SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-KSB

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

                  For the fiscal year ended December 31, 2001
                         Commission file number 0-49611

                       MILLENNIUM BANKSHARES CORPORATION
                 (Name of Small Business Issuer in its Charter)

                 Virginia                                54-1920520
       (State or Other Jurisdiction                   (I.R.S. Employer
    of Incorporation or Organization)               Identification No.)

          1601 Washington Plaza
             Reston, Virginia                              20190
 (Address of Principal Executive Offices)                (Zip Code)

                                 (703) 464-0100
                (Issuer's Telephone Number, Including Area Code)

         Securities registered under Section 12(b) of the Exchange Act:

                                                   Name of Each Exchange
         Title of Each Class                       on Which Registered
         -------------------                       -------------------

                 None                                      n/a

         Securities registered under Section 12(g) of the Exchange Act:

                     Common Stock, par value $5.00 per share
                                (Title of Class)

         Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for past 90 days.
<TABLE>
<CAPTION>
<S>                      <C>             <C>
      Yes                No    X         (not subject to such filing requirements for 90 days)
          ---------         ---------
</TABLE>

         Check if there is no  disclosure  of  delinquent  filers in response to
Item 405 of  Regulation  S-B contained in this form,  and no disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

         The  issuer's  gross  income  for  its  most  recent  fiscal  year  was
$10,044,030.

         The aggregate  market value of the voting stock held by  non-affiliates
computed by reference to the closing sales price of such stock on March 28, 2002
was  approximately  $22,099,572.  (The  exclusion from such amount of the market
value of the shares  owned by any person shall not be deemed an admission by the
registrant that such person is an affiliate of the registrant.)

         The number of  outstanding  shares of Common Stock as of March 29, 2002
was 3,685,478.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Proxy Statement for the 2002 Annual Meeting of Shareholders - Part III



<PAGE>


                                TABLE OF CONTENTS

                                     PART I

                                                                           Page

ITEM 1.  DESCRIPTION OF BUSINESS............................................ 3

ITEM 2.  DESCRIPTION OF PROPERTY........................................... 13

ITEM 3.  LEGAL PROCEEDINGS................................................. 14

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE
           OF SECURITY HOLDERS............................................. 14

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED
           STOCKHOLDER MATTERS............................................. 14

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
           CONDITION AND RESULTS OF OPERATIONS............................. 15

ITEM 7.  FINANCIAL STATEMENTS.............................................. 34

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
           ON ACCOUNTING AND FINANCIAL DISCLOSURE.......................... 34

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
           CONTROL PERSONS; COMPLIANCE WITH SECTION
           16(a) OF THE EXCHANGE ACT....................................... 34

ITEM 10. EXECUTIVE COMPENSATION............................................ 34

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
           OWNERS AND MANAGEMENT........................................... 35

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................... 35

ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K.............................35


                                      -2-
<PAGE>


                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

General

         Millennium   Bankshares   Corporation   is  a  bank   holding   company
headquartered  in  Reston,  Virginia.  We were  incorporated  in 1998 and  began
operations in April 1999. We provide  commercial and consumer  banking  services
through our principal  operating  subsidiary,  Millennium Bank, N.A. At December
31, 2001, we had total consolidated assets of $205.5 million, deposits of $188.6
million and stockholders' equity of $11.5 million.

         We  presently  operate  banking  offices  in  Reston,  Great  Falls and
Herndon,  Virginia.  All of our banking  offices are situated in Fairfax County,
Virginia,  just  west  of  Washington,   D.C.  Many  technology  companies  have
established  large operations in our area. The population of Fairfax County grew
from  818,584  in 1990 to  968,225 in 2000.  We plan to open  additional  branch
banking offices in Reston,  Virginia,  and Richmond,  Virginia, in the middle of
2002.

         We are a  community  bank  providing a broad  range of  commercial  and
retail banking  services  designed to meet the needs of businesses and consumers
in the  communities  we serve.  We emphasize  local  decision  making within our
organization  and  provide  attentive  personal  service  to our  customers.  By
combining the technological support and products and services that our customers
demand with direct access to senior management and responsive  customer service,
we seek to foster a business and consumer banking  environment that allows us to
effectively  compete in our particular market with other financial  institutions
of all sizes.

         Even though we are a small bank, we seek to provide our customers  with
the technological  support that banking in today's market requires.  We offer 24
hour a day,  seven day a week Internet  banking  services.  These services allow
consumers and businesses the ability to view accounts,  make  transfers,  submit
wire transfer  requests,  pay bills and stop payment of checks. The most popular
feature is the ability for  customers  to view their  cancelled  checks over the
Internet.

         We are  expanding  our  Internet  services  in  early  2002 to  include
synchronization  with Millennium  Bank through  financial  management  software.
Customers  will be able to synchronize  their accounts at Millennium  with their
money management software directly over the Internet. Bill-payment services from
the  money  management  software  over the  Internet  will be  available  to our
customers in the spring of 2002.

         We conduct almost all of our business  through  Millennium Bank and its
wholly and majority owned  subsidiaries.  These  subsidiaries,  which originate,
process,  and underwrite first and second residential mortgage loans, are listed
in the following  table.  These  subsidiaries  are not material to Millennium or
Millennium Bank.

<TABLE>
<CAPTION>

                                                                                                     Date
Subsidiary                            Location                Nature of Business                 Established
<S>                                   <C>                     <C>                                <C>
Millennium Capital                    Reston, VA              Wholesale and Retail Lending       May 1999
Millennium Residential Funding        Owings Mills, MD        Retail Lending                     March 2001
Millennium Wholesale Lending          Reston, VA              Wholesale Lending                  May 2001
Millennium Nationwide                 Irvine, CA              Retail Lending                     November 2001
Millennium Sunbelt Mortgage           Las Vegas, NV           Retail Lending                     December 2001

</TABLE>
                                      -3-
<PAGE>



         Millennium Bankshares Corporation is the sole shareholder of Millennium
Brokerage Services, Inc., which offers securities brokerage services,  financial
analysis,  professional money management, stocks, bonds and mutual funds through
UVEST.  Millennium  Insurance  Services,  Inc. is also a wholly owned subsidiary
that receives  revenues as a result of insurance  relationships  established  on
behalf of this company. Additionally,  Millennium e-Banking Solutions, L.L.C. is
a  subsidiary  of  Millennium  Bankshares  Corporation  in which we are majority
owner.  This  entity is  currently  testing  a  proprietary  financial  software
solution through Millennium Bank.

Strategy

         Our strategy for building  long term value for our  shareholders  is to
consistently grow our assets and generate  non-interest  income through the sale
of mortgage loans. Concurrently, we plan to expand our branch banking network to
lower our cost of funds and  diversify  our loan  portfolio  with  local  retail
consumer and commercial  business.  At present, we use brokered deposits to fund
mortgage loans held for sale. This method of funding  decreases our net interest
margin.  We plan to open additional  branch banking offices in northern Virginia
and  increase  our  commercial  clientele,  traditionally  a  source  for  large
non-interest bearing deposits.  We believe that this growth will result from our
ability to attract new  customers,  including  businesses and consumers who were
customers of companies that have recently  consolidated in our region yet desire
the  personal  service of a community  bank.  These local retail  deposits  will
replace brokered  deposits and allow us to increase our net interest margin.  To
achieve these goals, we plan to take the following steps.

       *      Emphasize  Mortgage Lending.  Presently,  we are rapidly expanding
              our mortgage lending  activities through Millennium Bank and other
              Millennium  subsidiaries.  Loans  retained  in our  mortgage  loan
              portfolio,  and  income  from  the  sale of  loans  has  increased
              steadily.  Mortgage  loans held for sale as of  December  31, 2001
              were $77.4  million,  an increase of $42.8  million  over year end
              2000.

              Second mortgage loans historically were the predominant product in
              the mortgage loan  portfolio.  We hold these loans only for thirty
              to sixty  days  before we sell  them.  Even  though we do not hold
              second  mortgage  loans as long  term  investments,  the  interest
              earned  during the  thirty to sixty days that we hold these  loans
              has generated above normal spreads over the cost of funds.

              Increases  and  decreases in our mortgage  banking  income  (which
              consists  primarily  of gains on sales of mortgage  loans) tend to
              offset  decreases and increases in the net interest  margin.  In a
              climate of lower or  declining  interest  rates,  our net interest
              margin  will tend to  decrease  as the yield on  interest  earning
              assets   decreases  faster  than  the  cost  of  interest  bearing
              liabilities.  Mortgage  banking  income,  in  contrast,  tends  to
              increase  in  times  of  lower or  declining  interest  rates,  as
              refinancing  activity  leads  to  an  increase  in  mortgage  loan
              originations. In a climate of rising or higher interest rates, the
              net  interest  margin will tend to  increase,  while a decrease in
              mortgage loan originations leads to a decrease in mortgage banking
              income.

              We  will  continue  to  evaluate  approaches  that  will  increase
              mortgage  loan  volume,  including,  but not limited to  increased
              lending  from  within   Millennium  Bank,   additional   operating
              subsidiaries, and expanded product offerings.

       *      Expand Our Branch  Network.  In 2001, we opened our second banking
              office in Great  Falls,  Virginia and our third office in Herndon,
              Virginia.  We plan to open a  fourth  banking  office  in  Reston,
              Virginia in spring 2002.

                                      -4-
<PAGE>

              Loan  production  is  presently  being funded to a large degree by
              brokered  deposits.  At December  31,  2001,  deposits  from these
              sources  represented $103.0 million,  compared to $40.3 million at
              December 31, 2000.  Funding  loans in this fashion may result in a
              decreased  net interest  margin.  With our branch  banking  growth
              strategies in select communities  throughout northern Virginia, we
              will attempt to reduce our cost of funds while  continuing to grow
              our loan portfolio. Offices will be positioned in communities with
              moderate  median  incomes and a high  concentration  of commercial
              business surrounding the location,  which is intended to result in
              a lower cost of funds.

       *      Emphasize commercial banking products and services. Small-business
              commercial  customers  are a source of  prime-based  loans and fee
              income from cash management services,  but low cost deposits which
              we  require  to  continue  to fund  our  aggressive  growth.  From
              December  31,  2000 to  December  31,  2001  our  commercial  loan
              portfolio  grew from $15.1 million to $24.6  million.  At December
              31, 2001 commercial  deposit  accounts  totaled $31.9 million,  of
              which $25.4 million were non-interest bearing demand deposits.  At
              December 31, 2000, commercial demand deposits were $11.8 million.

              We have been able to build a commercial  business base because our
              staff of bankers is continually  seeking  opportunities to network
              within  the  local  business  community.  Additionally,  the Chief
              Executive  Officer of  Millennium  Bank has over three  decades of
              commercial banking  experience in our local market area,  bringing
              both a strong  understanding  of  commercial  banking  needs and a
              sound  customer base to the table.  Significant  further growth in
              this  banking  area will depend on  expanding  our lending  staff.
              Small business lending is also advantageous  because certain loans
              are   eligible   for   guarantees    from   the   Small   Business
              Administration.  The bank has applied for Preferred  Lender status
              with the Small  Business  Administration,  which would allow us to
              internally approve Small Business Administration loans.

              Our strategic plans include targeting larger commercial customers.
              At the present  time,  our legal  lending limit is below the level
              necessary to serve the borrowing  requirements of these customers.
              We are able,  however,  to participate loans to other banks, which
              generally  facilitates  the borrowing  needs of larger  commercial
              customers. The additional capital from this offering will increase
              our legal lending limit to approximately  $2.8 million.  We expect
              that the  increase  in our legal  lending  limit  will be ample to
              accommodate the borrowing needs of customers in our target market,
              including larger commercial customers.

Market Area

         Millennium is headquartered in Fairfax County,  Virginia. This area had
a population  of  approximately  968,225 in 2000 and is expected to grow to just
under 1.1 million by 2010. We are located in northern Virginia  approximately 20
miles west of Washington, D.C. and 115 miles north of Richmond, Virginia. We are
situated in the new  "Silicon  Valley of the East" known as the Dulles  Corridor
which is home to companies  such as America  Online,  MCI, TRW, and others.  Our
branch  banking  offices  are  located  in this  area.  Our  target  market  for
commercial lending remains in northern Virginia.  Residential mortgage loans are
marketed on a national basis.

Competition

         Millennium is  headquartered  in the  Reston-Herndon  market area where
there is a very limited community bank presence.  It is a community  serviced by
the branches of large regional banks that are


                                      -5-
<PAGE>


headquartered,  for the most part, in cities outside the Washington Metropolitan
area. Our market area is a highly  competitive,  highly branched banking market.
We compete as a financial  intermediary with other commercial banks, savings and
loan  associations,  credit unions,  mortgage  banking firms,  consumer  finance
companies,  securities brokerage firms, insurance companies, money market mutual
funds and other  financial  institutions  operating in the Fairfax County market
area and elsewhere.

         Competition  in the  market  area for  loans to  small  businesses  and
professionals is intense, and pricing is important. Most of our competitors have
substantially  greater  resources  and  lending  limits  than  Millennium.  Many
competitors  offer  services,  such  as  extensive  branch  networks  and  trust
services,  that we  currently  do not  provide.  Moreover,  larger  institutions
operating in the northern Virginia market have access to borrowed funds at lower
costs than are available to Millennium.  Deposit  competition among institutions
in the market area also is strong.  As a result, it is possible that we will pay
above-market  rates to attract  deposits.  According  to a market  share  report
prepared by the FDIC, we held 0.53% of deposits in the Fairfax  County market as
of June 30, 2001,  the most recent date for which market  share  information  is
available.

Credit Policies

         The principal risk  associated  with each of the categories of loans in
Millennium's  portfolio is the  creditworthiness  of its borrowers.  Within each
category,  credit  risk is  increased  or  decreased,  depending  on  prevailing
economic  conditions.  In an  effort  to  manage  the  risk  of  loans  made  in
Millennium's  portfolio,  our policy gives loan  approval  limits to  individual
officers  based on their position and  experience.  Loans that are held for sale
are  underwritten  to  investor  guidelines.  All fixed rate  residential  first
mortgage loans are pre-sold prior to settlement on the loan.

         Millennium  has written  policies and  procedures to help manage credit
risk.  Millennium has implemented a loan review process that includes  portfolio
management  strategy,  underwriting  standards and risk  assessment  guidelines,
procedures for ongoing  identification  and management of credit  deterioration,
and regular  portfolio  reviews to  establish  loss  exposure  and to  ascertain
compliance with Millennium's policies.

         Millennium uses an Officers Loan Committee and Directors Loan Committee
to approve loans.  The Officers Loan  Committee,  which consists of the Chairman
and  additional  officers,  meets as necessary to review most  applications  for
loans that are intended to be held in the portfolio. A Directors Loan Committee,
which currently consists of ten directors,  approves loans in excess of $750,000
that have been previously approved by the Officers Loan Committee. The Directors
Loan Committee also reviews lending policies proposed by Management.

         We  obtain  small   business  and   commercial   loans  through  direct
solicitation  of  owners  and  continued  business  from  customers.   Completed
commercial loan applications are reviewed by Millennium's loan officers. As part
of the  application  process,  information  is obtained  concerning  the income,
financial  condition,  employment  and  credit  history  of  the  applicant.  If
commercial real estate is involved, information is also obtained concerning cash
flow after debt service.  Loan quality is analyzed  based on  Millennium  Bank's
experience and its credit underwriting guidelines,  as well as guidelines issued
by the Office of the Comptroller of the Currency and purchasers of loans.

         Residential loan originations come primarily from walk-ins, direct mail
solicitations,   Internet   advertising,   and   wholesale   and   correspondent
relationships. We have chosen to retain in our portfolio many of our residential
mortgage loans on properties  located in our local market.  In addition,  we are
actively seeking  non-conforming  one-to-four family  adjustable-rate  mortgages
that do meet all of our  secondary  marketing  guidelines  which we may hold for
sale  longer  than  other  products.  Loans  held for


                                      -6-
<PAGE>

sale are  conforming  and  non-conforming  fixed rate first and second  mortgage
loans with 80% to 125% loan to value.

         In the normal course of business,  Millennium makes various commitments
and incurs certain  contingent  liabilities which are disclosed in the footnotes
of its annual financial  statements,  including commitments to extend credit. At
December 31, 2001, commitments to extend credit totaled $12.6 million.

Commercial Lending

         General.  Commercial  business loans  generally have a higher degree of
risk than residential mortgage loans, but have commensurately  higher yields. To
manage these risks, Millennium generally secures appropriate collateral, obtains
personal guarantees from principals, and monitors the financial condition of its
business  borrowers.  The  availability of funds for the repayment of commercial
business  loans may be  substantially  dependent  on the success of the business
itself.  Further,  the collateral  for commercial  business loans may depreciate
over time and cannot be appraised  with as much  precision as  residential  real
estate. All commercial loans made by Millennium have recourse under the terms of
the   promissory   note.  At  December  31,  2001,   commercial   loans  totaled
$24.6 million, or 14.1% of the total loan portfolio.

         Millennium  has  implemented a credit review and  monitoring  system to
review  the  cash  flow of  commercial  borrowers.  Residential  mortgage  loans
generally are made on the basis of the borrower's ability to make repayment from
his employment and other income and are secured by real estate whose value tends
to be easily ascertainable. In contrast, commercial business loans typically are
made on the basis of the  borrower's  ability to make  repayment  from cash flow
from its business  and are secured by assets,  such as  commercial  real estate,
accounts receivable, equipment and inventory.

         Real  Estate  Loans.  Commercial  real  estate  loans may be secured by
various types of commercial real estate in Millennium's  market area,  including
multi-family  residential  buildings,  commercial  buildings and offices,  small
shopping  centers and churches.  In its  underwriting of commercial real estate,
Millennium  may  lend  up to 80%  of the  secured  property's  appraised  value.
Millennium's  commercial  real  estate  loan  underwriting  criteria  require an
examination of debt service coverage ratios, the borrower's creditworthiness and
prior credit history and reputation,  and Millennium generally requires personal
guarantees or endorsements of borrowers.

         Construction  Loans.  Our loan  policy  allows  for local  construction
loans,  primarily to individual  small builders on a limited basis.  At December
31, 2001, there were no construction and land development  loans  outstanding in
the  commercial  loan  portfolio.  Millennium  will  obtain a first  lien on the
property as security for its construction loans and personal guarantees from the
borrower's principal owners.

         Small Business  Lending.  Today,  the principal  activity of Millennium
Bank's  commercial loan division is the  origination of commercial  mortgage and
non-mortgage  loans to small and medium sized businesses.  Millennium  regularly
uses various loan  guarantee  loan programs  offered  through the Small Business
Administration,  including the 504 loan program, which is intended to help small
and medium sized  businesses  avoid large down  payments  and floating  interest
rates that are  typically  associated  with  purchases  of fixed  assets used to
expand operations.  Whenever  possible,  the 504 loan program provides long-term
and fixed rate financing for  investment in fixed assets,  primarily real estate
and large/heavy equipment.  At December 31, 2001, Small Business  Administration
loans were 1.1% of the commercial loan portfolio.


                                      -7-
<PAGE>

One-to-Four-Family Residential Real Estate Lending

         Millennium makes  residential  loans and sells them to investors in the
secondary  mortgage  market.  We originate both  conforming  and  non-conforming
single-family  loans.  Mortgage lending occurs in our banking offices as well as
through our mortgage banking  subsidiaries of Millennium Bank located in Reston,
Virginia, Owings Mills, Maryland, Irvine, California, and Las Vegas, Nevada.

         Millennium retains in its portfolio loans secured by one-to-four-family
residences,  some of which  are  located  in its  market  area.  We also  retain
non-conforming  adjustable rate mortgages for an unspecified  period of time for
consumers  that do not reside in our market  area.  These loans are eligible for
sale at a later time.

