UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))

[X] Definitive Proxy Statement

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

SALEM COMMUNITY BANKSHARES INC.
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(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
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[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(4) Date Filed:

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Notes:

SALEM COMMUNITY BANKSHARES, INC.
220 EAST MAIN STREET
SALEM, VIRGINIA 24153

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NOTICE OF 2001 ANNUAL MEETING OF SHAREHOLDERS

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TO BE HELD APRIL 24, 2001

The 2001 Annual Meeting of Shareholders of Salem Community Bankshares, Inc. will
be held at the Salem Civic Center located at 1001 Roanoke Boulevard, Salem,
Virginia, on Tuesday, April 24, 2001, at 10:30 a.m. for the following purposes:

1) To elect three (3) Class A directors to serve until the 2004
Annual Meeting of Shareholders, three (3) Class B directors to
serve until the 2002 Annual Meeting of Shareholders and four (4)
Class C directors to serve until the 2003 Annual Meeting of
Shareholders, or in the case of each director, until his successor
is duly elected and qualifies, as described in the Proxy Statement
accompanying this notice.

2) To transact such other business as may properly come before the
meeting or any adjournment thereof.

Only shareholders of record at the close of business on March 16, 2001, are
entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof.

By Order of the Board of Directors

Corinna Witt
Secretary to the Board

Salem, Virginia
April 2, 2001

IMPORTANT NOTICE

Please complete, sign, date and return the enclosed proxy in the accompanying
postage paid envelope so that your shares will be represented at the meeting.
Shareholders attending the meeting may personally vote on all matters which are
considered, in which event the signed proxies are revoked. Your proxy is
revocable by you at any time prior to its exercise.

SALEM COMMUNITY BANKSHARES, INC.
220 EAST MAIN STREET
SALEM, VIRGINIA 24153

PROXY STATEMENT

2001 ANNUAL MEETING OF SHAREHOLDERS

APRIL 24, 2001

GENERAL INFORMATION

The following information is furnished in connection with the
solicitation by and on behalf of the Board of Directors of the enclosed proxy to
be used at the 2001 Annual Meeting of Shareholders (the "Annual Meeting") of
Salem Community Bankshares, Inc. (the "Company") to be held Tuesday, April 24,
2001, at 10:30 a.m. at the Salem Civic Center located at 1001 Roanoke Boulevard,
Salem, Virginia, and at any adjournment thereof. The approximate mailing date of
this Proxy Statement and accompanying proxy is April 2, 2001.

Revocation and Voting of Proxies

Execution of a proxy will not affect a shareholder's right to attend
the Annual Meeting and to vote in person. Any shareholder who has executed and
returned a proxy may revoke it by attending the Annual Meeting and requesting to
vote in person. A shareholder may also revoke his proxy at any time before it is
exercised by filing a written notice with the Company or by submitting a proxy
bearing a later date. Proxies will extend to, and will be voted at, any properly
adjourned session of the Annual Meeting. Any such written notice of revocation
or later proxy should be sent to Clark Owen, Jr., President and Chief Executive
Officer, at 220 E. Main Street, Salem, Virginia 24153. If a shareholder
specifies how the proxy is to be voted with respect to any proposals for which a
choice is provided, the proxy will be voted in accordance with such
specifications. If a shareholder fails to specify with respect to such
proposals, the proxy will be voted FOR proposal 1, as set forth in the
accompanying notice and further described herein.

Voting Rights of Shareholders

Only those shareholders of record at the close of business on March 16,
2001, are entitled to notice of and to vote at the Annual Meeting, or any
adjournments thereof. The number of shares of common stock of the Company
outstanding on March 16, 2001, is 1,596,873 of which 1,596,873 are entitled to
vote at the Annual Meeting or any adjournment thereof. The Company has no other
class of stock outstanding. A majority of the votes entitled to be cast,
represented in person or by proxy, will constitute a quorum for the transaction
of business at the Annual Meeting. Each share of Company Common Stock entitles
the record holder thereof to one vote upon each matter to be voted upon at the
Annual Meeting.

