SECURITIES AND EXCHANGE COMMISSION
                      Washington, D.C. 20549

                            FORM 10-K

[X] Annual Report Pursuant to Section 13 or 15(d) of the
    Securities Exchange Act of 1934 [FEE REQUIRED]
    For the Fiscal Year Ended July 31, 1996
                                OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
    Securities Exchange Act of 1934 [NO FEE REQUIRED]

    For the transition period from _______________ to 
______________________

                 Commission File Number: 0-26870

                 AMERICAN NATIONAL BANCORP, INC.
             ---------------------------------------
      (Exact name of registrant as specified in its charter)

               Delaware                   52-1943817
               --------                   ----------
    (State or other jurisdiction of     (I.R.S. Employer
     incorporation or organization)   Identification Number)

   211 North Liberty Street, Baltimore, Maryland    21201
   ---------------------------------------------    -----
     (Address of Principal Executive Offices)     Zip Code

                          (410) 752-0400         
                        ---------------
                 (Registrant's telephone number)

Securities Registered Pursuant to Section 12(b) of the Act: None

Securities Registered Pursuant to Section 12(g) of the Act:

              Common Stock, par value $.01 per share
                         (Title of Class)

    Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding twelve
months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such
requirements for the past 90 days.  YES [X] NO [ ]

    Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of Registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X].

    As of September 27, 1996, there was issued and outstanding
3,603,646 shares of the Registrant's Common Stock.

    The aggregate market value of the voting stock held by non-
affiliates of the Registrant, which amount includes voting stock
held by officers and directors, computed by reference to the last
sale price on September 27, 1996, as reported by the Nasdaq
National Market, was approximately $45.0 million.

               DOCUMENTS INCORPORATED BY REFERENCE

1.  Annual Report to Stockholders for the fiscal year ended July
    30, 1996 (Parts II and IV).

2.  Proxy Statement for the November 21, 1996 Annual Meeting of
    Stockholders (Part III).
PAGE
<PAGE>
                              PART I

ITEM 1.  Business
-----------------

American National Bancorp, Inc.

    American National Bancorp, Inc. (the "Company") is a Delaware
corporation that was organized in July 1995.  On October 31, 1995,
the Company acquired 100% of the capital stock of American National
Savings Bank, F.S.B. (the "Bank"), sold 2,182,125 shares of common
stock in a subscription offering for a purchase price of $10.00 per
share (the "Offering"), and issued 1,798,375 shares of common stock
in exchange for 927,000 shares of the Bank's common stock held by
shareholders other than American National Bankshares, M.H.C.
(together with the Offering, the "Conversion").  Immediately
following the Conversion, the only significant assets of the
Company were the common stock of the Bank and $19.3 million of the
net proceeds from the Offering.  The Company is registered as a
savings and loan holding company with the Office of Thrift
Supervision (the "OTS").

    The Company employs executive officers and a support staff if
and as the need arises.  Such personnel are provided by the Bank
and are not paid separate remuneration for such services.  The
Company reimburses the Bank for the use of Bank personnel.  The
Company leases office space from and utilizes the premises,
equipment and furniture of the Bank, and reimburses the Bank for
rent, services, equipment, supplies and facilities provided.  The
Company's lending, gathering of deposits, and other operations are
discussed herein on a consolidated basis, and are primarily
conducted through the Bank.  At July 31, 1996, the Company had
total consolidated assets of $461.3 million, total consolidated
deposits of $313.1 million, and consolidated stockholders' equity
of $47.3 million. The Company's executive office is located at 211
North Liberty Street, Baltimore, Maryland  21201 and its telephone
number is (410) 752-0400.

American National Savings Bank, F.S.B.

    The Bank is a federally chartered stock savings bank
headquartered in Baltimore, Maryland.  The Bank conducts operations
through nine full-service offices in its market area consisting of
Baltimore City and parts of the Maryland counties of Baltimore,
Howard, Harford, Anne Arundel, and Carroll.  The Bank is primarily
engaged in the business of attracting deposits from the general
public in the Bank's market area, and investing such deposits
together with other funds, in loans collateralized by one- to four-
family residential real estate, mortgage-backed securities, and, to
a lesser extent, construction and land development loans, consumer
loans and investment securities.  In the past, the Bank also
actively originated multifamily residential real estate loans and
commercial real estate loans; however, originations of such loans
have decreased significantly in recent years as the Bank has sought
to reduce the credit risk and losses in its loan portfolio.  The
Bank also has reduced its involvement in real estate joint ventures
due to economic conditions and changes in regulatory capital
requirements. 

Market Area

    The Company's market area comprises Baltimore City and parts
of Baltimore, Howard, Harford, Anne Arundel and Carroll counties,
which are part of the Baltimore metropolitan area.  Baltimore City
is located approximately 30 miles from Washington, D.C., and is
part of the Washington-Baltimore Metropolitan Statistical Area. 
The Company's market area has a diverse base, although it has been
significantly influenced by the federal government and the defense
industry.  The Federal Government continues to be one of the area's
largest employers.  Headquartered within the Company's market area
are a number of Federal Government agencies, including the Social
Security Administration and the Health Care Financing
Administration.  Other major employers and industries within the
Company's market area include General Motors Truck and Bus Group,
Pepsi-Cola Company, Black and Decker Corporation, Sweetheart Cup
Company, Inc., John Hopkins University, the University of Maryland-
Baltimore, McCormick and Company, Inc., Bethlehem Steel Corp.,
Martin Marietta Aero and Naval Systems, Northrop-Grumman, Fort
Meade, Proctor and Gamble Cosmetic and Fragrance Products, The
Baltimore Sun, Baltimore Gas and Electric Company, Giant Food,
Inc., Bell Atlantic, Blue Cross and Blue Shield of Maryland, 
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<PAGE>
USF&G Corporation, PHH Corporation, Crown Central Petroleum, and
The Ryland Group, Inc.  The Baltimore metropolitan area also has an
active tourism industry, and is home to the Baltimore Orioles
professional baseball team and Oriole Park at Camden Yards, the
Baltimore Ravens professional football team, the Inner Harbor, and
the Baltimore Aquarium.  As of 1990, the population of the
Baltimore metropolitan area was approximately two million. 

Lending Activities

    Loan and Mortgage-Backed Securities Portfolio Composition. 
The principal components of the Company's loan portfolio are
conventional first mortgage loans secured by one- to four-family
residential real estate and, to a lesser extent, multifamily
residential real estate and commercial real estate loans.  At
July 31, 1996, the Company's total loan portfolio totalled
$298.5 million, of which $168.7 million, or 56.5%, were one- to
four-family residential real estate mortgage loans, $35.9 million,
or 12.0%, were multifamily residential real estate loans, and
$37.7 million, or 12.6%, were commercial real estate loans.  The
remainder of the Company's mortgage loans at July 31, 1996,
consisted of $37.5 million of construction and land development
loans.  To supplement its loan portfolio, the Company also invests
in mortgage-backed securities that directly or indirectly provide
funds principally for residential mortgage loans made to home
buyers in the United States.  See " Investment Activities." 
Consumer loans, consisting of home-equity loans, loans
collateralized by deposit accounts and other loans totalled
$17.1 million, or 5.8%, of the Company's total loan portfolio. 
PAGE
<PAGE>
     Analysis of Loan and Mortgage-Backed Securities Portfolio.  
Set forth below are selected
data relating to the composition of the Company's loan portfolio by 
type of loan, and
mortgage-backed securities portfolio, as of the dates indicated.


<TABLE>
<CAPTION>
                                                                                       At July 31,
                                    -----------------------------------------------------------------------------------------------
                                           1996               1995               1994                1993                1992
                                    -----------------  -----------------  ------------------  ------------------  -----------------
                                     Amount   Percent   Amount   Percent   Amount    Percent   Amount    Percent   Amount   Percent
                                    --------  -------  --------  -------  --------   -------  --------   -------  --------  -------
                                                                                   (Dollars in Thousands)
<S>                                 <C>       <C>      <C>       <C>      <C>        <C>      <C>        <C>      <C>       <C>
Real estate loans:
    One- to four-family residential $168,698   56.5%   $135,616   55.4%   $114,181    52.9%   $107,883    47.1%   $121,167   46.4%
    Multifamily residential           35,930   12.0      39,361   16.1      38,886    18.0      43,913    19.2      51,858   19.9
    Commercial                        37,695   12.6      38,894   15.9      41,747    19.4      48,812     1.3      55,559   21.3
    Construction (1)                  37,503   12.6      16,471    6.7       9,964     4.6      16,164     7.1      17,062    6.5
                                    --------  -----    --------  -----    --------   -----    --------   -----    --------  -----
       Total real estate loans       279,826   93.7     230,349    4.1     204,778    94.9     216,772    94.7     245,646   94.1
                                                      
Consumer loans:                               
    Home equity                        6,775    2.3       6,201    2.5       5,899     2.7       6,275     2.7       8,411    3.2
    Other (2)                         10,345    3.5       6,805    2.8       3,758     1.8       4,587     2.0       5,152    2.0
                                    --------  -----    --------  -----    --------   -----    --------   -----    --------  -----
        Total consumer loans          17,120    5.8      13,006    5.3       9,657     4.5      10,862     4.7      13,563    5.2
                                    --------  -----    --------  -----    --------   -----    --------   -----    --------  -----
                                                     
Accrued interest receivable            1,547     .5       1,323     .6       1,278      .6       1,394      .6       1,710     .7
                                    --------  -----    --------  -----    --------   -----    --------   -----    --------  -----
                                                     
        Total loans receivable       298,493  100.0%    244,671  100.0%    215,713   100.0%    229,028   100.0%    260,919  100.0%
                                    --------  -----    --------  ------   --------   -----    --------   -----    --------  -----
                                              -----              ------              -----               -----              -----
Less:                                               
    Undisbursed loan proceeds         14,837              5,138              2,513               3,786               3,215    
    Unearned loan fees                 1,202              1,083                989               1,321               1,571    
    Allowance for loan losses          4,412              6,361              3,669               2,326               1,468    
                                    --------           --------           --------            --------            --------
        Total loans receivable, net $278,042           $232,089           $208,542            $221,595            $254,665    
                                    --------           --------           --------            --------            --------
                                    --------           --------           --------            --------            --------
                                                       
Mortgage-backed securities (3)      $133,466           $159,805           $160,139            $119,815            $ 97,179    	
                                    --------           --------           --------            --------            --------
                                    --------           --------           --------            --------            --------
<FN>
___________________________________ __
(1) Includes land development loans of $14.2 million, $10.9 million, $5.2 million, $9.7 million and $14.1 million at July 31, 
1996, 1995, 1994, 1993 and 1992, respectively.
(2) Includes passbook loans, second mortgage loans, automobile loans and unsecured lines of credit.
(3) Includes $33.3 million, $3.0 million, $42.3 million and $17.9 million of mortgage-backed securities available for sale at 
July 31, 1996, 1995, 1994, and 1993, respectively.     
See Note 2 to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
    Loan Maturity Schedule.  The following table sets forth the
maturity or period of repricing of the Company's  portfolio at
July 31, 1996.  Demand loans, loans having no stated schedule of
repayments, and overdrafts are reported as due in one year or less. 
Adjustable and floating rate loans are included in the period in
which interest rates are next scheduled to adjust rather than in
which they mature, and fixed rate loans are included in the period
in which the final contractual repayment is due.


<TABLE>
<CAPTION>
                                                                                                Beyond
                                         Within       1-3        3-5       5-10      10-20        20	
                                         1 Year     Years       Years     Years      Years       Years      Total  
                                         -------    -------    -------    -------    -------    -------    --------
                                                                      (In Thousands)
<S>                                      <C>        <C>        <C>        <C>        <C>        <C>        <C>
    Real estate loans:
        One- to four-family residential  $46,464    $15,366    $10,070    $25,594    $23,151    $48,053    $168,698
        Multifamily residential           13,179     12,625      1,668      5,569      2,374        515      35,930
        Commercial                         9,162     13,708      4,619      2,926      5,451      1,829      37,695
        Construction (1)                  29,499      5,661                                       2,343      37,503
   Consumer loans                          7,342      4,239      4,478        726                   335      17,120
        Accrued interest receivable        1,547                                                              1,547
                                         -------    -------    -------    -------    -------    -------    --------
            Total                       $107,193    $51,599    $20,835    $34,815    $30,976    $53,075    $298,493
                                         -------    -------    -------    -------    -------    -------    --------
                                         -------    -------    -------    -------    -------    -------    --------
<FN>
_____________________________________
(1)    Includes land development loans.
</TABLE>


    Fixed- and Adjustable-Rate Loan Schedule.  The following table sets forth at
July 31, 1996, the dollar amount of all fixed-rate and adjustable-rate loans due
or scheduled next to reprice after July 31, 1997.


<TABLE>
<CAPTION>
                                           Fixed   Adjustable    Total   
                                         --------  ----------   --------
                                                (In Thousands)
<S>                                      <C>         <C>        <C>
Real estate loans:
  One- to four-family residential        $101,548    $20,686    $122,234
  Multifamily residential                  11,926     10,825      22,751
  Commercial                               17,926     10,607      28,533
  Construction (1)                                     8,004       8,004
Consumer loans                              9,409        369       9,778
                                         --------  ----------   --------
    Total                                $140,809    $50,491    $191,300
                                         --------  ----------   --------
                                         --------  ----------   --------
<FN>
_____________________________
(1)    Includes land development loans.
</TABLE>


    One- to Four-Family Residential Real Estate Loans.  The
Company's primary lending activity consists of the origination of
one- to four-family, owner-occupied, residential mortgage loans
collateralized by properties located in the Company's market area. 
The Company generally does not originate one- to four-family
residential loans collateralized by properties outside of its
market area, although from time to time the Company may purchase
loans collateralized by properties outside the Company's market
area if such loans satisfy the Company's internal underwriting
standards.  At July 31, 1996, $168.7 million, or 56.5% of the
Company's total loan portfolio consisted of one- to four-family
residential mortgage loans, and approximately $160.6 million, or
95.2%, of the Company's one- to four-family residential real estate
loans were collateralized by real estate located in the state of
Maryland.

    The Company's one- to four-family residential real estate loans
generally are originated and underwritten according to standards
that qualify such loans to be included in Freddie Mac ("FHLMC") and
Fannie Mae ("FNMA") purchase and guaranty programs and that
otherwise permit resale in the secondary mortgage market.  The
Company generally retains its adjustable rate mortgage ("ARM")
originations.  Whether the Company can or 
PAGE
<PAGE>
will sell fixed rate loans into the secondary market, however,
depends on a number of factors including the yield and the term of
the loan, market conditions, and the Company's current interest
rate gap position.  For example, in the current interest rate
environment, fixed rate loans with terms of less than 15 years and
with above-market yields are currently retained by the Company. 
During the fiscal years ended July 31, 1996, 1995, and 1994, the
Company sold into the secondary market $4.2 million, $2.2 million
and $8.7 million of one- to four-family residential mortgage loans,
generally from current period originations.  From time to time, the
Company may also exchange one- to four-family residential real
estate loans for FNMA securities.  As of July 31, 1996, the Company
had no such securities in its portfolio.

    The Company generally retains the servicing rights on loans it
has sold.  The Company receives fees for these servicing
activities, which include collecting and remitting loan payments,
inspecting the properties and making certain insurance and tax
payments on behalf of the borrowers.  As of July 31, 1996, the
Company serviced loans for others aggregating $50.0 million.

