SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                    FORM 10-Q


            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934


                  For the quarterly period ended March 31, 1999

                         Commission File Number 0-20516
                        --------------------------------


                          MASON-DIXON BANCSHARES, INC.
                         ------------------------------
             (Exact name of Registrant as specified in its charter)


Maryland                                                          52-1764929
---------                                                        ------------
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                               Identification No.)


45 W. Main Street, Westminster, Maryland                            21157
----------------------------------------                           -------
(Address of principal executive offices)                         (Zip Code)


                                 (410) 857-3401
                             ----------------------
                     Registrant's telephone number including
                                   area code:

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 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                     Yes   X                No
                         -----                 -----

The number of shares  outstanding of the registrant's  common stock on March 31,
1999: Common Stock, $1.00 Par Value --- 5,072,841


<PAGE>



PART I  -  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS
                          MASON-DIXON BANCSHARES, INC.
                CONSOLIDATED STATEMENTS OF CONDITION (UNAUDITED)
<TABLE>
<CAPTION>

(dollars in thousands)                                                               March 31, 1999     Dec. 31, 1998
                                                                                     --------------    -------------
ASSETS
<S>                                                                                  <C>                    <C>               
   Cash and due from banks                                                           $       22,442     $      22,642
   Interest bearing deposits in other banks                                                   2,058               638
   Federal funds sold                                                                         4,948             2,363
   Investment securities available for sale (AFS) - at fair value                           418,606           381,512
   Investment securities held to maturity (HTM) - at amortized cost
     (fair value of $186,079 and $188,522 respectively)                                     183,267           185,366
   Loans held for sale                                                                        2,185             7,645
   Loans (net of unearned income of $336 and $2)                                            505,275           462,557
       Less:  Allowance for credit losses                                                   (10,019)           (8,893)
                                                                                     --------------     -------------
          Loans, net                                                                        495,256           453,664
   Premises and equipment                                                                    15,524            15,213
   Other real estate owned                                                                      508               388
   Deferred income taxes                                                                      8,731             5,697
   Mortgage servicing and sub-servicing rights                                                2,134             2,213
   Intangible assets                                                                         11,416             6,654
   Accrued interest receivable and other assets                                              19,705            18,247
                                                                                     --------------     -------------

       Total Assets                                                                  $    1,186,780     $   1,102,242
                                                                                      =============      ============

LIABILITIES

   Non-interest bearing deposits                                                     $       98,399     $      94,946
   Interest bearing deposits                                                                608,232           545,403
                                                                                     --------------     -------------
       Total deposits                                                                       706,631           640,349
   Short-term borrowings                                                                     61,905            41,816
   Long-term borrowings                                                                     326,396           328,347
   Accrued expenses and other liabilities                                                     9,924             9,591
                                                                                     --------------     -------------

       Total Liabilities                                                                  1,104,856         1,020,103
                                                                                     --------------     -------------

STOCKHOLDERS' EQUITY

   Common stock - $1.00 par value, authorized:
      10,000,000 shares, issued and outstanding:
      5,072,841 shares (1999) and 5,071,682 shares (1998)                                     5,073             5,072
   Surplus                                                                                   35,697            35,738
   Retained earnings                                                                         41,098            39,535
   Accumulated other comprehensive income                                                        56             1,794
                                                                                     --------------     -------------

       Total Stockholders' Equity                                                            81,924            82,139
                                                                                     --------------     -------------

       Total Liabilities and Stockholders' Equity                                    $    1,186,780     $   1,102,242
                                                                                      =============      ============
</TABLE>

                                      - 2 -

<PAGE>



                          MASON-DIXON BANCSHARES, INC.
                CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                             Three Months Ending
(dollars in thousands)                                                               March 31, 1999   March 31, 1998
                                                                                     --------------   --------------
INTEREST INCOME
<S>                                                                                   <C>              <C>          
   Interest and fees on loans                                                         $    12,567      $      11,959
   Interest on deposits in other banks                                                         61                 15
   Interest on federal funds sold                                                             171                284
   Interest and dividends on investment securities:
       Taxable interest on mortgage-backed securities                                       4,833              4,404
       Other taxable interest and dividends                                                 3,104              1,844
       Tax exempt interest and dividends                                                    1,372              1,172
                                                                                     ------------     --------------
   Total interest income                                                                   22,108             19,678
                                                                                     ------------     --------------

INTEREST EXPENSE Interest on deposits:
   Time certificate of deposit of $100,000 or more                                            516                424
   Other deposits                                                                           5,729              5,768
                                                                                     ------------     --------------
   Total interest on deposits                                                               6,245              6,192

