FORM 10-QSB

                     U.S. SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549


(X)               QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


                For the quarterly period ended December 31, 2000
                                               -----------------

                                       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 0-24674
                                                ---------


                              SWVA BANCSHARES, INC
                              --------------------

    VIRGINIA                                                54-1721629
----------------                                         -----------------
(State or other jurisdiction of                           (I.R.S. Employer
incorporation or organization)                           Identification No.)

302 Second Street, SW, Roanoke Virginia                       24011-1597
---------------------------------------                     --------------
(Address of Principal executive offices)                     (Zip Code)

Registrant's telephone number, including area code  (540) 343-0135
                                                    --------------


Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by  Section  13 and 15 (d) of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  Registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days.

Yes    X      No
    ------       -------

The  number of shares  outstanding  of each of the  issuer's  classes  of common
stock, as of February 8, 2001: $0.10 par value - 423,612 common shares.

Transitional Small Business Disclosure Format (check one):

Yes           No    X
    ------       -------


<PAGE>

                      SWVA BANCSHARES, INC. & SUBSIDIARIES


                                      INDEX

        ================================================================



PART I.           FINANCIAL INFORMATION                                     PAGE
                  =====================                                     ====


Item 1.  Financial Statements

                  Consolidated Statements of Financial Condition
                  at December 31, 2000 (unaudited) and June 30, 2000           1

                  Consolidated Statements of Income for the Three
                  and Six Months Ended December 31, 2000 and
                  December 31, 1999 (unaudited)                                2

                  Consolidated Statements of Comprehensive Income
                  for the Three and  Six Months Ended December 31, 2000
                  and December 31, 1999 (unaudited)                            3

                  Consolidated Statements of Cash Flows for the
                  Six Months Ended December 31, 2000 and
                  December 31, 1999 (unaudited)                                4

                  Notes to Unaudited Interim Consolidated
                  Financial Statements                                         5



Item 2.  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                          7


PART II.          OTHER INFORMATION                                           10
                  =================
<PAGE>
                       SWVA BANCSHARES, INC & SUBSIDIARIES
                 Consolidated Statements of Financial Condition
                                 (In thousands)

                                     Assets
                                                           Dec 31      June 30
                                                          ---------   --------
                                                            2000        2000
                                                          ---------   --------
                                                         (Unaudited)
Cash and cash equivalents                                 $  2,323    $  2,060
Interest-bearing deposits                                      298       1,685
Investment & Mortgage Backed Securities:
  Held to Maturity, at amortized cost                          223         254
  Available for Sale, at fair value                         21,546      21,517
  Restricted at cost                                           585         585
Loans held for sale                                             90         857
Loans receivable, net                                       55,903      53,610
Foreclosed property                                            118         186
Property and equipment, net                                  1,742       1,681
Accrued interest receivable                                    691         607
Prepaid expenses and other assets                              668         919
                                                          --------    --------
    Total assets                                          $ 84,187    $ 83,961
                                                          ========    ========

                Liabilities and Stockholders' Equity
Deposits                                                  $ 66,852    $ 64,748
Advances from Federal Home Loan Bank                         9,200      11,700
Advances from borrowers
  for taxes and insurance                                      174         208
Other liabilities and deferred income                          476         563
                                                          --------    --------
    Total liabilities                                       76,702      77,219
                                                          --------    --------
Stockholders' Equity
Preferred Stock, 275,000 shares
   authorized, no shares issued or
   outstanding
Common stock, $.10 par value, 2,225,000
   shares authorized, 423,612 outstanding
   as of December 31, 2000 and as of June 30, 2000              42          42
Additional paid-in capital                                   2,842       2,824
Less unearned ESOP shares (18,258 shares)                     (182)       (182)
Less unearned MSBP shares (9,289 shares)                      (157)       (199)
Dividends declared and paid                                    (81)       (152)
Retained earnings
 (substantially restricted)                                  5,249       5,304
Valuation allowance
  marketable equity securities                                (228)       (895)
                                                          --------    --------
  Total Stockholders' Equity                                 7,485       6,742
                                                          --------    --------
  Total Liabilities
        and Stockholders' Equity                          $ 84,187    $ 83,961
                                                          ========    ========
Book Value Per Share (not in thousands)                   $  17.67    $  15.91
                                                          ========    ========


