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

                                    FORM 10-Q

               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


               FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999


                       Commission File Number: 000-24561


                        RESOURCE BANKSHARES CORPORATION
             (Exact name of Registrant as specified in its charter)

              Virginia                              54-1904386
(State or other jurisdiction of        (I.R.S. Employer Identification No.)
 incorporation or organization)


                 3720 Virginia Beach Blvd., Va. Beach, VA.23452
               (Address of principal executive offices) (Zip Code)

                                 (757) 463-2265
                         (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 Exchange  Act 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 ___

At September 30, 1999,  2,535,580  shares of Resource  Bankshares  Corporation's
common stock, $1.50 par value, were outstanding.




<PAGE>






                         RESOURCE BANKSHARES CORPORATION
                                    FORM 10-Q
                               SEPTEMBER 30, 1999

                                      INDEX

PART I.  FINANCIAL INFORMATION
<TABLE>
<CAPTION>

       Item 1.    Financial Statements
<S> <C>
                    Consolidated Balance Sheets as of September 30, 1999 and
                    December 31, 1998                                                                     3

                    Consolidated Statements of Income for the periods ended
                    September 30, 1999 and 1998                                                           4

                    Consolidated Statements of Stockholder's Equity for the period
                    ended September 30, 1999                                                              5

                    Consolidated Statements of Cash Flows for the periods ended
                    September 30, 1999 and 1998                                                           6

                    Notes to Consolidated Financial Statements                                            7

       Item 2.      Management's Discussion and Analysis of Financial Condition                          10
                    and Results of Operations

       Item 3.    Quantitative and Qualitative Disclosures about Market Risks                            19

PART II. OTHER INFORMATION

       Item 1.      Legal Proceedings                                                                    19

       Item 6.      Exhibits and Reports on Form 8-K                                                     20


                                       2

<PAGE>

</TABLE>


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements

<TABLE>
<CAPTION>

RESOURCE BANKSHARES CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)                                   September 30          December 31
                                                                                  1999                 1998
                                                                                   (Dollars in Thousands)
<S> <C>
ASSETS
Cash and due from banks                                                       $  3,458             $  4,325
Interest bearing deposits                                                        2,788                3,357
Federal funds sold                                                                   -                  800
Funds advanced in settlement of mortgage loans                                  16,381               21,052
Securities available for sale                                                    6,773                8,619
Securities held to maturity                                                     15,546                1,224
Loans, net of unearned income:
  Commercial                                                                    76,138               68,569
  Real estate - construction                                                    61,265               44,607
  Commercial real estate                                                        67,748               42,482
  Residential real estate                                                       27,819               28,702
  Installment and consumer loans                                                 4,260                4,162
                                                                       ----------------      ---------------
TOTAL LOANS                                                                    237,230              188,522
  Allowance for loan losses                                                    (3,723)              (2,500)
                                                                       ----------------      ---------------
NET LOANS                                                                      233,507              186,022

Other real estate owned                                                            186                  647
Premises and equipment                                                           3,850                3,281
Other assets                                                                     5,384                2,531
Accrued interest                                                                 1,936                1,602
                                                                       ----------------      ---------------
                                                                              $289,809             $233,460
                                                                       ================      ===============

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
  Non-interest bearing                                                        $ 16,653             $ 15,783
  Interest bearing                                                             223,387              190,436
                                                                       ----------------      ---------------
TOTAL DEPOSITS                                                                 240,040              206,219

Federal funds purchased                                                          7,921                    -
FHLB advances                                                                   14,703                7,300
Other liabilities                                                                1,409                1,500
Accrued interest                                                                 1,026                  652
Capital debt securities                                                          9,200                    -
                                                                       ----------------      ---------------
TOTAL LIABILITIES                                                              274,299              215,671

STOCKHOLDERS' EQUITY
 Common stock, par value $1.50 a share
  Shares authorized: 6,666,666
  Shares issued and outstanding:
  1999 - 2,535,580; 1998 2,477,124                                               3,803                3,716
 Additional paid-in capital                                                     10,554               10,702
 Retained earnings                                                               1,279                3,310
 Accumulated other comprehensive income                                          (126)                   61
                                                                       ----------------      ---------------
                                                                                15,510               17,789
                                                                       ----------------      ---------------
                                                                              $289,809             $233,460
                                                                       ================      ===============
See notes to consolidated financial statements.
</TABLE>



                                       3


<PAGE>

RESOURCE BANKSHARES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED)
<TABLE>
<CAPTION>

                                                                Three months ended                  Nine months ended
                                                                    September 30                      September 30
                                                                 1999           1998               1999            1998
                                                                (Dollars in Thousands)            (Dollars in Thousands)
<S> <C>
Interest income:
 Interest and fees on loans                                   $ 4,754         $3,963             $12,970         $11,268
 Interest on investment securities                                390            160                 977             563
 Interest on funds advanced                                       465            519               1,212           2,625
 Interest on other interest bearing deposits                       42            318                 311             546
                                                        --------------  -------------   -----------------  --------------

     Total interest income                                      5,651          4,960              15,470          15,002
                                                        --------------  -------------   -----------------  --------------

Interest expense:
 Interest on deposits                                           2,824          2,739               7,927           7,796
 Interest on borrowings                                           228            135                 468             864
 Interest on capital debt securities                              217              -                 484               -
                                                        --------------  -------------   -----------------  --------------
     Total interest expense                                     3,269          2,874               8,879           8,660
                                                        --------------  -------------   -----------------  --------------

     Net interest income                                        2,382          2,086               6,591           6,342

Provision for loan losses                                       4,667             25               4,667             150
                                                        --------------  -------------   -----------------  --------------
     Net interest income after
      provision for loan losses                                (2,285)         2,061               1,924           6,192
                                                        --------------  -------------   -----------------  --------------
Noninterest income:
  Mortgage banking income                                       1,759          1,447               4,878           5,744
  Service charges                                                 382            255                 891             595
  Gain on sale of loans and other real estate                       8              8                 280              10
                                                        --------------  -------------   -----------------  --------------
                                                                2,149          1,710               6,049           6,349
                                                        --------------  -------------   -----------------  --------------
Noninterest expense:
  Salaries and employee benefits                                1,920          1,454               5,139           5,260
  Occupancy expenses                                              304            282                 875             811
  Depreciation and equipment maintenance                          292            218                 646             580
  Stationery and supplies                                          81             65                 264             229
  Marketing and business development                              123             92                 325             263
  Professional fees                                               150             52                 232             127
  Outside computer services                                       118            135                 367             439
  Provision for funds advanced                                    275              6                 275             265
  FDIC insurance                                                   15             14                  42              38
  Expenses associated with other real estate                      (1)            33                  25              36
  Other                                                           644            184               1,746             954
                                                        --------------  -------------   -----------------  --------------
                                                                3,933          2,535               9,936           9,002
                                                        --------------  -------------   -----------------  --------------
Income (loss) before income tax                                (4,069)         1,236              (1,963)          3,539