With regard to the election of directors, votes may be cast in favor or
withheld. If a quorum is present, the nominees receiving a plurality of the
votes cast at the Annual Meeting will be elected directors; therefore, votes
withheld will have no effect. Thus, although abstentions and broker non-votes
(shares held by customers which may not be voted on certain matters because the
broker has not received specific instructions from the customer) are counted for
purposes of determining the presence or absence of a quorum for the transaction
of business, they are generally not counted for purposes of determining whether
such proposals have been approved and therefore have no effect.

Solicitation of Proxies

This solicitation of proxies is made on behalf of and the cost will be
borne by the Company. Solicitations will be made only by the use of the mails,
except that officers and regular employees of the Company and Salem Bank and
Trust, National Association (the "Bank") may make solicitations of proxies by
telephone, telegram, special letter, or by special call, acting without
compensation other than regular compensation. It is contemplated that brokerage
houses and other nominees, custodians, and fiduciaries will be requested to
forward the proxy soliciting material to the beneficial owners of the stock held
of record by such persons, and the Company will reimburse them for their charges
and expenses in this connection.

PROPOSAL ONE - ELECTION OF DIRECTORS

The Company's Board is divided into three classes (A, B, and C) of
directors. The term of office for all Company directors will expire at this
Annual Meeting. Truman R. Dorton, Carlos B. Hart and Gladys C. O'Brien, each of
whom currently serves as a director of the Company, are nominated to serve as
Class A directors. If elected, the Class A nominees will serve until the 2004
Annual Meeting of Shareholders. Morris Elam, H. Morgan Griffith and Dr. Walter
Hunt, each of whom currently serves as a director of the Company, are nominated
to serve as Class B directors. If elected, the Class B nominees will serve until
the 2002 Annual Meeting of Shareholders. Clark Owen, Jr., Carl E. Tarpley, Dr.
Eugene Bane and Rose Hagen, each of whom currently serves as a director of the
Company, are nominated to serve as Class C directors. If elected, the Class C
nominees will serve until the 2003 Annual Meeting of Shareholders. The persons
named in the proxy will vote for the election of the nominees named below unless
otherwise directed. The Company's Board believes that the nominees will be
available and able to serve as directors, but if any of these persons should not
be available or able to serve, the proxies may exercise discretionary authority
to vote for a substitute proposed by the Company's Board.

Certain information concerning the nominees for election at the Annual
Meeting is set forth below.

NOMINEE DIRECTORS

Director of
Name (Age) and Principal Occupation Company
Address Last Five Years Since
- -------------- -------------------- -----------

Class A Nominees to serve until the 2004 Annual Meeting

Truman R. Dorton (61) Dorton, Gooch, P.C. 1999
Daleville, Virginia

Carlos B. Hart (73) President 1999
Salem, Virginia Hart Motor Co., Inc.

Gladys C. O'Brien (64) Vice President 1999
Salem, Virginia O'Brien Meats

Class B Nominees to serve until the 2002 Annual Meeting

Morris A. Elam (76) Retired Owner 1999
Salem, Virginia Morris Elam Electric Co.

H. Morgan Griffith (43) Attorney-at-Law 1999
Salem, Virginia Representative to Virginia
House of Delegates

Dr. Walter A. Hunt (71) Retired Superintendent 1999
Salem, Virginia City of Salem Schools

Class C Nominees to serve until the 2003 Annual Meeting

Dr. Eugene M. Bane, Jr. (61) Doctor of Optometry 1999
Salem, Virginia

Rose M. Hagen (42) CPA, Financial Division 1999
Roanoke, Virginia Manager
Allstate Insurance, Co.

Clark Owen, Jr. (58) President and 1999
Roanoke, Virginia Chief Executive Officer
of Bank since 1977.
President and
Chief Executive Officer
of Company since 1999.

