directors is
incorporated herein by reference to the Company's Proxy Statement for the Annual
Meeting to be held on June 21, 2001 under the headings "Directors Fees" and
"Executive Compensation."

                                       39
<PAGE>

Item 11.  Security Ownership of Certain Beneficial Owners and Management
          --------------------------------------------------------------

    Information regarding security ownership of certain beneficial owners and
management is included in the Company's Proxy Statement for the Annual Meeting
to be held on June 21, 2001 under the headings "Securities Ownership of Certain
Beneficial Owners" and "Information with Respect to Continuing Directors," and
the information included therein is incorporated herein by reference.


Item 12.  Certain Relationships and Related Transactions
          ----------------------------------------------

     Information regarding certain relationships and related transactions is
included in the Company's Proxy Statement for the Annual Meeting to be held on
June 21, 2001 under the heading "Transactions with Certain Related Persons," and
the information included therein is incorporated herein by reference.



                             [intentionally blank]

                                       40
<PAGE>

<TABLE>
<CAPTION>

Item 13.  Exhibits and Reports on Form 8-K
          --------------------------------
<S>       <C>
(a)       1.  Financial Statements:
                                                                              Page in
                                                                              Annual
                                                                              Report*
                                                                              -------
              The following documents are filed as part of this report:

              Independent Auditors' Report.................................     14

              Report of Independent Accountants............................     15

              Consolidated Balance Sheets at December 31, 2000
               and 1999....................................................     16

              Consolidated Statements of Operations for the two
               years ended December 31, 2000...............................     17

              Consolidated Statements of Shareholders' Equity for
               the two years ended December 31, 2000.......................     18

              Consolidated Statements of Cash Flows for the two
               years ended December 31, 2000...............................  19-20

              Notes to Consolidated Financial Statements...................  21-41
</TABLE>
              *Incorporated by reference from the indicated pages of the 2000
                Annual Report to Stockholders.

              The financial statements, together with the report thereon of KPMG
              LLP dated February 1, 2001 and PricewaterhouseCoopers LLP dated
              February 18, 2000, appearing on pages 14 through 15 of the
              accompanying 2000 Annual Report to Stockholders are incorporated
              by reference in this Form 10-KSB Annual Report. With the exception
              of the aforementioned information and the information incorporated
              in Items 1, 5, 6 and 7, the 2000 Annual Report to Stockholders is
              not to be deemed filed as part of this Form 10-KSB Annual Report.

                                       41
<PAGE>

          2.  Exhibits:

              The following exhibits are either filed as part of this Part III
              or are incorporated herein by reference:

              Exhibit No.   Description
              -----------   -----------

                3.1*        Certificate of Incorporation of Essex Bancorp, Inc.,
                            dated June 21, 1994.  Filed as Exhibit 3.1 to the
                            Registrant's Form S-4 Registration Statement under
                            the Securities Act of 1933 as filed on August 15,
                            1994.

                3.2*        Certificate of Amendment of Essex Bancorp, Inc.,
                            dated August 10, 1994.  Filed as Exhibit 3.2 to the
                            Registrant's Form S-4 Registration Statement under
                            the Securities Act of 1933 as filed on August 15,
                            1994.

                3.3*        Certificate of Amendment to the Certificate of
                            Incorporation of Essex Bancorp, Inc., dated November
                            5, 1998.  Filed as Exhibit 3.3 to the Registrant's
                            Annual Report on Form 10-K for the year ended
                            December 31, 1998.

                3.4*        Bylaws of Essex Bancorp, Inc., effective July 25,
                            1994.  Filed as Exhibit 3.3 to the Registrant's Form
                            S-4 Registration Statement under the Securities Act
                            of 1933 as filed on August 15, 1994.

                4.1*        Certificate of Designation of the Series A Preferred
                            Stock of Essex Bancorp, Inc.  Filed as Exhibit 4.1
                            to the Registrant's Annual Report on Form 10-K for
                            the year ended December 31, 1995.

                4.2*        Certificate of Designations of Cumulative Perpetual
                            Preferred Stock, Series B of Essex Bancorp, Inc.
                            Filed as Exhibit 4.1 to the Registrant's Quarterly
                            Report on Form 10-Q for the quarter ended September
                            30, 1995.

                4.3*        Certificate of Designations of Cumulative Perpetual
                            Preferred Stock, Series C of Essex Bancorp, Inc.
                            Filed as Exhibit 4.2 to the Registrant's Quarterly
                            Report on Form 10-Q for the quarter ended September
                            30, 1995.