    The Company currently offers one- to four-family residential
mortgage loans with terms typically ranging from 10 to 30 years,
and with adjustable or fixed interest rates.  One- to four-family
residential real estate loans often remain outstanding for
significantly shorter periods than their contractual terms because
borrowers may refinance or prepay loans at their option.  The
average length of time that the Company's one- to four-family
residential mortgage loans remain outstanding varies significantly
depending upon trends in market interest rates and other factors. 
In recent years, the average maturity of the Company's mortgage
loans has decreased significantly due to the volume of refinancing
activity.  Accordingly, estimates of the average length of one- to
four-family loans that remain outstanding cannot be made with any
degree of accuracy.

    The Company's fixed rate mortgage loans amortize on a monthly
basis with principal and interest due each month.  The Company's
fixed rate loans are generally originated with terms ranging from
10 to 30 years.  The Company also offers seven year "balloon" loans
with an interest rate for the first seven years set at 25 basis
points less than the Company's 10 year fixed rate loans.  At the
end of the first seven years the interest rate for the remaining 23
year term is set at a margin over the then current FNMA 30-day
purchase price.

    Originations of fixed rate mortgage loans versus ARM loans are
monitored on an ongoing basis and are affected significantly by the
level of market interest rates, customer preference, the Company's
interest rate gap position, and loan products offered by the
Company's competitors.  The Company's ARM loans are generally for
terms of 30 years, with interest rates that adjust annually.  In
some instances, the Company offers three and five year ARM loans. 
Interest rate adjustments, are limited to 2% per year and 6% over
the life of the loan.  The Company's current index on its ARM loans
is the one year Treasury Bill rate, plus a margin.  The Company
will originate ARM loans with initially discounted rates, often
known as "teaser rates."  The Company determines whether a borrower
qualifies for an ARM loan based on the fully indexed rate of the
ARM loan at the time the loan is originated.  One- to four-family
residential ARM loans totaled $57.8 million, or 19.4%, of the
Company's total loan portfolio at July 31, 1996.  During the fiscal
year ended July 31, 1996, the Company purchased $10.9 million of
ARM loans collateralized by one- to four-family residential real
estate located primarily in Maryland.

    The primary purpose of offering ARM loans is to make the
Company's loan portfolio more interest rate sensitive.  Management
believes that although ARM loans better offset the adverse effects
of an increase in interest rates as compared to fixed-rate mortgage
loans, the increased mortgage payments required of adjustable-rate
mortgage loan borrowers in a rising interest rate environment could
potentially cause an increase in delinquencies and defaults.  The
Company has not historically experienced a material difference in
the delinquency rate between its fixed-rate and adjustable-rate
one- to four-family loans.

    The Company's one- to four-family residential first mortgage
loans customarily include due-on-sale clauses, which are provisions
giving the Company the right to declare a loan immediately due and
payable in the event, among other things, that the borrower sells
or otherwise disposes of the underlying real property serving as
security for the loan.  Due-on-sale clauses are an important means
of adjusting the rates on the Company's fixed rate mortgage loan
portfolio, and the Company has generally exercised its rights under
these clauses.
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    The Company makes one- to four-family real estate loans with
loan-to-value ratios of up to 95%.  For one- to four-family real
estate loans with loan-to-value ratios of between 80% and 90%, the
Company requires the first 20% of the loan amount to be covered by
private mortgage insurance.  For one- to four-family residential
real estate loans with loan-to-value ratios of between 90% and 95%,
the Company requires the first 25% of the loan amount to be covered
by private mortgage insurance.  The Company requires fire and
casualty insurance, as well as a title guaranty regarding good
title, on all properties securing real estate loans made by the
Company.

    Multifamily Residential Real Estate Loans.   In recent years,
the Company has significantly reduced its originations of 
multifamily residential real estate loans, and the total amount of
such loans in its loan portfolio has decreased.  The Company
currently makes multifamily residential real estate loans only to
existing or previous customers who have made timely payments on
loans that are current, or to facilitate the sale of property
acquired by the Company through foreclosure.  Loans collateralized
by multifamily residential real estate constituted approximately
$35.9 million, or 12.0%, of the Company's total loan portfolio at
July 31, 1996, compared to $51.9 million, or 19.9%, of the total
loan portfolio at July 31, 1992.  At July 31, 1996, the Company's
portfolio of multifamily residential real estate loans included 5
loans with principal balances that exceeded $1.0 million. 
Multifamily residential real estate originations totalled 4.9%,
3.8%, and 1.0%, of total loan originations during the fiscal years
ended July 31, 1996, 1995, and 1994, respectively.  Although the
Company increased its originations of multifamily residential real
estate loans to $3.7 million during the fiscal year ended July 31,
1996, from $1.8 million during the fiscal year ended July 31, 1995,
such loans constituted only 4.9% of originations over the year, and
conformed to the Company's strategy of originating such loans only
to existing or previous customers who had made timely payments on
loans.  None of the multifamily originations during the fiscal year
ended July 31, 1996, were loans to facilitate the sale of real
estate acquired by the Company through foreclosure.  The Company's
multifamily real estate loans are primarily collateralized by
multifamily residences, such as apartment buildings and condominium
buildings.  The Company also includes in its multifamily
residential real estate loan portfolio loans made to investors
collateralized by more than four single-family residences. 
Multifamily real estate loans are offered with fixed and adjustable
rates and are structured in a number of different ways depending
upon the circumstances of the borrower and the type of multifamily
project.  Fixed rate loans generally amortize over 15 to 25 years,
and generally contain call provisions permitting the Company to
require that the entire principal balance be repaid at the end of
five to seven years.  Such loans are priced as five to seven year
loans.  The Company's adjustable rate multifamily loans are
currently offered for terms of 15 to 30 years and are often
callable by the Company after five to ten years.  The Company has
generally not exercised call provisions of multifamily residential
real estate loans that have a good payment history and are priced
at market rates or higher.  Interest rates adjust monthly or
annually, subject to limitations, and are tied to a margin over the
one year Treasury index.  The Company's adjustable rate multifamily
residential real estate loans currently include limitations on
interest rate increases in any one year and over the life of the
loan. 

    Loans collateralized by multifamily real estate generally
involve a greater degree of credit risk than one- to four-family
residential mortgage loans and carry larger loan balances.  This
increased credit risk is a result of several factors, including the
concentration of principal in a limited number of loans and
borrowers, the effects of general economic conditions on income
producing properties, and the increased difficulty of evaluating
and monitoring these types of loans.  Furthermore, the repayment of
loans secured by multifamily real estate is typically dependent
upon the successful operation of the related real estate property. 
If the cash flow from the project is reduced, the borrower's
ability to repay the loan may be impaired.

    Commercial Real Estate Loans.  In recent years, the Company has
significantly reduced its originations of commercial real estate
loans and the total amount of such loans in its loan portfolio. 
The Company currently makes commercial real estate loans only to
existing or previous customers who have made timely payments on
loans that are current, or to facilitate the sale of commercial
real estate acquired by the Company through foreclosure.  Loans
secured by commercial real estate constituted approximately
$37.7 million, or 12.6% of the Company's total loan portfolio at
July 31, 1996, compared to $55.6 million, or 21.3% of the total
loan portfolio at July 31, 1992.  At July 31, 1996, the Company's
portfolio of commercial real estate loans included 12 loans with
principal balances that exceeded $1.0 million.  Commercial real
estate loan originations totalled 8.6%, 3.7% and 2.0% of total loan
originations during the fiscal years ended July 31, 1996, 1995, and
1994, respectively.  Although the Company 
PAGE
<PAGE>
increased its originations of commercial real estate loans to $6.6
million during the fiscal year ended July 31, 1996, from $1.7
million during the fiscal year ended July 31, 1995, such loans
conformed to the Company's strategy of originating commercial loans
only to existing or previous customers who had made timely payments
on loans.  Of the Company's originations of commercial real estate
loans during the fiscal year ended July 31, 1996, $1.5 million was
for the purpose of facilitating the sale of REO.  The Company's
commercial loans are secured by improved property such as shopping
centers, warehouses, office buildings, and other nonresidential
buildings.  Commercial real estate loans currently are offered with
fixed and adjustable rates and are structured in a number of
different ways depending upon the circumstances of the borrower and
the nature of the project.  Fixed rate loans generally amortize
over 15 to 25 years, and generally contain call provisions
permitting the Company to require that the entire principal balance
be repaid at the end of five to seven years.  Such loans are priced
as five to seven year loans.  The Company's adjustable rate
commercial real estate loans are currently offered for terms of 15
to 30 years and are often callable by the Company after 10 years. 
The Company has generally not exercised call provisions of
commercial real estate loans that have a good payment history and
are priced at market rates or higher.  Interest rates adjust
monthly or annually, and are tied to the one year Treasury index. 
The Company's adjustable rate commercial real estate loans
currently include limitations on interest rate increases in any one
year and over the life of the loan. 

    Loans secured by commercial real estate generally involve a
greater degree of credit risk than one- to four-family residential
mortgage loans and carry larger loan balances.  This increased
credit risk is a result of several factors, including the
concentration of principal in a limited number of loans and
borrowers, the effects of general economic conditions on income
producing properties, and the increased difficulty of evaluating
and monitoring these types of loans.  Furthermore, the repayment of
loans secured by commercial real estate is typically dependent upon
the successful operation of the related real estate property.  If
the cash flow from the project is reduced, the borrower's ability
to repay the loan may be impaired.

    Construction and Land Development Loans.  The Company offers
construction loans to individuals for the construction of their
residence as well as to builders for the construction of one- to
four-family residential units and to a much lesser extent
commercial and multifamily units.  In addition, the Company offers
land loans, including loans to purchase developed single family
lots and land acquisition and development loans to develop single
family lots.  At July 31, 1996, the Company's $37.5 million of
construction and land development loans included $23.3 million of
constructions loans and $14.2 million of land development loans. 
As of July 31, 1996, all construction and land loans were
collateralized by properties located within the suburbs of
Baltimore and Washington, D.C.

    Construction loans to individuals typically convert to
permanent loans at the end of the construction phase.  The maximum
loan amount does not typically exceed 80% of appraised value, and
the Company requires private mortgage insurance where the loan
amount exceeds 80% of appraised value.  Construction loans to
individuals have a maximum construction term of one year, after
which the loan may be converted to a 15 to 30 year fixed- or
adjustable-rate mortgage loan at the option of the borrower.  The
interest rates typically float at a margin over the prime rate and
adjust monthly.  The loan application process requires that the
builder submit accurate plans, specifications and cost projections. 
In addition, the Company reviews the borrower's existing financial
condition, including total outstanding debt.  Construction loans on
speculative units are restricted and in most instances homes are
required to be pre-sold before construction advances are made. 
Advances are made on percentage of completion basis and all
construction inspections are performed by the Company's appraisers
prior to disbursement.  Construction loans to builders generally
require the payment of interest only during the construction term. 
Depending upon the number of units to be built and the absorption
rate as determined by the appraisal, loan terms can vary between 12
to 24 months. 
 
     All recent land loan originations are secured by single family
lots, although a portion of prior originations included loans for
commercial purposes.  The maximum loan amount generally does not
exceed 75% of appraised value.   Loans made to purchase developed
lots have terms that are negotiated on a case-by-case basis.  The
Company does not make loans for speculation purposes land loans are
typically made to builders or individuals who intend to build
within a three-year period.  The loan application process requires
that the developer submit accurate 
<PAGE>
cost estimates, development and site plans and cash flow
projections.  In addition, the Company reviews the borrower's
existing financial condition including total outstanding debt.  
Land acquisition and development loans generally require the
developers to have the lots pre-sold to local or national builders. 
Depending upon the number of lots to be developed and the
absorption rate as determined by the appraisal, the loan term can
vary between 12 to 36 months.  Interest rates typically float at a
margin over the prime rate and adjust monthly.  Loan proceeds are
advanced as land development progresses, and in all instances, the
Company's appraisers inspect the property and the work completed
before the Company will disburse funds. 

    Construction and land development loans involve additional
risks attributable to the fact that funds are advanced upon an
appraisal of the completed project, which is of uncertain value
prior to its completion.  Because of the uncertainties inherent in
estimating construction and land development costs, as well as the
market value on the completed project and the effects of
governmental regulation of real property, it is relatively
difficult to evaluate accurately the total funds required to
complete a project and the related loan-to-value ratio.  The
Company's loans typically do not exceed 80% of the appraised value
of the completed project.  As a result of the foregoing,
construction and land development loans often involve the
disbursement of substantial funds with repayment dependent, in
part, on the success of the ultimate project rather than the
ability of the borrower or guarantor to repay principal and
interest.  If the Company is forced to foreclose on a project prior
to or at completion due to a default, there can be no assurance
that the Company will be able to recover all of the unpaid balance
of, and accrued interest on, the loan, as well as related
foreclosure and holding costs.  In addition, the Company may be
required to fund additional amounts to complete the project and may
have to hold the property for an unspecified period of time.

    Consumer Loans.  To a lesser extent, the Company originates
consumer loans.  As of July 31, 1996, consumer loans totalled $17.1
million, or 5.8%, of the Company's total loan portfolio.  The
principal types of consumer loans offered by the Company are
adjustable rate home equity lines of credit with terms up to 20
years, automobile loans with terms up to five years, loans secured
by deposit accounts and other loans consisting primarily of 5 to 15
year fixed-rate second mortgage loans, personal loans, and checking
account lines of credit.  Consumer loans, other than home equity
lines of credit and automobile loans, are offered primarily on a
fixed rate basis with maturities generally of less than ten years. 
The Company's home equity and residential second mortgage loans are
secured by the borrower's principal residence with a maximum
loan-to-value ratio, including the principal balances of both the
first and second mortgage loans, of 80% or less.  At July 31, 1996,
home equity loans totalled $6.8 million, or 39.8% of consumer
loans, and 2.3% of the Company's total loan portfolio.  At July 31,
1996, the Company had $9.2 million of contractual commitments for
lines of credit.

    Consumer loans entail greater credit risk than do residential
mortgage loans but have smaller balances and tend to have higher
interest rates.  See " Delinquencies and Classified
Assets Delinquent Loans, Nonperforming Assets and Restructured
Loans" for information regarding the Company's loan loss experience
and reserve policy.

    Loan Originations, Solicitation, Processing, and Commitments. 
Loan originations are derived from a number of sources such as
mortgage originators employed by the Company, real estate agent
referrals, existing customers, borrowers, builders, attorneys, and
walk-in customers.  Upon receiving a loan application, the Company
obtains a credit report and employment verification to verify
specific information relating to the applicant's employment,
income, and credit standing.  In the case of all multifamily
residential and commercial real estate loans, a third party
appraiser approved by the Company appraises the real estate
intended to collateralize the proposed loans.  The Company's
internal appraisers review all third party appraisals.  Either the
Company's internal appraisers or a third party appraiser performs
appraisals of one- to four-family residential properties.  An
underwriter in the Company's loan department checks the loan
application file for accuracy and completeness, and verifies the
information provided.  Pursuant to the Company's written loan
policies, all loans of less than $1.0 million are approved by the
Loan Committee that meets weekly and consists of four officers of
the Company, including the President and the Executive Vice
President.  Such policies also require that all loans of $1.0
million or more be approved by the Loan Committee consisting of
three directors.  For multifamily residential and commercial real
estate loans the Company requires that the borrower provide
operating statements, pro forma cash flow statements and, if
applicable, rent rolls.  In addition, the Company reviews the
borrower's credit standing and expertise in owning and managing the
type of property that will collateralize the loan.  For
construction loans, the 
PAGE
<PAGE>
Company requires that the borrower provide detailed construction
plans and specifications, and pro forma cash flow statements.  In
addition, the Company considers the feasibility of the project and
the pertinent experience of the borrower.  Proof of fire and
casualty insurance is required at the time the loan  is made and
throughout the term of the loan.  After the loan is approved, a
loan commitment letter is promptly issued to the borrower.