Interest on short-term borrowings                                                             734              1,581
Interest on long-term borrowings                                                            4,783              2,673
                                                                                     ------------     --------------
   Total interest expense                                                                  11,762             10,446
                                                                                     ------------     --------------

Net interest income                                                                        10,346              9,232

Provision for credit losses                                                                   264                317
                                                                                     ------------     --------------
Net interest income after provision for credit losses                                      10,082              8,915
                                                                                     ------------     --------------

OTHER OPERATING INCOME
   Service charges on deposit accounts                                                        480                537
   Trust Division income                                                                      445                381
   Gain/(Loss) on sale of securities                                                          147                311
   Gain on sale of mortgage loans                                                             542                436
   Gain on sale of branches                                                                     0                  0
   Other income                                                                               710                763
                                                                                     ------------     --------------
       Total other operating income                                                         2,324              2,428
                                                                                     ------------     --------------

OTHER OPERATING EXPENSES
   Salaries and employee benefits                                                           5,428              4,905
   Net occupancy expenses of bank premises                                                    805                692
   Furniture and equipment expenses                                                           521                483
   Legal and professional fees                                                                206                220
   FDIC insurance expense                                                                      19                 20
   Outside data processing expense                                                            322                341
   Amortization of mortgage sub-servicing rights                                               76                104

                                      - 3 -

<PAGE>



   Amortization of other intangible assets                                                    218                104
   Other expenses                                                                           1,630              1,093
                                                                                     ------------     --------------
       Total other operating expenses                                                       9,225              7,962
                                                                                     ------------     --------------

Income before income taxes                                                                  3,181              3,381
Income tax expense                                                                            654                870
                                                                                     ------------     --------------
NET INCOME                                                                           $      2,527     $        2,511
                                                                                      ===========      =============

Per Share Data:
   Cash Dividend Paid                                                                $       0.19     $         0.17

   Net Income (Basic)                                                                $       0.50     $         0.49
   Net Income (Diluted)                                                              $       0.50     $         0.49
   Average Shares Outstanding (Basic)                                                   5,074,214          5,079,326
   Average Shares Outstanding (Diluted)                                                 5,090,242          5,084,788
</TABLE>

                                      - 4 -

<PAGE>



                          MASON-DIXON BANCSHARES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  For the period ended March 31, 1999 and 1998
<TABLE>
<CAPTION>


(dollars in thousands)                                                                      1999                   1998       
------------------------------------------------------------------------------------------------------------------------------
Cash Flows From Operating Activities
<S>                                                                                  <C>                    <C>               
   Net Income                                                                        $            2,527     $            2,511
   Adjustments to reconcile net income to net cash provided by operating
   activities:
       Depreciation                                                                                 381                    406
       Amortization of mortgage sub-servicing rights                                                 76                    104
       Amortization of intangibles                                                                  208                    104
       Net accretion of purchase accounting adjustments                                            (234)                   (96)
       Provision for credit losses                                                                  264                    317
       Provision for deferred taxes                                                              (1,941)                     0
       Proceeds from sales of investment securities - Trading                                         0                     20
       Originations of loans held for sale                                                       (4,654)               (16,900)
       Proceeds from sales of loans held for sale                                                10,656                 12,316
       Net gain on sale of assets/liabilities                                                      (649)                  (782)
       Net (increase) decrease in accrued interest receivable and other assets                   (2,485)                (1,225)
       Net increase (decrease) in accrued expenses and other liabilities                            201                    965
       Other - net                                                                                   34                     (4)
                                                                                     ------------------     ------------------

                   Net cash provided by operating activities                                      4,384                 (2,264)
                                                                                     ------------------     ------------------

Cash Flows From Investing Activities
   Proceeds from maturities of investment securities - HTM                                       16,945                 16,322
   Purchases of investment securities - HTM                                                     (14,840)               (10,576)
   Proceeds from maturities of investment securities - AFS                                       44,189                 24,652
   Proceeds from sales of investment securities - AFS                                            19,953                 26,025
   Purchases of investment securities - AFS                                                     (93,395)               (50,145)
   Net (increase) decrease in loans                                                               2,393                    585
   Capital expenditures                                                                            (364)                  (521)
   Proceeds from sale of assets/liabilities                                                           0                     49
   Acquisitions of subsidiaries, net of cash acquired                                             6,985                (14,993)
                                                                                     ------------------     ------------------

                   Net cash used by investing activities                                        (18,134)                (8,602)
                                                                                     ------------------     ------------------