                4.4*        Form of Common Stock Purchase Warrant Certificate.
                            Filed as Exhibit 4.3 to the Registrant's Quarterly
                            Report on Form 10-Q for the quarter ended September
                            30, 1995.

* Not filed herewith.  In accordance with Rule 12b-32 of the General Rules and
  Regulations under the Securities Exchange Act of 1934, reference is made to
  the document previously filed with the Commission.

                                       42
<PAGE>

                4.5*        Specimen Common Stock Certificate of Essex Bancorp,
                            Inc.  Filed as Exhibit 4.1 to the Registrant's Pre-
                            Effective Amendment No. 1 to Form S-4 Registration
                            Statement under the Securities Act of 1933, as filed
                            on October 12, 1994.

                4.6*        Specimen Series B 9.5% Cumulative Preferred Stock
                            Certificate of Essex Bancorp, Inc.  Filed as Exhibit
                            4.6 to the Registrant's Annual Report on Form 10-K
                            for the year ended December 31, 1995.

                4.7*        Specimen Series C 8% Cumulative Preferred Stock
                            Certificate of Essex Bancorp, Inc.  Filed as Exhibit
                            4.7 to the Registrant's Annual Report on Form 10-K
                            for the year ended December 31, 1995.

                10.1*       Essex Savings Bank, F.S.B. Supplemental Executive
                            Retirement Plan dated August 26, 1993.  Filed as
                            exhibit 10.1 to the Registrant's Annual Report on
                            Form 10-K for the year ended December 31, 1997.

                10.2*       First Amendment to the Essex Savings Bank, F.S.B.
                            Supplemental Executive Retirement Plan dated June 5,
                            1997.  Filed as exhibit 10.2 to the Registrant's
                            Annual Report on Form 10-K for the year ended
                            December 31, 1997.

                10.3*       Second Amendment to the Essex Savings Bank, F.S.B.
                            Supplemental Executive Retirement Plan dated
                            November 1, 1997.  Filed as exhibit 10.3 to the
                            Registrant's Annual Report on Form 10-K for the year
                            ended December 31, 1997.

                10.4*       Third Amendment to the Essex Savings Bank, F.S.B.
                            Supplemental Executive Retirement Plan dated
                            December 1, 1998.  Filed as Exhibit 10.4 to the
                            Registrant's Annual Report on Form 10-K for the year
                            ended December 31, 1998.

                10.5*       Fourth Amendment to the Essex Savings Bank, F.S.B.
                            Supplemental Executive Retirement Plan dated October
                            27, 1999.  Filed as Exhibit 10.5 to the Registrant's
                            Annual Report on Form 10-K for the year ended
                            December 3, 1999.

                10.6*       Essex Bancorp, Inc. Non-Employee Directors Stock
                            Option Plan.  Filed as Exhibit 10.18 to the
                            Registrant's Form 10-K for the year ended December
                            31, 1994.


* Not filed herewith.  In accordance with Rule 12b-32 of the General Rules and
  Regulations under the Securities Exchange Act of 1934, reference is made to
  the document previously filed with the Commission.

                                       43
<PAGE>

                10.7*       First Amendment to the Essex Bancorp, Inc. Non-
                            Employee Directors Stock Option Plan dated July 29,
                            1995.  Filed as Exhibit 10.6 to the Registrant's
                            Annual Report on Form 10-K for the year ended
                            December 31, 1995.

                10.8*       Essex Bancorp, Inc. Stock Option Plan.  Filed as
                            Exhibit 10.19 to the Registrant's Form 10-K for the
                            year ended December 31, 1994.

                10.9*       First Amendment to the Essex Bancorp, Inc. Stock
                            Option Plan dated as of June 29, 1995.  Filed as
                            Exhibit 10.8 to the Registrant's Annual Report on
                            Form 10-K for the year ended December 31, 1995.

                10.10*      Second Amendment to the Essex Bancorp, Inc. Stock
                            Option Plan dated as of May 23, 1996.  Filed as
                            Exhibit 10.6 to the Registrant's Annual Report on
                            Form 10-K for the year ended December 31, 1996.

                10.11*      Essex Bancorp, Inc. Employee Stock Purchase Plan.
                            Filed as Exhibit 10.20 to the Registrant's Form 10-K
                            for the year ended December 31, 1994.

                10.12*      First Amendment to the Essex Bancorp, Inc. Employee
                            Stock Purchase Plan dated as of June 29, 1995.
                            Filed as Exhibit 10.10 to the Registrant's Annual
                            Report on Form 10-K for the year ended December 31,
                            1995.

                10.13*      Second Amendment to the Essex Bancorp, Inc. Employee
                            Stock Purchase Plan dated as of October 1, 1998.
                            Filed as Exhibit 10.13 to the Registrant's Annual
                            Report on Form 10-K for the year ended December 31,
                            1998.

