U. S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   Form 10-KSB

(Mark One)

   X     Annual report under section 13 or 15(d) of the Securities  Exchange Act
 -----   of 1934 for the fiscal year ended December 31, 2000.

         Transition  report  under  section  13 or 15(d) of the  Securities  and
 -----   Exchange Act of 1934 for the transition  period

Commission file number                  333-86993
                      ----------------------------------------------------------

  MainStreet BankShares, Inc. (Formerly Known as Smith River Bankshares, Inc.)
--------------------------------------------------------------------------------
                 (Name of small business issuer in its charter)

          Virginia                                           54-1956616
-------------------------------                     ----------------------------
(State or other jurisdiction of                           (I.R.S. Employer
 incorporation or organization)                          Identification No.)

Suite 12, Patrick Henry Mall
     730 East Church Street, Martinsville, Virginia                  24112
------------------------------------------------------------    ----------------
       (Address of principal executive offices)                    (Zip Code)

Issuer's telephone number                  (540) 632-8092
                          ------------------------------------------------------

Securities registered under Section 12(b)
                of the Act:
             (Title of class)              Name of exchange on which registered
                                      None
--------------------------------------------------------------------------------

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

         Common Stock, No Par Value                       None
-----------------------------------------  -------------------------------------
              (Title of class)             Name of exchange on which registered

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

Check if disclosure  of delinquent  filers in response to Item 405 of Regulation
S-B is not 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 ]

State issuer's revenues for its most recent fiscal year       $486,869
                                                        ------------------------

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates  computed by reference to the price at which the common equity
was sold,  or the average bid and asked  price of such  common  equity,  as of a
specified  date  within the past 60 days.  $5,597,837  based on $10.75 per share
                                           -------------------------------------
last time priced on February 20, 2001
-------------------------------------

(Applicable  only  to  corporate   registrants)   State  the  number  of  shares
outstanding of each of the issuer's  classes of common equity,  as of the latest
practicable date 689,368 shares outstanding as of February 28, 2001.
                 ---------------------------------------------------

Documents incorporated by reference.  Portions of the Corporation's 2001 Proxy
                                      ----------------------------------------
Statement have been incorporated by reference into Part III
-----------------------------------------------------------



Transitional Small Business Disclosure Format:   Yes          No   X
                                                     -----       -----

<PAGE>
                           MainStreet BankShares, Inc.
                (Formerly Known as Smith River Bankshares, Inc.)

                                   Form 10-KSB

                                      Index



                                     PART I
                                     ------



Item 1        Description of Business                                      1 - 2

Item 2        Description of Property                                          6

Item 3        Legal Proceedings                                                6

Item 4        Submission of Matters to a Vote of Security Holders              6



                                     PART II
                                     -------

Item 5        Market for Common Equity and Related Shareholder Matters         7

Item 6        Management's Plan of Operation                              7 - 11

Item 7        Financial Statements                                       12 - 28

Item 8        Changes In and Disagreements With Accountants on Accounting
              and Financial Disclosure                                        29


                                    PART III
                                    --------

Item 9        Directors, Executive Officers, Promoters and Control Persons,
              Compliance with Section 16(a) of the Exchange Act          29 - 31

Item 10       Executive Compensation                                          31

Item 11       Security Ownership of Certain Beneficial Owners and Management  31

Item 12       Certain Relationships and Related Transactions                  31

Item 13       Exhibits and Reports on Form 8-K                                31

<PAGE>
                                     PART I

Item 1.       Description of Business

General
-------

MainStreet BankShares, Inc., (the "Corporation", "Bankshares", or "Registrant"),
was  incorporated in the  Commonwealth of Virginia on January 14, 1999 under the
name of First  Community  National  BanCorp.,  Inc.  On July 8,  1999,  Restated
Articles of  Incorporation  became  effective  changing the Corporation  name to
Smith  River   Bankshares,   Inc.  On  March  6,  2001,   Restated  Articles  of
Incorporation  became  effective  changing the  Corporation  name to  MainStreet
BankShares,  Inc. The  Corporation  was  primarily  formed to serve as a holding
company for Smith River  Community Bank,  N.A.,  (the "Bank"),  a national bank.
Prior to the formation of the Corporation,  the Corporation's  shareholders (the
"Organizers")  formed FCNB LLC (the  "LLC"),  a limited  liability  company,  to
organize   the   Corporation   and  the  Bank  and  provide  for   financing  of
organizational  and other costs. The Corporation filed a registration  statement
on Form SB-2 with the Securities and Exchange Commission, (the "Commission"), to
register  the  stock  for a public  offering.  The  registration  statement  was
declared  effective by the  Commission  on November 4, 1999.  Bankshares  raised
$6,893,680  through its public  offering of its common stock which was completed
in July 2000.  Upon the  formation  of Smith River  Community  Bank,  N.A.,  the
Corporation  bought all the stock of the Bank from the proceeds of the offering.
The business of the Corporation is being conducted through the Bank.

Approval was received on December 16, 1999 from the State Corporation Commission
approving the acquisition of Smith River Community Bank by Bankshares.  Approval
from the Federal  Reserve  Bank of Richmond  was  received on December 10, 1999.
MainStreet BankShares, Inc. (formerly known as Smith River Bankshares,  Inc.) is
authorized  to engage in any  activity  available  by law to a  corporation,  as
permitted  under  Federal and state  regulatory  restrictions  applicable to the
activities of bank holding companies. The holding company structure will provide
greater  flexibility than Smith River Community Bank, N.A.  standing alone would
have  to  expand  and  diversify   business   activities  through  newly  formed
subsidiaries or through acquisitions. While there are no present plans to engage
actively  in any other  business  activities,  the  Corporation  will  study the
feasibility  of  establishing  or  acquiring  subsidiaries  to  engage  in other
business activities permitted by law.


Smith River Community Bank, N.A.
--------------------------------

Smith River  Community Bank, N.A. was organized under the National Bank Act as a
nationally  chartered  commercial bank and member of the Federal Reserve,  whose
deposits are insured by the Federal Deposit Insurance Corporation ("FDIC").  The
Bank  applied  for both the charter and  deposit  insurance  on March 31,  1999.
Preliminary  charter  approval was received from the Comptroller of the Currency
on August 4, 1999 and preliminary  deposit insurance  approval was received from
the FDIC on September  14, 1999.  The Bank  received  final  approvals  from the
Office of the  Comptroller  of the  Currency  and the FDIC on July 21, 2000 with
permission  to open on July 24,  2000.  The Bank's  initial  capitalization,  as
mentioned  previously,  was provided by Bankshares  purchasing $6,321,840 of its
common stock.

The Bank is accepting  deposits from the general  public and making  commercial,
consumer,  and real estate loans. It is anticipated that in the initial years of
operations,  the Bank will  rely  mainly on local  advertising  and  promotional
activities and on personal contacts by its directors, officers, and shareholders
to  attract  business  and to  acquaint  potential  customers  with  the  Bank's
personalized  services. The Bank emphasizes a high degree of personalized client
service in order to be able to serve each customer's  banking needs. Smith River
Community Bank's marketing approach emphasizes the advantages of dealing with an
independent,  locally-managed  and  headquartered  commercial  bank to meet  the
particular  needs  of  individuals,  professionals  and  small  to  medium-sized
businesses.  The Bank will continue to evaluate all banking services as to their
profitability.

Smith River  Community  Bank,  N.A.  opened its second  branch at 380  Riverside
Drive,  Bassett,  Virginia on December 4, 2000 and began to accept  deposits and
make loans at that location.

<PAGE>

Primary Service Area
--------------------

The primary service area of Smith River Community Bank, N.A. is Martinsville and
Henry  County,  Virginia  which is located in south  central  Virginia  with its
southern  border on the North Carolina state line. The city of  Martinsville  is
geographically  located in the center of the county. The market has a population
of  approximately  71,000  and  its  economy  is not in  pace  with  the  growth
experienced in other areas of Virginia.

Smith River  Community  Bank,  N.A. has received  regulatory  approval to open a
branch  in  Stuart,  Virginia  which is  located  in  Patrick  County.  The bank
anticipates  opening  the  branch in late  spring or early  summer of 2001.  The
branch  will  serve  the  Patrick   County  area  which  has  a  population   of
approximately 18,000.


Competition
-----------

Smith River  Community  Bank,  N.A.  experiences  competition  in attracting and
retaining  business  and  personal  checking  and savings  accounts,  and making
commercial,  consumer, and real estate loans and providing other services in the
primary  service  area.  The  principal  methods of  competition  in the banking
industry for deposits are service,  rates offered,  convenience of location, and
flexible  office hours.  The  principal  methods of  competition  in the banking
industry for loans are interest rates,  loan origination  fees, and the range of
lending  services  offered.  Competition  in the  service  area comes from other
commercial banks,  savings  institutions,  brokerage firms,  credit unions,  and
mortgage  banking firms.  Smith River Community Bank, N.A.  anticipates  that it
will be able to take advantage of the  consolidation  in the banking industry in
the  market  area  by  providing  personalized  banking  services  that  will be
desirable  to large  segments  of bank  customers  which will enable the Bank to
compete satisfactorily.


Employees
---------

Smith River Community Bank, N.A. currently employs eighteen  individuals,  among
whom are its Chief Executive  Officer,  Chief Financial  Officer,  and its Chief
Operating Officer.

<PAGE>
<TABLE>
                          Selected Statistical Information of MainStreet BankShares, Inc.
                          (Formerly Known as Smith River Bankshares, Inc. ) and Subsidiary

                     The following statistical information is based on daily average balances.


     Distribution of Assets, Liabilities, and Shareholders' Equity: Interest Rates and Interest Differentials

<CAPTION>
                                                           2000                                   1999
                                            ---------------------------------       ------------------------------
                                             Average                   Yield/        Average                Yield/
                                             Balance       Interest     Rate         Balance    Interest     Rate
                                             -------       --------     ----         -------    --------     ----

<S>                                         <C>            <C>         <C>          <C>         <C>         <C>
Loans, net of unearned income               $2,140,188     $226,240    10.57%       $    ---    $    ---     ---%
Securities available for sale                  784,169       56,461     7.20             ---         ---     ---
Interest-bearing deposits in banks*            165,925       85,280    51.40          93,495       5,440    5.82
Federal funds sold                           1,495,672      101,087     6.76             ---         ---     ---
                                            ----------     --------    -----        --------    --------    ----
   Total Interest Earning Assets             4,585,954      469,068    10.23%         93,495       5,440    5.82%
Cash and due from banks                        180,357                                 2,393
Other assets                                   296,262                                59,428
Reserve for loan losses                        (20,583)                                  ---
                                            ----------                              --------
   Total Assets                             $5,041,990                              $155,316
                                            ==========                              ========

Interest checking deposits                     116,274     $  2,409     2.07%       $    ---    $    ---     ---%
Money market deposits                          232,483       12,585     5.41             ---         ---     ---
Savings deposits                                45,853        1,302     2.84             ---         ---     ---
Certificates of deposit over $100,000          827,201       57,451     6.95             ---         ---     ---
Other time deposits                            762,041       51,431     6.75             ---         ---     ---
                                            ----------     --------     ----         --------    -------    ----
Total interest-bearing liabilities           1,983,852      125,178     6.31%            ---         ---    0.00%
Demand deposits                                249,486                                   ---         ---
Other liabilities                              469,284                               339,669
                                            ----------                              --------
   Total Liabilities                         2,702,622                               339,669
Shareholders' equity                         2,339,368                              (184,353)
                                            ----------                              --------

Total Liabilities and Shareholders' Equity  $5,041,990                              $155,316
                                            ==========                              ========



Net Interest Earnings/Margin                               $343,890     3.92%                   $  5,440    5.82%
                                                           ========     ====                    ========    ====

Net Yield on Interest Earning Assets                                    7.50%                               5.82%
                                                                        ====                                ====
</TABLE>


*Interest  income  received on funds in escrow for the  offering are included in
interest income.  There was no corresponding  average balance due to the account
being with the escrow agent.