                                        1
<PAGE>
                     SWVA BANCSHARES, INC. AND SUBSIDIARIES
                        Consolidated Statements of Income
                                 (In thousands)
<TABLE>
<CAPTION>
                                                    Three Months        Six Months
                                                                  Ended
                                                                  Dec 31
                                                   -----------------------------------
                                                     2000     1999     2000     1999
                                                     ----     ----     ----     ----
                                                               (Unaudited)
<S>                                                <C>      <C>      <C>      <C>
Interest Income
  Loans                                             $1,214   $1,004   $2,388   $1,934
  Mortgage-backed and related securities               143      158      289      320
  U.S. Government obligations including agencies       205      207      411      413
  Municipal Bonds                                       30       29       60       59
  Other investments, including overnight deposits       37      108       83      231
                                                    ------   ------   ------   ------
         Total interest income                       1,629    1,506    3,231    2,957
                                                    ------   ------   ------   ------
Interest expense
  Deposits                                             806      693    1,594    1,326
  Borrowed funds                                       141      126      287      282
                                                    ------   ------   ------   ------
         Total interest expense                        947      819    1,881    1,608
                                                    ------   ------   ------   ------

Net interest income                                    682      687    1,350    1,349
Provision for credit losses                             19        3       33        6
                                                    ------   ------   ------   ------
Net interest income after
  provision for credit losses                          663      684    1,317    1,343
                                                    ------   ------   ------   ------
Noninterest income
  Loan and other customer service fees                  58       84      121      142
  Gain on sale of mortgage loans                        49       18       72       68
  Gross rental income                                   25       26       51       50
                                                    ------   ------   ------   ------
         Total noninterest income                      132      128      244      260
                                                    ------   ------   ------   ------
Noninterest expenses
  Personnel                                            377      373      745      722
  Office occupancy and equipment                        93       85      178      172
  Data processing                                       71       59      139      117
  Federal insurance of accounts                          3        9        6       18
  Cost associated with pending merger                   29        -      153        -
  Other                                                104      121      195      227
                                                    ------   ------   ------   ------
         Total noninterest expenses                    677      647    1,416    1,256
                                                    ------   ------   ------   ------

         Income before income taxes                    118      165      145      347
         Provision for income taxes                     42       58       49      116
                                                    ------   ------   ------   ------
         Net Income                                 $   76   $  107   $   96   $  231
                                                    ======   ======   ======   ======
Basic earnings per share                            $  .19   $  .26   $  .24   $  .57
                                                    ======   ======   ======   ======
Diluted earnings per share                          $  .19   $  .26   $  .24   $  .57
                                                    ======   ======   ======   ======
Cash dividends per share                            $  .00   $  .00   $  .20   $  .20
                                                    ======   ======   ======   ======
</TABLE>

                                        2
<PAGE>
                     SWVA BANCSHARES, INC. AND SUBSIDIARIES
                 Consolidated Statements of Comprehensive Income
                                 (In thousands)

<TABLE>
<CAPTION>
                                                    Three Months      Six Months
                                                               Ended
                                                               Dec 31
                                                  ---------------------------------
                                                    2000    1999     2000    1999
                                                    ----    ----     ----    ----
                                                            (Unaudited)
<S>                                               <C>     <C>      <C>     <C>
Net Income                                         $  76   $ 107    $  96   $ 231