Income tax (benefit) expense                                   (1,418)           433                (689)          1,239
                                                        --------------  -------------   -----------------  --------------
Net (loss)  income                                            ($2,651)          $803             ($1,274)        $ 2,300
                                                        ==============  =============   =================  ==============

Cash dividend declared per common share                         $0.10         $ 0.06               $0.30         $  0.18
                                                        ==============  =============   =================  ==============
Basic earnings per common share (Note 5)                       $(1.04)        $ 0.32              $(0.51)        $  0.93
                                                        ==============  =============   =================  ==============
Diluted earnings per common share (Note 5)                     $(0.97)        $ 0.30              $(0.47)        $  0.85
                                                        ==============  =============   =================  ==============

See notes to consolidated financial statements.
</TABLE>


                                       4


<PAGE>




RESOURCE BANKSHARES CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)

Nine Months Ended September 30, 1999


<TABLE>
<CAPTION>



                                                                                                Accumulated
                                                                                                   Other
                                                                       Additional    Retained  Comprehensive
                                                    Common Stock        Paid-in      Earnings      Income
                                      Shares          Amount            Capital      (Deficit)     (Loss)       Total
                                      ------          ------            -------      ---------     ------       -----
<S> <C>
                                                                              (DOLLARS IN THOUSANDS)

Balance, December 31, 1998               2,477,124    $    3,716    $   10,702    $    3,310    $       61    $   17,789

Comprehensive income:
    Net income                                --            --            --          (1,274)         --          (1,274)

   Changes in unrealized
    appreciation (depreciation)
    on securities available for sale,
    net of reclassification
    adjustment and tax effect                 --            --            --            (187)                       (187)
                                                                                                                  ------
          Total comprehensive income                                                                              (1,461)

Proceeds from exercise of stock
     options                                27,733            41            88                                       129

Proceeds from exercise of warrants          59,822            90           276                                       366

Reacquisition of common stock              (29,099)          (44)         (512)                                     (556)

Cash dividends declared
     $ .30 per share                          --            --            --            (757)                       (757)
                                         --------     ----------    ---------     ----------    ----------    ----------

Balance, September 30, 1999              2,535,580    $    3,803    $   10,554    $    1,279    ($     126)   $   15,510
                                         =========    ==========    ==========    ==========    ==========    ==========

</TABLE>

See notes to consolidated financial statements.

                                       5
<PAGE>



RESOURCE BANKSHARES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                         Nine months ended
                                                                                   September 30     September 30
Operating activities                                                                       1999             1998
                                                                                        (Dollars in thousands)
<S> <C>
  Net (loss)  income                                                                    $(1,274)         $ 2,300
  Adjustments to reconcile to net cash used by operating activities:
   Provision for losses on loans and other real estate owned                              4,667              150
   Provision for losses on funds advanced on settlement of mortgage loans                   275                -
   Depreciation and amortization                                                            310              231
   Amortization of investment securities premiums, net of discounts                          40               69
   Gain on sale of loans and other real estate owned                                       (280)              (2)
   Loss on premises and equipment                                                            (1)              (4)
   Deferred loan origination fees, net of costs                                             502              (25)
   Changes in:
    Funds advanced in settlement of mortgage loans                                        4,397             (579)
    Interest receivable                                                                    (334)             (49)
    Interest payable                                                                        375               68
    Other assets                                                                         (2,186)            (243)
    Other liabilities                                                                       (91)             309
                                                                                          -----            -----
     Net cash provided by operating activities                                            6,400            2,225

Investing activities:
  Proceeds from sale of real estate owned, net of costs                                     590                -
  Proceeds from sales and maturities of
    available-for-sale securities                                                         2,282            4,501
  Proceeds from maturities of
    held-to-maturity securities                                                             320            1,302
  Purchases of held-to-maturity securities                                              (14,760)               -
  Purchases of available-for-sale securities                                               (647)          (1,897)
  Loan originations, net of principal repayments                                        (52,503)         (26,160)
  Purchases of premises, equipment and other assets                                      (1,059)            (244)
                                                                                        -------          -------
     Net cash used investing activities                                                 (65,777)         (22,498)

Financing activities:
  Proceeds from exercise of stock options and warrants                                      495              125
  Payments to reacquire common stock                                                       (556)               -
  Cash dividends declared                                                                  (757)            (443)
  Net proceeds (repayments) in FHLB advances                                             15,324          (11,650)
  Net proceeds from issuance of capital debt securities                                   8,816                -
  Net increase in demand deposits,
    NOW accounts and savings accounts                                                     2,542            4,035
  Net increase in certificates of deposit                                                31,278           27,633
                                                                                        -------          -------
     Net cash provided by financing activities                                           57,142           19,700

Increase in cash and cash equivalents                                                    (2,235)            (573)
Cash and cash equivalents at beginning of period                                          8,481           13,210
                                                                                        -------          -------
Cash and cash equivalents at end of period                                               $6,246          $12,637
                                                                                        =======          =======

Supplemental schedules and disclosures of cash flow information:

  Cash paid for:
    Interest on deposits and other borrowings                                           $ 8,505          $ 8,592
                                                                                        =======          =======

Schedule of noncash investment activities:
    Foreclosed real estate                                                              $ (590)         ($1,359)
                                                                                        =======          =======
</TABLE>

See notes to consolidated financial statements.

                                       6
<PAGE>

                        RESOURCE BANKSHARES CORPORATION

                   Notes to Consolidated Financial Statements
                               September 30, 1999
                                  (UNAUDITED)
                 (Dollars in thousands, except per share data)

Organization and Summary of Significant Accounting Policies


(1)  GENERAL

         Resource   Bankshares   Corporation,   a  Virginia   Corporation   (the
"Company"),  was incorporated  under the laws of the Commonwealth of Virginia on
February 4, 1998, primarily to serve as a holding company for Resource Bank (the
"Bank").


(2)  CASH AND CASH EQUIVALENTS

         For purposes of reporting cash flows, cash and cash equivalents include
cash and due from banks,  interest-bearing  deposits  with banks,  money  market
accounts, and federal funds sold.

