================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K/A

(Mark One)

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934 [NO FEE REQUIRED]

For the fiscal year ended December 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 No. 33-62278


                              GLEN BURNIE BANCORP
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


             MARYLAND                                      52-1782444
 ---------------------------------                    --------------------
   (State or other jurisdiction                         (I.R.S. Employer
 of incorporation or organization)                     Identification No.)

101 CRAIN HIGHWAY, S.E., GLEN BURNIE, MARYLAND                21061
----------------------------------------------           ---------------
  (Address of principal executive offices)                 (Zip Code)


       Registrant's telephone number, including area code: (410) 766-3300


   Securities registered pursuant to Section 12(b) of the Act: Not Applicable


   Securities registered pursuant to Section 12(g) of the Act: Not Applicable


Indicate by check mark whether the registrant (1) has filed all reports required
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or 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 [ ]

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 June 30, 1997, the aggregate market value of the registrant's voting stock
held by non-affiliates was approximately $13,632,625 based on the closing sales
price of $25.00 per share of the registrant's Common Stock on such date as
quoted on the OTC Bulletin Board. For purposes of this calculation only, it is
assumed that directors, officers and beneficial owners of more than 5% of the
registrant's outstanding voting stock are deemed affiliates.

Number of shares of Common Stock outstanding as of June 30, 1997:  883,858

================================================================================

<PAGE>

                                     PART I

Item 1.  Business

          Glen Burnie Bancorp (the "Company") is a bank holding company
organized in 1990 under the laws of the State of Maryland. It presently owns all
the outstanding shares of capital stock of The Bank of Glen Burnie (the "Bank"),
a commercial bank organized in 1949 under the laws of the State of Maryland,
serving Anne Arundel County and surrounding areas from its main office in Glen
Burnie, Maryland and branch offices in Odenton, Riviera Beach, Crownsville and
Severn, Maryland. The Bank is engaged in the commercial and retail banking
business as authorized by the banking statutes of the State of Maryland,
including receiving of demand and time deposits, and the making of loans to
individuals, associations, partnerships and corporations. Real estate financing
consists of residential first and second mortgage loans, home equity lines of
credit and commercial mortgage loans. Commercial lending consists of both
secured and unsecured loans. The Bank's deposits are insured up to applicable
limits by the Federal Deposit Insurance Corporation ("FDIC").

          The Company's principal executive office is located at 101 Crain
Highway, S.E., Glen Burnie, Maryland 21061. Its telephone number at such office
is (410) 766-3300.

Market Area

          The Bank considers its principal market area for lending and deposit
products to consist of Northern Anne Arundel County, Maryland. Northern Anne
Arundel County is a mature suburb of the City of Baltimore which in recent years
has experienced modest population growth and is characterized by an aging
population. Management believes that the majority of the working population in
its market area either commutes to Baltimore or is employed at the nearby
Baltimore Washington International airport. Anne Arundel County is generally
considered to have more affordable housing than other suburban Baltimore areas
and has begun to attract younger persons and minorities on this basis. This
inflow, however, has not been sufficient to affect current population trends.

Risk of Continued Losses

          During the years ended December 31, 1996 and 1995, the Company
reported consolidated net losses of $1.020 million and $1.727 million,
respectively. These results included substantial provisions for credit losses of
$6.596 million made in 1996 and $7.925 million made in 1995 to bolster the
Company's consolidated allowance for credit losses which was being depleted due
to substantial loan quality deterioration. Net charge-offs were $5.233 million
during 1996 and $6.991 million during 1995.

          The ability of the Company to recover from its consolidated net loss
position is largely dependent on the quality and level of the Bank's earning and
nonperforming assets, the interest rate environment and the adequacy of the
provision for credit losses. The real estate market in Anne Arundel County,
Maryland, the area where the Bank conducts its business, and the overall economy
in such area is likely to continue to have a significant effect on the quality
and level of the Bank's assets in the future. While the consolidated allowance
for credit losses of $5.061 million at the end of 1996 represented less than
3.9% of the Bank's gross loans, it represented 85.0% of its impaired loans.
Although this allowance is intended to cover known and inherent risks in the
loan portfolio, the allowance is an estimate which is inherently uncertain and
depends on the outcome of future events. There can be no assurance that
substantial future provisions for credit losses will not be required, or that
such provisions will not adversely impact the Bank's results of operations in
any given reporting period or over a longer period of time. Moreover, there can
be no assurance that the Bank will not continue to make loan charge-offs in the
future or that the allowance for credit losses will be sufficient to cover
future loan charge-offs.



                                       1
<PAGE>

Recent Loan Loss Experience Involving Significant Borrowers

          The Bank had outstanding loans to Mr. Brian Davis and various entities
and persons affiliated with him aggregating approximately $6.0 million. The
major borrowers in the affiliated group have filed bankruptcy proceedings and
significant recovery by the Bank on these loans is unlikely. As a result of the
foregoing, all but $30,000 of these loans have been charged-off.

          Mr. Davis has pled guilty to committing fraud against the Bank and
various other banks. The Bank's former chief lending officer, Steven G. Boyd,
has pled guilty to accepting bribes from Mr. Davis in return for approving loans
to Mr. Davis and related entities and to straw borrowers. The Federal grand jury
indictment against Mr. Boyd alleged, among other things, that he approved and
recommended loans for Mr. Davis and his affiliates and in addition approved
loans from the Bank of approximately $500,000 to "straw men" the proceeds of
which he knew were for the benefit of Mr. Davis in violation of the Bank's limit
on the amount that could be lent to related borrowers. The United States
Attorney's Office has stated that the investigation which led to Mr. Boyd's
indictment and Mr. Davis's conviction is continuing.

          At December 31, 1996, an equipment and automobile leasing entity and
its affiliates had approximately $6,218,000 in outstanding lease loans on which
approximately $700,000 in charge-offs had been taken during 1996. The Bank has
ceased approving new loans for these customers due to concerns about the quality
of certain of the loans and leases.

Memoranda of Understanding

          Effective June 13, 1996, the Board of Directors, the FDIC and the
Maryland State Bank Commissioner (the "Commissioner") entered into a Memorandum
of Understanding ("M.O.U.") which required the Bank to establish written
programs to reduce classified assets and contingent liabilities and to report to
the FDIC and the Commissioner quarterly on the status of such assets and
liabilities, to collect or charge-off certain classified loans, to maintain
ratios relating to capital and to delinquent and non-accrual loans, to provide
the FDIC and the Commissioner with thirty days notice prior to dividend
declaration, to develop an internal loan review and grading system, policies for
loan underwriting and administration, a strategic plan for improving operations
and budgets, and policies and monitoring systems for liquidity and interest rate
risk, to evaluate the allowance for loan and lease losses quarterly, to engage a
chief lending officer, to cease any violations of law or regulations cited by
the FDIC or the Commissioner, and to establish a committee of three directors to
monitor compliance with the M.O.U.

          Effective July 10, 1997, the Board of Directors entered into a revised
Memorandum of Understanding (the "Revised M.O.U.") with the FDIC and the
Commissioner which supersedes the June 13, 1996 M.O.U. Under the Revised M.O.U.,
the Bank may not declare or pay any dividends to the Company without the prior
written consent of the FDIC and the Commissioner if the ratio of the Bank's Tier
1 capital to assets would be less than 6.0%. Dividends to the Company may not
exceed 50% of net operating income after taxes for the period declared without
the prior written consent of the FDIC and the Commissioner. Within 360 days of
the Effective Date of the Revised M.O.U., the Bank is required to reduce its
classified assets to 25% of Tier 1 Capital plus its Allowance for Loan and Lease
Losses and to reduce its ratio of non-accrual loans and loans 30 days or more
past due to no more than 3.5% of gross loans. Additionally, the Bank will adopt
and implement an internal loan review and grading system meeting certain
criteria and make certain changes in existing policies and in its strategic
plan.

          Should the Bank fail to comply with the provisions of the M.O.U., the
FDIC or the Commissioner could seek to impose greater sanctions on the Bank.
Enforcement actions may include the issuance of formal and informal agreements,
the imposition of civil money penalties and the issuance of a cease-and-desist
order that can be judicially enforced. Neither the FDIC nor the Commissioner has
sought to initiate any such measures.

                                       2
<PAGE>

Lending Activities

          The Bank offers a full range of consumer and commercial loans. The
Bank's lending activities include residential and commercial real estate loans,
construction loans, land acquisition and development loans, equipment and
automobile lease financing, commercial loans and consumer installment lending.
Substantially all of the Bank's loan customers are residents of Anne Arundel
County and surrounding areas of Central Maryland. The Bank solicits loan
applications for commercial loans from small to medium sized businesses located
in its market area. The Bank believes that this is a market in which a
relatively small community bank, like the Bank, has a competitive advantage in
personal service and flexibility. The Bank's lease financing portfolio consists
of loans purchased from third party originators.

          During the last fiscal year, the Bank's loan portfolio significantly
decreased in size primarily due to declines in the size of construction and land
development portfolio and in its lease financing and demand and time loan
portfolio. The declines in the construction and land development portfolio
reflect the significant increase in such lending in fiscal year 1994 which was
not sustained in subsequent years. The Bank has decided to decrease its
equipment and automobile lease-based lending because of the difficulties
encountered in monitoring the financial condition of borrowers on purchased
leases. The declines in the demand and time loan portfolio reflect in part the
substantial charge-offs which the Bank has taken during the past two fiscal
years.



                                       3
<PAGE>

          The following table provides information on the composition of the
loan portfolio at the indicated dates.

<TABLE>
<CAPTION>


                                                                      At December  31,
                       -------------------------------------------------------------------------------------------------------
                                1996                1995                 1994               1993                  1992
                           $          %         $          %        $          %         $         %          $           %
                       --------    ------    --------   ------   --------   ------    --------  -------    --------    ------

                                                     (Dollars in thousands)

<S>                    <C>          <C>      <C>         <C>     <C>         <C>      <C>         <C>      <C>          <C>   
Real estate..........  $ 88,923     68.54%   $ 98,422    63.84%  $ 94,715    60.49%   $ 85,313    59.07%   $ 77,855     59.92%
Installment..........    22,281     17.17      27,898    18.10     32,352    20.66      27,537    19.07      21,706     16.70
Credit card..........     1,434      1.11       1,484     0.96      1,233     0.79         953     0.66         264      0.20
Commercial...........    17,095     13.18      26,366    17.10     28,278    18.06      30,615    21.20      30,130     23.18
                       --------    ------    --------   ------   --------   ------    --------  -------    --------    ------
                        129,733    100.00%    154,170   100.00%   156,578   100.00%    144,418   100.00%    129,955    100.00%
Allowance for 
  credit losses .....     5,061                 3,698               2,764                2,552                1,756
                       --------              --------            --------             --------             --------
Loans, net ..........  $124,672              $150,472            $153,814             $141,866             $128,199
                       ========              ========            ========             ========             ========
</TABLE>




          The following table sets forth the maturities for various categories
of the loan portfolio at December 31, 1996. Demand loans and loans which have no
stated maturity are treated as due in one year or less. At December 31, 1996,
the Company had $14,654,857 in loans due after one year with variable rates and
$103,876,394 in such loans with fixed rates. The Bank's long-term real estate
loans allow the Bank to call the loan after three years in order to adjust the
interest rate if necessary. The Bank has generally not exercised its call option
and the following table assumes no exercise of the Bank's call option.

                                       Due Over
                       Due Within     One to Five     Due Over
                       One Year          Years       Five Years         Total
                       --------          -----       ----------         -----
                                        (In thousands)

Real Estate........    $ 5,546         $10,802         $72,575        $ 88,923
Installment........      1,095          18,557           2,629          22,281
Credit Card........      1,434              --              --           1,434
Commercial.........      3,127          13,475             493          17,095
                       -------         -------         -------        --------
                       $11,202         $42,834         $75,697        $129,733
                       =======         =======         =======        =========



                                       4
<PAGE>





          Real Estate Lending. The Bank offers long-term mortgage financing for
residential and commercial real estate as well as shorter term construction and
land development loans. At December 31, 1996, the Bank had $35.6 million in
residential mortgages, $47.8 million in commercial mortgages and $5.5 million in
construction and land development loans. Residential mortgage and residential
construction loans are originated with fixed rates while commercial mortgages
may be originated on either a fixed or variable rate basis. Commercial
construction loans are generally originated on a variable rate basis. The Bank's
long-term, fixed-rate mortgages include a provision allowing the Bank to call
the loan after three years in order to adjust the interest rate. The Bank,
however, has never exercised this right. Substantially all of the Bank's real
estate loans are secured by properties in Anne Arundel County, Maryland. Under
the Bank's loan policies, the maximum permissible loan-to-value ratio for
owner-occupied residential mortgages is 80% of the lesser of the purchase price
or appraised value. For residential investment properties, the maximum
loan-to-value ratio is 75%. The maximum permissible loan-to-value ratio for
residential and commercial construction loans is 80%. The maximum loan-to-value
ratio for permanent commercial mortgages is 75%. The maximum loan-to-value ratio
for land development loans is 70% and for unimproved land is 65%. The Bank also
offers home equity loans secured by the borrower's primary residence provided
that the aggregate indebtedness on the property does not exceed 80% of its
value.