Carl E. Tarpley, Jr. (59) Executive Vice President 1999
Salem, Virginia of Bank since 1987.
Treasurer of Company
since 1999.

YOUR BOARD OF DIRECTORS RECOMMENDS A "FOR" THE ELECTION OF EACH OF THE NOMINEES
LISTED ABOVE.

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth information as of March 16, 2001,
concerning the beneficial ownership, direct or indirect, of Common Stock by
directors, nominees for director, the Chief Executive Officer, and all directors
and executive officers as a group.

Common Shares of Company Beneficially Owned (1)

Common Shares of Ownership as a Percentage
Company Beneficially of Common Stock
Name Owned (1) Outstanding
---- --------- -----------

Truman R. Dorton 15,683 (2)

Carlos B. Hart 39,035 2.44

Gladys C. O'Brien 33,450 2.09

Morris A. Elam 19,713 1.23

H. Morgan Griffith 1,602 (2)

Dr. Walter A. Hunt 39,989 2.50

Dr. Eugene M. Bane, Jr. 25,632 1.61

Rose M. Hagen 1,860 (2)

Clark Owen, Jr. 20,666 (3) 1.29

Carl E. Tarpley, Jr. 10,361 (3) (2)

Directors and
Executive Officers
as a Group
(19 persons) 212,990 13.34

- ---------------------
(1) Includes shares which may be deemed beneficially owned due to certain family
or business relationships. The listing of such shares is not to be construed as
an admission that a director is the "beneficial owner" of such shares.

(2) Less than one percent.

(3) Included in the shares listed are shares held in a 401(k) pool with other
participants. Mr. Owen's portion of this pool amounts to approximately 4,650
shares and Mr. Tarpley's portion amounts to approximately 2,220 shares. Messrs.
Owen and Tarpley may direct the account to sell their shares, but have no say in
how they are voted.

Meetings and Committees of the Board of Directors

The Board of Directors conducts its business through meetings. Since
the Company became a bank holding company in September, 2000, the Company's
Board of Directors has held two meetings and for the full year 2000 the Bank's
Board of Directors held twelve meetings. No director has attended fewer than 75
percent of the total meetings of the Company's and the Bank's Board of Directors
and the committees on which he or she served during this period.

Audit Committee. The only Committee established by the Board of
Directors is the Audit Committee. The Audit Committee is a joint committee of
the Board of Directors of both the Company and the Bank. The Audit Committee
consists of Carlos B. Hart (Chairperson), Truman R. Dorton and H. Morgan
Griffith. The Committee meets periodically with the independent auditors,
internal auditor, bank regulators and certain appropriate officers of the
Company. The basic functions of this committee include reviewing annual and
interim reports of the internal and the independent auditors, reviewing the
Company's system of internal controls and recommending the selection of
independent auditors. The Audit Committee met six times in 2000.

Staff members other than directors attend and participate in some Audit
Committee meetings.

Submission of Shareholder Proposals and Nominations

Under Securities and Exchange Commission rules and regulations,
proposals of shareholders intended to be presented at the 2002 Annual Meeting of
Shareholders of the Company must be received by the Company not later than
December 1, 2001, in order to be included in the proxy statement and form of
Proxy relating to such Annual Meeting. Such proposals should be sent to the
Secretary at the Company's principal office at 220 East Main Street, Salem,
Virginia 24153, by certified mail, return receipt requested. Any proposal that
is received by the Company after December 1, 2001, will be considered untimely
for consideration at the 2002 Annual Meeting.

The Company's bylaws provide that no business may be brought before a
shareholders' meeting by a shareholder unless the shareholder is entitled to
vote at the meeting and gives written notice to the President of Company not
later than 60 days nor more than 90 days prior to such meeting, (unless less
than 70 days notice of the date of the meeting is given, in which case notice
must be received from the shareholder on or before the 10th day following the
date of the notice of the meeting is made). Any such shareholder's notice shall
include (i) the name and address of the shareholder and a brief description of
the business the shareholder desires to bring before the meeting and the
reasons, and as to the shareholder giving such notice, (ii) the classes and
number of shares the shareholder owns of record and beneficially, and (iii) any
material interest of the shareholder in such business other than his or her
interest as a shareholder.