Cash Flows From Financing Activities
   Net increase (decrease) in deposits                                                              433                 16,893
   Net increase (decrease) in short-term borrowings                                              20,089                 (9,057)
   Proceeds from long-term borrowings                                                             2,160                 20,000
   Repayments of long-term borrowings                                                            (4,123)                (1,878)
   Issuance of additional shares of common stock                                                    100                    200
   Repurchase of common stock                                                                      (140)                     0
   Dividends paid                                                                                  (964)                  (863)
                                                                                     ------------------     ------------------

                   Net cash provided by financing activities                                     17,555                 25,295
                                                                                     ------------------     ------------------

Net increase (decrease) in cash and cash equivalents                                              3,805                 14,429
Cash and cash equivalents at beginning of year                                                   25,643                 37,963
                                                                                     ------------------     ------------------

Cash and cash equivalents at end of period                                           $           29,448     $           52,392
                                                                                      =================      =================
</TABLE>

                                      - 5 -

<PAGE>



                          MASON-DIXON BANCSHARES, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                  For the period ended March 31, 1999 and 1998

<TABLE>
<CAPTION>

                                                                                              Accumulated
                                                                                                 Other             Total
                                            Common                         Retained         Comprehensive      Stockholders'
(dollars in thousands)                      Stock         Surplus           Earnings            Income             Equity    
                                             -----        -------          --------            ------            ------    

<S>                 <C> <C>             <C>               <C>              <C>                 <C>              <C>          
Balance at December 31, 1997            $   5,077         $    35,948      $    32,275         $      2,149     $      75,449

Net Income (1st quarter 1998)                   -                   -            2,511                    -             2,511

Other comprehensive income, net of
 tax: unrealized loss on securities                                                                    (315)             (315)

Cash Dividend @ $.17 per share                  -                   -             (863)                   -              (863)

Issuance of additional shares of
 common stock                                   6                 194                -                    -               200
                                        -------------------------------------------------------------------------------------

Balance at March 31, 1998                   5,083              36,142           33,923                1,834            76,982

Net Income (2nd,3rd,4th quarters 1998)          -                   -            8,300                    -             8,300

Other comprehensive income, net of
 tax: unrealized loss on securities                                                                     (40)              (40)

Cash Dividend @ $.53 per share                  -                   -           (2,688)                   -            (2,688)

Issuance of additional shares of
  common stock                                 21                 583                                                     604

Repurchase of shares of common stock          (32)               (987)               -                    -            (1,019)
                                       ---------------------------------------------------------------------------------------

Balance at December 31, 1998                5,072              35,738           39,535                1,794            82,139

Net Income (1st quarter 1999)                   -                   -            2,527                    -             2,527

Other comprehensive income, net of tax:
 unrealized loss on securities                                                                       (1,738)           (1,738)

Cash Dividend @ $.19 per share                  -                   -             (964)                   -              (964)

Issuance of additional shares of stock          4                  96                -                    -               100

Repurchase of shares of common stock           (3)               (137)               -                    -              (140)
                                       --------------------------------------------------------------------------------------

Balance at March 31, 1999               $   5,073         $    35,697      $    41,098         $         56     $      81,924
                                       =======================================================================================
                                    
</TABLE>

                                      - 6 -

<PAGE>



                          MASON-DIXON BANCSHARES, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1. The  foregoing  financial  statements  are  unaudited,  however,  in the
opinion of Management, all adjustments (consisting of normal recurring accruals)
necessary  for a  fair  presentation  of  the  financial  statements  have  been
included. Certain amounts for prior periods have been reclassified to conform to
current period presentation. These statements should be read in conjunction with
the financial statements and notes thereto included in the Company's 1998 Annual
Report on Form 10-K.

Note 2.   Mergers and Acquisitions

         On January 5, 1999,  Mason-Dixon  completed the acquisition of Sterling
Bancorp, a privately held commercial bank headquartered in Baltimore,  Maryland.
Sterling  Bancorp  was the parent  company of Sterling  Bank & Trust Co.,  which
operated  four  branches;  one  in  Baltimore  City,  two  in  Baltimore  County
(Pikesville  and  Timonium)  and  one in Anne  Arundel  County  (Annapolis).  On
February 12, 1999,  Mason-Dixon  merged  Sterling  Bank & Trust Co. into Bank of
Maryland  and  simultaneously  closed  the  branch  offices  in  Pikesville  and
Baltimore City,  servicing  existing  customers of these branches through nearby
Bank of  Maryland  locations.  The  acquisition  was paid  for in cash  totaling
$10,300,000  and will be accounted for as a purchase in accordance  with APB 16.
At December 31, 1998,  Sterling  Bancorp had consolidated  assets  approximating
$73,800,000,  liabilities of $67,200,000 and stockholders' equity of $6,600,000.
Sterling  recorded  a net  loss  for  1998 of  $250,000  before  merger  related
expenses.  Goodwill associated with the purchase will be amortized over 15 years
using the straight-line method.