          Commercial Lending. The Bank's commercial loan portfolio consists
principally of demand and time loans for commercial purposes and purchased lease
financings. The Bank's business demand and time lending includes various working
capital loans, lines of credit and letters of credit for commercial customers.
Demand loans require the payment of interest until called while time loans
require a single payment of principal and interest at maturity. Such loans may
be made on a secured or an unsecured basis. All such loans are underwritten on
the basis of the borrower's creditworthiness rather than the value of the
collateral. The Bank's lease financing portfolio includes leases on various
types of commercial equipment that have been purchased from various vendors. The
Bank has determined to de-emphasize lease financing because of the difficulties
encountered in monitoring the financial condition of borrowers on purchased
leases.

          Installment Lending. The Bank makes consumer and commercial
installment loans for the purchase of automobiles, boats, other consumer durable
goods, capital goods and equipment. Such loans provide for repayment in regular
installments and are secured by the goods financed. Also included in installment
loans are overdraft loans and other credit repayable in installments. As of
December 31, 1996, approximately $9,834,381, or 44%, of the installment loans in
the Bank's portfolio had been originated for commercial purposes and
$12,446,283, or 56%, had been originated for consumer purposes.

          Credit Card and Related Loans. Credit card and related loans consist
of outstanding balances on credit cards and overdraft lines of credit. The Bank
offers no annual fee VISA(R) and MasterCard(R) credit cards to qualified
customers. Credit card billing and payment processing is done for the Bank by an
unaffiliated third party which receives a fee for such services. The Bank's
overdraft protection line of credit is offered as a convenience to qualified
customers.

          Although the risk of non-payment for any reason exists with respect to
all loans, certain other specific risks are associated with each type of loan.
The primary risks associated with commercial loans, including commercial real
estate loans, are the quality of the borrower's management and a number of
economic and other factors which induce business failures and depreciate the
value of business assets pledged to secure the loan, including competition,
insufficient capital, product obsolescence, changes in the cost of production,
environmental hazards, weather, changes in laws and regulations and general
changes in the marketplace. Primary risks associated with residential real
estate loans include fluctuating land and property values and rising interest
rates with respect to fixed-rate, long-term loans. Residential construction
lending exposes the Company to risks related to builder performance. Consumer
loans are affected primarily by domestic instability and a variety of factors
that may lead to the borrower's unemployment, including deteriorating economic
conditions in one or more segments of a local or broader economy.

                                       5
<PAGE>

          The Bank's lending activities are conducted pursuant to written
policies approved by the Board of Directors intended to ensure proper management
of credit risk. Loans are subject to a well defined credit process that includes
credit evaluation of borrowers, establishment of lending limits and application
of lending procedures, including the holding of adequate collateral and the
maintenance of compensating balances, as well as procedures for on-going
identification and management of credit deterioration. Regular portfolio reviews
are performed by the Senior Credit Officer to identify potential underperforming
credits, estimate loss exposure and to ascertain compliance with the Bank's
policies. On a quarterly basis, the internal auditor performs an independent
loan review. For significant problem loans, management review consists of
evaluation of the financial strengths of the borrower and the guarantor, the
related collateral, and the effects of economic conditions.

          The Bank's loan approval policy provides for various levels of
individual lending authority. The maximum lending authority granted by the Bank
to any one individual is $500,000. A combination of approvals from certain
officers may be used to lend up to an aggregate of $750.000. The Bank's
Executive Committee is authorized to approve loans up to $1,000,000. Larger
loans must be approved by the full Board of Directors.

          Under Maryland law, the maximum amount which the Bank is permitted to
lend to any one borrower and their related interests may generally not exceed
10% of the Bank's unimpaired capital and surplus which is defined to include the
Bank's capital, surplus, retained earnings and 50% of its reserve for possible
loan losses. Under this authority, the Bank would have been permitted to lend up
to $2.1 million to any one borrower at December 31, 1996. By interpretive ruling
of the Commissioner, Maryland banks have the option of lending up to the amount
that would be permissible for a national bank which is generally 15% of
unimpaired capital and surplus (defined to include a bank's total capital for
regulatory capital purposes plus any loan loss allowances not included in
regulatory capital). Under this formula, the Bank would have been permitted to
lend up to $3.4 million to any one borrower at December 31, 1996. It is
currently the Bank's policy to limit its exposure to any one borrower to no more
than $1.8 million in the aggregate unless the loan is approved by a 75% vote of
the Board of Directors. At December 31, 1996, the largest amount outstanding to
any one borrower and their related interests was $3.2 million.

Non-Performing Loans

          It is the current policy of the Bank to discontinue the accrual of
interest when a loan becomes 90 days or more delinquent and circumstances
indicate that collection is doubtful. For fiscal years prior to the 1996 fiscal
year, the Bank's policy was to consider real estate loans on a case-by-case
basis subject to collateral. For the year ended December 31, 1996, interest of
approximately $457,035 would have been accrued on non-accrual loans if such
loans had been current in accordance with their original terms. During that
time, $28,822 in interest on such loans was included in income.



                                       6
<PAGE>

          The following table sets forth the amount of the Bank's non-accrual
loans and accruing loans 90 days or more past due at the dates indicated. At
each of the dates indicated, the Bank did not have any troubled debt
restructurings within the meaning of Statement of Financial Accounting Standards
No. 15.
<TABLE>
<CAPTION>

                                                                                 At December 31,
                                                       --------------------------------------------------------------------
                                                         1996          1995           1994          1993           1992
                                                       --------      --------       -------       --------       ------
                                                                               (Dollars in thousands)
<S>                                                    <C>           <C>            <C>           <C>            <C>       
Non-accrual Loans:
   Real estate....................................     $  4,000      $   1,086      $     556     $      800     $      925
   Installment....................................          168            165             25             15             39
   Credit card & related .........................            0              4              0              0              0
   Commercial.....................................          378          1,120             74            299             43
                                                       --------      ---------      ---------     ----------     ----------
      Total Nonaccrual Loans......................        4,546          2,375            655          1,114          1,007
                                                       --------      ---------      ---------     ----------     ----------
Accruing Loans Past Due 90 Days or More:
   Real Estate....................................           87          2,967          2,604          1,602          1,702
   Installment....................................            0            300              0              0              0
   Credit card & related .........................            0             28              5             19              0
   Commercial.....................................            0            610            310            424              0
                                                       --------      ---------      ---------     ----------     ----------
      Total Accruing Loans Past Due 90 days
         or More..................................           87          3,905          2,919          2,045          1,702
                                                       --------      ---------      ---------     ----------     ----------
      Total Non-Performing Loans..................     $  4,633      $   6,280      $   3,574     $    3,159     $    2,709
                                                       ========      =========      =========     ==========     ==========
      Non-Performing Loans to Total Loans.........         3.72%          4.17%          2.32%          2.23%          2.11%
                                                       ========      =========      =========     ==========     ==========
      Allowance for Credit Losses to
         Non-Performing Loans ....................       109.24%         58.89%         77.39%         80.79%         64.78%
                                                       ========      =========      =========     ==========     ==========

</TABLE>

          Approximately $3,454,234, or 74.6% of the Bank's non-accrual loans at
December 31, 1996 were attributable to ten borrowers. Charge-offs of $528,805
have previously been taken on these loans. Five of these borrowers with loans
totaling $1,501,490 were in bankruptcy at that date. Because of the legal
protections afforded to borrowers in bankruptcy, collections on such loans are
difficult and the Bank anticipates that such loans may remain delinquent for an
extended period of time. Each of these loans is secured by collateral with a
value well in excess of the principal amount of the Bank's loan.

          At December 31, 1996, there were $1,408,000 in loans outstanding not
reflected in the above table as to which known information about possible credit
problems of borrowers caused management to have serious doubts as to the ability
of such borrowers to comply with present loan repayment terms. Such loans
consist of loans which were not 90 days or more past due but where the borrower
is in bankruptcy or has a history of delinquency or the loan to value ratio is
considered excessive due to deterioration of the collateral or other factors.

          At December 31, 1996 and 1995, the Company had $602,000 and $432,926,
respectively, in real estate acquired in partial or total satisfaction of debt.
As of December 31, 1996, a subsidiary of the Company, GBB Properties, Inc.
("GBB"), owned two parcels of real estate obtained from foreclosures by the
Bank. The book values of these properties were $143,000. One was a residential
property which could be used for certain commercial purposes which was
subsequently sold for $155,000 ($25,500 over its book value). The other
consisted of office condominiums. GBB also intends to sell this property. At
December 31, 1996, the Bank owned three foreclosed real estate properties having
a book value of $329,785. They consisted of residential property which the Bank
was holding for sale. All such properties are recorded at the lower of cost or
fair value at the date acquired and carried on the balance sheet as other real
estate owned. Losses arising at the date of acquisition are charged against the
allowance of credit losses. Subsequent write-downs that may be required and
expense of operation are included in non-interest expense. Gains and losses
realized from the sale of other real estate owned are included in non-interest
income or expense.



                                       7
<PAGE>
Allowance for Credit Losses

          The allowance for credit losses is established through a provision for
credit losses charged to expense. Loans are charged against the allowance for
credit losses when management believes that the collectibility of the principal
is unlikely. The allowance, based on evaluations of the collectibility of loans
and prior loan loss experience, is an amount that management believes will be
adequate to absorb possible losses on existing loans that may become
uncollectible. The evaluations take into consideration such factors as changes
in the nature and volume of the loan portfolio, overall portfolio quality,
review of specific problem loans, and current economic conditions and trends
that may affect the borrowers' ability to pay.

          Transactions in the allowance for credit losses during the last five
fiscal years were as follows:
<TABLE>
<CAPTION>
                                                                       Year Ended December 31,
                                                  ---------------------------------------------------------------
                                                    1996           1995         1994          1993         1992
                                                  --------       --------     --------      --------     ------
                                                                            (Dollars in thousands)
<S>                                              <C>          <C>           <C>           <C>          <C>       
Beginning balance..............................  $     3,698  $     2,764   $     2,552   $    1,755   $      993
                                                 -----------  -----------   -----------   ----------   ----------
Loans charged off
     Real estate...............................        1,047        1,541           425           98          193
     Installment...............................          786          270            29           41           25
     Credit card & related ....................          182          194             1            1            7
     Commercial................................        3,453        5,056           520          194           73
                                                 -----------  -----------   -----------   ----------   ----------
          Total................................        5,468        7,061           975          334          298
                                                 -----------  -----------   -----------   ----------   ----------
Recoveries
     Real estate...............................          103           33            18            1           41
     Installment...............................           57           11            20           19           16
     Credit card & related ....................            2            0             0            0            0
     Commercial................................           73           26            29           31            3
                                                 -----------  -----------   -----------   ----------   ----------
         Total.................................          235           70            67           51           60
                                                 -----------  -----------   -----------   ----------   ----------
Net charge-offs................................        5,233        6,991           908          385          238
Provisions charged to operations...............        6,596        7,925         1,120        1,080        1,000
                                                 -----------  -----------   -----------   ----------   ----------
Ending balance.................................  $     5,061  $     3,698   $     2,764   $    2,552   $    1,755
                                                 ===========  ===========   ===========   ==========   ==========
Average loans..................................  $   146,922  $   156,219   $   151,933   $  139,280   $  116,783
Net charge-offs to average loans...............        3.56%         4.48%         0.60%        0.20%        0.19%
</TABLE>

          The Bank's high level of loan charge-offs during the last two fiscal
years is primarily attributable to its lending relationships with Mr. Brian
Davis and various affiliated entities. See " -- Recent Loan Loss Experience
Involving Significant Borrowers." Such loans primarily consisted of loans for
purchases of trucks and other non-real estate secured loans which are
categorized under commercial loans in the above table. In addition, during
fiscal year 1996, the Bank began charging off all non-real estate secured loans
upon 90 days delinquency which contributed to a continued high level of
charge-offs.


                                       8
<PAGE>

          The following table shows the allowance for credit losses broken down
by loan category as of December 31, 1996. Such information for earlier periods
is not available.





                                              At December 31, 1996
                                    -----------------------------------------
                                     Reserve               Percent of Loans
                                    for Each               in Each Category
          Portfolio                 Category                to Total Loans
          ---------                 --------                --------------
                                              (Dollars in thousands)

          Real Estate.............    $2,109                     68.54%
          Installment.............       448                     17.17
          Credit Card.............        49                      1.11
          Commercial..............     2,455                     13.18
          Unallocated.............        --                        --
                                      ------                    ------
                Total.............    $5,061                    100.00%
                                      ======                    ======
                                      

Investment Securities

          The Bank maintains a substantial portfolio of investment securities to
provide liquidity as well as a source of earnings. The Bank's investment
securities portfolio consists primarily of U.S. Treasury securities as well as
securities issued by U.S. government agencies including mortgage-backed
securities. The Bank also invests in obligations of certain states and their
political subdivisions.

          The following table presents at amortized cost the composition of the
investment portfolio by major category at the dates indicated.

                                                        At December 31,
                                                 ------------------------------
                                                  1996          1995      1994
                                                 -------      -------   -------
                                                      (In thousands)

   U.S. Treasury securities ..................   $13,061      $15,071   $17,099
   U.S. Government agencies and
       mortgage-backed securities.............    56,607       30,235    22,162
   Obligations of states and political
       subdivisions...........................    25,726       27,380    20,471
   Other securities and stock.................       748          699       685
                                                 -------      -------   -------
   Total investment securities................   $96,142      $73,385   $60,417
                                                 =======      =======   =======





                                       9
<PAGE>

          The following table sets forth the scheduled maturities, book values
and weighted average yields for the Company's investment securities portfolio at
December 31, 1996. Weighted average yields for obligations of states and
political subdivisions are presented on a tax-equivalent basis.