<PAGE>

The following table sets forth for the period  indicated a summary of the change
in interest earned and interest paid resulting from changes in volume and rates.
The change in  interest  attributable  to both rate and volume  changes has been
allocated to rate and volume  changes in proportion to the  relationship  of the
absolute dollar amounts of the change in each.
<TABLE>
<CAPTION>
                                              2000 Compared to 1999 Increase         1999 Compared to 1998 Increase
                                               (Decrease) Due to Change In            (Decrease) Due to Change In
                                             --------------------------------       --------------------------------
                                                                     Total                                  Total
                                              Average   Average     Increase         Average   Average     Increase
                                              Volume      Rate     (Decrease)        Volume      Rate     (Decrease)
                                             --------   -------    ----------       --------   -------    ----------
<S>                                          <C>        <C>         <C>             <C>        <C>        <C>
Interest Income:
     Loans, net of unearned income           $226,240   $   ---     $226,240        $   ---    $  ---     $   ---
     Securities available for sale             56,461       ---       56,461            ---       ---         ---
     Interest-bearing deposits in banks         7,135    72,705       79,840          5,159       281       5,440
     Federal funds sold                       101,087       ---      101,087            ---       ---         ---
                                             --------   -------     --------        -------    ------     -------

           Total Interest Income              390,923    72,705      463,628          5,159       281       5,440


Interest Expense:
     Interest checking deposits                 2,409       ---        2,409           ---       ---         ---
     Money market deposits                     12,585       ---       12,585           ---       ---         ---
     Savings deposits                           1,302       ---        1,302           ---       ---         ---
     Certificates of deposit over $100,000     57,451       ---       57,451           ---       ---         ---
     Other time deposits                       51,431       ---       51,431           ---       ---         ---
                                             --------   -------     --------        ------      ----      ------

           Total Interest Expense             125,178      ---       125,178           ---       ---         ---

Net Interest Income                          $265,745   $72,705     $338,450        $5,159     $ 281      $5,440
                                             ========   =======     ========        ======     =====      ======


INVESTMENT PORTFOLIO


All  securities at December 31, 2000 were  classified as available for sale. The
carrying and approximate  market value and gross  unrealized gains and losses of
securities available for sale appear on page 19 of Part II, Item 7, Note 2.

                                     Due in One             Due in               Due in               Due After
                                    Year or Less          2 - 5 Years          5 - 10 Years            10 Years
                                  Amount    Yield      Amount      Yield     Amount     Yield      Amount     Yield         Total
                                  ------    -----      ------      -----     ------     -----      ------     -----        ------

Obligations of U. S Agencies    $1,596,401   6.19%   $1,283,426     6.68%  $1,401,357    7.52%    $    ---      ---%     $4,281,184

Other Securities                       ---                  ---                   ---              183,600     6.00         183,600
                                ----------           ----------            ----------             --------               ----------


Total                           $1,596,401           $1,283,426            $1,401,357             $183,600               $4,464,784
                                ==========           ==========            ==========             ========               ==========
</TABLE>


There were no investments at December 31, 1999.
<PAGE>

LOAN PORTFOLIO


The amounts of loans outstanding at December 31, 2000 are shown in the following
table according to loan type:


Commercial, financial and agricultural      $4,576,423
Real estate - mortgage                       1,683,650
Consumer                                     1,496,842
                                            ----------

     Gross Loans                             7,756,915
     Less:  Reserve for loan losses            (93,100)
                                            -----------

   Loans, net of unearned income            $7,663,815
                                            ==========


The following table shows the amount of commercial,  financial, and agricultural
loans outstanding at December 31, 2000 and their maturity distribution.
<TABLE>
<CAPTION>
                                                           After One
                                               Within     But Within       After
                                             One Year     Five Years     Five Years       Total
                                             --------     ----------     ----------       -----

<S>                                         <C>            <C>            <C>           <C>
Commercial, financial and agricultural     $1,205,928     $1,364,030     $2,006,465    $4,576,423
Interest rates are floating or adjustable     901,977        337,196      1,927,371     3,166,544
Interest rates are fixed or predetermined     303,951      1,026,834         79,094     1,409,879


At December 31, 2000 there were no loans past due 90 days or more, no nonaccrual
loans,  and no troubled  debt  restructurings.  There were no impaired  loans at
December 31, 2000. It is the Corporation's  policy to discontinue the accrual of
interest   on  loans   once   they   become   90  days  past  due  and  are  not
well-collateralized  or earlier when it becomes doubtful that the full principal
and interest will be collected.  Once a loan is placed on nonaccrual status, any
interest that is collected will be recorded on a cash basis.

The following table shows the Corporation's  average loan balance along with the
detail of the allowance for loan losses as of December 31, 2000:

Average amount of loans, net of unearned, outstanding during the year    $2,140,188
Balance of allowance for loan losses at beginning of year                       ---
Loans charges off                                                               ---
Recoveries of loans previously charged off                                      ---
Additions to the allowance for loan losses                                   93,100
                                                                         ----------
Balance at end of year                                                   $   93,100
                                                                         ==========

</TABLE>

In analyzing  the allowance for loan losses,  the  Corporation  has reviewed the
risk  ratings  of the  loan  portfolio.  The  Corporation  has also  taken  into
consideration  the  economy of its market  area  which has  experienced  certain
deterioration  over the last two years.  There is no historical  trend available
from  which to  retrieve  experience.  The  amount of the loan loss  reserve  by
category and the percentage of each category to total loans at December 31, 2000
is as follows:

Commercial, financial and agricultural      $25,489        59.00%
Real estate - mortgage                        9,216        21.70
Consumer                                      8,978        19.30
Specific reserve                                ---          ---
Unallocated                                  49,417          ---
                                            -------       ------
   Total                                    $93,100       100.00%
                                            =======       ======


There were no loans outstanding as of December 31, 1999.

<PAGE>

DEPOSITS

Total deposits at December 31, 2000 were $8,079,335.  See  Management's  Plan of
Operations for the major classifications of deposits along with their percentage
to total deposits. Certificates of deposit over $100,000 and other time deposits
were in excess of 10% of total deposits. The average balance for certificates of
deposit over  $100,000 was  $827,201  with an average rate of 6.95%.  Other time
deposits had an average  balance of $762,042 with an average rate of 6.75%.  The
maturities  of  certificates  of deposits  over $100,000 and other time deposits
appear in Note 6 on page of this report.


RETURN ON EQUITY AND ASSETS


Certain  ratios for equity and assets as of December  31, 2000 are  presented as
follows:

Return on average shareholders' equity               (29.13)%
Return on average assets                             (13.52)
Dividend payout ratio                                   ---
Average shareholders' equity to average assets        46.40



Item 2.       Description of Property

On April 6, 1999, the Corporation  entered into two leases. One lease is for the
Corporation's  executive  offices  and the other  lease is for the main  banking
office of Smith River  Community  Bank,  N.A. The executive  office lease is for
2,000 square feet of space located in the Patrick  Henry  Shopping Mall at Suite
12, 730 East Church  Street in  Martinsville,  Virginia.  The Bank's main office
lease  covers  nearly  2,486  additional  square feet and is located at 730 East
Church Street and Booker Road in  Martinsville,  Virginia.  The executive office
lease  began on May 1, 1999 and the main  office  lease began on August 1, 1999.
Both leases expire on July 31, 2002. Neither lease has a renewal option, but the
lessor and the lessee have agreed to discuss renewal options.

The Corporation also has a lease for a 3,400 square foot facility located at 380
Riverside Drive, in Bassett, Virginia. The facility is a former branch of a bank
which was closed  several years ago. The lease began on June 1, 1999 and expires
36 months from the opening of the branch,  December 4, 2000.  A third branch has
been  approved  by  the  Office  of  the  Comptroller  of  the  Currency  and is
anticipated for opening in late spring or early summer 2001 in Stuart, Virginia.
Presently, modular facilities are being looked at for possible facilities.

Neither the Corporation or the Bank own any real property.

The Bank's hours of operation are from 9:00 a.m. to 5:00 p.m. on Monday  through
Friday.  Drive  through  banking  hours are 8:30 a.m.  through 5:00 p.m.  Monday
through Friday and 8:30 a.m. through 1:00 p.m. on Saturdays.


Item 3.       Legal Proceedings


The  Corporation  currently is not involved in any litigation or similar adverse
legal or regulatory matters.



Item 4.       Submission of Matters To A Vote of Shareholders

None
<PAGE>
                                     PART II

Item 5.       Market for Common Equity and Related Shareholder Matters

MainStreet  BankShares,  Inc.  (formerly known as Smith River Bankshares,  Inc.)
filed a  registration  statement on Form SB-2 with the  Securities  and Exchange
Commission that was effective  November 4, 1999,  registering the shares for the
public offering. The registration statement covered the issuance of a maximum of
912,500  shares for common  stock to the general  public and 87,500  units to be
issued  to the  organizers.  Each  unit  consists  of one share of stock and one
warrant  to buy one share of stock in the future at a price of $10.00 per share.
The common stock and the units were sold at a price of $10.00 per share or unit.
Following the effective  date of the  registration  statement,  the  Corporation
began  accepting  subscriptions  for stock which were  deposited  with an escrow
agent.  The  offering  was  completed  in  July  2000  with  total  proceeds  of
$6,893,680.

We do not  anticipate  that our common  stock will be traded  actively  for some
time.  At  some  point  in  the  future,  we  may  investigate  trading  on  the
over-the-counter market or on an established exchange.  Before we can do that we
will have to find licensed  investment banking firms willing to make a market in
our stock.

There are  approximately  1,035  shareholders of common stock as of December 31,
2000.