    If the loan is approved, the commitment letter specifies the
terms and conditions of the proposed loan including the amount of
the loan, interest rate, amortization term, a brief description of
the required collateral, and required insurance coverage. 
Commitments are typically issued for 60-day periods.  The Company
typically collects a commitment fee on conventional, construction,
and land development loans.  The Company requires a title search
and, in the case of all real estate loans except home equity loans,
a title guaranty.  At July 31, 1996, the Company had commitments to
originate $8.9 million of mortgage loans.

    The Company also enters into commitments to extend credit.  At
July 31, 1996, the Company had contractual commitments to extend
credit (exclusive of undisbursed loans in process) for lines of
credit and irrevocable letters of credit of $9.2 million and
$2.1 million, respectively.  The commitments may be funded from
principal repayments of loans and mortgage-backed securities,
excess liquidity, savings deposits, and, if necessary, borrowed
funds.  Commitments under lines of credit are generally longer than
one year and are subject to periodic reevaluation and cancellation. 
Irrevocable letters of credit expire within two years.  Because
certain of the commitments may expire without being drawn upon, the
total commitment amounts do not necessarily represent future cash
requirements.
<PAGE>

    Origination, Purchase and Sale of Loans and Mortgage-Backed
Securities.  The table below shows the Company's loan origination,
purchase and sale of loans and mortgage-backed securities for the
years indicated.


<TABLE>
<CAPTION>
                                                 At July 31,     
                                       --------------------------------
                                         1996        1995        1994     
                                       --------    --------    --------
                                              (In Thousands)
<S>                                    <C>         <C>         <C>
Total loans receivable at beginning
   of year                             $232,089    $208,542    $221,595
Loans originated:
  Real estate:
    One- to four-family residential      30,297      25,559      34,752
    Multi-family residential              3,711       1,785         448
    Commercial                            6,586       1,727         855
    Construction (1)                     30,421      12,501       4,082
  Consumer:
    Home equity                           1,141       1,273         496
    Other                                 4,269       4,237       2,849
                                       --------    --------    --------
      Total originations                 76,425      47,082      43,482
Loans purchased                          17,972      11,216            
Transfer of mortgage loans
    to foreclosed real estate            (2,960)     (1,400)       (489)
Repayments                              (40,659)    (27,763)    (45,753)
Loan sales                               (4,194)     (2,159)     (8,710)
Other (2)                                  (631)     (3,429)     (1,583)
                                       --------    --------    --------
Net loan activity                       (30,472)    (23,535)    (13,053)
                                       --------    --------    --------
    Total loans receivable at end
       of year (3)                     $278,042    $232,089    $208,542
                                       --------    --------    --------
                                       --------    --------    --------


Mortgage-backed securities at 
  beginning of year                    $159,805    $160,139    $119,815
Purchases                                42,703      17,364     131,256
Sales. . .                              (56,036)     (3,100)    (49,601)
Repayments                              (11,823)    (15,001)    (39,790)
Other (4)                                (1,183)        403      (1,541)
                                       --------    --------    --------
Mortgage-backed securities
  at end of year (5)                   $133,466    $159,805    $160,139
                                       --------    --------    --------
                                       --------    --------    --------
<FN>
_____________________________________
(1)    Includes land development loans.
(2)    Consists of changes in the allowance for losses, undisbursed loan proceeds, unearned
discounts, and net deferred fees.
(3)    Includes $350,000 and $1.8 million of loans held for sale at July 31, 1996 and 1995,
respectively.
(4)    Consists of gain (loss) on sale of securities, discount or premium amortization, changes in
accrued interest receivable, and mark-to-market adjustment.
(5)    Includes $33.3 million, $3.0 million and $42.3 million of mortgage-backed securities available
for sale at July 31, 1996, 1995 and 1994, respectively.
</TABLE>


    Loan Origination Fees and Other Income.  In addition to
interest earned on loans, the Company generally receives fees in
connection with loan originations.  Such loan origination fees, net
of costs to originate, are deferred and amortized using an interest
method over the contractual life of the loan.  Fees deferred are
recognized into income immediately upon prepayment or sale of the
related loan.  At July 31, 1996, the Company had $1.2 million of
deferred loan origination fees.  Such fees vary with the volume and
type of loans and commitments made and
PAGE
<PAGE>
purchased, principal repayments, and competitive conditions in the
mortgage markets, which in turn respond to the demand and
availability of money.

    In addition to loan origination fees, the Company also receives
other fees, service charges, and other income that consist
primarily of deposit transaction account service charges and late
charges.  The Company recognized fees and service charges of
$640,000, $592,000, and $630,000 for the fiscal years ended July
31, 1996, 1995, and 1994, respectively.  Income received from loans
serviced for others was $146,000, $165,000, and $188,000, for the
fiscal years ended July 31, 1996, 1995, and 1994, respectively.

    Loans to One Borrower.  Federally chartered savings banks, such
as the Bank, are subject to the same limits on loans to a single or
related group of borrowers as those applicable to national banks,
which under current regulations, is limited to 15% of unimpaired
capital and unimpaired surplus on an unsecured basis, and an
additional amount equal to 10% of unimpaired capital and unimpaired
surplus if the loan is secured by readily marketable collateral
(generally, financial instruments, but not real estate).  The
Bank's maximum loan to one borrower limit was $5.8 million at July
31, 1996.  The Bank currently is in compliance with its loans-to-one-
borrower limitations. 

    The Bank's largest lending relationship at July 31, 1996,
included (i) several loans originated in 1987, 1988 and 1991,
collateralized by single family and multifamily residential units
and two small office buildings located in the Baltimore
Metropolitan area, and (ii) a fixed rate loan refinanced in 1986
with an eleven year call, collateralized by a 190 unit apartment
complex located in Easton, Maryland.  In 1992 the loans were
restructured at market rates and consolidated into two loans as
part of a bankruptcy proceeding which involved other properties of
the borrower not financed by the Bank.  At July 31, 1996, the loans
had a principal balance of $2.6 million and $2.7 million, and the
aggregate amount of the two loans was $5.3 million.  As of July 31,
1996, the loans were current with respect to their repayment terms
and were designated as special mention.  

    The Bank's second largest lending relationship at July 31, 1996
included an adjustable rate and two fixed rate loans collateralized
by two retail shopping centers in the Baltimore Metropolitan area.
The loans were originated in 1995, and in June 1996 the Bank
originated a fixed rate second mortgage collateralized by one of
the shopping centers. Each loan has a ten year call date. At July
31, 1996, the loans ranged from $295,000 to $3.2 million and
totalled $4.4 million. As of July 31, 1996, the loans were current
with respect to their repayment terms.

    The Bank's third largest lending relationship included the
following loans to one borrower:  (i) six adjustable rate loans
originated during 1987 through 1990 collateralized by one- to four-
family residential properties located in the Baltimore Metropolitan
area in amounts ranging from $68,000 to $554,000;  (ii) a fixed
rate loan originated in 1985 with a ten year call collateralized by
a multifamily apartment building in Baltimore City; and (iii) a
fixed rate loan originated in 1988 with a call date of December 31,
1996 collateralized by office and retail space in Baltimore.  The
loans described in (i) above were current with respect to their
repayment terms as of July 31, 1996, and had a carrying value of
$2.2 million.  The loans described in (ii) and (iii) were
restructured in 1992, at which time the Bank changed the interest
rate to a one year adjustable rate at .5% below market and
classified such loans as substandard.  The Bank obtained appraisals
on the properties described in (ii) and (iii) in 1995.  At July 31,
1996, the loan described in (ii) had a carrying value of $436,000,
net of specific reserves of $250,000, the loan described in (iii)
had a carrying value of $161,000, net of specific reserves of
$435,000, and both of the loans described in (ii) and (iii) were
current with respect to their restructured repayment terms.

    The Bank's fourth largest lending relationship at July 31,
1996, included an adjustable rate loan and three fixed rate loans
collateralized by apartment buildings and an office building in the
Baltimore Metropolitan area.  The loans were originated in 1987 and
1988.  In June 1994, the Bank originated a fixed rate second
mortgage loan collateralized by all of the properties.  As of July
31, 1996, the loans ranged from $346,000 to $1.2 million, and
totalled $3.5 million.  As of July 31, 1996, the  loans were
current with respect to their repayment terms.

    The Bank's fifth largest lending relationship at July 31, 1996
included four adjustable rate loans collateralized by a retail
shopping center and three apartment buildings in the Baltimore
Metropolitan area. The 
PAGE
<PAGE>
loans were originated in 1988 with a ten year call. At July 31,
1996, the loans ranged from $252,000 to $1.5 million and totalled
$2.9 million. As of July 31, 1996, the loans were current with
respect to their repayment terms.

Delinquencies and Classified Assets

    Delinquencies.  The Company's collection procedures provide
that when a loan is 15 days past due, a computer-generated late
charge notice is sent to the borrower requesting payment, plus a
late charge.  This is followed with a letter again requesting
payment when the payment becomes 20 days past due.  If delinquency
continues, at 30 days another collection letter is sent and
personal contact efforts are attempted, either in person or by
telephone, to strengthen the collection process and obtain reasons
for the delinquency.  Also, plans to arrange a repayment plan are
made.  If a loan becomes 60 days past due, the loan becomes subject
to possible legal action if suitable arrangements to repay have not
been made.  In addition, the borrower is given information which
provides access to consumer counseling services, to the extent
required by regulations of the Department of Housing and Urban
Development.  When a one- to four-family residential real estate
loan continues in a delinquent status for 90 days or more, and a
repayment schedule has not been made or kept by the borrower, a
notice of intent to foreclose is sent to the borrower, giving 30
days to cure the delinquency.  If not cured, foreclosure
proceedings are initiated.  For multifamily residential and
commercial real estate loans, foreclosure proceedings may be
initiated at the end of 30 or 60 days.

    Nonperforming Assets.  Loans are reviewed on a regular basis
and are placed on a nonaccrual status when, in the opinion of
management, the collection of interest is doubtful.  Mortgage loans
are placed on nonaccrual status generally when either principal or
interest is more than 90 days past due.  Interest accrued and
unpaid at the time a loan is placed on nonaccrual status is charged
against interest income.

    Real estate acquired by the Company as a result of foreclosure
or by deed in lieu of foreclosure is deemed REO until such time as
it is sold.  When REO is acquired, it is recorded at the lower of
the unpaid principal balance of the related loan or its estimated
fair value, less estimated selling expenses.  Valuations are
periodically performed by management, and any subsequent decline in
fair value is charged to operations.  Net REO totalled $766,000,
$890,000, and $655,000, at July 31, 1996, 1995, and 1994,
respectively.
PAGE
<PAGE>
    Delinquent Loans, Nonperforming Assets, and Restructured Loans. 
The following table sets forth information regarding nonperforming
loans, real estate owned by the Company, and restructured loans
within the meaning of SFAS 15, at the dates indicated.

<TABLE>
<CAPTION>
                                                          At July 31, 1996                  At July 31,
                                                          ----------------   -----------------------------------------
                                                          Number   Balance     1995      1994        1993       1992   
                                                          ------   -------   -------    -------    -------    --------
                                                  (Dollars in Thousands)
<S>                                                       <C>      <C>       <C>        <C>        <C>        <C> 
Nonperforming loans:
    One- to four-family residential real estate              12    $  690    $ 1,023    $ 1,403    $ 1,164    $ 3,099
    Multifamily residential real estate                       5     1,580      1,479        216      2,227      4,879
    Commercial real estate                                    2     1,374      5,907        734      2,720      1,606
    Construction (1)                                                                        996      1,350           
    Consumer loans                                            8       265        198        269        186        164
                                                          ------   -------   -------    -------    -------    --------
        Total nonperforming loans                            27     3,909      8,607      3,618      7,647      9,748
Total real estate owned (2)                                   7       766        890        663      1,285      2,410
                                                          ------   -------   -------    -------    -------    --------
        Total nonperforming assets                           34     4,675      9,497      4,281      8,932     12,158
                                                          ------   -------   -------    -------    -------    --------
                                                          ------   -------   -------    -------    -------    --------
                                                                                          
Restructured loans (3)                                        3     1,636      1,870      8,864      1,713      1,731
                                                          ------   -------   -------    -------    -------    --------
Total nonperforming assets and restructured loans            37    $6,311    $11,367    $13,145    $10,645    $13,889
                                                          ------   -------   -------    -------    -------    --------
                                                          ------   -------   -------    -------    -------    --------
                                                                                          
Total nonperforming loans to total                                               
    loans receivable                                                  1.31%     3.52%      1.67%      3.34%      3.74%
Total nonperforming loans to total assets                             0.85%     2.02%       .90%      2.00%      2.44%
Total nonperforming loans and real estate owned                             
    to total assets                                                   1.01%     2.23%      1.07%      2.33%      3.05%
<FN>
____________________________________
(1)    Includes land development loans.
(2)    Represents property acquired by the Company through foreclosure or deed in lieu of foreclosure.
(3)    All restructured loans are performing in accordance with their restructured payment terms.
</TABLE>


    During the fiscal years ended July 31, 1996, 1995 and 1994,
respectively, gross interest income of $567,000, $898,000, and
$1.1 million would have been recorded on nonperforming and
restructured loans, under their original terms, if the loans had
been current throughout the period.  The amount of interest income
on non-accrual loans actually included in income during the same
periods amounted to $151,000, $274,000 and $650,000.

    The Company adopted the provisions of Statement of Financial
Accounting Standards No. 114 "Accounting by Creditors for
Impairment of a Loan" and by Statement 118 "Accounting by Creditors
for Impairment of a Loan-Income Recognition and Disclosures"
(collectively referred to as "Statement 114") as of August 1, 1995. 
Statement 114 requires that impaired loans be measured on the
present value of expected future cash flows discounted at the
loan's effective interest rate, or at the loan's observable market
price or the fair value of the collateral if the loan is collateral
dependent.  A loan is considered impaired when, based on current
information and events, it is probable that a creditor will be
unable to collect all amounts due according to the contractual
terms of the loan agreement.  Impaired loans are generally placed
in nonaccrual status on the earlier of the date that management
determines that the collection of principal and/or interest is in
doubt or the date that principal or interest is 90 days or more
past-due.

    The Company's policy concerning restructured loans and loans to
facilitate the sale of REO is to take a realistic approach to
resolving its problem loans based on current market conditions, and
to work with each borrower on a case-by-case basis.  For all such
loans, the Company obtains a current appraisal and reviews the
borrower's and guarantor's financial statements.  The review
includes an analysis of the balance sheet and income statement, as
well as a review of the cash flow and operating results.  In
addition, the Company considers the borrower's past performance. 
The rates and terms are then established based on the viability of
the project and the cash flow generated.
PAGE
<PAGE>
    Classification of Assets.  Federal regulations provide for the
classification of loans and other assets such as debt and equity
securities considered by the OTS to be of lesser quality as
"substandard," "doubtful," or "loss" assets.  An asset is
considered "substandard" if it is inadequately protected by the
current net worth and paying capacity of the obligor or of the
collateral pledged, if any.  "Substandard" assets include those
characterized by the "distinct possibility" that the savings
institution will sustain "some loss" if the deficiencies are not
corrected.  Assets classified as "doubtful" have all of the
weaknesses inherent in those classified "substandard," with the
added characteristic that the weaknesses present make "collection
or liquidation in full," on the basis of currently existing facts,
conditions, and values, "highly questionable and improbable." 
Assets classified as "loss" are those considered "uncollectible"
and of such little value that their continuance as assets without
the establishment of a specific loss reserve is not warranted.  The
Company establishes a reserve for its "loss" assets, and may
classify a portion of a loan as substandard and another portion of
the same loan as "loss."