                10.14*      Restated Employment Agreement dated as of January 1,
                            1998 by and among Essex Bancorp, Inc., Essex Savings
                            Bank, F.S.B., Essex Mortgage Corporation and Gene D.
                            Ross.  Filed as exhibit 10.12 to the Registrant's
                            Annual Report on Form 10-K for the year ended
                            December 31, 1997.

                10.15*      First Amendment to the Restated Executive Services
                            Agreement dated as of January 1, 1998 by and among
                            Essex Bancorp, Inc., Essex Savings Bank, F.S.B.,
                            Essex Mortgage Corporation and Gene D. Ross.  Filed
                            as Exhibit 10.14 to the Registrant's Annual Report
                            on Form 10-K for the year ended December 31, 1998.


* Not filed herewith.  In accordance with Rule 12b-32 of the General Rules and
  Regulations under the Securities Exchange Act of 1934, reference is made to
  the document previously filed with the Commission.

                                       44
<PAGE>

                10.16*      Second Amendment to the Restated Employment
                            Agreement dated as of October 1, 1999 by and among
                            Essex Bancorp, Inc., Essex Savings Bank, F.S.B. and
                            Essex Home Mortgage Servicing Corporation (successor
                            to Essex Mortgage Corporation) and Gene D. Ross.
                            Filed as Exhibit 10.17 to the Registrant's Annual
                            Report on Form 10-K for the year ended December 31,
                            1999.

                10.17*      Change in Control Agreement dated as of January 1,
                            1998 by and among Essex Bancorp, Inc. and Gene D.
                            Ross.  Filed as Exhibit 10.16 to the Registrant's
                            Annual Report on Form 10-K for the year ended
                            December 31, 1998.

                10.18*      Restated Change in Control Agreement dated as of
                            October 1, 1999 by and among Essex Bancorp, Inc. and
                            Gene D. Ross.  Filed as Exhibit 10.19 to the
                            Registrant's Annual Report on Form 10-K for the year
                            ended December 31, 1999.

                10.19*      Restated Executive Services Agreement dated as of
                            January 1, 1998 by and among Essex Savings Bank,
                            F.S.B., Essex First Mortgage Corporation and Earl C.
                            McPherson.  Filed as exhibit 10.13 to the
                            Registrant's Annual Report on Form 10-K for the year
                            ended December 31, 1997.

                10.20*      First Amendment to the Restated Executive Services
                            Agreement dated as of January 1, 1998 by and among
                            Essex Savings Bank, F.S.B., Essex First Mortgage
                            Corporation and Earl C. McPherson.  Filed as Exhibit
                            10.18 to the Registrant's Annual Report on Form 10-K
                            for the year ended December 31, 1998.

                10.21*      Second Amendment to the Restated Executive Services
                            Agreement dated as of January 1, 1999 by and among
                            Essex Savings Bank, F.S.B., Essex First Mortgage
                            Corporation and Earl C. McPherson.  Filed as Exhibit
                            10.19 to the Registrant's Annual Report on Form 10-K
                            for the year ended December 31, 1998.

                10.22*      Change in Control Agreement dated as of January 1,
                            1998 by and among Essex Bancorp, Inc. and Earl C.
                            McPherson.  Filed as Exhibit 10.20 to the
                            Registrant's Annual Report on Form 10-K for the year
                            ended December 31, 1998.


* Not filed herewith.  In accordance with Rule 12b-32 of the General Rules and
  Regulations under the Securities Exchange Act of 1934, reference is made to
  the document previously filed with the Commission.

                                       45
<PAGE>

                10.23*      First Amendment to Change in Control Agreement dated
                            as of January 1, 1999 by and among Essex Bancorp,
                            Inc. and Earl C. McPherson.  Filed as Exhibit 10.21
                            to the Registrant's Annual Report on Form 10-K for
                            the year ended December 31, 1998.

                10.24*      Restated Change in Control Agreement dated as of
                            November 22, 1999 by and among Essex Bancorp, Inc.
                            and Earl C. McPherson.  Filed as Exhibit 10.25 to
                            the Registrant's Annual Report on Form 10-K for the
                            year ended December 31, 1999.

                10.25*      Subservicing Agreement between Essex Home Mortgage
                            Servicing Corporation and Continental Capital Corp.
                            dated as of April 15, 1998.  Filed as Exhibit 10.22
                            to the Registrant's Annual Report on Form 10-K for
                            the year ended December 31, 1998.

                11          Statement re Computation of Per Share Earnings.
                            Filed as an exhibit to this report.

