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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q





(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2009

OR



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

For the transition period from              to

Commission file number: 000-52946





VIRGINIA SAVINGS BANCORP, INC.

(Exact name of registrant as specified in its
Charter)







|                                                               |  |                                       
|-------------------------------------------------------------- |  | --------------------------------------
|VIRGINIA                                                       |  | 20-8947933                            
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I. R. S. Employer Identification No.)

600 Commerce Avenue, Front Royal, Virginia 22630

(Address of Principal Executive Offices) (Zip Code)

(540) 635-4137

(Registrants telephone number, including area code)





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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web
site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
submit and post such files.).     ̈  Yes     ̈  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                        |  |   |  |                           |  |  
|----------------------- |  | - |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈ |  | Accelerated filer         |  |  ̈
|                        |  |   | 
|Non-accelerated filer   |  |  ̈ |  | Smaller reporting company |  | x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).     ̈  Yes    x  No

As of May 15, 2009, there were issued and outstanding 1,899,984 shares of the registrants common stock.









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VIRGINIA SAVINGS BANCORP, INC.

QUARTERLY REPORT ON FORM 10-Q

March 31, 2009

INDEX



|                               |  |                                                                                                       |  |        
|------------------------------ |  | ----------------------------------------------------------------------------------------------------- |  | -------
|PART I - FINANCIAL INFORMATION |  |                                                                                                      
|                               |  |                                                                                                      
|Item 1 -                       |  | Financial Statements                                                                                  |  |        
|                               |  | Consolidated Statements of Financial Condition As of March 31, 2009 and December 31, 2008
(Unaudited) |  | Page 3 
|                               |  | Consolidated Statements of Operations, Three Months Ended March 31, 2009 and 2008 (Unaudited)         |  | Page 4 
|                               |  | Consolidated Statements of Accumulated Other Comprehensive Income (Loss) (Unaudited)                  |  | Page 5 
|                               |  | Consolidated Statements of Cash Flows, Three Months Ended March 31, 2009 and 2008 (Unaudited)         |  | Page 6 
|                               |  | Notes to Financial Statements (Unaudited)                                                             |  | Page 7 
|Item 2 -                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                 |  | Page 12
|Item 3 -                       |  | Quantitative and Qualitative Disclosures About Market Risk                                            |  | Page 22
|Item 4T -                      |  | Controls and Procedures                                                                               |  | Page 22
|                               | 
|PART II - OTHER INFORMATION    |  |                                                                                                      
|                               |  |                                                                                                      
|Item 1 -                       |  | Legal Proceedings                                                                                     |  | Page 23
|Item 1A -                      |  | Risk Factors                                                                                          |  | Page 23
|Item 2 -                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                           |  | Page 24
|Item 3-                        |  | Default Upon Senior Securities                                                                        |  | Page 24
|Item 4 -                       |  | Submission of Matters to a Vote of Security Holders                                                   |  | Page 24
|Item 5 -                       |  | Other Information                                                                                     |  | Page 24
|Item 6 -                       |  | Exhibits                                                                                              |  | Page 24
|                               | 
|Signatures                     |  | Page 25                                                                                              



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PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements

VIRGINIA SAVINGS
BANCORP, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)



|                                                                                                                                       |  |               |             |   |                  |   |             |  
|-------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ----------- | - | ---------------- | - | ----------- | -
|                                                                                                                                       |  | March 31,2009 |             |   | December 31,2008 |  
|ASSETS                                                                                                                                 |  |               |             |   |                  |   |             |  
|Cash and due from banks                                                                                                                |  | $             | 3,203,280   |   |                  | $ | 3,509,491   |  
|Interest bearing deposits at other banks                                                                                               |  |               | 5,515,246   |   |                  |   | 6,767,289   |  
|Federal funds sold                                                                                                                     |  |               | 1,517,000   |   |                  |   | 2,067,000   |  
|                                                                                                                                       |  |               |             |   |                  |   |             |  
|Total cash and cash equivalents                                                                                                        |  |               | 10,235,526  |   |                  |   | 12,343,780  |  
|Investment securities available for sale                                                                                               |  |               | 3,953,497   |   |                  |   | 5,046,563   |  
|Investment securities held to maturity (fair value of $3,523,731 and $3,020,452 at March 31, 2009 and December 31,
2008)               |  |               | 3,524,072   |   |                  |   | 3,020,714   |  
|Loans receivable, net of allowance for loan losses of $1,410,937 and $1,375,900 at March 31, 2009 and December 31,
2008                |  |               | 103,758,509 |   |                  |   | 102,857,617 |  
|Premises and equipment, net                                                                                                            |  |               | 5,907,379   |   |                  |   | 5,775,304   |  
|Federal Home Loan Bank of Atlanta Stock, at cost                                                                                       |  |               | 279,300     |   |                  |   | 322,300     |  
|Foreclosed real estate                                                                                                                 |  |               | 3,622,306   |   |                  |   | 3,656,322   |  
|Real estate held for sale                                                                                                              |  |               | 526,353     |   |                  |   | 526,353     |  
|Other assets                                                                                                                           |  |               | 1,934,982   |   |                  |   | 2,231,281   |  
|                                                                                                                                       |  |               |             |   |                  |   |             |  
|Total Assets                                                                                                                           |  | $             | 133,741,924 |   |                  | $ | 135,780,234 |  
|                                                                                                                                       |  |               |             |   |                  |   |             |  
|                                                                                                                                       |  |              
|LIABILITIES AND EQUITY                                                                                                                 |  |               |             |   |                  |   |             |  
|Liabilities                                                                                                                            |  |               |             |   |                  |   |             |  
|Interest bearing deposits                                                                                                              |  | $             | 114,431,243 |   |                  | $ | 118,039,571 |  
|Non-interest bearing deposits                                                                                                          |  |               | 6,611,974   |   |                  |   | 5,115,286   |  
|                                                                                                                                       |  |               |             |   |                  |   |             |  
|Total Deposits                                                                                                                         |  |               | 121,043,217 |   |                  |   | 123,154,857 |  
|Advances from borrowers for taxes and insurance                                                                                        |  |               | 84,376      |   |                  |   | 78,268      |  
|Other liabilities                                                                                                                      |  |               | 513,727     |   |                  |   | 458,024     |  
|                                                                                                                                       |  |               |             |   |                  |   |             |  
|Total Liabilities                                                                                                                      |  | $             | 121,641,320 |   |                  | $ | 123,691,149 |  
|                                                                                                                                       |  |               |             |   |                  |   |             |  
|                                                                                                                                       |  |              
|Equity                                                                                                                                 |  |               |             |   |                  |   |             |  
|Preferred stock, $10.00 par (500,000 shares authorized, zero shares issued and outstanding at March 31, 2009 and December 31, 2008)    |  |               |            |   |                  |   |            |  
|Common stock, $1.00 par (5,000,000 shares authorized; 1,899,984 shares issued and outstanding at March 31, 2009 and December 31,
2008) |  |               | 1,899,984   |   |                  |   | 1,899,984   |  
|Additional paid-in capital on common stock                                                                                             |  |               | 1,266,015   |   |                  |   | 1,266,015   |  
|Accumulated other comprehensive loss, net                                                                                              |  |               | (57,702     | ) |                  |   | (54,466     | )
|Retained earnings                                                                                                                      |  |               | 7,992,307   |   |                  |   | 7,977,552   |  
|                                                                                                                                       |  |               |             |   |                  |   |             |  
|Total Virginia Savings Bancorp, Inc. stockholders equity                                                                              |  |               | 11,100,604  |   |                  |   | 11,089,085  |  
|Preferred stock of subsidiary                                                                                                          |  |               | 1,000,000   |   |                  |   | 1,000,000   |  
|                                                                                                                                       |  |               |             |   |                  |   |             |  
|Total Equity                                                                                                                           |  |               | 12,100,604  |   |                  |   | 12,089,085  |  
|                                                                                                                                       |  |               |             |   |                  |   |             |  
|                                                                                                                                       |  |              
|Total Liabilities and Equity                                                                                                           |  | $             | 133,741,924 |   |                  | $ | 135,780,234 |  
|                                                                                                                                       |  |               |             |   |                  |   |             |  