(3)  SECURITIES

         Effective April 1, 1999 the Company adopted early election of Financial
Accounting  Standards  Board  Statement  No.  133,  "Accounting  for  Derivative
Instruments  and  Hedging  Transactions".  Pursuant  to the  provisions  of this
Statement,  which  allows  for a  reassessment  of intent  with  respect  to the
investment portfolio,  management has elected to transfer securities with a fair
value  of  $11,255  at the  time of  transfer  (original  cost -  $11,357)  from
available-for-sale  classification to the held-to-maturity  classification as of
April 1, 1999. The amortized  costs,  gross unrealized  gains,  gross unrealized
losses,  and fair values for  securities at September 30, 1999, are shown in the
following table.
<TABLE>
<CAPTION>

                                                                    Gross                   Gross
Available-for-Sale:                 Amortized Costs      Unrealized Gains       Unrealized Losses       Fair Values
--------------------------------- ----------------- ---------------------- ----------------------- -----------------
<S> <C>
U.S. Government Agencies                    $4,937                   $ 20                    $ 17            $4,940
Corporate Securities                           427                     --                      64               363
Other Securities                             1,509                     --                      39             1,470
--------------------------------- ----------------- ---------------------- ----------------------- -----------------
TOTALS                                      $6,873                    $20                    $120            $6,773
--------------------------------- ----------------- ---------------------- ----------------------- -----------------
</TABLE>
<TABLE>
<CAPTION>

                                                                    Gross                   Gross
Held-to-Maturity:                  Amortized Costs       Unrealized Gains       Unrealized Losses       Fair Values
--------------------------------- ----------------- ---------------------- ----------------------- -----------------
<S> <C>
U.S. Government and agency
 securities                                $   152                     $2                  $   --              $154
Municipal securities                           746                      5                      --               751
Corporate Securities                        14,648                     --                   1,243            13,405
--------------------------------- ----------------- ---------------------- ----------------------- -----------------
TOTALS                                     $15,546                     $7                  $1,243           $14,310
--------------------------------- ----------------- ---------------------- ----------------------- -----------------
</TABLE>


                                      -7-

<PAGE>








(4) ALLOWANCE FOR LOAN LOSSES

Changes in the allowance for loan losses are as follows:

               Balance as of January 1, 1999          $2,500

               Provision for loan losses               4,667

               Loans charged off                      (3,448)

               Recoveries                                  4
                                                      ------
               Balance at September 30, 1999          $3,723
                                                      ======


(5)  NET INCOME PER SHARE

     Basic EPS excludes dilution and is computed by dividing income available to
common shareholders by the weighted-average number of shares outstanding for the
period.  Diluted  EPS  reflects  the  potential  dilution  that  could  occur if
securities or other  contracts to issue common stock were  exercised,  converted
into common  stock or resulted in the  issuance of common stock that then shares
in the earnings of the entity.  The average  number of basic shares  outstanding
for the nine  months  ended  September  30,  1999,  and 1998 was  2,520,023  and
2,479,446,  respectively.  The  diluted  average  number of shares  for the nine
months  ended   September  30,  1999  and  1998  was  2,726,583  and  2,697,877,
respectively.

(6)  COMPREHENSIVE INCOME

     The Company adopted FASB Statement No. 130 Reporting  Comprehensive Income,
as of January 1, 1998.  Accounting  principles generally require that recognized
revenue,  expenses, gains and losses be included in net income. However, certain
changes  in assets  and  liabilities,  such as  unrealized  gains and  losses on
available-for-sale   securities,   are  reported  as  a  separate  component  of
comprehensive   income,   and  reported  in  the   consolidated   statements  of
stockholders'  equity.  The adoption of FASB  Statement No. 130 had no effect on
the Company's net income or shareholders' equity.

     The components of other comprehensive income and related tax effects are as
follows:
<TABLE>
<CAPTION>


                                                                       Nine months ended September 30
                                                                                    1999                  1998
                                                                           (Dollars in thousands)
<S> <C>
    Unrealized holding gains (losses) arising during
        the year on available-for-sale securities                                 ($288)                ($352)
    Tax effect                                                                      101                   119
                                                                                 -------                -----
    Net-of-tax amount                                                            ($ 187)                ($233)
                                                                                 =======                ======
</TABLE>



(7) SEGMENT REPORTING



     The Company has one reportable  segment,  its mortgage banking  operations.
This  segment  originates  residential  loans  and  subsequently  sells  them to
investors.  The commercial  banking and other banking operations provide a broad
range of lending and deposit  services to individual and  commercial  customers,
including such products as  construction  loans,  and other  business  financing
arrangements.

                                       -8-

<PAGE>



           The Company's  reportable  segment is a strategic  business unit that
offers different  products and services.  It is managed  separately  because the
segment  appeals to  different  markets  and,  accordingly,  requires  different
technology and marketing strategies.

           The segment's most  significant  revenue and expense is  non-interest
income and non-interest expense,  respectively.  The segments are reported below
for the periods  ended  September  30, 1999 and  September  30,  1998.  Selected
Financial Information

<TABLE>
<CAPTION>

                                                                              Mortgage
                                                            Commercial         Banking
                                                             and Other       Operations           Total
                                                             ---------       ----------           -----
                                                                       (Dollars in thousands)
<S> <C>
Nine Months Ended September 30, 1999

     Net interest income after provision
         for loan losses                                         $1,924         $   -             $ 1,924
     Noninterest income                                           1,138         4,911               6,049
     Noninterest expense                                         (4,471)       (5,465)             (9,936)
                                                                -------        ------             -------
       Net income before income taxes                           ($1,409)        ($554)            $(1,963)
                                                                =======        ======             =======


Nine Months Ended September 30, 1998

     Net interest income after provision
         for loan losses                                         $6,192         $  -               $6,192
     Noninterest income                                             602         5,747               6,349
     Noninterest expense                                         (4,230)       (4,772)             (9,002)
                                                                 ------        ------              ------
       Net income before income taxes                            $2,564         $ 975              $3,539
                                                                 ======        ======              ======
</TABLE>


Segment Assets
<TABLE>
<CAPTION>

                                                            Commercial          Mortgage
                                                             and Other           Banking          Total
                                                             ---------           -------          -----
                                                                        (Dollars in thousands)
<S> <C>

                  September 30, 1999                            $288,777        $1,032            $289,809
                  September 30, 1998                            $230,658        $  810            $231,468

</TABLE>

                                      -9-


<PAGE>






Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations
        (Dollars in thousands, except per share data)

Financial Condition and Results of Operations
---------------------------------------------

     In addition to historical  information,  the following  discussion contains
forward  looking  statements  that are subject to risks and  uncertainties  that
could  cause the  Company's  actual  results  to differ  materially  from  those
anticipated.  These forward looking statements include,  but are not limited to,
the effect of increasing  interest rates on the Company's  profitability and the
adequacy of the  Company's  allowance for future loan losses.  Several  factors,
including the local and national  economy,  the demand for residential  mortgage
loans and the adequacy of the  Company's  Year 2000  compliance,  may  adversely
affect the  Company's  ability to achieve  the  expected  results.  Readers  are
cautioned not to place undue reliance on these forward looking statements, which
reflect management's analysis only as of the date of this report.

     The Company incurred a net loss of $2,651,  or $0.97 per diluted share, for
the three months ended  September  30, 1999 compared with net income of $803, or
$0.30 per diluted share,  for the same period in 1998. For the nine months ended
September  30,  1999,  the Company  incurred a net loss of $1,274,  or $0.47 per
diluted share,  compared with net income of $2,300,  or $0.85 per diluted share,
for the same period in 1998.  The loss for the three months ended  September 30,
1999 and on a year to date basis are directly attributable to a $4,667 provision
for loan loss taken in the third  quarter.  The provision for loan loss occurred
as a result of credit problems with a significant  borrower within the Company's
asset based lending  portfolio,  as announced by the Company in August 1999. The
Company has decided to exit the asset based lending business,  which represented
only 5% of the Company's total loan portfolio.