         Millennium  evaluates both the borrower's ability to make principal and
interest  payments  and the value of the  property  that will  secure  the loan.
Millennium  makes first mortgage loans in amounts of up to 100% of the appraised
value of the underlying real estate,  but retains in our portfolio loans with an
80% or less  appraised  value.  We retain some second  mortgage loans secured by
property in our market area,  as long as the loan to value ratio does not exceed
95%.  If the loan to value  ratio  exceeds  95% or the  property  is outside our
market area,  the loan is sold in the secondary  market.  Second  mortgage loans
with a loan to value ratio over 95% are underwritten to  institutional  investor
guidelines and pre-sold.  For conventional loans in excess of 80% loan to value,
private mortgage insurance is secured insuring the mortgage loans to 75% loan to
value.

         Millennium's  current  one-to-four-family  residential  adjustable rate
mortgage  loans  have  interest  rates  that  adjust  every 1, 3, 5, or 7 years,
generally  in  accordance  with  the  rates on  one-year  U.S.  Treasury  bills.
Millennium's  adjustable  rate  mortgage  loans  generally  limit  interest rate
increases to 2% each rate adjustment period and have an established ceiling rate
at the time the  loans  are made of up to 6% over the  original  interest  rate.
Borrowers are qualified at the first year interest rate plus 2%. To compete with
other lenders in its market area,  Millennium  makes  one-year  adjustable  rate
mortgage loans at interest rates which,  for the first year, are below the index
rate which would  otherwise  apply to these loans.  At December 31, 2001,  $55.7
million,  or 56.3%, of Millennium's loan portfolio  consisted of adjustable rate
mortgage loans.  There are risks resulting from increased costs to a borrower as
a result of the  periodic  repricing  mechanisms  of these  loans.  Despite  the
benefits of adjustable rate mortgage loans to an  institution's  asset/liability
management,  they pose  additional  risks,  primarily  because as interest rates
rise, the underlying  payments by the borrowers  rise,  increasing the potential
for default.  At the same time, the marketability of the underlying property may
be  adversely  affected by higher  interest  rates.  We minimize  these risks by
underwriting these loans to be sold in the secondary mortgage market.

         Millennium  requires  title  opinions and fire and  casualty  insurance
coverage,  as well as title insurance and flood insurance where appropriate,  to
protect  Millennium's  interest.  The cost of this insurance coverage is paid by
the borrower. Millennium typically requires escrows for taxes and insurance.

Consumer Lending

         Millennium  offers  various  secured  and  unsecured   consumer  loans,
including  unsecured  personal  loans and  lines of  credit,  automobile  loans,
deposit account loans, installment and demand loans, letters of credit, and home
equity loans.  Such loans are generally made to customers with which  Millennium
has a pre-existing relationship.

         Consumer  loans may entail  greater risk than do  residential  mortgage
loans,  particularly in the case of consumer loans which are unsecured,  such as
lines of credit, or secured by rapidly  depreciable

                                      -8-
<PAGE>


assets such as  automobiles.  In such cases,  any  repossessed  collateral for a
defaulted  consumer loan may not provide an adequate  source of repayment of the
outstanding loan balance as a result of the greater  likelihood of damage,  loss
or depreciation.  The underwriting standards employed by Millennium for consumer
loans include a determination of the applicant's  payment history on other debts
and an assessment of ability to meet  existing  obligations  and payments on the
proposed loan. The stability of the applicant's monthly income may be determined
by verification of gross monthly income for primary employment, and additionally
from any verifiable secondary income. Although creditworthiness of the applicant
is of primary consideration,  the underwriting process also includes an analysis
of the value of the security in relation to the proposed loan amount.

Employees

         At December 31, 2001,  Millennium  had the  equivalent of 88 employees,
four of which  are  part-time  employees.  None of  Millennium's  employees  are
represented by any collective bargaining unit.

Supervision and Regulation

         General. As a bank holding company, Millennium is subject to regulation
under the Bank Holding  Company Act of 1956 and the  examination  and  reporting
requirements of the Board of Governors of the Federal Reserve System.  Under the
Bank Holding  Company Act, a bank holding company may not directly or indirectly
acquire  ownership  or  control  of  more  than  5%  of  the  voting  shares  or
substantially all of the assets of any bank or merge or consolidate with another
bank holding company without the prior approval of the Federal Reserve. The Bank
Holding  Company Act also  generally  limits the  activities  of a bank  holding
company to that of banking, managing or controlling banks, or any other activity
that is  determined  to be so  closely  related to  banking  or to  managing  or
controlling banks that an exception is allowed for those activities.

         As  a  national  bank,   Millennium  Bank  is  subject  to  regulation,
supervision  and  examination  at  the  federal  level  by  the  Office  of  the
Comptroller  of the  Currency.  Millennium  Bank is also subject to  regulation,
supervision and examination by the Federal Deposit Insurance Corporation.  State
and federal law also governs the  activities in which  Millennium  Bank engages,
the investments  that it may make and the aggregate  amount of loans that it may
grant to one borrower. Various consumer and compliance laws and regulations also
affect Millennium Bank's operations.

         The earnings of Millennium's  subsidiaries,  and therefore the earnings
of Millennium, are affected by general economic conditions, management policies,
changes in state and  federal  legislation  and  actions  of various  regulatory
authorities,  including  those  referred  to above.  The  following  description
summarizes  the  significant  state and  federal  laws to which  Millennium  and
Millennium  Bank  are  subject.  To the  extent  that  statutory  or  regulatory
provisions  or  proposals  are  described,  we qualify  the  description  in its
entirety by reference to the  particular  statutory or regulatory  provisions or
proposals.

         Payment  of  Dividends.  Millennium  is a  legal  entity  separate  and
distinct from its banking and other subsidiaries.  Virtually all of Millennium's
revenues will result from  dividends  paid to  Millennium  by  Millennium  Bank.
Millennium  Bank is  subject  to laws and  regulations  that limit the amount of
dividends it can pay. Under OCC  regulations,  a national bank may not declare a
dividend in excess of its undivided  profits,  which means that  Millennium Bank
must recover any  start-up  losses  before it may pay a dividend to  Millennium.
Additionally,  Millennium Bank may not declare a dividend if the total amount of
all dividends,  including the proposed dividend,  declared by Millennium Bank in
any calendar year exceeds the total of Millennium  Bank's retained net income of
that year,  combined  with its retained net income of the two  preceding  years,
unless  the  dividend  is  approved  by  Millennium  Bank's  federal


                                      -9-
<PAGE>

regulator.  Millennium Bank may not declare or pay any dividend if, after making
the dividend, it would be "undercapitalized", as defined in federal regulations.

         In addition, both Millennium and Millennium Bank are subject to various
regulatory  restrictions  relating  to  the  payment  of  dividends,   including
requirements  to  maintain  capital  at or above  regulatory  minimums.  Banking
regulators  have  indicated  that banking  organizations  should  generally  pay
dividends only if the organization's net income available to common shareholders
over the past year has been  sufficient  to fully  fund the  dividends,  and the
prospective   rate  of   earnings   retention   appears   consistent   with  the
organization's capital needs, asset quality and overall financial condition.

         Insurance of Accounts,  Assessments  and  Regulation  by the FDIC.  The
deposits of  Millennium  Bank are insured by the FDIC up to the limits set forth
under applicable law. The deposits of Millennium Bank are subject to the deposit
insurance assessments of the Bank Insurance Fund of the FDIC.

         The FDIC has  implemented  a risk-based  deposit  insurance  assessment
system  under  which the  assessment  rate for an insured  institution  may vary
according to  regulatory  capital  levels of the  institution  and other factors
(including supervisory evaluations). Depository institutions insured by the Bank
Insurance  Fund  that  are  "well  capitalized"  and  that  present  few  or  no
supervisory  concerns are required to pay only the statutory minimum  assessment
of $2,000 annually for deposit insurance,  while all other banks are required to
pay  premiums  ranging  from  .03% to  .27% of  domestic  deposits.  These  rate
schedules are subject to future  adjustments by the FDIC. In addition,  the FDIC
has authority to impose special assessments from time to time. However,  because
the legislation enacted in 1996 requires that both Savings Association Insurance
Fund insured and Bank Insurance  Fund-insured deposits pay a pro rata portion of
the interest due on the  obligations  issued by the Financing  Corporation,  the
FDIC is assessing Bank Insurance  Fund-insured deposits an additional 1.30 basis
points per $100 of deposits to cover those obligations.

         The FDIC is  authorized  to prohibit  any Bank  Insurance  Fund-insured
institution from engaging in any activity that the FDIC determines by regulation
or order to pose a serious threat to the respective  insurance  fund.  Also, the
FDIC may initiate  enforcement  actions  against  banks,  after first giving the
institution's  primary regulatory  authority an opportunity to take such action.
The FDIC may terminate the deposit insurance of any depository institution if it
determines,  after a hearing, that the institution has engaged or is engaging in
unsafe or unsound  practices,  is in an unsafe or unsound  condition to continue
operations,  or has  violated  any  applicable  law,  regulation,  order  or any
condition  imposed in writing by the FDIC. It also may suspend deposit insurance
temporarily  during  the  hearing  process  for  the  permanent  termination  of
insurance,  if the institution has no tangible capital.  If deposit insurance is
terminated,  the deposits at the  institution at the time of  termination,  less
subsequent  withdrawals,  shall  continue  to be insured  for a period  from six
months to two years,  as determined by the FDIC.  Management is not aware of any
existing  circumstances  that could result in termination  of Millennium  Bank's
deposit insurance.

         Capital.  Each of the OCC and the Federal Reserve has issued risk-based
and leverage  capital  guidelines  applicable to banking  organizations  that it
supervises. Under the risk-based capital requirements, Millennium and Millennium
Bank are each generally required to maintain a minimum ratio of total capital to
risk-weighted  assets (including certain  off-balance sheet activities,  such as
standby  letters of credit),  of 8%. At least half of the total  capital must be
composed of common equity,  retained earnings and qualifying perpetual preferred
stock, less certain intangibles ("Tier 1 capital"). The remainder may consist of
certain   subordinated  debt,  certain  hybrid  capital  instruments  and  other
qualifying  preferred  stock  and a limited  amount  of the loan loss  allowance
("Tier 2  capital"  which,  together  with  "Tier 1  capital",  composes  "total
capital").


                                      -10-
<PAGE>

         In  addition,  each of the  federal  banking  regulatory  agencies  has
established  minimum  leverage capital  requirements for banking  organizations.
Under these requirements, banking organizations must maintain a minimum ratio of
Tier 1 capital to adjusted  average  quarterly assets equal to 3% to 5%, subject
to federal bank regulatory  evaluation of an  organization's  overall safety and
soundness.

         The  risk-based  capital  standards  of each of the OCC and the Federal
Reserve explicitly  identify  concentrations of credit risk and the risk arising
from non-traditional  activities,  as well as an institution's ability to manage
these  risks,  as  important  factors to be taken into  account by the agency in
assessing an institution's overall capital adequacy. The capital guidelines also
provide that an institution's exposure to a decline in the economic value of its
capital due to changes in interest rates be considered by the agency as a factor
in evaluating a banking organization's capital adequacy.

         Other  Safety  and  Soundness  Regulations.   There  are  a  number  of
obligations  and  restrictions  imposed  on bank  holding  companies  and  their
depository  institution  subsidiaries by federal law and regulatory  policy that
are  designed  to reduce  potential  loss  exposure  to the  depositors  of such
depository  institutions  and to the FDIC insurance  funds in the event that the
depository  institution is insolvent or is in danger of becoming insolvent.  For
example,  under a policy of the Federal  Reserve  with  respect to bank  holding
company  operations,  a bank holding company is required to serve as a source of
financial  strength  to its  subsidiary  depository  institutions  and to commit
resources to support such institutions in circumstances where it might not do so
otherwise. In addition, the "cross-guarantee"  provisions of federal law require
insured  depository  institutions under common control to reimburse the FDIC for
any loss  suffered  or  reasonably  anticipated  by the FDIC as a result  of the
insolvency of commonly  controlled  insured  depository  institutions or for any
assistance  provided  by the  FDIC to  commonly  controlled  insured  depository
institutions  in  danger  of  failure.  The  FDIC may  decline  to  enforce  the
cross-guarantee  provision  if it  determines  that  a  waiver  is in  the  best
interests of the deposit  insurance  funds.  The FDIC's claim for  reimbursement
under the cross  guarantee  provisions is superior to claims of  shareholders of
the insured depository  institution or its holding company but is subordinate to
claims  of  depositors,   secured   creditors  and   nonaffiliated   holders  of
subordinated debt of the commonly controlled insured depository institutions.

         The federal  banking  agencies  also have broad  powers  under  current
federal  law to take  prompt  corrective  action to resolve  problems of insured
depository  institutions.  The extent of these  powers  depends upon whether the
institution   in   question   is   well-capitalized,   adequately   capitalized,
undercapitalized, significantly undercapitalized or critically undercapitalized,
as defined by the law. As of December 31, 2001,  Millennium and Millennium  Bank
were classified as well-capitalized.

         Federal and state banking regulators also have broad enforcement powers
over  Millennium  Bank,  including the power to impose fines and other civil and
criminal penalties, and to appoint a conservator.

         Community Reinvestment.  The requirements of the Community Reinvestment
Act are also  applicable to Millennium  Bank.  The  Community  Reinvestment  Act
imposes on financial  institutions an affirmative and ongoing obligation to meet
the credit needs of their local  communities,  including low and moderate income
neighborhoods,   consistent   with  the  safe  and  sound   operation  of  those
institutions.  A financial  institution's  efforts in meeting  community  credit
needs  currently are evaluated as part of the  examination  process  pursuant to
twelve  assessment  factors.  These  factors also are  considered  in evaluating
mergers, acquisitions and applications to open a branch or facility. To the best
knowledge of Millennium Bank, it is meeting its obligations  under the Community
Reinvestment Act.

         Interstate  Banking  and  Branching.  Current  federal  law  authorizes
interstate  acquisitions of banks and bank holding companies without  geographic
limitation.  Effective  June 1,  1997,  a bank  headquartered  in one  state was
authorized  to merge  with a bank  headquartered  in another  state,  as long as

                                      -11-
<PAGE>


neither of the states has opted out of such interstate merger authority prior to
such  date.  After  a bank  has  established  branches  in a  state  through  an
interstate  merger  transaction,  the bank may establish and acquire  additional
branches at any location in the state where a bank  headquartered  in that state
could have established or acquired  branches under  applicable  federal or state
law.

         Gramm-Leach-Bliley  Act of 1999. The Gramm-Leach-Bliley Act of 1999 was
signed into law on November  12,  1999.  The Act covers a broad range of issues,
including a repeal of most of the restrictions on affiliations  among depository
institutions,  securities  firms  and  insurance  companies.  Most of the  Act's
provisions  require the federal bank  regulatory  agencies and other  regulatory
bodies  to adopt  regulations  to  implement  the Act,  and for that  reason  an
assessment of the full impact on Millennium of the Act must await  completion of
that regulatory process.

         The Act  repeals  sections  20 and 32 of the  Glass-Stegall  Act,  thus
permitting unrestricted affiliations between banks and securities firms. The Act
also  permits  bank  holding  companies  to elect to  become  financial  holding
companies.  A financial  holding company may engage in or acquire companies that
engage in a broad range of financial services,  including securities  activities
such as underwriting,  dealing, brokerage,  investment and merchant banking, and
insurance  underwriting,  sales and brokerage  activities.  In order to become a
financial  holding  company,  the bank holding company and all of its affiliated
depository  institutions  must be  well-capitalized,  well-managed,  and have at
least a satisfactory Community Reinvestment Act rating.

         The Act  provides  that the states  continue to have the  authority  to
regulate insurance  activities,  but prohibits the states in most instances from
preventing or significantly  interfering with the ability of a bank, directly or
through  an  affiliate,   to  engage  in  insurance   sales,   solicitations  or
cross-marketing  activities.  Although the states  generally  must regulate bank
insurance  activities in a nondiscriminatory  manner, the states may continue to
adopt and enforce rules that specifically  regulate bank insurance activities in
certain areas identified in the Act. The Act directs the federal bank regulatory
agencies to adopt insurance consumer protection  regulations that apply to sales
practices, solicitations, advertising and disclosures.

         The Act  adopts a system  of  functional  regulation  under  which  the
Federal  Reserve is confirmed as the umbrella  regulator for  financial  holding
companies,  but  financial  holding  company  affiliates  are to be  principally
regulated by functional  regulators  such as the FDIC for state  nonmember  bank
affiliates, the Securities and Exchange Commission for securities affiliates and
state insurance regulators for insurance  affiliates.  The Act repeals the broad
exemption of banks from the definitions of "broker" and "dealer" for purposes of
the  Securities  Exchange  Act  of  1934,  but  identifies  a  set  of  specific
activities,  including traditional bank trust and fiduciary activities, in which
a bank may engage  without  being deemed a "broker",  and a set of activities in
which a bank may engage  without  being  deemed a  "dealer".  The Act also makes
conforming  changes in the  definitions of "broker" and "dealer" for purposes of
the Investment Company Act of 1940 and the Investment Advisers Act of 1940.

         The Act contains  extensive  customer  privacy  protection  provisions.
Under these provisions,  a financial  institution must provide to its customers,
at the  inception of the customer  relationship  and  annually  thereafter,  the
institution's  policies and  procedures  regarding  the  handling of  customers'
nonpublic  personal  financial  information.  The Act provides that,  except for
certain  limited  exceptions,  an  institution  may not  provide  such  personal
information to unaffiliated  third parties unless the  institution  discloses to
the customer that such  information may be so provided and the customer is given
the opportunity to opt out of such  disclosure.  An institution may not disclose
to a  non-affiliated  third party,  other than to a consumer  reporting  agency,
customer  account  numbers or other similar  account  identifiers  for marketing
purposes.  The Act also  provides  that the  states may adopt  customer  privacy
protections  that are more strict than those  contained in the Act. The Act also
makes  a  criminal  offense,  except  in


                                      -12-
<PAGE>


limited circumstances, obtaining or attempting to obtain customer information of
a financial nature by fraudulent or deceptive means.

ITEM 2.  DESCRIPTION OF PROPERTY

         Millennium  conducts  its  business  from its main  office  in  Reston,
Virginia,  two branch  banking  offices  and two  residential  lending  offices.
Majority owned subsidiaries occupy space that is not an obligation of Millennium
and  contractually  provided by the minority owner. The following table provides
certain information with respect to our properties:

<TABLE>
<CAPTION>

                               Date Facility                        Ownership and
     Location                     Opened                         Leasing Arrangements
     --------                     ------                         --------------------
<S>                               <C>             <C>
     Main Office:

     1601 Washington Plaza         1999           Leased from 1601 Washington Plaza, LLC, a
     Reston, Virginia                             Virginia limited liability company comprised of
                                                  unit   owners   that  are  also   Millennium
                                                  shareholders. Lease expires in 2010, subject
                                                  to  Millennium's   right  to  renew  for  an
                                                  additional 10-year term.

     Branch Offices:

     1025-K Seneca Road            2001           Lease expires in 2005, subject to Millennium's
     Great Falls, Virginia                        right to renew for three additional five-year
                                                  terms.

     1051 Elden Street             2001           Leased from 1051 Elden Street, LLC, a Virginia
     Herndon, Virginia                            limited liability company comprised of unit
                                                  owners that are also Millennium shareholders.
                                                  Lease is month-to-month dependent on improvements
                                                  to the property by the landlord.