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



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VIRGINIA SAVINGS BANCORP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)



|                                                    |  |                             |           |   |      |   |          
|--------------------------------------------------- |  | --------------------------- | --------- | - | ---- | - | ---------
|                                                    |  | Three Months endedMarch 31,
|                                                    |  | 2009                        |           |   | 2008
|Interest Income                                     |  |                             |           |   |      |   |          
|Interest and fees on loans                          |  | $                           | 1,596,148 |   |      | $ | 1,886,109
|Interest and dividends on investments               |  |                             | 60,330    |   |      |   | 265,275  
|Other interest income                               |  |                             | 2,546     |   |      |   | 22,451   
|                                                    |  |                             |           |   |      |   |          
|Total Interest Income                               |  |                             | 1,659,024 |   |      |   | 2,173,835
|                                                    |  |                            
|Interest Expense                                    |  |                             |           |   |      |   |          
|Interest on deposits                                |  |                             | 650,646   |   |      |   | 1,053,970
|Interest on short term borrowings                   |  |                             | 37        |   |      |   | 115,798  
|                                                    |  |                             |           |   |      |   |          
|Total Interest Expense                              |  |                             | 650,683   |   |      |   | 1,169,768
|                                                    |  |                             |           |   |      |   |          
|                                                    |  |                            
|Net interest income                                 |  |                             | 1,008,341 |   |      |   | 1,004,067
|Less: Provision for loan losses                     |  |                             | 39,723    |   |      |   | 75,216   
|                                                    |  |                             |           |   |      |   |          
|Net interest income after provision for loan losses |  |                             | 968,618   |   |      |   | 928,851  
|                                                    |  |                            
|Non-Interest Income                                 |  |                             |           |   |      |   |          
|Loan fees and late charges                          |  |                             | 38,660    |   |      |   | 58,528   
|Income from mortgage banking activities             |  |                             | 18,420    |   |      |   | 32,657   
|Fees from transaction accounts                      |  |                             | 211,781   |   |      |   | 277,715  
|Net loss on foreclosed real estate                  |  |                             | (219      | ) |      |   |         
|Other income                                        |  |                             | 1,035     |   |      |   | 4,178    
|                                                    |  |                             |           |   |      |   |          
|Total Non-Interest Income                           |  |                             | 269,677   |   |      |   | 373,078  
|                                                    |  |                            
|Non-Interest Expense                                |  |                             |           |   |      |   |          
|Salaries and employee benefits                      |  |                             | 646,291   |   |      |   | 704,993  
|Director compensation                               |  |                             | 19,714    |   |      |   | 63,229   
|Occupancy, furniture and equipment                  |  |                             | 97,575    |   |      |   | 85,855   
|Professional fees                                   |  |                             | 65,710    |   |      |   | 67,522   
|Data processing                                     |  |                             | 193,244   |   |      |   | 219,792  
|Marketing                                           |  |                             | 15,475    |   |      |   | 50,025   
|Foreclosed real estate                              |  |                             | 16,082    |   |      |   | 12,400   
|Overdraft protection plan                           |  |                             | 13,206    |   |      |   | 24,506   
|Other                                               |  |                             | 116,493   |   |      |   | 124,554  
|                                                    |  |                             |           |   |      |   |          
|Total non-interest expense                          |  |                             | 1,183,790 |   |      |   | 1,352,876
|                                                    |  |                             |           |   |      |   |          



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VIRGINIA SAVINGS BANCORP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited), Continued



|                                                    |  |                             |         |   |      |   |         |  
|--------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                    |  | Three Months endedMarch 31, |        
|                                                    |  | 2009                        |         |   | 2008 |  
|Income (loss) before income tax provision (benefit) |  |                             | 54,505  |   |      |   | (50,947 | )
|Income tax provision (benefit)                      |  |                             | 21,000  |   |      |   | (26,400 | )
|                                                    |  |                             |         |   |      |   |         |  
|Net income (loss)                                   |  |                             | 33,505  |   |      |   | (24,547 | )
|Dividends on preferred stock of subsidiary          |  |                             | (18,750 | ) |      |   | (18,750 | )
|                                                    |  |                             |         |   |      |   |         |  
|Net income (loss) attributable to common shares     |  | $                           | 14,755  |   |      | $ | (43,297 | )
|                                                    |  |                             |         |   |      |   |         |  
|Basic and diluted earnings (loss) per common share  |  | $                           | 0.01    |   |      | $ | (0.02   | )
|Dividends declared per common share                 |  | $                           |        |   |      | $ |        |  
|                                                    |  |                             |         |   |      |   |         |  

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

VIRGINIA SAVINGS BANCORP, INC.

CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Unaudited)



|                                                                                                     |  |                             |         |   |      |   |         |  
|---------------------------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                                     |  | Three Months endedMarch 31, |        
|                                                                                                     |  | 2009                        |         |   | 2008 |  
|Comprehensive Income (Loss)                                                                          |  |                             |         |   |      |   |         |  
|Net income (loss)                                                                                    |  | $                           | 33,505  |   |      | $ | (24,547 | )
|Unrealized losses on securities available for sale, net of taxes of $2,000 in 2009, and none in 2008 |  |                             | (3,236  | ) |      |   |        |  
|                                                                                                     |  |                             |         |   |      |   |         |  
|Comprehensive income (loss)                                                                          |  |                             | 30,269  |   |      |   | (24,547 | )
|Comprehensive (loss) attributable to preferred stock of subsidiary                                   |  |                             | (18,750 | ) |      |   | (18,750 | )
|                                                                                                     |  |                             |         |   |      |   |         |  
|Comprehensive income attributable to common stock shareholders                                       |  | $                           | 11,519  |   |      | $ | (43,297 | )
|                                                                                                     |  |                             |         |   |      |   |         |  



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VIRGINIA SAVINGS BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)



|                                                                                         |  |                              |            |   |      |   |             |  
|---------------------------------------------------------------------------------------- |  | ---------------------------- | ---------- | - | ---- | - | ----------- | -
|                                                                                         |  | Three Months Ended March 31, |           
|                                                                                         |  | 2009                         |            |   | 2008 |  
|Operating Activities:                                                                    |  |                              |            |   |      |   |             |  
|Net Income (loss)                                                                        |  | $                            | 33,505     |   |      | $ | (24,547     | )
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                              |            |   |      |   |             |  
|Provision for loan losses                                                                |  |                              | 39,723     |   |      |   | 75,216      |  
|Provision for losses on foreclosed real estate                                           |  |                              | 11,857     |   |      |   | 12,400      |  
|Loss on sale of foreclosed real estate                                                   |  |                              | 219        |   |      |   |            |  
|Amortization (accretion) of premiums and discounts on investments                        |  |                              | 8,566      |   |      |   | (614        | )
|Depreciation expense                                                                     |  |                              | 61,888     |   |      |   | 51,163      |  
|Decrease in other assets                                                                 |  |                              | 298,299    |   |      |   | 277,580     |  
|Increase (decrease) in other liabilities                                                 |  |                              | 55,703     |   |      |   | (229,231    | )
|                                                                                         |  |                              |            |   |      |   |             |  
|Net cash provided by operating activities                                                |  |                              | 509,760    |   |      |   | 161,967     |  
|                                                                                         |  |                              |            |   |      |   |             |  
|                                                                                         |  |                             
|Cash Flows from Investing Activities:                                                    |  |                              |            |   |      |   |             |  
|Maturities or call of available for sale investments                                     |  |                              | 1,000,000  |   |      |   | 13,000,000  |  
|Purchases of held to maturity investments                                                |  |                              | (500,000   | ) |      |   |            |  
|Principal repayments on mortgage backed securities                                       |  |                              | 75,906     |   |      |   | 426         |  
|Net redemption of Federal Home Loan Bank Stock                                           |  |                              | 43,000     |   |      |   | 406,000     |  
|Net (increase) decrease in loans receivable                                              |  |                              | (940,615   | ) |      |   | 47,098      |  
|Proceeds from sale of foreclosed real estate                                             |  |                              | 39,781     |   |      |   |            |  
|Cash paid for improvements made on foreclosed real estate                                |  |                              | (17,841    | ) |      |   |            |  
|Purchase of premises and equipment                                                       |  |                              | (193,963   | ) |      |   | (518,588    | )
|                                                                                         |  |                              |            |   |      |   |             |  
|Net cash provided (used) by investing activities                                         |  |                              | (493,732   | ) |      |   | 12,934,936  |  
|                                                                                         |  |                              |            |   |      |   |             |  
|                                                                                         |  |                             
|Cash Flows from Financing Activities:                                                    |  |                              |            |   |      |   |             |  
|Net decrease in deposits                                                                 |  |                              | (2,111,640 | ) |      |   | (3,658,377  | )
|Increase in escrow accounts                                                              |  |                              | 6,108      |   |      |   | 55,265      |  
|Net decrease in short-term borrowings                                                    |  |                              |           |   |      |   | (6,800,000  | )
|Dividends paid on preferred stock of subsidiary                                          |  |                              | (18,750    | ) |      |   | (18,750     | )
|                                                                                         |  |                              |            |   |      |   |             |  
|Net cash used by financing activities                                                    |  |                              | (2,124,282 | ) |      |   | (10,421,862 | )
|                                                                                         |  |                              |            |   |      |   |             |  
|                                                                                         |  |                             
|Net increase (decrease) in cash and cash equivalents                                     |  |                              | (2,108,254 | ) |      |   | 2,675,041   |  
|Cash and cash equivalents at beginning of period                                         |  |                              | 12,343,780 |   |      |   | 7,067,472   |  
|                                                                                         |  |                              |            |   |      |   |             |  
|Cash and cash equivalents at end of period                                               |  | $                            | 10,235,526 |   |      | $ | 9,742,513   |  
|                                                                                         |  |                              |            |   |      |   |             |  
|                                                                                         |  |                             
|Supplemental Disclosures of Cash Flow Information:                                       |  |                              |            |   |      |   |             |  
|Cash paid during the period for:                                                         |  |                              |            |   |      |   |             |  
|Interest                                                                                 |  | $                            | 650,665    |   |      | $ | 1,196,928   |  
|Income taxes                                                                             |  |                              |           |   |      |   | 22,100      |  

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



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VIRGINIA SAVINGS BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1  Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Virginia Savings
Bancorp, Inc. (the Company) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and in accordance with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion
of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included.