         On January 27, 1999,  Mason-Dixon entered into an Agreement and Plan of
Reorganization with BB&T Corporation ("BB&T") of Winston-Salem,  North Carolina.
The agreement  allows for the  acquisition  of Mason-Dixon by BB&T. The terms of
the agreement call for stockholders of Mason-Dixon to receive 1.3 shares of BB&T
common  stock for each common  share of  Mason-Dixon.  The  acquisition  will be
structured as a tax-free  exchange and accounted for as a  pooling-of-interests.
The  transaction  is subject to various  regulatory  approvals  and  approval by
Mason-Dixon stockholders. In conjunction with the agreement, Mason Dixon entered
into a Stock  Option  Agreement  which  grants BB&T the option to purchase up to
1,006,868 common shares of Mason-Dixon at a price per share of $40.00. Under the
conditions  of the  Agreement  and Plan of  Reorganization,  Mason-Dixon  is not
permitted  to issue any new shares of common  stock  other than those  permitted
under  Mason-Dixon's  Omnibus Stock Plan without prior written  consent of BB&T.
Additionally,  Mason-Dixon may not issue any new debt,  enter into any long-term
contracts  or operate  outside  its normal  course of business  without  written
consent from BB&T.

Note 3.  Investment Securities
<TABLE>
<CAPTION>

       (dollars in thousands)
                                                          Available-for-Sale                           Held-to-Maturity
                                                    March 31, 1999           March 31, 1998        March 31, 1999   March 31, 1998
                                                    --------------           --------------        --------------   --------------

<S>                                                   <C>                     <C>                  <C>                 <C>       
       U.S. Treasury securities and agency notes      $ 139,777               $    68,569          $    19,994         $   33,016
       Obligations of U.S. government agencies           99,016                   117,399               10,031             13,536
       Obligations of states and political subdivisions       0                         0              110,850             86,279
       Collateralized mortgage obligations              157,689                    49,746               35,477             59,004
       Other securities                                  22,033                    10,359                6,915              6,429
       Unrealized gains (losses)                             91                     2,989                    0                  0
                                                    -----------               -----------          -----------         ----------

           Total Investment Securities                $ 418,606               $   249,062          $   183,267         $  198,264
                                                    ===========               ===========          ============        ===========

</TABLE>

Note 4.  Loans (Net of Unearned Income)
<TABLE>
<CAPTION>

       (dollars in thousands)                                        March 31, 1999       March 31, 1998
                                                                     --------------       --------------

<S>                                                                  <C>                  <C>        
       Construction and Land Development                             $    47,799          $    36,188
       Residential Real Estate-Mortgages                                 172,280              186,782
       Commercial Real Estate-Mortgages                                  143,461              134,036
       Commercial                                                         89,354               87,269
       Consumer                                                           52,381               60,336
                                                                     -----------          -----------

          Total Loans                                                $   505,275          $   504,611
                                                                     ===========          ===========

</TABLE>

Note 4.  Allowance for Credit Losses
<TABLE>
<CAPTION>

       (dollars in thousands)                                            1999                  1998    
                                                                     -----------          -----------

<S>                                                                  <C>                  <C>        
       Balance at January 1                                          $     8,893          $     5,231
       Provision for the year                                                264                  317
       Recoveries on loans                                                   210                   42
                                                                     -----------          -----------
          Total                                                            9,367                5,590

       Less loans charged off                                              1,070                   52
       Allowance of purchased company                                      1,722                2,923
                                                                     -----------          -----------

       Balance at March 31                                           $    10,019          $     8,461
                                                                     ===========          ===========
</TABLE>


The  appropriateness  of the allowance for possible  credit losses is determined
based on a quarterly  detailed review of the loan portfolio,  off-balance  sheet
commitments, and recent economic projections.


                                      - 7 -

<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

FORWARD LOOKING STATEMENTS

         This  section of the  report may  contain  forward  looking  statements
within the meaning of the Private  Securities  Litigation  Act of 1995.  Certain
statements are included which may relate to management's beliefs,  expectations,
anticipation's  and plans  concerning,  among  other  things,  economic  trends,
interest  rates,  the Year 2000 issue,  and other matters.  Such  statements are
subject to numerous  uncertainties  including the effects of monetary  policies,
regulatory changes, levels of inflation,  unemployment,  consumer confidence and
the health of commercial  and  residential  real estate values in  Mason-Dixon's
market  area.  There can be no  assurance  that future  events  will  develop in
accordance with any forward looking statements contained herein.

