NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

Notice is hereby given that the regular annual meeting of  shareholders of South
Branch  Valley  Bancorp,  Inc.  will be held on May 5, 1998 at 7:00 p.m.  at the
Moorefield Middle School, Route 55 East, Moorefield,  West Virginia,  26836, for
the purpose of considering and voting upon the following matters:

      1.       To elect directors;

      2.       To approve the adoption of the Officer Stock Option Plan;

      3.       To ratify  the  selection  of  Arnett & Foster  as the  Company's
               independent  certified  public  accountants  for the fiscal  year
               ending December 31, 1998; and

      4.       To transact  such other  business as may properly come before the
               meeting.  The Board of  Directors  at  present  knows of no other
               business   to  come  before  the  annual   meeting.

               Only those  shareholders  of record at the close of  business  on
               March 20,  1998  shall be  entitled  to notice and to vote at the
               meeting.

                                    By order of the Board of Directors

                                    /s/ Oscar M. Bean
                                    ----------------------------------------
                                    Oscar M. Bean
                                    Chairman of the Board

Approximate mailing date of this Proxy: April 17, 1998

WE URGE YOU TO MARK,  DATE,  SIGN AND RETURN THE  ENCLOSED  PROXY AS PROMPTLY AS
POSSIBLE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. THIS WILL NOT LIMIT YOUR
RIGHT TO VOTE IN  PERSON IF YOU WISH TO DO SO AT THE  MEETING.  THE PROXY MAY BE
REVOKED AT ANY TIME PRIOR TO ITS EXERCISE IN  ACCORDANCE  WITH THE PROCEDURE SET
FORTH  IN THE  PROXY  MATERIALS  UNDER  THE  HEADING  "REVOCATION  OF  PROXY  OR
SUBSTITUTION."

                                 PROXY STATEMENT
                         ANNUAL MEETING OF SHAREHOLDERS
                                   May 5, 1998

GENERAL INFORMATION.

     This proxy statement is furnished by the Board of Directors of South Branch
Valley  Bancorp,  Inc. (the "Company") for the Annual Meeting of Shareholders to
be held at the  Moorefield  Middle  School,  Route  259 East,  Moorefield,  West
Virginia 26836 at 7:00 p.m. on May 5, 1998 and any adjournment thereof.  Holders
of shares of stock of the  Company of record at the close of  business  on March
20,  1998  are  entitled  to  notice  of and to vote at the  Annual  Meeting  of
Shareholders and at any adjournment of the meeting. The holders of a majority of
the  shares  entitled  to vote at the  meeting  must be  present  in  person  or
represented  by proxy in order to  constitute  a quorum for all  matters to come
before the meeting.

     In the  election  of  directors,  shareholders  cast  one (1) vote for each
nominee  for each  share  held.  However,  every  shareholder  has the  right of
cumulative  voting,  in  person  or by  proxy,  in the  election  of  directors.
Cumulative  voting gives each shareholder the right to aggregate all votes which
he or she is entitled to cast in the election of directors  and to cast all such
votes for one candidate or distribute  them among as many candidates and in such
a manner as the  shareholder  desires.  For 1998 the number of  directors  to be
elected is six (6) and therefore each  shareholder has the right to cast six (6)
votes in the  election of  directors  for each share of stock held on the record
date. If you wish to exercise,  by proxy, your right to cumulative voting in the
election of directors, you must provide a proxy showing how your votes are to be
distributed among one or more candidates. Unless contrary instructions are given
by a  shareholder  who signs and returns a proxy,  all votes for the election of
directors  represented  by such proxy will be divided  equally among the six (6)
nominees set forth in this proxy  statement.  However,  if cumulative  voting is
invoked  by any  shareholder,  the vote  represented  by the  proxies  delivered
pursuant to this solicitation,  which do not contain contrary instructions,  may
be cumulated at the  discretion of the Board of Directors of South Branch Valley
Bancorp,  Inc. in order to elect to the Board of Directors the maximum  nominees
named in this proxy statement.

     On the record date,  there were 412,827 shares of common stock  outstanding
which are held by approximately 634 shareholders.  A majority of the outstanding
shares of South Branch  Valley  Bancorp,  Inc.  will  constitute a quorum at the
meeting.   Abstentions  and  broker   non-votes  are  counted  for  purposes  of
determining  the  presence of a quorum for the  transactions  of  business.  The
election of each director  nominated  requires the favorable vote of a plurality
of all votes cast by the holders of common  stock at a meeting at which a quorum
is present.  Only shares that are voted in favor of a particular nominee will be
counted toward such nominee's achievement of a plurality. Abstentions and broker
non-votes will not be counted  toward such nominee's  achievement of a plurality
and thus have no effect.  A broker non-vote  generally  occurs when a broker who
holds shares in a street name for a customer does not have the authority to vote
on certain matters because its customer has not provided any voting instructions
on the matter.

RECENT DEVELOPMENTS.
- -------------------

     On March 24, 1998, the Capital State Bank, Inc., Charleston,  West Virginia
("Capital  State") held a Special  Meeting of  shareholders to consider and vote
upon the Agreement  and Plan of Merger dated August 6, 1997 as amended  December
16, 1997 (the  "Agreement")  by and among  Capital  State,  South Branch  Valley
Bancorp,  Inc.  ("South  Branch") and Capital Interim Bank, Inc., a wholly owned
subsidiary  of  South  Branch  ("Capital  Interim  Bank")  organized  solely  to
facilitate the acquisition of Capital State. Pursuant to the Agreement,  Capital
State was merged with and into Capital  Interim  Bank with Capital  Interim Bank
surviving the merger (the "Merger").  The shareholders of Capital State approved
the Merger on March 24, 1998.

     On March 25, 1998,  South Branch held a Special Meeting of its shareholders
at which  South  Branch  shareholders  were  asked to  consider  a vote upon two
proposals in  connection  with the Merger.  The first  proposal was to amend the
Articles of  Incorporation  of South Branch to increase the number of authorized
shares of common  stock,  par value  $2.50  per  share  from  600,000  shares to
2,000,000  shares.  The second proposal was to approve the issuance of up to One
Hundred Eighty-four-Thousand Five (184,005) shares of

                                              1

South Branch Valley stock as consideration  for the Merger.  The shareholders of
South Branch approved both proposals on March 25, 1998.

     No other matters came before either meeting or any adjournment thereof.

     Effective  at the close of business on March 31, 1998,  Capital  State Bank
merged with and into Capital  Interim Bank and became a wholly owned  subsidiary
of South Branch in accordance with the terms and conditions of the Agreement.

     Pursuant to the Agreement,  South Branch also agreed to take such action as
was  necessary to cause three members of the Board of Directors of Capital State
to become  members of the board of  directors of South  Branch.  Pursuant to the
Agreement,  Capital  State was  entitled to one  director in each class of South
Branch's  staggered  board.  Accordingly,  effective at the close of business on
March 31, 1998,  South Branch  agreed to appoint Frank A. Baer,  III,  Georgette
Rashid George and Charles S. Piccirillo, Esq. to the Board of Directors of South
Branch. These individuals will serve until the 1998 Annual Meeting.  These three
individuals have been nominated to continue to serve on South Branch's Board for
the terms indicated herein.

     Mary Ann Ours, whose term would have expired in 1998,  passed away in March
1998 after an extended  illness.  She was appointed to the Board in October 1994
to fill the unexpired term of her husband,  A. Clyde Ours,  Jr., after his death
and  was  subsequently  elected  to a three  year  term in  1995.  Her  tireless
contributions to the growth and success of the Company will be missed.

PROXY SOLICITATION.
- ------------------

     The  accompanying  proxy is  solicited  by the  Board of  Directors  of the
Company.  In that  connection,  this  proxy  statement  is being  mailed  to the
shareholders  on or before April 17, 1998. In addition to this  solicitation  by
mail, it is possible that employees of the Company may solicit proxies in person
or by telephone. Brokers,  fiduciaries,  custodians and other nominees have been
requested  to forward  solicitation  materials to the  beneficial  owners of the
common  stock of the  Company  held of  record in their  names  and  will,  upon
request,  be reimbursed for their reasonable  expenses in so doing. All costs of
the solicitation of proxies will be borne by the Company.

REVOCATION OF PROXY OR SUBSTITUTION.
- -----------------------------------

     Any person signing and mailing the enclosed proxy may, nevertheless, revoke
the proxy at any time before the actual  voting  thereof  (i) by giving  written
notice to the President of South Branch Valley Bancorp, Inc., (ii) by submitting
a subsequently dated proxy, or (iii) by appearing at the 1998 annual meeting and
voting in person.  On the  accompanying  proxy, a shareholder may substitute the
name of another person in lieu of those persons presently named as proxies. Such
substituted  persons  may be asked to  present  adequate  identification  to the
Secretary prior to voting.

SHAREHOLDER OWNERSHIP.
- ----------------------

     As of April 2,  1998,  so far as is known  to the  Company,  the  following
person  owned  beneficially  5% or more of the  outstanding  common stock of the
Company.  Beneficial  ownership has been restated to give effect to the issuance
of  approximately  183,438  shares of South Branch stock in connection  with the
Merger and is based on approximately 596,265 shares issued and outstanding as of
April 2, 1998.

NAME AND ADDRESS                 NUMBER OF SHARES             PERCENTAGE
- -----------------------         -----------------             -----------
John W. Crites                      51,205 (1)                   8.6%
46 Point Drive
Petersburg, WV 26847

(1) 23,905  shares are owned by  Allegheny  Wood  Products,  Inc.,  of which Mr.
Crites is majority owner and president.

                                              2

Proposal No. 1:        ELECTION OF DIRECTORS.

     Nominees.  There is one  nominee  for  election  as director to hold office
     --------
until the year 1999 and until his successor has been duly elected and qualified.
There is one nominee for election as director to hold office until the year 2000
and until her successor has been duly elected and qualified.  There are four (4)
nominees  for election as directors of the Company to hold office until the year
2001 and until their successors have been duly elected and qualified.

     The Articles of  Incorporation  of the Company provide that nominations for
election to the Board of  Directors  may be made by the Board of Directors or by
any  shareholder  entitled to vote for the election of  directors.  Nominations,
other than those made by or on behalf of the existing management of the Company,
must be made in writing and  delivered or mailed to the President of the Company
not less than thirty (30) days prior to any meeting of  shareholders  called for
the election of directors; provided, however, that if less than thirty (30) days
notice of the meeting is given to shareholders,  such nomination shall be mailed
or delivered to the  President of the Company not later than the fifth (5th) day
following the day on which the notice of meeting was mailed.  Such  notification
shall contain the following  information to the extent known by the shareholder:
(i) the name and address of each nominee,  (ii) the principal occupation of each
nominee, (iii) the name and address of the notifying  shareholder,  and (iv) the
number of shares of the  Company's  stock  owned by the  notifying  shareholder.
Nominations  not  made  in  accordance  with  these  requirements,  may,  in the
discretion  of the  chairman  of the  meeting,  be  disregarded,  and  upon  his
instruction, the votes cast for each such nominee shall be disregarded.