In order to preserve  capital to  facilitate  growth and  expansion,  MainStreet
BankShares,  Inc.  (formerly  known as Smith  River  Bankshares,  Inc.) does not
anticipate  paying cash  dividends in the immediate  future.  The only source of
funds for dividends  would be dividends  paid to the  Corporation by Smith River
Community Bank, N.A. The Bank similarly does not anticipate paying any dividends
to Bankshares in the foreseeable future because of the need to facilitate growth
and  expansion.  The Bank is also limited in the amount of dividend  payments by
the Office of the Comptroller of the Currency  ("OCC") which regulates the Bank.
The OCC limits annual  dividends to a maximum of retained profits of the current
year plus the two prior years,  without prior OCC approval.  In addition,  Smith
River Community Bank, N.A. may not pay dividends at all until its surplus equals
its stated capital.  Lastly, it is expected that the Bank will not be profitable
for at least three years.  Consequently,  it is not  anticipated  that dividends
will be paid for at least four years.


Item 6.       Management's Plan of Operations

General
-------

MainStreet BankShares, Inc. (formerly known as Smith River Bankshares, Inc.) was
incorporated  on January  14,  1999 in the  Commonwealth  of  Virginia  as First
Community  National  BanCorp.,  Inc.  On  July 8,  1999,  Restated  Articles  of
Incorporation became effective changing the name to Smith River Bankshares, Inc.
On March 6, 2001,  Restated Articles of Incorporation  became effective changing
the name to  MainStreet  BankShares,  Inc.  The  Corporation  was formed for the
primary  reason of becoming a bank  holding  company  for Smith River  Community
Bank, N.A. The Corporation filed a registration  statement on Form SB-2 with the
Securities and Exchange  Commission,  (the "Commission"),  to register the stock
for a public offering.  The registration statement was declared effective by the
Commission on November 4, 1999. MainStreet  BankShares,  Inc. (formerly known as
Smith River  Bankshares,  Inc.)  raised  $6,893,680  through its initial  public
offering.   Upon  the  formation  of  Smith  River  Community  Bank,  N.A.,  the
Corporation  bought all the stock of the Bank from the proceeds of the offering.
The business of the Corporation is being conducted through the Bank.  MainStreet
BankShares,  Inc.  (formerly  known as Smith River  Bankshares,  Inc.)  received
approval from the Federal Reserve Bank of Richmond on December 10, 1999 and from
the State  Corporation  Commission  on December 18, 1999 to acquire  Smith River
Community Bank, N.A. MainStreet BankShares,  Inc. (formerly known as Smith River
Bankshares,  Inc.)  successfully  completed the offering of its common shares of
stock in July 2000 and  capitalized  Smith River  Community  Bank, N.A. The Bank
received its final  approvals from the Office of the Comptroller of the Currency
and the  Federal  Deposit  Insurance  Corporation  in July 2000 and  opened  for
business on July 24, 2000.

Smith River  Community Bank, N.A. was organized under the National Bank Act as a
nationally  chartered  commercial bank and member of the Federal Reserve,  whose
deposits  are  insured by the FDIC.  The Bank  applied  for both the charter and
deposit insurance on March 31, 1999.  Preliminary  charter approval was received
from the Comptroller of the Currency on August 4, 1999 and preliminary  approval
was received from the FDIC on September 14, 1999. As previously  mentioned,  the
Bank  received  final  approvals  from the  Comptroller  of the Currency and the
Federal Deposit  Insurance  Corporation on July 21, 2000 with permission to open
on July 24, 2000.  The Bank has begun to accept  deposits  and make  commercial,
real estate,  and consumer loans.  For the initial years,  the Bank  anticipates
that it will rely on local  advertising and personal  contacts of its directors,
employees,  and shareholders to attract  customers and business to the Bank. The
Bank  plans  to  operate  as  a  locally  owned  and  operated  commercial  bank
emphasizing  personal  customer  service and other  advantages of banking with a
locally owned community bank.


<PAGE>

The  primary  source of funds for the  Corporation,  prior to the opening of the
Bank,  came from the Organizers who are also the  Corporation's  directors.  The
Organizers  formed  FCNB LLC,  a limited  liability  company,  to  organize  the
Corporation  and  the  Bank  and  to  provide  for  financing  of  organization,
pre-opening,  and offering expenses.  The Organizers  continued to make advances
for expenses until the completion of the offering.  The  Corporation  repaid the
LLC for the advances with funds received from the offering.  Management believes
the  remaining  funds will be  sufficient  to provide  for the  planned  capital
expenditures, operating costs, and additional branch openings.

Smith River Community  Bank,  N.A. opened an additional  branch at 380 Riverside
Drive,  Bassett,  Virginia  on  December 4, 2000.  Also,  the Bank has  received
approval from the Office of the  Comptroller of the Currency to open a branch in
Stuart,  Virginia  which is  located  in Patrick  County.  The Bank  anticipates
opening this branch in late spring or early summer.


Overview
--------

Total assets at December 31, 2000 were  $13,922,749.  The primary  components of
these  assets were net loans at  $7,663,815,  securities  available-for-sale  at
$4,464,784,  federal  funds sold at  $472,000  and  furniture  and  fixtures  at
$511,678.

Total shareholders' equity at December 31, 2000 was $5,703,421. This increase of
$6,041,068  over  year-end  1999  equity,  was from the  proceeds  of the  stock
offering,  net  of  pre-opening/organizational   costs,  offering  expenses  and
deferred costs.

The  Corporation's  net loss for the twelve  months ended  December 31, 2000 was
$(681,505)  compared to $(337,659) for the comparable  period ended December 31,
1999. The increases in 2000 are attributed to the opening of the Bank along with
a second  branch.  Additional  employees  were hired along with the  purchase of
additional supplies, data processing services, equipment, advertising, etc.


Results of Operation
--------------------

Net interest  income is the difference  between total interest  income and total
interest expense.  The amount of net interest income is determined by the volume
of  interest-earning  assets, the level of interest rates earned on those assets
and the cost of  supporting  funds.  The  difference  between  rates  earned  on
interest-earning  assets and the cost of supporting funds is measured by the net
interest  margin.  MainStreet  BankShares,  Inc.  (formerly known as Smith River
Bankshares,  Inc.) principal  source of income is from the net interest  margin.
The distribuion of assets, liabilities and equity long with the related interest
income and interest  expense is presented on page 3 of this report.  The general
level of interest rates  remained  stable over the period from the time the Bank
opened on July 24, 2000  through  year end.  The prime rate  remained  unchanged
during this time period.

Net interest  income was $343,890 for the twelve months ended  December 31, 2000
which produced a net interest margin of 7.50% for the year-to-date. In 1999, the
Corporation  only  had  interest  income  on  interest-bearing  deposits  and no
interest expense.  Total interest earned was $5,440 for the year ending December
31, 1999.


Provision for Loan Losses
-------------------------

A  provision  for  loan  losses  is  charged  to  earnings  for the  purpose  of
establishing an allowance for loan losses.  Losses are, in turn, charged to this
allowance  rather than being reported as a direct expense.  For the year-to-date
period,  the provision  for loan losses was $93,100.  This reserve of $93,100 at
year-end is 1.20% of gross loans outstanding. The amount is established based on
a continual  review of the  overall  quality of the loan  portfolio  taking into
effect any  nonperforming  loans,  problem loans, the mix of the portfolio,  and
current economic  conditions.  No assurance can be given that unforeseen adverse
economic  conditions  or  other  circumstances  will  not  result  in  increased
provisions in the future.

<PAGE>

Noninterest Income
------------------

Noninterest  income for the twelve months ending  December 31, 2000 was $17,801.
This income was  primarily  income  related to  checkbook  charges,  credit life
insurance,  and service  charges on deposit  accounts.  There was no noninterest
income for the comparable periods in 1999.


Noninterest Expense
-------------------

Total  noninterest  expense for the period ending December 31, 2000 and December
31, 1999 were $950,096 and $343,099,  respectively.  The increase in noninterest
expense is attributed to the opening of the Bank on July 24, 2000 which incurred
additional expenses along with the hiring of additional personnel.  Salaries and
employee benefits increased $346,075 or 223.71%,  for the period ending December
31, 2000 in  comparison  to the same  period in 1999.  Occupancy  and  equipment
expense was  $115,363  and $34,378 at December  31, 2000 and  December 31, 1999,
respectively,  an increase  of 235.57%.  Other  expenses  increased  $166,951 at
December  31,  2000  over the  comparable  period  in 1999.  This  increase  was
primarily due to date processing fees, supplies, advertising, and insurance.


Income Taxes
------------

The  Corporation  is subject to both federal and state income  taxes.  The Bank,
however,  is subject to federal  income taxes but not state income taxes. A bank
in Virginia  is required to pay a franchise  tax that is based on the capital of
the entity.  Management does not believe that the Bank will be profitable  until
at least the third  full year of  operations.  Because  of this and the start up
costs  associated  with the Bank, a substantial  net loss may accumulate  before
becoming profitable.  Under current Federal tax laws, these net operating losses
will be available to offset future taxable profits.  A net operating loss may be
carried forward for a period of up to 20 years to offset taxable income in those
years.  This could reduce taxes in the initial  years of  profitability.  If the
Bank should not become  profitable,  then it is unlikely that these tax benefits
will be realized;  therefore,  no tax benefit or provision has been recorded for
the year-to-date and period ended December 31, 2000 and 1999.


Year 2000 Readiness
-------------------

The Year  2000  issue  was not a  problem  for the  Corporation.  All  equipment
purchased  was Year 2000  compliant.  Contracts  have been signed  with  outside
vendors for software and data  processing.  These  vendors  experienced  minimal
problems  with the onset of the Year  2000.  Management  will  continue  to have
conversations  with its  vendors and service  providers  concerning  this issue.
Also, with the opening of the Bank, management is having dialogue with customers
for assurances of their Year 2000 issues.  The Corporation does not believe that
the Year 2000 will have any material impact on current operation.


BALANCE SHEET
-------------

Investment Portfolio
--------------------

The Corporation's investment portfolio is used for several purposes as follows:

1)       To maintain sufficient liquidity to cover deposit fluctuations and loan
         demand.
2)       To use securities to fulfill pledging collateral requirements.
3)       To utilize the  maturity/repricing  mix of portfolio securities to help
         balance the overall interest rate risk position of the balance sheet.
4)       To make a reasonable return on investments.

Funds  not  utilized  for  capital  expenditures  or  lending  are  invested  in
securities of the U.S. Government and its agencies,  mortgage-backed securities,
municipal bonds, and certain equity securities.  Currently,  the Corporation has
invested in U.S.  Agencies  and Federal  Reserve Bank Stock.  The  Corporation's
policy is not to invest  in  derivatives  or other  high-risk  instruments.  The
entire securities portfolio is categorized as available-for-sale at December 31,
2000.