                13          The 2000 Annual Report is attached as Exhibit 13.
                            Portions of the 2000 Annual Report are incorporated
                            by reference into this Form 10-KSB.

                21*         Subsidiaries of the Registrant.  Filed as Exhibit 21
                            to the Registrant's Annual Report on Form 10-K for
                            the year ended December 31, 1999.

* Not filed herewith.  In accordance with Rule 12b-32 of the General Rules and
  Regulations under the Securities Exchange Act of 1934, reference is made to
  the document previously filed with the Commission.

                                       46
<PAGE>

(b)       Reports on Form 8-K Filed in the Fourth Quarter of 2000

              On October 10, 2000, the Registrant filed a Form 8-K to report
          that effective October 4, 2000, the Registrant dismissed
          PricewaterhouseCoopers LLP as its independent accountants and engaged
          KPMG LLP as the Registrant's certifying accountants.

                                       47
<PAGE>

                                   SIGNATURES


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

                                Essex Bancorp, Inc.


                                By: /s/ Gene D. Ross
                                    ----------------
                                    Gene D. Ross
                                    Chairman, President,
                                    and Chief Executive
                                    Officer

                                    March 29, 2001
                                    --------------
                                        (Date)

    In accordance with 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 and on the dates indicated.

By:  /s/ Gene D. Ross                       March 29, 2001
     ----------------                       --------------
     Gene D. Ross                               (Date)
     Chairman, President, Chief
     Executive Officer and
     Principal Financial Officer


By:  /s/ Mary-Jo Rawson                     March 29, 2001
     ------------------                     --------------
     Mary-Jo Rawson                             (Date)
     Chief Accounting Officer


By:  /s/ Robert G. Hecht                    March 29, 2001
     -------------------                    --------------
     Robert G. Hecht                            (Date)
     Director


By:  /s/ Roscoe D. Lacy, Jr.                March 29, 2001
     -----------------------                --------------
     Roscoe D. Lacy, Jr.                        (Date)
     Director


By:  /s/ Harry F. Radcliffe                 March 29, 2001
     ----------------------                 --------------
     Harry F. Radcliffe                         (Date)
     Director

                                       48
<PAGE>

                Exhibit Index
<TABLE>
<CAPTION>

Exhibit No.               Description
-----------               -----------
<S><C>
   3.1*                   Certificate of Incorporation of Essex Bancorp, Inc., dated June 21, 1994.

   3.2*                   Certificate of Amendment of Essex Bancorp, Inc., dated August 10, 1994.

   3.3*                   Certificate  of Amendment to the  Certificate  of  Incorporation  of Essex  Bancorp,  Inc.,
                          dated November 5, 1998.

   3.4*                   Bylaws of Essex Bancorp, Inc., effective July 25, 1994.

   4.1*                   Certificate of Designation of the Series A Preferred Stock of Essex Bancorp, Inc.

   4.2*                   Certificate of  Designations of Cumulative  Perpetual  Preferred  Stock,  Series B of Essex
                          Bancorp, Inc.

   4.3*                   Certificate of  Designations of Cumulative  Perpetual  Preferred  Stock,  Series C of Essex
                          Bancorp, Inc.

   4.4*                   Form of Common Stock Purchase Warrant Certificate.

   4.5*                   Specimen Common Stock Certificate of Essex Bancorp, Inc.

   4.6*                   Specimen Series B 9.5% Cumulative Preferred Stock Certificate of Essex Bancorp, Inc.

   4.7*                   Specimen Series C 8% Cumulative Preferred Stock Certificate of Essex Bancorp, Inc.

  10.1*                   Essex Savings Bank, F.S.B. Supplemental Executive Retirement Plan, dated August 26, 1993.
</TABLE>

  ------------------------------------------------------------------------------
   *   For exhibit reference see Item 13.(a)2. for statement of location of
       exhibits incorporated by reference.


                                      E-1
<PAGE>

                Exhibit Index
<TABLE>
<CAPTION>

Exhibit No.               Description
-----------               -----------
<S> <C>
  10.2*                   First Amendment to the Essex Savings Bank, F.S.B.  Supplemental  Executive Retirement Plan,
                          dated June 5, 1997.

  10.3*                   Second  Amendment to the Essex  Savings  Bank,  F.S.B.  Supplemental  Executive  Retirement
                          Plan, dated November 1, 1997.

  10.4*                   Third Amendment to the Essex Savings Bank, F.S.B.  Supplemental  Executive Retirement Plan,
                          dated December 1, 1998.

  10.5*                   Fourth  Amendment to the Essex  Savings  Bank,  F.S.B.  Supplemental  Executive  Retirement
                          Plan, dated October 27, 1999.