     11260 Roger Bacon Drive     Expected         Lease expires in 2007 and has four consecutive
     Reston, Virginia           June 2002         five-year renewal options.

     8821 West Broad Street      Expected         Lease expires in 2009.
     Richmond, Virginia         June 2002

     Loan Offices:

     712 Lynn Street               2000           Sub-leased from a director of Millennium. Lease
     Herndon, Virginia                            expires in 2002.   Subject to landlord's option
                                                  to extend for additional three-year term.

     1604 Washington Plaza         2001           Lease expires in 2002.
     Reston, Virginia
</TABLE>


                                      -13-
<PAGE>

         We believe that all of our  properties are maintained in good operating
condition and are suitable and adequate for our operational needs.


ITEM 3.  LEGAL PROCEEDINGS

         In the course of its  operations,  Millennium may become party to legal
proceedings. Currently there are no such proceedings known by management.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters were submitted  during the fourth quarter of the fiscal year
covered by this report to a vote of our security holders.


                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS


         We completed our initial  public  offering on February 5, 2002,  and no
public market  existed for our common stock prior to that time. Our common stock
has been listed on the Nasdaq  SmallCap  Market  under the symbol  "MBVA"  since
February 6, 2002.

         Prior to our initial public offering, there were no trades of shares of
our common stock.  The initial public  offering  price was $6.00 per share.  The
closing  sales  price of a share of our  common  stock on March 28,  2002 on the
Nasdaq SmallCap Market was $7.38.

         We  have  not  declared  or  distributed  any  cash  dividends  to  our
shareholders,  and it is not likely that we will declare any cash  dividends for
several  years.  Our Board of Directors  intends to follow a policy of retaining
any  earnings  to provide  funds to operate  and  expand  our  business  for the
foreseeable  future.  Our future dividend policy is subject to the discretion of
the Board of  Directors  and will  depend  upon a number of  factors,  including
future earnings,  financial condition,  cash requirements,  and general business
conditions.

         Our ability to distribute  cash dividends will depend  primarily on the
abilities  of our  subsidiaries  to pay  dividends  to us. As a  national  bank,
Millennium Bank is subject to legal  limitations on the amount of dividends that
it is permitted to pay. Furthermore,  neither Millennium Bank nor we may declare
or pay a cash dividend on any of our capital stock if we are insolvent or if the
payment  of the  dividend  would  render  us  insolvent  or  unable  to pay  our
obligations  as  they  become  due in  the  ordinary  course  of  business.  For
additional information on these limitations,  see "Item 1. Business - Government
Supervision and Regulation - Payment of Dividends" above.

         As of March 29, 2002, we had approximately 225 shareholders of record.


                                      -14-
<PAGE>

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
          OF OPERATIONS

General

         The following  commentary  discusses  major  components of Millennium's
business  and  presents an overview of its  consolidated  financial  position at
December 31, 2001 and December 31, 2000 as well as results of operations for the
years ended  December  31,  2001,  2000,  and 1999.  This  discussion  should be
reviewed  in  conjunction  with  the  consolidated   financial   statements  and
accompanying notes and other statistical information presented elsewhere in this
annual report.

         Millennium  is not aware of any current  recommendations  by regulatory
authorities,  which,  if  implemented,  would  have  a  material  affect  on its
liquidity,  capital resources or results of operations.  There are no agreements
between Millennium and the Federal Reserve, the Office of the Comptroller of the
Currency or the Federal Deposit Insurance Corporation.  No regulatory agency has
made any recommendations concerning the operations of Millennium that could have
a material affect on its liquidity, capital resources or results of operations.

         As we discuss below, our financial  condition and results of operations
have been  impacted  positively  by the steps  that we have taken as part of our
business strategy. See "Item 1. Business - Business Strategy" above. In addition
to our branch office growth,  aggressive  pricing,  increased marketing and bank
consolidation  in our principal  market,  our  financial  results have also been
impacted  positively  by  economic  growth in our market  area since  1998.  The
current  economic  downturn  has affected a number of  businesses  in our market
area,  but we take certain  steps to limit any impact that this  downturn  could
have on us. For example,  we continually  monitor our loan portfolio in order to
identify any potential  weaknesses,  which could  indicate a potential  negative
trend that we would address.  See "Asset Quality" below for more  information on
the steps that we take with respect to our loan portfolio.  In addition, as part
of our  business  strategy,  we closely  examine  our  marketing  efforts  under
existing economic conditions with a view to make appropriate  adjustments to our
products  and  services,  such as loans and  deposits,  in order to withstand an
economic downturn.

Net Income

         Net income for the year ended December 31, 2001 was $940,183 ($0.45 per
basic share and $0.38 per diluted share),  compared to $543,190 ($0.33 per basic
and diluted  share) for the same period in 2000.  The increase in earnings  from
2000 to 2001 is a result  of  increased  net  interest  income,  growth  and the
expansion of its commercial and mortgage operations.

         Income  increased for the year ended December 31, 2001 due to increased
net interest income and increased  volume from commercial loans and its mortgage
banking operations.

Net Interest Income

         Net interest income is a major  component of Millennium's  earnings and
is equal to the  amount  by which  interest  income  exceeds  interest  expense.
Earning assets  consist  primarily of loans and  securities,  while deposits and
borrowings represent the major portion of interest bearing liabilities.  Changes
in the  volume  and mix of assets  and  liabilities,  as well as  changes in the
yields  and rates  paid,  determine  changes  in net  interest  income.  The net
interest  margin is  calculated  by  dividing  net  interest  income by  average
interest earning assets.

                                      -15-
<PAGE>

         Our net interest  margin is  sensitive  to the volume of mortgage  loan
originations. All fixed rate mortgage loans are sold; servicing released, in the
secondary  mortgage  market.  When the  volume  of  mortgage  loan  originations
increases, typically in a declining interest rate environment, funds advanced in
settlement of mortgage  loans  increases,  pending  delivery of the loans to the
loan  purchaser.  Until a mortgage  loan is  transferred  to the  purchaser,  we
receive  interest on the loan at the note rate.  Funds advanced in settlement of
mortgage  loans are financed to a large  extent with  brokered  certificates  of
deposit  with  maturities  of one to  six  months.  While  such  funds  advanced
contribute to net interest income,  the interest rate spread on this item is not
as great as the spread on our loan  portfolio,  which normally  carries a higher
interest yield and is financed with lower cost deposits. Thus, as funds advanced
in  settlement  of mortgage  loans  increase,  the  interest  spread and the net
interest margin decrease.

         Net interest  income was $4.7  million for the year ended  December 31,
2001 compared to $2.6 million for the year ended  December 31, 2000, an increase
of 80.4%.  This  improvement  in the net  interest  income was due to the volume
increases in the loan  portfolio.  Average loans for the year ended December 31,
2001 were $111.9  million,  a 130.0% increase over the same period in 2000. As a
result of match  funding  loans and  reductions in the prime lending rate in the
year  2001,  the net  interest  margin  decreased  to 3.82%  for the year  ended
December 31, 2001, compared to 4.78% for the year ended December 31, 2000.

         Average loans  increased  130.0% for the year ended  December 31, 2001.
The average  yield on average  loans  decreased 167 basis points from 10.18% for
the year ended December 31, 2000 to 8.51% for the same period in 2001. The yield
on interest  bearing  deposits  decreased from 6.02% for the year ended December
31,  2000 to  5.13%  for the same  period  in 2001.  The cost of  average  total
interest  bearing  liabilities  decreased from 6.07% for the year ended December
31,  2000 to 5.07% for the same period in 2001.  The average  rate paid on money
market accounts decreased 50 basis points from 4.54% for the year ended December
31,  2000 to 4.04%  for the  same  period  in 2001.  The  average  rate  paid on
certificates  of  deposits  decreased  144 basis  points from 6.92% for the year
ended December 31, 2000 to 5.48% for the same period in 2001.



                                      -16-
<PAGE>

         The  following  table  describes  the impact on  Millennium's  interest
income result from changes in average balances and average rates for the periods
indicated. The change in interest due to both volume and rate has been allocated
to volume and rate changes in  proportion  to the  relationship  of the absolute
dollar amounts of the change in each.


<TABLE>
<CAPTION>

                                                            Year Ended December 31
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
                                                             2001                               2000
-------------------------------------------------------------------------------------------------------------------
                                                           Interest     Average                Interest   Average
                                               Average     Income/      Yield/      Average    Income/    Yield/
                                               Balance     Expense       Rate       Balance    Expense     Rate
-------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
-------------------------------------------------------------------------------------------------------------------
<S>                                            <C>            <C>       <C>        <C>          <C>     <C>
Assets
Interest earning assets:
  Securities                                   $ 6,941         $373      5.37%      $ 5,327       $343    6.43%
  Loans                                        111,874        9,515      8.51%       48,639      4,952   10.18%
  Federal funds sold                             4,377          156      3.56%          568         35    6.24%
-------------------------------------------------------------------------------------------------------------------
  Total interest-earning assets/
   Total interest income                       123,192       10,044      8.15%       54,534      5,330    9.77%
-------------------------------------------------------------------------------------------------------------------
  Noninterest earning assets:
   Other assets                                  6,380                                3,363
-------------------------------------------------------------------------------------------------------------------
   Total noninterest earning assets              6,380                                3,363
-------------------------------------------------------------------------------------------------------------------
   Total assets                               $129,572      $10,044                 $57,897     $5,330
-------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Interest bearing liabilities:
  Demand/MMDA accounts                         $23,212         $937      4.04%      $13,499       $613    4.54%
  Savings                                          273            6      2.20%          175          4    2.43%
  Certificates of deposit                       75,492        4,138      5.48%       22,807      1,579    6.92%
-------------------------------------------------------------------------------------------------------------------
  Total interest bearing deposits               98,977        5,081      5.13%       36,481      2,196    6.02%
-------------------------------------------------------------------------------------------------------------------
  FHLB advances and other borrowings             6,455          260      4.03%        8,372        527    6.29%
-------------------------------------------------------------------------------------------------------------------
  Total interest bearing liabilities/total      44,853        5,341      5.07%       44,853      2,723    6.07%
    interest expense
-------------------------------------------------------------------------------------------------------------------
  Non interest bearing liabilities:
  Other liabilities                             13,870                                6,669
-------------------------------------------------------------------------------------------------------------------
  Total liabilities                            119,302                               51,522
-------------------------------------------------------------------------------------------------------------------
Stockholders' equity                            10,270                                6,375
-------------------------------------------------------------------------------------------------------------------
  Total liabilities and stockholders' equity  $129,572       $4,703                 $57,897     $2,723
-------------------------------------------------------------------------------------------------------------------
Interest spread (1)                                                      3.09%                            3.70%
Net interest income/net interest margin (2)                  $4,703      3.82%                  $2,607    4.78%
-------------------------------------------------------------------------------------------------------------------
</TABLE>




(1)      Interest spread is the average yield earned on earning assets, less the
         average rate incurred on interest bearing liabilities.
(2)      Net  interest  margin is net interest income, expressed as a percentage
         of average earning assets.


                                      -17-
<PAGE>



<TABLE>
<CAPTION>
                                                             Year Ended December 31
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
                                                             2000                               1999
--------------------------------------------------------------------------------------------------------------------
                                                           Interest     Average                Interest   Average
                                               Average     Income/      Yield/      Average    Income/     Yield/
                                               Balance     Expense       Rate       Balance    Expense      Rate
--------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
--------------------------------------------------------------------------------------------------------------------
<S>                                            <C>             <C>       <C>        <C>             <C>       <C>
Assets
Interest earning assets:
  Securities                                   $ 5,327         $343      6.43%      $ 3,190         $117      4.87%
  Loans                                         48,639        4,952     10.18%        8,621          601      9.30%
  Federal funds sold                               568           35      6.24%        2,689          135      6.73%
--------------------------------------------------------------------------------------------------------------------
  Total interest-earning assets/
   Total interest income                        54,534        5,330      9.77%       14,500          853      7.84%
--------------------------------------------------------------------------------------------------------------------
  Noninterest earning assets:
   Other assets                                  3,363                                1,897
--------------------------------------------------------------------------------------------------------------------
   Total noninterest earning assets              3,363                                1,897
--------------------------------------------------------------------------------------------------------------------
   Total assets                                $57,897       $5,330                 $16,397         $853
--------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Interest bearing liabilities:
  Demand/MMDA accounts                         $13,499         $613      4.54%      $ 5,031         $111      2.94%
  Savings                                          175            4      2.43%           81            2      3.38%
  Certificates of deposit                       22,807        1,579      6.92%        1,744           71      5.44%
--------------------------------------------------------------------------------------------------------------------
  Total interest bearing deposits               36,481        2,196      6.02%        6,856          184      3.58%
--------------------------------------------------------------------------------------------------------------------
  FHLB advances and other borrowings             8,372          527      6.29%        1,442           48      4.43%
--------------------------------------------------------------------------------------------------------------------
  Total interest bearing liabilities/total      44,853        2,723      6.07%        8,298          232      3.73%
   interest expense
--------------------------------------------------------------------------------------------------------------------
  Non interest bearing liabilities:
  Other liabilities                              6,669                                2,018
--------------------------------------------------------------------------------------------------------------------
  Total liabilities                             51,522                               10,316
--------------------------------------------------------------------------------------------------------------------
Stockholders' equity                             6,375                                6,081
--------------------------------------------------------------------------------------------------------------------
  Total liabilities and stockholders' equity   $57,897       $2,723                 $16,397         $232
--------------------------------------------------------------------------------------------------------------------
Interest spread (1)                                                      3.70%                                4.11%
Net interest income/net interest margin (2)                  $2,607      4.78%                      $621      5.71%
--------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)      Interest spread is the average yield earned on earning assets, less the
         average rate incurred on interest bearing liabilities.
(2)      Net  interest  margin is net interest income, expressed as a percentage
         of average earning assets.



                                      -18-
<PAGE>


         The  following  table  describes  the impact on  Millennium's  interest
income  resulting  from changes in average  balances  and average  rates for the
periods  indicated.  The change in interest due to both volume and rate has been
allocated to volume and rate changes in  proportion to the  relationship  of the
absolute dollar amounts of the change in each.

<TABLE>
<CAPTION>

                                      Year Ended December 31, 2001               Year Ended December 31, 2000
                                                Compared to                               Compared to
                                      Year Ended December 31, 2000               Year Ended December 31, 1999
                                             Change Due To:                             Change Due To:
    -----------------------------------------------------------------------------------------------------------------
                                                              Increase                                   Increase
    (Dollars in thousands)       Volume         Rate         (Decrease)       Volume         Rate       (Decrease)
    -----------------------------------------------------------------------------------------------------------------
<S>                             <C>             <C>          <C>              <C>      <C>             <C>
Interest income:
      Securities                $    104        $ (73)       $    31          $    78        $ 148     $   226
      Loans                        6,438       (1,876)         4,562            2,789        1,562       4,351
      Interest bearing deposits
       in other banks                235         (114)           121             (106)           6        (100)
    -----------------------------------------------------------------------------------------------------------------
        Total interest income      6,777       (2,063)         4,714            2,761        1,716       4,477
    Interest expense:
      Interest bearing
    deposits:
       Demand/MMDA accounts          442         (118)           324              186          316         502
       Savings                         2           (1)             1                2            0           2
       Certificates of deposit     3,647       (1,088)         2,559              860          648       1,508
       FHLB advances and other      (121)        (145)          (266)             230          249         479
    -----------------------------------------------------------------------------------------------------------------
       Total interest expense      3,970       (1,352)         2,618            1,278        1,213       2,491
    -----------------------------------------------------------------------------------------------------------------
       Net interest income        $2,807        $(711)        $2,096           $1,483        $ 503      $1,986
    -----------------------------------------------------------------------------------------------------------------
</TABLE>


Interest Sensitivity

         An important element of both earnings  performance and liquidity is the
management of the interest  sensitivity gap. The interest sensitivity gap is the
difference between interest-sensitive assets and interest-sensitive  liabilities
maturing or repricing within a specific time interval. The gap can be managed by
repricing assets or liabilities,  by selling investments,  by replacing an asset
or liability  prior to maturity,  or by adjusting  the interest  rate during the
life of an asset or  liability.  Matching the amounts of assets and  liabilities
repricing  in the same time  interval  helps to hedge the risk and  minimize the
impact on net  income  due to  changes  in  market  interest  rates.  Millennium
evaluates  interest rate risk and then  formulates  guidelines  regarding  asset
generation  and pricing,  funding  sources and pricing,  and  off-balance  sheet
commitments in order to decrease  sensitivity  risk.  These guidelines are based
upon management's outlook regarding future interest rate movements, the state of
the  regional and  national  economy,  and other  financial  and  business  risk
factors.

         At December 31,  2001,  Millennium  had $11.5  million more assets than
liabilities  that reprice  within one year or less and therefore was in an asset
sensitive  position.  A positive gap can adversely affect earnings in periods of
falling  interest  rates.  This positive  position is the result of the held for
sale mortgage loan portfolio.

         Millennium  has an  Asset/Liability  Committee,  which reviews  deposit
pricing,  changes in borrowed money,  investment and trading activity, loan sale
activities,  liquidity levels and the overall interest sensitivity.  The actions
of this  committee are reported to the Board of Directors  quarterly.  The Chief
Financial Officer manages the daily monitoring of interest rate risk, investment
and trading activity,  along with any other significant  transactions with input
from other committee members.



                                      -19-
<PAGE>


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

<TABLE>
<CAPTION>

                                                                            December 31, 2001
                                                                        Maturing or Repricing In:
---------------------------------------------------------------------------------------------------------------------
                                                       3 Months           4-12              1-5              Over
                                                       or less           Months            Years           5 Years
----------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
----------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>             <C>                 <C>             <C>
Interest-sensitive assets:
  Loans(1)                                              $ 105,509       $ 8,162             $ 52,650        $ 8,759
  Investments and mortgage-backed securities(2)            11,719             -                    -            864
  Deposits at other institutions                            9,714             -                    -              -
----------------------------------------------------------------------------------------------------------------------
    Total interest-sensitive assets                       126,942         8,162               52,650          9,623
----------------------------------------------------------------------------------------------------------------------

Cumulative interest-sensitive assets                      126,942       135,104              187,754        197,377
----------------------------------------------------------------------------------------------------------------------
Interest-sensitive liabilities:
  NOW accounts (3)                                              -             -                5,222              -
  Money market deposit accounts                                 -        33,862                    -              -
  Savings accounts (4)                                          -             -                  341              -
  Certificates of deposit                                  44,514        42,546               32,564          1,797
  Borrowed money                                            2,640             -                  400              0
----------------------------------------------------------------------------------------------------------------------
    Total interest-sensitive liabilities                   47,154        76,408               38,527          1,797
----------------------------------------------------------------------------------------------------------------------
Cumulative interest-sensitive liabilities                $ 47,154     $ 123,562             $162,089      $ 163,886
----------------------------------------------------------------------------------------------------------------------
Period gap                                               $ 79,788     $(68,246)              $14,123        $ 7,826
Cumulative gap                                             78,788        11,542               25,665         33,491
Ratio of cumulative interest-sensitive
  assets to interest-sensitive liabilities                269.21%       109.34%              115.83%        120.44%
Ratio of cumulative gap to total assets                    38.82%         5.62%               12.49%         16.30%

----------------------------------------------------------------------------------------------------------------------
Total Assets                                             $205,526      $205,526             $205,526       $205,526
----------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)      Includes mortgage loans held for sale.
(2)      Includes Federal Home Loan Bank stock.
(3)      Millennium  has found that NOW accounts are  generally not sensitive to
         changes in interest rates and therefore has placed such deposits in the
         "over 5 years" category.
(4)      In accordance with standard  industry  practice,  weighted average life
         factors have been applied to savings and money market deposit accounts.