     If the  enclosed  proxy is properly  executed  and received in time for the
meeting,  it is the  intention  of the person named in the proxy to vote for the
shares  represented  thereby for the persons nominated for election as directors
unless  authority  to vote  has  been  withheld  or  otherwise  directed  by the
shareholder.  All of the nominees have indicated a willingness to serve,  but in
case any of the nominees are not  candidates at the meeting or are  disqualified
as a candidate  for any reason,  it is the intention of the persons named in the
enclosed proxy to vote in favor of the remainder of the nominees and to vote for
substitute nominees at their discretion.

     Oscar M. Bean and Phoebe F.  Heishman were each elected to the Board at the
1995 Annual  Meeting and are currently  serving as directors of the Company.  H.
Charles  Maddy,  III was  elected  to the Board at the 1994  Annual  Meeting  is
currently serving as a director and as president of the Company. Mr. Maddy would
have stood for reelection in 1997,  however, on September 19, 1997, the Board of
Directors  voted  to  appoint  Mr.  Maddy  to fill the  vacancy  created  by the
resignation  of Renick C.  Williams  whose term would have expired in 1998.  All
nominees are also  directors of the  Company's  subsidiary,  South Branch Valley
National Bank,  except Messrs.  Baer and Piccirillo and Ms. George.  Pursuant to
the  Agreement,  three  directors  of Capital  State Bank,  Frank A. Baer,  III,
Georgette  Rashid George and Charles S.  Piccirillo  were appointed on March 31,
1998 to serve until the 1998 Annual  Meeting.  These nominees are also currently
directors of the Company's subsidiary, Capital State Bank, Inc.

     The  following  is  information  about the  nominees  as of April 2,  1998.
Beneficial  ownership  has been  restated  to give  effect  of the  issuance  of
approximately 183,438 shares of South Branch stock in connection with the Merger
and is based on approximately  596,528 shares issued and outstanding as of April
2, 1998.

TO SERVE FOR A ONE YEAR TERM UNTIL 1999:

     Frank A. Baer, III, 37, is President of Commercial  Insurance  Service,  an
     ------------------
insurance  brokerage.  He is also Vice  President  of M & B  Properties,  a real
estate company. He has served as a director of Capital State Bank since 1995. He
has  served as  director  of the  Company  since  March  1998.  Mr.  Baer is the
beneficial owner of 1,085 shares of the Company's common stock.

                                              3

TO SERVE FOR A TWO YEAR TERM UNTIL 2000:

     Georgette  Rashid  George,  37, is manager  of E&G,  Inc.  dba Ramada  Inn,
     --------------------------
manager of  Hospitality  Ventures,  dba Hampton Inn,  and manager of  Ridgeline,
Inc., a real estate development company. She has served as a director of Capital
State Bank since 1996.  She has served as  director  of the Company  since March
1998. Ms. George is the beneficial owner of 1,188 shares of the Company's common
stock.

TO SERVE FOR A THREE YEAR TERM UNTIL 2001:

     Oscar M. Bean,  48, is the  managing  partner of Bean & Bean,  Attorneys at
     -------------
Law. He has been a director of the Company  since 1987 and South  Branch  Valley
National Bank since 1978. He has served as Chairman of the Board since 1995. Mr.
Bean  currently  serves on the  Executive,  Planning  & Budget,  Asset/Liability
Management &  Investments  and  Compliance & Audit  committees.  Mr. Bean is the
beneficial owner of 9,274 shares of the Company's common stock.

     Phoebe F.  Heishman,  56, is the  publisher  and  editor of the  Moorefield
     -------------------
Examiner and  President of  R.E.Fisher  Co., Inc. She has been a director of the
Company  since 1987 and South Branch Valley  National  Bank since 1973.  She has
served as Secretary of the Company since 1995. Mrs. Heishman currently serves on
the Trust  Committee and is a rotating member of the Executive  Committee.  Mrs.
Heishman is the beneficial owner of 11,690 shares of the Company's common stock.

     H. Charles Maddy, III, 35 , has served as the President and Chief Executive
     ---------------------
Officer of South Branch Valley  National Bank since 1994. He has been a director
of both the Company and South Branch Valley National Bank since 1993. In 1994 he
was elected to a three year term and in 1997 was  appointed  to fill the vacancy
created by the resignation of Renick C. Williams.  Mr. Maddy currently serves on
the Executive,  Planning & Budget,  Asset/Liability Management & Investments and
Compliance & Audit  committees.  Mr. Maddy also serves on the Board of Directors
of Capital State Bank. Mr. Maddy is the beneficial  owner of 1,046 shares of the
Company's common stock.

     Charles  S.  Piccirillo,  43,  is a  partner  in the law firm of  Shaffer &
     -----------------------
Shaffer.  He is also a partner in Lawoff Associates,  a real estate partnership,
and is President  of Anggus  Enterprises,  Inc.,  which owns  commercial  rental
property.  He has served as a director  of Capital  State Bank since  1996.  Mr.
Piccirillo was appointed  acting  Chairman of Capital State in February 1997 and
was elected  Chairman the Board of Capital  State in June 1997. He has served as
director of the Company since March 1998. Mr. Piccirillo is the beneficial owner
of 1,138 shares of the Company's common stock.

BOARD OF DIRECTORS CONTINUING TO SERVE UNEXPIRED TERMS.

     In addition to the individual  nominees listed above,  the current Board of
Directors of the Company comprises the nine individuals listed below.  Directors
of the Company are divided  into three  classes and serve a staggered  three (3)
year term. All current  directors of the Company are also directors of the South
Branch  Valley  National Bank or Capital State Bank,  the only  subsidiaries  of
South Branch  Valley  Bancorp,  Inc.  Directors of South Branch or Capital State
serve for a one (1) year term. The table below sets forth information concerning
each  director  as of April 2, 1998.  The  current  number of  directors  of the
Company is fifteen (15).

                           Date
                       Current Term
                        as Director
                        of Company     Positions & Principal Occupation or
Name and Age              Expires      Employment Last Five Years
- ----------------      ---------------  -----------------------------------------------
                                             
Donald W. Biller (66)     1999         Director and Vice  Chairman of the Board since 1987;  Director of
                                       South Branch since 1975; President of D.W. Biller, Inc.; Director
                                       of WV Farm Credit ACA; Farmer.

                                                  4

                                             
James M. Cookman (44)     2000         Director of Company and South Branch  since 1994;  President
                                       of Cookman  Insurance  Center,  Inc.;  President  of Cookman
                                       Realty Group, Inc.,  Secretary/Treasurer of Apex Developers,
                                       Inc.;  Owner  of  WQWV-FM  radio  station;  Member  of  West
                                       Virginia Lottery Commission; Director of Capital State Bank.

John W. Crites (58)       1999         Director of Company and South Branch  since 1989;  President
                                       of  Allegheny  Wood  Products,   Inc.;  Partner,   Allegheny
                                       Dimension, LLC; Principal Stockholder, KJV Aviation.

Thomas J. Hawse, III (53) 2000         Director of Company and South Branch  since 1988;  President
                                       of Hawse Food Market, Inc.

Gary L. Hinkle (49)       2000         Director of Company and South Branch  since 1993;  President
                                       of Hinkle Trucking,  Inc., Dettinburn  Transport,  Inc., and
                                       Mt. Storm Fuel Corporation.

Jeffrey E. Hott (47)      1999         Director  of  Company  and South  Branch  since  1990;  Vice
                                       President  of Hott's  Ag  Services,  E.E.  Hott,  Inc.,  and
                                       Franklin Oil Co.

Harold K. Michael (54)    2000         Director of Company  and South  Branch  since  1994;  Owner/
                                       Agent of H.K.  Michael & Son  Insurance;  Member of the West
                                       Virginia House of Delegates; Director of Capital State Bank.

Russell F. Ratliff, Jr. (48)1999       Director of Company and South Branch  since 1994;  Treasurer
                                       of the Company,  1987 to present; Vice President and Cashier
                                       of the Bank,  1993 to present;  CEO and Cashier of the Bank,
                                       1988 to 1993.

Harry C. Welton (68)      1999         Director  of Company  since 1987;  Director of South  Branch
                                       since 1986; Retired farmer.

EXECUTIVE OFFICERS.

The following  table  identifies the executive  officers of the Company,  all of
whom were appointed in October 1997 to serve until the next annual meeting.  Mr.
Jennings is an  executive  officer of the  Company's  subsidiary,  South  Branch
Valley National Bank, and Ms. Byrnside is an executive  officer of the Company's
subsidiary,  Capital  State  Bank.  Mr.  Bean  and Mrs.  Heishman,  who are also
directors  of the  Company,  do not receive  additional  compensation  for their
service as  executive  officers  of the  Company  and thus are not listed in the
Executive Compensation Table shown on page 8.

Name, Year Appointed, Age           Office, Experience
- -------------------------           -------------------------
                                     
Oscar M. Bean, 1995 (48)            Chairman  of the  Board  of the  Company,  February  1995 to
                                    present;  Chairman  of the Board of South  Branch,  February
                                    1995 to present;  Secretary  of the Company 1987 to February
                                    1995.

Phoebe F. Heishman, 1995 (56)       Secretary of the Company, February 1995 to present.

H. Charles Maddy, III, 1988 (35)    President of the Company since 1994; Chief Financial Officer
                                    of the Company,  1988 to 1994; President and Chief Executive
                                    Officer of South  Branch,  April 1993 to present;  Executive
                                    Vice President of the Bank, 1992 to 1993; Vice President and
                                    Controller, 1988 to 1992.

Russell F. Ratliff, Jr., 1986 (48)  Treasurer of the Company,  1987 to present;  Vice  President
                                    and Cashier of South Branch,  April 1993 to present; CEO and
                                    Cashier of the Bank, 1988 to 1993.

                                                  5

                                                                                              
Scott C. Jennings, 1994 (36)        Vice President of Loan Administration for South Branch April
                                    1997  to  present;   Vice   President  of  Loan  Review  and
                                    Compliance,  1994 to April 1997;  Loan Review and Compliance
                                    Officer 1991 to 1994.