  10.6*                   Essex Bancorp, Inc. Non-Employee Directors Stock Option Plan.

  10.7*                   First  Amendment  to the Essex  Bancorp,  Inc.  Non-Employee  Directors  Stock Option Plan,
                          dated July 29, 1995.

  10.8*                   Essex Bancorp, Inc. Stock Option Plan.

  10.9*                   First Amendment to the Essex Bancorp, Inc. Stock Option Plan, dated as of June 29, 1995.

  10.10*                  Second Amendment to the Essex Bancorp, Inc. Stock Option Plan, dated as of May 23, 1996.

  10.11*                  Essex Bancorp, Inc. Employee Stock Purchase Plan.

  10.12*                  First Amendment to the Essex Bancorp,  Inc.  Employee Stock Purchase Plan, dated as of June
                          29, 1995.

</TABLE>
  ------------------------------------------------------------------------------
   *   For exhibit reference see Item 13.(a)2. for statement of location of
       exhibits incorporated by reference.

                                      E-2
<PAGE>

                Exhibit Index
<TABLE>
<CAPTION>

Exhibit No.               Description
-----------               -----------
<S> <C>
  10.13*                  Second  Amendment to the Essex Bancorp,  Inc.  Employee  Stock  Purchase Plan,  dated as of
                          October 1, 1998.

  10.14*                  Restated  Employment  Agreement  by and among Essex  Bancorp,  Inc.,  Essex  Savings  Bank,
                          F.S.B., Essex Mortgage Corporation and Gene D. Ross, dated as of January 1, 1998.

  10.15*                  First Amendment to the Restated  Executive  Services  Agreement by and among Essex Bancorp,
                          Inc.,  Essex Savings Bank,  F.S.B.,  Essex Mortgage  Corporation and Gene D. Ross, dated as
                          of January 1, 1998.

  10.16*                  Second Amendment to the Restated  Executive  Services Agreement by and among Essex Bancorp,
                          Inc.,  Essex Savings Bank,  F.S.B.,  Essex Mortgage  Corporation and Gene D. Ross, dated as
                          of October 1, 1999.

  10.17*                  Change in Control  Agreement by and among Essex  Bancorp,  Inc. and Gene D. Ross,  dated as
                          of January 1, 1998.

  10.18*                  Restated  Change in Control  Agreement by and among Essex  Bancorp,  Inc. and Gene D. Ross,
                          dated as of October 1, 1999.

  10.19*                  Restated  Executive  Services  Agreement by and among Essex  Savings  Bank,  F.S.B.,  Essex
                          First Mortgage Corporation and Earl C. McPherson, dated as of January 1, 1998.
</TABLE>

  ------------------------------------------------------------------------------
   *   For exhibit reference see Item 13.(a)2. for statement of location of
       exhibits incorporated by reference.

                                      E-3
<PAGE>

                Exhibit Index
<TABLE>
<CAPTION>

Exhibit No.               Description
-----------               -----------
<S><C>
  10.20*                  First  Amendment to the Restated  Executive  Services  Agreement by and among Essex Savings
                          Bank, F.S.B., Essex First Mortgage  Corporation and Earl C. McPherson,  dated as of January
                          1, 1998.

  10.21*                  Second Amendment to the Restated  Executive  Services  Agreement by and among Essex Savings
                          Bank, F.S.B., Essex First Mortgage  Corporation and Earl C. McPherson,  dated as of January
                          1, 1999.

  10.22*                  Change in Control Agreement by and among Essex Bancorp,  Inc. and Earl C. McPherson,  dated
                          as of January 1, 1998.

  10.23*                  First  Amendment to the Change in Control  Agreement by and among Essex  Bancorp,  Inc. and
                          Earl C. McPherson, dated as of January 1, 1999.

  10.24*                  Restated  Change  in  Control  Agreement  by and  among  Essex  Bancorp,  Inc.  and Earl C.
                          McPherson, dated as of November 22, 1999.

  10.25*                  Subservicing  Agreement between Essex Home Mortgage  Servicing  Corporation and Continental
                          Capital Corp., dated as of April 15, 1998.

  11                      Statement re Computation of Per Share Earnings.  Filed as an exhibit to this report.

  13                      The 2000 Annual  Report is attached as Exhibit 13.  Portions of the 2000 Annual  Report are
                          incorporated by reference into this Form 10-KSB.

  21*                     Subsidiaries of the Registrant.
</TABLE>
 ------------------------------------------------------------------------------
   *   For exhibit reference see Item 13.(a)2. for statement of location of
       exhibits incorporated by reference.

                                      E-4