     Without the loan loss provision and other related charges, net income would
have been $624,  or $0.23 per  diluted  share,  and $2001,  or $0.73 per diluted
share,  for the third  quarter  and  first  nine  months of 1999,  respectively.
Although earnings  expectations are subject to risks and uncertainties  (some of
which will be beyond the control of  management),  during the fourth  quarter of
1999 the Company expects core earnings to be consistent with core earning trends
for the first two  quarters  of 1999,  without  giving  effect to any  losses or
related  charges  associated  with the  defaulted  loan for  which the loan loss
provision has been made.

     Total assets at September 30, 1999 were $289,809, up 24.1% from $233,460 at
December 31, 1998,  primarily  reflecting  growth in loans.  The Company's  loan
portfolio  grew by  $48,708  or 25.8% in the  first  nine  months  of 1999.  The
principal  components  of the  Company's  assets at the end of the  period  were
$22,319 in  securities,  $6,246 in cash and cash  equivalents,  $16,381 in funds
advanced  in  settlement  of  mortgage  loans and  $233,507  in net  loans.  The
Company's lending activities are a principal source of income.

     Total  liabilities  at  September  30,  1999 were  $274,299,  up 27.2% from
$215,671 at December 31, 1998, with the increase almost entirely  represented by
a $33,821 (16.4%) growth in deposits.  Non-interest  bearing deposits  increased
$870 or 5.5%, while interest bearing deposits increased by $32,951 or 17.3%. The
Company's deposits are provided by individuals and businesses located within the
communities  served as well as the  national  market.  Federal  funds  purchased
increased from $0 at December 31, 1998 to $7,921 at September 30, 1999, and bank
borrowings  increased  from $7,300 at December  31, 1998 to $14,703 at September
30, 1999.

     The Company  raised  $9,200 of  additional  capital in the first quarter of
1999 by issuing  368,000  Trust  Preferred  Securities  at a price of $25.00 per
Security. The Trust Preferred Securities feature a 9.25% coupon. The Company, in
turn,  purchased  $5,000 of  non-cumulative  9.25% Preferred Stock issued by the
Bank.  This  Preferred  Stock  qualifies  as Tier 1  capital  for the  Bank  for
regulatory  purposes.  Management  believes that this  additional Tier 1 capital
provides the Bank with an increased  loans to one borrower  limitation,  and the
ability  to  continue  to grow its  balance  sheet  while  maintaining  its well
capitalized  status.  The Preferred Stock 9.25% coupon matches the coupon of the
Trust Preferred Securities.

                                      -10-

<PAGE>

         The funds  generated by the Trust  Preferred  Securities  offering were
invested in  marketable  securities  and will also be used by the Company in its
stock  repurchase  program.   The  marketable   securities  are  categorized  as
held-to-maturity.  The Company's stock repurchase program will be used to offset
the  otherwise  dilutive  effects  of stock  options  granted  to the  Company's
management as employment recruitment and retention perquisites.

          Total shareholders' equity at September 30, 1999 was $15,510, compared
to $17,789 at December 31, 1998.  This decline in  shareholders'  equity was the
result of a net loss of $1,274 for the nine  months  ended  September  30,  1999
compared with net income of $2,300 for the comparable  period in 1998. This loss
for the period was directly  attributable  to a provision for loan loss taken in
the third quarter of 1999 of $4,667, as discussed above.

         As  stated  previously,  the  Company's  loan  portfolio  has  grown to
$237,230 at September  30, 1999 from  $188,522 at December 31, 1998. As a result
of this increase in its loan portfolio, the Company's net interest income before
provision for loan loss for the three months ended September 30, 1999 was $2,382
compared to $2,086 for the comparable period in 1998.

         Profitability  as measured by the  Company's  return on average  assets
(ROA) was (.64%) for the nine months ended September 30, 1999, compared to 1.27%
for the same  period of 1998.  A key  indicator  of  performance,  the return on
average  equity  (ROE) was (9.29%) and 18.73% for the nine month  periods  ended
September 30, 1999 and 1998, respectively.

         Net interest income  represents a principal  source of earnings for the
Company.  The first  component of the Company's net interest income is it's loan
portfolio.  Making  sound loans that will  increase the  Company's  net interest
margin is the first  priority of management.  The second  component is gathering
core  deposits  to match and fund the loan  production  as cost  efficiently  as
possible.  The Company also uses electronic funding of deposits and Federal Home
Loan  Bank  ("FHLB")  advances  to fund loan  growth  as an asset and  liability
management tool and as a less expensive source of funds.

         Net interest  income,  before  provision for loan losses,  increased by
$249 to $6,591 for the nine months ended  September  30, 1999 versus  $6,342 for
the same period in 1998.  For the three months ended  September 30, net interest
income increased by 14.2% from $2,086 in 1998 to $2,382 in 1999.

                                      -11-

<PAGE>






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

The  following  table  sets  forth,  for  the  periods  indicated,   information
regarding:  (i) the total dollar  amount of interest  income of the Company from
categories of interest-bearing  assets and the resultant average yield; (ii) the
total dollar amount of interest expense on interest-bearing  liabilities and the
resultant average cost; (iii) net interest  position;  (iv) net interest income;
(v) net  interest  rate  spread;  (vi) net  interest  yield on  interest-earning
assets;  and  (vii)  the  ratio  of  total  interest-earning   assets  to  total
interest-bearing  liabilities.  Since  quarter-end  balances can be distorted by
one-day  fluctuations,  an  analysis  of changes in the  quarterly  averages  is
provided to give a better indication of balance sheet trends.



<TABLE>
<CAPTION>

                                                Three months ended           Three months ended          Nine months ended
                                                September 30, 1999            September 30, 1998         September 30, 1999
                                               Average             Yield/   Average            Yield/   Average            Yield/
                                              Balance(1) Interest Rate(2)  Balance(1) Interest Rate(2) Balance(1) Interest Rate(2)
                                               -----------------------------------------------------------------------------------
<S>     <C>
Assets
Interest-earning assets:
    Securities                                  $ 22,524  $  390    6.93%   $ 11,714 $  160    5.46%  $  19,728  $   977    6.60%
    Loans (3)                                    230,470   4,754    8.25%    170,885  3,963    9.28%    208,968   12,970    8.28%
    Interest bearing deposits                      3,021      42    5.56%     22,391    318    5.68%      8,385      311    4.95%
    Other interest-earning assets (4)             19,504     465    9.54%     28,974    519    7.17%     17,224    1,212    9.38%
                                                --------   -----    -----    -------  -----    -----     ------    -----    -----
       Total interest earning assets             275,519   5,651    8.20%    233,964  4,960    8.48%    254,305   15,470    8.11%
Noninterest earning assets:
    Cash and due from banks                        4,555                       4,023                      4,151
     Premises and equipment                        3,936                       3,297                      3,671
     Other assets                                  5,272                       5,025                      5,038
      Less: Allowance for loan losses             (2,292)                     (2,614)                    (2,380)
                                                --------                    --------                    -------
       Total noninterest earning assets           11,471                       9,731                     10,480
                                                --------                    --------                     ------
           Total assets                         $286,990                    $243,695                   $264,785
                                                ========                    ========                   ========