In preparing the
consolidated financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. Actual results could differ from those estimates.
Operating results for the three months ended March 31, 2009 are not necessarily indicative of the results that may be expected for any other interim period or the entire year ending December 31, 2009. The unaudited consolidated financial
statements and related notes thereto presented herein should be read in conjunction with the audited consolidated financial statements and footnotes included in the Companys Report on Form 10-K for the year ended December 31, 2008.

Note 2  Earnings Per Share

Basic net
income (loss) per common share was computed on the weighted average number of common shares outstanding. Diluted earnings per share are computed on a weighted average basis under the if converted method assuming conversion as of
January 1, 2009. Potential converted shares represent the conversion of the 100,000 shares of convertible preferred stock of the wholly owned subsidiary of the Company, Virginia Savings Bank, F.S.B. (the Bank), that is convertible
in the ratio of two shares of common stock to three shares of preferred stock, or 66,666 common shares. With the exception of preferred stock dividends of subsidiary, there were no adjustments to net income in the computation of diluted earnings per
common share for the quarter ended March 31, 2009 and 2008. The following table shows the computation of basic and diluted earnings (loss) per common share for the three months ended March 31, 2009 and 2008.



|                                                                    |  |                            |           |   |      |   |           |  
|------------------------------------------------------------------- |  | -------------------------- | --------- | - | ---- | - | --------- | -
|                                                                    |  | Three Months EndedMarch 31 |          
|                                                                    |  | 2009                       |           |   | 2008 |  
|Net Income (loss) before dividends on preferred stock of subsidiary |  | $                          | 33,505    |   |      | $ | (24,547   | )
|Dividends on preferred stock of subsidiary                          |  |                            | (18,750   | ) |      |   | (18,750   | )
|                                                                    |  |                            |           |   |      |   |           |  
|Net Income (loss) Available to Common Stock                         |  | $                          | 14,755    |   |      | $ | (43,297   | )
|                                                                    |  |                           
|Weighted average shares outstanding                                 |  |                            | 1,899,984 |   |      |   | 1,899,984 |  
|Basic and diluted earnings (loss) per common share                  |  | $                          | 0.01      |   |      | $ | (0.02     | )



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Note 3  Guarantees

The Bank issues stand-by letters of credit that are unconditional commitments guaranteeing performance by a customer to a third party. These guarantees are issued primarily to support private borrowing arrangements,
generally limited to real estate transactions. The credit risk involved in issuing these guarantees is essentially the same as that involved in extending loans to customers. At March 31, 2009 and December 31, 2008, with consideration given
to collateral and risk of default, management does not believe its exposure to these letters of credit is significant. These stand-by letters of credit were approximately $145,200 and $330,700, respectively, at March 31, 2009 and
December 31, 2008 with current expiration dates through September 10, 2009. The liability under these guarantees is not material.

The Bank also
issues standard representations, warranties and indemnifications in the course of selling mortgage loans and other types of loans. The Bank has not been required to act on such guarantees in the past and does not believe that any payments pursuant
to them would materially change the financial condition or results of operations as presented herein.

Note 4  Fair Value of Financial
Instruments

SFAS 157 establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy
gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy
under SFAS 157 are as follows:



|         |  |                                                                                                                                                                                
|-------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Level 1: |  | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.                                      
|         | 
|Level 2: |  | Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.          
|         | 
|Level 3: |  | Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported with little or no market
activity).

An asset or liabilitys level within the fair value hierarchy is based on the lowest level of input that is
significant to the fair value measurement.

For assets that the Company measures at fair value on a recurring basis, the fair value measurements by level
within the fair value hierarchy used at March 31, 2009 and December 31, 2008 are as follows:



|                               |  |               |           |         |   |         |  |         |           |  |   |  
|------------------------------ |  | ------------- | --------- | ------- | - | ------- |  | ------- | --------- |  | - | -
|                               |  | March 31,2009 |           | Level 1 |   | Level 2 |  | Level 3
|Investments available for sale |  | $             | 3,953,497 |         | $ |        |  | $       | 3,953,497 |  | $ | 



|                               |  |               |           |         |   |         |  |         |           |  |   |  
|------------------------------ |  | ------------- | --------- | ------- | - | ------- |  | ------- | --------- |  | - | -
|                               |  | Dec. 31, 2008 |           | Level 1 |   | Level 2 |  | Level 3
|Investments available for sale |  | $             | 5,046,563 |         | $ |        |  | $       | 5,046,563 |  | $ | 



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##### Table of Contents

For assets that the Company measures at fair value on a non-recurring basis, the fair value measurements by level within
the fair value hierarchy used at March 31, 2009 and December 31, 2008 are as follows:



|                       |  |               |           |         |  |         |  |         |   |          
|---------------------- |  | ------------- | --------- | ------- |  | ------- |  | ------- | - | ---------
|                       |  | March 31,2009 |           | Level 1 |  | Level 2 |  | Level 3
|Impaired loans         |  | $             | 908,710   |         |  |         |  |         | $ | 908,710  
|Foreclosed real estate |  |               | 3,034,265 |         |  |         |  |         |   | 3,034,265



|                       |  |               |           |         |  |         |  |         |   |          
|---------------------- |  | ------------- | --------- | ------- |  | ------- |  | ------- | - | ---------
|                       |  | Dec. 31, 2008 |           | Level 1 |  | Level 2 |  | Level 3
|Impaired loans         |  | $             | 247,230   |         |  |         |  |         | $ | 247,230  
|Foreclosed real estate |  |               | 1,305,878 |         |  |         |  |         |   | 1,305,878

The following valuation techniques were used to measure the fair value of assets in the table.

The Company reviews its available for sale investment securities portfolio on a quarterly basis to evaluate the fair value of these investments. The Company obtains
price quotes for securities with comparable financial characteristics and maturities from a third party source, and are therefore included as Level 2 fair values. The fair value consists of available for sale securities of $4,046,599 and $5,134,429
net of valuation allowances of $93,102 and $87,866 at March 31, 2009 and December 31, 2008, respectively. For the quarter ended March 31, 2009, the Company recognized a net adjustment to the carrying value of available for sale
securities of $3,236 net of taxes of $2,000 that is included in other comprehensive loss in shareholder equity as of March 31, 2009.

Loans included
in the above table are those which were accounted for under SFAS Number 114, Accounting by Creditors for Impairment of a Loan (SFAS 114), under which the Company has measured impairment generally based on the fair value of the
loans collateral. Fair value is generally determined based upon independent third party appraisals of the properties, or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values, based upon the
lowest level of input that is significant to the fair value measurements. The fair value consists of the loan balances of $1,203,247 and $527,230 less their valuation allowances of $294,537 and $280,000 at March 31, 2009 and December 31,
2008, respectively, as determined under SFAS 114. Additional provision for loan losses on these impaired loans for the three months ended March 31, 2009 were $14,537.

Fair values of foreclosed real estate were based on independent third party appraisals of the properties or discounted cash flows based upon the expected sales proceeds upon disposition of the assets. These values
were generally determined based on the sales prices of similar properties in the proximate vicinity. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements. The fair
value consists of foreclosed real estate of $2,942,714 and $1,682,221 at March 31, 2009 and December 31, 2008, respectively, and plus a net positive valuation allowances of $91,551 at March 31, 2009 and a net negative valuation
allowance of $376,343 at December 31, 2008. For the quarter ended March 31, 2009, the Company recognized net adjustments to the carrying value of real estate owned of $11,857 that is included in earnings for the quarter ended
March 31, 2009.