<PAGE>

Loan Portfolio
--------------

Bankshares  has  established  a credit policy  detailing the credit  process and
collateral  in loan  originations.  Loans to purchase  real estate and  personal
property are generally  collateralized by the related property with loan amounts
established  based on certain  percentage  limitations of the  property's  total
stated or appraised value. Credit approval is primarily a function of the credit
worthiness of the  individual  borrower or project based on pertinent  financial
information, the amount to be financed, and collateral. At December 31, 2000 the
loan portfolio was as follows:

         Commercial                          $4,576,423     59.00%
         Residential real estate              1,683,650     21.70
         Consumer                             1,496,842     19.30
                                             ----------    ------

                         Total               $7,756,915    100.00%
                                             ==========    ======


Deposits
--------

Total  deposits at December  31,  2000 were  $8,079,335.  The deposit mix was as
follows:

         Demand deposits                     $  625,799      7.75%
         Interest checking deposits             397,400      4.92
         Money market deposits                  756,821      9.37
         Savings deposits                       195,258      2.42
         Certificates of deposit
              over $100,000                   3,084,314     38.17
         Other time deposits                  3,019,743     37.37
                                             ----------    ------

                         Total               $8,079,335    100.00%
                                             ==========    =======


The  levels and mix of  deposits  are  influenced  by such  factors as  customer
service,  interest rates paid,  service charges,  and the convenience of banking
locations.  Competition  is fierce  from other  depository  institutions  in our
market.  Management attempts to identify and implement the pricing and marketing
strategies that will help control the overall cost of deposits and to maintain a
stable deposit mix.


Shareholders' Equity
--------------------

Total  shareholders  equity was  $5,703,421  at  December  31,  2000.  The stock
offering was completed  during the third quarter of 2000 with gross  proceeds of
$6,893,680.  Offering expenses of $185,518 have been netted against equity.  All
capital  levels  are  well in  excess  of  required  regulatory  minimums  for a
well-capitalized  institution.  See footnote No. 12 to the financial  statements
for capital ratios.


Asset Liability Management
--------------------------

Asset  liability   management   functions  to  maximize   profitability   within
established guidelines for liquidity,  capital adequacy, and interest rate risk.
It also helps to ensure that there is adequate  liquidity to meet loan demand or
deposit  outflows and interest  rate  fluctuations.  Liquidity is the ability to
meet maturing obligations and commitments,  withstand deposit fluctuations, fund
operations, and provide for loan requests.  Bankshares' liquidity is provided by
cash and due from banks, federal funds sold, securities available-for-sale,  and
loan repayments.  The Corporation's  ratio of liquid assets to total liabilities
at December 31, 2000 was 68.51%. For the year 2000,  deposits provided the basic
core for liquidity.

Interest  rate  sensitivity  is  measured  by the  difference,  or gap,  between
interest  sensitive  earning  assets and  interest  sensitive  interest  bearing
liabilities  and the resultant  change in net interest income due to market rate
fluctuations,  and  the  effect  of  interest  rate  movements  on  the  market.
Management utilizes these techniques for management of interest rate risk.

Impact of Inflation
-------------------

Most of the  Corporation's  assets  are  monetary  in nature and  therefore  are
sensitive  to interest  rate  fluctuations.  Management  will seek to manage the
relationship between interest-sensitive assets and liabilities.

<PAGE>

Item 7.       Financial Statements






                          INDEPENDENT AUDITORS' REPORT


The Board of Directors
MainStreet BankShares, Inc.
(Formerly Known as Smith River Bankshares, Inc.)


We have  audited the  accompanying  consolidated  balance  sheets of  MainStreet
BankShares, Inc. (formerly known as Smith River Bankshares, Inc.) and subsidiary
as of December 31, 2000 and 1999,  and the related  consolidated  statements  of
loss,  changes in  shareholders'  equity  (deficit)  and cash flows for the year
ended December 31, 2000 and for the period December 15, 1998 (date of inception)
through  December 31, 1999.  These  consolidated  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  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 consolidated  financial statements referred to above present
fairly,  in  all  material  respects,   the  financial  position  of  MainStreet
BankShares, Inc. (formerly known as Smith River Bankshares, Inc.) and subsidiary
as of December 31, 2000 and 1999, and the results of their  operations and their
cash flows for the year ended December 31, 2000 and for the period  December 15,
1998 (date of inception) through December 31, 1999, in conformity with generally
accepted accounting principles.



McLeod & Company


Roanoke, Virginia
February 23, 2001

<PAGE>
<TABLE>

                                       MAINSTREET BANKSHARES, INC.
                            (Formerly Known as Smith River Bankshares, Inc.)
                                       Consolidated Balance Sheets
<CAPTION>

ASSETS
                                                              December 31, 2000       December 31, 1999
                                                              -----------------       -----------------

<S>                                                           <C>                         <C>
Cash and due from banks                                       $   467,528                 $  2,583
Interest-bearing deposits in other banks                          226,744                  149,207
Federal funds sold                                                472,000                      ---
Securities available for sale                                   4,464,784                      ---

Loans:
     Commercial loans                                           4,576,423                      ---
     Residential real estate loans                              1,683,650                      ---
     Consumer loans                                             1,496,842                      ---
                                                              -----------                 --------
              Total Gross Loans                                 7,756,915                      ---
     Less:  Allowance for loan losses                             (93,100)                     ---
                                                              -----------                 --------
              Net Loans                                         7,663,815                      ---

Deferred stock issuance costs                                         ---                  114,422
Furniture, fixtures and equipment                                 511,678                   31,482
Accrued interest receivable                                        94,912                      ---
Other assets                                                       21,288                    6,796
                                                              -----------                 --------

              Total Assets                                    $13,922,749                 $304,490
                                                              ===========                 ========

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

Deposits:
     Non-interest bearing demand deposits                     $   625,799                 $    ---
     Interest checking deposits                                   397,400                      ---
     Money market deposits                                        756,821                      ---
     Savings deposits                                             195,258                      ---
     Certificate of deposits over $100,000                      3,084,314                      ---
     Other time deposits                                        3,019,743                      ---
                                                              -----------                 --------
              Total Deposits                                    8,079,335                      ---

Accrued interest payable and other liabilities                    139,993                  127,137
Advances from related parties                                         ---                  515,000
                                                              -----------                 --------

              Total Liabilities                                 8,219,328                  642,137
                                                              -----------                 --------

Shareholders' Equity (Deficit):

     Preferred stock, no par value, authorized                       ---                       ---
         10,000,000 shares; none issued
     Common stock, no par value, authorized 10,000,000
         shares; issued and outstanding 689,368 and
               and 12 shares in 2000 and 1999, respectively     6,708,162                       12
     Accumulated deficit                                       (1,019,164)                (337,659)
     Accumulated other comprehensive income                        14,423                      ---
                                                              -----------                 --------

         Total Shareholders' Equity (Deficit)                   5,703,421                 (337,647)
                                                              -----------                 --------

              Total Liabilities and Shareholders'
                    Equity (Deficit)                          $13,922,749                 $304,490
                                                              ===========                 ========
</TABLE>

See accompanying notes to consolidated financial statements.


<PAGE>
<TABLE>
                                       MAINSTREET BANKSHARES, INC.
                            (Formerly Known as Smith River Bankshares, Inc.)
                                     Consolidated Statements of Loss
<CAPTION>
                                                            Twelve  Months                  Period
                                                                Ended                       Ended
                                                          December 31, 2000           December 31, 1999
                                                          -----------------           -----------------
<S>                                                       <C>                           <C>
Interest Income:
       Interest and fees on loans                         $ 226,240                     $     ---
       Interest on interest-bearing deposits                 85,280                         5,440
                                                                                              ---
       Interest on federal funds sold                       101,087                           ---
       Interest on securities available for sale             56,461                           ---
                                                          ---------                     ---------

                    Total Interest Income                   469,068                         5,440
                                                          ---------                     ---------
Interest Expense:
       Interest on certificates of deposit
               over $100,000                                 57,451                           ---
       Interest on other deposits                            67,727                           ---
                                                          ---------                     ---------

                    Total Interest Expense                  125,178                           ---
                                                          ---------                     ---------

                    Net Interest Income                     343,890                         5,440
Provision for loan losses                                    93,100                           ---
Net Interest Income After Provision
       for Loan Losses                                      250,790                         5,440
                                                          ---------                     ---------

Noninterest Income:
       Service charges on deposit accounts                    3,598                           ---
       Other fee income and miscellaneous
            income                                           14,203                           ---
                                                          ---------                     ---------

                    Total Noninterest Income                 17,801                           ---
                                                          ---------                     ---------

Noninterest Expense:
       Salaries and employee benefits                       500,774                       154,699
       Occupancy and equipment expense                      115,363                        34,378
       Professional fees                                    114,851                       101 865
       Other expenses                                       219,108                        52,157
                                                          ---------                     ---------

                    Total Noninterest Expense               950,096                       343,099
                                                          ---------                     ---------

                           Net Loss                       $(681,505)                    $(337,659)
                                                          =========                      ========

                    Per Share:
                           Basic:
                           Net Loss Per Share             $   (2.25)                    $ (28,138)
                                                          =========                      ========
                           Average Shares
                                 Outstanding                303,253                            12

                           Fully Diluted:
                           Net Loss Per Share             $   (2.25)                    $ (28,138)
                                                          =========                      ========
                           Average Shares
                                 Outstanding                303,253                            12
</TABLE>

See accompanying notes to consolidated financial statements.


<PAGE>
<TABLE>
                                           MAINSTREET BANKSHARES, INC.
                                 (Formerly Known as Smith River Bankshares, Inc.)
                       Consolidated Statements of Changes in Shareholders' Equity (Deficit)
<CAPTION>


                                                                                    Accumulated       Total
                                       Number                                          Other       Shareholders'
                                     Of Common       Common        Accumulated     Comprehensive      Equity
                                       Shares         Stock          Deficit          Income        (Deficit)
                                       ------         -----          -------          ------        ---------
<S>                                  <C>           <C>           <C>               <C>            <C>
Balance at December 15, 1998
(Date of inception)                      ---       $     ---     $       ---       $   ---        $      ---

Net Loss                                 ---             ---        (337,659)          ---          (337,659)

Issuance of common stock                  12              12             ---           ---                12
                                    --------       ----------    -----------       -------        ----------

Balance at December 31, 1999              12              12        (337,659)          ---          (337,647)

Comprehensive Income (Loss)

       Net Loss                          ---             ---        (681,505)          ---          (681,505)

       Other comprehensive income:

             Change in unrealized
               gains on available
               -for-sale securities      ---             ---             ---        14,423            14,423
                                    --------      ----------     -----------       -------        ----------

   Total Comprehensive Income (Loss)     ---             ---        (681,505)       14,423          (667,082)

Issuance of common stock             689,368       6,893,680             ---           ---         6,893,680

Redemption of common stock               (12)            (12)            ---           ---               (12)

Deferred stock issuance costs            ---        (185,518)            ---           ---          (185,518)
                                     -------      ----------     -----------       ------------   ----------


Balance at December 31, 2000         689,368      $6,708,162     $(1,019,164)      $14,423        $5,703,421
                                     =======      ==========     ===========       =======        ==========

</TABLE>

See accompanying notes to consolidated financial statements.