Liabilities and Stockholders' Equity
Interest-bearing liabilities:
  Interest bearing deposits:
   Demand/Money Market Accounts                 $ 12,247  $  101    3.30%   $ 12,666 $  107    3.38%   $ 12,746   $  307    3.21%
    Savings                                       23,588     269    4.56%     19,570    224    4.58%     22,770      778    4.56%
    Certificates of deposit                      186,507   2,454    5.26%    166,487  2,408    5.79%    173,057    6,842    5.27%
                                                 -------   -----    -----    -------  -----    -----    -------    -----    -----
       Total interest bearing deposits           222,342   2,824    5.08%    198,723  2,739    5.51%    208,573    7,927    5.07%
    FHLB advances and other borrowings (5)        16,389     228    5.56%      9,555    135    5.65%     11,275      468    5.53%
    Capital debt securities                        9,200     217    9.43%                                 6,965      484    9.27%
                                                 -------   -----    -----   --------  -----    ----     -------   ------    -----
       Total interest-bearing liabilities        247,931   3,269    5.27%    208,278  2,874    5.52%    226,813    8,879    5.22%
                                                 -------   -----             -------  -----             -------    -----
 Noninterest-bearing
liabilities:
    Demand deposits                               17,996                      14,896                     17,455
    Other liabilities                              2,355                       3,593                      2,114
                                                --------                    --------                      -----
       Total noninterest earning liabilities      20,351                      18,489                     19,569
                                                --------                    --------                     ------
Stockholders' equity                              18,708                      16,928                     18,403
                                                --------                    --------                     ------
Total liabilities and stockholder's equity      $286,990                    $243,695                   $264,785
                                                ========                    ========                   ========
Net interest income/interest rate spread (6)               $2,382    2.93%           $ 2,086   2.96%              $6,591    2.89%
                                                           ======    ====            =======   =====               =====   =====
Net interest position (7) /
Net yield on
 interest-earning assets (8)                    $ 27,588            0.86%   $ 25,686           0.89%   $ 27,492             2.59%
                                                 =======          =======   ========         =======    =======            ======
Ratio of average interest-earning assets to
 average interest-bearing  liabilities (9)                         111.13%                    112.33%                      112.12%
                                                                  =======                    =======                       ======

</TABLE>



<TABLE>
<CAPTION>

                                                            Nine months ended
                                                             September 30, 1998
                                                           Average             Yield/
                                                          Balance(1) Interest Rate (2)
                                                          --------------------------
<S>     <C>
Assets
Interest-earning assets:
    Securities                                           $ 13,061 $   563    5.75%
    Loans (3)                                             163,435  11,268    9.19%
    Interest bearing deposits                              13,684     546    5.32%
    Other interest-earning assets (4)                      44,902   2,625    7.79%
                                                          -------  ------    -----
       Total interest earning assets                      235,082  15,002    8.51%
Noninterest earning assets:
    Cash and due from banks                                 2,994
     Premises and equipment                                 3,290
     Other assets                                           4,318
      Less: Allowance for loan losses                      (2,612)
                                                          -------
       Total noninterest earning assets                     7,990
                                                          -------
           Total assets                                  $243,072
                                                          =======

Liabilities and Stockholders' Equity
Interest-bearing liabilities:
  Interest bearing deposits:
   Demand/Money Market Accounts                            $ 11,715   $287    3.27%
    Savings                                                  19,919    682    4.57%
    Certificates of deposit                                 158,046  6,827    5.76%
                                                            -------  -----    -----
       Total interest bearing deposits                      189,680  7,796    5.48%
    FHLB advances and other borrowings (5)                   20,108    864    5.73%
    Capital debt securities                                       -      -       -
                                                            -------  -----    -----
       Total interest-bearing liabilities                   209,788  8,660    5.50%
                                                            -------  -----
 Noninterest-bearing liabilities:
        Demand deposits                                      13,870
        Other liabilities                                     2,906
                                                           --------
        Total noninterest earning liabilities                16,776
                                                           --------
Stockholders' equity                                         16,508
                                                           --------
Total liabilities and stockholder's equity                 $243,072
                                                           ========

Net interest income/interest rate spread (6)                        $6,342    3.00%
                                                                    ======    =====
Net interest position (7) /
Net yield on
 interest-earning assets (8)                                $25,294           2.70%
                                                            =======         =======
Ratio of average interest-earning assets to
 average interest-bearing  liabilities (9)                                   112.06%
                                                                            =======


</TABLE>

<PAGE>


(1)  Average balances are computed on daily balances.

(2)  Yield and rate  percentages are all computed  through the  annualization of
     interest  income  and  expenses  versus  the  average   balances  of  their
     respective accounts.


(3)  Non-accrual loans are included in the average loan balances,  and income on
     such loans is recognized on a cash basis.

(4)  Consists of funds advanced in settlement on loans.

(5)  Consists of FHLB advances and federal funds purchased.

(6)  Represents   the   difference   between   the  average   yield   earned  on
     interest-earning  assets and the  average  rate paid on  interest-  bearing
     liabilities.

(7)  Equals  total   interest-earning   assets   minus  total   interest-bearing
     liabilities.

(8)  Equals net interest income divided by average interest-earning assets.

(9)  Equals average  interest-earning assets divided by average interest-bearing
     liabilities.

                                      -12-
<PAGE>


     Non-interest  income  declined  from  $6,349  for  the  nine  months  ended
September  30, 1998 to $6,049 for the same  period in 1999.  This  decrease  was
primarily  attributable  to reduced loan  refinancing  activity in the Company's
mortgage banking  operations.  Due to recent increases in market interest rates,
the  Company is likely to  continue  to  experience  significant  reductions  in
mortgage loan  refinancings  in future  periods,  which in turn will continue to
adversely  impact  the  Company's   noninterest  income.   These  interest  rate
increases,  or any further  increases in the future,  will also adversely impact
the  Company's  ability to generate  noninterest  income from new mortgage  loan
originations  because higher interest rates tend to reduce the overall volume of
the home mortgage market. For the nine months ended September 30, 1999, mortgage
banking income  declined by 15.1% to $4,878 versus $5,744 for the same period of
1998.  Mortgage  banking  continues  to  be  a  key  element  of  the  Company's
operations. Because of the uncertainty of future loan origination volume and the
future level of interest rates, the Company may continue to experience  declines
in  mortgage  banking  income  in future  periods.  Other  non-interest  income,
consisting mostly of service charges, and a gain on sale of loans in early 1999,
increased  by $566 to $1,171  for the nine  months  ending  September  30,  1999
compared to the same period in 1998.