    The following table sets forth the aggregate amount of the
Bank's classified assets at the dates indicated.

<TABLE>
<CAPTION>
                                                 At July 31,     
                                       --------------------------------
                                         1996        1995        1994     
                                       --------    --------    --------
                                              (In Thousands)
<S>                                    <C>         <C>         <C> 
Substandard assets (1)                 $  5,300    $  8,757    $ 12,671
Doubtful assets                                                        
Loss assets                               2,411       3,909         929
   Total classified assets             $  7,711    $ 12,666    $ 13,600
<FN>
____________________________________
(1)    Includes REO.
</TABLE>


    Two of the loans in the Bank's third largest lending
relationship, with a carrying value of $597,000 as of July 31,
1996, were classified substandard, and $685,000 relating to such
loans was classified as loss.  Such loans are described above in
" Lending Activities Loans to One Borrower."  The following is a
discussion of other classified assets with net carrying values in
excess of $250,000 as of July 31, 1996.  Amounts identified below
as specific reserves have been classified as "loss" in the above
table.

    In 1986 the Bank granted a 30-year fixed rate loan
collateralized by office and retail space in Baltimore.  In August
1993, the Bank restructured the loan from a fixed rate to a one-year 
adjustable rate at .5% below market rates.  As of July 31,
1996, the collateral property was approximately 75% rented.  The
collateral was last appraised in 1995.  As of July 31, 1996, a
total of $450,000 had been charged-off, and the loan had a carrying
value of $693,000, net of specific reserves of $750,000.  The loan
is current under the restructured terms.  

    In 1987 the Bank originated a loan collateralized by ten
multifamily residential units located in Baltimore. In February
1992, due to periodic delinquencies, the Bank modified the monthly
payments by reducing the interest rate to 8.0%.  As of July 31,
1996, a total of $41,000 had been charged-off, and the loan was
carried at $354,000.  As of July 31, 1996, the loan was current as
restructured. 

    In 1987 and 1990, the Bank granted an adjustable rate loan and
a fixed rate second mortgage loan collateralized by a 95-unit
apartment building located in Baltimore, Maryland.  In April 1995,
the Bank classified the loans as substandard due to payment
delinquencies. The borrowers have signed a contract to sell the
property and it is expected to settle by December 31, 1996.  At
July 31, 1996, a total of $111,000 had been charged off and the
loans had an aggregate carrying value of $957,000, net of a
specific reserve of $498,000.

    Other Loans of Concern.  Assets that do not expose the Bank to
risk sufficient to warrant classification in one of the
aforementioned categories, but which possess some weaknesses, are
designated "special mention" by 
PAGE
<PAGE>
management.  Loans designated as special mention are generally
loans that, while current in required payments, have exhibited some
potential weaknesses that, if not corrected, could increase the
level of risk in the future.  At July 31, 1996, the Bank had $5.5
million of special mention loans, including two loans to the same
borrower that constituted the Bank's largest lending relationship. 
See " Lending Activities Loans to One Borrower."

    Allowance for Loan Losses.  Management's policy is to provide
for estimated losses on the Company's loan portfolio based on
management's evaluation of the risk inherent in the loan portfolio. 
The Company regularly reviews its loan portfolio, including problem
loans, to determine whether any loans require classification or the
establishment of appropriate reserves or allowances for losses. 
Such evaluation, which includes a review of all loans of which full
collectability of interest and principal may not be reasonably
assured, considers, among other matters, the estimated fair value
of the underlying collateral.  Other factors considered by
management include the size and risk exposure of each segment of
the loan portfolio, present indicators such as delinquency rates
and the borrower's current financial condition, and current
economic conditions that may affect the borrower's ability to pay. 
Management calculates the general  allowance for loan losses in
part based on past experience, and in part based on specified
percentages of loan balances.  While both general and specific loss
allowances are charged against earnings, general loan loss
allowances are added back to capital, subject to a limitation of
1.25% of risk-based assets, in computing risk-based capital under
OTS regulations.

    During the fiscal years ended July 31, 1996, 1995 and 1994, the
Company added $772,000 million, $3.4 million, and $2.0 million,
respectively, to the allowance for loan losses.  The Company's
allowance for loan losses totalled $4.4 million, $6.4 million and
$3.7 million, at July 31, 1996, 1995 and 1994, respectively.  

    Management believes that the allowances for losses on loans and
investments in real estate are adequate.  While management uses
available information to recognize losses on loans and investments
in real estate, future additions to the allowances may be necessary
based on changes in economic conditions, particularly in Baltimore
City and the state of Maryland.  In addition, various regulatory
agencies, as an integral part of their examination process,
periodically review the Company's allowances for losses on loans
and investments in real estate.  Such agencies may require the
Company to recognize additions to the allowances based on their
judgments about information available to them at the time of their
examination.
PAGE
<PAGE>
    Analysis of the Allowance For Loan Losses.  The following table
sets forth the analysis of the allowance for loan losses for the
periods indicated.

<TABLE>
<CAPTION>
                                                                            Years Ended July 31,
                                              ----------------------------------------------------------------------------
                                                   1996           1995            1994            1993            1992    
                                              ------------    ------------    ------------    ------------    ------------
                                                                             (In Thousands)
<S>                                           <C>             <C>             <C>             <C>             <C>
Total loans outstanding, net                  $    278,042    $    232,089    $    208,542    $    221,595    $    254,665
Average loans outstanding                          254,090         225,633         217,662         241,437         277,049

Allowance balances (at beginning of year)            6,361           3,669           2,326           1,468           1,729
Provision for losses:
    One- to four-family residential                     40             184             368             396              15
    Multi-family residential                           249              49             100           1,543           1,488
    Commercial                                         482           2,589             704           1,473             854
    Construction                                                       528             646             190             300
    Consumer                                             1              36             171               9              22
                                              ------------    ------------    ------------    ------------    ------------
        Total provision for losses                     772           3,386           1,989           3,611           2,679

Charge-offs:
    One- to four-family residential                   (157)           (178)             (8)           (406)            (28)
    Multi-family residential                          (391)            (54)           (202)           (965)         (2,146)
    Commercial                                      (2,492)           (517)                         (1,083)           (752)
    Construction                                                      (279)           (380)           (460)               
    Consumer                                            (3)             (5)            (98)            (11)            (14)
                                              ------------    ------------    ------------    ------------    ------------
        Total charge-offs                           (3,043)         (1,033)           (688)         (2,925)         (2,940)

Recoveries                                             322             339              42             172                
                                              ------------    ------------    ------------    ------------    ------------
    Allowance balance (at end of year)          $    4,412      $    6,361      $    3,669    $      2,326      $    1,468
                                              ------------    ------------    ------------    ------------    ------------
                                              ------------    ------------    ------------    ------------    ------------

Allowance for loan losses as a percent
  of net loans receivable at end of period            1.59%           2.74%           1.76%           1.05%            .58%
Net loans charged off as a percent
  of average loans outstanding                        1.07%            .31%            .30%           1.14%           1.06%
Ratio of allowance for loan losses
  to total nonperforming loans
  at end of period                                  112.87%          73.90%         101.41%          30.42%          15.06%
Ratio of allowance for loan losses
  to nonperforming loans and REO
  at end of period                                   94.37%          66.98%          85.70%          26.04%          12.07%
</TABLE>

    Allocation of Allowance for Loan Losses.  The following table
sets forth the allocation of allowance for loan losses by loan
category for the years indicated.

<TABLE>
<CAPTION>
                                                                            At July 31,              
                                           ----------------------------------------------------------------------------
                                                     1996                      1995                   1994    
                                           -------------------------  ---------------------  --------------------------
                                                          % of                    % of                      % of
                                            Amount    Total Loans(1)  Amount  Total Loans(1)  Amount    Total Loans(1)
                                           --------   --------------  ------  -------------- --------   ---------------
                                                                   (Dollars in Thousands)
<S>                                        <C>            <C>         <C>          <C>         <C>         <C>
Balance at end of year
  applicable to:
    One- to four-family residential        $    523        56.5%      $  530        55.4%      $  509        52.9%
    Multi-family residential                  1,128        12.0        1,265        16.1          970        18.0
    Commercial                                2,042        12.6        3,892        15.9        1,796        19.4
    Construction (2)                            586        12.6          547         6.7          298         4.6
    Consumer                                    133         5.8          127         5.3           96         4.5
    Accrued interest receivable                   -          .5                       .6                       .6
                                           --------       ------      ------       -----       ------       -----
        Total allowance for
          loan losses                      $  4,412       100.0%      $6,361       100.0%      $3,669       100.0%
                                           --------       ------      ------       -----       ------       -----
                                           --------       ------      ------       -----       ------       -----
<FN>
____________________________________
(1)    Represents the percent of the Company's total loan portfolio that is composed of loans in each specific loan category.
(2)    Includes land development loans.
</TABLE>
<PAGE>


Investment Activities

    General.  To supplement local mortgage loan originations where
available funds exceed mortgage loan demand, the Company maintains
a substantial portfolio of liquid investments with low credit risk. 
These investments, however, are subject to interest rate risk. 
These investments are composed primarily of mortgage-backed
securities and United States Government and agency obligations.  At
July 31, 1996, mortgage-backed securities totalled $133.5 million,
or 28.9%, of the Company's total assets, and United States
Government or an agency or sponsored corporation of the United
States Government totalled $31.1 million, or 6.7%, of the Company's
total assets.  By investing in these types of assets, the Company's
strategy has been to reduce significantly the credit risk of its
asset base in exchange for lower yields than would typically be
available on real estate loans.  The Company's mortgage-backed
securities represent interests in, or are collateralized by, pools
of mortgage loans originated by private lenders that have been
grouped by various governmental, government-related, or private
organizations.  The Company manages its interest rate risk, in
part, by maintaining a substantial amount of adjustable-rate
mortgage-backed securities in its investment portfolio.  At July
31, 1996, $97.4 million, or 73.0%, of the Company's $133.5 million
of mortgage-backed securities had adjustable interest rates ("ARM
Securities").

    In addition, the Bank is required under federal regulations to
maintain a minimum amount of liquid assets that may be invested in
specified short-term securities and certain other investments.  The
Bank has generally maintained a portfolio of liquid assets that
exceeds regulatory requirements.

    The Bank's Loan/Investment Committee meets on a regular basis
to decide whether any alterations need to be made in the investment
portfolio, based on market levels and conditions, current economic
data, political and regulatory information, and the Bank's internal
needs.  Based on the parameters of the investment policy, the Bank
tries to diversify its holdings through the purchase of short- and
medium-term and fixed- and variable-rate instruments, which provide
both an adequate return as well as some insulation from interest
rate risk.  All investment decisions are made by the Committee
after analysis and market price cross-checks have been completed.

    Effective February 1992, the OTS adopted Thrift Bulletin 52
("TB 52").  Among other things, TB 52 sets forth certain guidelines
with respect to depository institutions' investment in certain
"high risk mortgage securities."  "High-risk mortgage securities"
are defined as any mortgage derivative product that at the time of
purchase, or at any subsequent date, meets any of three tests that
are set forth in TB 52.  High-risk mortgage securities may be
purchased only in limited circumstances, and if held in a
portfolio, may be reported as trading assets at market value,
available-for-sale assets at the lower of cost or market value, or
as held to maturity at cost.  In certain circumstances, OTS
examiners may seek the orderly divestiture of high-risk mortgage
securities.  Prior to purchasing a mortgage derivative security the
Loan/Investment Committee obtains an analysis of whether the
mortgage security meets any one of the three TB 52 tests, and falls
into the category of "high-risk mortgage security."  The Committee
thereafter presents such analysis to the Board.  The Bank documents
no less frequently than annually whether a change in the
characteristics of any mortgage derivative security in its
portfolio causes such security to become a "high-risk mortgage
security."  As of July 31, 1996, the Bank did not hold any "high-
risk mortgage securities" in its portfolio.

    Mortgage-Backed Securities.  The Company's mortgage-backed
securities include pass-through securities and CMOs.  Pass-through
securities provide the Company with payments consisting of both
principal and interest as mortgages in the underlying mortgage pool
are paid off by the borrowers.  The average maturity of pass-
through mortgage-backed securities varies with the maturities of
the underlying mortgage instruments and with the occurrence of
unscheduled prepayments of those mortgage instruments.  Mortgage-
backed securities also include $72.0 million of CMOs, which are
debt obligations collateralized by the cash flows from mortgage
loans or pools of mortgage loans.
PAGE
<PAGE>
    Mortgage-backed securities may be classified into the following
principal categories, according to the issuer or guarantor:

        (i)    Securities that are backed by the full faith and
credit of the United States Government.  Ginnie Mae ("GNMA"), the
principal United States Government guarantor of such securities, is
a wholly owned United States Government corporation within HUD. 
GNMA is authorized to guarantee, with the full faith and credit of
the United States, the timely payment of principal and interest,
but not of market value, on securities issued by approved
institutions and backed by pools of FHA-insured or VA-guaranteed
mortgages.  At July 31, 1996, $3.7 million, or 2.8%, of the
Company's mortgage-backed securities consisted of such securities.

        (ii)    Securities that are issued by a government
sponsored agency but that are not backed by the full faith and
credit of the United States Government.  The primary issuers of
these securities include Fannie Mae ("FNMA") and Freddie Mac
("FHLMC").  FNMA is a United States Government-sponsored
corporation owned entirely by private stockholders.  Pass-through
securities issued by FNMA are guaranteed as to timely payment of
principal and interest by FNMA.  FHLMC issues securities
representing interests in residential mortgage loans that it pools. 
FHLMC is a United States Government-sponsored corporation that
guarantees the timely payment of interest and ultimate collection
of principal, and its stock is publicly traded.  At July 31, 1996,
$129.7 million, or 97.2% of the Company's mortgage-backed
securities, consisted of such securities.

        (iii)    Securities that represent interests in, or are
collateralized by, pools consisting principally of residential
mortgage loans created by non-governmental issuers.  These
securities generally offer a higher rate of interest than the other
two types of mortgage-backed securities because there are no direct
government guarantees of payment as in the former securities,
although certain credit enhancements may exist. Securities issued
by certain private organizations may not be readily marketable. 
Private mortgage-backed securities purchased by the Company must be
rated in one of the two highest rating categories by at least one
nationally recognized statistical rating organization.  At July 31,
1996, $52,000 of the Company's mortgage-backed securities,
consisted of such securities.

    The Company's mortgage-backed securities include both fixed-
rate and ARM Securities.  Unlike fixed-rate mortgage-backed
securities, ARM Securities have periodic adjustments in the coupons
on the underlying mortgages.  Management believes that the
adjustable rate feature of the mortgages underlying the ARM
Securities generally will help to reduce sharp changes in the value
of the ARM Security in response to normal interest rate
fluctuations.  As the interest rates on the mortgages underlying
the ARM Securities are reset periodically (generally one to twelve
months but as long as five years), the yields of such securities
will gradually align themselves to reflect changes in the market
rates so that the market value of such securities will remain
relatively constant as compared to fixed-rate instruments. 
Management believes that this, in turn, should cause the value of
an ARM Security to fluctuate less than fixed-rate mortgage-backed
securities.