<PAGE>
<TABLE>
                                     MAINSTREET BANKSHARES, INC.
                          (Formerly Known as Smith River Bankshares, Inc.)
                                Consolidated Statements of Cash Flows
<CAPTION>

                                                           Twelve Months                 Period
                                                              Ended                       Ended
                                                        December 31, 2000           December 31, 1999
                                                        -----------------           -----------------
<S>                                                       <C>                           <C>
Cash Flows From Operating Activities

     Net loss                                             $   (681,505)                 $ (337,659)
     Provision for loan losses                                  93,100                         ---
     Depreciation                                               33,593                         ---
     Accretion of discounts on securities                         (684)                        ---
     Increase in accrued interest receivable                   (94,912)                        ---
     Increase in other assets                                  (14,492)                     (6,796)
     Increase in accrued interest payable
        and other liabilities                                   12,856                     127,137
                                                          ------------                  ----------
         Net cash used by operating activities                (652,044)                   (217,318)
                                                          ------------                  ----------

Cash Flows From Investing Activities

     Increase in interest-bearing deposits in other banks      (77,537)                   (149,207)
     Increase in federal funds sold                           (472,000)                        ---
     Purchase of furniture, fixtures, and equipment           (513,789)                    (31,482)
     Purchases of securities available for sale             (5,499,677)                        ---
     Proceeds from calls of securities
         available for sale                                  1,050,000                         ---
     Increase in loans                                      (7,756,915)                        ---
                                                          ------------                  ----------

         Net cash used by investing activities             (13,269,918)                   (180,689)
                                                          ------------                  ----------

Cash Flows From Financing Activities

     Increase in time deposits greater than $100,000         3,084,314                         ---
     Increase in other time deposits                         3,019,743                         ---
     Proceeds (payments) on advances from related parties     (515,000)                    515,000
     Proceeds from issuance of common stock                  6,893,668                          12
     Costs of stock issuance                                   (71,096)                   (114,422)
     Increase in other deposits                              1,975,278                         ---
                                                          ------------                  ----------

         Net cash provided by financing activities          14,386,907                     400,590
                                                          ------------                  ----------

         Net increase in cash and cash equivalents             464,945                       2,583
Cash and cash equivalents at beginning of period          $      2,583                  $      ---
                                                          ------------                  ----------

Cash and cash equivalents at end of period                $    467,528                  $    2,583
                                                          ============                  ==========
Supplemental disclosure of cash flow information:
         Cash paid during the period for interest         $     38,647                  $      ---
                                                          ============                  ==========
</TABLE>



See accompanying notes to consolidated financial statements.

<PAGE>

                           MAINSTREET BANKSHARES, INC.
                (Formerly Known as Smith River Bankshares, Inc.)

                   Notes to Consolidated Financial Statements

                                December 31, 2000


Note 1 - Summary of Accounting Policies

(c)      General

MainStreet  BankShares,  Inc.  (Formerly known as Smith River Bankshares,  Inc.)
(the  "Corporation"  or  "Bankshares"),  incorporated as a Virginia  corporation
effective  January 14, 1999, was a development  stage  enterprise until July 24,
2000. The Corporation was primarily organized to serve as a bank holding company
for Smith River Community Bank, N.A. (the "Bank").  The Bank opened for business
on July 24, 2000 and began its  operations  as a full service  commercial  bank.
Prior to the organization of the Corporation,  the Corporation's  directors, who
were also the  Organizers,  formed  FCNB LLC, a limited  liability  company,  to
organize   the   Corporation   and  the  Bank  and  provide  for   financing  of
organizational, offering, and other pre-opening costs.

The Corporation  raised $6,893,680 through a sale of its common stock and units.
The  Corporation  filed a  registration  statement  on Form SB-2 to register the
stock, which was declared effective by the Securities and Exchange Commission on
November 4, 1999.  Proceeds  from the sale of the stock were  primarily  used to
acquire all of the stock of the Bank on July 24, 2000.  Since the opening of the
Bank, the Corporation's operations have been conducted through the Bank.

Based on current facts and circumstances,  management believes that the proceeds
received  from the  offering,  $6,893,680,  will  permit the Bank to conduct its
initial operations to invest in loans, securities,  and other earning assets. It
will also  provide for the  operations  of an  additional  branch that opened in
December  2000 along with an  anticipated  branch in late spring or early summer
2001.

The  Corporation  reports  its  activities  as a  single  business  segment.  In
determining  the   appropriateness  of  segment   definition,   the  Corporation
considered  components  of the business  about which  financial  information  is
available and will  evaluate it regularly  relative to resource  allocation  and
performance assessment.

(b)      Principles of Consolidation

The  consolidated  financial  statements  include  the  accounts  of  MainStreet
BankShares,  Inc.  (Formerly  known as Smith  River  Bankshares,  Inc.)  and its
wholly-owned  subsidiary,  Smith River  Community  Bank,  N.A.  All  significant
intercompany  accounts and  transactions  have been  eliminated.  The  financial
statements  for  1999  include  the  period  from  December  15,  1998  (date of
inception) through December 31, 1999.

(c)      Cash Equivalents

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

(d)      Securities

Bankshares  classifies  and  accounts for its  investments  in  accordance  with
Statement of Financial  Accounting  Standards No. 115,  "Accounting  for Certain
Investments  in Debt  and  Equity  Securities."  Securities  are  classified  at
purchase  date  under  the  specific  identification  method.  Amortization  and
accretion of premiums and discounts are included in income over the  contractual
life of the securities.

(e)      Loans

Loans are stated at the amount of funds disbursed. Interest on loans is computed
by methods which generally result in level rates of return on principal  amounts
outstanding.



<PAGE>

                           MAINSTREET BANKSHARES, INC.
                (Formerly Known as Smith River Bankshares, Inc.)

                   Notes to Consolidated Financial Statements

                                December 31, 2000




(f)      Loan Fees and Costs

Bankshares  adopted  Statement  of  Financial   Accounting   Standards  No.  91,
"Accounting for  Nonrefundable  Fees and Costs  Associated  With  Originating or
Acquiring  Loans and Initial  Direct  Costs of Leases".  Currently,  there is no
substantial  difference  between  fees  and  costs.  A  regular  review  will be
conducted as experience with our lending processes increases.

(g)      Allowance for Loan Losses

An  allowance  for loan losses is  maintained  in order to provide for losses in
collection of loans that can be currently estimated.  The level of the allowance
of loan losses is based upon the quality of the loan  portfolio as determined by
management after consideration of diversification as to the type of loans in the
portfolios,  the amount of collateralized as compared to uncollateralized loans,
banking  industry  standards  and  averages,  and general  economic  conditions.
Management  believes  that the  allowance  for loan  losses is  adequate.  While
management  uses  available  information  to recognize  losses on loans,  future
additions to the allowance for loan losses may be necessary  based on changes in
economic conditions.

(h)      Furniture, Fixtures and Equipment

Furniture,   fixtures  and  equipment  are  stated  at  cost  less   accumulated
depreciation  and  amortization.  Depreciation  and  amortization are charged to
expense on a straight-line  basis over the estimated useful lives.  Maintenance,
repairs and minor  improvements are charged to expense as incurred.  Significant
improvements are capitalized.

(i)      Organizational Costs

The  American  Institute  of  CPA's  has  issued  Statement  of  Position  98-5,
"Reporting on the Costs of Start-Up  Activities."  In general,  the SOP requires
that  organizational  and similar  start-up costs be expensed.  Examples of such
costs that have been  incurred by the  Corporation  are legal  fees,  consulting
fees, and regulatory  application fees. The Corporation adopted the requirements
of the SOP from its inception and has  accordingly  expensed all  organizational
costs.

(j)      Stock Options and Warrants

As permitted by Statement of Financial Standards (SFAS) No. 123, "Accounting for
Stock-Based  Compensation",  the Corporation  accounts for its stock options and
warrants using the intrinsic  value method  prescribed in Accounting  Principles
Board Opinion (APB) No. 25, "Accounting for Stock Issued to Employees".  APB No.
25 requires compensation expense to be recorded on the date of grant only if the
current market value price of the underlying  stock exceeds the exercise  price.
Proforma information is presented as if net income had been determined under the
fair value based method as prescribed by SFAS No. 123.

(k)      Income Taxes

The Corporation is subject to federal and state income taxes.  However, no taxes
have been  accrued or paid because of operating  losses  incurred.  Deferred tax
assets have been fully offset by a valuation  allowance pursuant to Statement of
Financial Accounting Standards No. 109.

<PAGE>
                           MAINSTREET BANKSHARES, INC.
                (Formerly Known as Smith River Bankshares, Inc.)

                   Notes to Consolidated Financial Statements

                                December 31, 2000

(l)      Loss Per Share

Statement of Financial  Accounting  Standards No. 128,  "Accounting for Earnings
Per Shares"  requires dual  presentation of basic and diluted earnings per share
on the face of the  statements  of income and requires a  reconciliation  of the
numerators  and  denominators  of the  basic  and  diluted  earnings  per  share
calculation.  Basic income per share is calculated based on the weighted average
number of shares of common stock outstanding during each period.  Diluted income
per share is computed using  weighted  average  shares  outstanding  adjusted to
reflect the dilutive effect of all potential common shares that were outstanding
during the period. For the year ending December 31, 2000 the effect of the stock
options and warrants were  anti-dilutive and as such were not reflected in fully
diluted loss per share.

(m)      Use of Estimates

The presentation 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 revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.

(n)      Reclassifications

Certain  reclassifications  have been made to the 1999  financial  statements to
conform to the presentation used in 2000.


Note 2 - Securities

The carrying values,  unrealized gains and losses and approximate  market values
of investment  securities at December 31, 2000 are shown in the table below. The
entire  investment  portfolio is  classified as  available-for-sale  to preserve
maximum liquidity for funding needs.
<TABLE>
<CAPTION>
                                                            Gross         Gross
                                          Amortized       Unrealized   Unrealized      Approximate
                                            Cost            Gains        Losses        Market Value
                                            ----            ----         ------        ------------

<S>                                     <C>               <C>            <C>            <C>
U.S. government agencies                $4,266,761        $14,423          ---          $4,281,184

Federal reserve stock                      183,600            ---          ---             183,600
                                        ----------        -------        -----          ----------

Total securities available for sale     $4,450,361        $14,423        $ ---          $4,464,784
                                        ==========        =======        =====          ==========
</TABLE>


The  amortized  costs and  market  values of  securities  available  for sale at
December 31, 2000, by contractual maturity, are shown below. Expected maturities
may differ from contractual  maturities  because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.

<PAGE>
                           MAINSTREET BANKSHARES, INC.
                (Formerly Known as Smith River Bankshares, Inc.)

                   Notes to Consolidated Financial Statements

                                December 31, 2000

                                                      Amortized     Approximate
                                                        Cost        Market Value
                                                        ----        ------------
       Due in one year or less                       $1,596,401      $1,596,401
       Due after one year but within five years       1,276,611       1,283,426
       Due after five years but within ten years      1,393,749       1,401,357
       Due after ten years                              183,600         183,600
                                                     ----------      ----------

                                                     $4,450,361      $4,464,784
                                                     ==========      ==========


There were no pledged  securities at year-end  December 31, 2000.  There were no
sales of securities during the year 2000.