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Note 5  Preferred Stock of Subsidiary

On March 31, 2006, the Bank entered into a stock purchase agreement with a third party pursuant to which the Bank sold 100,000 shares of Series A preferred stock at a purchase price of $10.00 per share. The
Series A preferred stock pays a $0.75 annual dividend, payable in quarterly installments. The dividends payable on the Series A preferred stock are prior and in preference to any dividend on the Banks common stock. Beginning on March 31,
2008, the Series A preferred stock became redeemable at the option of the Bank, in whole or in part, at a redemption price of (1) $10.00 per share and (2) and accrued but unpaid dividends. Beginning on April 1, 2008, the holder of
Series A preferred stock of the Bank became entitled to convert the security into shares of the Companys common stock such that for every three shares of Series A preferred stock the former holder thereof would receive two shares of the
Companys common stock.

In December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements, an
Amendment of ARB 51 (SFAS 160), which requires non-controlling interests (previously referred to a minority interests) to be treated as a separate component of equity. SFAS No. 160 is effective for periods beginning on or after
December 15, 2008. Earlier application was prohibited. SFAS No. 160 applies to the Series A preferred stock of the Bank. SFAS No. 160 will be applied prospectively to all non-controlling interests, including any that arose before the
effective date except that comparative period information must be recast to re-classify non-controlling interest in equity, attribute net income and other comprehensive income to non-controlling interest, and provide other disclosures required by
SFAS No. 160. The following table presents the effect of adoption of SFAS No. 160 to the statement of financial condition.



|                              |  |                  |            |             |   |                  |  |   |           
|----------------------------- |  | ---------------- | ---------- | ----------- | - | ---------------- |  | - | ----------
|                              |  | December 31,2008 |            | Adjustments |   | December 31,2008
|                              |  | (as reported)    |            |             |   | [restated]      
|Total stockholders equity    |  | $                | 11,089,085 |             | $ |                 |  | $ | 11,089,085
|Preferred stock of subsidiary |  |                  |           |             |   | 1,000,000        |  |   | 1,000,000 
|                              |  |                  |            |             |   |                  |  |   |           
|Total Equity                  |  | $                | 11,089,085 |             | $ | 1,000,000        |  | $ | 12,089,085
|                              |  |                  |            |             |   |                  |  |   |           

Note 6  New Accounting Pronouncements

In April 2009, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) FAS No. 157-4, Determining Fair Value
When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly. FSP FAS 157-4 provides additional guidance for estimating fair value in accordance with SFAS 157
when the volume and level of activity for the asset or liability have significantly decreased. The FSP also includes guidance on identifying circumstances that indicate a transaction is not orderly. FSP FAS 157-4 is effective for interim and annual
periods ending after June 15, 2009, and shall be applied prospectively. Earlier adoption is permitted for periods ending after March 15, 2009. The Company did not early adopt, and does not expect the adoption of FSP FAS 157-4 to have a
material impact on its consolidated financial statements.

In April 2009, the FASB issued FSP FAS 107-1 and Accounting Principles Board Opinion
No. 28-1 (APB 28-1), Interim Disclosures about Fair Value of Financial Instruments. FSP FAS 107-1 and



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##### Table of Contents

APB 28-1 amend SFAS No. 107, Disclosures about Fair Value of Financial Instruments to require disclosures about fair value of financial
instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. In addition, the FSP amends APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in
summarized financial information at interim reporting periods. The FSP is effective for interim periods ending after June 15, 2009, with earlier adoption permitted for periods ending after March 15, 2009. The Company did not early adopt,
and does not expect the adoption of FSP FAS 107-1 and APB 28-1 to have a material impact on its consolidated financial statements.

In April 2009, the FASB
issued FSP FAS 115-1 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments. FSP FAS 115-1 and FAS 124-2 amends other-than-temporary impairment guidance for debt securities to make guidance more operational and
to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities. The FSP does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. FSP
FAS 115-1 and FAS 124-2 is effective for interim and annual periods ending after June 15, 2009, with earlier adoption permitted for periods ending after March 15, 2009. The Company did not early adopt, and does not expect the adoption of
FSP FAS 115-1 and FAS 124-2 to have a material impact on its consolidated financial statements.

In April 2009, the Securities and Exchange Commission (the
SEC) issued Staff Accounting Bulletin No. 111 (SAB 111). SAB 111 amends and replaces SAB Topic 5.M. in the SAB Series entitled Other Than Temporary Impairment of Certain Investments in Debt and Equity
Securities. SAB 111 maintains the SEC Staffs previous views related to equity securities and amends Topic 5.M. to exclude debt securities from its scope. The Company does not expect the implementation of SAB 111 to have a material impact
on its consolidated financial statements.

Note 7  Reclassifications

Certain prior period amounts have been reclassified to conform to the current periods method of presentation. These reclassifications had no effect upon previously reported results of operations or retained
earnings.



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##### Table of Contents

Item 2 - Managements Discussion and Analysis of Financial Condition and Results of
Operations

Forward-Looking Statements

This quarterly report of the Company contains forward-looking statements within the meaning of the Securities Exchange Act of 1934. The words will, believe, expect,
should, and anticipate and words of similar construction are intended in part to help identify forward-looking statements. All forward-looking statements involve risks and uncertainty and certain factors could cause actual
results to differ materially from the anticipated results or other expectations expressed in forward-looking statements. Risks and uncertainties that may affect future results include, but are not limited to, changes in the economy, interest rate
movements, timely developments of technology resources for customer services and operating systems, the impact of competitive services and pricing, Congressional legislation and similar matters. Management cautions readers not to place undue
reliance on forward-looking statements, which are subject to influence by the foregoing risk factors and unanticipated future events.

In preparing
the consolidated financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. Actual results could differ from those estimates.Operating results for the three months ended March 31, 2009 are not necessarily indicative of the results that may be expected for any other interim period or the entire year ending December 31, 2009.

Critical Accounting Policies

The
Companys accounting policies are in accordance with accounting principles generally accepted in the United States of America and conform to practices generally followed in the banking industry. Certain of these policies involve a significant
amount of judgment and estimates based on assumptions for which the actual results are uncertain. Different assumptions in the preparation of these estimates could result in material changes in the Companys financial position and results of
operations. Our judgments and estimates are based upon historical experience and other factors management believes to be reasonable within the context of the circumstances in which they are applied.

There are three areas of accounting policy and practice that are particularly sensitive to managements judgment and in which significant estimates are used. These
are allowances for losses on loans, allowances for losses on foreclosed real estate, and other than temporary impairment of investment securities. Other accounting policies also involve the use of judgment and significant estimates but the impact of
these processes are not material to the Companys financial condition or results of operations.

FASB 114, Accounting by Creditors for
Impairment of a Loan, provides guidelines for the valuation of impaired loans. More extensive guidelines have been published by bank regulatory bodies. The latter provide for the classification of problem loans as sub-standard, doubtful and
loss. There is also a regulatory special mention category for performing loans that are the subject of heightened management concern as potential problem loans.



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It is the Banks general policy to place loans in a non-accrual status when they become 90 days delinquent. Loans
may, however, be placed in a non-accrual status regardless of their term of delinquency if the borrower exhibits signs of financial distress or if the collateral property decreases in value significantly below the loan balance. Generally, if a
borrower has multiple loans, all of his loans, including currently performing loans, will be placed in a non-accrual status if there are indications that the borrower is having serious financial difficulties. Once loans other than homogeneous loans
are placed in a non-accrual status, they are evaluated for individual impairment. At March 31, 2009, the Bank had 15 loans in a non-accrual status with regard to interest income, all of which were evaluated for individual impairment.

The 15 loans evaluated for individual impairment were to ten borrowers. The Bank has provided specific loan loss allowances against six of these loans
that total $294,500. No loss allowances were required on the remaining loans because management believes they have collateral values that exceed the related loan balances.

Under FASB Statement No. 5, Accounting for Contingencies (FASB 5), loan loss allowances on large groups of homogeneous loans are provided based upon the Banks historical loss
experience for similar types of loans. As part of its loan loss analysis under FASB 5, management also considers qualitative factors including concentrations of credit and current economic conditions as they may impact borrowers ability to
meet their financial obligations.

Management identified four classifications of loans that represent high concentrations of credit. Three of these credit
concentration areas fall in a range of 100% to 200% of equity. These loan products are home equity lines of credit, balloon loans, non-residential real estate loans and builder construction loans. Loans to builders for the speculative construction
of homes were $4.7 million at March 31, 2009 and are less than equity. Home equity lines of credit and balloon lines are collateralized by residential one-to-four family properties, and had balances of approximately $13.3 million and $36.8
million, respectively, at March 31, 2009. Non-residential real estate loans approximated $20.3 million at March 31, 2009.