         Contractual  principal  repayments of loans do not necessarily  reflect
the actual term of  Millennium's  loan  portfolio.  The average life of mortgage
loans is  substantially  less  than  their  contractual  terms  because  of loan
prepayments and enforcement of due-on-sale  clauses,  which gives Millennium the
right to declare a loan  immediately  due and payable in the event,  among other
things,  the borrower  sells the real  property  subject to the mortgage and the
loan is not repaid. In addition,  certain borrowers increase their equity in the
security property by making payments in excess of those required under the terms
of the mortgage.



                                      -20-
<PAGE>


Investments

         At December 31, 2001,  Millennium had $12.6 million in total  available
for sale  securities,  an  increase of 82.4% from $6.9  million at December  31,
2000. The increase reflects the net effect of purchases of these securities with
excess capital and  dispositions of callable  securities that were called during
this period.

         The following  tables show the amortized  cost and fair market value of
investment securities at the dates indicated.
<TABLE>
<CAPTION>

                                                     December 31, 2001                       December 31, 2000
      -----------------------------------------------------------------------------------------------------------
                                                  Cost             Market              Cost              Market
      -----------------------------------------------------------------------------------------------------------
      (Dollars in thousands)
      -----------------------------------------------------------------------------------------------------------
<S>                                             <C>                <C>                  <C>                <C>
      Held-to-maturity
          US Government & Agency Securities       $  0               $  0                $  0               $  0
          Other                                      0                  0                   0                  0
      -----------------------------------------------------------------------------------------------------------
          Total held-to-maturity                     0                  0                   0                  0
      -----------------------------------------------------------------------------------------------------------
      Available for sale
          US Government & Agency Securities     11,749             11,719               6,081              6,080
          Other                                      0                  0                   0                  0
      -----------------------------------------------------------------------------------------------------------
          Total available for sale              11,749             11,719               6,081              6,080
      -----------------------------------------------------------------------------------------------------------
      Trading
          U.S. Government Obligations                0                  0                   0                  0
      -----------------------------------------------------------------------------------------------------------
          Total Trading                              0                  0                   0                  0
      -----------------------------------------------------------------------------------------------------------
      Other
          Federal Home Loan Bank Stock             631                631                 586                586
          Federal Reserve Bank Stock               174                174                 174                174
          Community Bankers Bank                    59                 59                  59                 59
      -----------------------------------------------------------------------------------------------------------
          Total                                $12,612            $12,583              $6,900             $6,899
      -----------------------------------------------------------------------------------------------------------
</TABLE>


         The  following   tables  set  forth  the  composition  of  Millennium's
investment portfolio at the dates indicated.
<TABLE>
<CAPTION>

     ------------------------------------------------------------------------------------------------
                                                                 December 31
     ------------------------------------------------------------------------------------------------
                                                      2001                            2000
     ------------------------------------------------------------------------------------------------
                                            Book            % of             Book          % of
                                           Value            Total            Value         Total
     ------------------------------------------------------------------------------------------------
<S>                                       <C>             <C>               <C>            <C>
     (Dollars in thousands)
     Investment securities:
        US Government & Agency Securities $11,749         93.15%            $6,081         88.13%
        Treasury notes                          0             0                  0             0
        Other                                   0             0                  0             0
     ------------------------------------------------------------------------------------------------
          Subtotal                         11,749         93.15              6,081         88.13

     Other:
        Federal Home Loan Bank Stock          631          5.00%               586          8.50%
        Federal Reserve Bank Stock            174          1.38                174          2.52
        Community Bankers Bank                 59           .47                 59           .85
     ------------------------------------------------------------------------------------------------
     Total Investment Securities          $12,612        100.00%            $6,900        100.00%
     ------------------------------------------------------------------------------------------------
</TABLE>


                                      -21-
<PAGE>

Loans

         Net loans consist of total loans,  deferred loan fees and the allowance
for loan losses and exclude loans held for sale. Net loans were $97.7 million at
December 31,  2001,  an increase of 54.0 million or 123.6% over the December 31,
2000 balance of $43.7  million.  Mortgage loans held for sale were $77.4 million
at December  31, 2001 an increase of $42.8  million or 123.4% over the  December
31,  2000  balance of $34.6  million.  Mortgage  loans  held for sale  typically
turnover on average every 30 days.

         The following  table sets forth the  composition of  Millennium's  loan
portfolio in dollars at the dates indicated.

<TABLE>
<CAPTION>

                   -------------------------------------------------------------------------
                                                                      December 31
                   -------------------------------------------------------------------------
                                                                  2001             2000
                   -------------------------------------------------------------------------
<S>                                                             <C>              <C>
                   (Dollars in thousands)
                      Mortgage loans (1)                        $62,085          $18,148
                      Commercial real estate                     10,918            9,987
                      Construction and land loans                     0                0
                          Total real estate                      73,003           28,135

                      Commercial business loans                  24,614           15,133
                      Consumer loans                              1,120              714
                      Overdrafts                                    292               92
                   -------------------------------------------------------------------------
                        Total loans receivable                  $99,029          $44,074
                   -------------------------------------------------------------------------
                   Less:
                      Undistributed loans in process                  0                0
                      Deferred fees and unearned discounts           16              (69)
                      Allowance for losses                        1,391             6466
                   -------------------------------------------------------------------------
                          Total net items                             0                0
                   -------------------------------------------------------------------------
                          Total loans receivable, net           $97,654          $43,677
                   -------------------------------------------------------------------------
</TABLE>

                   (1)  Amounts exclude loans held for sale.


         The growth of our loan  portfolio  reflects our growth  strategy in the
mortgage  lending area. At December 31, 2001, we had  commercial  business loans
totaling  $24.6 million or 24.9% of the total  portfolio.  Residential  mortgage
loans were $62.1 million,  which  represented  62.7% of gross loans.  The dollar
amount of  Millennium's  residential  mortgage loans has increased  dramatically
since December 31, 2000. This reflects a decision to emphasize  mortgage lending
and portfolio  adjustable rate mortgage loans with interest  adjustment  periods
not to exceed seven years. All new conforming fixed-rate mortgage loans are sold
in the secondary mortgage market.

         For  all  periods  presented  in  this  annual  report,  there  were no
non-accruals,  past due or restructured loans. In addition,  there were no other
non-performing loans or foreclosed real estate.

Asset Quality

         Asset quality is an important  factor in the successful  operation of a
financial  institution.  Banking  regulations  require  institutions to classify
their own assets and to  establish  prudent  general  allowances  for losses for
assets  classified  as  substandard  or  doubtful.  For the  portion  of  assets
classified  as loss, an  institution  is required to either  establish  specific
allowances  of 100% of the amount  classified  or charge  such  amounts  off its
books.

         Assets,  which do not currently expose Millennium to sufficient risk to
warrant  classification  in one of the  aforementioned  categories,  but  posses
potential   weaknesses  are  required  to  be  designated   special  mention  by
management. These loans are monitored closely to ensure that there is no further
deterioration in the loan. On the basis of management's review of its assets, at
December  31,  2001,


                                      -22-
<PAGE>

Millennium  had  classified  $441,000 of its assets as  substandard  and none as
doubtful or loss. Millennium writes off any loans that are classified as loss.

         Unless well secured and in the process of collection, Millennium places
loans on a non-accrual  status after being  delinquent  greater than 90 days, or
earlier in situations in which the loans have developed  inherent  problems that
indicate payment of principal and interest may not be made in full. Whenever the
accrual of interest  is stopped,  previously  accrued but  uncollected  interest
income is reversed. Thereafter, interest is recognized only as cash is received.
The loan is reinstated to an accrual basis after it has been brought  current as
to  principal  and interest  under the  contractual  terms of the loan.  For all
periods  presented in this  prospectus,  there were no non-accrual,  past due or
restructured  loans. In addition,  there were no other  non-performing  loans or
foreclosed real estate.

Delinquent and problem loans

         When a borrower fails to make a required payment on a loan,  Millennium
attempts to cure the delinquency by contacting the borrower.  A notice is mailed
to the  borrower  after a payment is 15 days past due and again when the loan is
30 days past due.  For most loans,  if the  delinquency  is not cured  within 60
days,  Millennium  issues a notice of intent to foreclose on the property and if
the  delinquency  is  not  cured  within  90  days,   Millennium  may  institute
foreclosure action. In most cases, deficiencies are cured promptly.

Allowance for losses on loans and real estate

         Millennium  provides  valuation  allowances for  anticipated  losses on
loans and real estate when its management  determines that a significant decline
in the value of the collateral has occurred,  and if the value of the collateral
is less  than the  amount  of the  unpaid  principal  of the  related  loan plus
estimated costs of acquisition  and sale. In addition,  Millennium also provides
reserves  based on the dollar amount and type of collateral  securing its loans,
in order to protect against  unanticipated  losses. A loss experience percentage
is established for each loan type and is reviewed annually. Each month, the loss
percentage  is applied to the  portfolio,  by product  type,  to  determine  the
minimum amount of reserves required.  Although  management believes that it uses
the best information  available to make such determinations,  future adjustments
to reserves may be necessary, and net income could be significantly affected, if
circumstances  differ  substantially from assumptions used in making the initial
determinations.



                                      -23-
<PAGE>


         An analysis of the  allowance  for loan  losses,  including  charge-off
activity,  is presented  below for the periods  indicated.  The increases in our
allowance for loan losses are the result of adjustments that management has made
in response to the growth of our loan portfolio.
<TABLE>
<CAPTION>

                                                                  Year Ended
                     ------------------------------------------------------------------
                                                                  December 31
                     ------------------------------------------------------------------
                                                              2001             2000
                     ------------------------------------------------------------------
<S>                                                           <C>             <C>
                     (Dollars in thousands)
                     Balance at beginning of period           $  466          $ 161
                     Provision charged to operations           1,020            305
                     Charge-offs:
                          Real estate                             96              0
                          Consumer                                 0              0
                          Commercial                               0              0
                     Recoveries:
                          Real estate                              1              0
                          Consumer                                 0              0
                          Commercial                               0              0
                     ------------------------------------------------------------------
                     Net Charge-offs                              95              -
                     ------------------------------------------------------------------
                     ------------------------------------------------------------------
                     Balance, end of period                   $1,391          $ 466
                     ------------------------------------------------------------------
                     Allowance for loan losses to period
                          end total loans                       .79%           .59%
                     Allowance for loan losses to
                           nonaccrual loans                       0%             0%
                     Net charge-offs to average loans         .0009%             0%
</TABLE>

Provision for loan losses

         For the year ended December 31, 2001, the provision for loan losses was
$1,020,000  compared to  $305,000  for the year ended  December  31,  2000.  The
provision  for loan  losses is a current  charge to  earnings  to  increase  the
allowance for loan losses.  We have established the allowance for loan losses to
reflect inherent,  probable and known losses in the loan portfolio.  Our opinion
is that the  allowance  for loan losses at December 31, 2001  remains  adequate,
based on our internal  analysis  that the  allowance is  sufficient to cover any
potential  losses in our loan portfolio.  Although we believe that the allowance
is adequate, there can be no assurances that additions to the allowance will not
be  necessary in future  periods,  which would  adversely  affect our results of
operations. The allowance for loan losses at December 31, 2001 was $1,391,000 or
0.8% of total loans  receivable  compared  to  $466,000 or 0.6% at December  31,
2000.  Millennium  monitors its loan loss allowance monthly and makes provisions
as necessary.



                                      -24-
<PAGE>

         A breakdown  of the  allowance  for loan losses in dollars and loans in
each category to total loans in percentages is provided in the following tables.
Because  all of these  factors  are subject to change,  the  breakdown  does not
necessarily predict future loan losses in the indicated categories.

<TABLE>
<CAPTION>

                                              December 31, 2001               December 31, 2000
        ----------------------------------------------------------------------------------------------
                                                          Ratio of                        Ratio of
                                                          Loans to                        Loans to
                                                         Total Gross                    Total Gross
                                           Allowance        Loans         Allowance        Loans
        ----------------------------------------------------------------------------------------------
        (Dollars in thousands)
        ----------------------------------------------------------------------------------------------
<S>                                           <C>            <C>              <C>            <C>
        Mortgage loans                        $   689        49.5%            $ 231          67.1%
        Commercial                                580        41.7                87          19.26
        Lines of credit                           100         7.2               139          12.7
        Consumer                                   22         1.6                 9           0.9
        Unallocated overdrafts                      0         0.0                 0           0.1
        ----------------------------------------------------------------------------------------------
             Total                            $ 1,391       100.0%            $ 466         100.0%
        ----------------------------------------------------------------------------------------------
</TABLE>


Non-Interest Income

         General.  Millennium's  non-interest  income consists primarily of loan
fees,  net  gains on sale of  loans  and fees and  service  charges  on  deposit
accounts. Service charges and commissions from Millennium Insurance Services and
Millennium  Brokerage  Services  represent  less  than 5% of total  non-interest
income as of December 31, 2001. The following table presents  information on the
sources and amounts of non-interest income.

<TABLE>
<CAPTION>
                                                                          Year Ended
                                                                         December 31
              -------------------------------------------------------------------------------------
              Non Interest Income                               2001        2000         1999
              -------------------------------------------------------------------------------------
              (Dollars in thousands)
<S>                                                          <C>           <C>           <C>
              Service charges, commissions and fees          $     94      $    50       $   5
              Mortgage banking operations income                5,138        3,856         432
              Other income                                        164          143          44
              -------------------------------------------------------------------------------------
              Total                                          $  5,396      $ 4,049       $ 481
              -------------------------------------------------------------------------------------
</TABLE>

         For the year ended  December  31,  2001,  non-interest  income was $5.4
million,  compared to $4.0 million for the year ended  December  31, 2000.  This
increase was a result of general  growth in our business.  In addition,  service
charges on  deposit  accounts  have  increased  $44,000 to $94,000  for the same
period.

         Mortgage Banking  Operations.  The principal source of revenue from our
mortgage banking operations is income from sales of residential  mortgage loans.
Gains  from the sale of  mortgage  loans  were $5.1  million  for the year ended
December 31, 2001, an increase of $1.2 million over loan sale gains for the year
2000.  The  substantially  higher  gains in 2001  reflect  both the higher  loan
origination  volume and a climate of falling  interest rates,  beginning in late
2000.

         Millennium  originates  fixed  rate  and  adjustable  rate  residential
mortgage  loans  through its retail  branches  and  operating  subsidiaries.  In
addition,  we  purchase  residential  mortgage  loans on a  limited  basis  from
selected  mortgage  brokers.  In the year ended December 31, 2001, we originated
and


                                      -25-
<PAGE>

purchased  $352.0 million of residential  mortgage  loans, an increase of $232.0
million over the nine months ended December 31, 2000.

         During the year ended December 31, 2001 and the year ended December 31,
2000 , Millennium sold $262.6 million and $81.3 million,  respectively, of loans
and pools of loans.

         The  tables   that   follow   summarize   residential   mortgage   loan
originations, purchases and sales by type of loan for the periods indicated.

<TABLE>
<CAPTION>
                                                                       December 31
-------------------------------------- ----------------------------------------------------------------------------
                                                       2001                                   2000
-------------------------------------- -------------------------------------- -------------------------------------
(Dollars in thousands)                       Amount            % of Total          Amount           % of Total
-------------------------------------- -------------------- ----------------- ------------------ ------------------
<S>                                          <C>                   <C>              <C>                  <C>
Mortgage Loans Originated and Purchased
Fixed Rate
  First Mortgage                             $193,700              55.02%           $2,989               2.48%
  Second Mortgage                             104,662              29.73           106,776              88.75

Adjustable Rate
  First Mortgage                               53,712              15.25            10,545               8.77
  Second Mortgage                                   0               0.00                 0               0
-------------------------------------- -------------------- ----------------- ------------------ ------------------

Total Residential Mortgage Loans
 Originated and Purchased                    $352,074             100.00%         $120,310             100.00%
-------------------------------------- -------------------- ----------------- ------------------ ------------------

Mortgage Loans Sold
Fixed Rate
  First Mortgage                             $130,405              49.68%           $2,695               3.32%
  Second Mortgage                             114,809              43.74            75,240              92.59

Adjustable  Rate
  First Mortgage                               17,292               6.58             3,328               4.09
  Second Mortgage                                   0               0.00                 0               0
-------------------------------------- -------------------- ----------------- ------------------ ------------------

Total Mortgage Loans Sold                    $262,506             100.00%          $81,263             100.00%
-------------------------------------- -------------------- ----------------- ------------------ ------------------
</TABLE>


         We make mortgage loans through  Millennium  Bank and its majority owned
operating  subsidiaries.  In the year  ended  December  31,  2001,  40.3% of our
residential  mortgage  loan  production  came  from  our  non-banking  operating
subsidiaries.  Each operating subsidiary's loan production consists primarily of
loans to consumers  acquired through the Internet,  direct mail and brokers.  In
each case the minority  shareholder  may  terminate  its  relationship  with the
operating  subsidiary on six months notice. Our remaining  residential  mortgage
loan production comes from Millennium Bank.

         We sell  residential  first and second  mortgage loans in the secondary
mortgage market to institutional  purchasers.  All second mortgage loans and all
fixed rate first  mortgage  loans  originated  or  purchased  are held for sale.
Millennium does not presently originate federally insured or guaranteed mortgage
loans or sell loans to government  agencies.  We do not swap mortgage  loans for
mortgage backed  securities.  All loan sales are for cash. When we sell loans we
give   customary   representations   and   warranties.   If  we   breach   those
representations  and  warranties,  a buyer of loans can require us to repurchase
the loans.

         Mortgage  banking  activities   generally  involve  risks  of  loss  if
secondary mortgage market interest rates increase  substantially while a loan is
in the  "pipeline"  (the period  beginning  with the  application to

                                      -26-
<PAGE>

make or the commitment to purchase a loan and ending with the sale of the loan).
In order to reduce  this  interest  rate  risk,  we sell each  fixed  rate first
mortgage  loan  when  the  borrower  locks  in the  interest  rate on the  loan.
Millennium sells pools of second mortgage loans to institutional  purchasers and
will hold closed loans pending  delivery to a purchaser.  While our policy is to
sell all fixed rate second mortgage loans within 60 days of  origination,  we do
accept  the risk of  changing  interest  while we hold a second  mortgage  loan.
Millennium  does not use  options,  futures  or other  derivatives  to hedge its
interest rate risk.

         In an environment of stable  interest  rates,  our gains on the sale of
mortgage  loans would  generally  be limited to those gains  resulting  from the
yield  differential  between  retail  mortgage  loan  interest  rates  and rates
required  by  secondary  market  purchasers.  A loss from the sale of a loan may
occur if interest rates increase between the time we establish the interest rate
on a loan and the time the loan is sold.

         Periods of rising interest rates will adversely  affect our income from
our mortgage banking operations.  In periods of rising interest rates,  consumer
demand for new  mortgages and  refinancing  decreases,  which in turn  adversely
affects  our  mortgage  lending.  Because  of the  uncertainty  of  future  loan
origination  volume  and the future  level of  interest  rates,  there can be no
assurance that we will realize gains on the sale of loans in future periods.

         Increases and decreases in our mortgage  banking income (which consists
primarily  of gains on sales of  mortgage  loans) tend to offset  decreases  and
increases  in the net  interest  margin.  In a  climate  of lower  or  declining
interest  rates,  our net interest  margin will tend to decrease as the yield on
interest  earning  assets  decreases  faster than the cost of  interest  bearing
liabilities. Mortgage banking income, in contrast, tends to increase in times of
lower or declining interest rates, as refinancing  activity leads to an increase
in mortgage loan originations.  In a climate of rising or higher interest rates,
the net interest margin will tend to increase, while a decrease in mortgage loan
originations leads to a decrease in mortgage banking income.