Other comprehensive income, net of tax
         Unrealized gains (losses) on securities     502    (257)     668    (410)
                                                   -----   -----    -----   -----
Comprehensive Income                               $ 578   $(150)   $ 764   $(179)
                                                   =====   =====    =====   =====
</TABLE>


                                        3
<PAGE>
                      SWVA BANCSHARES, INC. & SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                                 (In Thousands)

                                                              Six Months Ended
                                                                    Dec 31
                                                            --------------------
                                                               2000       1999
                                                               ----       ----
                                                                 (Unaudited)
Operating Activities
    Net Income                                               $    96    $   231
Adjustments to Reconcile Net Income to Net Cash
        Provided by (used in) operating activities
        MSBP Shares Allocated                                     42         13
        Provision for credit losses                               23          6
        Provision for depreciation and amortization               59         58
        Loans Originated for Sale                             (5,040)    (5,127)
        Proceeds from sale of loans originated for sale        5,878      5,062
        Gain on Sale of Loans, from fees                         (71)       (67)
        Net (increase) decrease in Other Assets                 (172)        17
        Net increase (decrease) in Other Liabilities            (102)       176
                                                             -------    -------
      Net cash provided by operating activities                  713        369
                                                             -------    -------
Investing activities
    Proceeds from maturity of investments
        and interest-bearing deposits                          1,387      2,746
    Proceeds from sale of FHLB Stock                               -        109
    Proceeds from sale of available for sale investments         500     (1,487)
    Purchase of investments and interest-bearing deposits          -          -
    Purchase of available for sale investments                     -          -
    Purchase of property and equipment                          (120)       (29)
    Purchase of FHLB Stock                                         -        (59)
    Net (increase) decrease in loans                          (2,249)    (2,012)
    Purchase of loans                                              -     (1,900)
    Principal repayments on Mortgage Backed Securities           509        477
                                                             -------    -------
        Net cash provided by (used in) investing activities       27     (2,155)
                                                             -------    -------
Financing activities
    Curtailment of advances and other borrowings              (6,000)    (4,500)
    Proceeds from advances and other borrowings                3,500      3,500
    Net increase (decrease) in savings deposits                2,104      3,405
    Repurchase of stock                                            -          -
    Dividends paid                                               (81)       (76)
                                                             -------    -------
    Net cash provided by (used in) financing activities         (477)     2,329
                                                             -------    -------

Increase in cash and cash equivalents                            263        543

Cash and cash equivalents at beginning of period               2,060      2,454
                                                             -------    -------
Cash and cash equivalents at end of period                   $ 2,323    $ 2,997
                                                             =======    =======

                                        4
<PAGE>
                      SWVA BANCSHARES, INC. & SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - BASIS OF PRESENTATION

The accompanying  unaudited interim consolidated  financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial  information and with the  instructions  to Form 10-QSB.  Accordingly,
they do not include all of the information  and footnotes  required by generally
accepted accounting principles for complete financial statements.

The accompanying  consolidated financial statements include the accounts of SWVA
Bancshares,  Inc.  ("Company")  and  its  wholly-  owned  subsidiary,  Southwest
Virginia Savings Bank, FSB ("Bank") and its wholly-owned  subsidiary,  Southwest
Virginia  Service  Corporation.   All  significant   intercompany  balances  and
transactions have been eliminated in consolidation.

In the opinion of management,  all adjustments  (consisting of normal  recurring
accruals)  considered  necessary  for  fair  presentation  have  been  included.
Operating  results  for  the  six  months  ended  December  31,  2000,  are  not
necessarily  indicative  of the results that may be expected for the year ending
June 30, 2001.