    If the Company purchases mortgage-backed securities at a
premium, mortgage foreclosures and unscheduled  principal
prepayments may result in some loss of the principal investment to
the extent of the premium paid.  On the other hand, if mortgage-
backed securities are purchased at a discount, both a scheduled
payment of principal and an unscheduled repayment of principal will
increase current and total returns.
PAGE
<PAGE>
    CMOs are securities created by segregating or partitioning cash
flows from mortgage pass-through securities or from pools of
mortgage loans.  CMOs provide a broad range of mortgage investment
vehicles by tailoring cash flows from mortgages to meet the varied
risk and return preferences of investors.  These securities enable
the issuer to "carve up" the cash flow from the underlying
securities and thereby create multiple classes of securities with
different maturity and risk characteristics.  Each class has a
specified maturity or final distribution date.  In one structure,
payments of principal, including any principal prepayments, on the
collateral are applied to the classes in the order of their
respective stated maturities or final distribution dates, so that
no payment of principal will be made on any class until all classes
having an earlier stated maturity or final distribution date have
been paid in full.  In other structures, certain classes may pay
concurrently, or one or more classes may have a priority with
respect to payments on the underlying collateral up to a specified
amount.  The Company has not and will not invest in any class with
residual characteristics.  Additionally, the Company will not
invest in any subordinated class that is not rated in one of the
two highest rating categories by at least one nationally recognized
statistical rating organization.
<PAGE>
    Mortgage-Backed Securities Portfolio.  Set forth below are selected 
data relating to the composition of the Company's mortgage-backed securities
portfolio as of the dates indicated.

<TABLE>
<CAPTION>
                                                                                       At July 31,
                                    -----------------------------------------------------------------------------------------------
                                           1996               1995               1994                1993                1992
                                    -----------------  -----------------  ------------------  ------------------  -----------------
                                     Amount   Percent   Amount   Percent   Amount    Percent   Amount    Percent   Amount   Percent
                                    --------  -------  --------  -------  --------   -------  --------   -------  --------  -------
                                                                                   (Dollars in Thousands)
<S>                                 <C>       <C>      <C>       <C>      <C>        <C>      <C>        <C>      <C>       <C>
Pass-through certificates:
  Adjustable                        $ 25,494   19.1%   $ 11,934    7.5%   $ 10,863     6.8%   $ 13,834     11.5%  $  1,366     1.4%
  Fixed (1)                           35,345   26.5      88,640    55.4     97,021    60.6      46,372     38.7     83,111    85.5
    Total pass-through certificates   60,839   45.6     100,574    62.9    107,884    67.4      60,206     50.2     84,477    86.9
                                                      
CMOs:                                             
  Adjustable (2)                      71,949   53.9      58,322    36.5     46,342    28.9      29,430     24.6                   
  Fixed                                   52                142      .1      5,156     3.2      29,641     24.7     11,957    12.3
    Total CMOs                        72,001   53.9      58,464    36.6     51,498    32.1      59,071     49.3     11,957    12.3
                                                      
Accrued interest receivable              626    0.5         767      .5        757      .5         538       .5        745      .8
                                                     
  Total mortgage-backed securities  $133,466  100.0%   $159,805   100.0%  $160,139   100.0%   $119,815    100.0%  $ 97,179   100.0%
<FN>
___________________________________ __
(1)    Includes mortgage-backed securities available for sale of $25.0 million, $6.0 million, and $17.9 million, at July 31, 
1996, 1994 and 1993, respectively. 
(2)    Includes CMOs available for sale of $8.1 million, $3.0 million and $36.3 million at July 31, 1996, 1995 and 1994, 
respectively.
</TABLE>
PAGE
<PAGE>
    Investment Securities.  The following table sets forth the
carrying value of the Company's investment securities portfolio,
interest-earning deposits in other institutions, federal funds
sold, securities purchased under agreements to resell, and FHLB
stock, at the dates indicated.  At July 31, 1996, the market value
of the Company's investment securities, and interest-earning
deposits in other institutions, federal funds sold, and FHLB stock
was approximately $36.4 million.


<TABLE>
<CAPTION>
                                                               At July 31,        
                                                    --------------------------------
                                                      1996        1995        1994   
                                                    --------    --------    --------
                                                             (In Thousands)
<S>                                                 <C>         <C>         <C> 
Investment securities:
    U.S. Government and agency obligations (1)      $ 30,489    $ 13,615    $  7,701
    Accrued interest receivable                          615         303         181
                                                    --------    --------    --------
        Total investment securities                   31,104      13,918       7,882
                                                                                                  
      
Interest-earning deposits in other institutions        1,837       2,240       2,360
Federal funds sold                                       394         950       1,343
Federal Home Loan Bank stock                           3,141       2,914       2,914
                                                    --------    --------    --------
        Total investments                           $ 36,476    $ 20,022    $ 14,499
                                                    --------    --------    --------
                                                    --------    --------    --------
<FN>    
________________________________
(1)    Includes securities available for sale of $6.8 million and $1.0 million at July 31, 1996 and
1994, respectively.
</TABLE>


    Investment Portfolio Maturities.  The following table sets
forth the carrying values, annualized weighted average yield, and
market values for the Company's investment securities at July 31,
1996.

<TABLE>
<CAPTION>
                                                                        At July 31, 1996
                   -----------------------------------------------------------------------------------------------------------
                         One Year           One to              Five to            More than
                         Or Less          Five Years           Ten Years           Ten Years       Total Investment Securities
                   -----------------------------------------------------------------------------------------------------------
                   Carrying   Average  Carrying  Average   Carrying  Average   Carrying  Average   Carrying  Market   Average
                    Value    Yield(1)   Value    Yield(1)   Value    Yield(1)   Value    Yield(1)    Value    Value   Yield(1)
                   --------  --------  --------  --------  --------  --------  --------  --------  --------  -------  --------
                                            (Dollars in Thousands)
<S>                <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>      <C> 
Investment 
  securities:
U.S. Government 
  agency 
  securities(2)    $               %   $  1,500     3.86%   $ 14,814   7.08%    $14,175    7.80%   $30,489    $30,031   7.26%
Accrued 
 interest 
 receivable            615                                                                             615        615
   Total           $   615         %   $  1,500     3.86%   $ 14,814   7.08%    $14,175    7.80%   $31,104    $30,646   7.26%
<FN>
____________________________________
(1)    Represents annualized weighted average yield.
(2)    Includes securities available for sale.
</TABLE>

<PAGE>
Sources of Funds

    General.  Deposits are the major source of the Company's funds for
lending and other investment purposes.  In addition to deposits, the
Company derives funds from the amortization and prepayment of loans and
mortgage-backed securities, the sale or maturity of investment
securities, operations and advances from the FHLB.  Scheduled loan
principal repayments are a relatively stable source of funds, while
deposit inflows and outflows and loan prepayments are influenced
significantly by general interest rates and market conditions. 
Borrowings may be used on a short-term basis to compensate for
reductions in the availability of funds from other sources or on a
longer term basis for general business purposes.

    Deposits.  Consumer and commercial deposits are attracted
principally from within the Company's market area through the offering
of a broad selection of deposit instruments including checking and NOW
accounts, savings, money market deposit, term certificate accounts and
individual retirement accounts.  The Company accepts deposits of
$100,000 or more and offers negotiated interest rates on such deposits. 
Deposit account terms vary according
PAGE
<PAGE>
to the minimum balance required, the period of time during which the
funds must remain on deposit, and the interest rate, among other
factors.  The maximum rate of interest which the Company must pay is not
established by regulatory authority.  The Company regularly evaluates
its internal cost of funds, surveys rates offered by competing
institutions, reviews the Company's cash flow requirements for lending
and liquidity, and executes rate changes when deemed appropriate.  The
Company has sought to decrease the risk associated with changes in
interest rates by advertising and pricing certificates of deposit to
provide customers with incentives to choose certificates of deposit with
longer terms.  The Company typically does not obtain funds through
brokers, nor does it solicit funds outside its market area.

<PAGE>
    Deposit Portfolio.  Savings and other deposits in the Company as of
July 31, 1996, are composed of the following:


<TABLE>
<CAPTION>
    Weighted                                                          Percentage
   Average                                                 Minimum     of Total
Interest Rate    Minimum Term                               Amount     Balances      Deposits 
-------------    ------------                             ---------  -----------     --------
                                                                    (In Thousands)
<S>              <C>           <C>                        <C>        <C>             <C>

        %           None        Checking/demand deposit    $         $    3,094        0.99%
                                accounts ("DDA")
    1.94            None        NOW Accounts                             11,944        3.81
    2.99            None        Regular Savings               100        30,786        9.83
    2.50            None        Christmas Club Accounts         5           549        0.18
    2.99            None        Super Passbook              1,000         9,446        3.02
    3.06            None        Investment Manager         20,000        15,001        4.79
    2.96            None        Money Market                2,500        26,144        8.35

            Certificates of Deposit

    4.86         3 months       Fixed term, fixed rate        500         8,218        2.62
    4.95         6 months       Fixed term, fixed rate        500        17,617        5.63
    5.14        12 months       Fixed term, fixed rate        500        26,673        8.52
    5.24        12 months       Fixed term, fixed rate     25,000        21,574        6.89
    5.15        13 months       Fixed term, fixed rate        500         3,663        1.17
    5.80        18 months       Fixed term, fixed rate     25,000        13,790        4.40
    5.51        24 months       Fixed term, fixed rate        500        11,265        3.60
    5.69        30 months       Fixed term, fixed rate        500         4,424        1.41
    5.94        30 months       Fixed term, fixed rate     25,000        27,449        8.77
    5.33        36 months       Fixed term, fixed rate        500         4,865        1.55
    5.39        48 months       Fixed term, fixed rate        500         3,248        1.04
    6.30        60 months       Fixed term, fixed rate        500        46,947       15.00
    6.56        84 months       Fixed term, fixed rate        500         9,794        3.13
    6.63       120 months       Fixed term, fixed rate        500        16,592        5.30
                                                                     ----------      ------
                                                                     $  313,083      100.00%
                                                                     ----------      ------
                                                                     ----------      ------
</TABLE>
PAGE
<PAGE>
    The following table sets forth the change in dollar amount of 
savings deposits in the various types of savings accounts offered by the 
Company between the dates indicated.


<TABLE>
<CAPTION>
                                                                                         At July 31,
                               ----------------------------------------------------------------------------------------------------
                                            1996                              1995                               1994
                               --------------------------------  --------------------------------   -------------------------------
                               Balance   Percent(1)   Change(2)  Balance   Percent(1)   Change(2)   Balance   Percent(1)  Change(2)
                               -------   ----------   ---------  -------   ----------   ---------   -------   ----------  ---------
                                                                                   (Dollars in Thousands)
<S>                            <C>         <C>        <C>        <C>       <C>          <C>          <C>        <C>       <C> 
Checking DDA and 
 NOW Accounts (3)              $ 15,038      4.8%     $ 1,047    $  13,991      4.5%    $   (158)    $  14,149     4.6%   $ (1,425)
Super and regular savings        40,781     13.0         (357)      41,138     13.1       (5,392)       46,530    15.1        (512)
Money market and investment                               
    manager (4)                  41,145     13.2       (7,433)      48,578     15.4       (7,989)       56,567    18.3      (6,749)
                                                                     
Time deposits that mature (5):                               
    within 12 months             118,772     37.9       10,546      108,226     34.4       21,098       87,128    28.2       1,358
    within 12-36 months           59,823     19.1       (3,385)      63,208     20.1        1,523       61,685    19.9         214
    beyond 36 months              37,524     12.0       (1,948)      39,472     12.5       (3,458)      42,930    13.9      (1,608)
                                --------    -----     --------     --------   ------     --------    ---------   -----    --------
    Total deposits              $313,083    100.0%     $(1,530)    $314,613    100.0%    $  5,624    $ 308,989   100.0%   $ (8,722)
                                --------    -----     --------     --------   ------     --------    ---------   -----    --------
                                --------    -----     --------     --------   ------     --------    ---------   -----    --------
<FN>
____________________________________
(1)    Represents percentage of total deposits.
(2)    Represents increase (decrease) in balance from end of prior year.
(3)    Includes Super NOW with a minimum average balance requirement of $2,500.
(4)    Money market accounts require a minimum average balance of $2,000 and the investment manager accounts require a minimum 
average balance of $20,000.
(5)    Individual Retirement Accounts ("IRAs") are included in the respective certificate balances.  IRAs totaled $43.0 million, 
$43.1 million, and $43.9 million, as of July 31, 1996, 1995 and 1994, respectively.
</TABLE>
<PAGE>
<PAGE>
    The following table sets forth the certificates of deposit in the
Company classified by rates as of the dates indicated:

<TABLE>
<CAPTION>
                                  At July 31,
                       --------------------------------
                         1996        1995         1994     
                       --------    --------    --------
                                (In Thousands)
<S>                    <C>         <C>         <C>

 3.01- 4.00%           $    459    $  4,541    $ 49,044
 4.01- 6.00%            134,910      81,782      81,291
 6.01- 8.00%             80,716     121,866      52,050
 8.01-10.00%                 34       2,717       9,358
                       --------    --------    --------
                       $216,119    $210,906    $191,743                
               --------    --------    --------
                       --------    --------    --------
</TABLE>
 

    The following table sets forth the amount and maturities of
certificates of deposit at July 31, 1996.

<TABLE>
<CAPTION>
                                  Amount Due    
                ------------------------------------------------
               Less Than     1-2       2-3     After
                One Year    Years     Years   3 Years   Total
                ----------   -----     -----   -------  --------
    Rate                          (In Thousands)
<S>             <C>        <C>       <C>      <C>      <C>
 3.01- 4.00%      $   127   $    92   $     1  $   239  $    459
 4.01- 6.00%       89,391    21,567    11,364   12,588   134,910
 6.01- 8.00%       29,224    19,608     7,187   24,697    80,716
 8.01-10.00%           30         4                           34
                 $118,772   $41,271   $18,552  $37,524  $216,119
</TABLE>


<PAGE>
    The following table indicates the amount of the Company's negotiable
certificates of deposit of $100,000 or more by time remaining until
maturity as of July 31, 1996.

<TABLE>
<CAPTION>
                                                 Certificates
       Maturity Period                            of Deposit
                                                 ------------
                      (In Thousands)

<S>                                              <C>
    Three months or less                            $5,069
    Over three months through six months             3,344
    Over six months through twelve months            5,203
    Over twelve months                               8,803
         Total                                     $22,419
</TABLE>

    The following table sets forth the activity in the savings deposits
of the Company for the years indicated:

<TABLE>
<CAPTION>
                                   Years Ended July 31,     
                           ------------------------------------
                             1996          1995          1994
                           --------       -------      --------
                                      (In Thousands)
<S>                       <C>            <C>          <C>

Net withdrawals            $(17,355)      $(9,299)     $(22,649)
Interest credited            15,825        14,923        13,927
                           --------       -------      --------
  Net increase (decrease) 
   in savings deposits     $ (1,530)      $ 5,624      $ (8,722)
                           --------       -------      --------
                           --------       -------      --------
</TABLE>                                                        <PAGE> 
         
<PAGE>
Borrowings

    Deposits are the Company's primary source of funds.  The Company,
through its subsidiary, the Bank, also obtains funds from the FHLB and
through reverse repurchase agreements.  FHLB advances are collateralized
by selected assets of the Company.  Such advances are made pursuant to
several different credit programs, each of which has its own interest
rate and range of maturities.  The maximum amount that the FHLB will
advance to member institutions, including the Bank, for purposes other
than meeting withdrawals, fluctuates from time to time in accordance
with the policies of the OTS and the FHLB.  As of July 31, 1996, the
Company had a $95 million line of credit with the FHLB, and FHLB
advances of $62.8 million.  The maximum amount of FHLB advances to a
member institution generally is reduced by borrowings from any other
source.  See "Regulation and Supervision Federal Home Loan Bank System."