During its most recent
evaluation of the adequacy of the Companys loan allowances conducted as of March 31, 2009, management concluded that the factors applied to performing loans to derive loss allowances were adequate as of year-end. We reached that
conclusion after considering that balances in high concentration credit areas are diminishing, particularly in builder construction loans, and that there has not been a significant change in environmental factors since the previous evaluation as of
December 31, 2008.

Management believes that as of March 31, 2009, the loan loss allowances provided are adequate to absorb the losses inherent
in the Banks loan portfolio. We, however, caution that continued deterioration of real estate values and general economic conditions may result in the need for further additions to loan loss allowances if collateral values fall below loan
balances on non-performing loans, and if home builders and other large borrowers who depend upon sales of real estate properties for repayment of their loans do not realize sufficient cash flows to repay their loans in full when they become due.



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##### Table of Contents

While management segments the loan portfolio into several categories for purposes of evaluating the adequacy of loan loss
allowances and makes tentative allocations of these allowances to specific loan products, all loss reserves are available to absorb losses from any sector of the loan portfolio.

The Bank evaluates the fair value of foreclosed real estate. Such evaluations are based upon observable market values of comparable properties obtained through appraisals when available. In the absence of adequate
appraisal values, the properties are valued using the discounted present value of the anticipated future cash flows. In addition to the appraisal values, the Bank considers costs which may be necessary to make the property salable, and selling costs
to dispose of the property. The net realizable values derived through this process are measured against the recorded book value of the loan. The Bank records foreclosed real estate at fair value less estimated disposal costs at the foreclosure date.
If the fair value of the foreclosed real estate exceeds the related loan balance at the date of foreclosure, the positive valuation adjustment is recorded as a credit to other income. If the fair value of the foreclosed real estate is less than the
related loan balance at the date of foreclosure, the negative valuation adjustment is recorded as a charge against the loan loss allowance. Subsequent to the initial recording at fair value, foreclosed real estate properties are carried at the lower
of cost or fair value and are evaluated for impairment not less frequently than quarterly after the initial evaluation is performed at the time of acquisition. Any increase to the allowance for losses on foreclosed real estate made after the initial
valuation is recorded as an expense. During the quarter ended March 31, 2009, the allowance for losses on foreclosed real estate increased $11,900.

The Company reviews its investment securities portfolio on a quarterly basis to identify and evaluate investments that have indications of possible other than temporary impairment. Such securities are written down to their fair value when
there is impairment in value that is other than temporary. The determination of whether or not other than temporary impairment exists is a matter of judgment. Factors considered in determining whether a loss is temporary include the length of time
and the extent to which fair value has been less than the cost basis, the financial condition and credit quality of the security issuer, and the Banks ability and intent to hold the investment securities for a period of time sufficient to
allow for any anticipated recovery in market value. At March 31, 2009, the Companys held to maturity investment securities had a fair value that approximates book value.

The Companys available for sale investment securities had a fair value of approximately $93,000 below book value. An unrealized loss of $41,400 was recorded in the current quarter as a reduction in the
securities carrying value with an offset to accumulated other comprehensive loss. The $93,000 accumulated loss, net of a $35,000 provision for income taxes, is a component of equity. These unrealized losses are not considered to be other than
temporary and are primarily the result of interest rate changes and not credit concerns about the issuers.

Overview of
Performance

Virginia Savings Bancorp, Inc. is a holding company incorporated in Virginia and headquartered in Front Royal, Virginia. The
Companys banking subsidiary is Virginia Savings Bank, FSB.

The Company recorded net income of $14,800 for the first quarter of 2009. While this is a
modest amount by the Companys and its predecessor institution, the Banks, historical standards, it is a substantial improvement over the previous quarters net loss of $690,400. During the current



14



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##### Table of Contents

quarter the Company recorded minimal additions to its loss allowance accounts, a total of approximately $36,000, and had immaterial amounts of losses on the
sale of foreclosed real estate and other foreclosed real estate expenses. In addition, the Companys net interest income for the first quarter of 2009 was approximately the same as the first quarter of 2008 despite an 18% decrease in the
average balance of interest earning assets from prior year.

Financial Condition

At March 31, 2009, the total assets of the Company were $133.7 million, a decrease of $2.0 million since December 31, 2008. This decrease occurred in two area;
cash and cash equivalents decreased $2.1 million and investments available for sale decreased $1.1 million. Loans receivable increased $900,900 and investments held to maturity increased $503,000.

Deposits decreased $3.6 million during the quarter ended March 31, 2009. Core deposit accounts, primarily checking and passbook savings accounts, increased $1.9
million from December 31, 2008 to March 31, 2009. Certificate of deposit accounts decreased $5.5 million during the same time period. At March 31, 2009 and December 31, 2008, the Company had no short-term borrowings.

Asset Quality

Asset quality has been an
area requiring considerable attention from management since early in 2008. At the end of the current quarter, the Bank had $11.8 million of classified assets including $3.6 million of foreclosed real estate. Management takes a proactive approach to
problem asset resolution and is aggressive in identifying and acquiring when necessary impaired loans. As a consequence, we foreclosed upon $3.1 million of real estate loans during the year ended December 31 2008, but did not have to foreclose
upon any loans during the first quarter of 2009. Non-accrual loans were approximately $2.0 million at December 31, 2008 and are currently $2.6 million. Management believes that it has identified all problem loans in loans receivable as of
March 31, 2009 and has provided adequate loan loss allowances for potential losses inherent in the loan portfolio. In making this statement, we must caution that we are in a period of great uncertainty regarding the economic and financial
conditions nationally and in the Companys market area. Todays well-performing loan may very well be tomorrows problem asset.

Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008

The Company recorded income before
dividends on preferred stock of subsidiary of $33,500 for the quarter ended March 31, 2009, an increase of $58,100 from the $24,500 net loss, for the same period in 2008. Net interest income increased $4,300 from the same period last year.
Non-interest income decreased $103,400. Non-interest expenses decreased $169,100, or 12.5%, and pre-tax income before dividends on preferred stock of subsidiary increased by $105,500.

Net interest margin, the difference between interest income and interest expense, is the primary source of operating revenues for the Company. Table 1 below presents, for the three months ended March 31, 2009 and
2008, the average balances, related interest income and expense amounts, and average yields and costs which influence the Banks net interest margin. Table 2 reflects the changes in interest income and interest expense between the periods which
resulted from changes in average volumes and average rates.