Emma L. Byrnside (48)               President of Capital State Bank, 1997 to present;  Executive
                                    Vice President  1995-1997,  Vice  President,  Bank One, West
                                    Virginia, Boone, NA, 1975 to 1995.

OWNERSHIP OF STOCK BY DIRECTORS AND EXECUTIVE OFFICERS.

        The following  table sets forth the amount of common stock  beneficially
owned by each  director  and by all  executive  officers  and  directors  of the
Company and its  subsidiaries,  South Branch  Valley  National  Bank and Capital
State Bank, as a group of seventeen (17) persons as of April 2, 1998. Beneficial
ownership  has been  restated  to give effect of the  issuance of  approximately
183,438 shares of South Branch stock in connection  with the Merger and is based
on approximately 596,265 shares issued and outstanding.

 Name of                     Qualifying                Other Shares
Beneficial                   Shares          Beneficially   Owned     Percent of
  Owner                      Owned            Direct       Indirect     Class**
- --------------------       ----------------- -----------------------------------
Frank A. Baer, III           1,000               11         74  (12)       .0%
Oscar M. Bean                1,000            6,536      1,738   (4)      1.4%
Donald W. Biller             1,000              506      5,120   (9)       .9%
James M. Cookman             1,000               --      2,161   (7)       .4%
John W. Crites               1,000           26,300     23,905   (2)      8.4%
Georgette R. George         ***341                0        847  (10)       .2%
Thomas J. Hawse, III         1,000            2,100        ---             .5%
Phoebe F. Heishman           1,000            9,150      1,540   (5)      1.7%
Gary L. Hinkle               1,000                1      3,400   (8)      2.5%
Jeffrey E. Hott              1,000            3,530     18,105   (3)      3.6%
H. Charles Maddy, III        *                  202        844   (6)       .2%
Harold K. Michael            1,000               38        ---             .0%
Charles S. Piccirillo       ***253                0        885  (11)       .2%
Russell F. Ratliff, Jr         *                950        883   (6)       .3%
Harry C. Welton, Jr.         1,000              840      9,465   (1)      1.7%

                                               61,635       68,967       21.9%
                                               ======       ======       =====
All directors and
executive officers as
a group (17 persons)                           62,878       69,422       22.2%
                                               ======       ======       =====

*   Director/employee   not   required  to  own  1,000  shares  to  qualify  for
directorship.
** Does not include qualifying shares.
*** Director does not own the required number of qualifying  shares at this time
but has until the  expiration  of his or her term to accumulate  the  qualifying
shares.

(1) All shares indirectly held are owned by the spouse.

(2) All  shares  indirectly  held by Mr.  Crites  are  owned by  Allegheny  Wood
Products, Inc. of which Mr. Crites is the President and majority shareholder.

(3) 150 shares are owned by Mr. Hott's minor  children;  10,855 shares are owned
by E.E.  Hott,  Inc. and 7,100 shares are owned by Franklin Oil Co. (Mr. Hott is
vice president of both companies).

(4) 55 shares are owned by Mr. Bean's spouse; 493 shares are owned by Mr. Bean's
minor  children;  1,190  shares are owned by Mr.  Bean's  mother for whom he has
power of attorney.

                                                  6

(5) 220 shares are owned by Ms.  Heishman's  spouse;  1,320  shares are owned by
minor children.

(6) Fully  vested  shares held on behalf of named  individual  in the  Company's
ESOP.

(7) 710 shares are owned by Mr.  Cookman's minor children;  500 shares are owned
by Cookman Insurance Center,  Inc. in which Mr. Cookman has a majority interest,
and 1,368  shares are owned by the Cookman  Insurance  Center,  Inc.  Retirement
Plan.

(8) 3,400 shares are owned by Hinkle  Trucking,  Inc. of which Mr. Hinkle is the
President.

(9) All shares  indirectly held by Mr. Biller are owned by D.W. Biller,  Inc. of
which Mr. Biller is the President.

(10) 341 shares are owned by the spouse and 506 shares are held by the  spouse's
retirement plan.

(11) 506 shares  are held in trust by Shaffer & Shaffer  and 379 shares are held
by the Shaffer & Shaffer retirement plan.

(12) 74 shares are owned by minor children.

DIRECTORS' QUALIFICATIONS, FEES, COMMITTEES, MEETINGS AND ATTENDANCE.
- --------------------------------------------------------------------

     Each  director of the Company is required to own a minimum of 1,000  shares
of the  Company's  common  stock.  Ownership  is defined  as shares  held in the
individual's own name, jointly with spouse, or by a company where the individual
has  controlling  interest.  Directors  who are also  employees of the Company's
subsidiary banks are exempt from this  requirement.  In addition,  each director
must sign an oath and pledge  confidentiality on all matters that he might learn
in his role as a director. The Company requires that all directors retire at the
end of the term during which the director attains the age of 70.

     Directors  of the Company do not receive a fee for their  services.  During
the 1997  calendar  year,  there  were  twelve  (12)  meetings  of the  Board of
Directors of the Company.  The Company has no standing  committees.  Nominations
for election to office are made by the Board as a whole.

     Directors  of South  Branch  Valley  National  Bank receive a fee for their
services of $400 per month  except for the  Chairman  of the Board who  receives
$900 per  month.  They  also  receive  $100 for each  meeting  they  attend.  As
employees of the bank, Mr. Maddy and Mr. Ratliff do not receive the $100 fee for
each meeting  attended.  Prior to 1994,  South Branch Valley  National Bank paid
major  medical  health  insurance  premiums  for all  members  of its  Board  of
Directors. In 1994, the Board elected to discontinue these payments on a forward
going  basis  and  individuals  elected  to the Board  after  that date will not
receive these payments.  For those still receiving payments,  such payments will
be eliminated upon  retirement.  The following  members of the board continue to
receive these payments in the amounts indicated.  Oscar M. Bean - $5,670, Donald
W. Biller - $5,646,  John W. Crites - $5,642,  Phoebe F. Heishman - $5,751, Gary
L. Hinkle - $5,649,  Jeffrey E. Hott - $5,746, and Harry C. Welton, Jr. - $5,649
for a total payment of $39,753.

     Pursuant to a deferred  compensation  plan adopted in 1994,  directors  may
elect to defer their fee income.  Periodically,  the fees will be  converted  to
units  representing  shares of the Company's stock which the Company is required
to deliver when the director  reaches  retirement age.  Directors have no voting
rights  with  respect to the units of Company  stock  purchased.  The  following
directors  currently  have the right to receive the  indicated  number of shares
pursuant to this arrangement. Oscar M. Bean - 278 shares, Donald W. Biller - 549
shares,  James M. Cookman - 584 shares,  John W. Crites - 638 shares,  Thomas J.
Hawse,  III - 659 shares,  Gary L. Hinkle - 664 shares,  and Harold K. Michael -
562 shares.

     During the 1997 calendar year, there were twelve (12) meetings of the Board
of Directors of South Branch  Valley  National  Bank.  The Board of Directors of
South Branch Valley National Bank has a standing Executive Committee, a standing
Planning & Budget Committee, a standing Compliance & Audit Committee, a standing
Trust Committee, and a standing Asset/Liability  Management Committee. The Board
does not have a nominating  committee as nominations  are made by the Board as a
whole.

                                                  7

     The Executive  Committee is comprised of eight directors,  four of whom are
regular  members  including  the Chairman of the Board and the President & Chief
Executive  Officer and the Vice  President of  Operations.  The fourth member is
rotated alphabetically each year and for the current year is John W. Crites. The
other four  members  rotate each month  according to their  membership  on other
committees  which are meeting the same day.  The  Committee  monitors the Bank's
problem loans, sets loan limits for the Bank's officers and for the Officer Loan
Committee.  It sits as an  approval  body for loans above the limits set for the
Officer Loan  Committee,  and is  responsible  for the Bank's loan  policy.  The
committee  has  the  authority  to  establish  officers'  salaries  and  reviews
management's  recommendations  as to employee pay grade scales and other matters
relating to compensation and personnel.  The committee may transact any business
that the entire Board can transact.

     The  Compliance  &  Audit  Committee  has  the  primary  responsibility  of
administering the Bank's compliance monitoring system and of reviewing all audit
issues relating to the Bank, both external and internal. The committee met three
times in 1997 to review reports submitted by the compliance officer and internal
auditor,  noting any exceptions,  and sees that education and training  sessions
are scheduled for any area where  deficiencies are noted. The committee looks at
each employee's area of  responsibility to ascertain that there are no conflicts
of interest.  Current  members of this  committee  are Oscar M. Bean, H. Charles
Maddy,  III,  Russell F. Ratliff,  Jr., Donald W. Biller,  Harold K. Michael and
Harry C. Welton.

     The  Asset/Liability  Management  Committee  coordinates the Bank's overall
acquisition and allocation of funds along with managing the Bank's interest rate
exposure and determining general balance sheet strategy.  This committee is also
involved  with the  investment  policy,  asset/liability  management,  liquidity
management,  capital  management  and related  issues.  Current  members of this
committee are Oscar M. Bean, Harry C. Welton,  H. Charles Maddy,  III, Thomas J.
Hawse, III, James M. Cookman and Russell F. Ratliff, Jr. This committee meets at
least quarterly.

     The Planning & Budget Committee  currently  consists of Oscar M. Bean, John
W. Crites,  Thomas J. Hawse,  III,  Gary L. Hinkle,  H. Charles  Maddy,  III and
Russell F. Ratliff,  Jr. This committee recommends planning and budgeting policy
to the Board,  monitors  the  planning and  budgeting  activities  of the Bank's
officers,  and is  responsible  for planning  future  direction of the Bank. The
Bank's  strategic  plan,   mission   statement  and  policy  statement  are  all
responsibilities of this committee.

     The Trust  Committee  reviews  all  issues  relating  to the  Bank's  trust
department,  including audit issues. The Committee is currently comprised of the
following members: Donald W. Biller, Jeffrey E. Hott and Phoebe F. Heishman.

EXECUTIVE COMPENSATION.
- -----------------------

Cash  Compensation.  Executive  officers of the Company are not  compensated for
- ------------------
services rendered to the Company.  Executive  officers of its subsidiary,  South
Branch Valley National Bank, are compensated for services  rendered to the Bank.
The  table  below  sets  forth  the cash  compensation  of the  Company's  Chief
Executive Officer and any executive officer of South Branch Valley Bancorp, Inc.
or its  subsidiaries  earning  $100,000 or more for the years ended December 31,
1997, 1996 and 1995.