<TABLE>
<CAPTION>
                                        One Year or Less  One to Five Years  Five to Ten Years More than Ten Years      Total
                                       -----------------  -----------------  ----------------- ------------------- ----------------
                                                Weighted           Weighted          Weighted           Weighted           Weighted
                                        Book    Average    Book    Average   Book    Average   Book     Average     Book   Average
                                        Value    Yield     Value    Yield    Value    Yield    Value     Yield      Value   Yield
                                       ------    -----     -----    -----    -----    -----    -----     -----     -------  -----
                                                                            (Dollars in thousands)

<S>                                    <C>       <C>     <C>        <C>     <C>        <C>    <C>        <C>       <C>       <C>  
U.S. Treasury securities               $3,999    5.89%   $ 6,342    6.00%   $ 2,720    6.08%  $    --      --%     $13,061   5.99%
U.S. Government agencies and
 mortgage-backed securities                --     --      22,318    6.61     20,885    7.16    13,404    7.16       56,607   6.84
Obligations of states and political
 subdivisions                             231    8.47      2,179    9.09      8,873    8.68    14,443    7.70       25,726   8.16
Other securities and stock                748    7.25         --      --         --      --        --      --          748   7.25
                                       ------    ----    -------    ----    -------    ----   -------    ----      -------   ----
     Total investment securities       $4,978    6.21%   $30,839    6.66%   $32,478    7.48%  $27,847    7.44%     $96,142   7.08%
                                       ======    ====    =======    ====    =======    ====   =======    ====      =======   ====

</TABLE>

          At December 31, 1996, the Bank had no investments in securities of a
single issuer (other than the U.S. government securities and securities of
federal agencies and government-sponsored enterprises) which aggregated more
than 10% of stockholders' equity other than its investments in Maryland State,
County and Municipal securities which had an aggregate book value of $17.0
million and aggregate market value of $17.5 million at that date and its
investments in Pennsylvania State, County and Municipal securities which had a
book value of $8.7 million and a market value of $8.8 million at that date. The
foregoing totals include securities payable from or secured by different sources
of revenue or taxing authorities.


Deposits and Sources of Funds

          The funds needed by the Bank to make loans are generated by deposit
accounts solicited from the communities surrounding its main office and five
branches in northern Anne Arundel county. Consolidated total deposits were
$232,745,975 as of December 31, 1996. In addition, the Bank may borrow up to $26
million under a line of credit from the Federal Home Loan Bank of Atlanta.

          The Bank's deposit products include regular savings accounts
(statements), money market deposit accounts, demand deposit accounts, NOW
checking accounts, IRA accounts and certificates of deposit accounts. Variations
in service charges, terms and interest rates are used to target specific
markets. Ancillary products and services for deposit customers include safe
deposit boxes, money orders and travelers checks, night depositories, automated
clearinghouse transactions, wire transfers, automated teller machines, telephone
banking, and a customer call center.

          The Bank obtains deposits principally through its network of six
offices. The Bank does not solicit brokered deposits. At December 31, 1996, the
Bank had approximately $12.1 million in certificates of deposit and other time
deposits of $100,000 including IRA accounts. The following table provides
information as to the maturity of all time deposits of $100,000 or more at
December 31, 1996.
                                                           Amount
                                                      --------------
                                                      (In thousands)

               Three months or less                     $     1,614
               Over three through six months                  1,757
               Over six through 12 months                     2,366
               Over 12 months                                 6,423
                                                        -----------
                   Total                                $    12,130
                                                        ===========




                                       10
<PAGE>



Competition

          The Bank faces competition from other community banks and financial
institutions and larger intrastate and interstate banks and financial
institutions compete vigorously (currently, twelve financial institutions
operate within two miles of the Bank's headquarters). Former directors of the
Bank, including its former Chief Executive Officer, have established a new bank
with a main office in Glen Burnie close to the Bank's headquarters. The Bank
anticipates that this new bank will solicit a significant number of its
customers.

          The Bank's interest rates, loan and deposit terms, and offered
products and services are governed, to a large extent, by such competition. The
Bank attempts to provide superior service within its community and to know and
facilitate services to its customers. It seeks commercial relationships with
small to medium size businesses which, it believes, would welcome personal
service and flexibility. While it believes it is the sixth largest deposit
holder in Anne Arundel County, Maryland, with an estimated 5.74% market share as
of June 1996 (the latest date for which the Bank has relevant data available),
it believes its greatest competition comes from smaller community banks which
offer similar personalized services.

Other Activities

          The Company also owns all outstanding shares of capital stock of GBB
Properties, Inc. ("GBB"), another Maryland corporation which was organized in
1994 and which is engaged in the business of acquiring, holding and disposing of
real property, typically acquired in connection with foreclosure proceedings (or
deeds in lieu of foreclosure) instituted by the Bank or acquired in connection
with branch expansions by the Bank. No branch expansion occurred in 1996.

Employees

          At December 31, 1996, the Bank had 151 employees. Neither the Company
nor GBB currently has any employees.


                           SUPERVISION AND REGULATION

Regulation of the Company

          General. The Company is a bank holding company within the meaning of
the Bank Holding Company Act of 1956 (the "BHCA"). As such, the Company is
registered with the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") and subject to Federal Reserve Board regulation,
examination, supervision and reporting requirements. As a bank holding company,
the Company is required to furnish to the Federal Reserve Board annual and
quarterly reports of its operations at the end of each period and to furnish
such additional information as the Federal Reserve Board may require pursuant to
the BHCA. The Company is also subject to regular inspection by Federal Reserve
Board examiners.

          Under the BHCA, a bank holding company must obtain the prior approval
of the Federal Reserve Board before (i) acquiring direct or indirect ownership
or control of any voting shares of any bank or bank holding company if, after
such acquisition, the bank holding company would directly or indirectly own or
control more than 5% of such shares; (2) acquiring all or substantially all of
the assets of another bank or bank holding company; or (3) merging or
consolidating with another bank holding company.

                                       11
<PAGE>

         Effective September 29, 1995, the Riegle-Neal Interstate Banking and
Branching Efficiency of 1994 (the "Riegle-Neal Act") authorized the Federal
Reserve Board to approve an application of an adequately capitalized and
adequately managed bank holding company to acquire control of, or acquire all or
substantially all of the assets of, a bank located in a state other than such
holding company's home state, without regard to whether the transaction is
prohibited by the laws of any state. The Federal Reserve Board may not approve
the acquisition of a bank that has not been in existence for the minimum time
period (not exceeding five years) specified by the statutory law of the host
state. The Reigle-Neal Act also prohibits the Federal Reserve Board from
approving such an application if the applicant (and its depository institution
affiliates) controls or would control more than 10% of the insured deposits in
the United States or 30% or more of the deposits in the target bank's home state
or in any state in which the target bank maintains a branch. The Reigle-Neal Act
does not affect the authority of states to limit the percentage of total insured
deposits in the state which may be held or controlled by a bank or bank holding
company to the extent such limitation does not discriminate against out-of-state
banks or bank holding companies. Individual states may also waive the 30%
state-wide concentration limit contained in the Reigle-Neal Act. Under Maryland
law, a bank holding company is prohibited from acquiring control of any bank if
the bank holding company would control more than 30% of the total deposits of
all depository institutions in the State of Maryland unless waived by the
Commissioner.

          Additionally, beginning on June 1, 1997, the federal banking agencies
are authorized to approve interstate merger transactions without regard to
whether such transaction is prohibited by the law of any state, unless the home
state of one of the banks opted out of the Reigle-Neal Act by adopting a law
after the date of enactment of the Reigle-Neal Act and prior to June 1, 1997
which applies equally to all out-of-state banks and expressly prohibits merger
transactions involving out-of-state banks. The State of Maryland did not pass
such a law during this period. Interstate acquisitions of branches will be
permitted only if the law of the state in which the branch is located permits
such acquisitions. Interstate mergers and branch acquisitions will also be
subject to the nationwide and statewide insured deposit concentration amounts
described above.

          The BHCA also prohibits, with certain exceptions, a bank holding
company from acquiring direct or indirect ownership or control of more than 5%
of the voting shares of a company that is not a bank or a bank holding company,
or from engaging directly or indirectly in activities other than those of
banking, managing or controlling banks, or providing services for its
subsidiaries. The principal exceptions to these prohibitions involve certain
non-bank activities which, by statute or by Federal Reserve Board regulation or
order, have been identified as activities closely related to the business of
banking or managing or controlling banks. The activities of the Company are
subject to these legal and regulatory limitations under the BHCA and the Federal
Reserve Board's regulations thereunder. Notwithstanding the Federal Reserve
Board's prior approval of specific nonbanking activities, the Federal Reserve
Board has the power to order a holding company or its subsidiaries to terminate
any activity, or to terminate its ownership or control of any subsidiary, when
it has reasonable cause to believe that the continuation of such activity or
such ownership or control constitutes a serious risk to the financial safety,
soundness or stability of any bank subsidiary of that holding company.

         Capital Adequacy. The Federal Reserve Board has adopted guidelines
regarding the capital adequacy of bank holding companies, which require bank
holding companies to maintain specified minimum ratios of capital to total
assets and capital to risk-weighted assets. See "Regulation of the Bank --
Capital Adequacy."

          Dividends and Distributions. The Federal Reserve Board has the power
to prohibit dividends by bank holding companies if their actions constitute
unsafe or unsound practices. The Federal Reserve Board has issued a policy
statement on the payment of cash dividends by bank holding companies, which
expresses the Federal Reserve Board's view that a bank holding company should
pay cash dividends only to the extent that the company's net income for the past
year is sufficient to cover both the cash dividends and a rate of earning
retention that is consistent with the company's capital needs, asset quality,
and overall financial condition.

          Bank holding companies are required to give the Federal Reserve Board
notice of any purchase or redemption of their outstanding equity securities if
the gross consideration for the purchase or redemption, when combined with the
net consideration paid for all such purchases or redemptions during the
preceding 12 months, is equal to 10% or more of the bank holding company's


                                       12
<PAGE>

consolidated net worth. The Federal Reserve Board may disapprove such a purchase
or redemption if it determines that the proposal would violate any law,
regulation, Federal Reserve Board order, directive, or any condition imposed by,
or written agreement with, the Federal Reserve Board. Bank holding companies
whose capital ratios exceed the thresholds for "well capitalized" banks on a
consolidated basis are exempt from the foregoing requirement if they were rated
composite 1 or 2 in their most recent inspection and are not the subject of any
unresolved supervisory issues.

Regulation of the Bank

          General. As a state-chartered bank with deposits insured by the FDIC
but which is not a member of the Federal Reserve System (a "state non-member
bank"), the Bank is subject to the supervision of the Commissioner and the FDIC.
The Commissioner and FDIC regularly examine the operations of the Bank,
including but not limited to capital adequacy, reserves, loans, investments and
management practices. These examinations are for the protection of the Bank's
depositors and not its stockholders. In addition, the Bank is required to
furnish quarterly and annual call reports to the Commissioner and FDIC. The
FDIC's enforcement authority includes the power to remove officers and directors
and the authority to issue cease-and-desist orders to prevent a bank from
engaging in unsafe or unsound practices or violating laws or regulations
governing its business.

          The Bank's deposits are insured by the FDIC to the legal maximum of
$100,000 for each insured depositor. Some of the aspects of the lending and
deposit business of the Bank that are subject to regulation by the Federal
Reserve Board and the FDIC include reserve requirements and disclosure
requirements in connection with personal and mortgage loans and savings deposit
accounts. In addition, the Bank is subject to numerous federal and state laws
and regulations which set forth specific restrictions and procedural
requirements with respect to the establishment of branches, investments,
interest rates on loans, credit practices, the disclosure of credit terms and
discrimination in credit transactions.

          Capital Adequacy. The Federal Reserve Board and the FDIC have
established guidelines with respect to the maintenance of appropriate levels of
capital by bank holding companies and state non-member banks, respectively. The
regulations impose two sets of capital adequacy requirements: minimum leverage
rules, which require bank holding companies and banks to maintain a specified
minimum ratio of capital to total assets, and risk-based capital rules, which
require the maintenance of specified minimum ratios of capital to
"risk-weighted" assets.

          The regulations of the Federal Reserve Board and the FDIC require bank
holding companies and state non-member banks, respectively, to maintain a
minimum leverage ratio of "Tier 1 capital" (as defined in the risk-based capital
guidelines discussed in the following paragraphs) to total assets of 3.0%.
Although setting a minimum 3.0% leverage ratio, the capital regulations state
that only the strongest bank holding companies and banks, with composite
examination ratings of 1 under the rating system used by the federal bank
regulators, would be permitted to operate at or near such minimum level of
capital. All other bank holding companies and banks are expected to maintain a
leverage ratio of at least 1% to 2% above the minimum ratio, depending on the
assessment of an individual organization's capital adequacy by its primary
regulator. Any bank or bank holding company experiencing or anticipating
significant growth would be expected to maintain capital well above the minimum
levels. In addition, the Federal Reserve Board has indicated that whenever
appropriate, and in particular when a bank holding company is undertaking
expansion, seeking to engage in new activities or otherwise facing unusual or
abnormal risks, it will consider, on a case-by-case basis, the level of an
organization's ratio of tangible Tier 1 capital (after deducting all
intangibles) to total assets in making an overall assessment of capital.