         We defer fees we receive in loan  origination,  commitment and purchase
transactions.  Deferred  income  pertaining to loans held for sale is taken into
income at the time of sale of the loan.  On a quarterly  basis,  mortgage  loans
held for sale are marked to the lower of aggregate cost or market value.

Non-Interest Expenses

         For the year ended December 31, 2001,  non-interest  expenses were $7.9
million,  compared to $5.8 million for the year ended  December  31,  1999.  The
increases in the year ended  December 31, 2001 compared to December 31, 2000 was
due to increased costs  associated with the expanded branch network and staffing
the mortgage operation.

                                                              Year Ended
                                                              December 31
                   ------------------------------------------------------------
                   Non Interest Expense                    2001        2000
                   ------------------------------------------------------------
                   (Dollars in thousands)
                   Personnel                             $5,045     $3,456
                   Occupancy                                486        303
                   Furniture, equipment & computers         608        336
                   Marketing fees                           232        764
                   Professional fees                        194         60
                   Administrative expense                 1,379        889
                   ------------------------------------------------------------
                   Total                                 $7,944     $5,808
                   ------------------------------------------------------------


                                      -27-
<PAGE>

Income Taxes

         Millennium  recorded  income tax expense in the amount of $195,000  for
the year ended  December 31, 2001.  There was no income tax expense for the year
ended December 31, 2000.

         As of December 31, 2001, we have approximately $303,000 of net deferred
tax assets on our books.  In  addition to federal  income  taxes the bank pays a
Virginia  state  franchise  tax.  For the year  ended  December  31,  2001,  the
franchise taxes amounted to $42,930 and expensed $32,198.

Sources of Funds

Deposits

         Deposits have been the principal  source of Millennium's  funds for use
in lending and for other general business purposes.  At present,  Millennium has
employed  alternative  methods of gathering  deposits to fund our mortgage  loan
operations  including brokered deposits.  Brokered deposits are deposits that we
obtain  from other  banks  through  brokers  for a fee.  Brokered  deposits  are
available in bulk, and they provide a quicker source of funding than traditional
core  deposits.  Additionally,  brokered  deposits  do  not  require  additional
spending for marketing or education of employees.  The brokered deposits that we
obtain consist  primarily of jumbo 30 day to 180-day  certificates  of deposits,
which increase  Millennium's overall cost of funds and decrease our net interest
margin.

         In addition to deposits, Millennium derives funds from loan repayments,
cash flows  generated  from  operations,  which  includes  interest  credited to
deposit accounts,  repurchase  agreements entered into with commercial banks and
Federal Home Loan Bank of Atlanta advances. Borrowings may be used to compensate
for reductions in deposits or  deposit-inflows at less than projected levels and
have been used on a longer-term basis to support expanded lending activities.

         Millennium  attracts both  short-term  and long-term  deposits from the
general public by offering a wide  assortment of accounts and rates.  Millennium
offers statement  savings  accounts,  various checking  accounts,  various money
market accounts,  fixed-rate  certificates with varying  maturities,  individual
retirement  accounts  and is  expanding  to provide  products  and  services for
businesses and brokered deposits.  Millennium's  principal use of deposits is to
originate loans and fund investment securities.

         At December  31, 2001,  deposits  were $188.6  million,  an increase of
164.3%  from  $71.3  million at  December  31,  2000.  The  deposit  growth is a
reflection of branch office growth, aggressive pricing,  increased marketing and
bank  consolidation  in Millennium's  principal  market.  In order to reduce the
overall  cost of funds and reduce our  reliance on high cost time  deposits  and
short  term  borrowings  as a funding  source,  management  continues  to direct
extensive marketing efforts towards attracting lower cost transaction  accounts.
However,  there is no assurance  that these  efforts will be  successful,  or if
successful, will reduce our reliance on time deposits and short term borrowings.


                                      -28-
<PAGE>



         The  following  table sets forth the dollar  amount of  deposits in the
various types of deposit programs offered by Millennium at the dates indicated.

                                                       December 31
                   ---------------------------------------------------------
                                                   2001            2000
                   ---------------------------------------------------------
                   (Dollars in thousands)
                   Savings accounts                 $  341           $ 191
                   Demand deposit accounts          27,722           8,160
                   NOW accounts                      5,222           2,798
                   Money market accounts            33,862          11,515
                   CD's less than $100K             31,885           9,036
                   CD's greater than $100K          89,536          39,643
                   ---------------------------------------------------------
                        Total                     $188,568         $71,343
                   ---------------------------------------------------------


         The  following  table  contains  information  pertaining to the average
amount and the average rate paid on each of the following deposit categories for
the periods indicated.
<TABLE>
<CAPTION>

                                                           For the Year Ended December 31
     ---------------------------------------------------------------------------------------------------------
                                                      2001                                 2000
     ---------------------------------------------------------------------------------------------------------
                                                            Average                               Average
                                          Average            Rate                 Average          Rate
                                          Balance            Paid                 Balance          Paid
     ---------------------------------------------------------------------------------------------------------
<S>                                     <C>                  <C>                 <C>               <C>
     (Dollars in thousands)
     Noninterest bearing
        Demand deposits                  $12,513             0.00%                $6,669           0.00%
     Interest bearing
        NOW/Money Market                  23,212             4.04%                13,499           2.70%
        Savings deposits                     273             2.21%                   175           4.84%
        Time deposits                     75,516             5.48%                22,807           7.02%
     ---------------------------------------------------------------------------------------------------------
        Total deposits                  $111,514             4.56%               $43,150           5.12%
     ---------------------------------------------------------------------------------------------------------
</TABLE>


         The variety of deposit accounts offered by Millennium has allowed us to
be competitive in obtaining funds and has allowed it to respond with flexibility
to,  although not to  eliminate,  the threat of  disintermediation  (the flow of
funds away from depository institutions such as banking institutions into direct
investment vehicles such as government and corporate securities). The ability of
Millennium to attract and maintain  deposits,  and its cost of funds,  has been,
and will continue to be, significantly affected by money market conditions.

                                      -29-
<PAGE>

         The following  table sets forth the deposit flows of Millennium  during
the periods indicated.


                                                     Year Ended
                                                     December 31
                 --------------------------------------------------------------
                                           2001          2000         1999
                 --------------------------------------------------------------
                 (Dollars in thousands)
                 --------------------------------------------------------------
                 Opening balance           $71,343      $22,016      $     0
                 Net deposits              111,818       47,131       21,832
                 Interest credited           5,407        2,196          184
                 --------------------------------------------------------------
                 Ending balance           $188,568      $71,343      $22,016
                 --------------------------------------------------------------
                 Net increase             $117,225      $49,327      $22,016
                 --------------------------------------------------------------
                 Percent increase         164.31%       224.05%        0.00%
                 --------------------------------------------------------------


         The following table  indicates the amount of Millennium's  certificates
of deposits by time remaining until maturity as of December 31, 2001.

<TABLE>
<CAPTION>
                                                                       Maturity
--------------------------------------------------------------------------------------------------------------------
                                                  3 Months     Over 3 to    Over 6 to        Over
                                                   or less     6 months     12 months     12 months       Total
--------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
--------------------------------------------------------------------------------------------------------------------

<S>                                                 <C>         <C>          <C>             <C>         <C>
Certificates of deposit less than $100,000           $3,978      $3,551       $1,819        $ 22,537      $31,885
Certificates of deposit of $100,000 or more          40,536      26,849       10,327          11,824       89,536
--------------------------------------------------------------------------------------------------------------------
     Total certificates of deposits                 $44,514     $30,400      $12,146         $34,361     $121,421
--------------------------------------------------------------------------------------------------------------------
</TABLE>


Borrowings

         As a member of the  Federal  Home Loan Bank of Atlanta,  Millennium  is
required to own capital stock in the Federal Home Loan Bank and is authorized to
apply for advances from the Federal Home Loan Bank.  Each Federal Home Loan Bank
credit program has its own interest rate,  which may be fixed, or variable,  and
range of  maturities.  The Federal Home Loan Bank may prescribe  the  acceptable
uses to which these  advances may be put, as well as on the size of the advances
and  repayment  provisions.  The advances  are  collateralized  by  Millennium's
investment in Federal Home Loan Bank stock and certain  mortgage loans.  See the
Notes  to  Consolidated  Financial  Statements  for  information  regarding  the
maturities and rate structure of  Millennium's  Federal Home Loan Bank advances.
At December  31,  2001 and  December  31,  2000,  $400,000  and  $7,425,000  was
outstanding to the Federal Home Loan Bank.

         Millennium's  borrowings also include  securities sold under agreements
to repurchase and federal funds  purchased.  Securities sold under agreements to
repurchase are collateralized  with Government Agency  securities.  The proceeds
are used by Millennium for general corporate purposes.  At December 31, 2001 and
December 31, 2000,  Millennium had $2.6 million and $2.2 million,  respectively,
of securities sold under agreements to repurchase.

         Millennium  uses  borrowings  to  supplement  deposits  when  they  are
available  at a lower  overall cost to  Millennium  or they can be invested at a
positive rate of return.


                                      -30-
<PAGE>


         The following tables set forth the maximum month-end balances,  average
balances  and  weighted  average  rates,  of  Federal  Home Loan Bank  advances,
securities  sold under  agreements to repurchase  and other  borrowings  for the
periods indicated.

<TABLE>
<CAPTION>

                                                                    Year Ended
                                                                    December 31
---------------------------------------------------------------------------------------------------------------
                                                     2001                                  2000
---------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
---------------------------------------------------------------------------------------------------------------
<S>                                                  <C>                                 <C>
Maximum Balance:
   FHLB Advances                                     $400                                $11,725
   Securities sold under
     agreements to repurchase                       $14,368                              $13,595
---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>

                                          Average            Weighted            Average          Weighted
                                          Balance            Average             Balance           Average
                                                               Rate                                 Rate
---------------------------------------------------------------------------------------------------------------
<S>                                       <C>                 <C>                <C>                <C>
   FHLB Advances                          $4,131              4.45%              $4,996             6.62%
   Securities sold under
     agreements to repurchase             $2,699              3.96%              $3,376             5.93%
---------------------------------------------------------------------------------------------------------------
</TABLE>


         The following table sets forth the balances of Millennium's  short-term
borrowings at the dates indicated.

                                                              December 31
               -----------------------------------------------------------------
                                                          2001            2000
               -----------------------------------------------------------------
               (Dollars in thousands)
               -----------------------------------------------------------------
               FHLB advances                                $400        $7,425
               Securities sold under agreements to
                  repurchase                                   0             0
               -----------------------------------------------------------------
               Fed Funds Purchased                         2,640         2,606
               -----------------------------------------------------------------
                   Total short-term borrowings            $3,040       $10,031
               -----------------------------------------------------------------
               Weighted average interest rate of
                  short-term FHLB advances                  0.00%         6.22%
               Weighted average interest rate of
                  securities sold under agreements to
                  repurchase                                2.24          4.95
               Weighted average interest rate of other
                  borrowings                                6.48          6.71
               -----------------------------------------------------------------


Liquidity and Capital Resources

         Liquidity  is  the  ability  to  meet  present  and  future   financial
obligations  either  through the sale of existing  assets or the  acquisition of
additional funds through asset and liability  management.  Cash flow projections
are  regularly  reviewed  and  updated  to assure  that  adequate  liquidity  is
provided.  As a result  of  Millennium's  management  of liquid  assets  and the
ability to generate liquidity through increasing  deposits,  management believes
that Millennium  maintains  overall  liquidity that is sufficient to satisfy its
depositors' requirements and meet its customers' credit needs.

                                      -31-
<PAGE>

         Millennium's  primary  sources of funds are deposits,  borrowings,  and
amortization,  prepayments and maturities of outstanding  loans and investments,
and loan sales.  While  scheduled  payments from the  amortization  of loans and
securities are relatively  predictable sources of funds,  deposit flows and loan
prepayments  are  greatly   influenced  by  general  interest  rates,   economic
conditions and competition.  Excess funds are invested in overnight  deposits to
fund cash requirements experienced in the normal course of business.  Millennium
has been able to  generate  sufficient  cash  through  its  deposits  as well as
borrowings.

         For the year  ended  December  31,  2001,  net cash  used by  operating
activities was $40.7 million,  compared to $27.5 million used for the year ended
December 31, 2000. Investing activities used approximately $62.3 million for the
year ended  December 31 2001,  which was a result of a net  increase in loans of
approximately  $55.0  million,  net  paydown of  investment  securities  of $4.0
million,  net investment  securities purchases of $9.8 million, and purchases of
office  properties  and equipment of  approximately  $1.5 million.  For the year
ended December 31, 2000  investing  activities  used $32.5 million,  which was a
result of a net increase in loans of approximately $28.7 million, net paydown of
investment  securities of $461,000,  net investment securities purchases of $3.5
million,  and  purchases of office  properties  and  equipment of  approximately
$687,000.

         Millennium uses its sources of funds primarily to meet operating needs,
to pay deposit withdrawals and fund loan commitments.  At December 31, 2001, and
December 31, 2000 and 1999 total  approved loan  commitments  were $5.1 million,
$1.8 million and $885,000  respectively.  In addition, at December 31, 2001, and
December 31, 2000 and 1999,  commitments  under unused lines of credit were $7.5
million,  $5.9 million and $4.7 million,  respectively.  Certificates of deposit
scheduled  to mature in one year or less at December  31,  2001,  totaled  $87.1
million.

         At December 31, 2001,  we had a borrowing  limit of $30.8  million with
the Federal Home Loan Bank.  Our  outstanding  borrowings  from the Federal Home
Loan Bank  totaled  $400,000 at December 31,  2001,  which leaves an  additional
borrowing capacity of $30.4 million. In October 2001, the Federal Home Loan Bank
increased our borrowing  limit to 15% of total assets,  which would  represent a
limit of $30.8  million  based on our assets at December 31, 2001.  We also have
two lines of credit with the  Community  Bankers Bank in Virginia in the amounts
of $4.8 million,  which is unsecured,  and $7.7 million,  which is secured.  Our
outstanding  borrowings from the Community  Bankers Bank totaled $2.6 million at
December 31, 2001, with remaining available lines of credit of $9.9 million.

         Management  intends to fund  anticipated  loan  closings and  operating
needs during 2001 through cash on hand,  brokered  deposits,  proceeds  from the
sale of loans,  cash generated  from  operations  and  anticipated  increases in
deposits.  Current and anticipated marketing programs will be primarily targeted
at the  attraction  of lower  cost  transaction  accounts.  Concurrent  with the
strategies  employed to attract these  accounts,  management  plans to gradually
reduce the rate paid on time deposits in comparison to the competition. However,
the pricing of time deposits  will be balanced  against  upcoming  maturities to
ensure that  liquidity  is not  adversely  impacted  by a large  run-off of time
deposits.

         Capital  represents  funds,  earned or obtained,  over which  financial
institutions  can  exercise  greater  control in  comparison  with  deposits and
borrowed funds.  The adequacy of Millennium's  capital is reviewed by management
on an  ongoing  basis  with  reference  to  size,  composition  and  quality  of
Millennium's resources and consistent with regulatory  requirements and industry
standards.  Management  seeks to maintain a capital  structure that will support
anticipated asset growth and absorb any potential losses.

                                      -32-
<PAGE>

         Millennium  Bankshares  and  Millennium  Bank are subject to regulatory
capital  requirements of the Federal Reserve.  At December 31, 2001,  Millennium
exceeded all such  regulatory  capital  requirements  as shown in the  following
table.
<TABLE>
<CAPTION>

                                                                    December 31, 2001
                                                    Millennium Bankshares               Millennium
                                                         Corporation                       Bank
----------------------------------------------------------------------------------------------------------
(Dollars in thousands)
----------------------------------------------------------------------------------------------------------
<S>                                                   <C>                               <C>
Tier 1 Capital:
Common Stock                                          $  11,203                         $   5,900
Capital Surplus                                               0                             5,900
Cumulative Preferred Securities (1)                           0                                 0
Retained Earnings                                           342                               391
----------------------------------------------------------------------------------------------------------
Disallowed intangible assets                                  0                                 0
----------------------------------------------------------------------------------------------------------
Total Tier 1 Capital                                  $  11,545                         $  11,991
----------------------------------------------------------------------------------------------------------

Tier 2 Capital:
Allowance for loan losses (2)                             1,391                             1,391
Cumulative Preferred Securities                               0                                 0
----------------------------------------------------------------------------------------------------------
Total Tier 2 Capital                                      1,391                             1,391
----------------------------------------------------------------------------------------------------------
Total Risk Based Capital                              $  12,936                         $  13,382
Risk Weighted Assets                                   $129,073                          $128,620

Capital Ratios:
Tier 1 Risk-based                                        8.94%                             9.52%
Total Risk-based                                        10.02%                            10.62%
Tier 1 Capital to average adjusted total assets          9.37%                             9.67%
----------------------------------------------------------------------------------------------------------
</TABLE>

(1)      Limited to 1/3 of core capital.
(2)      Limited to 1.25% of risk weighted assets.


Impact of Inflation and Changing Prices and Seasonality

         The  financial  statements  in this  document  have  been  prepared  in
accordance  with  generally  accepted  accounting  principles  which require the
measurement of financial  position and operating  results in terms of historical
dollars,  without  considering changes in the relative purchasing power of money
over time due to inflation.

         Unlike   industrial   companies,   virtually  all  of  the  assets  and
liabilities  of a financial  institution  are  monetary in nature.  As a result,
interest  rates  have a more  significant  impact on a  financial  institution's
performance  than the effects of general levels of inflation.  Interest rates do
not necessarily move in the same direction or in the same magnitude as the price
of goods and services, since such prices are affected by inflation.

Forward Looking Statements

         We make  forward  looking  statements  in this  annual  report that are
subject to risks and  uncertainties.  These forward looking  statements  include
statements  regarding  profitability,  liquidity,  allowance  for  loan  losses,
interest rate sensitivity, market risk, and financial and other goals. The words
"believes,"  "expects,"  "may," "will,"  "should,"  "projects,"  "contemplates,"
"anticipates,"  "forecasts,"  "intends"  or other  similar  words  or terms  are
intended to identify forward looking statements.


                                      -33-
<PAGE>
         These   forward   looking   statements   are  subject  to   significant
uncertainties because they are based upon or are affected by factors including:

    *    Continued  levels of loan quality and  origination  volume;
    *    Interest rate  fluctuations  and other  economic  conditions;
    *    Competition in product offerings and product pricing;
    *    Continued relationships with major customers;
    *    Future laws and regulations; and
    *    Other factors,  including  those matters  discussed in this section and
         the "Risk Factors"  section of our  prospectus  dated January 31, 2002,
         which was filed  with the SEC as part of a  Registration  Statement  on
         Form SB-2.

         Because  of these  uncertainties,  our  actual  future  results  may be
materially  different  from  the  results  indicated  by these  forward  looking
statements.  In addition,  our past  results of  operations  do not  necessarily
indicate our future results.