NOTE 2 -- EARNINGS PER SHARE

The  following  table  sets  forth  the  reconciliation  of the  numerators  and
denominators of the basic and diluted earnings per share (EPS) computations:

<TABLE>
<CAPTION>

                                                                                 Three Months            Six Months
                                                                                               Ended
                                                                                               Dec 31,
                                                                             --------------------------------------------
                                                                                2000      1999        2000        1999
                                                                                ----      ----        ----        ----
                                                                                            (Unaudited)
<S>                                                                        <C>       <C>         <C>          <C>
         Numerator:
(a) Net income available to shareholders                                    $     76   $    107    $       96   $    231
                                                                            ========   ========    ==========   ========
         Denominator:
         Weighed-average shares outstanding                                  423,612    426,612       423,612    425,112
         Less: ESOP weighed-average shares outstanding                       (18,258)   (22,819)      (18,258)   (22,819)
                                                                            --------   --------    ----------   --------
(b) Basic EPS weighed-average shares outstanding                             405,354    403,793       405,354    402,293

         Effect of dilutive securities:
           Incremental shares attributable to the Stock Option                     -          -             -          -
           Plan and Management Stock Bonus Plan                                    -          -             -          -
                                                                            --------   --------    ----------   --------
(c) Diluted EPS weighed-average shares outstanding                           405,354    403,793       405,354    402,293
                                                                            ========   ========    ==========   ========

         Basic earnings per share (a/b)                                     $    .19   $    .26    $      .24   $    .57
                                                                            ========   ========    ==========   ========

         Diluted earnings per share (a/c)                                   $    .19   $    .26    $      .24   $    .57
                                                                            ========   ========    ==========   ========
</TABLE>


                                        5
<PAGE>

NOTE 3 -- FASB Statement on Reporting Comprehensive Income

Effective July 1, 1998, the Company  adopted FASB Statement No. 130,  "Reporting
Comprehensive Income." Statement No. 130 requires the reporting of comprehensive
income in addition to net income from operations. Comprehensive income is a more
inclusive  financial  reporting  methodology that includes certain disclosure of
certain  financial  information that has historically not been recognized in the
calculation of net income.

The Company had  unrealized  gain on securities  held as available for sale, for
the three  months  ended  December  31,  2000 of  $502,000  after tax  versus an
unrealized  loss of $257,000  after tax for the three months ended  December 31,
1999. The Company had unrealized gains on securities held as available for sale,
for the six months  ended  December  31,  2000 of  $668,000  after tax versus an
unrealized  loss of $410,000  after tax for the six months  ended  December  31,
1999.  The  before  tax and  after tax  amount,  as well as the tax  benefit  is
summarized below.

                                                                 Tax
                                                    Before    (Expense)   After
                                                     Tax       Benefit     Tax
                                                     ---       -------     ---

Three months ended December 31, 2000:
         Unrealized gains (losses) on securities   $   761    ($  259)   $  502

Three months ended December 31, 1999:
         Unrealized gains (losses) on securities   ($  389)   $   132    ($ 257)



Six months ended December 31, 2000:
         Unrealized gains (losses) on securities   $ 1,011    ($  343)   $  668

Six months ended December 31, 1999:
         Unrealized gains (losses) on securities   ($  621)   $   211    ($ 410)



NOTE 4 - Proposed Merger

On August 8, 2000, the Company  announced a proposed merger with FNB Corporation
of Christiansburg, Virginia. Terms of the agreements require the stockholders of
the Company to receive  consideration  valued at $20.25,  consisting of cash and
stock  in  FNB  Corporation,  subject  to  certain  restrictions  regarding  the
allocation  of cash and  stock  consideration.  Consummation  of the  merger  is
contingent upon the approval of the Company's stockholders and state and federal
regulators, as well as the conditions under the merger agreement.

                                        6
<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Comparison of Financial Condition at December 31, 2000 and June 30, 2000
------------------------------------------------------------------------

Total assets increased  $226,000 or 0.27% from $83.9 million at June 30, 2000 to
$84.2 million at December 31, 2000. Net loans receivable  increased $2.3 million
or 4.28% to $55.9  million at December  31, 2000 from $53.6  million at June 30,
2000 due to increased  activity in small business loans and greater retention of
mortgage production in the loan portfolio.