15



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|                                   |  |                                      |         |                |      |            |  |      |               |  |                |         |            |   |       |  |       |  
|---------------------------------- |  | ------------------------------------ | ------- | -------------- | ---- | ---------- |  | ---- | ------------- |  | -------------- | ------- | ---------- | - | ----- |  | ----- | -
|Average Balance Sheet              |  | For The Three Months Ended March 31, |         | Table 1        |     
|Dollars in thousands               |  | 2009                                 |         |                | 2008 |           
|                                   |  | AverageVolume                        |         | Income/Expense |      | Yield/Rate |  |      | AverageVolume |  | Income/Expense |         | Yield/Rate |  
|Assets                             |  |                                      |         |                |      |            |  |      |               |  |                |         |            |   |       |  |       |  
|Interest Earning Assets            |  |                                      |         |                |      |            |  |      |               |  |                |         |            |   |       |  |       |  
|Loans receivable (1)               |  | $                                    | 103,315 |                | $    | 1,596      |  | 6.18 | %             |  | $              | 112,371 |            | $ | 1,886 |  | 6.71  | %
|Investment securities (2)          |  |                                      | 8,158   |                |      | 60         |  | 2.94 | %             |  |                | 30,196  |            |   | 253   |  | 3.35  | %
|Other interest earning assets (3)  |  |                                      | 7,053   |                |      | 3          |  | 0.17 | %             |  |                | 799     |            |   | 23    |  | 11.51 | %
|FHLB stock                         |  |                                      | 321     |                |      |           |  | 0.00 | %             |  |                | 1,628   |            |   | 12    |  | 2.95  | %
|                                   |  |                                      |         |                |      |            |  |      |               |  |                |         |            |   |       |  |       |  
|Total Interest Earning Assets      |  | $                                    | 118,847 |                | $    | 1,659      |  | 5.58 | %             |  | $              | 144,994 |            | $ | 2,174 |  | 6.00  | %
|                                   |  |                                      |         |                |      |           
|Other Assets                       |  |                                      |         |                |      |            |  |      |               |  |                |         |            |   |       |  |       |  
|Cash and due from banks            |  |                                      | 3,759   |                |      |            |  |      |               |  |                | 3,970   |            |   |       |  |       |  
|Premises and equipment, net        |  |                                      | 5,913   |                |      |            |  |      |               |  |                | 4,876   |            |   |       |  |       |  
|Accrued interest receivable        |  |                                      | 534     |                |      |            |  |      |               |  |                | 754     |            |   |       |  |       |  
|Foreclosed real estate             |  |                                      | 3,470   |                |      |            |  |      |               |  |                | 640     |            |   |       |  |       |  
|Branch building held for sale      |  |                                      | 526     |                |      |            |  |      |               |  |                |        |            |   |       |  |       |  
|Other assets                       |  |                                      | 1,557   |                |      |            |  |      |               |  |                | 569     |            |   |       |  |       |  
|                                   |  |                                      |         |                |      |            |  |      |               |  |                |         |            |   |       |  |       |  
|Total Other Assets                 |  |                                      | 15,759  |                |      |            |  |      |               |  |                | 10,809  |            |   |       |  |       |  
|                                   |  |                                      |         |                |      |            |  |      |               |  |                |         |            |   |       |  |       |  
|Total Assets                       |  | $                                    | 134,606 |                |      |            |  |      |               |  | $              | 155,803 |            |   |       |  |       |  
|                                   |  |                                      |         |                |      |            |  |      |               |  |                |         |            |   |       |  |       |  
|                                   |  |                                      |         |                |      |           
|Interest-Bearing Liabilities       |  |                                      |         |                |      |            |  |      |               |  |                |         |            |   |       |  |       |  
|Checking accounts                  |  | $                                    | 21,096  |                | $    | 13         |  | 0.25 | %             |  | $              | 19,748  |            | $ | 29    |  | 0.59  | %
|Money market accounts              |  |                                      | 1,678   |                |      | 1          |  | 0.24 | %             |  |                | 2,072   |            |   | 4     |  | 0.77  | %
|Savings accounts                   |  |                                      | 19,339  |                |      | 41         |  | 0.85 | %             |  |                | 17,687  |            |   | 64    |  | 1.45  | %
|Certificates of deposit            |  |                                      | 72,962  |                |      | 596        |  | 3.27 | %             |  |                | 85,371  |            |   | 957   |  | 4.48  | %
|Short term borrowings              |  |                                      | 19      |                |      |           |  | 0.00 | %             |  |                | 10,130  |            |   | 116   |  | 4.58  | %
|                                   |  |                                      |         |                |      |            |  |      |               |  |                |         |            |   |       |  |       |  
|Total Interest-Bearing Liabilities |  | $                                    | 115,094 |                | $    | 651        |  | 2.26 | %             |  | $              | 135,008 |            | $ | 1,170 |  | 3.47  | %
|                                   |  |                                      |         |                |      |            |  |      |               |  |                |         |            |   |       |  |       |  
|                                   |  |                                      |         |                |      |           
|Non-interest bearing deposits      |  | $                                    | 6,544   |                |      |            |  |      |               |  | $              | 6,656   |            |   |       |  |       |  
|Other Liabilities                  |  |                                      | 901     |                |      |            |  |      |               |  |                | 839     |            |   |       |  |       |  
|Common stockholders equity (4)    |  |                                      | 11,067  |                |      |            |  |      |               |  |                | 12,300  |            |   |       |  |       |  
|Preferred stock of subsidiary      |  |                                      | 1,000   |                |      |            |  |      |               |  |                | 1,000   |            |   |       |  |       |  
|                                   |  |                                      |         |                |      |            |  |      |               |  |                |         |            |   |       |  |       |  
|Total Liabilities and Equity       |  | $                                    | 134,606 |                |      |            |  |      |               |  | $              | 155,803 |            |   |       |  |       |  
|                                   |  |                                      |         |                |      |            |  |      |               |  |                |         |            |   |       |  |       |  
|                                   |  |                                      |         |                |      |           
|Net Interest Income/Spread         |  |                                      |         |                | $    | 1,008      |  | 3.32 | %             |  |                |         |            | $ | 1,004 |  | 2.53  | %
|                                   |  |                                      |         |                |      |            |  |      |               |  |                |         |            |   |       |  |       |  
|Net interest margin                |  |                                      |         |                |      |            |  | 3.39 | %             |  |                |         |            |   |       |  | 2.98  | %
|                                   |  |                                      |         |                |      |            |  |      |               |  |                |         |            |   |       |  |       |  



|(1) | Includes non-accrual loans.
|--- | ---------------------------

|(2) | Includes mortgage backed securities.
|--- | ------------------------------------

|(3) | The yield on other interest earning assets is computed using average daily general ledger balances. Due to the Banks issuance of large dollar amounts of cashier checks in
2008, this balance was significantly less than the interest earning balances at our correspondent bank because of float.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Average balances are based on average daily balances except for Stockholders Equity which is computed on month end balances.
|--- | -----------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

|                                                                 |  |         |  |  |  |  |  | 
|---------------------------------------------------------------- |  | ------- |  |  |  |  |  | 
|Analysis of Change in Net Interest Income (Dollars in
thousands) |  | Table 2



|                                   |  |                                                                |      |   |      |   |      |          |  |   |       |   |  |   |      |  
|---------------------------------- |  | -------------------------------------------------------------- | ---- | - | ---- | - | ---- | -------- |  | - | ----- | - |  | - | ---- | -
|                                   |  | Quarters Ended Mar. 31, 2009 vs 2008Increase (Decrease) Due to |     
|                                   |  | Volume                                                         |      |   | Rate |   |      | Vol/Rate |  |   | Total |  
|Interest Income On:                |  |                                                                |      |   |      |   |      |          |  |   |       |   |  |   |      |  
|Loans Receivable                   |  | $                                                              | (155 | ) |      | $ | (147 | )        |  | $ | 12    |   |  | $ | (290 | )
|Investments Securities             |  |                                                                | (186 | ) |      |   | (25  | )        |  |   | 18    |   |  |   | (193 | )
|Other Interest Earning Investments |  |                                                                | 77   |   |      |   | (22  | )        |  |   | (75   | ) |  |   | (20  | )
|FHLB Stock                         |  |                                                                |     |   |      |   | (12  | )        |  |   |      |   |  |   | (12  | )
|                                   |  |                                                                |      |   |      |   |      |          |  |   |       |   |  |   |      |  
|                                   |  |                                                                | (109 | ) |      |   | (59  | )        |  |   | (57   | ) |  |   | (225 | )
|                                   |  |                                                                |      |   |      |   |      |          |  |   |       |   |  |   |      |  
|                                   |  |                                                                |      |  
|Total Interest Earning Assets      |  | $                                                              | (264 | ) |      | $ | (206 | )        |  | $ | (45   | ) |  | $ | (515 | )
|                                   |  |                                                                |      |   |      |   |      |          |  |   |       |   |  |   |      |  
|                                   |  |                                                                |      |  
|Interest-Bearing Liabilities       |  |                                                                |      |   |      |   |      |          |  |   |       |   |  |   |      |  
|Checking Accounts                  |  | $                                                              | 2    |   |      | $ | (17  | )        |  | $ | (1    | ) |  | $ | (16  | )
|Money Market                       |  |                                                                | (1   | ) |      |   | (2   | )        |  |   |      |   |  |   | (3   | )
|Savings Accounts                   |  |                                                                | 6    |   |      |   | (27  | )        |  |   | (2    | ) |  |   | (23  | )
|Certificates of Deposit            |  |                                                                | (139 | ) |      |   | (260 | )        |  |   | 38    |   |  |   | (361 | )
|Short term borrowings              |  |                                                                | (116 | ) |      |   |     |          |  |   |      |   |  |   | (116 | )
|                                   |  |                                                                |      |   |      |   |      |          |  |   |       |   |  |   |      |  
|Total Interest Bearing Liabilities |  | $                                                              | (248 | ) |      | $ | (306 | )        |  | $ | 35    |   |  | $ | (519 | )
|                                   |  |                                                                |      |   |      |   |      |          |  |   |       |   |  |   |      |  
|                                   |  |                                                                |      |  
|Net Interest Income                |  | $                                                              | (16  | ) |      | $ | 100  |          |  | $ | (80   | ) |  | $ | 4    |  
|                                   |  |                                                                |      |   |      |   |      |          |  |   |       |   |  |   |      |  

Net interest income increased $4,000 from the first quarter of 2008 to the first quarter of 2009. This is net of a
$515,000 decrease in interest income and a decrease of $519,000 in interest expense.