A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB, INCLUDING THE CONSOLIDATED
FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2000, REQUIRED TO
BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IN WASHINGTON, D.C. SHALL
BE PROVIDED BY THE COMPANY WITHOUT CHARGE TO EACH SHAREHOLDER UPON HIS WRITTEN
REQUEST TO GILL R. ROSEBERRY, CHIEF FINANCIAL OFFICER AND CORPORATE SECRETARY,
110 EAST MAIN STREET, SALEM, VIRGINIA 24153.

Transactions with Management

Directors and officers of the Company and Bank and persons with whom
they are associated have had, and expect to have in the future, banking
transactions including loans, with the Bank in the ordinary course of their
businesses. In the opinion of management of the Bank, all such loans and
commitments for loans were made on substantially the same terms, including
interest rates, collateral and repayment terms as those prevailing at the same
time for comparable transactions with other persons, were made in the ordinary
course of business, and do not involve more than a normal risk of collectibility
or present other unfavorable features.

Directors' Fees

Directors of the Company and the Bank (other than Mr. Owen and Mr.
Tarpley who are employees of the Company or Bank) receive monthly directors'
fees of $500. The Chairman of the Board receives a monthly fee of $650. Mr. Owen
and Mr. Tarpley receive no directors' fees.

Interest of Management in Certain Transactions

As of December 31, 2000, borrowing by all policy-making officers,
directors, principal shareholders and their associates amounted to $424,000 or
2.1 percent of total capital. The maximum aggregate amount of such indebtedness
during 2000 was $497,000, or 2.5 percent of total year-end capital. These loans
were made in the ordinary course of the Bank's business, on the same terms,
including interest rates and collateral, as those prevailing at the same time
for comparable transactions with others, and do not involve more than the normal
risks of collectibility or present other unfavorable features. The Bank expects
to have in the future similar banking transactions with officers, directors,
principal shareholders and their associates.

COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table sets forth information as of March 16, 2001,
concerning the beneficial ownership, direct or indirect, of Common Stock by
persons beneficially owning more than five percent of the Company's Common
Stock.

NAME AND ADDRESS AMOUNT BENEFICIALLY OWNED PERCENT OF CLASS (1)
- --------------------------------------------------------------------------------

Warren L. Baker, et al 89,803 5.62
Roanoke, Virginia

Estate of John Hagen, 82,755 5.18
Sondra Hagen, Executrix
Salem, Virginia

CEDE and Company 682,399 42.73 (2)

- ---------------------
(1) Includes shares which may be deemed beneficially owned due to family or
business relationships, joint ownership, voting power or investment power.

(2) CEDE and Company shares are believed to be held for the benefit of several
shareholders.

EXECUTIVE COMPENSATION

The following table presents information relating to total compensation
of Mr. Owen, President and Chief Executive Officer, the only executive officer
of the Company whose compensation exceeded $100,000 for any year in the
three-year period ended December 31, 2000. All compensation was paid by the
Bank, the Company's wholly-owned subsidiary.

SUMMARY COMPENSATION TABLE

Long-Term
Annual Compensation Compensation
------------------- ------------
Other
Name and Principal Annual All Other
Position Year Salary($) Bonus Compensation Compensation(1)
- ------------------ ---- -------- ----- ------------ ---------------

Clark Owen, Jr 2000 $107,768 $6,480 0 None 6,236

President & Chief 1999 103,369 6,120 0 None 5,378

Executive Officer 1998 99,350 5,961 0 None 5,338

- ------------------

(1) Annual contributions to 401(K) plan in 2000, 1999, 1998 and premiums paid
for life insurance.

STOCK OPTION GRANTS

No options were granted to Mr. Owen during 2000, 1999, or 1998.