SUMMARY

         Mason-Dixon  Bancshares,  Inc.  ("Mason-Dixon")  reported net income of
$2.527  million  for the first  quarter  of 1999,  an  increase  over the $2.511
million reported for the first quarter of 1998. On a per share basis (both basic
and diluted),  net income equaled $.50 for the first quarter of 1999 compared to
$.49 for 1998, up 2%.

         For the quarter,  annualized  return on average assets was .86% in 1999
compared to 1.00% for 1998, while return on average stockholders' equity equaled
12.86% compared to 13.47% for the same period for 1998.

         Results  for  the  first  quarter  include  Sterling   Bancorp,   which
Mason-Dixon  acquired on January 5, 1999. The acquisition is being accounted for
under the purchase method of accounting  therefore  historical  results have not
been restated to include Sterling Bancorp's Statement of Condition or Results of
Operations  for periods  prior to 1999.  Sterling  Bank and Trust Co.,  Sterling
Bancorp's  subsidiary,  operated as a separate affiliate of Mason-Dixon from the
date of acquisition  through February 12, 1999, at which time it was merged into
Mason-Dixon's Bank of Maryland  affiliate.  Mason-Dixon  recorded  approximately
$4.3 million in goodwill  associated with the acquisition and is amortizing this
amount over 15 years using the straight-line method.

         For the quarter, net interest income increased $1,114,000 (+12%) due to
normal growth in earning  assets,  and from the  acquisition  of Sterling Bank &
Trust Co. in January of 1999 and Rose Shanis  Financial  Services in February of
1998. Non-interest income decreased by $104,000 (+4%) as a result of lower gains
on sales of securities,  which declined by $164,000.  Other  operating  expenses
increased $1,263,000 (+16%) due to normal expense growth and additional expenses
for Sterling Bank & Trust Co. and Rose Shanis.

STATEMENT OF CONDITION

         Total  assets at March 31, 1999 were $1.187  billion,  up 13% over last
year. Loans totaled $505 million,  equal to last year.  Deposits increased by 6%
to $707 million. Excluding the changes in loans and deposits related to the sale
of 5 branches of Mason-Dixon's Bank of Maryland affiliate in June of 1998 and

                                      - 8 -

<PAGE>



the  acquisition  of Sterling  Bank & Trust Co.,  loans grew  approximately  $15
million  (+3%),  while  deposits grew $61 million  (+9%).  Stockholders'  equity
totaled $82 million.


INCOME STATEMENT - FIRST QUARTER

         Net interest  income  increased by $1.114  million  (12%) due to normal
growth in earning assets and from the acquisition of Sterling  Bancorp.  The net
interest  margin on earning  assets  decreased 5 basis points to 4.06%.  Average
earning assets increased $153 thousand (16%) while interest bearing  liabilities
increased $146 thousand (17%).

         Total other  operating  income  decreased 4% or $104 thousand.  Service
charge  income  decreased  by $57  thousand,  largely  due to the  sale  of five
branches of Mason-Dixon's  Bank of Maryland  affiliate in June of 1998. Gains on
sales  of  mortgage  loans  grew by $106  thousand  or 24%  due to  higher  loan
origination  of the Mortgage  Banking  Division of Carroll County Bank and Trust
Company (Mason-Dixon Bancshares Mortgage Company). Trust Division income grew by
$64 thousand or 17% due to growth in accounts under management. Securities gains
decreased by $164 thousand.  Other  operating  income  decreased by $53 thousand
also due to the sale of branches.

         Total other operating  expenses  increased by $1.263 million or 16% due
to the  additional  expenses of the Rose  Shanis  (acquired  February  1998) and
Sterling  Bancorp  (acquired  January 1999).  Most categories of other operating
expenses increased as a result of the acquisitions.

CAPITAL ADEQUACY

         At the end of the quarter,  the Company's  capital  leverage  ratio was
7.80%,  down  from  8.87% at the end of the year.  Tier 1 and  Total  Risk-based
ratios  were  12.91% and 15.96%  respectively  compared  to 14.99% and 18.30% at
December 31, 1998.  Regulatory  minimums to qualify as "well capitalized" are 5%
for capital  leverage,  6% for Tier 1 Risk-based,  and 10% for Total  Risk-based
capital.  Decreases  in the various  capital  adequacy  ratios were  largely the
result of the January 1999 purchase of Sterling Bancorp. This acquisition was an
all cash  purchase  accounted  for under  the  purchase  method  of  accounting,
therefore,  no equity was issued in the acquisition,  and the recorded  goodwill
totaled  approximately $4.3 million.  As a result,  qualifying levels of capital
decreased, while assets associated with the merger increased Mason-Dixon's total
assets and  risk-adjusted  assets.  This  combination  resulted in lower capital
ratios.