     For the nine months ended  September 30, 1999,  the Company's  non-interest
expense  totaled  $9,936 or 10.4%  greater  than the same  period in 1998.  This
increase in expenses was  primarily  due to expansion  of the  Company's  office
locations  in the Hampton  Roads area.  The largest  component  of  non-interest
expense,  salaries  and  employee  benefits,  which  represents  51.7%  of total
non-interest  expense,  decreased  2.3% to  $5,139  for the  nine  months  ended
September 30, 1999 over the same period in 1998.  Occupancy expense increased by
7.9% to $875, depreciation and equipment maintenance increased by 11.4% to $646,
office  supplies  expense  increased  by 15.3% to $264,  marketing  and business
development  increased 23.6% to $325, and outside  computer  services  decreased
(due  to  one-time  expenses  incurred  in  1998  in  connection  with a  system
conversion)  by 16.4% to $367 for the nine months ended  September 30, 1999 over
the same period in 1998.  Other expenses  increased by 61.5%,  to $2,088 for the
nine months ended September 30, 1999 over the same period in 1998.

     In  establishing  the  allowance  for loan losses,  management  considers a
number of factors, including loan asset quality, related collateral and economic
conditions  prevailing  during  the  loan's  repayment.  In its  loan  policies,
management emphasizes the borrower's ability to service the debt, the borrower's
general  creditworthiness and the quality of collateral.  The allowance for loan
losses as a percentage  of  quarter-end  loans at September 30 was 1.6% and 1.4%
for 1999 and 1998, respectively.  The provisions for loan losses were $4,667 and
$150 for the nine months ended September 30, 1999 and 1998,  respectively.  This
significant increase in the provision for loan loss in the third quarter of 1999
over the same period in the previous year was the result of the previously noted
credit problems  encountered  within the Company's asset based lending  program.
Such credit quality problems were exclusively related to this business unit, and
the Company has, as a result, decided to exit this market segment.

     While the Company  believes it has  sufficient  allowance  for its existing
loan  portfolio,  there can be no assurances  that an  additional  allowance for
losses on existing loans may not be necessary in the future, particularly if the
economy worsens.  Management  believes that losses on these assets, if any, will
be  minimal,  although  no  assurance  can be given in this  regard.  Loans  are
generally  placed in  nonaccrual  status when the  collection  of principal  and
interest is 90 days or more past due, unless the obligation is both well-secured
and in the process of collection.

                                      -13-

<PAGE>

Non Performing Assets

The following table presents the Company's non performing assets for the periods
set forth below.

<TABLE>
<CAPTION>


                                                                    September 30       December 31
                                                                        1999              1998
                                                                        -----             ----
                                                                        (Dollars in thousands)
<S>     <C>
Non accrual loans                                                    $  1,586         $    533
Other real estate                                                         186              647
Loans 90 days or more past due and still accruing interest                700              412
                                                                     --------         --------
      Total non performing assets                                    $  2,472         $  1,592
                                                                     ========         ========

       Total assets                                                  $289,809         $233,460
                                                                     ========         ========

       Total non performing assets to total assets                       0.85%            0.68%
                                                                     ========         ========
</TABLE>


                                      -14-
<PAGE>

Summary of Loan Loss Experience

The following  table  presents the Company's  loan loss  experience and selected
loan loss ratios for the nine months ended September 30, 1999 and 1998.

<TABLE>
<CAPTION>


                                                                       Nine months ended September 30
                                                                           1999             1998
                                                                            (Dollars in thousands)

Balance of allowance for loan losses
  at beginning of year                                                   $  2,500         $  2,573

Loans charged-off:
 Commercial                                                                (3,358)             (89)
 Installment                                                                   (4)              (5)
 Real Estate                                                                  (84)            (141)
 Credit Cards and Other Consumer                                               (2)              (8)
                                                                         --------         --------
 Total loans charged-off                                                   (3,448)            (243)
                                                                         --------         --------

Recoveries of loans previously charged off:
 Commercial                                                                     1                1
 Installment                                                                    1                3
 Real Estate                                                                    -               35
 Credit Cards and Other Consumer                                                2               20
                                                                         --------         --------
 Total recoveries                                                               4               59
                                                                         --------         --------

Net loans charged-off                                                      (3,444)            (184)
Additions to allowance charged
 to expense                                                                 4,667              150
                                                                         --------         --------
Balance at end of quarter                                                $  3,723         $  2,539
                                                                         ========         ========

Average loans                                                            $239,049         $163,435

Loans at end of period                                                   $237,230         $176,790

Selected Loan Loss Ratios:
 Net charge-off during the period to average loans                           1.44%            0.11%
 Provision for loan losses to average loans                                  1.95%            0.09%
 Provision for loan losses to net charge-offs during
  the period                                                                  136%              82%
 Allowance for loan losses to loans at end of period                         1.57%            1.44%
 Non-performing assets at end of period                                  $  2,472         $  2,402
 Non-performing assets to total loans at
  end of period                                                              1.04%            1.36%
 Allowance for loan losses to non-performing assets
  at end of period                                                            151%             106%


                                      -15-
<PAGE>

Interest Rate Sensitivity

         Management  evaluates  interest  sensitivity  through  the  use  of  an
asset/liability  management  reporting  gap model on a quarterly  basis and then
formulates  strategies  regarding asset generation and pricing,  funding sources
and pricing,  and off-balance sheet commitments in order to decrease sensitivity
risk. These strategies are based on management's outlook regarding interest rate
movements,  the state of the regional and national economies and other financial
and business  risk  factors.  In addition,  the Company  establishes  prices for
deposits and loans based on local market  conditions  and manages its securities
portfolio under policies that take interest risk into account.

         Liquidity  represents  the  institution's  ability to meet  present and
future  financial  obligations.  Liquid assets  include cash,  interest  bearing
deposits with banks, money market accounts,  federal funds sold, investments and
loans maturing within one year. The Company's funding  requirements are supplied
from a range of traditional sources, including various types of demand deposits,
money  market  accounts,  certificates  of deposit  and  short-term  borrowings.
Federal Home Loan Bank ("FHLB")  advances are utilized as funding sources by the
Company. At September 30, 1999, there were $14,703 in FHLB advances outstanding.
The Company  has a warehouse  line of credit  collateralized  by first  mortgage
loans amounting to $50,000,  which expires  December 2, 1999. The Company has no
reason to believe this arrangement will not be renewed although no assurance can
be given in this regard.  The Company had no outstanding  warehouse  advances at
September 30, 1999 and 1998. At September 30, 1998,  $9,300 was  outstanding  in
FHLB advances outside of the warehouse line.

         The Company also had  purchased  Federal  Funds in the amount of $7,921
and $0 at September  30, 1999 and 1998,  respectively.  The Company has lines of
credit with other correspondent banks of $11,509 and $2,000.