          The risk-based capital rules of the Federal Reserve Board and the FDIC
require bank holding companies and state non-member banks, respectively, to
maintain minimum regulatory capital levels based upon a weighting of their
assets and off-balance sheet obligations according to risk. Risk-based capital
is composed of two elements: Tier 1 capital and Tier 2 capital. Tier 1 capital
consists primarily of common stockholders' equity, certain perpetual preferred
stock (which must be noncumulative with respect to banks), and minority
interests in the equity accounts of consolidated subsidiaries; less all
intangible assets, except for certain purchased mortgage servicing rights and


                                       13
<PAGE>

credit card relationships. Tier 2 capital elements include, subject to certain
limitations, the allowance for losses on loans and leases; perpetual preferred
stock that does not qualify as Tier 1 capital and long-term preferred stock with
an original maturity of at least 20 years from issuance; hybrid capital
instruments, including perpetual debt and mandatory convertible securities; and
subordinated debt and intermediate-term preferred stock.

          The risk-based capital regulations assign balance sheet assets and
credit equivalent amounts of off-balance sheet obligations to one of four broad
risk categories based principally on the degree of credit risk associated with
the obligor. The assets and off-balance sheet items in the four risk categories
are weighted at 0%, 20%, 50% and 100%. These computations result in the total
risk-weighted assets. The risk-based capital regulations require all banks and
bank holding companies to maintain a minimum ratio of total capital (Tier 1
capital plus Tier 2 capital) to total risk-weighted assets of 8%, with at least
4% as Tier 1 capital. For the purpose of calculating these ratios: (i) Tier 2
capital is limited to no more than 100% of Tier 1 capital; and (ii) the
aggregate amount of certain types of Tier 2 capital is limited. In addition, the
risk-based capital regulations limit the allowance for loan losses includable as
capital to 1.25% of total risk-weighted assets.

          FDIC regulations and guidelines additionally specify that state
non-member banks with significant exposure to declines in the economic value of
their capital due to changes in interest rates may be required to maintain
higher risk-based capital ratios. The federal banking agencies, including the
FDIC, have proposed a system for measuring and assessing the exposure of a
bank's net economic value to changes in interest rates. The federal banking
agencies, including the FDIC, have stated their intention to propose a rule
establishing an explicit capital charge for interest rate risk based upon the
level of a bank's measured interest rate risk exposure after more experience has
been gained with the proposed measurement process. Federal Reserve Board
regulations do not specifically take into account interest rate risk in
measuring the capital adequacy of bank holding companies.

          The FDIC has issued regulations which classify state non-member banks
by capital levels and which authorize the FDIC to take various prompt corrective
actions to resolve the problems of any bank that fails to satisfy the capital
standards. Under such regulations, a well-capitalized bank is one that is not
subject to any regulatory order or directive to meet any specific capital level
and that has or exceeds the following capital levels: a total risk-based capital
ratio of 10%, a Tier 1 risk-based capital ratio of 6%, and a leverage ratio of
5%. An adequately capitalized bank is one that does not qualify as
well-capitalized but meets or exceeds the following capital requirements: a
total risk-based capital ratio of 8%, a Tier 1 risk-based capital ratio of 4%,
and a leverage ratio of either (i) 4% or (ii) 3% if the bank has the highest
composite examination rating. A bank not meeting these criteria is treated as
undercapitalized, significantly undercapitalized, or critically undercapitalized
depending on the extent to which the bank's capital levels are below these
standards. A state non-member bank that falls within any of the three
undercapitalized categories established by the prompt corrective action
regulation will be subject to severe regulatory sanctions. As of December 31,
1996, the Bank was well-capitalized as defined by the FDIC's regulations.

          Branching. Maryland law provides that, with the approval of the
Commissioner, Maryland banks may establish branches within the State of Maryland
without geographic restriction and may establish branches in other states by any
means permitted by the laws of such state or by federal law. The Reigle-Neal Act
authorizes the FDIC to approve interstate branching de novo by state banks, only
in states which specifically allow for such branching. The Reigle-Neal Act also
requires the appropriate federal banking agencies to prescribe regulations by
June 1, 1997 which prohibit any out-of-state bank from using the interstate
branching authority primarily for the purpose of deposit production. These
regulations must include guidelines to ensure that interstate branches operated
by an out-of-state bank in a host state are reasonably helping to meet the
credit needs of the communities which they serve.

          Dividend Limitations. Pursuant to the Maryland Financial Institutions
Code, Maryland banks may only pay dividends from undivided profits or, with the
prior approval of the Commissioner, their surplus in excess of 100% of required
capital stock. The Maryland Financial Institutions Code further restricts the
payment of dividends by prohibiting a Maryland bank from declaring a dividend on
its shares of common stock until its surplus fund equals the amount of required
capital stock or, if the surplus fund does not equal the amount of capital
stock, in an amount in excess of 90% of net earnings. In addition, the Bank is
prohibited by federal statute from paying dividends or making any other capital


                                       14
<PAGE>

distribution that would cause the Bank to fail to meet its regulatory capital
requirements. Further, the FDIC also has authority to prohibit the payment of
dividends by a state non-member bank when it determines such payment to be an
unsafe and unsound banking practice. Under the MOU, the Bank may not pay a
dividend without prior notice to the Commissioner and the FDIC if its ratio of
Tier 1 capital to assets would be less than 6.0%. In addition, dividends may not
exceed 50% of net operating income after taxes for the period declared without
the prior written consent of the FDIC and the Commissioner.

          Deposit Insurance. The Bank is required to pay semi-annual assessments
based on a percentage of its insured deposits to the FDIC for insurance of its
deposits by the Bank Insurance Fund ("BIF"). Under the Federal Deposit Insurance
Act, the FDIC is required to set semi-annual assessments for BIF-insured
institutions to maintain the designated reserve ratio of the BIF at 1.25% of
estimated insured deposits or at a higher percentage of estimated insured
deposits that the FDIC determines to be justified for that year by circumstances
raising a significant risk of substantial future losses to the BIF.

          Under the risk-based deposit insurance assessment system adopted by
the FDIC, the assessment rate for an insured depository institution depends on
the assessment risk classification assigned to the institution by the FDIC,
which is determined by the institution's capital level and supervisory
evaluations. Based on the data reported to regulators for the date closest to
the last day of the seventh month preceding the semi-annual assessment period,
institutions are assigned to one of three capital groups -- "well capitalized,
adequately capitalized or undercapitalized." Within each capital group,
institutions are assigned to one of three subgroups on the basis of supervisory
evaluations by the institution's primary supervisory authority and such other
information as the FDIC determines to be relevant to the institution's financial
condition and the risk posed to the deposit insurance fund. Under the current
assessment schedule, well-capitalized banks with the best supervisory ratings
are not required to pay any premium for deposit insurance. All BIF-insured
banks, however are required to pay an assessment to the FDIC in an amount equal
to 1.3 basis points times their assessable deposits to help fund interest
payments on certain bonds issued by the Financing Corporation, an agency
established by the federal government to finance takeovers of insolvent thrifts.

          Transactions with Affiliates. A state non-member bank or its
subsidiaries may not engage in "covered transactions" with any one affiliate in
an amount greater than 10% of such bank's capital stock and surplus, and for all
such transactions with all affiliates a state non-member bank is limited to an
amount equal to 20% of capital stock and surplus. All such transactions must
also be on terms substantially the same, or at least as favorable, to the bank
or subsidiary as those provided to a non-affiliate. The term "covered
transaction" includes the making of loans, purchase of assets, issuance of a
guarantee and similar other types of transactions. An affiliate of a state
non-member bank is any company or entity which controls, is controlled by or is
under common control with the state non-member bank. In a holding company
context, the parent holding company of a state nonmember bank (such as the
Company) and any companies which are controlled by such parent holding company
are affiliates of the state nonmember bank. The BHCA further prohibits a
depository institution from extending credit to or offering any other services,
or fixing or varying the consideration for such extension of credit or service,
on the condition that the customer obtain some additional service from the
institution or certain of its affiliates or not obtain services of a competitor
of the institution, subject to certain limited exceptions.

          Loans to Directors, Executive Officers and Principal Stockholders.
Loans to directors, executive officers and principal stockholders of a state
non-member bank must be made on substantially the same terms as those prevailing
for comparable transactions with persons who are not executive officers,
directors, principal stockholder or employees of the Bank unless the loan is
made pursuant to a compensation or benefit plan that is widely available to
employees and does not favor insiders. Loans to any executive officer, director
and principal stockholder together with all other outstanding loans to such
person and affiliated interests generally may not exceed 15% of the bank's
unimpaired capital and surplus and all loans to such persons may not exceed the
institution's unimpaired capital and unimpaired surplus. Loans to directors,


                                       15
<PAGE>

executive officers and principal stockholders, and their respective affiliates,
in excess of the greater of $25,000 or 5% of capital and surplus (up to
$500,000) must be approved in advance by a majority of the board of directors of
the bank with any "interested" director not participating in the voting. State
non-member banks are prohibited from paying the overdrafts of any of their
executive officers or directors. In addition, loans to executive officers may
not be made on terms more favorable than those afforded other borrowers and are
restricted as to type, amount and terms of credit.

                                    * * * * *

Item 3.  Legal Proceedings

         McCafferty's Restaurant ("McCafferty's") had commenced an adversary
proceeding (McCafferty's, Inc. v. Bank of Glen Burnie Adversary Case, Case No.
96-5137-ESD, U.S. Bankr. Ct., D. Md.) on March 20, 1996 in McCafferty's pending
Chapter 11 bankruptcy case (In re McCafferty's, Inc., Case No. 96-5-2444-SD,
U.S. Bankr. Ct., D. Md.). The United States District Court for the District of
Maryland has assumed jurisdiction (Bank of Glen Burnie v. McCafferty's, Inc.,
Civil Action No. MJG-96-3656, D-Md, 1996). McCafferty's alleges that the Bank,
acting in concert with Brian Davis (McCafferty's former treasurer and chief
financial officer who has pled guilty to fraud against the Bank and various
other banks), defrauded McCafferty's through alleged forgery of loan documents,
improper payment of checks, wrongful diversion of loan proceeds, illegal
overbilling and conspiracy to conceal illegal acts. McCafferty's seeks
$5,000,000 in compensatory damages, $50,000,000 in punitive damages and
declaratory and injunctive relief under numerous counts, including one count
pled under the Racketeer Influenced and Corrupt Organizations Act ("RICO"). On
December 4, 1997, the U.S. District Court dismissed McCafferty's claims under
RICO but denied the Bank's motion to dismiss McCafferty's other claims. The Bank
denies any wrongdoing and any liability, and intends to continue contesting the
litigation vigorously. The Company does not believe that the outcome of this
litigation will have a material adverse effect on its business.

          In addition to the foregoing litigation, the Bank is a defendant in
three suits filed in the Circuit Court for Baltimore County by creditors of a
company controlled by Mr. Davis alleging in each case that the Bank improperly
negotiated checks for loan proceeds over forged endorsements. The aggregate
damages sought in First National Bank of Maryland v. The Bank of Glen Burnie
(Case No. 03-C-96-001925 filed February 28, 1996), Elkridge National Bank v. The
Bank of Glen Burnie (Case No.03-C-96-002064 filed March 4, 1996) and Commercial
and Farmers Bank v. The Bank of Glen Burnie (Case No. 03-C-96-002941 filed March
25, 1996) total approximately $2,000,000. In Elkridge National Bank, a judgment
in the amount of $284,000 has been rendered in favor of plaintiffs which the
Bank has appealed. The Bank denies liability in each of these suits. In
addition, the Bank has filed a counter-claim in the First National Bank of
Maryland suit seeking damages in excess of the amounts sought by the plaintiff.
Accordingly, the Bank does not believe that the outcome of these suits will have
a material adverse effect on the Bank.

          The Bank is also a defendant in Beal GMC v. The Bank of Glen Burnie
(Case No. C96-32383OC filed October 2, 1996 in Anne Arundel County Circuit
Court) in which it is alleged that employees of the Bank falsely represented to
a third party that checks drawn on Mr. Davis's account and payable to plaintiff
had cleared the Bank. Plaintiff seeks compensatory damages of $500,000 and
punitive damages of $5.0 million. The Bank does not believe that this claim has
merit and is vigorously defending this action.

          The Bank is involved in various other legal actions relating to its
business activities. These actions involve claims for money damages which do not
exceed 10% of the Company's consolidated current assets in any one case or in
any group of proceedings presenting in large degree the same legal and factual
issues. The Company does not believe that any ultimate liability or risk of loss
with respect to these actions will materially affect its consolidated financial
position.

                                    * * * * *



                                       16
<PAGE>
                                PART II

Item 5.  Market for the Registrant's Common Equity and Related Stockholder 
         Matters

          The Company's stock is traded in the over-the-counter market and
quoted on the OTC Bulletin Board under the symbol "GLBZ." There is not currently
an active trading market for the Common Stock. The following table sets forth
the high and low sales prices for the Common Stock for each full quarterly
period during 1995 and 1996, based on trades reported on the OTC Bulletin Board
or by Legg Mason Wood Walker, Inc., the principal market maker for the Company's
stock. Prices have been adjusted to give retroactive effect to a six-for-five
stock split effected through a stock dividend paid on January 3, 1996.