Interest-bearing  deposits representing  investment in other Bank' certificates,
decreased  $1.4 million or 82.31% from $1.7 million at June 30, 2000 to $298,000
at December 31, 2000. The decrease was mainly due to a decision by management to
use funds to fund  mortgage  loans  instead of placing them in  certificates  of
deposits with other financial institutions.  Cash and cash equivalents increased
$263,000  or 12.77%  from  $2.1  million  at June 30,  2000 to $2.3  million  at
December 31, 2000. Held to Maturity Investments  decreased $31,000 from $254,000
at June 30, 2000 to $223,000 at December 31, 2000.

At June 30,  2000,  three  loans  totaling  $186,000  were  added to  foreclosed
property due to their delinquency status.  During the quarter ended December 31,
2000,  one of the loans was paid in full,  therefore the balance at December 31,
2000 was $118,000. The foreclosed properties consist of two loans, each of which
is secured by single family real estate. No loss is anticipated.

Classified  assets  totaled  $492,000,  of  which  $365,000  was  classified  as
substandard and $127,000 as doubtful. Of the $365,000 classified as substandard,
$333,000 were on single  family  mortgage  loans,  $25,000 were on single family
real estate and $7,000 was on a consumer loan.

Deposits increased $2.1 million, or 3.25% from $64.7 million at June 30, 2000 to
$66.8  million at  December  31,  2000 due mainly to  special  rates  offered on
certificates of deposits.  The funds received on these  certificates was used to
fund loans and to decrease  the amount of borrowed  funds.  Core  deposits  were
$19.5 million or 29.09% of total savings.

At December 31, 2000,  there was $9.2 million  outstanding  in advances from the
Federal Home Loan Bank of Atlanta as compared to $11.7  million  outstanding  at
June 30, 2000.

Advances from borrowers for taxes and insurance  decreased $34,000 or 16.35% due
to payment of escrow  for real  estate  taxes  paid  during the  quarter  ending
December 31, 2000. Other  liabilities and deferred income  decreased  $87,000 or
15.45%.

Results of Operations for the Three Months ended December 31, 2000
------------------------------------------------------------------
and December 31, 1999
---------------------

         Net Income  decreased  $31,000 or 28.97%,  from  $107,000 for the three
months ended  December  31, 1999 to $76,000 for the three months ended  December
31, 2000.  The decrease was due mainly to costs  associated  with the  Company's
proposed merger with FNB Corporation.

         Interest Income increased $123,000, or 8.17%, from $1.5 million for the
three months ended  December 31, 1999 to $1.6 million for the three months ended
December  31, 2000.  The increase was a result of an increase in small  business
loans and increased retention of mortgage loans in the portfolio.

         Interest  Expense  increased  $128,000 or 15.63% from  $819,000 for the
three  months  ended  December  31, 1999 to $947,000  for the three months ended
December 31, 2000. The increase was due mainly to an increase in deposits due to
special certificates of deposit promotions and an increase in funds borrowed.

         Net Interest Income  decreased by $5,000 or 0.73% from $687,000 for the
three  months  ended  December  31, 1999 to $682,000  for the three months ended
December 31, 2000.

         Provision  for Credit  Losses.  The Bank made an addition of $19,000 to
the  provision  for credit  losses for the quarter  ended  December 31, 2000, an
increase of $16,000 over the quarter ending December 31, 1999. The allowance for
credit  losses was  $241,000  as of  December  31,  2000.  Attributable  to this
increase is the new emphasis on commercial  and consumer  loans which add credit
risk to the loan portfolio due to the risk inherent nature of these loans.

                                        7
<PAGE>

Results of Operations for the Three Months ended December 31, 2000
------------------------------------------------------------------
and December 31, 1999, cont.
----------------------------

         Non-interest Income increased by $4,000, or 3.13% from $128,000 for the
three  months  ended  December  31, 1999 to $132,000  for the three months ended
December  31,  2000.  The  increase  was due to gains on sale of mortgage  loans
during the quarter  ended  December  31,  2000 and a tax refund  recorded in the
quarter ended December 31, 1999.