    The Company sells securities under agreements to repurchase with
selected dealers (reverse repurchase agreements) as a means of obtaining
short-term funds as market conditions permit.  In a reverse repurchase
agreement, the Company sells a fixed dollar amount of securities to a
dealer under an agreement to repurchase the securities at a specific
price within a specific period of time, typically not more than 180
days.  Reverse repurchase agreements are treated as financings of the
Company and the obligations to repurchase securities sold are reflected
as a liability of the Company.  The dollar amount of securities
underlying the agreements remain an asset of the Company.  There were
$34.4 million in securities sold under agreements to repurchase at July
31, 1996.

    The following table sets forth certain information regarding
borrowings by the Company during the periods indicated.

<TABLE>
<CAPTION>
                                      Years Ended July 31,     
                                -------------------------------
                                 1996        1995        1994
                                -------     -------    --------
                                     (Dollars in Thousands)
<S>                             <C>         <C>       <C>
Weighted average rate paid on:
  Securities sold under 
   agreements to repurchase       5.71%       5.77%      3.45%
    FHLB advances                 5.87        6.06       6.35
                                                                 
Agreements to repurchase:                                
    Maximum balance             $39,011     $34,338    $14,808
    Average balance              34,005      20,741      9,307
FHLB advances:                                             
    Maximum balance              62,824      60,229     50,730
    Average balance              46,851      50,182     31,403
</TABLE>


Subsidiaries' Activities

    The Company has four indirect subsidiaries that are wholly-owned by
the Bank, National Development Corporation ("NDC"), American National
Insurance Agency, Inc. ("ANIA") and Liberty Street, Inc. ("LSI"), which
are Maryland corporations, and ANSB Corporation ("ANSB"), which is a
Delaware corporation.  ANIA acts as agent in offering annuity and
mortgage life insurance products and mutual funds to customers of the
Company.  ANIA does not underwrite insurance.  NDC was formed in May
1983 primarily to acquire and develop land, through joint ventures with
others, for the construction of single-family residences in the
Company's market area.  ANSB was incorporated in June 1994 for the
purpose of holding investment securities for the Company. LSI was
incorporated in May 1996 for the purpose of acquiring selected real
estate at foreclosure for the Company.  At July 31, 1996, the Company
had a $23.3 million equity investment in ANSB, a $457,000 equity loss in
NDC, a $42,000 equity investment in ANIA, a $73,000 equity investment in
LSI,  and loans of $1.3 million to NDC, $780,000 to NDC's joint venture
Quarterfield Development Partnership ("QDP"), and no loans to ANIA or
ANSB.  
PAGE
<PAGE>
For the year ended July 31, 1996, NDC had a net loss of $196,000, ANIA
had a net loss of $2,000, ANSB had net income of $2.2 million, and LSI
had a net loss of $1,000.

    NDC has been winding down its operations, and as of July 31, 1996,
it was participating in one joint venture, QDP, which was formed in
January 1989 to purchase raw land in Anne Arundel County, Maryland.  QDP
has developed 136 building lots to sell to builders or to construct
single family residences for sale to individuals, and as of July 31,
1996, had 10 lots, of which 5 were under contract.  NDC provided QDP
with $1.3 million in equity, and the Company provided a $6.0 million
loan, and a $2.5 million line of credit.  As of July 31, 1996, QDP paid
off the original $6.0 million loan.   QDP also owed the Company $701,000
under the $2.5 million line of credit.  The line of credit was extended
and expires on December 31, 1996, unless extended by the Company.  The
amount outstanding under the line of credit fluctuates regularly, and
has been as high as $1.6 million and as low as $700,000 during the
fiscal year ended July 31, 1996. 

Competition

    As of June 30, 1994, 27 commercial banks, 69 credit unions, and 59
savings institutions maintained 568 branch offices in the Company's
market area.  The Company encounters strong competition both in
attracting deposits and in originating real estate and other loans.  Its
most direct competition for deposits has historically come from
commercial and savings banks, other savings associations, and credit
unions in its market area.   The Company expects continued strong
competition from such financial institutions in the foreseeable future,
including increased competition from "super-regional" banks entering the
market by purchasing large banks and savings banks, as well as
institutions marketing "non-traditional" investments.  Many of these
regional institutions have greater financial and marketing resources
available to them than does the Company.  As of June 30, 1994, the
Company held approximately 1.4% of all deposits held by commercial
banks, credit unions, and savings associations in the Company's market
area.  The Company competes for savings deposits by offering depositors
a high level of personal service and a wide range of competitively
priced financial services.

    The competition for real estate and other loans comes principally
from commercial banks, other savings institutions, and mortgage banking
companies.  The Company is one of a large number of institutions that
compete for real estate loans in the Company's market area.  This
competition for loans has increased substantially in recent years.  Many
of the Company's competitors have substantially greater financial and
marketing resources available to them than does the Company.  The
Company competes for real estate loans primarily through the interest
rates and loan fees it charges and advertising.    


                      REGULATION AND SUPERVISION

General

    The Bank is subject to extensive regulation, examination and
supervision by the OTS, and the FDIC as the deposit insurer.  The Bank
is a member of the FHLB System and its deposit accounts are insured up
to applicable limits by the SAIF, which is managed by the FDIC.  The
Bank must file reports with the OTS and the FDIC concerning its
activities and financial condition in addition to obtaining regulatory
approvals prior to entering into certain transactions such as mergers
with, or acquisitions of, other financial institutions.  There are
periodic examinations by the OTS and the FDIC to test the Bank's
compliance with various regulatory requirements.  This regulation and
supervision establishes a comprehensive framework of activities in which
an institution can engage and is intended primarily for the protection
of the insurance fund and depositors.  The regulatory structure also
gives the regulatory authorities extensive discretion in connection with
their supervisory and enforcement activities and examination policies,
including policies with respect to the classification of assets and the
establishment of adequate loan loss reserves for regulatory purposes. 
Any change in such policies, whether by the OTS, the FDIC or Congress,
could have a material adverse impact on the Company, the Bank and their
operations.  The Company, as a savings and loan holding company, is also
required to file certain reports with, and otherwise comply with the
rules and regulations of the OTS.  Certain of the regulatory
requirements applicable to the Bank and to the Company are referred to
below or elsewhere herein.
PAGE
<PAGE>
Federal Regulation of Savings Institutions

    Business Activities.  The activities of savings institutions are
governed by the Home Owners' Loan Act, as amended (the "HOLA") and, in
certain respects, the Federal Deposit Insurance Act (the "FDI Act"). 
The federal banking statutes, as amended by the Financial Institutions
Reform, Recovery and Enforcement Act of 1989 ("FIRREA") and the Federal
Deposit Insurance Corporation Improvement Act ("FDICIA") (i) restrict
the solicitation of brokered deposits by savings institutions that are
troubled or not well-capitalized, (ii) prohibit the acquisition of any
corporate debt security that is not rated in one of the four highest
rating categories, (iii) restrict the aggregate amount of loans secured
by non-residential real estate property to 400% of capital, (iv) permit
savings and loan holding companies to acquire up to 5% of the voting
shares of non-subsidiary savings institutions or savings and loan
holding companies without prior approval, and (v) permit bank holding
companies to acquire healthy savings institutions.

    Loans to One Borrower.  Under the HOLA, savings institutions are
generally subject to the national bank limits on loans to one borrower. 
Generally, savings institutions may not make a loan or extend credit to
a single or related group of borrowers in excess of 15% of the Bank's
unimpaired capital and surplus.  An additional amount may be lent, equal
to 10% of unimpaired capital and surplus, if such loan is secured by
readily marketable collateral, which is defined to include certain
securities and bullion, but generally does not include real estate.  At
July 31, 1996, the Bank is in compliance with its loans to one borrower
limitations.  See "Business of the Bank Lending Activities Loans to One
Borrower."

    Qualified Thrift Lender Test.  The HOLA requires savings
institutions to meet a qualified thrift lender ("QTL") test.  Under the
QTL test, a savings association is required to maintain at least 65% of
its "portfolio assets" (total assets less (i) specified liquid assets up
to 20% of total assets, (ii) intangibles, including goodwill, and
(iii) the value of property used to conduct business) in certain
"qualified thrift investments," primarily residential mortgages and
related investments, including certain mortgage-backed and related
securities on a monthly basis in 9 out of every 12 months.  A savings
association that fails the QTL test must either convert to a bank
charter or operate under certain restrictions.  As of July 31, 1996, the
Bank maintained 86.1% of its portfolio assets in qualified thrift
investments and, therefore, met the QTL test.

    Limitation on Capital Distributions.  OTS regulations impose
limitations upon all capital distributions by savings institutions, such
as cash dividends, payments to repurchase or otherwise acquire its
shares, payments to stockholders of another institution in a cash-out
merger and other distributions charged against capital.  The rule
establishes three tiers of institutions, which are based primarily on an
institution's capital level.  An institution that exceeds all fully
phased-in capital requirements before and after a proposed capital
distribution ("Tier 1 Association") and has not been advised by the OTS
that it is in need of more than normal supervision, could, after prior
notice but without the approval of the OTS, make capital distributions
during a calendar year equal to the greater of: (i) 100% of its net
earnings to date during the calendar year plus the amount that would
reduce by one-half its "surplus capital ratio" (the excess capital over
its fully phased-in capital requirements) at the beginning of the
calendar year; or (ii) 75% of its net earnings for the previous four
quarters; provided that the institution would not be undercapitalized,
as that term is defined in the OTS Prompt Corrective Action regulations,
following the capital distribution.  As of July 31, 1996, the Bank had
$9.0 million of capital that could be paid as dividends under such
regulations.  Any additional capital distributions would require prior
regulatory approval.  In the event the Bank's capital fell below its
fully-phased in requirement or the OTS notified it that it was in need
of more than normal supervision, the Bank's ability to make capital
distributions could be restricted.  In addition, the OTS could prohibit
a proposed capital distribution by any institution, which would
otherwise be permitted by the regulation, if the OTS determines that
such distribution would constitute an unsafe or unsound practice.

    Liquidity.  The Bank is required to maintain an average daily
balance of liquid assets (cash, certain time deposits, bankers'
acceptances, specified U.S. Government, state or federal agency
obligations, shares of certain mutual funds and certain corporate debt
securities and commercial paper) equal to a monthly average of not less
than a specified percentage of its net withdrawable deposit accounts
plus short-term borrowings.  This liquidity requirement which is
currently 5%, may be changed from time to time by the OTS to any amount
within the range of 4% to 10% depending upon economic conditions and the
savings flow of member institutions.  The Bank's 
PAGE
<PAGE>
liquidity ratio averaged 7.7% during the month of July 1996.  OTS
regulations also require each savings institution to maintain an average
daily balance of short-term liquid assets at a specified percentage
(currently 1%) of the total of its net withdrawable deposit accounts and
borrowings payable in one year or less.  Monetary penalties may be
imposed for failure to meet these liquidity requirements.  During the
month of July 1996, the Bank's short-term liquidity ratio averaged 1.6%. 
The Bank has never been subject to monetary penalties for failure to
meet its liquidity requirements.  

    Assessments.  Savings institutions are required by OTS regulation to
pay assessments to the OTS to fund the operations of the OTS.  The
general assessment, paid on a quarterly basis, is computed upon the
savings institution's total assets, including consolidated subsidiaries,
as reported in the institution's latest quarterly thrift financial
report.  The Bank paid assessments of $772,000, $809,000, and $831,000
for the fiscal years ended July 31, 1996, 1995 and 1994, respectively.

    Community Reinvestment.  Under the Community Reinvestment Act (the
"CRA"), as implemented by OTS regulations, a savings institution has a
continuing and affirmative obligation, consistent with its safe and
sound operation, to help meet the credit needs of its entire community,
including low and moderate income neighborhoods.  The CRA does not
establish specific lending requirements or programs for financial
institutions, nor does it limit an institution's discretion to develop
the types of products and services that it believes are best suited to
its particular community, consistent with the CRA.  The CRA requires the
OTS, in connection with its examination of a savings institution, to
assess the institution's record of meeting the credit needs of its
community and to take such record into account in its evaluation of
certain applications by such institution.  The CRA rating system
identifies four levels of performance that may describe an institution's
record of meeting community needs:  outstanding, satisfactory, needs to
improve and substantial non-compliance.  The CRA also requires all
institutions to make public disclosure of their CRA ratings.  The CRA
regulations were recently revised.  Effective July 1, 1995, the OTS
assesses the CRA performance of a savings institution under lending,
service and investment tests, and based on such assessment, assigns an
institution in one of the four above-referenced ratings.  The Bank
received an "Outstanding" CRA rating under the current CRA regulations
in its most recent federal examination by the OTS.  

    Transactions with Related Parties.  The Bank's authority to engage
in transactions with related parties or "affiliates" (i.e., any company
that controls or is under common control with an institution, including
the Company and its non-savings institution subsidiaries) or to make
loans to certain insiders, is limited by Sections 23A and 23B of the
Federal Reserve Act ("FRA").  Section 23A limits the aggregate amount of
transactions with any individual affiliate to 10% of the capital and
surplus of the savings institution and also limits the aggregate amount
of transactions with all affiliates to 20% of the savings institution's
capital and surplus.  Certain transactions with affiliates are required
to be secured by collateral in an amount and of a type described in
Section 23A and the purchase of low quality assets from affiliates is
generally prohibited.  Section 23B provides that certain transactions
with affiliates, including loans and asset purchases, must be on terms
and under circumstances, including credit standards, that are
substantially the same or at least as favorable to the institution as
those prevailing at the time for comparable transactions with non-
affiliated companies.  In addition, savings institutions are prohibited
from lending to any affiliate that is engaged in activities that are not
permissible for bank holding companies and no savings institution may
purchase the securities of any affiliate other than a subsidiary.  At
July 31, 1996, the Bank was in compliance with the transactions with
affiliates rules governed by Sections 23A and 23B.

    The Bank's authority to extend credit to executive officers,
directors and 10% stockholders, as well as entities controlled by such
persons, is currently governed by Sections 22(g) and 22(h) of the FRA,
and Regulation O thereunder.  Among other things, these regulations
require such loans to be made on terms substantially the same as those
offered to unaffiliated individuals and do not involve more than the
normal risk of repayment.  Regulation O also places individual and
aggregate limits on the amount of loans the Bank may make to such
persons based, in part, on the Bank's capital position, and requires
certain approval procedures to be followed.

    Enforcement.  Under the FDI Act, the OTS has primary enforcement
responsibility over savings institutions and has the authority to bring
enforcement action against all "institution-related parties," including
stockholders, and any attorneys, appraisers and accountants who
knowingly or recklessly participate in wrongful action likely to 
PAGE
<PAGE>
have an adverse effect on an insured institution.  Formal enforcement
action may range from the issuance of a capital directive or cease and
desist order to removal of officers and/or directors of the
institutions, receivership, conservatorship or the termination of
deposit insurance.  Civil penalties cover a wide range of violations and
actions, and range up to $25,000 per day, unless a finding of reckless
disregard is made, in which case penalties may be as high as $1 million
per day.  Criminal penalties for most financial institution crimes
include fines of up to $1 million and imprisonment for up to 30 years. 
Under the FDI Act, the FDIC has the authority to recommend to the
Director of OTS that enforcement action be taken with respect to a
particular savings institution.  If action is not taken by the Director,
the FDIC has authority to take such action under certain circumstances.