ITEM 7.  FINANCIAL STATEMENTS

         The following  financial  statements are filed as a part of this report
following Item 13 below:

         Independent Auditors' Report
         Consolidated   Balance   Sheets  as  of  December  31,  2001  and  2000
         Consolidated Statements of Operations for the Years Ended  December 31,
                2001, 2000 and 1999
         Consolidated  Statements  of  Changes in  Stockholders'  Equity for the
                Years Ended December 31, 2001 and 2000
         Consolidated  Statements of  Comprehensive  Income (Loss) for the Years
                Ended December 31, 2001, 2000 and 1999
         Consolidated  Statements of Cash Flows for the Years Ended December 31,
                2001, 2000 and 1999
         Notes to Consolidated Financial Statements


ITEM 8.  CHANGES    IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

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


                                    PART III

ITEM 9.  DIRECTORS,  EXECUTIVE   OFFICERS,  PROMOTERS   AND  CONTROL   PERSONS;
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

         Pursuant to General  Instruction  E(3) of Form 10-KSB,  the information
contained under the headings  "Election of Directors,"  "Executive  Officers Who
Are Not Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance"
in  our  Proxy  Statement  for  the  2002  Annual  Meeting  of  Shareholders  is
incorporated herein by reference.


ITEM 10. EXECUTIVE COMPENSATION

         Pursuant to General  Instruction  E(3) of Form 10-KSB,  the information
contained under the headings "Director Compensation,"  "Executive Compensation,"
"Stock Options," and "Employment Agreements" in our Proxy Statement for the 2002
Annual Meeting of Shareholders is incorporated herein by reference.


                                      -34-
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         Pursuant to General  Instruction  E(3) of Form 10-KSB,  the information
contained  under the headings  "Security  Ownership of Management" and "Security
Ownership  of Certain  Beneficial  Owners" in our Proxy  Statement  for the 2002
Annual Meeting of Shareholders is incorporated herein by reference.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Pursuant to General  Instruction  E(3) of Form 10-KSB,  the information
contained  under  the  heading  "Transactions  with  Management"  in  our  Proxy
Statement for the 2002 Annual Meeting of Shareholders is incorporated  herein by
reference.


ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K

         (a)      Exhibits.

                  3.1      Articles of  Incorporation  (restated  in  electronic
                           format),  attached as Exhibit 3.1 to the Registration
                           Statement on Form SB-2, as amended,  Registration No.
                           333-72500,  filed with the  Commission on October 30,
                           2002  (the  "Form  SB-2"),   incorporated  herein  by
                           reference.

                  3.2      Bylaws,  attached  as  Exhibit  3.2 to the Form SB-2,
                           incorporated herein by reference.

                  4.1      Form of Common Stock Certificate, attached as Exhibit
                           4.1  to  the  Form  SB-2,   incorporated   herein  by
                           reference.

                  4.2      Form of Warrant Agreement, attached as Exhibit 4.2 to
                           the Form SB-2, incorporated herein by reference.

                  10.1     Employment  Contract,  dated as of  February 8, 2001,
                           between Millennium Bankshares Corporation, Millennium
                           Bank and Carroll C. Markley, attached as Exhibit 10.1
                           to the Form SB-2, incorporated herein by reference.

                  10.2     Form  of   Employee   Stock   Option  of   Millennium
                           Bankshares  Corporation,  attached as Exhibit 10.2 to
                           the Form SB-2, incorporated herein by reference.

                  21       List of  Subsidiaries, attached  as Exhibit 21 to the
                           Form SB-2, incorporated herein by reference.

         (b)      Reports on Form 8-K.

                           No  reports  on Form  8-K were  filed  by  Millennium
                  during the last quarter of the period covered by this report.


                                      -35-
<PAGE>

                        MILLENNIUM BANKSHARES CORPORATION

                           DECEMBER 31, 2001 AND 2000





<PAGE>


                        MILLENNIUM BANKSHARES CORPORATION

                                FINANCIAL REPORT
                           DECEMBER 31, 2001 AND 2000



                                    CONTENTS




                                                                          Page
                                                                          ----
INDEPENDENT AUDITOR'S REPORT ON THE CONSOLIDATED
    FINANCIAL STATEMENTS                                                    1


FINANCIAL STATEMENTS

    Consolidated Balance Sheets                                             2

    Consolidated Statements of Operations                                   3

    Consolidated Statements of Changes in Stockholders' Equity              4

    Consolidated Statements of Comprehensive Income (Loss)                  5

    Consolidated Statements of Cash Flows                                   6

    Notes to Consolidated Financial Statements                           7 - 22






<PAGE>

                 [LETTERHEAD OF THOMPSON, GREENSPON & CO., P.C.]




                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders
Millennium Bankshares Corporation
Reston, Virginia


         We  have  audited  the  accompanying  consolidated  balance  sheets  of
Millennium  Bankshares  Corporation  as of December  31, 2001 and 2000,  and the
related consolidated statements of operations,  changes in stockholders' equity,
comprehensive  income  (loss) and cash flows for the years  ended  December  31,
2001, 2000 and 1999. These financial  statements are the  responsibility  of the
Corporation's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States of America.  Those standards  require that we plan
and  perform  the  audits to  obtain  reasonable  assurance  about  whether  the
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial  statements.  An audit also  includes  assessing  the  accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.

         In our opinion,  the  financial  statements  referred to above  present
fairly,  in  all  material  respects,   the  financial  position  of  Millennium
Bankshares  Corporation as of December 31, 2001 and 2000, and the results of its
operations  and its cash flows for the years ended  December 31, 2001,  2000 and
1999 in conformity with accounting  principles  generally accepted in the United
States of America.



/s/ THOMPSON, GREENSPON & CO., P.C.

Fairfax, Virginia
February 20, 2002


                                       1
<PAGE>


                        MILLENNIUM BANKSHARES CORPORATION

                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2001 AND 2000



<TABLE>
<CAPTION>
                                                                                 2001                      2000
                                                                             ------------               -----------

                  ASSETS

<S>                                                                      <C>                          <C>
Cash and Due from Banks                                                  $        756,038             $     175,819
Federal Funds Sold                                                              9,714,314                    46,350
Mortgage loans held for sale                                                   77,426,083                34,643,164
Loans Receivable, net                                                          97,654,285                43,677,216
Investment Securities, available for sale                                      12,582,385                 6,898,134
Bank Premises and Equipment, net                                                2,344,362                 1,427,369
Accrued Interest Receivable                                                     1,023,558                   616,324
Other Assets                                                                    4,024,681                 2,007,865
                                                                             ------------               -----------
Total Assets                                                                 $205,525,706               $89,492,241
                                                                             ============               ===========

                  LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
    Deposits
        Non-interest bearing                                                $  27,721,861             $   8,159,957
        Interest bearing                                                        5,222,263                 2,798,478
        Savings deposits                                                       34,202,094                11,494,515
        Time deposits                                                         121,421,476                48,889,941
                                                                             ------------               -----------
                  Total Deposits                                              188,567,694                71,342,891
                                                                             ------------               -----------

    Repurchase agreements and other borrowed money                              3,040,000                10,031,000
    Accrued interest payable                                                      731,641                   267,001
    Other accrued expenses                                                      1,660,905                   218,288
                                                                             ------------               -----------
                  Total Liabilities                                           194,000,240                81,859,180
                                                                             ------------               -----------

STOCKHOLDERS' EQUITY
    Common  stock (Par value $5.00,  shares  authorized  10,000,000,
    issued and outstanding as of December 31, 2001 and 2000 are
    2,247,978 and 1,653,280, respectively.)                                    11,202,753                 8,232,233
    Accumulated other comprehensive income (loss)                                 (19,533)                   (1,235)
    Retained earnings (deficit)                                                   342,246                  (597,937)
                                                                             ------------               -----------
                  Total Stockholders' Equity                                   11,525,466                 7,633,061
                                                                             ------------               -----------

Total Liabilities and Stockholders' Equity                                   $205,525,706               $89,492,241
                                                                             ============               ===========
</TABLE>



The Notes to  Consolidated  Financial  Statements  are an integral part of these
statements.


                                       2
<PAGE>


                        MILLENNIUM BANKSHARES CORPORATION

                     CONSOLIDATED STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

<TABLE>
<CAPTION>

                                                                     2001                2000              1999
                                                                 ------------         -----------      ------------

<S>                                                              <C>                  <C>              <C>
Interest Income
    Interest and fees on loans                                   $  9,515,519         $ 4,952,336      $    600,979
    Interest on investment securities                                 528,511             377,864           251,808
                                                                 ------------         -----------      ------------
                  Total Interest Income                            10,044,030           5,330,200           852,787

Interest Expense
    Interest on deposits and borrowed funds                         5,341,077           2,723,135           232,070
                                                                 ------------         -----------      ------------
                  Net Interest Income                               4,702,953           2,607,065           620,717

Provision for Possible Loan Losses                                 (1,020,000)           (305,000)         (161,000)
                                                                 ------------         -----------      ------------
                  Net Interest Income after Provision
                      for Possible Loan Losses                      3,682,953           2,302,065           459,717

Other Income
    Fee income                                                      5,137,531           3,853,773           434,127
    Service charges and other income                                  258,924             194,946            46,900
                                                                 ------------         -----------      ------------
                                                                    9,079,408           6,350,784           940,744
                                                                 ------------         -----------      ------------

Operating Expenses
    Officers and employee compensation                              5,045,052           3,456,421         1,295,008
    Occupancy and equipment expense                                 1,093,986             638,433           306,910
    Marketing, promotion and advertising expenses                     231,793             763,741            54,863
    Other operating expenses                                        1,573,245             948,999           425,090
                                                                 ------------         -----------      ------------
                  Total Operating Expenses                          7,944,076           5,807,594         2,081,871
                                                                 ------------         -----------      ------------

Income before Income Taxes                                          1,135,332             543,190        (1,141,127)

Provision for Income Taxes                                            195,000                  -                 -
                                                                 ------------         -----------      ------------

Net Income (Loss)                                                $    940,183         $   543,190      $ (1,141,127)
                                                                 ============         ===========      ============

Earnings (loss) per common share
Basic                                                                    0.45                0.33            (0.69)
                                                                 ============         ===========      ============
Diluted                                                                  0.38                0.33            (0.69)
                                                                 ============         ===========      ============

Weighted average shares outstanding
Basic                                                               2,066,512           1,653,280         1,653,280
                                                                    =========           =========         =========
Diluted                                                             2,469,998           1,653,280         1,653,280
                                                                    =========           =========         =========
</TABLE>







The Notes to  Consolidated  Financial  Statements  are an integral part of these
statements.


                                       3
<PAGE>


                        MILLENNIUM BANKSHARES CORPORATION

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                           DECEMBER 31, 2001 AND 2000

<TABLE>
<CAPTION>
                                                                         Retained      Accumulated
                                              Number                     Earnings    Other Comprehensive
                                             Of Shares    Par Value      (Deficit)    Income (Deficit)      Totals
                                            ----------   -----------    -----------   ----------------     --------
<S>                                          <C>         <C>            <C>             <C>             <C>

Balances, December 31, 1998                       --     $       --     $       --      $       --       $      --

Sale of common stock                         1,653,280      8,232,233           --              --         8,232,233

Change in other comprehensive
    income (loss)                                 --             --             --           (95,471)        (95,471)

Net Income (Loss)                                 --             --       (1,141,127)           --        (1,141,127)
                                          ------------   ------------   ------------    ------------    ------------

Balances, December 31, 1999                  1,653,280      8,232,233     (1,141,127)        (95,471)      6,995,635

Change in other comprehensive
    income (loss)                                 --             --             --            94,236          94,236

Net Income                                        --             --          543,190            --           543,190
                                          ------------   ------------   ------------    ------------    ------------

Balance, December 31, 2000                   1,653,280      8,232,233       (597,937)         (1,235)      7,633,061

Sale of common stock                           594,698      2,970,520           --              --         2,970,520

Change in other comprehensive
    income (loss)                                 --             --             --           (18,298)        (18,298)

Net Income                                        --             --          940,183            --           940,183
                                          ------------   ------------   ------------    ------------    ------------

Balance, December 31, 2001                   2,247,978   $ 11,202,753   $    342,246    $    (19,533)   $ 11,525,466
                                          ============   ============   ============    ============    ============
</TABLE>

The Notes to  Consolidated  Financial  Statements  are an integral part of these
statements.


                                       4
<PAGE>


                        MILLENNIUM BANKSHARES CORPORATION

             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
              FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999



<TABLE>
<CAPTION>

                                                                      2001               2000              1999
                                                                    --------           --------         ----------

<S>                                                                 <C>                <C>              <C>
Net Income (loss)                                                   $940,183           $543,190         $(1,141,127)

Other Comprehensive Income (loss), net of tax
Unrealized gain (loss) on securities available for sale              (18,298)            94,236             (95,471)
                                                                    --------           --------         -----------

Comprehensive Net Income (loss)                                     $921,885           $637,426         $(1,236,598)
                                                                    ========           ========         ===========

</TABLE>










The Notes to  Consolidated  Financial  Statements  are an integral part of these
statements.

                                       5
<PAGE>


                       MILLENNIUM BANKSHARES CORPORATION

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999


<TABLE>
<CAPTION>

                                                                      2001               2000              1999
                                                                      ----               ----              ----

<S>                                                             <C>                <C>                 <C>
Cash Flows from Operating Activities
    Net income (loss)                                           $      940,183     $      543,190      $ (1,141,127)
    Noncash items included in net loss
        Depreciation and amortization                                  534,276            291,706           121,420
        Amortization of security premiums and accretion
            of discounts, net                                          119,958             43,141                 -
        Provision for possible loan losses                           1,020,000            305,000           161,000
        Increase in
             Mortgage loans held for sale, net                     (42,782,919)       (27,068,001)       (7,575,263)
        Accrued interest receivable                                   (407,234)          (455,242)         (161,082)
        Other assets                                                (2,016,815)        (1,537,367)         (477,858)
        Increase in
            Accrued interest payable                                   464,640            248,265            18,736
            Other accrued expenses                                   1,442,617            167,115            51,173
                                                                --------------    ---------------      ------------
                  Net Cash Provided (Used) by
                      Operating Activities                         (40,685,294)       (27,462,193)       (9,003,001)
                                                                --------------    ---------------      ------------

Cash Flows from Investing Activities
    Increase in loans receivable, net                              (54,902,395)       (28,714,843)      (15,428,373)
    Purchase of securities available for sale                       (9,822,545)        (3,533,276)       (3,870,333)
    Paydown of securities available for sale                         4,000,038            461,099            -
    Payments for the purchase of property                           (1,451,269)          (687,324)       (1,145,811)
                                                                --------------    ---------------      ------------
                  Net Cash Used by Investing
                      Activities                                   (62,270,846)       (32,474,344)      (20,444,517)
                                                                --------------    ---------------      ------------

Cash Flows from Financing Activities
    Proceeds from issuance of common stock                           2,970,520             -              8,232,333
    Net increase in deposits                                       117,224,803         49,326,883        22,016,008
    Net increase in Federal funds purchased                         (6,991,000)         3,242,000         6,789,000
                                                                --------------    ---------------      ------------
                  Net Cash Provided by Financing
                      Activities                                   113,204,323         52,568,883        37,037,341
                                                                --------------    ---------------      ------------

Net Increase (Decrease) in Cash and
    Due from Banks                                                  10,248,183         (7,367,654)        7,589,823

Cash and Due from Banks, beginning of period                           222,169          7,589,823                -
                                                                --------------    ---------------      ------------

Cash and Due from Banks, end of period                          $   10,470,352    $       222,169      $  7,589,823
                                                                ==============    ===============      ============


Noncash Investing Activities
    Unrealized gain on securities available for sale, net       $      (18,298)   $       (94,236)     $     95,471
                                                                ==============    ===============      ============

</TABLE>


The Notes to  Consolidated  Financial  Statements  are an integral part of these
statements.

                                       6
<PAGE>


                        MILLENNIUM BANKSHARES CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000




1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Organization and Significant Accounting Policies

         Millennium  Bankshares  Corporation (the Corporation),  a Virginia bank
         holding corporation,  was incorporated on December 1, 1998. On April 1,
         1999,  the  Corporation  acquired  all of  the  outstanding  shares  of
         Millennium Bank N.A., (the Bank), a wholly owned subsidiary.

         In  March  1999,   Millennium   Brokerage  Services,   Inc.  (Brokerage
         Services),   a  wholly  owned   subsidiary  of  the   Corporation   was
         incorporated  Millennium  Capital,  Inc., a wholly-owned  subsidiary of
         Millennium  Bank,  N.A., was  incorporated  in March 1999. In 2000, the
         Corporation formed two wholly-owned subsidiaries,  Millennium e-Banking
         Solution, L.L.C. and Millennium Insurance Services, Inc.

         Millennium Bank is a federally  chartered  national bank and is subject
         to regulation by the Office of the  Comptroller of the Currency  (OCC).
         The  principal  activities  of the Bank  are to  attract  deposits  and
         originate loans. Millennium Capital, Inc., a wholly-owned subsidiary of
         the  Bank  conducts   mortgage  banking  as  permitted  for  nationally
         chartered banks by applicable  regulations.  The Bank is engaged in the
         general business of banking;  aimed at serving  individuals,  small and
         medium sized  businesses  and the  professional  communities of Reston,
         Herndon and Fairfax County,  Virginia.  The Bank conducts  full-service
         banking operations from its branch and headquarters  located in Reston,
         Virginia.

         The  accounting  and  reporting  policies  of  the  Corporation  are in
         accordance with generally accepted accounting principles and conform to
         general practices within the banking industry.  The more significant of
         these policies are discussed below.

         Principals of Consolidation

         The accompanying consolidated financial statements include the accounts
         of the Millennium  Bankshares and its  subsidiaries:  Millennium  Bank,
         N.A.,   Millennium  Brokerage  Services,   Inc.,  Millennium  e-Banking
         Solutions,   L.L.C.,  and  Millennium  Insurance  Services,   Inc.  All
         significant   intercompany   accounts   and   transactions   have  been
         eliminated.

         Reclassifications

         Certain  reclassifications  have been made to prior period  balances to
         conform to the current year.

         Use of Estimates

         The  preparation of financial  statements in conformity  with generally
         accepted  accounting  principles  requires management to make estimates
         and  assumptions  that  affect  the  reported  amounts  of  assets  and
         liabilities and disclosure of contingent  assets and liabilities at the
         date of the financial  statements  and the reported  amounts of revenue
         and expenses  during the reporting  period.  Actual  results could vary
         from the estimates that were used.

         Start Up Costs and Organizational Expenses

         The Corporation and its subsidiaries have adopted Statement of Position
         98-5,  which  permits  expensing  of  costs  of  start  up  activities,
         including organizational expenses, as incurred.


                                       7
<PAGE>


                       MILLENNIUM BANKSHARES CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000



1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         Cash and Cash Equivalents

         For purposes of reporting cash flows, cash and cash equivalents include
         cash on hand and amounts due from banks.

         Cash paid for interest  amounted to $4,876,437  in 2001,  $2,474,870 in
         2000 and $213,334 in 1999.

         Loans, Loan Fees and Loans Held for Sale

         Loans are stated at the principal amount  outstanding,  net of deferred
         loan fees.  Interest on loans is  generally  computed  using the simple
         interest method.  Loan fees and related direct loan  origination  costs
         are deferred and  recognized as an adjustment of yield over the life of
         the loan or currently upon the sale or repayment of the loans.

         Loans  that  management  has the  intent  and  ability  to hold for the
         foreseeable  future or until maturity or pay-off generally are reported
         at their outstanding unpaid principal balances adjusted for charge-off,
         the  allowance  for  loan  losses,  and any  deferred  fees or costs on
         originated  loans.  Interest income is accrued on the unpaid  principal
         balance.  Loan  origination  fees,  net of certain  direct  origination
         costs, are deferred and recognized as an adjustment of the related loan
         yield using the interest method.

         The  accrual  of  interest  on  mortgage   and   commercial   loans  is
         discontinued  at the  time the loan is 90 days  delinquent  unless  the
         credit is well-secured and in process of collection.  Credit card loans
         and other  personal  loans are typically  charged-off no later than 180
         days  past  due.  In all  cases,  loans are  placed  on  nonaccrual  or
         charged-off  at an earlier date if  collection of principal or interest
         is considered doubtful.