         Management  seeks to ensure  adequate  liquidity to fund loans and meet
the Company's financial requirements and opportunities. To provide liquidity for
current,  ongoing and  unanticipated  needs,  the Company  maintains  short-term
interest bearing  certificates of deposits,  federal funds sold, and a portfolio
of debt  securities.  The Company also structures and monitors the flow of funds
from debt  securities  and from  maturing  loans.  As  securities  are generally
purchased to provide a source of  liquidity,  most are  classified as securities
available-for-sale  when  purchased.  Unrealized  holding  gains and  losses for
available-for-sale  securities  are excluded from earnings and reported as a net
amount  in  a  separate  component  of  stockholders'   equity  until  realized.
Securities  are  composed   primarily  of  governmental  or   quasi-governmental
agencies.

         The  Company's  financial  position  at  September  30,  1999  reflects
liquidity and capital levels that management  believes are currently adequate to
fund  anticipated  future  business  expansion.  Capital ratios are in excess of
required regulatory minimums for a well capitalized institution.  The assessment
of  capital  adequacy  depends  on a number of  factors  such as asset  quality,
liquidity,   earnings  performance,  and  changing  competitive  conditions  and
economic forces. The adequacy of the Company's capital is reviewed by management
on an ongoing basis.  Management seeks to maintain a capital structure that will
assure an adequate level of capital to support  anticipated  asset growth and to
absorb potential losses.

                                      -16-

<PAGE>

         The  following  table  presents the amounts of the  Company's  interest
sensitive  assets  and  liabilities  that  mature  or  reprice  in  the  periods
indicated.

                                                                            September 30, 1999
                                                                                 Maturing
                                            --------------------------------------------------------------------------
                                               Within            4-12           1-5          Over
                                               ------           -------        -----        -------
                                              3 months          Months         Years        5 Years             Total
                                              --------          ------         -----        -------             -----
                                                                          (Dollars in thousands)
<S>     <C>
Interest-Earning Assets:
    Investment securities                    $  2,137        $  3,077       $  1,525       $ 15,580          $ 22,319
    Loans                                     139,668          17,369         50,992         29,201           237,230
    Interest bearing deposits                   2,788               -              -              -             2,788
    Other interest-earning assets              16,381               -              -              -            16,381
                                             --------        --------       --------       --------          --------
Total interest-earning assets                 160,974          20,446         52,517         44,781           278,718
                                             --------        --------       --------       --------          --------

Interest-Bearing Liabilities:
   Deposits
        Demand and savings (1)                                              $ 34,275              -          $ 34,275
        Time deposits, $100,000 and over        3,462           7,008          1,288              -            11,758
         Other time deposits                   53,976         110,435         12,943              -           177,354
   Other interest-bearing liabilities          17,324               -            300          5,000            22,624
   Capital debt securities                          -               -              -          9,200             9,200
                                             --------       ---------       --------       --------          --------
Total interest-earning liabilities             74,762         117,443         48,806         14,200           255,211
                                             --------       ---------       --------       --------          --------

         Period Gap                          $ 86,212       $ (96,997)       $ 3,711       $ 30,581          $ 23,507
                                             --------       ---------       --------       --------          --------

         Cumulative Gap                      $ 86,212       $ (10,785)       $(7,074)      $ 23,507
                                             --------       ---------       --------       --------

         Ratio cumulative gap total
            interest-earning assets             30.93%          -3.87%         -2.54%          8.43%

</TABLE>

 (1) Management has determined that interest checking,  money market and savings
accounts are not sensitive to changes in related market ratio and, therefore, we
have placed them in the 1-5 years category.

         Regulatory  capital  adequacy  standards  are  based on an  established
minimum  for  Tier 1  Risk-Based  Capital,  Risk-Based  Capital  and the  Tier 1
Leverage Ratio. The following table summarizes regulatory capital ratios for the
Company and the Bank at September 30, 1999.

                                                   Resource     Resource
                                Required Ratio    Bankshares     Bank
                                --------------    ----------    --------
         Tier 1 risk-based          4.00%           8.44%         8.18%
         Total risk-based           8.00%          11.32%         9.43%
         Tier 1 Leverage         4.00-5.00%         7.23%         7.21%

         The  Company  and the Bank  are in full  compliance  with all  relevant
regulatory capital requirements.

         The effect of changing  prices on financial  institutions  is typically
different  from other  industries as the Company's  assets and  liabilities  are
monetary in nature. Interest rates are significantly impacted by inflation,  but
neither the timing nor the  magnitude  of the changes  are  directly  related to
price level  indices.  Impacts of inflation on interest  rates,  loan demand and

                                      -17-
<PAGE>

deposits  are  reflected  in  the  Company's  financial  statements.  Management
believes  that the mortgage  banking  operations  provide  somewhat of a natural
interest  rate  hedge,  in that the Company is interest  rate  sensitive  in the
six-month period.  When interest rates decline,  the Company's  earnings will be
negatively impacted in the six-month period but the mortgage  operation's volume
should increase. The reverse should occur in rising interest rate markets.

Year 2000 Compliance
--------------------

         The ability of the Company's  computers,  software and other  equipment
utilizing   microprocessors  to  recognize  and  properly  process  data  fields
containing a 2-digit year after 1999 is commonly  referred to as the "Year 2000"
issue.  The Year 2000 issue is the result of  computer  programs  and  equipment
which are dependent on "embedded chip  technology"  using two digits rather than
four to define the applicable  year. Any of the Company's  computer  programs or
equipment  that are date  dependent  may recognize a date using "00" as the year
1900  rather  than the year  2000.  This  could  result in a system  failure  or
miscalculations  causing disruptions of operations,  or a temporary inability to
process transactions, or otherwise engage in similar normal business activities.

         The  Company  adopted  a five  phase  plan of action  developed  by the
Federal  Financial  Institutions  Examination  Council ("FFIEC") to address Year
2000 issues and created an in-house committee to manage the Y2K project.  During
phase one,  "awareness," the Company developed an overall strategy and timetable
for the  completion  of all Year 2000  requirements.  Phase  two,  "assessment,"
involved  analyzing,   prioritizing  and  putting  all  internal  systems,  both
information  technology  (IT)  and  non-IT  systems,  on  track  for  Year  2000
compliance  according to the timetable  established in the awareness  phase. The
Company has no proprietary or in-house developed systems or software,  so non-IT
systems  are  limited to  infrastructure  and  communications.  During the third
phase,  "renovation,"  necessary  upgrades  or  replacements  were  ordered  for
hardware and software. In addition,  each of the Company's vendors was contacted
regarding their Year 2000 progress.

         The  fourth  phase,  "validation,"included  the  evaluation  of  vendor
testing and live testing when possible. Since the Company has no legacy systems,
most of the testing was by proxy,  where the vendor supplied testing scripts and
results  and the  Company  evaluated  both to  determine  that the  testing  was
adequate  and that the results were as expected  and  satisfactory.  The Company
changed  data  processors  in late 1997 and is served by a Service  Bureau which
houses and maintains all hardware,  software and backups  applicable to updating
and maintaining the Company's  customer and financial  records.  Because this is
the area of greatest  risk to the Company with regard to Year 2000 issues,  this
arrangement  meant the Company must carefully  oversee the efforts of the vendor
to ensure Year 2000  compliance was complete and timely.  The data processor has
renovated  and tested its systems and has  supplied a series of test scripts and
results  for each  application,  as well as  hardware,  software  and  operating
systems.  The Company's  in-house Year 2000 committee has reviewed each phase of
the data  processor's  testing  and  documented  the  results,  which  were then
reported to and ratified by the Company's  Board of Directors.  The Company will
continue  testing and validation  throughout the remainder of 1999 to ensure the
continuing reliability of its systems. Phases one through four are complete.