Interest on loans receivable decreased $290,000 in the quarter ended
March 31, 2009 from the quarter ended March 31, 2008. Table 2 above indicates that the decrease in interest income from loans was due to a decrease in the average volume of loans outstanding and a decrease in income caused by lower
interest rates in the current period. The average balance of loans outstanding, as reported in Table 1, decreased by $9.1 million from 2008 to 2009, while the average yield on loans receivable decreased by 53 basis points. Loans receivable had an
average yield of 6.18% for the first quarter of 2009, which is down from 6.71% in first quarter of 2008. The data in Table 2 indicates that the lower average volume of loans outstanding during the first quarter of 2009 decreased interest income by
$155,000, and that lower interest rates decreased income by $147,000.

Interest and dividend income on investments decreased by $225,000 in the quarter
ended March 31, 2009 from the quarter ended March 31, 2008. Interest income on investment securities decreased by $193,000 in the quarter ended March 31, 2009 from the quarter ended March 31, 2008 due to a lower average balance
outstanding in the first quarter of 2009 and a decrease in the average interest rate. The average balance of investment securities decreased by $22.0 million in the first quarter of 2009 from the same period in 2008, and the average rate decreased
by 41 basis points. The remaining sources of dividend and interest income decreased $32,000. Late in the first quarter of 2009, the Federal Home Loan Bank of Atlanta ( FHLB) announced that it suspended dividend payments on its capital
stock until further notice. The Banks overall yield on interest earning assets was 5.58% in 2009, 42 basis point decrease from the 6.00% achieved in 2008.



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##### Table of Contents

Interest expense decreased $519,000 in the quarter ended March 31, 2009 from the quarter ended March 31, 2008.
The decrease in interest expense was primarily caused by a $361,000 decrease in interest on certificates of deposit and a $116,000 decrease in interest on short-term borrowings. The average balance of certificates of deposit decreased by $12.4
million in the first quarter of 2009 compared to the same quarter in 2008, and the average interest rate decreased 121 basis points. These changes resulted in a $139,000 decrease in interest expense due to the decreased volume of accounts
outstanding and a $260,000 decrease in interest expense due to lower interest rates paid. Interest on transaction accounts decreased $42,000. The Companys use of borrowings was extremely limited in 2009. The $116,000 decrease in interest
expense for the first quarter of 2009 was entirely volume driven.

The Companys overall cost of interest bearing liabilities decreased 121 basis
points in the first quarter of 2009 versus the first quarter of 2008, decreasing from 3.47% in 2008 to 2.26% in 2009.

The Company made a $39,700 provision
for loan losses for the three months ended March 31, 2009 as compared to a $75,200 provision for loan losses in the three months ended March 31, 2008. The Bank accounts for the credit risk associated with its lending activities through its
provision for loan losses. The provision is the expense recognized in the statement of operations to adjust the loan loss allowance to an appropriate balance as determined by the Banks credit risk analysis procedures. See Critical
Accounting Policies for a discussion of the Banks methodology for determining loan loss allowances.

The $39,700 provision for loan losses
is in recognition of concentrations of credit risk in the Banks loan portfolio, the Banks recent experiences in management of foreclosed real estate, environmental concerns over both the local and national real estate markets, and other
economic uncertainties potentially affecting the performance of the loan portfolio.

Total other income decreased $103,400 from the quarter ended
March 31, 2008 to the same period in 2009.

Loan fees and late charges decreased $19,900, or 34.0% from first quarter 2008 to first quarter 2009. This
decrease was due to a $17,900 decrease in fees for short-term loan extensions. All other fees decreased a net amount of $2,000.

Income from mortgage
banking activities decreased $14,200, or 43.6%. Fees for loans originated on behalf of a correspondent decreased $10,400. There was a $3,800 net decrease in loan servicing fees.

Fees from transaction accounts decreased 23.8% or $65,900 from first quarter 2008 to first quarter 2009 primarily due to a $49,100 decrease in insufficient fund fees. ATM fees decreased $10,600 from first quarter
2008. All other transaction account fees decreased a net amount of $6,200 in the current period from the same period in 2008.



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##### Table of Contents

Non-interest expenses decreased $169,100, or 12.5%, in the first quarter of 2009 compared to the first quarter of 2008.
Management instituted a cost-cutting program in 2008, the effects of which are reflected in the Companys first quarter 2009 results. All major expense categories are reduced from their first quarter 2008 levels.

Salaries and employee benefits decreased $58,700 or 8.3% in the first quarter 2009 from the first quarter of 2008. Salaries decreased $42,000 and group insurance
benefits decreased $9,000. Effective January 1, 2009, the salaries of all employees of the Company were reduced approximately 5% as a temporary cost savings measure until a return to profitable operations is achieved. The Company selected a new
insurance company to provide group health insurance for employees at a lower cost than that available from the previous insurance company. All other compensation related expense are reduced a net amount of $7,700.

Directors fees and expenses decreased $43,500, or 68.8%, in the first quarter 2009 from the first quarter of 2008 due to the implementation of a lower cost
insurance benefit plan that reduced insurance premiums by $40,200, and a reduction in per meeting fees totaling $6,900.

Data processing expenses decreased
$26,500, or 12.1%, in the first quarter 2009 from the first quarter of 2008 primarily due to a $18,200 decrease in deposit account servicing costs and a $14,500 decrease in data communication costs. All other data processing expense increased a net
amount of $6,200.

Marketing expenses decreased $34,600, or 69.1% in the first quarter 2009 from the first quarter of 2008. As part of its cost reduction
efforts, management assessed its marketing needs and significantly reduced its advertising plans and reduced its marketing expenses accordingly

Income tax
expense for the first quarter of 2009 was $21,000, an increase of $47,400 over the first quarter of 2008s income tax benefit of $26,400. The effective tax rate for the three months ended March 31, 2009 was 38.5% versus a negative 51.8% in
the same period in 2008.

Liquidity and Capital Resources

At March 31, 2009, the Company had approximately $10.2 million of liquid assets in the form of cash and cash equivalent investments. The Company also has $4.0 million of investment securities that are classified
as available for sale and $3.5 million of investments classified as held to maturity. Three million dollars of the held to maturity investments have short-term maturities. As of March 31, 2009, the Company has pledged $500,000 of held to
maturity US agency bonds as collateral for public deposits of Virginia counties.

The Company has approximately $29.4 million of pre-approved credit from
the FHLB with funding available on a same day basis and did not have any borrowings outstanding against this line of credit at March 31, 2009.

The
Companys current liquidity position is more than adequate to meet its lending needs and to fund potential customer withdrawals from deposit accounts.



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##### Table of Contents

At March 31, 2009, the Companys common equity was equal to 8.3% of total assets and is essentially unchanged
from 8.2% at December 31, 2008. Equity increased by $11,500 during the first quarter of 2009. This is the net of $14,800 in operating income less a $3,200 increase in other comprehensive loss.

The Office of Thrift Supervision (OTS) regulations require federal savings banks to maintain minimum capital standards: a 4.0% of tangible assets Tier 1
(core) capital requirement, and an 8.0% risk based capital requirement. These capital requirements are applicable to the Companys wholly owned subsidiary, Virginia Savings Bank, F.S.B. The OTS does not have specific capital requirements
applicable to thrift holding companies.

The Bank is required to file a quarterly report on its financial condition, results of operations and other
financial information with the OTS. OTS financial reporting rules follow the same generally accepted accounting principles (GAAP) applicable to this Quarterly Report on Form 10-Q except for certain specified areas in which regulatory
accounting principles (RAP) differ from GAAP. One of these areas is accounting for properties acquired through foreclosure. GAAP indicates that these properties should be accounted for at their fair value on the foreclosure date and at
the lower of cost or fair value thereafter. OTS RAP specifies that they be reported at the lower of their historical cost or their fair value. Application of RAP to the Banks accounting for real estate acquired through foreclosure resulted in
approximately $603,000 less in prior period earnings and tangible capital, as reported to the OTS, than the amounts determined under GAAP and reported in this Quarterly Report on Form 10-Q. This difference between GAAP and RAP will continue to exist
until the Bank disposes of the properties. Table 3 reflects the $603,000 lower amount of capital reported to OTS. In addition to this accounting difference, the financial information reported to the OTS is for the Bank only. The Company is not
subject to minimum capital requirements under OTS regulations.