         Non-interest  Expense increased by $30,000,  or 4.64% from $647,000 for
the three months ended  December 31, 1999 to $677,000 for the three months ended
December 31, 2000.  The  increase  was due mainly to costs  associated  with the
Company's proposed merger with FNB Corporation.

         Provision for income taxes The provision for income taxes for the three
months  ended  December  31, 2000 was $42,000  compared to $58,000 for the three
months ended December 31, 1999. The decrease was due to decreased income for the
quarter ended December 31, 2000.

Results of Operations for the Six Months ended December 31, 2000
----------------------------------------------------------------
and December 31, 1999
---------------------

         Net Income  decreased  $135,000 or 58.44%,  from  $231,000  for the six
months ended  December 31, 1999 to $96,000 for the six months ended December 31,
2000. The decrease was due mainly to costs associated with the Company'sproposed
merger with FNB Corporation.

         Interest Income increased $274,000, or 9.27%, from $3.0 million for the
six months  ended  December  31, 1999 to $3.2  million for the six months  ended
December 31, 2000.  The  increase was mainly due to increased  income  resulting
from an increase in small  business  loans and  increased  retention of mortgage
loans in the portfolio.

         Interest Expense increased $273,000 or 16.98% from $1.6 million for the
six months  ended  December  31, 1999 to $1.9  million for the six months  ended
December 31, 2000. The increase was due mainly to an increase in deposits due to
special certificates of deposit promotions and an increase in funds borrowed.

         Net Interest  Income  remained  basically level at $1.3 million for the
six months ended December 31, 1999 and the six months ended December 31, 2000.

         Provision  for Credit  Losses.  The Bank made an addition of $33,000 to
the provision  for credit losses for the six months ended  December 31, 2000, an
increase of $27,000 over the same period ending December 31, 1999. The allowance
for credit  losses was  $241,000  at December  31,  2000.  Attributable  to this
increase is the new emphasis on commercial  and consumer  loans which add credit
risk to the loan portfolio due to the risk inherent nature of these loans.

         Non-interest  Income  decreased by $16,000,  or 6.15% from $260,000 for
the six months  ended  December  31, 1999 to $244,000  for the six months  ended
December 31,  2000.  The decrease was mainly due to a refund on prior year taxes
recorded in the quarter ending December 31, 1999.

         Non-interest Expense increased by $160,000, or 12.74% from $1.3 million
for the six months  ended  December  31, 1999 to $1.4 million for the six months
ended  December 31, 2000. The increase was mainly due to costs  associated  with
the Company's proposed merger with FNB Corporation.

         Provision  for income taxes The  provision for income taxes for the six
months  ended  December  31, 2000 was $49,000  compared to $116,000  for the six
months ended December 31, 1999. The decrease was due to decreased income for the
six months ended December 31, 2000.

                                        8
<PAGE>

Regulatory Capital Requirements

OTS capital  regulations  require  savings  institutions  to meet three  capital
standards:  (1) tangible capital equal to 1.5% of total adjusted  assets,  (2) a
leverage ratio (core  capital)  equal to at least 3.0% of total adjusted  assets
and (3) a risk-based  capital  requirement equal to 8.0% of total  risk-weighted
assets.