    The federal banking agencies have adopted a regulation and
Interagency Guidelines Prescribing Standards for Safety and Soundness
("Guidelines") to implement the safety and soundness standards required
under the FDI Act.  The Guidelines set forth the safety and soundness
standards that the federal banking agencies use to identify and address
problems at insured depository institutions before capital becomes
impaired.  The standards set forth in the Guidelines address internal
controls and information systems; internal audit system; credit
underwriting; loan documentation; interest rate risk exposure; asset
growth; and compensation, fees and benefits.  The agencies also adopted
a proposed rule which proposes asset quality and earnings standards
which, if adopted, would be added to the Guidelines.  If the appropriate
federal banking agency determines that an institution fails to meet any
standard prescribed by the Guidelines, the agency may require the
institution to submit to the agency an acceptable plan to achieve
compliance with the standard, as required by the FDI Act.  The final
regulations establish deadlines for the submission and review of such
safety and soundness compliance plans.

    Capital Requirements.  The OTS capital regulations require savings
institutions to meet three capital standards: a 1.5% tangible capital
standard, a 3.0% leverage ratio (or core capital ratio) and an 8.0%
risk-based capital standard.  Core capital is defined as common
stockholders' equity (including retained earnings), certain non-
cumulative perpetual preferred stock and related surplus, minority
interests in equity accounts of consolidated subsidiaries less
intangibles other than certain qualifying supervisory goodwill and
certain purchased mortgage servicing rights ("PMSRs").  The OTS
regulations also require that, in meeting the tangible ratio, leverage
and risk-based capital standards, institutions must deduct investments
in and loans to subsidiaries engaged in activities not permissible for
a national bank.  The activities of NDC are not permissible for national
banks, and, accordingly, the Bank's investment in and extensions of
credit to NDC must be excluded from regulatory capital.  See "Business
of the Bank Subsidiaries' Activities."

    The risk-based capital standard for savings institutions requires
the maintenance of Tier 2 (core) and total capital (which is defined as
core capital and supplementary capital) to risk weighted assets of 4.0%
and 8.0%, respectively.  In determining the amount of risk-weighted
assets, all assets, including certain off-balance sheet assets, are
multiplied by a risk-weight of 0% to 100%, as assigned by the OTS
capital regulation based on the risks the OTS believes are inherent in
the type of asset.  The components of Tier 1 (core) capital are
equivalent to those discussed earlier under the 3.0% leverage ratio
standard.  The components of supplementary capital currently include
cumulative preferred stock, long-term perpetual preferred stock,
mandatory convertible securities, subordinated debt and intermediate
preferred stock and allowance for loan and lease losses.  Allowance for
loan and lease losses includable in supplementary capital is limited to
a maximum of 1.25%.  Overall, the amount of supplementary capital
included as part of total capital cannot exceed 100% of core capital.

    The OTS regulatory capital rule also incorporates an interest rate
risk component.  Savings associations with "above normal" interest rate
risk exposure are subject to a deduction from total capital for purposes
of calculating their risk-based capital requirements.  A savings
association's interest rate risk is measured by the decline in the net
portfolio value of its assets (i.e., the difference between incoming and
outgoing discounted cash flows from assets, liabilities and off-balance
sheet contracts) that would result from a hypothetical 200-basis point
increase or decrease in market interest rates, divided by the estimated
economic value of the association's assets.  In calculating its total
capital under the risk-based rule, a savings association whose measured
interest rate risk exposure exceeds 2%, must deduct an interest rate
component equal to one-half of the difference between the institution's
measured interest rate risk and 2%, multiplied by the estimated economic
value of the institution's assets.  The OTS has deferred for the present
time, the date on which the interest rate component is to be deducted
from total capital.  A savings association with assets of less than
$300 million and risk-based capital ratios in excess of 12% is not
subject to the interest rate risk component, unless the OTS determines
otherwise.  The rule also provides that the Director of the OTS may
waive or defer an institution's interest rate risk component on a case-by-
PAGE
<PAGE>
case basis.  The Bank would be required to make a deduction from total
capital for purposes of calculating the Bank's risk-based capital
requirement if such capital reduction were required at July 31, 1996.  

    At July 31, 1996, the Bank exceeded each of the three OTS capital
requirements on a fully phased-in basis.  Set forth below is a summary
of the Bank's compliance with the OTS capital standards as of July 31,
1996.

<TABLE>
<CAPTION>
                                 At July 31, 1996    
                               --------------------
                                        Percent of
                               Amount    Assets (1)
                               ------   -----------
                              (Dollars in Thousands)
<S>                            <C>         <C>
    Tangible capital:
        Capital level          $39,800      8.64%
        Requirement              6,907      1.50
        Excess                 $32,893      7.14%
    Core capital:
          Capital level        $39,800      8.64%
        Requirement (2)         13,813      3.00
        Excess                 $25,987      5.64%
    Risk-based capital:
        Capital level          $41,801     18.20%
        Requirement             18,380      8.00
        Excess                 $23,421     10.20%
<FN>                                
(1)    Tangible and core capital levels are calculated on the basis of
a percentage of total adjusted assets; risk-based capital levels are
calculated on the basis of a percentage of risk-weighted assets.
(2)    The OTS has proposed a core capital requirement for savings
associations comparable to the new requirement for national banks.  The
OTS proposed core capital ratio would be at least 3% of total adjusted
assets for thrifts that receive the highest supervisory rating for
safety and soundness, with a 4% to 5% core capital requirement for all
other thrifts.  
</TABLE>


Prompt Corrective Regulatory Action

    Under the OTS Prompt Corrective Action regulations, the OTS is
required to take certain supervisory actions against undercapitalized
institutions, the severity of which depends upon the institution's
degree of capitalization.  Generally, a savings institution that has
total risk-based capital of less than 8.0% or a leverage ratio or a
Tier 1 core capital ratio that is less than 4.0% is considered to be
undercapitalized.  A savings institution that has a total risk-based
capital ratio of less than 6.0%, a Tier 1 core risk-based capital ratio
of less than 3.0% or a leverage ratio that is less than 3.0% is
considered to be "significantly undercapitalized" and a savings
institution that has a tangible capital to assets ratio equal to or less
than 2.0% is deemed to be "critically undercapitalized."  Subject to a
narrow exception, the banking regulator is required to appoint a
receiver or conservator for an institution that is "critically
undercapitalized."  The regulation also provides that a capital
restoration plan must be filed with the OTS within 45 days of the date
an institution receives notice that it is "undercapitalized,"
"significantly undercapitalized" or "critically undercapitalized."  In
addition, numerous mandatory supervisory actions become immediately
applicable to the institution, including, but not limited to,
restrictions on growth, investment activities, capital distributions,
and affiliate transactions.  The OTS could also take any one of a number
of discretionary supervisory actions, including the issuance of a
capital directive and the replacement of senior executive officers and
directors.

Insurance of Accounts and Regulation by the FDIC

    The Bank is a member of the SAIF, which is administered by the FDIC. 
Deposits are insured up to applicable limits by the FDIC and such
insurance is backed by the full faith and credit of the U.S. Government. 
As insurer, the FDIC imposes deposit insurance premiums and is
authorized to conduct examinations of and to require reporting by FDIC-
insured institutions.  It also may prohibit any FDIC-insured institution
from engaging in any activity the FDIC determines by regulation or order
to pose a serious risk to the FDIC.  The FDIC also has the authority to
initiate enforcement actions against savings banks, after giving the OTS
an opportunity to take such 
PAGE
<PAGE>
action, and may terminate the deposit insurance if it determines that
the institution has engaged or is engaging in unsafe or unsound
practices, or is in an unsafe or unsound condition.

    The FDIC's deposit insurance premiums are assessed through a risk-
based system under which all insured depository institutions are placed
into one of nine categories and assessed insurance premiums, ranging
from .23% to .31% of deposits, based upon their level of capital and
supervisory evaluation.  Under the system, institutions classified as
well capitalized (i.e., a core capital ratio of at least 5%, a ratio of
core capital to risk-weighted assets of at least 6% and a risk-based
capital ratio of at least 10%) and considered healthy would pay the
lowest premium while institutions that are less than adequately
capitalized (i.e., a core capital or core capital to risk-based capital
ratios of less than 4% or a risk-based capital ratio of less than 8%)
and considered of substantial supervisory concern would pay the highest
premium.  Risk classification of all insured institutions will be made
by the FDIC for each semi-annual assessment period.

    The FDIC is authorized to increase assessment rates, on a semiannual
basis, if it determines that the reserve ratio of the SAIF will be less
than the designated reserve ratio of 1.25% of SAIF insured deposits.  In
setting these increased assessments, the FDIC must seek to restore the
reserve ratio to that designated reserve level, or such higher reserve
ratio as established by the FDIC.  The FDIC may also impose special
assessments on SAIF members to repay amounts borrowed from the United
States Treasury or for any other reason deemed necessary by the FDIC. 

    In September 1996, Congress enacted legislation to recapitalize the
SAIF by a one-time assessment on all SAIF-insured deposits held as of
March 31, 1995. The assessment will be  65.7 basis points per $100 in
deposits, payable on November 30, 1996. For the Bank, the assessment is
expected to be $2.1 million (or $1.4 million when adjusted for taxes),
based on the Bank's deposits on March 31, 1995 of $314.2 million.   In
addition, beginning January 1, 1997, pursuant to the legislation,
interest payments on bonds ("FICO Bonds") issued in the late 1980's by
the Financing Corporation to recapitalize the now defunct Federal
Savings and Loan Insurance Corporation will be paid jointly by BIF-
insured institutions and SAIF-insured institutions. The FICO assessment
will be 1.29 basis points per $100 in BIF deposits and 6.44 basis points
per $100 in SAIF deposits. Also beginning January 31, 1997, the current
annual minimum premium of 23 basis points will be reduced to
approximately 6.44 basis points.  Beginning January 1, 2000, the FICO
interest payments will be paid pro-rata by banks and thrifts based on
deposits (approximately 2.4 basis points per $100 in deposits). The BIF
and SAIF will be merged on January 1, 1999, provided the bank and saving
association charters are merged by that date. In that event, pro-rata
FICO sharing will begin on January 1, 1999.

Federal Home Loan Bank System

    The Bank is a member of the FHLB System, which consists of 12
regional FHLBs.  The FHLB provides a central credit facility primarily
for member institutions.  The Bank, as a member of the FHLB, is required
to acquire and hold shares of capital stock in that FHLB in an amount at
least equal to 1% of the aggregate principal amount of its unpaid
residential mortgage loans and similar obligations at the beginning of
each year, or 1/20 of its advances (borrowings) from the FHLB, whichever
is greater.  The Bank was in compliance with this requirement with an
investment in FHLB-Atlanta stock, at July 31, 1996, of $3.1 million.

    The FHLBs are required to provide funds for the resolution of
insolvent thrifts and to contribute funds for affordable housing
programs.  These requirements could reduce the amount of dividends that
the FHLBs pay to their members and could also result in the FHLBs
imposing a higher rate of interest on advances to their members.  For
the fiscal year ended July 31, 1996, dividends from the FHLB-Atlanta to
the Bank amounted to $212,000.  If dividends were reduced, or interest
on future FHLB-Atlanta advances increased, the Bank's net interest
income would likely also be reduced.

Federal Reserve System

    The Federal Reserve Board regulations require savings institutions
to maintain non-interest-earning reserves against their transaction
accounts (primarily NOW and regular checking accounts).  The Federal
Reserve Board regulations generally require that reserves be maintained
against aggregate transaction accounts as follows: for accounts
aggregating $54.0 million or less (subject to adjustment by the Federal
Reserve Board) the reserve requirement is 3%; and for accounts greater
than $54.0 million, the reserve requirement is $1.6 million plus 10%
(subject to adjustment by the Federal Reserve Board between 8% and 14%)
against that portion of total transaction accounts in excess of
$54.0 million.  The first $4.2 million of otherwise reservable balances
(subject to adjustments 
PAGE
<PAGE>
by the Federal Reserve Board) are exempted from the reserve
requirements.  The Bank is in compliance with the foregoing
requirements.  The balances maintained to meet the reserve requirements
imposed by the FRB may be used to satisfy liquidity requirements imposed
by the OTS.

Holding Company Regulation

    The Company is a non-diversified savings and loan holding company
within the meaning of the HOLA, as amended.  As such, the Company is
registered with the OTS and is subject to OTS regulations, examinations,
supervision and reporting requirements.  In addition, the OTS has
enforcement authority over the Company and its non-savings institution
subsidiaries.  Among other things, this authority permits the OTS to
restrict or prohibit activities that are determined to be a serious risk
to the subsidiary savings institution.  The Bank is required to notify
the OTS 30 days before declaring any dividend to the Company.

    As a unitary savings and loan holding company, the Company generally
is not restricted under existing laws as to the types of business
activities in which it may engage, provided that the Bank continues to
be a QTL.  See " Federal Regulation of Savings Institutions Qualified
Thrift Lender Test" for a discussion of the QTL requirements.  Upon any
nonsupervisory acquisition by the Company of another savings association
or savings bank that meets the QTL test and is deemed to be a savings
institution by the OTS, the Company would become a multiple savings and
loan holding company (if the acquired institution is held as a separate
subsidiary) and would be subject to extensive limitations on the types
of business activities in which it could engage.  The HOLA limits the
activities of a multiple savings and loan holding company and its non-
insured institution subsidiaries primarily to activities permissible for
bank holding companies under Section 4(c)(8) of the Bank Holding Company
Act, subject to the prior approval of the OTS, and activities authorized
by OTS regulation.  The OTS is prohibited from approving any acquisition
that would result in a multiple savings and loan holding company
controlling savings institutions in more than one state, subject to two
exceptions: (i) the approval of interstate supervisory acquisitions by
savings and loan holding companies, and (ii) the acquisition of a
savings institution in another state if the laws of the state of the
target savings institution specifically permit such acquisitions.

    The HOLA prohibits a savings and loan holding company, directly or
indirectly, or through one or more subsidiaries, from acquiring another
savings institution or holding company thereof, without prior written
approval of the OTS.  It also prohibits the acquisition or retention of,
with certain exceptions, more than 5% of a non-subsidiary savings
institution, a non-subsidiary holding company, or a non-subsidiary
company engaged in activities other than those permitted by the HOLA; or
acquiring or retaining control of an institution that is not federally
insured.  In evaluating applications by holding companies to acquire
savings institutions, the OTS must consider the financial and managerial
resources, future prospects of the company and institution involved, the
effect of the acquisition on the risk to the insurance fund, the
convenience and needs of the community and competitive factors.

    Federal law generally provides that no "person," acting directly or
indirectly or through or in concert with one or more other persons, may
acquire "control," as that term is defined in OTS regulations, of a
federally insured savings institution without giving at least 60 days
written notice to the OTS and providing the OTS an opportunity to
disapprove of the proposed acquisition.  Such acquisitions of control
may be disapproved if it is determined, among other things, that (i) the
acquisition would substantially lessen competition; (ii) the financial
condition of the acquiring person might jeopardize the financial
stability of the savings institution or prejudice the interests of its
depositors; or (iii) the competency, experience or integrity of the
acquiring person or the proposed management personnel indicates that it
would not be in the interest of the depositors or the public to permit
the acquisition of control by such person.