MARKET RISK DISCLOSURES - INTEREST RATE SENSITIVITY

         At the  end of the  quarter,  Mason-Dixon  had an  estimated  one  year
negative gap of $28 million on a consolidated  basis,  which was less than 3% of
assets. The negative one year gap at the end of the last quarter was $45 million
or 4% of total assets.  This position reflects a low level of interest rate risk
and would  indicate  longer term earnings  would  decrease  somewhat with higher
levels of interest  rates.  Management  believes  the overall  rate  sensitivity
position is appropriate for current rate conditions.

       Mason-Dixon tests its interest rate sensitivity through the deployment of
simulation  analysis.  An earnings  simulation  model is used to  estimate  what
effects  specific  interest  rate changes would have on one year of net interest
income.  Derivative  financial  instruments,  such as interest  rate swaps,  are
included in the

                                      - 9 -

<PAGE>



analysis.  Interest rate caps and floors on certain products are included to the
extent they become effective within one year. Changes in prepayment  assumptions
have been included  where changes in payment  behavior  pattern is assumed to be
different to the  simulation.  Call features on certain  securities are based on
their  projected call  probability in view of the assumed rate  environment.  At
March 31,  1998  Mason-Dixon's  estimated  earnings  profile  reflected a modest
sensitivity  to  interest  rate  changes.  Based on an assumed  100 basis  point
immediate increase in interest rates,  Mason-Dixon's  pretax net interest income
would  increase  by $249  thousand  (1%) if rates were to  increase by 100 basis
points, and decline by $759 thousand (2%) should rates fall by 100 basis points.

YEAR 2000 PREPAREDNESS

       This is a Year 2000 Readiness  Disclosure under the Year 2000 Information
and  Readiness  Disclosure  Act of 1998.  Mason-Dixon  continued its progress in
preparing  for the Year 2000 through the first  quarter.  The Year 2000 Issue is
the result of computer  programs and equipment  which are dependent on using two
digits  rather than four to define any  particular  year.  Any of  Mason-Dixon's
computer  programs or other  equipment  that are date  dependent may recognize a
date using "00" as the Year 1900 rather than the Year 2000. This could result in
a system  failure  or  miscalculations  causing  disruptions  of  operations,  a
temporary inability to process transactions, send invoices, or engage in similar
normal business activity.

       Mason-Dixon  has had in  place a task  force  which  has  been  preparing
information  technology  (IT) systems,  as well as non-IT systems for two years.
Representatives  of  the  task  force  regularly  update   Mason-Dixon's  Senior
Management and Board of Directors with progress  reports which outline  progress
and  future  timetables  for  completion  of  critical  phases  of the Year 2000
project.  Mason-Dixon  adopted a Year 2000 plan  developed  by its task force in
accordance  with  guidelines  set forth by the  Federal  Financial  Institutions
Examination  Council  (FFIEC).  Mason-Dixon  expects that all phases of its Year
2000 plan will be completed by the deadlines established by the FFIEC.

       The initial "assessment" phase of the Year 2000 project began in 1997 and
included an inventory of all systems (IT and non-IT)  with  potential  Year 2000
risk.  Critical IT systems,  which include item processing,  communications with
the Federal Reserve  ("Fedline"),  and core loan and deposit  processing systems
were  identified.  Critical non-IT systems which include  telephone and internal
communications  systems,  ATM's, and payroll were also  identified.  Vendors who
provide  various  systems were  contacted  to assess their Year 2000  readiness.
Mason-Dixon has completed its review of customized computer code included in the
data  processing  system  provided  by its primary  supplier of data  processing
services. The assessment phase is complete,  although it is updated periodically
as necessary.

       During  the  most  recent  quarter,   the  project  progressed  with  the
renovation and/or  replacement of systems to achieve Year 2000 readiness and the
testing of critical and non-critical systems.