AGGREGATED OPTION EXERCISES IN 2000 AND YEAR-END OPTION VALUES

The following table reflects certain information regarding the exercise
of stock options during the year ended December 31, 2000, as well as information
with respect to unexercised options held at such date by Mr. Owen.

Year-End Options Values
-----------------------
Options Exercised Number of Value of Unexercised
-----------------
Unexercised Options "In the Money"
Shares at Year End(#) Options at Year
Acquired on Value Exercisable/ End($) Exercisable/
Name Exercised(#) Realized($) Unexercisable Unexercisable(1)
---- ------------ ----------- ------------- --------------------

Clark Owen, Jr. 426 $ 2,450 444/443 $ 2,997/ $ 2,990

- --------------
(1) Calculated as the difference between the current market value and the
exercise price of the options. Assume a current market value of $14.75 per
share, as of December 31, 2000.

EMPLOYMENT AGREEMENTS

The Company's President and Treasurer have each entered into an
employment agreement with the Company which provides that upon a change in
control of the Company, the employment agreement shall automatically renew for a
period of three years. If within 36 months after a change in control, the
Company terminates the executive's employment, the executive will (1) be
entitled to receive for the greater of the remainder of the term or 24 months
all prerequisites provided immediately prior to termination and payment of all
insurance premiums necessary to continue the executive's life, health and
accident insurance; (2) be entitled to receive for the greater of the remainder
of the term, or 12 months, the annual compensation to which the executive was
entitled immediately prior to termination; and (3) become vested in all employee
benefit plans as of the date when final compensation is paid to the executive.
An agreement has also been put in place for other members of management of the
Company which provides that upon a change in control of the Company, the
severance agreement shall continue in effect for a period of three years. Upon
termination of the employee's employment following a change in control for
reasons other than death, retirement, disability, by the Company for cause, or
by the employee for other than good reason, the employee shall receive certain
severance pay and medical benefits.

RETIREMENT PLAN

The Company maintains a 401(k) defined contribution plan (the "Plan")
covering substantially all employees who have completed six months of service
and are at least 21 years of age. The Plan allows participants to contribute
through salary reduction up to 20 percent of their annual compensation on a
pretax basis. Contributions by the Company are paid into a trust semimonthly at
the rate of 3 percent of eligible compensation. The annual expense under the
Plan was $104,882 for the year ended December 31, 2000.

EMPLOYEE STOCK OPTION PLAN

In 1992, the Board of Directors and the stockholders of the Bank
approved an Employee Stock Option Plan (the "Plan") to give Bank directors,
officers and employees (collectively referred to as employees) an opportunity to
acquire shares of the common stock of the Bank to provide an incentive for
employees to continue to promote the best interest of the Bank and enhance its
long-term performance, and to provide an incentive for employees to join or
remain with the Bank. Under the Plan, options may be granted at not less than
fair market value on the date of grant. Stock options granted under the plan are
exercisable in July of each year in ratable installments over the option period,
which expires in 2002. Any options not exercised as permitted are forfeited. In
the event of a change in control, merger, consolidation, dissolution or
liquidation, employees holding unexercised stock options will be given 30 days
to exercise any unexercised stock options, without regard to installment
exercise limitations. In connection with the formation of the Company and its
acquisition of all the Bank's outstanding stock, the options in the Plan which
had not been exercised as of such date automatically became options to acquire
stock in the Company on the same terms and conditions. All options granted
pursuant to the Plan after the formation of the holding company are deemed
options to acquire the common stock of the Company.

At December 31, 2000 there were 72,010 additional shares available for
grant under the Plan.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires directors, executive
officers and 10% beneficial owners of the Company's Common Stock to file reports
concerning their ownership of Common Stock. The Company believes that its
officers and directors complied with all filing requirements under Section 16(a)
of the Securities Exchange Act of 1934 during 2000.