Federal Securities Laws

    The Company's Common Stock is registered with the Securities and
Exchange Commission ("SEC") under the Securities Exchange Act of 1934
(the "Exchange Act").  The Company is subject to the information, proxy
solicitation, insider trading restrictions and other requirements under
the Exchange Act.

    The registration under the Securities Act of 1933 (the "Securities
Act") of shares of the Common Stock which were issued in connection with
the mutual-to-stock conversion of American National Bankshares, M.H.C.
did not cover the resale of such shares.  Shares of the Common Stock
purchased by persons who are not affiliates of the Company may be resold
without registration.  Shares purchased by an affiliate of the Company
are subject to the resale restrictions of Rule 144 under the Securities
Act.  If the Company meets the current public information 
PAGE
<PAGE>
requirements of Rule 144 under the Securities Act, each affiliate of the
Company who complies with the other conditions of Rule 144 (including
those that require the affiliate's sale to be aggregated with those of
certain other persons) would be able to sell in the public market,
without registration, a number of shares not to exceed, in any
three-month period, the greater of (i) 1% of the outstanding shares of
the Company or (ii) the average weekly volume of trading in such shares
during the preceding four calendar weeks.  Provision may be made in the
future by the Company to permit affiliates to have their shares
registered for sale under the Securities Act under certain
circumstances.

                      FEDERAL AND STATE TAXATION

General

    The Company and its subsidiaries currently file a consolidated
federal income tax return on a July 31 fiscal year basis.  Consolidated
returns have the effect of eliminating intercompany distributions,
including dividends, from the computation of consolidated taxable income
for the taxable year in which the distributions occur.  The following
discussion of tax matters is intended only as a summary, and while it
does not purport to be a comprehensive description of all tax rules
applicable to the Bank or the Company, all matters deemed material by
management have been discussed.

Federal Taxation 

    Tax Bad Debt Reserves.  Savings associations such as the Bank that
meet certain definitional tests relating to the composition of assets
and other conditions prescribed by the Internal Revenue Code (the
"Code") are permitted to establish reserves for bad debts and to make
annual additions thereto which may, within specified formula limits, be
taken as a deduction in computing taxable income for federal income tax
purposes.  The amount of the bad debt reserve deduction for "non-
qualifying loans" is computed under the experience method.  For tax
years beginning before December 31, 1995, the amount of the bad debt
reserve deduction for "qualifying real property loans" (generally loans
secured by improved real estate) may be computed under either the
experience method or the percentage of taxable income method (based on
an annual election).  If a saving association elected the latter method,
it could claim, each year, a deduction based on a percentage of taxable
income, without regard to actual bad debt experience.  Under the
experience method, the bad debt reserve deduction is an amount
determined under a formula based generally upon the bad debts actually
sustained by the savings and loan association over a period of years.  

    Under recently enacted legislation, the percentage of taxable income
method has been repealed for years beginning after December 31, 1995,
and "large" associations, i.e., the quarterly average of the
association's total assets or of the consolidated group of which it is
a member, exceeds $500 million for the year, may no longer be entitled
to use the experience method of computing additions to their bad debt
reserve.  A "large" association must use the direct write-off method for
deducting bad debts, under which charge-offs are deducted and recoveries
are taken into taxable income as incurred. If the Bank is not a "large"
association, the Bank will continue to be permitted to use the
experience method. The Bank will be required to recapture (i.e., take
into income) over a six-year period its applicable excess reserves, i.e,
the balance of its reserves for losses on qualifying loans and
nonqualifying loans, as of the close of the last tax year beginning
before January 1, 1996, over the greater of (a) the balance of such
reserves as of December 31, 1987 (pre-1988 reserves) or (b) in the case
of a bank which is not a "large" association, an amount that would have
been the balance of such reserves as of the close of the last tax year
beginning before January 1, 1996, had the bank always computed the
additions to its reserves using the experience method. Postponement of
the recapture is possible for a two-year period if an association meets
a minimum level of mortgage lending for 1996 and 1997.  As of July 31,
1996, the Bank is not required to recapture any of its bad debt reserve.

    If an association ceases to qualify as a "bank" (as defined in Code
Section 581) or converts to a credit union, the pre-1988 reserves and
the supplemental reserve are restored to income ratably over a six-year
period, beginning in the tax year the association no longer qualifies as
a bank.  The balance of the pre-1988 reserves are also subject to
recapture in the case of certain excess distributions to (including
distributions on liquidation and dissolution), or redemptions of,
shareholders.

    Corporate Alternative Minimum Tax.  For taxable years beginning
after December 31, 1986, the Internal Revenue Code of 1986, as amended
(the "Code") imposes a tax on alternative minimum taxable income
("AMTI") at a rate of 20%.  Only 90% of AMTI can be offset by net
operating losses.  For taxable years beginning after 
PAGE
<PAGE>
December 31, 1989, the adjustment to AMTI based on book income will be
an amount equal to 75% of the amount by which a corporation's adjusted
current earnings exceeds its AMTI (determined without regard to this
preference and prior to reduction for net operating losses).  In
addition, for taxable years beginning after December 31, 1986, and
before January 1, 1996, an environmental tax of .12% of the excess of
AMTI (with certain modifications) over $2.0 million is imposed on
corporations, including the Company, whether or not an Alternative
Minimum Tax ("AMT") is paid.  The Company does not expect to be subject
to the AMT.

    The Company was last audited by the Internal Revenue Service for tax
years through July 31, 1993.  For additional information regarding
taxation, see Notes 1 and 14 of Notes to the Consolidated Financial
Statements.

State and Local Taxation

    Maryland Taxation.  The State of Maryland generally imposes a
franchise tax on thrift institutions computed at a rate of 7% of net
earnings.  For the purpose of the 7% franchise tax,  net earnings are
defined as the net income of the thrift institution as determined for
federal corporate income tax purposes, plus (i) interest income from
obligations of the United States, of any state, including Maryland, and
of any country, municipal or public corporation authority, special
district or political subdivision of any state, including Maryland,
(ii) any profit realized from the sale or exchange of bonds issued by
the State of Maryland or any of its political subdivisions, and
(iii) any deduction for state income taxes.

    Delaware Taxation.  As a Delaware business corporation, the Company
will be required to file annual returns and pay annual fees and an
annual franchise tax to the State of Delaware.  These taxes and fees are
not expected to be material.

ITEM 2.    Properties

Properties

    The Company conducts its business through two offices including its
main office and an operations center located in Baltimore, Maryland, and
seven full service branch offices located in three counties.  The
following table sets forth certain information concerning the main
office and each branch office of the Company at July 31, 1996.  The
aggregate net book value of the Company's premises and equipment was
$1.2 million at July 31, 1996.

<TABLE>
<CAPTION>
                                          Owned      Lease
                                  Year      or     Expiration
                                 Opened   Leased      Date       
                                 ------   ------   ------------------ 
<S>                               <C>     <C>      <C>
Main Office:

211 N. Liberty Street             1986    Leased   March 2001
Baltimore, Maryland 21201

Branch Offices:

825 Dulaney Valley Road           1959    Leased   December 1999
#275   
Baltimore, Maryland  21204

4371 Ebenezer Road                1961    Leased   September 2001(1)
Baltimore, Maryland  21236

6832 Reisterstown Road            1961    Leased   September 2011
Baltimore, Maryland  21215

206 Harundale Mall                1962    Leased   May 1999
Glen Burnie, Maryland 21061

9469 Baltimore National Pike      1990    Leased   November 2000
Ellicott City, Maryland  21043
<PAGE>

<PAGE>
7848 Eastpoint Mall               1985    Leased   March 2005
Baltimore, Maryland  21224

11700 Reisterstown Road           1986    Leased   June 2006
Reisterstown, Maryland  21136

2 West Rolling Crossroads, #110   1987    Leased   October 1997 (1)
Baltimore, Maryland  21228

Operations Center:

5801 Moravia Boulevard            1989    Leased   September 1999
Suites 5815-5817
Baltimore, Maryland  21206
<FN>
____________________________________
(1)    Excludes five-year renewal option.
</TABLE>


ITEM 3.    Legal Proceedings

    There are various claims and lawsuits in which the Company and the
Bank periodically are involved incident to their businesses.  In the
opinion of management, no material loss is expected from any of such
pending claims or lawsuits.


ITEM 4.    Submission of Matters to a Vote of Security Holders

    During the fourth quarter of the fiscal year covered by this report,
the Company did not submit any matters to the vote of security holders. 


                               PART II

ITEM 5.    Market for Registrant's Common Stock and Related Stockholder
Matters

       The section titled "Common Stock and Related Matters" of the 1996
Annual Report to Stockholders is incorporated herein by reference.  No
other sections of such Annual Report are incorporated herein by this
reference.

ITEM 6.    Selected Financial Data

    The section titled "Selected Consolidated Financial and Other Data"
of the 1996 Annual Report to Stockholders is incorporated herein by
reference.  No other sections of such Annual Report are incorporated
herein by this reference.

ITEM 7.    Management's Discussion and Analysis of Financial Condition
and Results of Operations

    The section titled "Management's Discussion and Analysis of
Financial Condition and Results of Operations" of the 1996 Annual Report
to Stockholders is incorporated herein by reference.  No other sections
of such Annual Report are incorporated herein by this reference.


ITEM 8.    Financial Statements and Supplementary Data

    The sections titled "Consolidated Statements of Financial
Condition," "Consolidated Statements of Operations," "Consolidated
Statements of Stockholders' Equity," "Consolidated Statements of Cash
Flows" and "Notes to Consolidated Financial Statements" of the 1996
Annual Report to Stockholders are incorporated herein by reference.

ITEM 9.    Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure

    Not Applicable


                               PART III

ITEM 10.    Directors and Executive Officers of the Registrant

    Information concerning the Directors of the Registrant is
incorporated herein by reference from the Registrant's definitive Proxy
Statement dated October 18, 1996 (the "Proxy Statement").

ITEM 11.    Executive Compensation

    Information concerning the Executive Compensation of the Registrant
is incorporated herein by reference from the Registrant's Proxy
Statement.

ITEM 12.    Security Ownership of Certain Beneficial Owners and
Management

    Information concerning security ownership of certain owners and
management is incorporated herein by reference from the section titled
"Voting Securities and Principal Holders Thereof" of Registrant's Proxy
Statement.

ITEM 13.    Certain Relationships and Related Transactions

    Information concerning relationships and transactions is
incorporated herein by reference from the section titled "Certain
Transactions with the Company" of the Registrant's Proxy Statement.

                               PART IV

ITEM 14.  Exhibits, Financial Statement Schedules, and Reports on From
8-K

    (a)(1)  Financial Statements

    The following information appearing in the Registrant's 1996 Annual
Report is incorporated by reference as Exhibit 13 to this Annual Report
on Form 10-K.
                                                                     Page in
                                                                   Annual Report
        Annual Report Sections

        Report of Independent Auditors                                     51

        Consolidated Statements of Financial Condition
         as of July 31, 1996 and 1995                                      17


        Consolidated Statements of Operations for the years ended
        July 31, 1996, 1995 and 1994                                       18

        Consolidated Statements of Stockholders' Equity for the years
        ended July 31, 1996, 1995 and 1994                                 19

        Consolidated Statements of Cash Flows for the years ended
        July 31, 1996, 1995 and 1994                                       20

        Notes to Consolidated Financial Statements                         22

    (a)(2)  Financial Statement Schedules

     All financial statement schedules have been omitted as the required
information is inapplicable or has been included in the Notes to
Financial Statements.

    (a)(3) Exhibits

                                                              Sequential Page
                                    Reference to Prior         Number Where
                                      Filing or Exhibit       Attached Exhibits
    Regulation S-K                    Number Attached      Are Located in This
    Exhibit Number    Document            Hereto             Form 10-K Report

    2      Plan of acquisition,            (1)               Not Applicable
           reorganization, arrangement,
           liquidation or succession

    3.1    Articles of Incorporation       (1)               Not Applicable

    3.2    Bylaws                          (1)               Not Applicable

    4      Instruments defining the        (1)               Not Applicable
           rights of security holders,
           including debentures

    9      Voting trust agreement          None              Not Applicable

    10.1   1993 Incentive Stock            (1)               Not Applicable
        

    10.2   1993 Stock Option Plan          (1)               Not Applicable
           for Outside Directors

    10.3   1993 Recognition and            (1)               Not Applicable
           Retention Plan for Employees

    10.4   1993 Recognition and            (1)               Not Applicable
           Retention Plan for Outside 
           Directors    

    10.5   Employment Agreement of          (1)             Not Applicable
           A. Bruce Tucker

    10.6   Employment Agreement of          (1)             Not Applicable
           Joseph Solomon

    10.7   401(k) Plan, including Amendment (1)             Not Applicable

    10.8   Employee Stock Ownership Plan    (1)             Not Applicable

    10.9   1996 Stock Option Plan          10.9                 	41

    10.10  1996 Recognition and            10.10               	53
           Retention Plan

    10.11  Employment Agreement of         10.11                	62	
           James M. Uveges

    10.12  Employment Agreement of         10.12                	76
           Mark S. Barker

    11     Statement re: computation       Not               Not Applicable
           of per share earnings        Required

    12     Statement re: computation       Not               Not  Applicable
           of ratios                    Required

    13     Annual Report to Security        13                  	91
        
    16     Letter re: change in certifying  None             Not Applicable
           accountants

    18     Letter re: change in accounting  None             Not Applicable
           principles

    21     Subsidiaries of Registrant       21                  	162

    22     Published report regarding       None             Not Applicable
           matters submitted to vote of
           security holders

    23     Consents of Experts and Counsel  Not Required     Not Applicable

    24     Power of Attorney                Not Required    Not Applicable

    27     Financial Data Schedule          Not Required    Not Applicable

    28    Information from reports          None            Not Applicable
          furnished to state
          insurance regulatory
          authorities

    99    Additional Exhibits               None            Not Applicable
 

_______________                             
(1)    Filed as exhibits to the Registrant's Registration Statement on Form 
S-1 filed with the SEC on July 13, 1995, as amended on August 30, 1995.  All
such previously filed documents are hereby incorporated by reference in 
accordance with Item 601 of Regulation S-K.

    (b)  Reports on Form 8-K:

    The Registrant has not filed a Current Report on Form 8-K during the
year ended July 31, 1996.
PAGE
<PAGE>
                              SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                        AMERICAN NATIONAL BANCORP, INC.


Date: 10/28/96              By: /s/ A. Bruce Tucker
                                A. Bruce Tucker, President
                                Chief Executive Officer
                                and Director


    Pursuant to the requirements of the Securities Exchange of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.



By: /s/ A. Bruce Tucker           By: /s/ James M. Uveges
    A. Bruce Tucker, President,      James M. Uveges, Senior Vice
     Chief Executive                  President and Chief
     and Director                     Financial Officer 
    (principal accounting officer)

Date: 10/28/96                    Date: 10/28/96



By: /s/ Howard K. Thompson        By: /s/ Lenwood M. Ivey
    Howard K. Thompson, Chairman     Lenwood M. Ivey, Director
     of the Board           

Date: 10/28/96                    Date: 10/28/96



By: /s/ David L. Pippinger        By: /s/ Joseph M. Solomon
    David L. Pippinger, Director      Joseph M. Solomon, Director

Date: 10/28/96                    Date: 10/28/96



By: /s/ Betty J. Stull            By: /s/ Jimmie T. Noble
    Betty J. Stull, Director         Jimmie T. Noble, Director

Date: 10/28/96                   Date: 10/28/96