                                      1996                 1995
                                ---------------     ------------------
       Quarter Ended            High      Low         High       Low
       -------------            ----      ---         ----       ---

       March 31,              $37.500   $34.000     $32.917    $28.750
       June 30,                36.250    33.000      32.917     31.042
       September 30,           33.500    33.000      32.917     32.083
       December 31,            34.000    25.000      34.375     28.854


          As of June 30, 1997, the latest date for which the Company was able to
obtain information on a reported sale of the Common Stock, the last reported
sales price for the Common Stock on the OTC Bulletin Board was $25.00 per share.

          As of June 30, 1997, the number of record holders of the Common Stock
was 481.

          Since its inception, the Company has paid quarterly cash dividends on
its Common Stock. Per share cash dividends declared for each full quarter during
last two fiscal years and the current year to date, giving retroactive effect to
a six-for-five stock split effected through a stock dividend paid on January 3,
1996, were as follows:

         Quarter Ended                     1996          1995
         ---------------                   ----          ----

         March 31,                        $0.300        $0.208
         June 30,                          0.300         0.250
         September 30,                     0.300         0.250
         December 31,                      0.050         0.250


          The Company intends to pay dividends equal to forty percent (40%) of
its profits for each quarter. However, dividends remain subject to declaration
by the Board of Directors in its sole discretion and there can be no assurance
that the Company will be legally or financially able to make such payments.
Payment of dividends may be limited by Federal and state regulations which
impose general restrictions on a bank's and bank holding company's right to pay
dividends (or to make loans or advances to affiliates which could be used to pay
dividends). Generally, dividend payments are prohibited unless a bank or bank
holding company has sufficient net (or retained) earnings and capital as
determined by its regulators. See "Item 1. Business -- Supervision and
Regulation -- Regulation of the Company -- Dividends and Distributions" and
"Item 1. Business -- Supervision and Regulation -- Regulation of the Bank --
Dividend Limitations." The Bank's payment of dividends is further restricted by
the M.O.U. which requires prior approval of the FDIC and the Commissioner for
the payment of dividends by the Bank in excess of 50% of its net operating
income or if the Bank's Tier 1 capital ratio would be reduced below 6.0%. See
"Item 1. Business -- Memoranda of Understanding." 



                                       17
<PAGE>



Item 6.  Selected Financial Data

         The following table presents consolidated selected financial data for
the Company and its subsidiaries for each of the periods indicated. Dividends
and earnings per share have been adjusted to give retroactive effect to stock
splits and stock dividends accounted for as stock splits.



<TABLE>
<CAPTION>




                                                                                  At December 31,
                                                    ---------------------------------------------------------------------
                                                      1996            1995           1994          1993            1992
                                                     -------        --------       --------       -------        --------
                                                                  (In thousands, except per share data)

<S>                                                  <C>            <C>            <C>            <C>            <C>     
Operations Data:
Net Interest Income...............................   $ 10,884       $ 11,339       $ 11,868       $ 10,736       $  8,788
Provision for Credit Losses.......................      6,596          7,925          1,120          1,080          1,000
Other Income......................................      2,230          1,904          1,515          1,408          1,360
Other Expense.....................................      9,019          8,740          7,139          6,716          5,954
Net Income (Loss).................................     (1,020)        (1,727)         3,517          3,047          2,284

Share Data:
Net Income (Loss) Per Share.......................   $  (1.16)      $  (2.01)      $   4.22       $   3.69       $   2.79
Cash Dividends Declared Per Common Share..........       0.95           0.96           0.80           0.75           0.72
Weighted Average Common Shares Outstanding........    881,211        861,116        833,849        826,244        817,324

Financial Condition Data:
Total Assets......................................   $254,325       $246,165       $232,935       $223,422       $203,573
Loans Receivable, net.............................    124,672        150,472        153,814        141,866        128,199
Total Deposits....................................    232,746        221,121        208,566        202,911        186,358
Total Stockholders' Equity........................     18,507         20,537         21,677         18,617         15,716

Performance Ratios:
Return on Average Assets..........................      (0.41)%        (0.73)%         1.53%          1.40%          1.23%
Return on Average Equity..........................      (5.29)         (7.42)         17.24          17.70          15.23
Net Interest Margin(1)............................       5.04           5.42           5.88           5.67           5.46
Dividend Payout Ratio.............................        *              *            19.24          20.38          25.89

Capital Ratios:
Average Equity to Average Assets..................       7.82%          9.89%          8.86%          7.92%          8.05%
Leverage Ratio(2).................................       7.00           8.20           9.40           8.60           8.40
Total Risk-Based Capital Ratio(2).................      12.50          13.62          15.35          14.30          13.30

Asset Quality Ratios:
Allowance for Credit Losses to Gross Loans........       3.90%          2.40%          1.77%          1.77%          1.35%
Non-performing Loans to Total Loans...............       3.72           4.17           2.32           2.23           2.11
Allowance for Credit Losses to Non-performing 
  Loans...........................................     109.24          58.89          77.34          80.79          64.78
Net Loan Charge-offs to Average Loans.............       3.56           4.48           0.60           0.20           0.19
</TABLE>
--------------------
*    Not meaningful
(1)  Presented on a tax-equivalent basis.
(2)  Bank only.



                                       18
<PAGE>






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



Overview

          The Company recorded net losses of $1,020,177 and $1,726,748 for the
years ended December 31, 1996 and 1995. The Company's recent results of
operations have been significantly affected by charge-offs related to loans
outstanding to Mr. Brian Davis and affiliated entities. During the 1995 fiscal
year, the Bank's aggregate outstanding loans to these entities totaled as much
as $6.0 million and these entities represented the Bank's largest single group
of borrowers. Included in total outstandings were loans made to various
borrowers who allegedly funneled the proceeds to Mr. Davis. Mr. Davis has since
pled guilty to defrauding the Bank and other financial institutions and the
Bank's former Chief Lending Officer has pled guilty to accepting bribes from Mr.
Davis in connection with these loans. See "Item 1. Business -- Recent Loan
Losses Involving Significant Borrowers." The Board of Directors of the Bank has
entered into Memoranda of Understanding with the FDIC and the Maryland
Commissioner of Banking to address certain factors relating to its recent
losses. See "Item 1. Business -- Memoranda of Understanding."

          The Bank continues to be involved in litigation related to Mr. Davis'
activities including suits by entities affiliated with Mr. Davis. See "Item 1.
Business -- Legal Proceedings." Although the Company does not believe that
outcome of this litigation will have a material adverse effect on the Bank,
these lawsuits have required the Company to incur considerable legal and
professional fees which have significantly increased the Company's other
expense. Adverse publicity related to these lawsuits is also believed to have
also hurt the Bank's competitive position in its market place.

          In 1995, the Company also underwent a change in management as a slate
of nominees proposed by F. William Kuethe, Jr. and John E. Demyan, members of
two of the Bank's founding families, defeated management's nominees in a proxy
contest at the 1995 annual meeting of stockholders. Expenses related to this
contest resulted in a $687,841 restructuring charge during 1995. The Bank's
current management has been focused on addressing the Bank's asset quality and
other operating problems and resolving the litigation in which the Bank is
involved while maintaining the Bank as the locally owned and oriented community
bank which it has historically been.

Forward-Looking Statements

          When used in this discussion and elsewhere in the Prospectus, the
words or phrases "will likely result," "are expected to," "will continue," "is
anticipated," "estimate," "project" or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. The Company cautions readers not to
place undue reliance on any such forward-looking statements, which speak only as
of the date made, and to advise readers that various factors, including regional
and national economic conditions, unfavorable judicial decisions, substantial
changes in levels of market interest rates, credit and other risks of lending
and investment activities and competitive and regulatory factors could affect
the Company's financial performance and could cause the Company's actual results
for future periods to differ materially from those anticipated or projected.

          The Company does not undertake and specifically disclaims any
obligation to update any forward-looking statements to reflect occurrence of
anticipated or unanticipated events or circumstances after the date of such
statements.

                                       19
<PAGE>


Comparison of Results of Operations For the Years Ended December 31, 1996, 1995
and 1994


          General. For fiscal year 1996, the Company had a consolidated net loss
of $1,020,177 ($1.16 per share) compared to a 1995 consolidated net loss of
$1,726,748 ($2.01 per share) and a 1994 consolidated net income of $3,516,593
($4.22 per share). The losses during 1996 and 1995 were primarily due to a
significant increase in the provision for credit losses to $6,596,000 for 1996
and $7,925,000 for 1995 compared to $1,120,000 for 1994. The increase resulted
from provisions being made to charge-off delinquent and non-performing loans.
The collectibility of certain loans, significant in aggregate amount, became
doubtful during 1996 and the Bank charged-off a significant amount of such
loans. Charge-offs in 1996 amounted to $5,468,293 following the $7,060,650
charged off in 1995.

          Net Interest Income. The primary component of the Company's net income
is its net interest income which is the difference between income earned on
assets and interest expense paid on deposits and borrowings used to fund them.
Net interest income is determined by the spread between the yields earned on the
Company's interest-earning assets and the rates paid on interest-bearing
liabilities as well as the relative amounts of such assets and liabilities. Net
interest income, divided by average interest-earning assets, represents the
Company's net interest margin.

          Consolidated net interest income prior to provision for credit losses
decreased by $454,884 (4.0%) from $11,339,137 in 1995 to $10,884,253 in 1996.
Net interest income had decreased by $528,822 (4.5%) in 1995 from $11,867,959 in
1994. The 1996 decrease was primarily due to an increase in interest expense on
deposits and a decrease in total interest revenues from lending activities for
such period. The 1995 decrease is primarily due to an increase in interest
expense on deposits which exceeded a slight increase in total interest revenues
from lending activities for such period. The movement of deposits from lower
yielding savings and money market accounts to higher yielding certificates of
deposit resulted in an increase in the Bank's cost of deposits during 1996 and
1995. In addition, loans on which accrual of interest has been discontinued
amounted to $4,545,581 at December 31, 1996. Interest that would have accrued
under the terms of these loans was $457,035. Interest income on loans fell
$1,394,512 (9.6%) from $14,475,876 at the end of 1995 to $13,081,364 at the end
of 1996, after increasing $390,234 (2.8%) during 1995 from $14,085,642 at the
end of 1994. In addition to increased loan charge offs, the Bank made fewer
loans during 1996 than 1995.

          During 1996 and 1995, the Bank shifted investments from U.S. Treasury
securities to U.S. government agency and state and municipal securities because
they have offered higher yields. Interest from Federal funds sold almost doubled
during 1996, increasing from $138,678 in 1995 to $261,423 in 1996 as Federal
funds sold increased significantly. Significant gains in investment securities
($506,695) occurred in 1995 as a result of a restructuring of the Bank's
investment securities portfolio. The gains were much smaller in 1996 after the
restructuring was complete.



                                       20
<PAGE>








          The following table allocates changes in income and expense
attributable to the Bank's interest-earning assets and interest-bearing
liabilities for the periods indicated between changes due to changes in rate and
changes in volume. Changes due to rate/volume are allocated to changes due to
volume.
<TABLE>
<CAPTION>

                                                                                           Year Ended December 31,
                                                               --------------------------------------------------------------------
                                                                1996      vs.      1995                 1995      vs.      1994
                                                               --------------------------------     -------------------------------
                                                                                Change Due to                      Change Due to
                                                               Increase/     ------------------     Increase/    -----------------
                                                               Decrease      Rate        Volume     Decrease     Rate       Volume
                                                               --------      ----        ------     --------     ----       ------
                                                                                         (In thousands)
<S>                                                             <C>         <C>         <C>         <C>         <C>         <C>     
Assets
Interest-earning assets:
   Federal funds sold ......................................    $   122     $   (37)    $   159     $    38     $    52     $   (14)
                                                                -------     -------     -------     -------     -------     -------
   Interest-bearing deposits ...............................        (31)        (17)        (14)         62           0          62
                                                                -------     -------     -------     -------     -------     -------
   Investment securities:
      U.S. Treasury securities and obligations
        of U.S. government agencies ........................      1,082         234         848          99         (20)        119
      Obligations of states and
        political subdivisions(1) ..........................        472         (74)        546          52         (57)        109
      All other investment securities ......................          2          (1)          3          23           6          17
                                                                -------     -------     -------     -------     -------     -------
         Total investment securities .......................      1,556         159       1,397         174         (71)        245
                                                                -------     -------     -------     -------     -------     -------
   Loans, net of unearned income
      Demand, time and lease ...............................       (613)        (56)       (557)         88         145         (57)
      Mortgage and construction ............................       (269)       (604)        335         301         (41)        342
      Installment and credit card ..........................       (517)         31        (548)          4        (122)        126
                                                                -------     -------     -------     -------     -------     -------
         Total gross loans(2) ..............................     (1,399)       (629)       (770)        393         (18)        411
                                                                -------     -------     -------     -------     -------     -------
      Allowance for credit losses
         Total net loans ...................................     (1,399)       (629)       (770)        393         (18)        411
                                                                -------     -------     -------     -------     -------     -------
Total interest-earning assets ..............................    $   248     $  (524)    $   772     $   667     $   (37)    $   704
                                                                =======     =======     =======     =======     =======     =======

Liabilities
Interest-bearing deposits:
   Savings and NOW .........................................    $  (112)    $  (191)    $    79     $  (302)    $   (12)    $  (290)
   Money market ............................................       (111)        (42)        (69)       (147)         43        (190)
   Other time deposits .....................................        762           7         755       1,613         902         711
                                                                -------     -------     -------     -------     -------     -------
      Total interest-bearing deposits ......................        539        (226)        765       1,164         933         231
Non-interest-bearing deposits ..............................         --          --          --          --          --          --
                                                                -------     -------     -------     -------     -------     -------
Borrowed funds .............................................        (39)         (9)        (30)         21          22          (1)
                                                                -------     -------     -------     -------     -------     -------
Total interest-bearing liabilities .........................    $   500     $  (235)    $   735     $ 1,185     $   955     $   230
                                                                =======     =======     =======     =======     =======     =======
</TABLE>

--------------------
(1)  Tax equivalent basis.
(2)  Non-accrual loans included in average balances.