INDEPENDENT PUBLIC ACCOUNTANTS

KPMG LLP served as the Company's independent public accountants for the
year ended December 31, 2000. No accountants have been selected by the Board to
act as the Company's independent public accountants for the year ending December
31, 2001. The Board will make that selection later in the year. A representative
of KPMG LLP will be present at the Annual Meeting and will be given the
opportunity to make a statement and respond to appropriate questions from the
shareholders.

The following table sets forth the amount of audit fees, financial
information systems design and implementation fees and all other fees billed or
expected to be billed by KPMG LLP, the Company's principal accountant, for the
year ended December 31, 2000:

Amount
------
Audit fees (1) $45,000
Financial information systems
design and implementation fee (2) -
All other fees (3) 13,925
-------
Total fees $58,925
=======
_______________
(1) includes annual financial statement audit and limited quarterly review
services.
(2) no such services were provided by KPMG LLP for the most recent fiscal
year.
(3) primarily represents income tax services other than those directly
related to the audit of the income tax accrual, as well as services
performed in connection with the filing of Form S-4 registration
statement by the Company.

AUDIT COMMITTEE REPORT

The Audit Committee of the Board of Directors, which consists of
directors who meet the independence requirements of the Securities and Exchange
Commission (SEC) listing standards, and the internal auditor has furnished the
following report:

The Audit Committee (the "Committee") reviews the Company's financial
reporting process on behalf of the Board. The role and responsibilities of the
Audit Committee are set forth in a written Charter adopted by the Board, which
is attached as an Addendum to this Proxy Statement. Management has the primary
responsibility for the financial statements and the reporting process, including
the system of internal controls. The independent auditors are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with accounting principles generally accepted in the
United States of America and to issue a report thereon. The Committee monitors
these processes.

In this context, the Committee met and held discussions with management
and the independent auditors. Management represented to the Committee that the
Company's consolidated financial statements

were prepared in accordance with accounting principles generally accepted in the
United States of America, and the Committee reviewed and discussed the
consolidated financial statements with management and the independent auditors.
The Committee also discussed with the independent auditors the matters required
to be discussed by Statement on Auditing Standards No. 61 (Communication with
Audit Committees).

In addition, the Committee discussed with the independent auditors the
auditors' independence from the Company and its management, and the independent
auditors provided to the Committee the written disclosures and letter required
by the Independence Standards Board Standard No. 1 (Independent Discussions with
Audit Committees). However, The Audit Committee of the Board of Directors has
not yet considered whether the provision of financial information systems design
and implementation and other non-audit services is compatible with maintaining
KPMG LLP's independence, but plans to do so at its meeting in March, 2001.

The Committee also discussed with the Company's independent auditors
and internal auditor the overall scope and plans for their respective audits.
The Committee met with the internal and independent auditors, with and without
management present, to discuss the results of their examinations, their
evaluations of the Company's internal controls, and the overall quality of the
Company's financial reporting.

Based on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors, and the Board of Directors has approved,
that the audited consolidated financial statements be included in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 2000, for filing
with the Securities and Exchange Commission.

Audit Committee Members

Carlos B. Hart, Chairperson
Truman R. Dorton
H. Morgan Griffith

OTHER BUSINESS

As of the date of this Proxy Statement, management of the Company has no
knowledge of any matters to be presented for consideration at the Annual Meeting
other than those referred to above. If any other matters properly come before
the Annual Meeting, the persons named in the accompanying proxy intend to vote
such proxy, to the extent entitled, in accordance with their judgment as to what
is in the best interests of the Company.

By Order of the Board of Directors

Corinna Witt
Secretary to the Board

Salem, Virginia
April 2, 2001

A copy of the Company's Annual Report on Form 10-KSB Report (including exhibits)
as filed with the Securities and Exchange Commission for the year ended December
31, 2000, will be furnished without charge to shareholders upon written request
directed to the Company's Corporate Secretary as set forth on the first page of
this Proxy Statement.