         All  interest  accrued but not  collected  for loans that are placed on
         nonaccrual or  charged-off is reversed  against  interest  income.  The
         interest  on  these  loans  is  accounted  for  on  th  ecash-basis  or
         cost-recovery method, until qualifying for return to accrual. Loans are
         returned to accrual status when all the principal and interest  amounts
         contractually   due  are  brought   current  and  future  payments  are
         reasonably  assured.  The  Corporation  does  not  have  loans  in  the
         nonaccrual status at December 31, 2001 and 2000.

         Mortgage loans originated and intended for sale in the secondary market
         are  carried  at the  lower of cost or  estimated  market  value in the
         aggregate.  Net unrealized  losses are  recognized  through a valuation
         allowance by charges to income.

                                       8
<PAGE>

                       MILLENNIUM BANKSHARES CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


         Allowance for Possible Loan Losses

         The  provision  for possible  loan losses and the related  allowance is
         established  to  reflect  inherent,  probable  and known  losses in the
         portfolio at December 30, 2001 and 2000.  The allowance is increased by
         provisions for loan losses charged to operating  expense and reduced by
         net chargeoffs.  The provisions are based on  management's  estimate of
         net realizable  value or fair value of the  collateral,  as applicable,
         considering the current and future operating or sales conditions.

         The  allowance  for loan  losses is  evaluated  on a  regular  basis by
         management  and is  based  upon  management's  periodic  review  of the
         collectibility  of the  loans in light of  historical  experience,  the
         nature and volume of the loan  portfolio,  adverse  situations that may
         affect  the  borrower's  ability  to  repay,  estimated  value  of  any
         underlying   collateral  and  prevailing  economic   conditions.   This
         evaluation is inherently subjective,  as it requires estimates that are
         susceptible  to  significant  revision,  as  more  information  becomes
         available.

         A loan is considered  impaired when,  based on current  information and
         events,  it is probable that the Corporation  will be unable to collect
         the  scheduled  payments of principal or interest when due according to
         the  contractual  terms of the loan  agreement.  Factors  considered by
         management  in  determining   impairment   include   payments   status,
         collateral value, and the probability of collecting scheduled principal
         and interest  payments when due.  Loans that  experience  insignificant
         payment delays and payment  shortfalls  generally are not classified as
         impaired.  Management determines the significance of payment delays and
         payment shortfalls on a case-by-case  basis,  taking into consideration
         all of  the  circumstances  surrounding  the  loan  and  the  borrower,
         including  the  length of the delay,  the  reasons  for the delay,  the
         borrower's  prior  payment  record,  and the amount of the shortfall in
         relation to the principal and interest owed.  Impairment is measured on
         a loan by loan basis for commercial and construction loan by either the
         present  value of expected  future cash flows  discounted at the loan's
         effective  interest rate, the loan's  obtainable  market price,  or the
         fair value of the collateral if the loan is collateral  dependent.  The
         Corporation  does not have loans classified as impaired at December 31,
         2001 and 2000.



         Securities Available for Sale

         Securities to be held for  indefinite  periods of time and not intended
         to be held to  maturity  or on a  long-term  basis  are  classified  as
         available  for sale and  accounted  for at fair  value on an  aggregate
         basis.   These   include   securities   used  as  part  of  the  Bank's
         asset/liability  management  strategy  and may be sold in  response  to
         changes  in  interest  rates,  prepayment  risk,  the need or desire to
         increase  liquidity,  to  satisfy  regulatory  requirements  and  other
         similar factors.  Unrealized  gains and losses of securities  available
         for sale are excluded from earnings and included in  accumulated  other
         comprehensive income component of stockholders'  equity, net of related
         income taxes.  Realized  gains and losses of  securities  available for
         sale  are  included  in net  securities  gains  (losses)  based  on the
         specific identification method.



                                       9
<PAGE>

                       MILLENNIUM BANKSHARES CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000



1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         Federal Home Loan Bank Stock

         Millennium, as a member of the Federal Home Loan Bank (FHLB) of Atlanta
         is required  to hold  shares of capital  stock in the FHLB in an amount
         equal to 5 percent of its borrowings  from the FHLB. This investment is
         recorded at cost, and it is pledged as collateral for advances from the
         FHLB.  The amount of FHLB stock was  $631,400  and $586,300 at December
         31,  2001  and  2000,  respectively,  and was  included  in  investment
         securities, available-for-sale in the consolidated balance sheets.

         Bank Premises and Equipment

         Premises  and   equipment   are  stated  at  cost,   less   accumulated
         depreciation  and  amortization.  Leasehold  improvements are amortized
         over the asset  life  using the  straight-line  method.  Furniture  and
         equipment are depreciated over estimated useful lives of five and seven
         years using the straight-line  method.  The Bank depreciates  furniture
         and equipment using accelerated methods for income tax reporting.

         Repurchase Agreements

         Securities sold under  agreements to repurchase  mature daily,  usually
         within one to thirty  days,  or over a set term,  usually  one to three
         years from the transaction date.

         Stockholders' Equity

         The  Corporation was capitalized  through a private  offering  circular
         dated November 24, 1998, for  $8,266,400.  Costs related to the private
         offering  totalled  $34,167,  resulting  in  net  capital  proceeds  of
         $8,232,233.  The Corporation  had a second private  offering during the
         year ended December 31, 2001 raising  $2,973,490.  Costs related to the
         second  private  offering  totaled  $2,970  resulting  in  net  capital
         proceeds of $2,970,520.

         Banking laws and regulatory  compliance  restrict the  availability  of
         earnings for the payment of dividends.

         Millennium Bankshares  Corporation has 10,000,000,  $5 par value shares
         authorized; 2,247,978 shares are issued and outstanding at December 31,
         2001.  All  references  to the  number of common  shares and per common
         share  amounts  have been  restated to give  retroactive  effect to the
         stock split for all periods presented.






                                       10
<PAGE>

                       MILLENNIUM BANKSHARES CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000




1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         Income Taxes

         The Corporation  utilizes an asset and liability approach to accounting
         for income  taxes.  The  objective is to recognize the amount of income
         taxes   payable  or  refundable  in  the  current  year  based  on  the
         Corporation's  income tax return and the deferred tax  liabilities  and
         assets for the  expected  future tax  consequences  of events that have
         been  recognized  in  the  Corporation's  financial  statements  or tax
         returns.  The asset and liability  method  accounts for deferred income
         taxes by applying enacted statutory rates to temporary differences, the
         difference between financial  statement amounts and tax bases of assets
         and liabilities. Deferred income tax liabilities or assets are adjusted
         to reflect changes in tax laws or rates in the year of enactment.

         The Corporation pays state franchise tax in lieu of state income taxes.

         Advertising

         The Corporation follows the policy of charging the costs of advertising
         to expense as incurred.

         Income per Common Share

         The Corporation has adopted Statement of Financial Accounting Standards
         ("SFAS")  No.  128  which  establishes   standards  for  computing  and
         presenting  earnings per share (EPS) for entities  with  publicly  held
         common stock. The standard  requires  presentation of two categories of
         earnings  per share,  basic EPS and  diluted  EPS.  Basic EPS  excludes
         dilution  and is  computed  by  dividing  income  available  to  common
         stockholders   by  the   weighted-average   number  of  common   shares
         outstanding for the year.  Diluted EPS reflects the potential  dilution
         that could occur if securities or other contracts to issue common stock
         were  exercised  or  converted  into  common  stock or  resulted in the
         issuance  of common  stock  that then  shared  in the  earnings  of the
         Corporation.





                                       11

<PAGE>


                       MILLENNIUM BANKSHARES CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000




2.       SECURITIES AVAILABLE FOR SALE

         The amortized cost and approximate market value of securities available
         for sale as shown in the balance sheets of the Bank are as follows:

<TABLE>
<CAPTION>
                                                                              Gross                  Approximate
                                                   Amortized                 Unrealized                Market
                                                     Cost                      Losses                   Value
                                                  ----------                ------------             -----------
<S>                                               <C>                           <C>                  <C>
         December 31, 2001
             U.S. Government and
                 Agency Securities                $11,748,736                   $30,051              $11,718,685
             Equity securities                        863,700                        -                   863,700
                                                  -----------                   -------              -----------
                                                  $12,612,436                   $30,051              $12,582,385
                                                  ===========                   =======              ===========

                                                                              Gross                  Approximate
                                                   Amortized                 Unrealized                Market
                                                     Cost                      Losses                   Value
                                                  ----------                ------------             -----------
         December 31, 2000:
             U.S. Government and
                 Agency Securities                 $6,080,769                   $1,235                $6,079,534
             Equity securities                        818,600                       -                    818,600
                                                  -----------                   -------              -----------
                                                   $6,899,369                   $1,235                $6,898,134
                                                  ===========                   =======              ===========

</TABLE>

         The  scheduled  maturities  of U.S.  Government  and Agency  securities
         available for sale at December 31, 2001 were as follows:


<TABLE>
<CAPTION>
                                                                  Approximate
                                              Amortized             Market
                                                Cost                Value
                                            -------------        -------------
<S>                                           <C>                  <C>
                 Due from one year to
                     five years              $        -           $        -
                 Due from five years and
                     thereafter                11,748,736           11,718,685
                                             ------------         ------------
                                              $11,748,736          $11,718,685
                                              ===========          ===========

</TABLE>

         Investment   securities  with  a  carrying  amount  of  $5,012,964  and
         $6,079,534 at December 31, 2001 and 2000, respectively, were pledged as
         collateral  on  Federal  Home  Loan  Bank and  Community  Bankers  Bank
         advances and for other purposes as required or permitted by law.





                                       12
<PAGE>

                       MILLENNIUM BANKSHARES CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000





3.       LOANS RECEIVABLE

         Loans receivable include the following at December 31:

                                                   2001            2000
                                                   ----            ----

                Mortgage loans                 $ 62,084,550    $ 18,147,802
                Commercial                       24,614,401      15,132,779
                Lines of credit                  10,918,127       9,986,878
                Consumer                          1,119,882         714,106
                Overdrafts                          292,644          92,221
                                               ------------    ------------
                Subtotal                         99,029,604      44,073,786
                Provision for loan losses        (1,391,326)       (466,000)
                Deferred loan costs (fees)           16,007          69,430
                                               ------------    ------------
                     Totals                    $ 97,654,285    $ 43,677,216
                                               ============    ============

         An analysis of the  allowance for possible loan losses is as follows at
         December 31:

                                                        2001              2000
                                                        ----              ----
                Balance beginning of period           $   466,000       $161,000
                Provision for loan losses               1,020,000        305,000
                Loans charged to reserve                  (95,949)          -
                Recoveries credited to reserve              1,275           -
                                                      -----------       --------
                     Totals                           $ 1,391,326       $466,000
                                                      ===========       ========

         Total  mortgage  loans pledged as collateral for Federal Home Loan Bank
         advances  were  $15,733,075  and  $12,837,525  at December 31, 2001 and
         2000, respectively.  The total amount of loans being serviced by others
         was $56.0 million at December 31,2001.

4.       PREMISES AND EQUIPMENT

         Premises and equipment include the following at December 31:

                                                        2001              2000
                                                        ----              ----
                 Furniture and equipment           $2,754,764        $1,515,311
                 Leasehold improvements               534,000           325,184
                                                   ----------        ----------
                                                    3,288,764         1,840,495
                 Less accumulated depreciation       (944,402)         (413,126)
                                                   ----------        ----------
                                                   $2,344,362        $1,427,369
                                                   ==========        ==========

         Depreciation of premises and equipment  charged to expense  amounted to
         $534,276 and $291,706 in 2001 and 2000, respectively.


                                       13

<PAGE>


                       MILLENNIUM BANKSHARES CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000



5.       DEPOSITS

         Deposits consist of the following at December 31:
<TABLE>
<CAPTION>

                                                 Weighted                           Weighted
                                                  Average                            Average
                                               Interest Rate          2001        Interest Rate            2000
                                               -------------     -------------    -------------        ------------
<S>                                               <C>            <C>                  <C>              <C>
                 Non-interest bearing
                     Demand deposits              0.00%          $  27,721,861        0.00%            $  8,159,957
                 Interest bearing
                     Demand deposits              4.04%              5,222,263        2.70%               2,798,478
                 Savings deposits                 2.21%             34,202,094        4.84%              11,494,515
                 Time deposits                    5.48%            121,421,476        7.02%              48,889,941
                                                  ----           -------------         ---             ------------
                                                  4.56%           $188,567,694        5.12%             $71,342,891
                                                  ====            ============        ====              ===========
</TABLE>

         Time  certificates  of deposit in  denominations  of  $100,000  or more
         totalled  $89,535,932 in 2001 and $13,315,186 in 2000.  Certificates of
         deposit mature as follows at December 31:

                                                 2001                  2000
                                            -------------          -----------
                 3 months or less           $  44,514,241          $11,487,237
                 3 to 12 months                42,545,905           25,239,919
                 1 to 5 years                  32,564,411            8,807,697
                 Over 5 years                   1,796,919            3,355,088
                                            -------------          -----------
                      Totals                $ 121,421,476          $48,889,941
                                            =============          ===========

6.       BORROWINGS

         The Bank had borrowings outstanding as follows:

<TABLE>
<CAPTION>
                                                 Interest
                                                    Rate            Maturity                Amount
                                                 ----------      ---------------         ------------
<S>                                               <C>            <C>                     <C>
                 December 31, 2000:
                 Federal Home Loan Bank           6.48%          May 28, 2004            $    400,000
                 Federal Funds Purchased          1.81%          Demand                     2,640,000
                                                                                         ------------
                                                                                         $  3,040,000
</TABLE>


<TABLE>
<CAPTION>

                                                 Interest
                                                    Rate            Maturity                Amount
                                                 ----------      ---------------         ------------
<S>                                               <C>            <C>                     <C>
                 December 31, 2000:
                 Federal Home Loan Bank            6.35%         Jan. 22, 2001           $  6,275,000
                                                   6.07%         May 29, 2001                 750,000
                                                   6.48%         May 28, 2004                 400,000
                 Federal Funds Purchased           6.55%         Demand                     2,606,000
                                                                                         ------------
                                                                                         $ 10,031,000
</TABLE>

         Interest  expense on  borrowed  funds was  $284,180  for the year ended
         December 31, 2001 and $526,682 for the year ended December 31, 2000.


                                       14

<PAGE>



                       MILLENNIUM BANKSHARES CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000




7.       INCOME TAXES

         The provision for income taxes consists of the following::

                                                          2001         2000
                                                      ------------  ----------
                  Current (benefit) provision          $  501,000    $      -
                  Deferred (benefit) provision           (306,000)          -
                                                       ----------    --------
                  Total provision for income taxes     $  195,000    $      -
                                                       ==========    ========

         Deferred income taxes reflect temporary  differences in the recognition
         of revenue and  expenses  for tax  reporting  and  financial  statement
         purposes,  principally because certain items, such as the allowance for
         loan losses and loan fees,  are  recognized  in  different  periods for
         financial  reporting  and tax return  purposes.  In 2001,  a  valuation
         allowance has not been established for deferred tax assets. Realization
         of the deferred tax asset is dependent on generating sufficient taxable
         income.  Although  realization is not assured management believes it is
         more  likely  than not  that  all of the  deferred  tax  asset  will be
         realized.

         Net deferred tax assets are comprised of the following at December 31:
<TABLE>
<CAPTION>

                  Deferred Source                                       2001                2000
                  ---------------                                    ----------           ----------
<S>                                                                  <C>                  <C>
                  Net operating loss carryforward                    $    -               $  136,000
                  Start-up costs                                         24,000               35,000
                  Loan loss reserve                                     372,000               77,000
                  Unearned loan fees                                     (6,000)             (22,000)
                  Depreciation                                          (87,000)             (20,000)
                                                                     ----------           ----------
                           Gross deferred tax assets (liability)        303,000              206,000

                  Allowance                                                  -              (206,000)
                                                                     ----------           ----------
                           Net deferred tax asset                    $  303,000           $    -
                                                                     ==========           ==========
</TABLE>

         The  provisions  for income taxes differs from the amount of income tax
         determined by applying the applicable U.S. statutory Federal income tax
         rate to pretax income as a result of the following differences:
<TABLE>
<CAPTION>

                                                                       2001          2000
                                                                    ----------    ----------
<S>                                                                   <C>            <C>
                  Statutory Federal income tax rate                      34%            34%

                  Change in deferred tax asset valuation allowance      (17)           (34)
                                                                      -----          -----
                  Effective tax rate                                     17%             0%
                                                                      =====          =====
</TABLE>





                                       15
<PAGE>


                       MILLENNIUM BANKSHARES CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000




8.       REGULATORY MATTERS

         Millennium's primary supervisory agent is the OCC. The OCC has mandated
         certain minimum capital  standards for the industry.  In addition,  the
         Federal  Deposit   Insurance   Corporation   Improvement  Act  of  1991
         ("FDICIA")   outlines  various  levels  of  capital  adequacy  for  the
         industry.

         Failure to meet  minimum  capital  requirements  can  initiate  certain
         mandatory  -  and  possibly  additional   discretionary  -  actions  by
         regulation that, if undertaken,  could have a direct material effect on
         Millennium's  financial  statements.  Under capital adequacy guidelines
         and the regulatory  framework for prompt corrective action.  Millennium
         must  meet  specific  capital  guidelines  that  involve   quantitative
         measures of its  assets,  liabilities,  and  certain  off-balance-sheet
         items as calculated under qualitative judgments by the regulators about
         components, risk weightings, and other factors.

         Quantitative  measures  established  by  regulation  to ensure  capital
         adequacy require Millennium to maintain minimum amounts and ratios (set
         forth in the table  below) of total and Tier I capital  (as  defined in
         the  regulations) to risk-weighted  assets (as defined),  and of Tier I
         capital (as defined) to average assets (as defined).

         As of December  31,  2001,  the most recent  notification  from the OCC
         categorized the Bank as well capitalized under the regulatory framework
         for prompt  corrective  actions.  To be categorized as well capitalized
         the Bank must maintain minimum total risk-based, Tier I risk-based, and
         Tier  I  leverage  ratios  as set  forth  in the  table.  There  are no
         conditions or events since that notification  that management  believes
         have changed the institutions category.

         Millennium's  actual  capital  amounts and ratios are also presented in
         the tables below. (All dollar amounts are in thousands.)

<TABLE>
<CAPTION>
                                                                         For
                                                                       Capital                     To be Well
                                              Actual                   Purposes                    Capitalized
                                             Amount        Ratio       Amount        Ratio       Amount     Ratio
                                             ------        -----       -------       -----       ------     -----
<S>                                           <C>          <C>           <C>         <C>          <C>       <C>
        As of December 31, 2001
             Total Capital
                 (to risk-weighted assets)    $13,383      10.62%        $10,081     8.00%        $12,591   10.00%
             Tier I
                 (to risk-weighted assets)     11,992        9.52          5,040     4.00           7,560    6.00
             Tier I ( to average assets)        9,939        9.67          4,110     4.00           5,135    5.00
        As of December 31, 2000
             Total Capital
                 (to risk-weighted assets)      8,041       10.27          6,261     8.00           7,826   10.00
             Tier I Capital
                 (to risk-weighted assets)      7,575        9.68          3,130     4.00           4,700    6.00
             Tier I Capital
                 (to average assets)            6,231       11.71          2,130     4.00           2,660    5.00

</TABLE>

                                       16
<PAGE>


                       MILLENNIUM BANKSHARES CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000




9.       SUBSEQUENT EVENTS

         In February 2002 the Corporation  completed its initial public offering
         and registration  statement with the Securities and Exchange Commission
         (SEC).  The  Corporation  is currently  trading on the Nasdaq  SmallCap
         Market  under the  symbol  "MBVA".  The  Corporation  raised a total of
         $8,625,000,  selling a total of 1,437,500  shares of its common  stock.
         Net proceeds  from the offering  were  $8,003,445  after  deducting the
         underwriting  fee and other  offering  expenses.  The proceeds from the
         sale of the shares will be used for general corporate purposes.