                                       21
<PAGE>

          The following table provides information for the designated periods
with respect to the average balances, income and expense and annualized yields
and costs associated with various categories of interest-earning assets and
interest-bearing liabilities.


<TABLE>
<CAPTION>


                                                                          Year Ended December 31,
                                        -------------------------------------------------------------------------------------------
                                                       1996                              1995                       1994
                                        -------------------------------- ------------------------------  --------------------------
                                                                Average                         Average                     Average
                                         Average                Yield/   Average                Yield/   Average             Yield/
                                         Balance     Interest    Cost    Balance    Interest     Cost    Balance    Interest  Cost
                                         -------     --------   ------   -------    --------    ------   -------    -------- ------
                                                                        (Dollars in thousands)
<S>                                      <C>         <C>         <C>     <C>         <C>        <C>     <C>         <C>        <C>  
Assets:
Interest-earning assets:
   Federal funds sold................... $  5,185    $   261     5.03%   $  2,416    $   139    5.75%   $  2,799    $   101    3.61%
                                         --------    -------     ----    --------    -------    ----    --------    -------    ----
   Interest-bearing deposits............    1,267         54     4.26       1,526         85    5.57         415    $    23    5.54
                                         --------    -------     ----    --------    -------    ----    --------    -------    ----
   Investment securities:
      U.S. Treasury securities and 
        obligations of U.S. government
        agencies .......................   53,454      3,669     6.86      40,263      2,587    6.43      38,430      2,488    6.47
      Obligations of States and
        political subdivisions(1).......   27,875      2,307     8.28      21,479      1,835    8.54      20,240      1,783    8.81
      All other investment securities...      737         54     7.33         696         52    7.47         443         29    6.55
                                         --------    -------     ----    --------    -------    ----    --------    -------    ----
         Total investment securities....   82,066      6,030     7.35      62,438      4,474    7.12      59,113      4,300    7.28
                                         --------    -------     ----    --------    -------    ----    --------    -------    ----
   Loans, net of unearned income
   Demand, time and lease...............   22,343      1,944     8.70      28,559      2,557    8.95      29,232      2,469    8.45
   Mortgage and construction............   97,777      8,886     9.07      94,322      9,135    9.68      90,804      8,834    9.73
   Installment and credit card..........   26,802      2,278     8.50      33,338      2,795    8.38      31,897      2,791    8.75
                                         --------    -------     ----    --------    -------    ----    --------    -------    ----
         Total gross loans(2)...........  146,922     13,088     8.91     156,219     14,487    9.27     151,933     14,094    9.45
         Allowance for credit losses....    3,835                           2,766                          2,762
                                         --------                        --------                       --------
        Total net loans.................  143,087     13,088     9.15     153,453     14,487    9.44     149,171     14,094    9.45
                                         --------    -------     ----    --------    -------    ----    --------    -------    ----
        Total interest-earning assets...  231,605     19,433     8.39     219,833     19,185    8.73     211,498     18,518    8.76
                                                     -------     ----                -------    ----                -------    ----
Cash and due from banks.................    7,936                           7,152                          9,769
Other assets............................    7,318                           8,471                          8,817
                                         --------                        --------                       --------
         Total assets................... $246,859                        $235,456                       $230,084
                                         ========                        ========                       ========
Liabilities and Stockholders' Equity:
Interest-bearing deposits:
  Savings and NOW....................... $ 71,455    $ 2,075     2.90%   $ 68,957    $ 2,187    3.17%   $ 78,067    $ 2,489    3.19%
  Money market..........................   26,911        818     3.04      29,081        929    3.19      35,301      1,076    3.05
  Other time deposits...................   83,486      4,819     5.77      70,382      4,057    5.76      54,524      2,444    4.48
                                         --------    -------     ----    --------    -------    ----    --------    -------
    Total interest-bearing deposits.....  181,852      7,712     4.24     168,420      7,173    4.26     167,892      6,009    3.58
Borrowed funds..........................    1,029         50     4.86       1,549         89    5.75       1,573         68    4.32
                                         --------    -------     ----    --------    -------    ----    --------    -------
    Total interest-bearing liabilities..  182,881      7,762     4.24     169,969      7,262    4.27     169,465      6,077    3.59
                                                     -------                         -------                        -------
Non-interest-bearing deposits...........   44,570                          41,500                         39,585
Other liabilities.......................      110                             699                            639
Stockholders' equity....................   19,298                          23,288                         20,395
                                         --------                        --------                       --------
Total liabilities and equity............                                 $235,456                       $230,084
                                                                         ========                       ========
Net interest income.....................             $11,671                         $11,923                        $12,441
                                                     =======                         =======                        =======
Net interest spread.....................                         4.15%                          4.46%                          5.17%
                                                                 ====                           ====                           ====
Net interest margin.....................                         5.04%                          5.42%                          5.88%
                                                                 ====                           ====                           ====
</TABLE>
-------------------- 
(1)  Tax equivalent basis. The incremental tax rate applied was 37.04% for 1996
     and 38.62% for 1995 and 1994.
(2)  Non-accrual loans included in average balance.


                                       22
<PAGE>






          Provision for Credit Losses. During fiscal year 1996, the Company
provided $6,596,000 for credit losses compared to $7,925,000 in such provisions
during 1995 and $1,120,000 in provisions during 1994. The higher provisions
during fiscal years 1996 and 1995 reflect the amount determined by the Company
to be necessary to maintain the allowance for credit losses to an adequate level
after significant increases in loan charge-offs during these years. See "Item 1.
Business -- Recent Loan Loss Experience Involving Significant Borrowers."


          Other Income. Other income for fiscal year 1996 was $2,230,457, an
increase of $326,174, or 17.1%, over fiscal year 1995 and an increase of
$715,626, or 47.2%, over fiscal year 1994. The improvement in other income
reflects increased service charges on deposit accounts attributable to growth in
deposits and $560,000 in proceeds from an insurance settlement with the Bank's
fidelity bond company relating to the reimbursement of legal fees expended by
the Bank in defending certain actions. These improvements in other income offset
a decline in gains on sales of securities following a restructuring of the
Bank's securities portfolio.

          Other Expenses. Salary and employee benefit expenses increased
$497,732 (12.0%) during the year ended December 31, 1996 rising from $4,137,232
in 1995 to $4,634,964 in 1996. They rose only $149,014 (3.7%) during 1995 from
$3,988,218 in 1994. During 1996 the Bank staff was increased in the credit
analysis and loan collection areas to deal with the Bank's troubled loans.
Increased other expenses of the Company and its subsidiaries in 1996 primarily
resulted from increased legal fees and other continuing costs of litigation. See
"Item 1. Business -- Legal Proceedings." The Bank has obtained insurance
reimbursement for approximately $560,000 of its 1995 restructuring and
litigation charges which is included in other income.

          Income Taxes. For the years ended December 31, 1996 and 1995, the
Company recognized $1,480,192 and $1,694,444 in tax benefits compared to an
income tax expense of $1,606,761 during the 1994 fiscal year. Due primarily to
its holdings of tax-exempt state, county and municipal securities, the Company
recorded tax losses during the two prior fiscal years. These net operating
losses have been applied to prior years' earnings resulting in tax benefits in
each of the periods. The Company has recently reduced its holdings of tax-exempt
state, county and municipal securities and reinvested the proceeds in U.S.
Government agency securities the income on which is not exempt from federal
taxation. Accordingly, the Company anticipates an increase in taxable income
which may reduce the availability of future tax benefits.

Comparison of Financial Condition at December 31, 1996 and 1995

          The Company's total assets increased to $254,324,701 at December 31,
1996 from $246,164,736 at December 31, 1995 and from $232,934,732 at December
31, 1994. Although the loan portfolio had declined to $124,672,414 at December
31, 1996 from $150,471,768 at December 31, 1995 and $153,814,422 at December 31,
1994, total assets grew due to an expansion of the investment securities
portfolio.

          The declines in the loan portfolio during fiscal years 1996 and 1995
were principally due to a decrease in construction and land development loans
which had substantially increased during the preceding year but declined during
the most recent fiscal years due to decreased origination activity and loan
charge-offs. Commercial mortgage loans increased during 1995 and again slightly
in 1996. Residential mortgages increased in 1995 but fell in 1996, as did demand
and time loans. The decline in demand and time loans reflects decreased lending
activity and increased charge-offs. Lease financing and installment loans
decreased in both 1995 and 1996. The Bank has decided to decrease its equipment
and automobile lease based lending because of the difficulties in monitoring the
financial condition of the clients of lease company borrowers.

          During fiscal year 1996, the total investment securities portfolio
grew by $21,975,153, or 29.46%, after growing by $14,197,134, or 23.50% during
fiscal year 1995 to $74,598,847. The increases in the investment securities
portfolio during fiscal years 1996 and 1995 reflects increases in deposits


                                       23
<PAGE>

coupled with a decline in new lending activity and increased loan amortization
primarily in the shorter term construction and land development, lease financing
and installment portfolios. The Bank has allowed some run-off in the investment
securities portfolio as deposits have declined during the current fiscal year.

          Total deposits increased from $221,120,763 at the end of 1995 to
$232,745,975 at the end of 1996, an increase of $11,625,212 (5.3%). Total
deposits increased by $12,555,110 (6.0%) during 1995 from $208,565,653 at the
end of 1994. While deposits increased during the past two fiscal years, the Bank
believes that a general downward trend in interest rates paid on deposit
accounts has resulted in a trend away from lower yielding deposit products
toward higher yielding long term deposits. NOW accounts totaled $22,792,376 at
year end 1996, an increase of $502,527 (2.3%) from the 1995 year end total of
$22,289,849, which was a $17,141 (0.1%) increase over the 1994 year end total of
$22,272,708. Money market accounts declined $1,391,386 (5.0%) during 1996
falling from $27,602,041 at the end of 1995 to $26,210,655 at the end of 1996.
They had declined $5,278,782 (16.1%) during 1995 from $32,880,823 at the end of
1994. Over the same period, savings deposits, after decreasing from $52,830,352
in 1994 to $46,752,665 in 1995, a decrease of $6,077,687 (11.5%), increased by
$1,440,302 (3.1%) to end 1996 at $48,192,967. Meanwhile, certificates of deposit
over $100,000 decreased from $9,844,841 at the end of 1995 to $8,620,096 at the
end of 1996, a decline of $1,224,745 (12.4%). The foregoing does not include IRA
accounts in excess of $100,000. During 1995 these balances had increased by
$2,040,197 (26.1%) from the 1994 year end balance of $7,804,644. Other time
deposits (made up of certificates of deposit less than $100,000 and individual
retirement accounts) increased by $8,032,607 (11.6%) in 1996 and by $17,788,337
(34.4%) in 1995, rising from $51,696,007 at the end of 1994 to year end totals
of $69,484,344 for 1995 and $77,516,951 for 1996.

          Operating losses during 1995 and 1996 significantly affected retained
earnings which fell $4,007,822 (43.8%) during 1995 from $9,154,546 at year end
1994 to $5,146,724 at year end 1995, and another $1,856,647 (36.1%) during 1996
to end 1996 at $3,290,077. Surplus steadily increased, however, rising $466,191
(8.6%) during 1995 from $5,450,852 at the end of 1994 to $5,917,043 at the end
of 1995, and $275,857 (4.7%) during 1995 to end 1996 at $6,192,900. The increase
in the surplus account was primarily a result of the reinvestment of dividends
pursuant to the Dividend Reinvestment Plan.

Asset/Liability Management

          Net interest income, the primary component of the Company's net
income, arises from the difference between the yield on interest-earning assets
and the cost of interest-bearing liabilities and the relative amounts of such
assets and liabilities. The Company manages its assets and liabilities by
coordinating the levels of and gap between interest-rate sensitive assets and
liabilities to minimize changes in net interest income and in the economic value
of its equity despite changes in market interest rates. The Bank's
Asset/Liability and Risk Management Committee meets on a monthly basis to
monitor compliance with the Board's objectives. Among other tools used by the
Asset/Liability and Risk Management Committee to monitor interest rate risk is a
"gap" report which measures the dollar difference between the amount of
interest-earning assets and interest-bearing liabilities subject to repricing
within a given time period. Generally, during a period of rising interest rates,
a negative gap position would adversely affect net interest income, while a
positive gap would result in an increase in net interest income, while,
conversely, during a period of falling interest rates, a negative gap would
result in an increase in net interest income and a positive gap would adversely
affect net interest income.