                           SUMMARY COMPENSATION TABLE

                               Annual Compensation
Name and
Principal                                                               All Other
Position                        Year        Salary         Bonus        Compensation

H. Charles Maddy, III           1997        $89,313       $32,808       $20,521  (1)
President & Chief
Executive Officer               1996        $73,500       $26,667       $19,113  (1)

                                1995        $70,000       $25,110       $19,432  (1)

                                                  8

(1) Amount  includes  payments  made on behalf of the  executive to the ESOP and
401(k) Profit Sharing Plan, amounts taxable to the executive for personal use of
the  Company  vehicle,  and fees  received by the  executive  as a member of the
Company's subsidiary bank's Board of Directors.

SOUTH BRANCH VALLEY BANCORP, INC. PLANS.
- ----------------------------------------

     The Company has a defined contribution  profit-sharing and thrift plan with
401(k) provisions covering  substantially all employees.  Any employee who is at
least 21 years of age and is  employed  in a position  requiring  at least 1,000
hours of service per year is eligible to participate.  Vesting in  discretionary
contributions  occurs at the rate of 0% for the  first two years of  eligibility
and 20% per year thereafter.  Under the provisions of the plan, the Company will
make a  matching  contribution  on  behalf  of  each  participant  of 25% of the
participant's  salary reduction  contributions of up to 4% of such participant's
compensation.  These matching  contributions shall be fully vested at all times.
The  Company  may also make  optional  contributions  at the  discretion  of the
Company's Board of Directors.  Total Company  contributions  to the plan for the
year ended December 31, 1997, totaled $53,417. The trustees of the plan are also
members of the Company's Board of Directors.

     The  Company  has  an  Employee  Stock   Ownership  Plan  (ESOP)   covering
substantially all employees. Any employee who is at least 21 years of age and is
credited  with at least 1,000 hours of service  during the plan year is eligible
to participate.  Vesting occurs at the rate of 0% for the first year of credited
service  and 20% for each year  thereafter.  Under the  provisions  of the plan,
employee  participants  in the ESOP are not permitted to contribute to the plan,
rather the cost of the ESOP is borne by the Company through annual contributions
in amounts determined by the Company's Board of Directors.  Contributions to the
plan for the year ended December 31, 1997, totaled $41,047.  The trustees of the
ESOP are also members of the Company's Board of Directors.

     In 1990, the Company adopted an incentive  compensation program for its key
employees.  Bonuses are awarded to key employees  based on a prescribed  formula
using the Company's  return on assets as a base. For the year ended December 31,
1997,  $149,155  was paid under the  provisions  of the  incentive  compensation
program.  The amounts  awarded to the Chief  Executive  Officer are shown in the
bonus column of the Compensation Table.

CHANGE OF CONTROL AGREEMENT.
- ---------------------------

     Effective  January 26, 1996, the Company  entered into an agreement with H.
Charles Maddy,  III, its Chief Executive  Officer,  to encourage him to continue
his employment  with the Company in the event that the Company might be acquired
by another entity (the "Agreement"). The Board of Directors determined that such
an arrangement was appropriate,  especially in view of the recent entry of large
regional bank holding  companies  into West Virginia.  The  agreements  were not
undertaken in the belief that a change of control of the Company was imminent.

     Generally,  the Agreement provides  severance  compensation to Mr. Maddy if
his employment should end under certain  specified  conditions after a change of
control.  Compensation  is paid upon any  involuntary  termination  following  a
change of control  unless  Mr.  Maddy is  terminated  for  cause.  In  addition,
compensation  will be paid after a change of control  if Mr.  Maddy  voluntarily
terminates  employment  because  of (i) a  decrease  in the total  amount of Mr.
Maddy's base salary below the level in effect on the date of consummation of the
change of control, without Mr. Maddy's consent; (ii) a material reduction in the
importance  of Mr.  Maddy's  job  responsibilities  without his  consent,  (iii)
geographical  relation of Mr.  Maddy  without his consent to an office more than
twenty (20) miles from his  location  at the time of a change of  control;  (iv)
failure by the Company to obtain  assumption  of the contract by its  successor,
(v)  failure of the  Company to give  notice of  termination  as required in the
Agreement,  or (vi) any  removal of Mr.  Maddy  from,  or failure to reelect Mr.
Maddy to, any position with the Company or Bank that he held  immediately  prior
to the change in control  without  his prior  written  consent  (except for good
cause, death, disability or retirement).

     Under the Agreement,  a "change of control" is deemed to occur in the event
of (i) a change of  ownership  of the  Company  which  must be  reported  to the
Securities  and Exchange  Commission  as a change of control,  including but not
limited to the  acquisition  by any  "person"  (as such term is used in Sections
13(d) and 14(d) of the Securities and Exchange Act of 1934 (the "Exchange  Act")
of direct or indirect "beneficial ownership" (as defined by Rule 13d-3 under the
Exchange Act) of twenty-five  percent (25%) or more of the combined voting power
of the Company's  then  outstanding  securities,  or (ii) the failure during any
period of three (3)  consecutive  years of  individuals  who at the beginning of
such  period  constitute  the Board  for any  reason  to  constitute  at least a
majority thereof, unless the election

                                                  9

of each director who was not a director at the beginning of such period has been
approved in advance by directors  representing at least  two-thirds (2/3) of the
directors  at the  beginning  of the  period,  or (iii)  the  consummation  of a
"Business Combination" as defined in the Company's Articles of Incorporation.

     Under the Agreement,  severance benefits include: (a) cash payment equal to
Mr. Maddy's monthly base salary in effect on either (i) the date of termination;
or (ii) the date  immediately  preceding  the change of  control,  whichever  is
higher,  multiplied by the number of full months between the date of termination
and the date that is twenty-four  (24) months after the date of  consummation of
the change of control;  (b) payment of cash incentive  award,  if any, under the
Company's bonus plan;  continuing  participation  in employee  benefit plans and
programs such as retirement,  disability  and medical  insurance for a period of
twenty-four (24) months following the date of termination.

     Mr. Maddy also has the right to terminate his employment  without reason by
giving written notice of termination  within six (6) months of  consummation  of
any change of control.  In such event,  Mr.  Maddy will be entitled to receive a
lump sum equal to 75% of his salary, as defined in the Agreement.

        The Agreement  does not effect the right of the Company to terminate Mr.
Maddy,  or change the salary or  benefits  of Mr.  Maddy,  with or without  good
cause,  prior to any change of control;  provided,  however,  any termination or
change  which takes place after  discussions  have  commenced  which result in a
change of control will be presumed to be a violation of the  agreement  and will
entitle  the  officer to the  benefits  under the  agreement,  absent  clear and
convincing evidence to the contrary.

TRANSACTIONS WITH DIRECTORS, OFFICERS AND PRINCIPAL SHAREHOLDERS.
- ------------------------------------------------------------------

     Directors and executive  officers of South Branch Valley Bancorp,  Inc. and
its   subsidiaries,   members  of  their   immediate   families,   and  business
organizations  and individuals  associated with them have been customers of, and
have had normal banking transactions with, South Branch Valley National Bank and
Capital State Bank. All such  transactions  were made in the ordinary  course of
business,  were made on substantially the same terms,  including  interest rates
and collateral, as those prevailing at the time for comparable transactions with
other persons and did not involve more than the normal risk of collectibility or
present other unfavorable features.

STOCK TRANSFERS.
- ----------------

     Shares of the Company's  common stock are  occasionally  bought and sold by
private individuals,  firms or corporations. In many instances, the Company does
not have  knowledge  of the  purchase  price or the  terms of the  purchase.  No
definitive records of bids and ask or sale prices are available. The Company has
engaged  Ferris,  Baker,  Watts  Incorporated as its market maker for its common
stock. Persons interested in buying or selling the Company's common stock should
contact David J. Miller at (304)697-2119 or (800)505-2030.  The company may also
be reached at the following address:

                              David J. Miller, CPA
                            Ferris, Baker Watts, Inc.
                                 704 4th Avenue
                              Huntington, WV 25701

PROPOSAL NO. 2:       PROPOSAL TO APPROVE OFFICER STOCK OPTION PLAN

Summary of the officer Stock Option Plan
- ----------------------------------------

     At a meeting  held on March 25,  1998,  the South Branch Board of Directors
unanimously  approved the adoption of an Officer Stock Option Plan (the "Officer
Plan") and  directed  that the Officer Plan be  submitted  to  shareholders  for
approval.  The Officer Plan  provides for the granting of options  (individually
referred to as "Stock  Option") for up to 120,000  shares of South Branch Common
Stock.  The Officer Plan will become effective upon approval of the shareholders
of South Branch at this Annual Meeting.  The South Branch Board believes that it
is in the best  interest  of South  Branch and its  shareholders  to attract and
retain  qualified and motivated  management  and that the Officer Plan will help
South Branch achieve this goal. The Officer Plan is not intended to qualify as a
stock option plan under Section

                                                 10

422 of the Internal  Revenue Code of 1986, as amended,  (the "Code"  generally).
West  Virginia Code ss.  31-1-84  requires  shareholder  approval of the Officer
Plan. The Officer Plan is not subject to the Employee Retirement Income Security
Act of 1974 ("ERISA").

     THIS  SECTION  CONTAINS A SUMMARY  OF KEY TERMS OF THE  OFFICER  PLAN.  THE
COMPLETE  OFFICER PLAN IS ATTACHED HERETO AS EXHIBIT A. THE SUMMARY  DESCRIPTION
OF THE  OFFICER  PLAN DOES NOT PURPORT TO BE COMPLETE  AND IS  QUALIFIED  IN ITS
ENTIRETY BY REFERENCE TO THE COMPLETE DOCUMENT ATTACHED HERETO AS EXHIBIT A.

Purpose of the Officer Plan
- ---------------------------

     The Officer  Plan  permits  officers  of the Board of South  Branch and its
subsidiaries  to acquire and hold Common Stock  ("Common  Stock") of the Company
and share in the  growth  of the value of the  Company,  thereby  reinforcing  a
mutuality  of  interest  with  shareholders.  In the  opinion  of the  Board  of
Directors,  the long-term  success of South Branch is dependent upon the ability
of South Branch to attract and retain  outstanding  individuals  and to motivate
their best efforts on behalf of South Branch's interest.  The Board of Directors
believes  that the Officer Plan will be effective in providing its officers with
a proprietary  interest in the business and consequently a greater  incentive to
promote the long-term interests of South Branch.

Common Stock Available
- -----------------------

     The total  number of shares of Common  Stock  that may be issued  under the
Officer  Plan shall not exceed in the  aggregate  one  hundred  twenty  thousand
(120,000)  shares,  which shares may be in whole or in part,  as the Board shall
from time to time determine, authorized but unissued shares of Common Stock.