       Test scripts were completed for testing critical  software as of December
31, 1998.  Mason-Dixon  has completed  testing of a significant  number (71%) of
systems  as of March 31,  1999 and  expects to  complete  testing  all  critical
applications  by June 30,  1999.  Mason-Dixon  expects to  complete  testing all
systems (critical and non-critical) by September 30, 1999. From vendor responses
and/or  certifications of Year 2000 compliance,  Mason-Dixon has determined that
several  critical IT and non-IT systems will have to be modified to achieve Year
2000 readiness or be replaced with Year 2000 compliant systems. Mason-Dixon does
not perform in-house  programming,  and thus is dependent on external vendors to
modify customized

                                     - 10 -

<PAGE>



software code.  Mason-Dixon's  primary supplier of data processing  services had
adopted a Year 2000 plan and  timetable and has provided  written  assurances to
Mason-Dixon of its progress and intention to achieve Year 2000 readiness of both
its standard system and customized computer code by March 31, 1999.  Mason-Dixon
expects  that  non-compliant  systems  will be  replaced or  renovated  prior to
January 1, 2000.

       The contingency  planning phase of Mason-Dixon's  Year 2000 project began
during the third  quarter of 1998 and was  completed by the end of January 1999.
This process incorporates both Business Redemption Plans and Business Resumption
Plans.  Business Redemption Plans identify alternative vendors with the capacity
to convert systems which are not Year 2000 compliant to compliant  systems prior
to the end of  1999.  Business  Resumption  Plans  establish  manual  procedures
capable of processing critical systems where transactions or volumes are limited
in the event of the most  reasonably  likely  worst case  scenario.  Contingency
plans will be tested by September 30, 1999.

       The expected cost of  modifications  and  replacements  to  non-compliant
systems is currently  estimated to be between  $700,000  and  $1,000,000  and is
being funded  through  operating  cash flows.  Through  March 31,  1999,  direct
expenses  related to the Year 2000 issue have been $623,000 and does not include
any  internal  personnel  costs.  In the  second  quarter  of 1998,  Mason-Dixon
recorded a charge to earnings of $700,000 for these estimated costs.

       During the second quarter of 1998,  Mason-Dixon completed a review of the
Year 2000 readiness of all  significant  borrowers.  Mason-Dixon  has determined
that the ability of some of Mason-Dixon's  customers to repay their  obligations
to  Mason-Dixon  may be impaired by their  ability to remedy their own Year 2000
issues. Mason-Dixon does not anticipate that such impairment will be significant
enough to materially impact its financial position.  Mason-Dixon's monitoring of
credit risk  attributable to the Year 2000 issue continued through the remainder
of 1998,  and resulted in a  year-to-date  increase in the  allowance for credit
losses of approximately $918,000.

       Mason-Dixon has distributed  surveys to determine the Year 2000 readiness
of significant funds providers to Mason-Dixon. Responses have been received from
a significant number of these providers, however, since Mason-Dixon's assessment
process is not yet  complete,  the  potential  for  unplanned  reductions in the
availability  of funds  from  significant  funding  sources  that have not taken
appropriate  steps to manage their own Year 2000  problems  exists.  Most of the
significant  funds  providers  are banks or bankers'  banks which are subject to
regulatory  oversight relating to the Year 2000 issue.  Follow-up and assessment
of the Year 2000  readiness of significant  funds  providers will continue until
determination  of  Year  2000  readiness  is  made.  Contingency  plans  will be
developed to provide  alternative funding sources should funds providers fail to
provide adequate assurance of Year 2000 readiness.

       Management  of  Mason-Dixon   believes  that  the  potential  effects  on
Mason-Dixon's  internal  operations  of the Year  2000  problem  can and will be
addressed  prior  to the  year  2000.  However,  if  required  modifications  or
conversions  are not made or are not  completed  on a timely  basis prior to the
year 2000, the Year 2000 problem could disrupt normal business  operations.  The
most reasonably  likely worst case Year 2000 scenarios  foreseeable at this time
would  include  Mason-Dixon  temporarily  not  being  able to  process,  in some
combination,  various  types of  customer  transactions.  This could  affect the
ability of Mason-Dixon  to, among other things,  originate new loans,  post loan
payments, accept deposits or allow immediate withdrawals,  and, depending on the
amount of time such a scenario  lasted,  could have material  adverse effects on
Mason-Dixon.

                                     - 11 -

<PAGE>




       Ultimately, the success of Mason-Dixon's efforts to address the Year 2000
issue  depends  to a large  extent  not  only on the  corrective  measures  that
Mason-Dixon  undertakes,  but  also on the  efforts  undertaken  by  businesses,
government  entities,  and other  independent  entities  who provide data to, or
receive  data  from,  Mason-Dixon,   such  as  borrowers,  vendors,  or  deposit
customers.  In  particular,   Mason-Dixon's  credit  risk  associated  with  its
borrowers may increase as a result of problems such borrowers may have resolving
their  own Year  2000  issues.  Although  it is not  possible  to  evaluate  the
magnitude of any potential increased credit risk at this time, the impact of the
Year 2000 issue on borrowers  could  result in  increases  in problem  loans and
credit losses in future years.