          During recent periods, the Company has maintained a negative gap
position that has benefitted earnings as interest rates have fallen. In order to
reduce its negative gap position, the Company has recently begun investing in
mortgage-backed and other securities which have rates that adjust to market
rates. The Company also maintains a significant portfolio of available-for-sale
securities that can be quickly converted to more liquid assets if needed.



                                       24
<PAGE>

          The following table sets forth the Bank's interest-rate sensitivity at
December 31, 1996.


<TABLE>
<CAPTION>


                                                                     Over             Over 1
                                                                   3 through          through           Over
                                                 0-3 Months        12 Months          5 Years          5 Years             Total
                                               -------------     -------------     -------------     -------------     -------------
<S>                                            <C>               <C>               <C>               <C>               <C>          
Assets:
   Cash and due from banks .................   $          --     $          --     $          --     $          --     $  10,665,679
   Federal funds and overnight deposits ....      12,011,981                --                --                --        12,011,981
   Securities ..............................       2,481,893         3,286,000        28,912,000        61,894,000        96,573,893
   Loans ...................................      27,021,000        12,082,000        35,318,000        50,251,414       124,672,414
   Fixed assets ............................              --                --                --                --         4,145,464
   Other assets ............................              --                --                --                --         3,482,390
                                               -------------     -------------     -------------     -------------     -------------
      Total assets .........................   $  41,514,874     $  15,368,000     $  64,230,000     $ 112,145,414     $ 251,560,821
                                               =============     =============     =============     =============     =============

Liabilities:
   Demand deposit accounts .................   $          --     $          --     $          --     $          --     $  49,375,582
   NOW and money market deposit accounts ...      49,003,029                --                --                --        49,003,029
   Savings and IRA Accounts ................      51,139,000         5,421,000        15,329,000          (474,038)       71,414,962
   Certificates of deposit .................      14,233,000        30,278,000        17,191,000           940,917        62,642,917
   Other liabilities .......................              --                --                --                --         1,015,224
      Stockholders' equity .................              --                --                --                --        18,109,107
                                               -------------     -------------     -------------     -------------     -------------
      Total liabilities and capital ........   $ 114,375,029     $  35,699,000     $  32,520,000     $     466,879     $ 251,560,821
                                               =============     =============     =============     =============     =============

GAP ........................................   $ (72,860,155)    $ (20,331,000)    $  31,710,000     $ 111,678,535
Cumulative GAP .............................     (72,860,155)      (93,191,155)      (61,481,155)       50,197,380
Cumulative GAP as a % of total assets ......          (28.96)%          (37.05)%          (24.44)%           19.95%
</TABLE>


          The foregoing analysis assumes that the Bank's assets and liabilities
move with rates at their earliest repricing opportunities based on final
maturity. Mortgage-backed securities are assumed to mature during the period in
which they are estimated to prepay and it is assumed that loans and other
securities are not called prior to maturity. Certificates of deposit and IRA
accounts are presumed to reprice at maturity. NOW savings accounts are assumed
to reprice within three months although it is the Company's experience that such
accounts may be less sensitive to changes in market rates.

Liquidity and Capital Resources

          The Company currently has no business other than that of the Bank and
does not currently have any material funding commitments. The Company's
principal sources of liquidity are cash on hand and dividends received from the
Bank. The Bank is subject to various regulatory restrictions on the payment of
dividends.

          The Bank's principal sources of funds for investments and operations
are net income, deposits from its primary market area, principal and interest
payments on loans, interest received on investment securities and proceeds from
maturing investment securities. Its principal funding commitments are for the
origination or purchase of loans and the payment of maturing deposits. Deposits
are considered a primary source of funds supporting the Bank's lending and
investment activities.

          The Bank's most liquid assets are cash and cash equivalents, which are
cash on hand, amounts due from financial institutions, federal funds sold and
money market mutual funds. The levels of such assets are dependent on the Bank's
operating financing and investment activities at any given time. The variations
in levels of cash and cash equivalents are influenced by deposit flows and
anticipated future deposit flows.


                                       25
<PAGE>

          Cash and cash equivalents (cash due from banks, interest-bearing
deposits in other financial institutions, and Federal funds sold) as of December
31, 1996 were $22,677,661, an increase of $13,227,640 (140.0%) from the December
31, 1995 total of $9,450,021. Most of this increase was in Federal funds sold
which were at a $-0- balance at the end of 1995 and totaled $10,175,000 at the
end of 1996. The large balance in Federal funds sold at the end of 1996 was a
result of recent increases in non-personal money market demand accounts and
business checking accounts immediately before year end combined with a higher
average balance maintained during the year. The 1995 year end total was a slight
$156,295 (1.6%) decrease from the $9,606,316 1994 year end total. Short-term
borrowings decreased as cash and cash equivalents rose. Short-term borrowings
fell $468,846 (21.0%) during 1995 from $2,226,568 at the end of 1994 to
$1,757,722 at the end of 1995 and by another $1,209,785 (68.8%) during 1995 to
end 1996 at $547,937.

          The Bank may draw on a $26,000,000 line of credit from the Federal
Home Loan Bank of Atlanta. Borrowings under the line are secured by a lien on
the Bank's residential mortgage loans. As of December 31, 1996, however, no
amounts were outstanding under this line. In addition the Bank has a secured
line of credit in the amount of $2.0 million from another commercial bank.

Recently Adopted Accounting Standards

          In February 1997, the FASB issued Statement No. 128, "Earnings Per
Share." This Statement establishes standards for computing and presenting
earnings per share (EPS) and applies to entities with publicly held common stock
or potential common stock. This Statement simplifies the standards for computing
earnings per share previously found in APB Opinion No. 15, "Earnings Per Share,"
and makes them comparable to international EPS standards. It replaces the
presentation of primary EPS with a presentation of basic EPS. It also requires
dual presentation of basic and diluted EPS on the face of the income statement
for all entities with complex capital structures and requires a reconciliation
of the numerator and denominator of the basic EPS computation to the numerator
and denominator of the diluted EPS computation. This Statement is effective for
financial statements issued for periods ending after December 15, 1997,
including interim periods; earlier application is not permitted. This Statement
requires restatement of all prior-period EPS data presented. Management believes
that adoption of this pronouncement will not impact any previously reported
earnings per share information.

Impact of Inflation and Changing Prices

          The consolidated financial statements and notes thereto presented
herein have been prepared in accordance with generally accepted accounting
principles, which require the measurement of financial position and operating
results in terms of historical dollars without considering the changes in the
relative purchasing power of money over time due to inflation. Unlike most
industrial companies, nearly all of the Company's assets and liabilities are
monetary in nature. As a result, interest rates have a greater impact on the
Company's performance than do the effects of general levels of inflation.
Interest rates do not necessarily move in the same direction or to the same
extent as the prices of goods and services.

                                       26
<PAGE>

Item 8.  Financial Statements and Supplementary Data



                         Report of Independent Auditors




The Board of Directors
Glen Burnie Bancorp and Subsidiaries
Glen Burnie, Maryland


We have audited the accompanying consolidated balance sheet of Glen Burnie
Bancorp and Subsidiaries as of December 31, 1996, and the related consolidated
statements of income, changes in stockholders' equity, and cash flows for the
year then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit. The consolidated
financial statements of Glen Burnie Bancorp and Subsidiaries as of December 31,
1995 and 1994 were audited by other auditors whose report dated March 8, 1996
expressed an unqualified opinion on those statements.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the 1996 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Glen Burnie Bancorp and Subsidiaries as of December 31, 1996, and the
consolidated results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles.

As discussed in Note 9 to the Consolidated Financial Statements, the Company
changed its method of accounting for post-retirement health care benefits in
1995.


Trice & Geary LLC


Salisbury, Maryland
February 12, 1997





                                       27
<PAGE>


                         Report of Independent Auditors



The Board of Directors and
   Stockholders
Glen Burnie Bancorp and Subsidiaries
Glen Burnie, Maryland


         We have audited the accompanying consolidated balance sheets of Glen
Burnie Bancorp and Subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, changes in stockholders' equity, and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

         We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Glen Burnie Bancorp and Subsidiaries as of December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.

         As discussed in Note 11 to the financial statements, the Company
changed its method of accounting for postretirement health care benefits in
1995.

                                            /s/      ROWLES & COMPANY, LLP


Baltimore, Maryland
March 8, 1996


                                       28
<PAGE>


                      Glen Burnie Bancorp and Subsidiaries

                           Consolidated Balance Sheets
<TABLE>
<CAPTION>


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

December 31,                                                                       1996             1995             1994
---------------------------------------------------------------------------------------------------------------------------

                                                      Assets

<S>                                                                           <C>             <C>             <C>
Cash and due from banks ...................................................   $  10,665,680   $   7,992,328   $   6,768,528
Interest bearing deposits in other financial institutions .................       1,836,981       1,457,693       1,037,788
Federal funds sold ........................................................      10,175,000            --         1,800,000
Investment securities available for sale, at fair value ...................      54,906,836      68,597,172       3,273,076
   
Investment securities held to maturity (fair value
   1996 $41,998,402; 1995 $6,092,901; 1994 $55,751,053) ...................      41,667,057       6,001,675      57,128,637
    
Ground rents, at cost .....................................................         267,974         269,825         269,825
Loans, less allowance for credit losses
   1996 $5,060,592; 1995 $3,698,271; 1994 $2,763,874 ......................     124,672,414     150,471,768     153,814,422
Premises and equipment, at cost, less
    accumulated depreciation ..............................................       4,154,465       4,248,830       4,661,344
Accrued interest receivable ...............................................       1,937,928       2,154,599       2,236,803
Prepaid income taxes ......................................................       1,055,974       3,164,915         277,636
Deferred income taxes .....................................................       1,380,966         263,860         778,818
Other real estate owned ...................................................         602,285         432,926         417,993
Other assets ..............................................................       1,001,141       1,109,145         469,862
                                                                              -------------   -------------   -------------

         Total assets .....................................................   $ 254,324,701   $ 246,164,736   $ 232,934,732
                                                                              =============   =============   =============

                                       Liabilities and Stockholders' Equity
Liabilities:
Deposits
   Non-interest-bearing demand ............................................   $  49,412,930   $  45,147,023   $  41,081,119
   Interest-bearing .......................................................     183,333,045     175,973,740     167,484,534
                                                                              -------------   -------------   -------------
         Total deposits ...................................................     232,745,975     221,120,763     208,565,653
Short-term borrowings .....................................................         547,937       1,757,722       2,226,568
Dividends payable .........................................................          44,193         218,208         169,987
Accrued interest payable on deposits ......................................         214,977         229,715         186,823
Other liabilities .........................................................       2,185,249       2,300,942         108,668
                                                                              -------------   -------------   -------------
         Total liabilities ................................................     235,738,331     225,627,350     211,257,699
                                                                              -------------   -------------   -------------

Commitments and contingencies

Stockholders' equity
   
  Common stock, par value $10, authorized 5,000,000 shares;
    issued and outstanding 1996 883,858 shares;
    1995 872,838 shares; 1994 708,083 shares ..............................       8,838,588       8,728,383       7,080,834
    
  Surplus .................................................................       6,192,900       5,917,043       5,450,852
  Retained earnings .......................................................       3,290,077       5,146,724       9,154,546
  Net unrealized appreciation (depreciation) on securities
     available for sale, net of income taxes ..............................         264,805         745,236          (9,199)
                                                                              -------------   -------------   -------------
         Total stockholders' equity .......................................      18,586,370      20,537,386      21,677,033
                                                                              -------------   -------------   -------------

         Total liabilities and stockholders' equity .......................   $ 254,324,701   $ 246,164,736   $ 232,934,732
                                                                              =============   =============   =============
</TABLE>

     The Notes to Consolidated Financial Statements are an integral part of
                          these financial statements.