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##### Table of Contents

Actual and required regulatory capital requirements at March 31, 2009 and December 31, 2008 follow:



|                 |  |                               |  |        
|---------------- |  | ----------------------------- |  | -------
|Capital Position |  | Virginia Savings Bank, F.S.B. |  | Table 3



|               |  |                 |            |            |                              |   |                |                                                                |            |  |      |                |  |            |            |  |       |  
|-------------- |  | --------------- | ---------- | ---------- | ---------------------------- | - | -------------- | -------------------------------------------------------------- | ---------- |  | ---- | -------------- |  | ---------- | ---------- |  | ----- | -
|               |  | Capital Amounts |            |            | For CapitalAdequacy Purposes |   |                | To be Well CapitalizedUnder Prompt CorrectiveAction Provisions |           
|               |  | ActualAmount    |            | % ofAssets |                              |   | RequiredAmount |                                                                | % ofAssets |  |      | RequiredAmount |  | % ofAssets |           
|March 31, 2009 |  |                 |            |            |                              |   |                |                                                                |            |  |      |                |  |            |            |  |       |  
|Tangible (1)   |  | $               | 11,300,741 |            | 8.46                         | % |                | $                                                              | 2,002,928  |  | 1.50 | %              |  |            | N/A        |  | N/A   |  
|Tier I (2)     |  |                 | 10,300,741 |            | 9.73                         | % |                |                                                                | N/A        |  | N/A  |                |  | $          | 6,350,019  |  | 6.00  | %
|Core (1)       |  |                 | 10,300,741 |            | 7.71                         | % |                |                                                                | 5,341,140  |  | 4.00 | %              |  |            | 6,676,425  |  | 5.00  | %
|Total (2)      |  |                 | 12,417,141 |            | 11.73                        | % |                |                                                                | 8,466,692  |  | 8.00 | %              |  |            | 10,583,365 |  | 10.00 | %
|               |  |                 |            |            |                              |  
|Dec. 31, 2008  |  |                 |            |            |                              |   |                |                                                                |            |  |      |                |  |            |            |  |       |  
|Tangible (1)   |  | $               | 11,241,354 |            | 8.31                         | % |                | $                                                              | 2,028,085  |  | 1.50 | %              |  |            | N/A        |  | N/A   |  
|Tier I (2)     |  |                 | 10,241,354 |            | 9.73                         | % |                |                                                                | N/A        |  | N/A  |                |  | $          | 6,314,006  |  | 6.00  | %
|Core (1)       |  |                 | 10,241,354 |            | 7.57                         | % |                |                                                                | 5,408,227  |  | 4.00 | %              |  |            | 6,760,284  |  | 5.00  | %
|Total (2)      |  |                 | 12,337,254 |            | 11.72                        | % |                |                                                                | 8,418,675  |  | 8.00 | %              |  |            | 10,523,343 |  | 10.00 | %



|(1) | To adjusted total assets.
|--- | -------------------------

|(2) | To risk-weighted assets.
|--- | ------------------------

To be considered a well-capitalized institution
under the Federal Deposit Insurance Corporation Improvement Act of 1991, the Bank must have a core capital ratio of at least 5.0%, a Tier I risk-based capital ratio of at least 6%, and a total risk-based capital ratio of at least 10%. The most
recent notification from the OTS categorized the Bank as well-capitalized.

Off-Balance Sheet Arrangements

The Bank routinely engages in off-balance sheet arrangements in the normal course of business to meet the financial needs of its customers. These arrangements consist of
outstanding mortgage loan commitments, letters of credit and lines of credit and involve, to varying degrees, elements of credit risk in excess of the amount recognized in the statement of financial condition. The contractual amounts of these
instruments are an indication of the extent of involvement the Bank has in each class of off-balance sheet financial instruments. The Banks exposure to credit loss from non-performance by the other party to the above-mentioned financial
instruments is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

The Bank had outstanding commitments to make mortgage loans secured by real property, exclusive of the undisbursed portion of loans in process, of approximately $2.4
million at March 31, 2009, all of which expire within one year. Loans in process represent the undisbursed portion of construction loans already on the Banks books. Disbursements are made at each stage of the construction process after an
inspection by a qualified real estate appraiser. At March 31, 2009, the Bank had loans in process commitments of approximately $722,000 that expire within nine months.



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##### Table of Contents

The Bank also issues stand-by letters of credit that are unsecured conditional commitments issued by the Bank
guaranteeing performance by a customer to a third party. These guarantees are issued primarily to support private borrowing arrangements. At March 31, 2009, the Bank had $145,200 of stand-by letters of credit outstanding with expiration dates
through September 10, 2009.

Lines of credit are loan commitments to individuals and companies that have fixed expiration dates as long as there is no
violation of any condition established in the contract. The Bank evaluates each customers credit worthiness on a case-by-case basis. The Company, at March 31, 2009, had secured lines of credit with available balances of $12.8 million and
unsecured lines of credit with available balances of $1.5 million. Many of these commitments are expected to expire without being fully drawn down. The total commitment amounts do not therefore necessarily represent future cash requirements.

The risks involved in these off-balance sheet arrangements are essentially the same as those involved in extending loan facilities to customers. No amount
has been recognized in the statement of financial condition as of March 31, 2009 as a liability for credit loss due to off-balance sheet arrangements. Management does not anticipate any difficulties in funding these commitments.

Item 3 - Quantitative and Qualitative Disclosures About Market Risk

The information in this item is not required of smaller reporting companies.

Item 4T -
Controls and Procedures

Managements Disclosure Controls

Management of the Company is responsible for the preparation of the accompanying financial statements and for their integrity and objectivity. The financial statements
have been prepared in conformity with accounting principles generally accepted in the United States of America. Management also prepares the other information in this quarterly report and is responsible for its accuracy and consistency with the
financial statements.

Management has designed what it believes are appropriate disclosure controls and procedures. These controls and procedures are
designed to insure that management receives all pertinent information that may be required to be disclosed in its quarterly reports. Such information is not limited to financial data but also includes non-financial information that should be
considered for disclosure.

Management has concluded that as of March 31, 2009, implementation of its structure of disclosure controls and procedures
was not wholly effective in meeting their intended purposes. The most recent review of these systems, conducted as of March 31, 2009, revealed material weaknesses, which are detailed below, that could adversely affect the Companys ability
to properly and accurately record and report financial data.



22



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##### Table of Contents

The Company, under the direction of its Chief Executive Officer and its Chief Financial Officer, conducted an evaluation
of the effectiveness of the Companys internal control over financial reporting as of March 31, 2009. Managements assessment identified material weaknesses in the Companys internal control over financial reporting because of
ineffective controls related to computations, methodology and presentation of a limited number of non-routine complex transactions which could potentially aggregate to material misstatements in financial reporting. Managements testing of
internal controls also identified instances of significant deficiencies in internal controls pertaining to segregation of duties and independent review that existed at March 31, 2009 which when combined, were considered by management to be a
material weakness.

In order to address the material weaknesses described above, the Company will take the following remedial actions:

Management added accounting staff in the first quarter of 2009 to better segregate accounting duties and to provide additional support to the financial accounting review
process leading to the preparation of financial statements. Management is the process of developing and implementing procedures to ensure that the complex non-routine transactions identified in managements evaluation of internal controls over
financial reporting have a sufficient level of review to ensure that the risk of misstatement is minimized. The Company anticipates that such procedures will be implemented throughout 2009 as the training and education of our accounting staff
continues and as appropriate policies and procedures are documented and their effective implementation is tested .

Management has also remediated certain
of the significant deficiencies identified in its most recent internal control evaluation. Management in the process of developing and implementing policies and procedures to insure that the remaining deficiencies are corrected in the near future.

Changes in Internal Control Over Financial Reporting

There were no changes during the quarter ended March 31, 2009 in the Companys internal control over financial reporting that materially affected, or which are reasonably likely to affect, the Companys
internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1 - Legal Proceedings

In the
ordinary course of its operations, the Company is a party to various legal proceedings. Based upon information currently available, management believes that such legal proceedings, in the aggregate, will not have a material adverse effect on the
business, financial condition or results of operations of the Company.

Item 1A - Risk Factors

The information in this item is not required of smaller reporting companies.



23



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##### Table of Contents

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3 - Default Upon Senior
Securities

None

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

None

Item 5 - Other Information

None

Item 6 - Exhibits



|              |  |                                           
|------------- |  | ------------------------------------------
|ExhibitNumber |  | Description                               
|31-1          |  | Rule 13a-14(a)/15d-14(a) CEO Certification
|              | 
|31-2          |  | Rule 13a-14(a)/15d-14(a) CFO Certification
|              | 
|32            |  | Section 1350 Certification                



24



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##### Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                               |  |     |  |                                                
|------------------------------ |  | --- |  | -----------------------------------------------
|VIRGINIA SAVINGS BANCORP, INC.
|                               |  |    
|                               |  | By: |  | /s/ W. Michael Funk                            
|May 15, 2009                   |  |     |  | W. Michael Funk                                
|Date                           |  |     |  | President & Chief Executive Officer            
|                               |  |    
|                               |  | By: |  | /s/ Noel F. Pilon                              
|May 15, 2009                   |  |     |  | Noel F. Pilon                                  
|Date                           |  |     |  | Senior Vice President & Chief Financial Officer



25