       The entire cost of the project and projected  completion  dates are based
on management's best estimates, which were derived using numerous assumptions of
future events.  There can be no guarantee that these  estimates will be achieved
and actual  results could  materially  differ from the  estimates.  Factors that
might affect the timely and  efficient  completion  of  Mason-Dixon's  Year 2000
projects  include,  but are not limited to,  vendors'  abilities  to  adequately
correct or convert software and the effect on Mason-Dixon's  ability to test its
systems,  the  availability  and the cost of personnel  trained in the Year 2000
area, and the ability to identify and correct all relevant computer programs and
similar uncertainties.

       Bank regulatory  agencies have recently issued additional  guidance under
which  they are  assessing  Year 2000  readiness.  The  failure  of a  financial
institution to take appropriate action to address  deficiencies in the Year 2000
project management process may result in enforcement  actions which could have a
material  adverse  effect on  Mason-Dixon,  result in civil money  penalties  or
result in the  delay of  applications  seeking  to  acquire  other  entities  or
otherwise expand activities.

PART II  -  OTHER INFORMATION

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

       None.

ITEM 5.  OTHER INFORMATION

         The Mason-Dixon Board of Directors has scheduled  Mason-Dixon's  Annual
Meeting of  Stockholders  currently  for July 12,  1999,  at 10:00 a.m.,  at the
Wakefield Valley Golf Club, 1000 Fenby Farm Road, Westminster, Maryland 21158 to
(1)  consider  and vote upon a proposal  to approve  the  Agreement  and Plan of
Reorganization,   dated  January  27,  1999  (the  "Merger  Agreement')  between
Mason-Dixon  and BB&T  Corporation,  a North Carolina  corporation  ("BB&T") and
related plan of merger,  pursuant to which  Mason-Dixon will merge with and into
BB&T  (the  "Merger")  and  each  share of  common  stock  of  Mason-Dixon  then
outstanding  will be  converted  into the right to receive 1.30 shares of common
stock of BB&T, plus cash in lieu of any fractional share interest;  (2) to elect
four  Class I  directors  of  Mason-Dixon  to serve  until  the  earlier  of the
effective time of the Merger,  the 2002 Annual Meeting of Stockholders,  or such
time as their  respective  successors  are  elected  and  qualified;  and (3) to
transact such other business as may be properly brought before the meeting or at
any and all adjournments or postponements  thereof. If a stockholder intended to
present a stockholder  proposal at the Annual Meeting pursuant to SEC Rule 14a-8
(for inclusion in the Mason- Dixon proxy  statement),  the stockholder must have
notified  Mason-Dixon of such intention by May 5, 1999. If a stockholder intends
to present a stockholder  proposal at the Annual  Meeting in a manner other than
the  inclusion  of the  proposal in  Mason-Dixon's  proxy  statement,  the proxy
holders named by Mason-Dixon may exercise their  discretionary  voting authority
on the matter in  accordance  with their best  judgment  unless the  stockholder
notified Mason-Dixon of such intention by May 5, 1999.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

       a.  Exhibits

       3.2 Mason-Dixon  Bancshares,  Inc. Bylaws, Restated on November 27, 1996,
and Amended on October 22, 1997,  January 28, 1998, April 18, 1998,  January 25,
1999, and April 14, 1999, filed herewith.

       27 Financial Data Schedule, filed electronically herewith.


       b.  Reports on Form 8-K

       On  January 8, 1999,  Mason-Dixon filed on Form 8-K its announcement that
it  had  completed  its  acquisition  of Sterling  Bancorp,  a  privately  held,
Baltimore-based  bank holding  company.  This event was reported under Item 5 on
Form 8-K.


                                     - 12 -

<PAGE>



       On January 29, 1999,  Mason-Dixon filed on Form 8-K its announcement that
it  had  entered  into  an  Agreement  and  Plan  of  Reorganization  with  BB&T
Corporation of Winston-Salem, North Carolina. Under the terms of this agreement,
Mason-Dixon would be acquired by BB&T Corporation. This event was reported under
item 5 on Form 8-K.


                                   SIGNATURES


       Pursuant to the requirements 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.


                                     MASON-DIXON BANCSHARES, INC.

   May 13, 1999                      /s/ Thomas K. Ferguson        
                                     ------------------------------
                                     By:  Thomas K. Ferguson
                                          President/Chief Executive Officer


   May 13, 1999                      /s/ Mark A. Keidel              
                                     --------------------------------
                                     By:  Mark A. Keidel
                                          Vice President/Chief Financial Officer




F7532.600

                                     - 13 -