10.      OPERATING LEASES

         Millennium  leases its  corporate  headquarters  and most of its branch
         facilities under non-cancelable lease agreements.  Most of these leases
         provide for the payment of property taxes and other costs by Millennium
         and include one or more renewal options ranging up to ten years.

         The  following are the future  minimum  lease  payments at December 31,
         2001:

         Years ending December 31,
                  2002                                         $  486,171
                  2003                                            520,751
                  2004                                            536,367
                  2005                                            552,448
                  2006                                            531,157
                  2007 and thereafter                           1,318,263
                                                              -----------
                             Total                             $3,945,157
                                                               ==========

         Rent expense amounted to $306,103,  $212,189 and $108,364 for the years
         ended December 31, 2001, 2000 and 1999.

11.      INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS

         In the  ordinary  course of  business,  the Bank has  granted  loans to
         directors,  executive officers,  employees and their associates.  These
         transactions have been made on substantially the same terms,  including
         interest  rates and  collateral,  as those  prevailing  at the time for
         comparable  transactions with unrelated persons.  Directors,  officers,
         employees and their affiliated  companies were indebted to the Bank for
         loans  totaling  $11,562,418  and  $8,176,629  at December 31, 2001 and
         2000,  respectively.  Deposits by related  parties to the Bank  totaled
         $6,158,799 and $5,539,454 at December 31, 2001 and 2000, respectively.

         The  Corporation  paid  $88,883 in 2001 and  $14,254 in 2000 to the law
         firm of two directors  who serve as legal  counsel for the  Corporation
         and its subsidiaries.




                                       17
<PAGE>


                        MILLENNIUM BANKSHARES CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000




12.      COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS OF CREDIT

         In the normal course of business,  the Bank incurs  certain  contingent
         liabilities  that  are  not  reflected  in the  accompanying  financial
         statements.   Commitments  under  unfunded   commitments   approximated
         $5,137,223 in 2001 and $9,035,680 in 2000. The Bank does not anticipate
         any material losses as a result of these commitments.

         The Bank  uses the same  credit  policies  in  making  commitments  and
         conditional  obligations as it does for  on-balance-sheet  instruments.
         The amount of collateral obtained, if deemed necessary by the Bank upon
         extension of credit, is based on management's  credit evaluation of the
         counter-party. Collateral held varies but may include cash, securities,
         accounts  receivable,  inventory,  property,  plant and  equipment  and
         income-producing commercial properties and residential properties.

         Most of the Bank's loans,  commitments,  and commercial standby letters
         of credit have been granted to customers in the Bank's market area. The
         concentrations  of  credit by type of loan are set forth in Note 3. The
         distribution   of  commitments  to  extend  credit   approximates   the
         distribution of loans  outstanding.  The Bank does not extend credit to
         any single  borrower or group of related  borrowers  in excess of their
         legal limit.

13.      STOCK OPTION PLAN

         On August 12, 1999, the  Corporation  adopted an Incentive Stock Option
         Plan.  The total number of shares  granted under the plan cannot exceed
         1,000,000 shares. The plan is administered by the Board of Directors of
         the  Corporation and the plan will terminate as of August 11, 2009. The
         Board has authorized the Chairman of the  Corporation  the authority to
         grant 300,000 shares to key employees at his discretion. Under the plan
         the option  price of the  shares  must be granted at not less than fair
         market value,  the shares term may not exceed ten years and the options
         are not transferable.

                                                    Number of       Option Price
                                                      Shares         Per Share
                                                  -------------   --------------
                 Outstanding, December 31, 1999       165,600            $ 5
                                                     --------            ---
                     Grants                           209,366              5
                     Exercised                         -                 -
                     Canceled or expired               (8,700)             5
                                                    ---------            ---
                 Outstanding, December 31, 2000       366,266              5
                                                      -------            ---
                     Grants                           416,666              5
                     Exercised                         -                 -
                     Canceled or expired              (15,300)             5
                                                     --------            ---
                 Outstanding, December 31, 2001       767,632            $ 5
                                                      =======            ===



                                       18
<PAGE>


                         MILLENNIUM BANKSHARES CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000




13.      STOCK OPTION PLAN (CONTINUED)

         The vesting period of the remaining options is as follows:

                 Vested and exercisable                     139,063
                 February 1, 2002                           145,472
                 February 1, 2003                           145,472
                 February 1, 2004                           145,472
                 February 1, 2005                           114,013
                 February 1, 2006                            78,140
                                                            -------
                                                            767,632

         The Corporation adopted the disclosure-only  provisions of Statement of
         Financial  Accounting  Standards No. 123,  Accounting  for  Stock-Based
         Compensation  and will continue to apply  Accounting  Principles  Board
         Statement  No. 25 and related  interpretations  in  accounting  for its
         employee   compensation  plans.  SFAS  123  establishes   standards  of
         financial   accounting   and   reporting   for   stock-based   employee
         compensation  plans including stock option plans,  stock purchase plans
         and other  arrangements by which  employees  receive shares of stock or
         other  equity  instruments  based on the  market  price of an  entity's
         stock.

         If the Corporation had elected to recognize  compensation  cost for the
         plan based on the fair value at the grant dates for awards  under those
         plans,  consistent  with the method  prescribed  by SFAS No.  123,  net
         income and  earnings per share would have been changed to the pro forma
         amounts indicated below:

<TABLE>
<CAPTION>

                                                                          2001             2000
                                                                       -----------      -----------
<S>                                                                       <C>              <C>
                 Net income                          As reported          $940,183         $543,190
                                                     Pro forma             806,579          432,271
                 Basic earnings per share            As reported              .46              .33
                                                     Pro forma                .39              .26
                 Diluted earnings per share          As reported              .38              .33
                                                     Pro forma                .33              .26
</TABLE>

         Compensation  costs under SFAS 123 are recognized  when the options are
         vested  and  exercisable.  The  fair  value  of  Millennium  Bankshares
         Corporation  stock  options  used to  compute  pro forma net income and
         earnings per share  disclosures is the estimated present value at grant
         date  using  the  Black  Scholes   pricing  model  with  the  following
         assumptions:  a risk free interest  rate of 5.02 percent,  no estimated
         dividend  yield,  an expected  volatility of 10 percent and an expected
         holding period of five years.





                                       19
<PAGE>


                       MILLENNIUM BANKSHARES CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000



14.      EARNINGS PER SHARE

         The following table shows the weighted average number of shares used in
         computing  earnings per share and the effect on weighted average number
         of shares of potential dilutive common stock.

<TABLE>
<CAPTION>

                                                       For the Years Ended December 31,
                        --------------------------------------------------------------------------------------------
                                                  2001                         2000                    1999
                                           ---------------------      ---------------------    ---------------------
                                                      Per Share                   Per Share                Per Share
                                              Shares   Amount            Shares     Amount       Shares      Amount
                                           ---------- ----------      ----------  ---------    ----------  ---------
<S>                                         <C>           <C>          <C>            <C>       <C>           <C>
         Net Income (loss)                  2,066,512     $0.45        1,653,280      $.33      1,653,280     $(.69)
                                                          =====                       ====                    =====
         Basic earnings per share
         Effect of dilutive securities
             Stock options                    127,939                        -                         -
             Warrants                         275,547                        -                         -
                                            ---------                  ---------                ---------
         Diluted earnings per share         2,469,998     $0.38        1,653,280   $.33         1,653,280     $(.69)
                                            =========     =====        =========   ====         =========     =====
</TABLE>

         Stock  options and Warrants to purchase  common stock were  outstanding
         during 2000 and 1999 but were not  included in the  computation  of EPS
         because the options' exercise price was greater than the average market
         price of the common shares.

15.      PARENT COMPANY ACTIVITY

         Millennium Bankshares Corporation owns all of the outstanding shares of
         the Bank.  Accordingly,  the balance  sheet and statement of income for
         the Corporation only, are as follows at December 31:

                                        BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                        2001                    2000
                                                                  ---------------          --------------
<S>                                                               <C>                        <C>
                 Assets:
                     Cash and due from banks                      $       63,411             $     31,876
                     Investment in subsidiaries                       12,283,677                7,487,092
                     Other assets                                        128,378                  114,093
                                                                  --------------             ------------
                 Total Assets                                     $   12,475,466             $  7,633,061
                                                                  ==============             ============

                 Liabilities:
                     Short term line of credit                    $      950,000             $          -

                 Stockholder's equity:
                     Common stock                                     11,202,753                8,232,233
                     Accumulated other comprehensive loss                (19,533)                  (1,235)
                     Retained earnings (deficit)                         342,246                 (597,937)
                                                                  --------------             ------------
                 Total Liabilities and Stockholders' Equity          $12,475,466               $7,633,061
                                                                  ==============             ============
</TABLE>


                                       20
<PAGE>


                       MILLENNIUM BANKSHARES CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000




15.      PARENT COMPANY ACTIVITY (CONTINUED)

                                        STATEMENTS OF INCOME

                                                      2001           2000
                                                  -----------    -----------
Equity in earnings of subsidiaries                $   919,884    $   538,893
Interest income, net                                   20,299          4,297
                                                  -----------    -----------
Net income (loss)                                 $   940,183    $   543,190
                                                  ===========    ===========

                       STATEMENTS OF CASH FLOWS

                                                      2001           2000
                                                  -----------    -----------
Cash Flows from Operating Activities
    Net income (loss)                             $   940,183    $   543,190
    Increase in other assets                          (14,285)       (67,468)
                                                  -----------    -----------
Net Cash Provided by Operating Activities             925,898        475,722
                                                  -----------    -----------

Cash Flows from Investing Activities
    Increase in investment subsidiaries            (4,814,883)    (1,608,757)
                                                  -----------    -----------

Cash Flows from Financing Activities
    Proceeds from short term borrowings               950,000           -
    Proceeds from issuance of common stock          2,970,520           -
                                                  -----------    -----------
Net Cash Provided by Financing Activities           3,920,520           -
                                                  -----------    -----------

Net (Decrease) Increase in Cash and
    Due from Banks                                     31,535     (1,133,035)
Cash and Due from Banks, beginning of period           31,876      1,164,911
                                                  -----------    -----------
Cash and Due from Banks, end of period            $    63,411    $    31,876
                                                  ===========    ===========

Noncash Investing Activities
    Unrealized gain (loss) on securities
        available for sale, net                   $   (18,298)   $   (94,236)
                                                  ===========    ===========


                                       21
<PAGE>


                       MILLENNIUM BANKSHARES CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000



16.      ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

         The assumptions used and the estimates disclosed represent management's
         best judgment of appropriate  valuation  methods.  These  estimates are
         based  on  pertinent  information  available  to  management  as of the
         respective  reporting  dates.  In certain  cases,  fair  values are not
         subject to precise  quantification  or  verification  and may change as
         economic  and market  factors,  and  management's  evaluation  of those
         factors change.

         Although management uses its best judgment in estimating the fair value
         of these financial  instruments,  there are inherent limitations in any
         estimation  technique.  Therefore,  these fair value  estimates are not
         necessarily  indicative of the amounts that Millennium would realize in
         a market transaction. Because of the wide range of valuation techniques
         and the numerous  estimates  which must be made, it may be difficult to
         make reasonable  comparisons of Millennium's  fair value information to
         that of other  financial  institutions.  It is important  that the many
         uncertainties  discussed  above be considered  when using the estimated
         fair  value   disclosures   and  to  realize   that  because  of  these
         uncertainties,  the  aggregate  fair value  amount  should in no way be
         construed as representative of the underlying value of Millennium.  The
         estimated fair values of Millennium's financial instruments at December
         31, 2001 and 2000 are as follows:

<TABLE>
<CAPTION>
                                                 December 31, 2001                     December 31, 2000
                                               Carrying          Fair              Carrying           Fair
         ($ in thousands)                       Amount          Value               Amount            Value
                                              ---------      -----------           -------        ------------
<S>                                             <C>            <C>                 <C>             <C>
         Financial assets:
             Cash and Federal funds             $ 10,470       $ 10,470            $     222       $     222
             Loans held for sale                  77,426         77,426               34,643          34,643
             Loans receivable, net                97,654        103,654               43,677          45,622
             Available-for-sale securities        12,582         12,582                6,898           6,898
         Financial liabilities:
             Deposits                            188,568        194,671               71,343          74,561
             Other borrowings                      5,433          5,433               10,516          10,516
</TABLE>

         The following  methods and  assumptions  were used to estimate the fair
         value amounts at December 31, 2001 and 2000:

         Cash and Cash Equivalents

         Carrying amount approximates fair value

         Available-for Sale Securities

         Fair value is based on quoted market prices

         Loans Receivable, Net of Allowance

         Fair value of loans is estimated  using  discounted  cash flow analyses
         based on contractual  repayment  schedules.  The discount rates used in
         these  analyses  are based on either  the  interest  rates paid on U.S.
         Treasury  securities of comparable  maturities adjusted for credit risk
         and  non-interest  operating  costs  or the  interest  rates  currently
         offered by  Millennium  for loans with  similar  terms to  borrowers of
         similar credit quality.


                                       22
<PAGE>



                       MILLENNIUM BANKSHARES CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000



16.      ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

         Loans Held for Sale

         Fair value is based on selling prices arranged by arms-length contracts
         with third parties

         Deposits

         The  carrying  amount  of  deposit   liabilities   payable  on  demand,
         consisting of NOW accounts,  money market deposits,  statement  savings
         and other  deposit  accounts  approximates  fair  value.  Fair value of
         fixed-rate  certificates  of deposit is estimated  based on  discounted
         cash flow  analyses  using the  remaining  maturity  of the  underlying
         accounts  and  interest  rates  currently  offered on  certificates  of
         deposit with similar original maturities

         Borrowings

         The carrying  amount of  short-term  FHLB  advances  approximates  fair
         value.  Fair  value  of all  other  borrowings  is  estimated  based on
         discounted  cash flow  analyses  using the  remaining  maturity  of the
         borrowings  and interest rates  currently in effect on borrowings  with
         similar original maturities.

17.      QUARTERLY FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>

                                            Quarter Ended       Quarter Ended       Quarter Ended      Quarter Ended
                                            December 31,        September 30,            June 30,         March 31,
                                                   2001               2001                2001                2001
                                            --------------      --------------      --------------     -------------
<S>                                               <C>                 <C>                 <C>                  <C>
         Interest income
         Net interest income                      $3,116             $2,640              $2,092              $2,196
         Provision for loan losses                 1,358              1,383                 946               1,016
         Income before income taxes                  250                350                 255                 165
         Net income                                  253                323                 292                 267
                                                 -------            -------             -------             -------
                                                     171                210                 292                 267
                                                 -------            -------             -------             -------

         Earnings per share:
             Basic                                $.07               $.09                 $.13              $.16
             Diluted                               .06                .07                  .11               .14
</TABLE>

<TABLE>
<CAPTION>

                                            Quarter Ended       Quarter Ended       Quarter Ended      Quarter Ended
                                            December 31,        September 30,            June 30,         March 31,
                                                 2000               2000                2000                2000
                                            --------------      --------------      --------------     -------------
<S>                                               <C>                 <C>                 <C>                  <C>
         Interest income
         Net interest income                      $2,134              $1,382              $1,045               $770
         Provision for loan losses                   926                 679                 565                437
         Income before income taxes                  160                  75                  45                 25
         Net income                                  254                 294                  17                (22)
                                                --------             -------            --------              -----
                                                     254                 294                  17                (22)
                                                --------             -------            --------              -----

         Earnings per share:
             Basic                                $.15                $.18                $.01              $(.01)
             Diluted                               .15                 .18                 .01               (.01)

</TABLE>

                                       23
<PAGE>



                                   SIGNATURES

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

                                             MILLENNIUM BANKSHARES CORPORATION



Date:  March 29, 2002                        By:  /s/ Carroll C. Markley
                                                  ------------------------------
                                                  Carroll C. Markley
                                                  Chairman, President and
                                                  Chief Executive Officer


         In accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  registrant and in the capacities and
on the dates indicated.

<TABLE>
<CAPTION>
               Signature                                      Title                                 Date


<S>                                         <C>                                                <C>
        /s/ Carroll C. Markley              Chairman, President and Chief Executive            March 29, 2002
-------------------------------------                Officer and Director
           Carroll C. Markley                    (Principal Executive Officer)

         /s/ Thomas J. Chmelik                             Treasurer                           March 29, 2002
-------------------------------------              (Principal Financial and
           Thomas J. Chmelik                          Accounting Officer)


                                                     Chairman of the Board                     March 29, 2002
-------------------------------------
           Bronson Ford Byrd


                                                  Vice Chairman of the Board                   March 29, 2002
-------------------------------------
          L. James D'Agostino


         /s/ Andrew E. Kauders                             Director                            March 29, 2002
-------------------------------------
           Andrew E. Kauders


                                                           Director                            March 29, 2002
-------------------------------------
              Jay W. Khim


         /s/ Stewart R. Little                             Director                            March 29, 2002
-------------------------------------
           Stewart R. Little



<PAGE>

          /s/ David B. Morey                               Director                            March 29, 2002
-------------------------------------
             David B. Morey


         /s/ Arthur J. Novick                              Director                            March 29, 2002
-------------------------------------
            Arthur J. Novick


                                                           Director                            March 29, 2002
-------------------------------------
            Gregory L. Oxley


                                                           Director                            March 29, 2002
-------------------------------------
           Rolando J. Santos


                                                           Director                            March 29, 2002
-------------------------------------
            Robert T. Smoot


          /s/ Derek A. Tidman                              Director                            March 29, 2002
-------------------------------------
            Derek A. Tidman


                                                           Director                            March 29, 2002
-------------------------------------
           Ronald W. Torrence


         /s/ Douglas K. Turner                             Director                            March 29, 2002
-------------------------------------
           Douglas K. Turner

</TABLE>


<PAGE>


                                  EXHIBIT INDEX

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

     3.1         Articles of  Incorporation  (restated  in  electronic  format),
                 attached as Exhibit 3.1 to the  Registration  Statement on Form
                 SB-2, as amended,  Registration No.  333-72500,  filed with the
                 Commission on October 30, 2002 (the "Form SB-2"),  incorporated
                 herein by reference.

     3.2         Bylaws, attached as Exhibit 3.2 to the Form SB-2,  incorporated
                 herein by reference.

     4.1         Form of Common Stock Certificate, attached as Exhibit 4.1 to
                 the Form SB-2,  incorporated  herein by reference.

     4.2         Form of  Warrant  Agreement,  attached  as  Exhibit  4.2 to the
                 Form  SB-2,  incorporated  herein  by reference.

     10.1        Employment  Contract,  dated as of  February  8, 2001,  between
                 Millennium Bankshares Corporation,  Millennium Bank and Carroll
                 C.  Markley,  attached  as  Exhibit  10.1  to  the  Form  SB-2,
                 incorporated herein by reference.

     10.2        Form  of  Employee  Stock  Option  of  Millennium   Bankshares
                 Corporation,  attached  as  Exhibit  10.2  to the  Form  SB-2,
                 incorporated herein by reference.

     21          List of  Subsidiaries, attached as Exhibit 21 to the Form SB-2,
                 incorporated herein by reference.