Eligibility for Participation
- -----------------------------

     Only officers of South Branch and its  subsidiaries  may participate in the
Officer Plan.

Option Agreement
- -----------------

     Each Stock  Option  granted  under the Officer Plan will be evidenced by an
Option  Agreement  between the Company and the officer.  These  agreements  will
contain the terms on which the option can be exercised.

Option Price
- -------------

     The option  price for  purchasing  a share of Common Stock will be the fair
market value of the Common Stock on the date the option is granted.

     "Fair  Market  Value"  means the value of Common  Stock (i) if listed on an
established  Common Stock  exchange,  based on its price on such exchange at the
close of business on the date in question; (ii) if traded on a reasonably active
basis but not listed on an established Common Stock exchange, based on its price
as  reflected  on the  NASDAQ  Interdealer  Quotation  System  of  the  National
Association of Securities Dealers,  Inc. at the close of business on the date in
question;  or (iii) if the  Common  Stock is not  traded  on any  United  States
securities  exchange  but is traded  on any  formal  over-the-counter  quotation
system in general  use in the United  States,  the value per share  shall be the
mean of the closing prices  reported on the last five (5) business days on which
the Common Stock is traded prior to the date of grant.

     South Branch is not traded on a securities exchange.  Accordingly,  at this
time,  the market  value of South  Branch stock will be based on the mean of the
closing prices reported on the last five (5) business days on which Common Stock
traded prior to the date of grant.  As of March 31, 1998,  the fair market value
of South Branch Common Stock as defined above was $43.98.

     The option price can be paid by cash,  certified  check, or by surrender of
previously  acquired shares of Common Stock with a fair market value on the date
surrendered equal to the exercise price.

                                       11

Option Expiration
- -----------------

     Each Stock Option will automatically  expire after ten (10) years, unless a
shorter  expiration  term is  granted  by the  Board.  No  Stock  Option  may be
exercised by any person after expiration.

Option Termination
- ------------------

     In the event of  termination  of  employment  by either  the  participating
officer  or the  Company,  other  than a  termination  by reason of  retirement,
permanent disability,  or death, an officer may exercise the stock option within
six months after termination (or such other time as the Committee may authorize)
with  respect  to the  number  of  shares  which  were  vested  at the  date  of
termination.

     In the event of retirement, a participating officer will become one hundred
percent  (100%)  vested in any Stock Option he or she has been granted under the
Officer Plan. Such Officer may exercise the Stock Option anytime within one year
of retirement.

     In the event of permanent disability,  to the extent that the Officer would
have been  entitled  to  exercise  the  Stock  Option  immediately  prior to the
disability,  such option may be  exercised  with respect to the number of shares
that were vested during the period the Stock Option could have been exercised if
the director had not been disabled.

     In the event of death,  to the extent the Officer  would have been entitled
to exercise the Stock Option  immediately  prior to his or her death, such Stock
Option may be exercised during the period the option would have been exercisable
if the deceased  director had not died,  by the person or persons to whom his or
her rights shall have passed by will or by laws of descent and distribution.

Administration
- --------------

     The Officer Plan is  administered  by a Committee of the Board appointed by
the Board,  however,  the Board reserves the right to administer the Plan in its
discretion.  The Committee has discretion,  subject to the express provisions of
the plan to: (i) to determine the officers to whom options may be granted;  (ii)
to determine  the time or times when options may be granted;  (iii) to determine
the purchase price of the Common Stock covered by each option; (iv) to determine
the number of shares to be  subject to each  option;  (v) to  determine  when an
option may be exercised and whether in whole or in installments as the result of
a  vesting  schedule  triggered  by the  passage  of time or the  attainment  of
performance  goals set by the  Committee  and  approved  by the  Board;  (vi) to
prescribe,  amend, or rescind rules and regulations  relating to the Plan; (vii)
to determine any other terms and  provisions  and any related  amendments of the
individual Non Qualified  Stock Option  Agreements,  which need not be identical
for  each  Participating  Officer,  including  such  terms  and  provisions  and
amendment  as shall be required in the  judgment of the  Committee to conform to
any change in any law or  regulation  applicable  thereto,  and with  particular
regard to any changes in or effect of the Code and the  regulations  thereunder;
and (viii) to make all other  determinations  deemed  necessary or advisable for
the administration of the Plan.

Officer Plan Effective Date
- ---------------------------

     The  Officer  Plan  is  effective  on  the  date  of  its  approval  by the
shareholders of South Branch.

Officer Plan Expiration
- -----------------------

     The Officer Plan will  automatically  terminate at the tenth anniversary of
the date of shareholder  approval of the Officer Plan. The term of Stock Options
granted before such tenth anniversary may continue beyond that date.

Amendment and Termination of the Officer Plan
- ---------------------------------------------

     The Board of Directors may at any time amend or terminate the Officer Plan.
Among other things,  the Board may (a) increase the maximum  number of shares to
which  options may be granted,  subject to  approval  by the  shareholders;  (b)
increase  the period  during  which  options  may be  granted or options  may be
exercised;  or (c) provide for the  administration of the Plan in a manner which
may avoid, without the consent of the officer to whom any option

                                       12

shall  theretofore  shall have been granted,  adversely  affecting the rights of
such officer under such grant.  Amendments may not alter the outstanding options
without the consent of the optionee.

Registration of Common Stock
- ----------------------------

     South Branch will  register the shares  issued under the Officer Plan under
applicable federal and state securities law, unless an exemption is available.

Initial Option Grants
- ---------------------

     The Committee  will award  options to officers of the Company.  The options
will be nonassignable and nontransferable.  All options are subject to all terms
of the Officer  Plan,  including but not limited to, those related to employment
status, change in corporate structure,  restrictions on exercise,  and a vesting
schedule for options granted.

Federal Income Tax Consequences
- -------------------------------

     The Officer Plan permits South Branch to grant  non-statutory Stock options
(options that do not meet the Stock option requirements under Section 422 of the
Code).  Options granted under the Officer Plan, which are non-statutory,  may be
taxed to the  participant  depending  on the  provisions  of such  options  when
granted,  exercised,  disposed of or when any restrictions placed thereon lapse.
South Branch will be treated as having paid  compensation to the participant and
generally  may  deduct  the same at the time at which and in the same  amount in
which the participant is considered to have realized compensation, except as may
be limited under Section 280G of the Code relating to golden parachute  payments
exceeding $1 million.

     THE FEDERAL INCOME TAX DISCUSSION SET FORTH IN THIS SECTION IS INCLUDED FOR
GENERAL  INFORMATION  ONLY AND DOES NOT  PURPORT  TO BE A COMPLETE  ANALYSIS  OR
LISTING OF ALL POTENTIAL TAX  CONSEQUENCES.  THE DISCUSSION DOES NOT ADDRESS THE
TAX  CONSEQUENCES  ARISING  UNDER THE LAWS OF ANY  STATE,  LOCALITY,  OR FOREIGN
JURISDICTION. THE DISCUSSION IS BASED UPON THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED,  TREASURY REGULATIONS THEREUNDER,  AND ADMINISTRATIVE RULINGS AND COURT
DECISIONS AS OF THE DATE HEREOF.  ALL OF THE FOREGOING ARE SUBJECT TO CHANGE AND
ANY SUCH CHANGE COULD AFFECT THE  CONTINUING  VALIDITY OF THE  DISCUSSION.  PLAN
PARTICIPANTS  SHOULD  CONSULT  THEIR OWN TAX ADVISORS AS TO THE  PARTICULAR  TAX
CONSEQUENCES TO THEM, INCLUDING THE EFFECT OF FOREIGN, STATE, AND LOCAL TAXES.

Resale of Common Stock by Officer Plan Participants
- ---------------------------------------------------

     Participants  who exercise  options and receive  South Branch  Common Stock
under the Officer Plan may resell the Common Stock received without  restriction
if  they  are  not  affiliates  of  South  Branch.  Those  participants  who are
affiliates  will be  subject  to the  resale  provisions  of Rule 144  under the
Securities Act of 1933, as amended.

Change in Control Provisions
- ----------------------------

     If there is a change of control of South  Branch (as defined in the Officer
Plan),  all options  granted  shall become  immediately  vested and  exercisable
regardless  of the  number of years  that have  passed  since the date of grant.
Generally, a "Change of Control" occurs if (i) any individual, firm, corporation
or other entity (other than the Company or its employee benefit plans) is or has
become a beneficial owner, directly or indirectly,  of securities of the Company
representing  twenty-five  percent (25%) or more of the combined voting power of
the Company's then  outstanding  securities;  (ii) the Company files a report or
proxy  statement with the Securities and Exchange  Commission  disclosing that a
Change in Control of the Company  has or may have  occurred or will or may occur
in the future pursuant to any then-existing  contract or transaction;  (iii) the
Company is merged or  consolidated  with  another  corporation  and, as a result
thereof,  securities  representing less than fifty percent (50%) of the combined
voting power of the surviving or resulting corporation's securities are owned in
the aggregate by holders of the Company's  securities  immediately prior to such
merger or  consolidation;  (iv) all or  substantially  all of the  assets of the
Company are sold in a single transaction or a series of related  transactions to
a single purchaser or a group of affiliated purchasers; or (v) during any period
of twenty-four  (24) consecutive  months,  individuals who were Directors of the
Company at the beginning of such period

                                       13

cease to  constitute  at least a  majority  of the  Company's  board  unless the
election, or nomination for election by the Company's shareholders, of more than
one-half of any new  Directors of the Company was approved by a vote of at least
two-thirds  of the  Directors  of the  Company  then  still in  office  who were
Directors of the Company at the beginning of such twenty-four (24) month period,
either  actually or by prior  operation  of this  clause (v).  Under the Officer
Plan,  Change in Control  does not  include  any  transaction  described  in the
definition  of  Change in  Control  in  connection  with  which the  Corporation
executes a letter of intent or similar agreement with another company within one
year from the effective date of the Plan.

Considerations For and Against the Proposal
- -------------------------------------------

     In the opinion of the Board of Directors  of South  Branch,  the  long-term
success of South  Branch is  dependent  upon its  ability to attract  and retain
outstanding  individuals  and to motivate  their best efforts on behalf of South
Branch's  interests.  Consequently,  the Board of Directors  believes  that both
South Branch and its shareholders  benefit by providing officers of South Branch
the option to acquire shares of South Branch Common Stock.

     Under the Officer  Plan,  shares may be  purchased  by  participants  at an
option price fixed on the date the options are awarded.  Generally,  the options
would later be exercised by the participant only if the market price at the time
of the exercise exceeds the option price. Thus the participant may acquire South
Branch  Common  Stock at a price  below  its  market  value.  At the time of its
exercise,  therefore,  South Branch  experiences slight dilution in its earnings
per share to the extent that the book value of South Branch Common Stock exceeds
the option price.