As shown below, the Bank's tangible,  core and risk-based capital  significantly
exceed all applicable regulatory capital requirements of the OTS at December 31,
2000:
                                                                   Percent of
                                                                   ----------
                                                       Amount          Assets
                                                       ------          ------

                  GAAP Capital....................     $7,510           8.85%
                                                        =====          =====

                  Tangible Capital................     $7,510           8.85%
                  Tangible Capital Requirement....      1,273           1.50%
                                                        -----          -----
                  Excess..........................     $6,237           7.35%
                                                        =====          =====

                  Core Capital....................     $7,510           8.85%
                  Core Capital Requirement........      2,546           3.00%
                                                        -----          -----
                  Excess..........................     $4,964           5.85%
                                                        =====          =====

                  Total Risk-Based Capital........     $7,750          15.53%
                  Risk-Based Capital Requirement..      3,758           8.00%
                                                        -----          -----
                  Excess..........................     $3,992           7.53%
                                                        =====          =====

Management  believes that under current  regulations,  the Bank will continue to
meet its minimum capital  requirements in the foreseeable future.  Events beyond
the control of the Bank,  such as  increased  interest  rates or downturn in the
economy  in areas in which  the Bank  operates  could  adversely  affect  future
earnings  and as a result,  the  ability of the Bank to meet its future  minimum
capital requirements.

Liquidity

The Bank's  liquidity is a measure of its ability to fund loans,  withdrawals of
deposits and other cash outflows in a cost effective manner.  The Bank's primary
sources of funds are deposits and proceeds from principal and interest  payments
on loans and mortgage backed securities.  The Bank also obtains funds from sales
and maturities of investment  securities,  short-term investments and borrowings
(namely  advances from the FHLB of Atlanta).  The Bank uses such funds primarily
to meet existing and continuing loan commitments, to fund maturing time deposits
and savings withdrawals and to maintain liquidity. While loan payments, maturing
investments and mortgage-backed  securities are a relatively  predictable source
of funds,  deposit flows and loan prepayments are greatly  influenced by general
interest rates,  economic  conditions and  competition.  The Bank's liquidity is
also influenced by the level of demand for funding loan originations.

The Bank is required  under federal  regulations to maintain  certain  specified
levels of "liquid  investments,"  which include certain United States government
obligations and other approved investments. Current regulations require the Bank
to maintain liquid assets of not less than 4% of its net  withdrawable  accounts
plus short term borrowings. Those levels may be changed from time to time by the
regulators  to  reflect  current  economic  conditions.  The  Bank's  regulatory
liquidity was 25.23% at December 31, 2000 and 22.94% as of June 30, 2000.

Impact of Inflation and Changing Prices

The  consolidated  financial  statements  of  the  Company  and  notes  thereto,
presented  elsewhere  herein,  have been prepared in accordance with GAAP, which
require the measurement of financial  position and operating results in terms of
historical  dollars without  considering  the change in the relative  purchasing
power of money over time due to inflation.  The impact of inflation is reflected
in the  increased  cost of the  Company's  operations.  Unlike  most  industrial
companies,  nearly all the assets and  liabilities of the Company are financial.
As a result,  interest rates have a greater impact on the Company's  performance
than do the  effects  of  general  levels of  inflation.  Interest  rates do not
necessarily  move in the same  direction  or to the same extent as the prices of
goods and services.

                                        9
<PAGE>

                      SWVA BANCSHARES, INC. & SUBSIDIARIES

                                     PART II

Item 1.  Legal Proceedings

                  Not applicable.

Item 2.  Changes in Securities and Use of Proceeds

                  Not applicable.

Item 3.  Defaults upon Senior Securities

                  Not applicable.

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

                  Not applicable.

Item 5.  Other Information

                  None.

Item 6.  Exhibits and Reports on Form 8-K.

                  None.


                                       10
<PAGE>


                      SWVA BANCSHARES, INC. & SUBSIDIARIES

                                   SIGNATURES


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

                                SWVA Bancshares, Inc.


Date:    February 12, 2001      By:   /s/ D. W. Shilling
                                    ------------------------------------
                                D. W. Shilling
                                President, Chief Financial Officer, and Director


Date:    February 12, 2001      By:   /s/  Mary G. Staples
                                    -----------------------------------
                                Mary G. Staples
                                Controller/Treasurer
                                Principal Financial Officer


                                       11