Note 3 - Allowance for Loan Losses

Changes in the allowance for loan losses are as follows:

         Balance at January 1, 2000                  $    ---
         Provision for loan losses                     93,100
         Recoveries                                       ---
         Charge-offs                                      ---
                                                     --------
         Balance at December 31, 2000                $ 93,100
                                                     ========


There were no non-performing  loans,  troubled debt restructurings,  or impaired
loans at December 31, 2000.


Note 4 - Furniture, Fixtures and Equipment

Furniture, fixtures and equipment at December 31:

                                                          2000             1999
                                                        --------         -------

         Furniture and equipment                        $361,582         $31,482
         Computer software                               158,463             ---
         Leasehold improvements                           25,226             ---
                                                        --------         -------
                                                         545,271          31,482

         Accumulated depreciation and amortization       (33,593)            ---
                                                        --------         -------

         Total furniture, fixtures and equipment        $511,678         $31,482
                                                        ========         =======
<PAGE>

                           MAINSTREET BANKSHARES, INC.
                (Formerly Known as Smith River Bankshares, Inc.)

                   Notes to Consolidated Financial Statements

                                December 31, 2000



Note 5 - Deposits

The maturities of  certificates of deposit over $100,000 and other time deposits
at December 31, 2000 are as follows:

                               Certificates of Deposit
                                   Over $100,000           Other Time Deposits
                                   -------------           -------------------

Three months or less                 $1,120,000                $  822,533
Over 3 through 6 months               1,864,314                 1,254,057
Over 6 through 12 months                100,000                   843,978
Over 12 months                              ---                    99,175
                                     ----------                ----------

         Total                       $3,084,314                $3,019,743
                                     ==========                ==========


Total deposit dollars from officers,  directors,  and their related interests at
December 31, 2000 were $1,049,985.


Note 6 - Income Taxes

Deferred  tax  assets  and   liabilities  are  recognized  for  the  future  tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases  and  operating  loss and tax  credit  carryforwards.  The  primary  items
resulting  in  deferred  tax  assets  at  December  31,  2000  are   unamortized
organizational   costs  and  net  operating  losses  of  $71,000  and  $609,000,
respectively. The primary item resulting in a deferred tax liability at December
31, 2000 is  depreciation  of $64,000.  However,  the resulting net deferred tax
assets  have been fully  offset by a  valuation  allowance  to reflect  the high
degree of  uncertainty  regarding  the ultimate  realization  of the related tax
benefits. If the operations are not ultimately profitable, the tax benefits will
not be realized.

The  Corporation's  net operating loss of $609,000 is available to offset future
taxable income, if any, through 2020.


Note 7 - Loss Per Share
<TABLE>
<CAPTION>
                                                          Twelve Months Ended December 31, 2000
                                                          -------------------------------------

                                                      Income                Shares         Per Share
                                                     Numerator           Denominator         Amount
                                                     ---------           -----------         ------

Basic EPS
<S>                                                  <C>                    <C>              <C>
   Income (loss) available to common shareholders    $(681,505)             303,253          $(2.25)

Diluted EPS

   Income (loss) available to common shareholders    $(681,505)             303,253          $(2.25)




<PAGE>

                           MAINSTREET BANKSHARES, INC.
                (Formerly Known as Smith River Bankshares, Inc.)

                   Notes to Consolidated Financial Statements

                                December 31, 2000

<CAPTION>
                                                                Period Ended December 31, 1999
                                                                ------------------------------

                                                         Income              Shares          Per Share
                                                       Numerator           Denominator         Amount
                                                       ---------           -----------         ------

Basic EPS

       Income (loss) available to common shareholders  $(337,659)               12            $(28,138)

Diluted EPS

       Income (loss) available to common shareholders  $(337,659)               12            $(28,138)
</TABLE>


Note 8 - Comprehensive Income

Bankshares  adopted  Statement  of  Financial   Accounting  Standards  No.  130,
"Reporting  Comprehensive  Income" upon the opening of the Bank.  This statement
established standards for reporting and presentation of comprehensive income and
its components.  The following table discloses the reclassifications  related to
securities   available-for   sale  that  are  included  in   accumulated   other
comprehensive income on the balance sheet as of December 31, 2000.


Net unrealized gains on securities available for sale:

           Net unrealized holding gains during the year                $14,423
           Less reclassification adjustments for gains (losses)
                  included in net income                                   ---
           Income tax benefit                                              ---
                                                                       -------

                         Accumulated Other Comprehensive Income        $14,423
                                                                       =======


Note 9 -  Employee Benefit Plans

Smith River Bankshares, Inc. funds certain costs for medical benefits in amounts
determined at the discretion of management. There are no postretirement benefits
at this time.  Bankshares has a 401-k plan which provides for  contributions  by
employees. Bankshares currently does not have a matching contribution.


Note 10 - Leases and Commitments

The Corporation has entered into a lease for administrative  office space with a
term  beginning  May 1, 1999 and expiring in 39 months.  Rent paid for the first
three months was $750 per month,  and thereafter  increased to $1,000 per month.
The Corporation may cancel the lease with 90 days notice.

The Corporation has also entered into separate leases for property to be used as
bank branches.  One lease has a term of 36 months commencing August 1, 1999, and
requires  a monthly  rental of $2,500.  The other  lease has a term of 36 months
beginning  December 4, 2000, and requires a monthly  rental of $2,500.  Prior to
that date, interim monthly rent of $500 was being paid beginning June 1999.



<PAGE>

                           MAINSTREET BANKSHARES, INC.
                (Formerly Known as Smith River Bankshares, Inc.)

                   Notes to Consolidated Financial Statements

                                December 31, 2000



The Corporation has entered into an employment  agreement with its President and
Chief   Executive   Officer.   The  agreement  has  a  three-year  term  and  is
automatically  extended by one year if not  terminated at least 90 days prior to
each  anniversary  date.  Under the terms of the agreement,  the individual will
continue in a consulting capacity after the end of the period of employment.


Note 11 - Stock Options and Warrants

On the opening date of Smith River  Community  Bank,  N.A.,  July 24, 2000,  the
President and CEO was granted 30,000 stock options at the then fair market value
of $10.00.  The stock options will be exercisable if he is employed as President
and  CEO  of  MainStreet  BankShares,   Inc.  (formerly  known  as  Smith  River
Bankshares,  Inc.)  and the Bank on the  first  anniversary  of the day the bank
opened for  business  (the  first  10,000  options)  and on each of the next two
anniversaries  (for  each of the next two  10,000  option  grants).  Each of the
options will have a ten-year term from the date of grant and will expire 30 days
after employment is terminated.

Each  organizer/director  was  granted  one warrant for each share of stock that
they purchased in the original offering. These warrants were granted on July 24,
2000  and   totaled   87,500   warrants.   Each   warrant   will   entitle   the
organizer/director  to  purchase,  at anytime  within ten years from the date of
grant, an additional share at $10.00 per share. The warrants are not immediately
exercisable. The right to exercise the warrants will vest for one-third (1/3) of
the shares covered by the warrants on each of the first three  anniversaries  of
the date the Bank opened for  business,  so long as the  organizer/director  has
served continuously as a director of MainStreet BankShares, Inc. (formerly known
as Smith River  Bankshares,  Inc.) and Smith River Community Bank, N.A. from its
opening until the  particular  anniversary  and has attended a minimum of 75% of
the Board of Directors  meetings  during the period.  However,  all the warrants
will become  vested upon the change in control of  MainStreet  BankShares,  Inc.
(formerly known as Smith River Bankshares, Inc.) or a sale by the company of all
or substantially all its assets. The warrants are detachable and the shares with
which they were originally issued as a unit may be separately  transferred.  The
warrants are generally not transferable  except by operation of law.  Bankshares
has the right, upon notice from any regulatory  authority,  to require immediate
exercise or forfeiture  of the warrants if the exercise is reasonably  necessary
in order to inject additional capital into the Bank.

The  Corporation  has reserved 117,500  shares of authorized but unissued shares
of common stock related to these option and warrant agreements.

The per share weighted  average fair value of stock options and warrants granted
during  2000  was  $5.02  on the  date  of  grant  utilizing  the  Black-Scholes
option-pricing model with the following assumptions:

Risk-free  interest rate of 6.217%.
Expected life of options and warrants of 10 years.
Expected volatility of stock price of 20%.
Expected dividend yield of 0%.

<PAGE>
                           MAINSTREET BANKSHARES, INC.
                (Formerly Known as Smith River Bankshares, Inc.)

                   Notes to Consolidated Financial Statements

                                December 31, 2000


The  Corporation  applies APB Opinion No. 25 in accounting for its stock options
and warrants and, accordingly,  no compensation cost has been recognized for its
stock  options or warrants in the  consolidated  financial  statements.  Had the
Corporation  determined  compensation  cost based on the fair value of its stock
options at the grant date under SFAS No. 123, the  Corporation's  net loss would
have increased to the proforma amounts indicated below:

Net loss:
         As reported                  $681,505
         Proforma                     $763,365

Basic net loss per shares:
         As reported                  $  (2.25)
         Proforma                     $  (2.52)

Diluted net loss per shares:
         As reported                  $  (2.25)
         Proforma                     $  (2.52)


At December 31, 2000, the weighted  average  exercise price and weighted average
remaining  contractual life of the 117,500 outstanding options and warrants were
$10 and 9.6 years,  respectively.  There were no options or  warrants  exercised
during 2000 and there were no options or warrants  exercisable  at December  31,
2000.


 Note 12 - Regulatory Requirements and Restrictions

Under the applicable federal laws, the Comptroller of the Currency restricts the
total dividend payments of any calendar year, without prior approval, to the net
profits of that year as defined,  combined with retained net profits for the two
preceding  years.  Bankshares  will not be paying  dividends  until they  become
profitable and it is deemed appropriate by management.

The Bank is a member of the Federal Reserve System;  however, it processes daily
through a  correspondent  bank,  Community  Bankers Bank.  Smith River Community
Bank,  N.A.  must  currently  maintain a reserve  balance  of  $50,000  with the
correspondent bank.

<PAGE>
                           MAINSTREET BANKSHARES, INC.
                (Formerly Known as Smith River Bankshares, Inc.)