Vote Required
- --------------

     An affirmative vote of the holders of a majority of the outstanding  shares
of South Branch Common Stock is required to adopt the Officer Plan. Shares voted
"Abstain"  and shares not voted will have the same  effect as if the shares were
voted "against" approval of the plan.

     SOUTH BRANCH'S BOARD OF DIRECTORS  RECOMMEND,  BY THE VOTE INDICATED ABOVE,
THAT THE  SHAREHOLDERS  VOTE FOR THE  ADOPTION OF THE OFFICER  STOCK OPTION PLAN
DISCUSSED ABOVE.

Proposal No. 3:        INDEPENDENT PUBLIC ACCOUNTANT.

     At the meeting, the shareholders of the Company will be asked to ratify the
selection of the firm of Arnett & Foster,  PLLC, of 1000 Laidley Tower,  500 Lee
Street East,  Charleston,  West Virginia  25329,  as the  Company's  independent
auditors  for the year ending  December  31,  1998. A member of the firm will be
available to respond to shareholder inquiries at the annual meeting.

OTHER MATTERS.
- --------------

     The Board of Directors  does not intend to bring other  matters  before the
meeting  except items  incident to the context of the meeting.  However,  on all
matters  properly  brought  before the  meeting  by the Board or by others,  the
persons named as proxies in the accompanying  proxy, or their substitutes,  will
vote in accordance with the recommendations of the Board of Directors.

SHAREHOLDER PROPOSALS.
- ---------------------

     To be  included in the Board of  Directors'  Proxy  Statement  for the 1999
Annual Meeting of Shareholders, a shareholder's proposal must be received by the
Company on or before  December 31, 1998. The proposal  should be directed to the
secretary of the Company at P.O. Box 680, Moorefield, West Virginia 26836.

ANNUAL REPORT.
- -------------

     The annual  report of the Company for the year ended  December  31, 1997 is
being mailed  concurrently with this Proxy Statement.  The financial  statements
and other  information to be delivered with this Proxy Statement  constitute the
annual disclosure statement as required by 12 C.F.R. 18.

                                       14

FORM 10-KSB.
- -----------

     THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS BEING
SOLICITED,  UPON THE REQUEST OF ANY SUCH PERSON,  A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-KSB FOR 1997.  REQUESTS  FOR COPIES OF SUCH  REPORT  SHOULD BE
DIRECTED  TO  CAROL A.  RIGGLEMAN,  ASSISTANT  SECRETARY,  SOUTH  BRANCH  VALLEY
BANCORP, INC., P.O. BOX 680, MOOREFIELD, WEST VIRGINIA 26836.

                                         By Order of the Board of Directors
                                             Dated:   April 10, 1998

                                       15

                                                                      EXHIBIT A

                        SOUTH BRANCH VALLEY BANCORP, INC.
                         1998 OFFICER STOCK OPTION PLAN

        Witnesseth this 1998 OFFICER STOCK OPTION PLAN dated as of the _____ day
of __________,  1998, by SOUTH BRANCH VALLEY BANCORP,  INC.  ("Corporation"),  a
West Virginia corporation:

1.        PURPOSE OF PLAN.  The purpose of this 1998  Officer  Stock Option Plan
          ("Plan")  is to  further  the  success  of  the  Corporation  and  its
          subsidiaries by making stock of the Corporation available for purchase
          by officers  of the  Corporation  or its  subsidiaries  through  stock
          option  grants.  The Plan  provides an  additional  incentive  to such
          officers  to  continue  in the  Corporation's  service and give them a
          greater interest as stockholders in the success of the Corporation.

2.        REFERENCE,  CONSTRUCTION, AND DEFINITIONS. Unless otherwise indicated,
          all  references  made in this Plan shall be to articles,  sections and
          subsection  of this Plan.  This Plan shall be construed in  accordance
          with  the  laws  of the  state  of West  Virginia.  The  headings  and
          subheadings  in this  Plan  have  been  inserted  for  convenience  of
          reference only and are to be ignored in  construction of the provision
          of this Plan. In the  construction  of this Plan, the masculine  shall
          include the feminine and  singular the plural,  wherever  appropriate.
          The  following  terms shall have the meanings set forth  opposite such
          terms:

           (a)      "Board" means the Board of Directors of the Corporation.

           (b)      "Business  Day"  means  each  Monday,  Tuesday,   Wednesday,
                    Thursday and Friday on which the Corporation's  Common Stock
                    is available for purchase or sale.

           (c)      "Change  of  Control"  means (a) a report is filed  with the
                    Securities and Exchange  Commission  (the "SEC") on Schedule
                    13D or Schedule  14D-1 (or any successor  schedule,  form or
                    report),  each as promulgated  pursuant to the Exchange Act,
                    disclosing  that  any  "person",  as  such  term  is used in
                    section  13(d) and  Section  14(d)(2) of the  Exchange  Act,
                    other than the company or any company employee benefit plan,
                    is or has become a beneficial owner, directly or indirectly,
                    of  securities  of  the  Company  representing   twenty-five
                    percent  (25%) or more of the  combined  voting power of the
                    Company's then outstanding securities; (b) the Company files
                    a report or proxy  statement  with the SEC  pursuant  to the
                    Exchange  Act  disclosing  in response to Item 1 of Form 8-K
                    thereunder  or Item 6(e) of Schedule 14A  thereunder  that a
                    Change in Control of the Company has or may have occurred or
                    will  or  may   occur  in  the   future   pursuant   to  any
                    then-existing  contract or  transaction;  (c) the Company is
                    merged or consolidated  with another  corporation  and, as a
                    result  thereof,  securities  representing  less than  fifty
                    percent (50%) of the combined  voting power of the surviving
                    or resulting corporation's  securities (or of the securities
                    of a parent  corporation  in case of a merger  in which  the
                    surviving  or resulting  corporation  becomes a wholly owned
                    subsidiary  of the  parent  corporation)  are  owned  in the
                    aggregate by holders of the Company's securities immediately
                    prior  to  such   merger  or   consolidation;   (d)  all  or
                    substantially all of the assets of the Company are sold in a
                    single transaction or a series of related  transactions to a
                    single purchaser or a group of affiliated purchasers; or (e)
                    during any period of twenty-four  (24)  consecutive  months,
                    individuals  who  were  Directors  of  the  Company  at  the
                    beginning  of such  period  cease to  constitute  at least a
                    majority of the  Company's  board  unless the  election,  or
                    nomination  for election by the Company's  shareholders,  of
                    more than  one-half of any new  Directors of the Company was
                    approved by a vote of at least  two-thirds  of the Directors
                    of the Company  then still in office who were  Directors  of
                    the Company at the beginning of such  twenty-four (24) month
                    period, either actually or by prior operation of this clause
                    (e). A Change in Control  shall not include any  transaction
                    described  in  the   definition  of  Change  in  Control  in
                    connection with which the  Corporation  executes a letter of
                    intent or similar  agreement with another company within one
                    year  from the  effective  date of the  Plan.  The date of a
                    Change  of  Control  shall be  deemed  to be the date of the
                    earlier of the date of (i)  consummation  of the transaction
                    involving the Change in Control,  or (ii) the execution of a
                    definitive   agreement  by  the   Corporation   involving  a
                    transaction deemed to be a Change in Control; .

                                                                       EXHIBIT A

           (d)      "Code" means the Internal  Revenue Code of 1986,  as amended
                    from time to time.

           (e)      "Committee"  means the  Committee of the Board  appointed by
                    the Board to administer the Plan as constituted from time to
                    time in  accordance  with Section 4(a);  provided,  however,
                    that if the Committee  shall not be in  existence,  the term
                    "Committee" shall mean the Board.

           (f)      "Common  Stock"  means the common stock ($2.50 par value) of
                    the Corporation.

           (g)      "Corporation"  means South Branch  Valley  Bancorp,  Inc., a
                    West Virginia banking corporation.

           (h)      "Date of Grant" means the date on which an option is granted
                    under the Plan.

           (i)      "Effective  Date"  means  the  date  on  which  the  Plan is
                    approved and adopted by the shareholders of the Corporation.

           (j)      "Fair  Market  Value" means the value of Common Stock (i) if
                    listed on an established stock exchange,  based on its price
                    on such  exchange  at the close of  business  on the date in
                    question;  (ii) if traded on a  reasonably  active basis but
                    not listed on an established  stock  exchange,  based on its
                    price as  reflected  on the  NASDAQ  Inter-dealer  Quotation
                    System of the National  Association  of Securities  Dealers,
                    Inc. at the close of business on the date in question; (iii)
                    if the  Common  Stock is not  traded  on any  United  States
                    securities   exchange   but  is   traded   on   any   formal
                    over-the-counter  quotation  system  in  general  use in the
                    United States,  the value per share shall be the mean of the
                    closing  prices  reported on the last five (5) Business Days
                    on which the common stock traded prior to the date of grant.

           (k)      "Non Qualified Stock Option" means an Option which is not of
                    the type described in Section 422(b) or 423(b) of the Code.

           (l)      "Option"  means an option to  purchase  a share or shares of
                    the Corporation's par value Common Stock.

           (m)      "Option Agreement" means the written agreement to be entered
                    into by the Corporation and the Participant,  as provided in
                    Section 6 hereof.

           (n)      "Participant"  means any officer of the  Corporation  or its
                    subsidiaries designated by the Committee and approved by the
                    Board to receive a stock option grant pursuant to this Plan.

           (o)      "Plan" means this 1998 Officer Stock Option Plan.

           (p)      "Retirement"  shall mean  termination  of  employment by the
                    Participant  (i) at the age of 65 or  more,  or  (ii)  after
                    twenty-five years of service with the Corporation.

           (q)      "Term" means the period during which a particular Option may
                    be exercised in accordance with Section 8(b) hereof.

           (r)      "Vest" or "Vesting"  means the date,  event, or act prior to
                    which an Option,  in whole or in part,  is not  exercisable,
                    and as a  consequence  of which the  Option,  in whole or in
                    part, becomes exercisable for the first time.

3.        STOCK SUBJECT TO PLAN. Subject to the provisions of Sections 6, 7, and
          8, there shall be reserved for issuance or transfer  upon the exercise
          of Options to be granted from time to time under the Plan an aggregate
          of one hundred twenty thousand (120,000) shares of Common Stock, which
          shares  may be in whole or in part,  as the Board  shall  from time to
          time  determine,  authorized and unissued  shares of Common Stock,  or
          issued shares of Common Stock which shall have been  reacquired by the
          Corporation.  If any  Option  granted  under  the Plan  shall  expire,
          terminate, or be canceled for any reason without having been exercised
          in  full,  the  unpurchased  shares  subject  thereto  shall  again be
          available for the purpose of the Plan.