ADDENDUM TO PROXY STATEMENT

SALEM COMMUNITY BANKSHARES, INC.
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS

I. Audit Committee Purpose

The Audit Committee is appointed by the Board of Directors to assist the Board
in fulfilling its oversight responsibilities. The Audit Committee's primary
duties and responsibilities are to:

. Monitor the integrity of the Company's financial reporting process and
systems of internal controls regarding finance, accounting, and legal
compliance.

. Monitor the independence and performance of the Company's independent
auditors and internal auditing department.

. Provide an avenue of communication among the independent auditors,
management, the internal auditing department, and the Board of Directors.

. Report to the Board of Directors.

. Encourage adherence to, and continuous improvement of, the Company's
policies, procedures and practices at all levels.

The Audit Committee has the authority to conduct any investigation appropriate
to fulfilling its responsibilities and it has direct access to the independent
auditors as well as anyone in the organization. The Audit Committee has the
ability to retain, at the Company's expense, special legal, accounting, or other
consultants or experts it deems necessary in the performance of its duties.

II. Audit Committee Composition and Meetings

Audit Committee members shall meet the requirements of the Securities and
Exchange Commission (SEC). The Audit Committee shall be comprised of three or
more directors as determined by the Board, each of whom shall be independent
non-executive directors, free from any relationship that would interfere with
the exercise of his or her independent judgment. The SEC has established 3
criteria for assessing independence of non-executive directors:

. Former employees. Must be a minimum of three years since he/she was an
employee.

7/2000

Charter of the Audit Committee of the Board of Directors
Page 2

. Family members of former employees. Must be a minimum of three years since
the relative was an employees.

. An Audit Committee member's compensation cannot be impacted by an employee
of the company.

All members of the Committee shall have a basic understanding of finance and
accounting and be able to read and understand fundamental financial statements,
and at least one member of the Committee shall have accounting or related
financial management expertise.

Audit Committee members shall be appointed by the Board of Directors. If an
Audit Committee Chair is not designated or present, the members of the Committee
may designate a Chair by majority vote of the Committee membership.

The Committee shall meet at least four times annually, or more frequently as
circumstances dictate. The Audit Committee Chair shall prepare and/or approve an
agenda in advance of each meeting. The Committee should meet privately in
executive session at least annually with management, the director of the
internal auditing department, the independent auditors and as a committee to
discuss any matters that the Committee or each of these groups believe should be
discussed. In addition, the Committee or at least its Chair should communicate
with management and the independent auditors quarterly to review the Company's
financial statements and significant findings based upon the auditors' limited
review procedures.

III. Audit Committee Responsibilities and Duties

Review Procedures
- -----------------

1. Review and reassess the adequacy of this Charter at least annually.
Submit the Charter to the Board of Directors for approval and have the
document published at least every three years in accordance with SEC
regulations.

2. Review the Company's annual audited financial statements prior to
filing or distribution. Review should include discussion with
management and independent auditors of significant issues regarding
accounting principles, practices and judgments.

3. In consultation with management, the independent auditors and the
internal auditors, consider the integrity of the Company's financial
reporting processes

Charter of the Audit Committee of the Board of Directors
Page 3

and controls. Discuss significant financial risk exposures and the
steps management has taken to monitor, control and report such
exposures. Review significant findings prepared by the independent
auditors and the internal auditing department together with
management's responses.

4. Review with financial management and the independent auditors the
Company's quarterly financial results prior to the release of earnings
and/or the Company's quarterly financial statements prior to filing or
distribution. Discuss any significant changes to the Company's
accounting principles and any items required to be communicated by the
independent auditors in accordance with SAS 61 (see item 9). The Chair
of the Committee may represent the entire Audit Committee for purposes
of this review.

Independent Auditors
- --------------------

5. The independent auditors are ultimately accountable to the Audit
Committee and the Board of Directors. The Audit Committee shall review
the independence, and performance of the auditors and annually
recommend to the Board of Directors the appointment of the independent
auditors or approve any discharge of auditors when circumstances
warrant.