                   Notes to Consolidated Financial Statements

                                December 31, 2000


Bankshares and the Bank are subject to various regulatory  capital  requirements
administered by the federal and state banking agencies.  Failure to meet minimum
capital  ratios  can  initiate  certain  mandatory,   and  possibly   additional
discretionary  actions by regulators that, if undertaken,  could have a material
effect  on  the  consolidated   financial   statements.   Quantitative  measures
established by regulations to ensure capital adequacy require Bankshares and the
Bank to maintain  minimum capital ratios.  At December 31, 2000,  Bankshares and
the Bank are above  capital  adequacy  requirements  to which they are  subject.
Actual  capital  amounts and ratios as of December 31, 2000 are presented in the
following table:
<TABLE>
<CAPTION>

                                                                                  To Be Well Capitalized
                                                                  For Capital     Under Prompt Corrective
                                               Actual              Adequacy           Action Provisions
                                               ------              --------           -----------------
                                          Amount      Ratio     Amount     Ratio      Amount     Ratio
                                          ------      -----     ------     -----      ------     -----

<S>                                     <C>           <C>       <C>        <C>        <C>        <C>
Total capital (to risk weighted assets) $5,796,521    67.16%    $609,400   8.0%       $863,000   10.0%

Tier I capital (to risk weighted assets) 5,703,421    66.08      345,200   4.0         517,800    6.0

Tier I capital (to average assets)       5,703,421    45.14      505,400   4.0         631,750    5.0

</TABLE>


Note 13 - Parent Company Financial Information
                                                        Condensed Balance Sheet
                                                        -----------------------

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

Cash                                                          $     3,670
Interest-bearing deposits in other banks                          226,744
Investments in subsidiary bank                                  5,473,007
                                                              -----------


Total Assets                                                  $ 5,703,421
                                                              ===========

Liabilities and Shareholders' Equity

Common shareholders' equity                                     5,703,421
                                                              -----------

Total Liabilities and Shareholders' Equity                    $ 5,703,421
                                                              ===========
<PAGE>
<TABLE>
                           MAINSTREET BANKSHARES, INC.
                (Formerly Known as Smith River Bankshares, Inc.)

                   Notes to Consolidated Financial Statements

                                December 31, 2000



                          CONDENSED STATEMENT OF INCOME

<CAPTION>
                                                                         Year Ended
                                                                     December 31, 2000
                                                                     -----------------
<S>                                                                    <C>
Revenue:
Equity in undistributed loss of subsidiary bank                        $  (863,256)
Interest income                                                             85,280
Other income                                                                96,471
                                                                       -----------

Loss Before Income Tax Benefit                                            (681,505)
                                                                       -----------

Income tax benefit                                                             ---
                                                                       -----------

Net Income                                                             $  (681,505)
                                                                       ===========



                        CONDENSED STATEMENT OF CASH FLOWS

                                                                         Year Ended
                                                                     December 31, 2000
                                                                     -----------------
Cash Flows From Operating Activities:
Net loss                                                                 $  (681,505)
Adjustments to reconcile net income to net cash from operations
Equity in undistributed loss of subsidiary bank                              863,256
Net decrease in other assets                                                   6,796
Net decrease in other liabilities                                           (127,137)
                                                                         -----------
       Net Cash Provided by Operating Activities                              61,410
                                                                         -----------

Cash Flows From Investing Activities:
Net increase in interest-bearing deposits                                    (77,537)
Purchases of furniture and equipment                                         (44,209)
Capital contributed to subsidiary bank                                    (6,321,840)
Transfer of furniture, fixtures, and equipment to subsidiary bank             75,691
                                                                         -----------
       Net Cash Used in Investing Activities                              (6,367,895)
                                                                         -----------

Cash Flows from Financing Activities:
Payments on advances from related parties                                   (515,000)
Proceeds from issuance of common stock                                     6,893,668
Costs of stock issuance                                                      (71,096)
                                                                         -----------
       Net Cash Provided By Financing Activities                           6,307,572
                                                                         -----------

       Net Increase in Cash                                                    1,087
       Cash at Beginning of Year                                               2,583
                                                                         -----------
       Cash at End of Year                                               $     3,670
                                                                         ===========
</TABLE>
<PAGE>

                           MAINSTREET BANKSHARES, INC.
                (Formerly Known as Smith River Bankshares, Inc.)

                   Notes to Consolidated Financial Statements

                                December 31, 2000


Note 14 - Financial Instruments With Off-Balance-Sheet Risk

In the normal course of business to meet the financing  needs of its  customers,
Bankshares  is a party to financial  instruments  with  off-balance-sheet  risk.
These  financial   instruments  involve  commitments  to  extend  credit.  These
instruments  involve,  to varying degrees,  elements of credit risk in excess of
the amount recognized in the consolidated balance sheet.

The Corporation's  exposure to credit loss in the event of nonperformance by the
other party to the financial  instruments  for  commitments  to extend credit is
represented  by the  contractual  amount of those  instruments.  The same credit
policy is used in making  commitments as is used for  on-balance-sheet  risk. At
December 31, 2000, outstanding commitments to extend credit were $1,552,585.

Commitments  to extend  credit are  agreements  to lend to a customer as long as
there is no breach of any condition  established  in the  contract.  Commitments
generally  have fixed  expiration  dates or other  termination  clauses  and may
require  payment of a fee. The  commitments  may expire without ever being drawn
upon,  therefore,  the total  commitment  amounts do not  necessarily  represent
future cash outlays for the Corporation.


Note 15 - Concentrations of Credit Risk

All of the Corporation's  activity is with customers located in the southwestern
region of Virginia. Accordingly, operational results are closely correlated with
the  economic  trends  within  this  region and  influenced  by the  significant
industries within the region including  furniture,  pre-built housing,  textile,
and others.  At December 31, 2000, the commercial  portfolio is diversified with
no significant concentrations of credit.


Note 16 - Fair Value of Financial Instruments

The following  methods and  assumptions  were used to estimate the fair value of
each class of financial  instrument for which it is practicable to estimate that
value:

(a.)   Short-Term Financial Instruments
       --------------------------------
       The carrying values of short-term  financial  instruments  including cash
       and cash equivalents,  federal funds sold,  interest-bearing  deposits in
       domestic banks and short-term  borrowings  approximate  the fair value of
       these  instruments.  These  financial  instruments  generally  expose the
       Corporation to limited credit risk and have no stated maturity or have an
       average maturity of 30-45 days and carry interest rates which approximate
       market value.

(b.)   Securities Available for Sale
       -----------------------------
       The fair value of investments is estimated based on bid prices  published
       in  financial  newspapers  or bid  quotations  received  from  securities
       dealers.

(c.)   Loans
       -----
       Fair values are estimated for portfolios of loans with similar  financial
       characteristics.  Loans are segregated by type such as  commercial,  real
       estate - commercial,  real estate - construction,  real estate - mortgage
       and other  consumer.  Each loan category is further  segmented into fixed
       and adjustable  rate interest  terms and by performing and  nonperforming
       categories.

       The fair value of performing loans is calculated by discounting scheduled
       cash flows through the estimated maturity using estimated market discount
       rates that reflect the credit and interest rate risk inherent in the loan
       as well as estimates for operating expenses and prepayments. The estimate
       of maturity is based on management's  assumptions with repayment for each
       loan classification,  modified, as required, by an estimate of the effect
       of current economic and lending conditions.

<PAGE>

                           MAINSTREET BANKSHARES, INC.
                (Formerly Known as Smith River Bankshares, Inc.)

                   Notes to Consolidated Financial Statements

                                December 31, 2000

(d.)   Deposits
       --------
       The fair value of demand,  interest  checking,  savings and money  market
       deposits  is the  amount  payable  on  demand.  The  fair  value of fixed
       maturity time deposits and certificates of deposit is estimated using the
       rates currently offered for deposits of similar remaining  maturities and
       repayment characteristics.

(e.)   Commitments  to Extend  Credit,  Standby  Letters of Credit and Financial
       -------------------------------------------------------------------------
       Guarantees  Written
       -------------------
       The only  amounts  recorded for  commitments  to extend  credit,  standby
       letters of credit and financial  guarantees  written are the fees arising
       from these unrecognized financial instruments.


The estimated  fair values of financial  instruments at December 31, 2000 are as
follows:

                                               Carrying Value     Fair Value
                                               --------------     ----------

FINANCIAL ASSETS:

Cash and due from banks                         $   467,528      $    467,528
Interest-bearing deposits in other banks            226,744           226,744
Federal funds sold                                  472,000           472,000
Securities available for sale                     4,464,784         4,464,784
Loans, net of unearned income                     7,756,915         7,386,128
                                                -----------      ------------

        Total Financial Assets                  $13,387,971      $ 13,017,184
                                                ===========      ============

FINANCIAL LIABILITIES:

Deposits:
    Non-interest bearing demand deposits        $   625,799      $    625,799
    Interest checking deposits                      397,400           397,400
    Money market deposits                           756,821           756,821
    Savings deposits                                195,258           195,258
    Certificates of deposit over $100,000         3,084,314         3,076,394
    Other time deposits                           3,019,743         3,016,038
                                                -----------      ------------

        Total Financial Liabilities             $ 8,079,335      $  8,067,710
                                                ===========      ============


Fair value  estimates  are made at a specific  point in time,  based on relevant
market  information  about the  financial  instrument.  These  estimates  do not
reflect any premium or discount  that could result from offering for sale at one
time the  Corporation's  entire holdings of a particular  financial  instrument.
Because  no  market  exists  for a  significant  portion  of  the  Corporation's
financial  instruments,  fair value  estimates are based on judgments  regarding
future   expected   loss   experience,   current   economic   conditions,   risk
characteristics  of  various  financial  instruments  and other  factors.  These
estimates  are  subjective  in nature and involve  uncertainties  and matters of
significant judgment and therefore, cannot be determined with precision. Changes
in assumptions could  significantly  affect the estimates.  Fair value estimates
are based on existing  on-and-off-balance  sheet financial  instruments  without
attempting to estimate the value of anticipated future business and the value of
assets and liabilities that are not considered financial instruments.


Note 17 - Contingenies and Other Matters

The  Corporation  currently is not involved in any litigation or similar adverse
legal or regulatory matters.

<PAGE>

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

              None

                                    PART III

Item 9.       Directors, Executive Officers, Promoters and Control Persons,
              Compliance with Section 16(a) of the Exchange Act

                           Directors of the Registrant

The Board of Directors of MainStreet  BankShares,  Inc. (formerly known as Smith
River  Bankshares,  Inc.) are divided into three  classes  that serve  staggered
three-year terms. The members of one class are elected at each annual meeting of
shareholders  and hold office until the third  annual  meeting  following  their
election or until successors are elected and qualified.  The term of the Class A
Directors  expires in 2002,  the term of the Class B Directors  expires in 2003,
and the term of the Class C Directors  expires in 2001. The following tables set
forth material information about the current executive officers and directors of
MainStreet BankShares, Inc. (formerly known as Smith River Bankshares, Inc.)