                                                                       EXHIBIT A

4.      ADMINISTRATION.

           (a)      The Plan shall be administered by the Committee.  Actions by
                    the Committee for purposes of this Plan shall be by not less
                    than  a  majority   of  its   members.   Any   decision   or
                    determination reduced to writing and signed by all Committee
                    members  shall be fully as  effective as if it had been made
                    by a majority  vote at a meeting  duly called and held.  The
                    Committee shall report all action taken by it to the Board.

           (b)      The Board may  authorize  the  Committee to  administer  the
                    Plan. In the event the Board elects to administer  the Plan,
                    the  Board  shall  have the power  and  authority  otherwise
                    delegated  to the  Committee in the Plan  documents  and all
                    acts  performed  by the  Committee  under the Plan  shall be
                    performed by the Board.

            (c)     The Committee  shall have authority in its  discretion,  but
                    subject to the express provisions of the Plan:

                    (1) to determine Participants to whom Option may be granted;

                    (2) to  determine  the  time or  times  when  Option  may be
                        granted;

                    (3) to  determine  the  purchase  price of the Common  Stock
                        covered by each Option grant;

                    (4) to determine  the number of shares of Common Stock to be
                        subject to each Option;

                    (5) to determine when an Option can be exercised and whether
                        in whole  or in  installments  as the  result  of a  
                        Vesting schedule triggered by the passage of time or the
                        attainment of performance  goals set by the  Committee
                        and approved by the Board;

                    (6) to prescribe,  amend,  or rescind rules and  regulations
                        relating to the Plan;

                    (7) to  determine  any other  terms and  provisions  and any
                        related  amendments to the individual Option Agreements,
                        which need not be identical for each Participant, 
                        including such  terms  and  provisions  and   amendments
                        as  shall  be required in the judgement of the Committee
                        to conform to any change in any law or regulation\
                        applicable thereto, and with particular  regard to any
                        changes  in or effect of the Code  and  the  regulations
                        thereunder; and

                    (8) to make all other  determinations  deemed  necessary  or
                        advisable for the administration of the Plan.

5.        PARTICIPATION.  Options  may be granted to  officers  employed  by the
          Corporation or its  subsidiaries.  In determining the officers to whom
          Options  may be granted and the number of shares to be covered by each
          grant,  the Committee may take into account the nature of the services
          rendered by the  respective  officers,  their  present  and  potential
          contributions to the Corporation's  success, and such other factors as
          the Committee in its discretion  shall deem  relevant.  Options may be
          granted to officers who currently hold Corporate  stock or who hold or
          have held Options under this Plan.

6.      OPTION GRANTS AND LIMITS.

           (a)      Nothing contained in this Plan or in any resolution  adopted
                    or to be adopted by the Board shall  constitute the granting
                    of any Option hereunder.  The granting of an Option pursuant
                    to the Plan  shall  take  place  only when a written  Option
                    Agreement  shall have been duly executed and delivered by or
                    on behalf of the  Corporation  and the  officer (or his duly
                    authorized  attorney-in-fact)  in whom such  Option is to be
                    granted.

           (b)      During the Participant's  lifetime, any Option granted under
                    this Plan shall be  exercisable  only by the  Participant or
                    any guardian or legal representation of the Participant, and
                    the Option shall not be transferable  except, in case of the
                    death of the death of the  Participant,  by will or the laws
                    of descent and distribution, nor shall the Option be subject
                    to attachment,  execution,  or other similar process. In the
                    event of (i) any  attempt by the  Participant  to  alienate,
                    assign, pledge, hypothecate, or otherwise

                                                                       EXHIBIT A

                    dispose of the Option,  except as provided in this Plan,  or
                    (ii)  the  levy of any  attachment,  execution,  or  similar
                    process  upon  the  rights  or  interests  conferred  by the
                    Option,  the  Corporation may terminate the Option by notice
                    to the  Participant  and upon such  notice the Option  shall
                    become null and void.

           (c)      Each  Option  Agreement  shall  include a  Vesting  schedule
                    describing  the  date,  event,  or act upon  which an Option
                    shall Vest,  in whole or in part,  with  respect to all or a
                    specified portion of the shares covered by such Option. This
                    condition   shall  not  impose  upon  the   Corporation  any
                    obligation to retain the  Participant  in its employ for any
                    period.

           (d)      Options shall be limited to Non Qualified Stock Options.

7.        OPTION PRICES.  The Option price to be paid by the Participants to the
          Corporation  for each share  purchased upon the exercise of the Option
          shall be not less than the Fair Market  Value of the share on the date
          the Option is granted.  In no event may an Option be granted under the
          Plan if the  Option  price  per  share is less than the par value of a
          share.

8.        EXERCISE OF OPTIONS.

           (a)      A  Participant  may exercise any Option  granted  under this
                    Plan with respect to all or any part of the number of shares
                    then  exercisable  under  the terms of this  written  Option
                    Agreement by giving the Committee  written  notice of intent
                    to exercise. The notice of exercise shall specify the number
                    of shares to be  purchased  under the Option and the date of
                    exercise.

           (b)      Each Option granted under the Plan shall be exercisable only
                    during a Term  established  by the Committee as set forth in
                    the applicable Option Agreement.  In no event shall the Term
                    of the Option  extend beyond ten (10) years from the date of
                    grant of the Option.

           (c)      Full  payment of the option  price for the shares  purchased
                    shall be made by the  Participant  on or before the exercise
                    date  specified  in the notice of  exercise.  Payment of the
                    purchase  price of any  shares  with  respect  to which  the
                    Option is being  exercised shall be (i) cash, (ii) certified
                    check to the order of the  Corporation,  or (iii)  shares of
                    Common  Stock of the  Corporation  valued at the Fair Market
                    Value on such Business Day as the Option or portion  thereof
                    is exercised.

           (d)      The   Corporation   shall  not  be   required   to   deliver
                    certificates  for such  shares  until  full  payment  of the
                    Option price has been made. On or as soon as is  practicable
                    after  the  exercise  date  specified  in the  Participant's
                    notice  and upon  full  payment  of the  Option  price,  the
                    Corporation shall cause to be delivered to the Participant a
                    certificate  or  certificates  for  the  shares  then  being
                    purchased  (out  of  previously  unissued  Common  Stock  or
                    reacquired Common Stock, as the Corporation may elect).  The
                    exercise of the Option and the  resulting  obligation of the
                    Corporation  to deliver  Common  Stock  shall,  however,  be
                    subject to the condition that the listing,  registration, or
                    qualification   of  the  Option  or  the  shares   upon  any
                    securities  exchange  or under any state or federal  law, or
                    the consent, or approval of any governmental regulatory body
                    shall have been effected or obtained free of any  conditions
                    not acceptable to the Committee.

           (e)      If the  Participant  fails  to  pay  for  any of the  shares
                    specified in such notice or fails to accept  delivery of the
                    shares,  his right to purchase such shares may be terminated
                    by the Corporation.  The date specified in the Participant's
                    notice as the date of  exercise  shall be deemed the date of
                    exercise of the Option,  provided  that  payment in full for
                    the shares to be  purchased  upon such  exercise  shall have
                    been received by such date.

           (f)      The holder of an Option  shall not have any of the rights of
                    a  stockholder  with  respect to the  shares  subject to the
                    Option until such shares shall be issued or  transferred  to
                    him upon the exercise of his Option.

                                                                       EXHIBIT A

           (g)      Notwithstanding  the  foregoing,  any  shares  that  may  be
                    purchased as of the Effective Date, pursuant to the terms of
                    any  Option  granted  prior  to the  Effective  Date,  shall
                    continue  thereafter  to  be  purchasable  pursuant  to  the
                    exercise of such Option.

9.        TERMINATION,  DISABILITY,  OR DEATH OF OPTION  HOLDER.  The ability to
          exercise Options under this Plan shall be conditioned as follows:

           (a)      Exercise  During  and  After  Employment.  Unless  otherwise
                    provided  in  the  terms  of an  Option,  an  Option  may be
                    exercised by the Participant while he is an employee and has
                    maintained  since  the  date  of the  grant  of  the  Option
                    continuous status as an employee.

                    In  the  event  of   termination  of  the  employment  of  a
                    Participant by either the  Participant or the Corporation to
                    whom an Option has been granted under the Plan, other than a
                    termination by reason of retirement,  permanent  disability,
                    or  death  (all  as  more  fully   described   below),   the
                    Participant  may  (unless  otherwise  provided in his or her
                    Option  Agreement)  exercise  his or her  option at any time
                    within six months after such termination, or such other time
                    as the  Committee may  authorize,  but in no event after ten
                    years from the date of the  granting  thereof,  with respect
                    to, the number of shares  covered by his or her Option which
                    were Vested at the date of termination of employment.

           (b)      Exercise Upon Retirement.  Unless otherwise  provided in the
                    terms of an Option, if a Participant's continuous employment
                    shall terminate by reason of his retirement, at a retirement
                    date  authorized by the Committee,  from the  Corporation or
                    its  subsidiaries,  a retired  Participant shall be come one
                    hundred  percent  (100%)  Vested  in any  Option he has been
                    granted under the Plan as of that date,  and he may exercise
                    the otherwise  exercisable Option anytime within one year of
                    his retirement date.

           (c)      Exercise  Upon  Permanent   Disability.   Unless   otherwise
                    provided  in the  terms  of an  Option,  if a  Participant's
                    continuous   employment  shall  terminate  by  reason  of  a
                    permanent  disability  (as  determined by the  Participant's
                    establishing  to the Committee his  disability as defined in
                    Code Section  22(e))(3) of the Code, as amended from time to
                    time),  then such Option of the disabled  Participant may be
                    exercised  with  respect to the number of shares  covered by
                    the Participant's  Option that were Vested immediately prior
                    to that disability.  Such Option of the permanently disabled
                    Participant  may be  exercised  during the period the Option
                    would  have been  exercisable  if the  permanently  disabled
                    Participant  had  not  been  permanently  disabled  and  had
                    remained in employment.