6. Approve the fees and other significant compensation to be paid to the
independent auditors.

7. On an annual basis, the Committee should review and discuss with the
independent auditors all significant relationships they have with the
Company that could impair the auditors' independence.

8. Review the independent auditors' audit plan-discuss scope, staffing,
locations, reliance upon management and internal audit and general
audit approach.

9. Prior to the filing of Form 10-KSB, discuss the results of the audit
with the independent auditors. Discuss certain matters required to be
communicated to audit committees in accordance with AICPA SAS 61.

10. Consider the independent auditors' judgments about the quality and
appropriate-ness of the Company's accounting principles as applied in
its financial reporting.

11. Review the budget, plan, changes in plan, activities, organizational
structure, and qualifications of the internal audit department, as
needed.

Charter of the Audit Committee of the Board of Directors
Page 4

12. Review the appointment, performance and replacement of the senior
internal audit executive.

Internal Audit Department and Legal Compliance
- ----------------------------------------------

13. Review significant reports prepared by the internal audit department
together with management's response and follow-up to these reports.

14. On at least an annual basis, review with the Company's counsel, any
legal matters that could have a significant impact on the
organization's financial statements, the Company's compliance with
applicable laws and regulations, inquiries received from regulators or
governmental agencies.

Other Audit Committee Responsibilities
- --------------------------------------

15. Annually prepare a report to shareholders as required by the Securities
Exchange Commission. The report should be included in the Company's
annual proxy statement. The report should state whether the Audit
Committee has:

. Reviewed and discussed the audited financial statements with management.

. Discussed with the independent auditors the matters required to be discussed
by SAS 61.

. Received certain disclosures from the auditors regarding their independence
as required by the ISB 1.

. Recommended to the Board of Directors to include the audited consolidated
financial statements in the annual report on Form 10-KSB filed with the SEC.

16. Perform any other activities consistent with this Charter, the
Company's by-laws and governing law, as the Committee or the Board
deems necessary or appropriate.

17. Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.

PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS
OF SALEM COMMUNITY BANKSHARES, INC. TO BE HELD APRIL 24, 2001

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned, revoking all prior proxies, hereby appoints Eugene M. Bane,
Jr., Carlos B. Hart, and Rose M. Hagen as proxies, and each or any of them with
full power of substitution, and hereby authorizes them to represent and to vote,
as designated below, all the shares of Common Stock of SALEM COMMUNITY
BANKSHARES, INC. held of record by the undersigned on March 16, 2001 at the
Annual Meeting of Shareholders to be held April 24, 2001 or any adjournment
thereof.

1. Election of directors.

. Election of three Class A directors to serve until the 2004
Annual Meeting of Shareholders.
Truman R. Dorton
Carlos B. Hart
Gladys C. O'Brien

. Election of three Class B directors to serve until the 2002
Annual Meeting of Shareholders.
Morris Elam
H. Morgan Griffith
Dr. Walter Hunt

. Election of four Class C directors to serve until the 2003
Annual Meeting of Shareholders.
Clark Owen, Jr.
Carl E. Tarpley, Jr.
Dr. Eugene Bane
Rose Hagen

_______ FOR ALL NOMINEES listed below (except as marked to the contrary).

_______ AGAINST ALL NOMINEES listed above.

You may withhold authority to vote for any nominee by striking through his or
her name.

2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, OR IF AUTHORITY IS NOT
WITHHELD, THIS PROXY WILL BE VOTED "FOR" PROPOSAL NO. 1 ABOVE AND IN THE
---
DISCRETION OF THE PROXY AGENTS ON OTHER MATTERS.

Please sign exactly as your name appears below on this proxy. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by authorized person.

_____________________________ _________________________________
Signature Date Signature Date

NUMBER OF SHARES ________________
________________________________________________________________________________
PLEASE MARK, SIGN, DATE & RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE
________________________________________________________________________________