    Name (Age)                                      Offices and Positions Held
    ----------                                      --------------------------

            Class A Directors - Term Expires 2002

    William S. Clark (47)                           Director
                                                    Executive Vice President

    Mervyn R. King, MD (67)                         Director

    Morton W. Lester (67)                           Director

    Cecil R. McCullar (64)                          Director
                                                    President and CEO

            Class B Directors - Term Expires 2003

    Jesse D. Cahill, Sr. (70)                       Director

    Roxanne B. Miller (67)                          Director

    Jim R. Mills (64)                               Director

    Joe C. Philpott (69)                            Director


           Class C Directors - Terms Expires 2001

    P. H. Brammer (68)                              Director

    George R. Nelson, Jr. (65)                      Director

    Douglas E. Riddle (56)                          Director

    Milford A. Weaver (75)                          Director


<PAGE>

William S. Clark joined the  Corporation  in July 2000.  From July 1999 to April
2000, he was a City Executive for BB&T of Virginia.  Prior to the acquisition of
BB&T of MainStreet Financial Corporation, Mr. Clark was President and CEO of the
First Bank of Stuart (a  subsidiary of MainStreet  Financial  Corporation)  from
January  1996 to July 1999.  Prior to that he was Vice  President  of  Southwest
Virginia  Savings Bank where he was employed from June 1978 to January 1996. Mr.
Clark was elected to the Board of Directors on February 20, 2001.

Mervyn R. King, MD, retired anesthesiologist, was founder and President of M. R.
King and  Associates,  Inc.,  a company  that  provided  anesthesia  and related
services to Memorial  Hospital of Martinsville and Henry County for 29 years. He
presently is co-owner and CEO of the following  businesses:  Countryside  Manor,
Inc.  (a  nursing  home),   Countryside  Village  Retirement  Community,   Inc.,
Countryside Properties LP (a real estate holding company),  Martinsville Nissan,
Inc.,  Peaksview Buick,  Pontiac, and GMC Trucks, Inc., and Inside Track Co. (an
antique  business and a design and  manufacturing  company of toy train  display
cases).

Morton  W.  Lester  is  President  of The  Lester  Corporation,  a  real  estate
investment and property management company, and Vice President of Motor Imports,
Inc.  Currently,  Mr.  Lester serves on the Blue Ridge  Airport  Authority,  and
served as its chairman for 23 years.

Cecil R.  McCullar  has worked  for  several  banks.  Most  recently  he was the
President and CEO of First American FSB, a $450 million thrift which is a wholly
owned  subsidiary of First American  Corporation  from 1995 to 1998, and Charter
Federal  Savings  Bank,  which  was a  $750  million  thrift  with  28  branches
throughout southwest Virginia and Knoxville, Tennessee from 1993 to 1995.

P. H. Brammer is a retired realtor.

Jesse D. Cahill,  Sr. has been a real estate broker and general contractor since
1959.

Roxann B. Miller is a principal stockholder in Dillon Insurance Agency. She is a
retired school teacher.

Jim R. Mills is currently president of Jim Mills  Lincoln-Mercury-Chrysler-Jeep,
a new vehicle franchise dealer since 1985.

George R. Nelson, Jr. became owner and operator of Nelson Ford, Inc. in 1975. He
is also owner and  operator of G R  Chevrolet,  Inc.  and Nelson  Mazda  Subaru,
Nelson Pontiac, Buick, GMC, Inc. He also owns Homes by Nelson.

Joe C. Philpott,  retired, worked for Bassett Furniture Industries for 42 years,
retiring as Executive Vice President of Manufacturing and a board director.

Douglas E. Riddle has been in the automotive  business for over 35 years.  He is
the owner of Riddle Dodge Honda.

Milford A. Weaver is presently  owner and co-founder of Virginia  Blower Company
in Collinsville and Galax, Virginia, and is currently serving as Chairman of the
Board.




                        Executive Officers Not a Director


                                                                First Elected
     Name (Age)                 Offices and Positions Held      As an Officer
     ----------                 --------------------------      -------------


Brenda H. Smith (41)            Senior Vice President and          8/99
                                Chief Financial Officer

<PAGE>

Brenda H. Smith joined the  Corporation  in August 1999.  From 1995 to 1999, she
was Vice President,  Corporate  Controller and Assistant Secretary of MainStreet
Financial Corporation,  a $2 billion multi-bank holding company headquartered in
Martinsville,  Virginia.  From 1988 to 1995,  she was an Accounting  Officer for
Piedmont Trust Bank, a subsidiary of MainStreet Financial Corporation.


Item 10.        Executive Compensation

The  information  required by Item 10 of Form 10-KSB appears on pages 18 through
20 of the 2001  Corporation's  Proxy  Statement  and is  incorporated  herein by
reference.



Item 11.        Security Ownership of Certain Beneficial Owners and Management

The information required by Item 11 of Form 10-KSB appears on pages 9 through 10
of the  2001  Corporation's  Proxy  Statement  and  is  incorporated  herein  by
reference.


Item 12.        Certain Relationships and Related Transactions

BankShares'   officers  and   directors,   and  other   corporations,   business
organizations, and persons with which some of BankShares' officers and directors
are associated  customarily  have banking  transactions  with the Bank. All such
transactions  were made in the ordinary course of business on substantially  the
same terms, including interest rates and security for loans, as those prevailing
at the time in comparable transactions with others and did not involve more than
the normal risk of collectibility or present other unfavorable features.

Prior to the organization of the Corporation,  the Corporation's  directors, who
were also the  organizers,  formed  FCNB LLC, a limited  liability  company,  to
organize   the   Corporation   and  the  Bank  and  provide  for   financing  of
organizational,  offering,  and other  pre-opening  costs. At December 31, 1999,
$515,000 was owed to the  organizers/directors.  All dollars were  reimbursed in
the year 2000 once the stock offering was completed.


Item 13.        Exhibits and Reports on Form 8-K


      a)        See Index to Exhibits.

      b)        Reports on Form 8-K.

                Report on Form 8-K was filed on 1/3/01 announcing the regulatory
                approval to open a branch in Stuart, Virginia.


<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.

MAINSTREET BANKSHARES, INC.
(Formerly Known as Smith River Bankshares, Inc.)


By:    /s/ Cecil R. McCullar
       --------------------------------------------------------
       Cecil R. McCullar, 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>

           NAME                                     TITLE                                         DATE
           ----                                     -----                                         ----

<S>                                              <C>                                           <C>
/s/Cecil R. McCullar                             President and Chief Executive                 March 15, 2001
-----------------------------------              Officer, Director                             ---------------
Cecil R. McCullar                                                                                  Date

/s/Brenda H. Smith                               Senior Vice President/                        March 15, 2001
-----------------------------------              Chief Financial Officer                       ---------------
Brenda H. Smith                                                                                    Date

/s/P. H. Brammer                                 Director                                      March 15, 2001
-----------------------------------                                                            --------------
Patricia H. Brammer                                                                                Date

/s/Jesse D. Cahill, Sr                           Director                                      March 15, 2001
-----------------------------------                                                            --------------
Jesse D. Cahill                                                                                    Date

/s/William S. Clark.                             Director/                                     March 15, 2001
-----------------------------------              Executive Vice President                      ---------------
William S. Clark                                                                                   Date

/s/Mervyn R. King, MD                            Director                                      March 15, 2001
-----------------------------------                                                            ---------------
Mervyn R. King, MD                                                                                 Date

/s/Morton W. Lester                              Director                                      March 15, 2001
-----------------------------------                                                            --------------
Morton W. Lester                                                                                   Date

/s/Roxann B. Miller                              Director                                      March 15, 2001
-----------------------------------                                                            --------------
Roxann B. Miller                                                                                   Date

/s/Jim R. Mills                                  Director                                      March 15, 2001
-----------------------------------                                                            --------------
Jim R. Mills                                                                                       Date

/s/George R. Nelson, Jr.                         Director                                      March 15, 2001
-----------------------------------                                                            --------------
George R. Nelson, Jr.                                                                              Date

/s/Joe C. Philpott                               Director                                      March 15, 2001
-----------------------------------                                                            ---------------
Joe C. Philpott                                                                                    Date

/s/Douglas E. Riddle                             Director                                      March 15, 2001
-----------------------------------                                                            --------------
Douglas E. Riddle                                                                                  Date

/s/Milford A. Weaver                             Director                                      March 15, 2001
-----------------------------------                                                            ---------------
Milford A. Weaver                                                                                  Date
</TABLE>

<PAGE>



                                Index to Exhibits

Number          Description of Exhibit
------          ----------------------

    3(i)*       Restated  Articles of Incorporation  of the  Corporation,  dated
                July 8, 1999 and Restated Articles of Incorporation  dated March
                6, 2001 attached as an exhibit.

    3(ii)*      By-laws of the  Corporation,  dated  August 5, 1999 and  amended
                February 20, 2001 attached as an exhibit.

    4.1*        Warrant  Plan and  Certificates  as  adopted  July 27,  1999 and
                amended August 26, 1999 **** and amended December 19, 2000.

    4.2         Provision in Registrant's  Articles of Incorporation  and Bylaws
                defining the Rights of Holders of the Registrant's  common stock
                (included in Exhibits 3.1 and 3.2, respectively).

    4.3*        Form of Shares Subscription Agreement.

    4.4*        Form of Units Subscription Agreement.

   10.1**       Contribution  Agreement  among  the  Organizers,   dated  as  of
                December 8, 1998.

   10.2*        Lease  dated  April  6,  1999,  with  respect  to  the  proposed
                executive office of the Corporation.

   10.3*        Lease dated April 6, 1999,  with  respect to the  proposed  main
                banking office.

   10.4*        Lease dated May 6, 1999,  with  respect to the  possible  branch
                office of Smith River Community Bank, N.A.

   10.5*        Employment  Agreement  between  the  Corporation  and  Cecil  R.
                McCullar, dated as of June 1, 1999.

   10.6*        Consulting Agreement between the Corporation and Bank Resources,
                Inc., dated December 8, 1998.

   10.7*        Escrow Agreement between First Citizens Bank & Trust Company and
                the Corporation dated September 8, 1999.

   10.8**       Software license and service agreement between FISERV Solutions,
                Inc. and the Corporation dated September 1999.

   10.9**       Software license and maintenance  agreement between  Concentrex,
                Inc./CFI Pro Services, Inc. and the Corporation, dated September
                27, 1999.

   10.10***     Contract to purchase  hardware and software  license and service
                agreement  between Unisys and the  Registrant  dated October 25,
                1999.

   10.11***     Related  contracts to purchase  equipment  and software  between
                Information  Technology,  Inc. and the Registrant  dated October
                25, 1999.

   10.12        Consulting agreement between Southeast Financial Holdings,  Inc.
                and the Corporation  dated 2/21/00 filed with the  Corporation's
                10-KSB on March 24, 2000.

   21           Subsidiaries of the Registrant.
______________________

*         (Incorporated  by reference to  Registration  statement  #333-86993 on
          Form SB-2 filed September 13, 1999.)
**        (Incorporated  by reference to  Registration  Statement  #333-86993 on
          Form SB-2/A filed October 22, 1999.)
***       (Incorporated  by reference to Quarterly Report on Form 10-QSB for the
          quarter ended September 30, 2000 filed November 13, 2000.)
****      (Incorporated  by reference to Quarterly Report on Form 10-QSB for the
          quarter  ended  September 30, 1999 filed  December 20, 1999.)