           (d)      Exercise Upon Death.  Unless otherwise provided in the terms
                    of an Option, if a Participant's continuous employment shall
                    terminate  by reason of his death,  then to the extent  that
                    the  Participant  would have been  entitled to exercise  the
                    Option  immediately  prior to his death.  Such Option of the
                    deceased  Participant may be exercised during the period the
                    Option   would  have  been   exercisable   if  the  deceased
                    Participant had not died and had remained in employment,  by
                    the person or  persons  (including  his  estate) to whom his
                    rights  under such  Option  shall have  passed by will or by
                    laws of descent and distribution.

10.     ADJUSTMENTS.

           (a)      In the event that the outstanding shares of Common Stock are
                    hereafter   increased   or  decreased  or  changed  into  or
                    exchanged for a different  number or kind of shares or other
                    securities of the Corporation or of another corporation,  by
                    reason  of  a  recapitalization,   reclassification,   stock
                    split-up,   combination  of  shares  or  dividend  or  other
                    distribution   payable   in   capital   stock,   appropriate
                    adjustment  shall be made by the Committee in the number and
                    kind of shares for which  Options  may be granted  under the
                    Plan.  In addition,  the  Committee  shall make  appropriate
                    adjustment  in the  number  and kind of  shares  as to which
                    outstanding  Options,  or portions thereof then unexercised,
                    shall be  exercisable,  to the end  that  the  proportionate
                    interest  of the holder of the Option  shall,  to the extent
                    practicable,  be maintained as before the occurrence of such
                    event. Such adjustment in outstanding Options shall be

                                                                       EXHIBIT A

                    made  without  change in the total price  applicable  to the
                    unexercised  portion of the Option but with a  corresponding
                    adjustment in the Option price per share.

           (b)      In the event of a Change in  Control,  any Option  under the
                    Plan  shall  terminate  as of a  date  to be  fixed  by  the
                    Committee,  provided  that not less than  ninety  (90) days'
                    written  notice of the date so fixed  shall be given to each
                    Participant,  and each such Participant shall have the right
                    during such period to exercise  any of his or her Options as
                    to all or any part of the shares covered  thereby  including
                    shares  as to which  such  Options  would not  otherwise  be
                    exercisable by reason of any insufficient lapse of time.

           (c)      Adjustment and determinations under this Section 10 shall be
                    made  by  the   Committee,   whose   decisions  as  to  what
                    adjustments or determinations  shall be made, and the extent
                    thereof, shall be final, binding, and conclusive.

11.            CHANGE OF CONTROL.  Notwithstanding  any other Plan provisions or
               grant  term,  in the event of a Change of  Control,  all  Options
               granted hereunder shall become Vested and exercisable  regardless
               of the number of years that have passed since the Date of Grant.

12.            AMENDMENT AND TERMINATION. Unless the Plan shall theretofore have
               been terminated as hereinafter  provided,  it shall terminate on,
               and no Option shall be granted  thereunder after the tenth (10th)
               anniversary  of the Effective  Date.  The Board may terminate the
               Plan or make such modifications or amendments thereof as it shall
               deem  advisable,  or to  conform  to any  change  in  any  law or
               regulation  applicable  thereto,  including  (a)  increasing  the
               maximum  number of shares to which  Options may be granted  under
               the Plan, subject to shareholder approval, (b) changing the class
               of employees  eligible to be granted or Options may be exercised,
               or (d) providing for the  administration  of the Plan in a manner
               which may avoid,  without the consent of the  Participant to whom
               any  Option  shall  theretofore  have  been  granted,   adversely
               affecting the rights of such Participant under such grant.

13.            RESTRICTIONS ON ISSUING SHARES. The transfer of a share of Common
               Stock upon the  exercise of each  Option  shall be subject to the
               condition that if at any time the Corporation  shall determine in
               its discretion that the  satisfaction of withholding tax or other
               withholding  liabilities,  or that the listing,  registration  or
               qualification  of  any  shares  otherwise  deliverable  upon  any
               securities  exchange  or under any state or federal  law, or that
               the consent or approval of such regulatory  body, is necessary or
               desirable  as a  condition,  of,  or  in  connection  with,  such
               transfer of shares pursuant thereto, then in any such event, such
               transfer shall not be effective unless such withholding, listing,
               registration, qualification, consent, or approval shall have been
               effected  or  obtained   under   conditions   acceptable  to  the
               Corporation.

14.            USE OF PROCEEDS.  The proceeds  received  from the sale of Common
               Stock pursuant to the exercise of Options  granted under the Plan
               shall be added to the  Corporation's  general  funds and used for
               general corporate purposes.

15.            INDEMNIFICATION OF COMMITTEE. In addition to such other rights of
               indemnification  as they may have as  members  of the Board or as
               members of the Committee,  the members of the Committee  shall be
               indemnified  by the  Corporation  against all costs and  expenses
               reasonable incurred by them in connection with any action,  suit,
               or proceeding to which they or any of them may be party by reason
               of any action taken or failure to act under or in connection with
               the Plan,  or any Option and against all amounts  paid by them in
               settlement thereof (provided such settlement is approved by legal
               counsel   selected  by  the  Corporation)  or  paid  by  them  in
               satisfaction  of  a  judgment  in  any  such  action,   suit,  or
               proceeding,  except a judgment based upon a finding of bad faith.
               Upon the institution of any such action,  suit, or proceeding,  a
               Committee member shall notify the Corporation in writing,  giving
               an opportunity, at its own expense, to handle and defend the same
               before such Committee  member  undertakes to handle it on his own
               behalf.

16.            EFFECTIVENESS  OF THE PLAN. The Plan shall become effective as of
               the Effective Date.  Options may be granted to Participants prior
               to such date,  but the ability to exercise  all such Options from
               such grant shall be conditioned upon such approval and advice.

                                                                       EXHIBIT A
17.     MISCELLANEOUS.

           (a)      Employment  Not Affected.  Neither the granting of an Option
                    nor its  exercise  shall be  construed  as  granting  to the
                    Participant  any right with  respect to  continuance  of his
                    employment with the Corporation or its subsidiaries.  Except
                    as may otherwise be limited by a written  agreement  between
                    the Corporation or its subsidiaries and the Participant, the
                    right of the Corporation or its subsidiaries to terminate at
                    will  the  Participant's  employment  with  it at  any  time
                    (whether by dismissal, discharge,  retirement, or otherwise)
                    is   specifically   reserved  by  the   Corporation  or  its
                    subsidiaries  as the  employer or on behalf of the  employer
                    (whichever  the  case  may  be)  and   acknowledged  by  the
                    Participant.

           (b)      Notice.  Any notice to the Corporation  provided for in this
                    instrument shall be addressed to it in care of its President
                    at its principal office in West Virginia,  and any notice to
                    the Participant shall be addressed to the Participant at the
                    current   address  shown  on  the  payroll  records  of  the
                    Corporation.  Any notice shall be deemed to be duly given if
                    and when  properly  addressed  and  posed by  registered  or
                    certified mail, postage prepaid.

SOUTH BRANCH VALLEY BANCORP, INC.

By: ____________________________________
        H. Charles Maddy, III
        President
                                            Attest: ___________________________

                                            Title: ____________________________

                  PROXY FOR ANNUAL MEETING OF THE SHAREHOLDERS
                     OF SOUTH BRANCH VALLEY BANCORP, INC. ON
                                   May 5, 1998

The undersigned hereby appoints Russell F. Ratliff, Jr., Treasurer, and Carol A.
Riggleman,  Assistant Secretary, of South Branch Valley Bancorp, Inc., or either
of them with full power to act alone as  attorneys  and  proxies to vote all the
shares of the common stock of South Branch Valley Bancorp, Inc. held or owned by
the  undersigned at the Annual Meeting of Shareholders on May 5, 1998 and at any
adjournments thereof, as follows:

1.   A)  Election  of  Director  to serve a one year term until the 1999  annual
     meeting or until his successor is elected and qualified:

     [  ]  FOR ALL NOMINEES LISTED BELOW        [  ]  WITHHOLD AUTHORITY
     EXCEPT AS MARKED TO THE CONTRARY BELOW     TO VOTE FOR NOMINEE LISTED BELOW

                               Frank A. Baer, III

     B)  Election  of  Director  to serve a two year term until the 2000  annual
     meeting or until her successor is elected and qualified:

     [  ]  FOR ALL NOMINEES LISTED BELOW        [  ]  WITHHOLD AUTHORITY
     EXCEPT AS MARKED TO THE CONTRARY BELOW     TO VOTE FOR NOMINEE LISTED BELOW

                             Georgette Rashid George

     C) Election of  Directors  to serve a three year term until the 2001 annual
     meeting or until their successors are elected and qualified:

     [  ]  FOR ALL NOMINEES LISTED BELOW        [  ]  WITHHOLD AUTHORITY
     EXCEPT AS MARKED TO THE CONTRARY BELOW     TO VOTE FOR ALL NOMINEES LISTED
                                                BELOW

     (INSTRUCTION:  To withhold  authority to vote for any  individual  nominee,
     strike a line through the nominee's name in the list below.)

     Oscar M. Bean, Phoebe F. Heishman, H. Charles Maddy, III,
     Charles S. Piccirillo

2.   Adoption of the Officer Stock Option Plan.

         [  ] FOR              [  ] AGAINST                 [  ] ABSTAIN

3.   Ratification  of  the  selection  of  Arnett  &  Foster  as  the  Company's
     independent  certified  public  accountants  for  the  fiscal  year  ending
     December 31, 1998.

         [  ] FOR              [  ] AGAINST                 [  ] ABSTAIN

4.   In their discretion, upon any other business which may properly come before
     the meeting or any adjournment thereof.

         [  ] FOR              [  ] AGAINST                [  ] ABSTAIN

     THIS  PROXY  IS  SOLICITED  ON  BEHALF  OF THE  BOARD OF  DIRECTORS  OF THE
     CORPORATION.

THE SHARES OF COMMON STOCK REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED.
IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3, AND 4.

THIS PROXY  CONFIRMS ON THE PROXY HOLDER THE POWER OF CUMULATIVE  VOTING AND THE
POWER TO VOTE  CUMULATIVELY FOR LESS THAN ALL OF THE NOMINEES LISTED IN ITEMS 1,
2, 3 AND 4. IF ANY OTHER BUSINESS IS PRESENTED AT SAID MEETING, THIS PROXY SHALL
BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS.  THIS
PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS  EXERCISE IN  ACCORDANCE  WITH THE
PROCEDURE SET FORTH IN THE PROXY MATERIALS.

                                            Dated                      , 1998
                                                  ---------------------

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

                                            Shareholder  should sign  exactly as
                                            name  appears  on  the  label.   Any
                                            person signing in fiduciary capacity
                                            should  please  enclose proof of his
                                            appointment  unless  such  proof has
                                            already  been  furnished.  All joint
                                            owners must sign.