         The  final  phase,  "implementation,"  will  occur  at the  turn of the
century  with the  readiness  to execute  contingency  plans if  necessary.  The
Company's  Contingency  Plan is complete and has been tested by every work group
involved in doing the Company's business. Contingency plans include alternatives
for each critical system, which should allow business to continue with little or
no  interruption  past the turn of the  century.  These  alternatives  are being
subjected  to the same  process  as the  Company's  primary  service  providers.
Additionally,  the  contingency  plans  include  performing  tasks  manually  if
necessary, until the appropriate applications are operational.

                                      -18-
<PAGE>

         In addition to verifying its internal and vendor supplied systems,  the
Company has provided compliance certification questionnaires to its customers in
order to determine  their  ability to be Year 2000  compliant.  Each borrower is
assigned a credit  risk  rating  based on the  questionnaire  and the  Company's
knowledge of the borrower.  If a customer does not respond to the  questionnaire
or if its response  does not provide the Company with  adequate  assurance  that
such  customer's  failure  to be Year 2000  compliant  would not have a material
adverse  effect  on the  Company,  the  Company  is  entitled  to take  steps to
terminate its relationship with the customer before December 31, 1999. Year 2000
compliance is a part of the review  process for new loans,  which  maintains the
integrity of the Company's  commercial loan portfolio on an ongoing basis.  Each
month,  the Company's  Board of Directors  receives a commercial  loan portfolio
Year 2000 Credit Risk Analysis.

          Costs to date directly  attributable to the Year 2000 project have not
been  substantial  due to the fact that the  change in data  processors  and the
acquisition  of a bank in late 1997  required a complete  upgrade of all desktop
computer systems and servers.  Year 2000 compliance was an important part of all
purchases and management believes that any known issues were corrected. The Year
2000  progress of all data  processing  companies is being  monitored by outside
auditors and regulators and the Company receives  regular reports  regarding the
progress. Costs to date total $80 thousand;  however, testing by outside vendors
may exceed $100 thousand based on best estimates  available to date.  Management
anticipates that these funds will be financed internally.

          Because the Company had a detailed  Business  Continuation Plan before
the  Year  2000  plan  began,  various  potential  business   interruptions  and
alternatives were already documented which would permit a short term continuance
as long as the data processor  preserves the ability to update records.  Loss of
the data  processor is the greatest risk to the Company.  The Year 2000 progress
of all data  processing  companies is being  monitored  by outside  auditors and
regulators  and the Company  receives  regular  reports  regarding the progress.
While a  change  of data  processors  would  be time  consuming,  the  Company's
contingency  plans include  alternatives  for each critical  system,  as well as
plans to perform tasks manually if necessary, until appropriate applications are
operational.

          The Company's  Year 2000  readiness is subject to  supervision  by the
Federal  Reserve System  through  examination  for compliance  with the guidance
issued by the FFIEC.  Should the Company's readiness be found deficient it could
be subject to  informal  enforcement  actions  such as written  notification  of
deficiencies  to be  remediated,  or formal  enforcement  actions  such as civil
penalties,  temporary  cease and desist orders  requiring  immediate  corrective
actions, and the possible public release of any such cease and desist order.

          If the Company and its customers,  suppliers and vendors were not Year
2000  compliant  by January  1,  2000,  the most  reasonably  likely  worst case
scenario would be a temporary  shutdown of  operations.  Any such shutdown could
have a material adverse effect on the Company's results of operations, liquidity
and financial position.

Item 3.   Quantitative and Qualitative Disclosures about Market Risk

          Not applicable.

PART II   OTHER INFORMATION

Item 1.   Legal Proceedings

        On November 5, 1999, AGM Development Corporation ("AGM"),  Michael Agnew
and  Barbara  M.  Agnew   (collectively   the  "Agnews")  (AGM  and  the  Agnews
collectively  the  "Plaintiffs")  filed a lawsuit  against  Resource  Bank,  the
Company's wholly owned banking subsidiary ("Bank"), in the Circuit Court for the
City of Virginia Beach, Virginia ("Court"). AGM and the Angews are the borrowers
and guarantors  under certain loans which the Bank declared in default in August
1999 ("Defaulted  Loans").  For a detailed discussion of this loan default,  see
"Part I. Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations."

        The  lawsuit  alleges  that  the  Bank  did  not  act in a  commercially
reasonable manner when it seized and attempted to liquidate  certain  collateral
that secured the  Defaulted  Loans.  In  connection  with this  allegation,  the
Plaintiffs  are  seeking a  declaratory  judgment  that all  obligations  of the
Plaintiffs to the Bank have been satisfied and that the Bank is not entitled to
seek deficiency  judgments  against the Plaintiffs.  Based on advice of counsel,
management  does not believe that the relief  sought by the  Plaintiffs  will be
granted by the Court.

       The lawsuit also alleges that the Bank's proposed public auction of the
stock of a privately held company was not commercially reasonable. The stock was
owned by the Agnews individually, but was pledged by the Agnews to the Bank as
collateral for the Defaulted Loans. The lawsuit asked the Court to enjoin the
public auction that was scheduled on November 9, 1999. No injunction has been
granted. The public auction occurred as scheduled on November 9, 1999 and the
Bank bid for and purchased the stock on that date. Based on advice of counsel,
management believes that the public auction was conducted in accordance with
applicable law.

        The  Company and the Bank intend to  vigorously  defend all  allegations
made by the  Plaintiffs  in the  lawsuit.  The Company does not believe that the
lawsuit will have a material adverse effect on the Company's business, financial
condition or results of operations

                                      -19-
<PAGE>

Item 6.   Exhibits And Reports on Form 8-K

              (a) The registrant includes herein the following exhibits.

          Exhibit No.        Description
          27                 Financial Data Schedule

                                      -20-
<PAGE>

                                   SIGNATURES

          In  accordance  with  the   requirements  of  the  Exchange  Act,  the
registrant  caused this  report to be signed on its behalf by the  under-signed,
thereunto duly authorized.

                          RESOURCE BANKSHARES CORPORATION


                               /s/ Lawrence N. Smith
                                   ---------------------------------
                                         Lawrence N. Smith
                                   President & Chief Executive Officer
                                       Date: November 15, 1999


                               /s/ Eleanor J. Whitehurst
                                   ---------------------------------
                                       Eleanor J. Whitehurst
                          Senior Vice President & Chief Financial Officer
                                       Date: November 15, 1999