                                       29
<PAGE>




                      Glen Burnie Bancorp and Subsidiaries

                        Consolidated Statements of Income

<TABLE>
<CAPTION>


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

Years Ended December 31,                                  1996            1995              1994
--------------------------------------------------------------------------------------------------


<S>                                                   <C>             <C>             <C>
Interest income on
   Loans, including fees ..........................   $ 13,081,364    $ 14,475,876    $ 14,085,642
   U.S. Treasury securities .......................        822,215         987,119       1,037,453
   U.S. Government agency securities ..............      2,846,357       1,599,850       1,450,536
   State and municipal securities .................      1,517,827       1,261,886       1,218,119
   Federal funds sold .............................        261,423         138,678         101,537
   Other ..........................................        116,708         137,296          51,814
                                                      ------------    ------------    ------------
         Total interest income ....................     18,645,894      18,600,705      17,945,101
                                                      ------------    ------------    ------------

Interest expense on
   Deposits .......................................      7,711,989       7,172,845       6,008,866
   Short-term borrowings ..........................         49,652          88,723          68,276
                                                      ------------    ------------    ------------
         Total interest expense ...................      7,761,641       7,261,568       6,077,142
                                                      ------------    ------------    ------------

         Net interest income ......................     10,884,253      11,339,137      11,867,959

Provision for credit losses .......................      6,596,000       7,925,000       1,120,000
                                                      ------------    ------------    ------------

         Net interest income after
             provision for credit losses ..........      4,288,253       3,414,137      10,747,959
                                                      ------------    ------------    ------------

Other income
   Service charges on deposit accounts ............      1,042,355         948,021         956,643
   Other fees and commissions .....................        483,537         449,567         480,019
   Gains on investment securities .................        144,565         506,695          78,169
   Proceeds from insurance settlement .............        560,000            --               --
                                                      ------------    ------------    ------------
         Total other income .......................      2,230,457       1,904,283       1,514,831
                                                      ------------    ------------    ------------

Other expenses
   Salaries .......................................      3,346,927       2,954,742       2,831,455
   Employee benefits ..............................      1,288,037       1,182,490       1,156,763
   Occupancy ......................................        528,528         465,732         484,738
   Furniture and equipment ........................        739,115         741,602         645,707
   Restructuring and litigation charges ...........           --         1,407,641            --
   Other expenses .................................      3,116,472       1,987,405       2,020,773
                                                      ------------    ------------    ------------
         Total other expenses .....................      9,019,079       8,739,612       7,139,436
                                                      ------------    ------------    ------------

Income (loss) before income taxes .................     (2,500,369)     (3,421,192)      5,123,354

Federal and state income taxes (benefits) .........     (1,480,192)     (1,694,444)      1,606,761
                                                      -------------   -------------   ------------

Net income (loss) .................................   $ (1,020,177)   $ (1,726,748)   $  3,516,593
                                                      =============   =============   ============

Net income (loss) per share of common stock .......   $      (1.16)   $      (2.01)   $       4.22
                                                      =============   =============   ============

Weighted-average shares of common stock outstanding        881,211         861,116         833,849
                                                      =============   =============   ============

</TABLE>


       The Notes to Consolidated Financial Statements are an integral part
                         of these financial statements.



                                       30
<PAGE>





                      Glen Burnie Bancorp and Subsidiaries

           Consolidated Statements of Changes in Stockholders' Equity

                  Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>

                                                                                                             Net Unrealized
                                                                                                              Appreciation
                                                                                                             (Depreciation)
                                                                                                                   on      
                                                 Common Stock                                                  Securities  
                                            -----------------------                           Retained          Available  
                                            Shares        Par Value           Surplus         Earnings          For Sale   
                                            ------        ---------           -------         --------        -------------

<S>                                         <C>            <C>               <C>              <C>                 <C>        
Balances, December 31, 1993                 583,402       $5,834,024        $5,290,979       $7,491,574          $       --

Unrealized appreciation on securities
   available for sale at January 1, 1994         --               --                --               --             132,529
Net income                                       --               --                --        3,516,593                  --
Stock split effected in the form of 20%
   stock dividend                           117,705        1,177,053                --       (1,177,053)                 --
Issuance of shares for employee and
   director stock purchase plans              4,605           46,050            96,247               --                  --
Shares retired                              (10,558)        (105,580)         (237,574)              --                  --
Cash dividends, $.80 per share                   --               --                --         (676,568)                 --
Dividends reinvested                         12,929          129,287           301,200               --                  --
Net change in unrealized depreciation
   on securities available for sale              --               --                --               --            (141,728)
                                            -------       ----------        ----------       -----------          ----------

Balances, December 31, 1994                 708,083        7,080,834         5,450,852        9,154,546              (9,199)

Net loss                                         --               --                --       (1,726,748)                 --
Stock split effected in the form of 20%
   stock dividend                           145,472        1,454,719                --       (1,454,719)                 --
Issuance of shares for employee and
   director stock purchase plans              8,488           84,880           191,174               --                  --
Cash dividends,  $.96 per share                  --               --                --         (826,355)                 --
Dividends reinvested                         10,795          107,950           275,017               --                  --
Net change in unrealized appreciation
   on securities available for sale              --               --                --               --             754,435
                                           --------       ----------        -----------      ----------           ---------

Balances, December 31, 1995                 872,838        8,728,383         5,917,043        5,146,724             745,236

Net loss                                         --               --                --       (1,020,177)                 --
Issuance of shares for employee and
   director stock purchase plans                200            2,000             3,384               --                  --
Cash dividends, $.95 per share                   --               --                --         (836,470)                 --
Dividends reinvested                         10,820          108,205           272,473               --                  --
Net change in unrealized appreciation
    on securities available for sale             --               --                --               --            (480,431)
                                           --------       ----------        ----------      -----------           ---------

Balances, December 31, 1996                 883,858       $8,838,588        $6,192,900      $ 3,290,077           $ 264,805
                                           ========       ==========        ==========      ===========           =========

</TABLE>




     The Notes to Consolidated Financial Statements are an integral part of
                          these financial statements.



                                       31
<PAGE>




                      Glen Burnie Bancorp and Subsidiaries

                      Consolidated Statements of Cash Flows


<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------

Years Ended December 31,                                           1996             1995               1994  
-------------------------------------------------------------------------------------------------------------

<S>                                                           <C>                <C>              <C>
Cash flows from operating activities:
   Net income (loss)                                          $ (1,020,177)      $(1,726,748)     $ 3,516,593
   Adjustments to reconcile net income (loss) to net
      cash provided by operating activities
         Depreciation, amortization, and accretion                 606,650           564,533          529,474
         Provision for credit losses                             6,596,000         7,925,000        1,120,000
         Losses on other real estate owned                          13,192           136,800          123,000
         Deferred income taxes (benefits)                         (814,821)           40,272           56,559
         Gains on disposal of assets, net                         (144,318)         (509,982)        (139,646)
         Changes in assets and liabilities:
            (Increase) decrease in accrued interest receivable     216,671            82,204         (278,740)
            (Increase) decrease in prepaid income taxes and
               other assets                                      2,108,195        (2,943,020)        (356,943)
            Increase (decrease) in accrued interest payable        (14,738)           42,892            5,310
            Increase (decrease) in other liabilities              (115,693)          266,301         (182,651)
                                                              ------------       -----------       ----------

         Net cash provided by operating activities               7,430,961         3,878,252        4,392,956
                                                              ------------       -----------       ----------

Cash flows from investing activities:
   Proceeds from disposals of investment securities:
      Maturities of held to maturity investment securities       4,984,661        10,266,038       11,405,887
      Maturities of available for sale investment securities     9,707,289           500,000               --
      Sales of available for sale investment securities         10,103,956        20,109,830        2,530,156
   Purchases of held to maturity investment securities         (40,650,194)         (493,391)     (12,512,137)
   Purchases of available for sale investment securities        (6,711,564)      (41,033,354)      (3,282,257)
   (Increase) decrease in loans, net                            19,203,353        (4,794,585)     (13,617,098)
   Proceeds from sales of other real estate                             --           588,747          553,922
   Purchases of other real estate                                 (182,551)               --               --
   Purchases of premises and equipment                            (449,275)         (600,331)        (478,025)
   Purchase of intangibles                                              --          (544,652)              --
                                                              ------------       -----------      -----------

         Net cash used in investing activities                  (3,994,325)      (16,001,698)     (15,399,552)
                                                              ------------       -----------      -----------

Cash flows from financing activities:
   Increase in deposits, net                                    11,625,212        12,555,110        5,654,923
   Increase (decrease) in short-term borrowings                 (1,209,785)         (468,846)         957,307
   Cash dividends paid                                          (1,010,485)         (778,134)        (663,965)
   Common stock dividends reinvested                               380,678           382,967          430,487
   Issuance of common stock                                          5,384           276,054          142,297
   Common stock retired                                                 --                --         (343,154)
                                                              ------------       -----------      ----------- 

         Net cash provided by financing activities               9,791,004        11,967,151        6,177,895
                                                              ------------       -----------      -----------

Increase (decrease) in cash and cash equivalents                13,227,640          (156,295)      (4,828,701)

Cash and cash equivalents, beginning of year                     9,450,021         9,606,316       14,435,017
                                                              ------------       -----------      -----------

Cash and cash equivalents, end of year                         $22,677,661       $ 9,450,021      $ 9,606,316
                                                              ============       ===========      ===========
</TABLE>



     The Notes to Consolidated Financial Statements are an integral part of
                          these financial statements.




                                       32
<PAGE>

                      Glen Burnie Bancorp and Subsidiaries

                      Consolidated Statements of Cash Flows
                                   (Continued)
<TABLE>
<CAPTION>

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

Years Ended December 31,                                              1996            1995              1994
---------------------------------------------------------------------------------------------------------------

<S>                                                              <C>                <C>              <C>
Supplementary Cash Flow Information:

   Interest paid                                                 $ 7,776,379        $7,218,676       $6,071,832
   Income taxes paid (refunded)                                  $(1,718,184)        1,152,564        1,691,297


</TABLE>



     The Notes to Consolidated Financial Statements are an integral part of
                          these financial statements.




                                       33
<PAGE>
                      Glen Burnie Bancorp and Subsidiaries

                   Notes to Consolidated Financial Statements

Note 1.  Summary of Significant Accounting Policies

         The Bank provides financial services to individuals and corporate
         customers located in Anne Arundel County and surrounding areas of
         Central Maryland, and is subject to competition from other financial
         institutions. The Bank is also subject to the regulations of certain
         Federal and State agencies and undergoes periodic examinations by those
         regulatory authorities. The accounting policies of the Bank conform to
         generally accepted accounting principles and to general practices
         within the banking industry.

         Significant accounting policies not disclosed elsewhere in the
         consolidated financial statements are as follows:

         Principles of Consolidation:

         The consolidated financial statements include the accounts of Glen
         Burnie Bancorp (the Company) and its subsidiaries, The Bank of Glen
         Burnie (the Bank) and GBB Properties, Inc., a company engaged in the
         acquisition and disposition of other real estate. Intercompany balances
         and transactions have been eliminated. The Parent Only financial
         statements of the Company account for the subsidiaries using the equity
         method of accounting.

         Use of Estimates:

         The preparation of financial statements in conformity with generally
         accepted accounting principles requires management to make estimates
         and assumptions that affect the reported amounts of assets and
         liabilities and disclosure of contingent assets and liabilities at the
         dates of the financial statements and the reported amounts of revenues
         and expenses during the reporting periods. Actual results could differ
         from those estimates.

         Securities Held to Maturity:

         Bonds, notes and debentures for which the Bank has the positive intent
         and ability to hold to maturity are reported at cost, adjusted for
         premiums and discounts that are recognized in interest income using the
         straight-line method over the period to maturity. Securities
         transferred into held to maturity from the available for sale portfolio
         are recorded at fair value at time of transfer with unrealized gains or
         losses reflected in equity and amortized over the remaining life of the
         security.

         Securities Available for Sale:

         Marketable debt and equity securities not classified as held to
         maturity are classified as available for sale. Securities available for
         sale may be sold in response to changes in interest rates, loan demand,
         changes in prepayment risk and other factors. Securities available for
         sale are carried at fair value, with unrealized gains or losses based
         on the difference between amortized cost and fair value reported as a
         separate component of stockholders' equity, net of deferred tax.
         Realized gains and losses, using the specific identification method,
         are included as a separate component of non-interest income. Premiums
         and discounts are recognized in interest income using the straight-line
         method over the period to maturity.
   
         Loans and Allowance for Credit Losses:

         On January 1, 1995, the Bank adopted Financial Accounting Standards
         Board (FASB) Statement No. 114, "Accounting by Creditors for Impairment
         of a Loan," as amended by FASB Statement No. 118, "Accounting by
         Creditors for Impairment of a Loan--Income Recognition and
         Disclosures." Statement No. 114, as amended, requires that the
         measurement of a loan's impairment be based on the present value of the
         loan's expected future cash flows or, alternatively, the observable
         market price of the loan or the fair value of the collateral. The
         effect of adopting Statement No. 114 was not material.

         Loans are carried at the amount of unpaid principal, adjusted for
         deferred loan fees and origination costs. Interest on loans is accrued
         based on the principal amounts outstanding. It is the Bank's policy to
         discontinue the accrual of interest when a loan is specifically
         determined to be impaired or when principal or interest is delinquent
         for ninety days or more. When a loan is placed on a nonaccrual status,
         all interest previously accrued but not collected is reversed against
         current period interest income. Interest income generally is not
         recognized on specific impaired loans unless the likelihood of further
         loss is remote. Cash collections on such loans are applied as
         reductions of the loan principal balance and no interest income is
         recognized on those loans until the principal balance has been
         collected. Interest income on other nonaccrual loans is recognized only
         to the extent of interest payments received.

                                       34
<PAGE>


                      Glen Burnie Bancorp and Subsidiaries

                   Notes to Consolidated Financial Statements
                                   (Continued)


Note 1.  Summary of Significant Accounting Policies (continued)

         The allowance for credit losses is established through a provision for
         credit losses charged to expense. Loans are charged against the
         allowance for credit losses when management believes that the
         collectibility of the principal is unlikely. The allowance, based on
         evaluations of the collectibility of loans and prior loan loss
         experience, is an amount that management believes will be adequate to
         absorb possible losses on existing loans that may become uncollectible.
         The evaluations take into consideration such factors as changes in the
         nature and volume of the loan portfolio, overall portfolio quality,
         review of specific problem loans, and current economic conditions and
         trends that may affect the borrower's ability to pay.

         While management believes it has established the allowance for credit
         losses in accordance with generally accepted principles and has taken
         into account the views of its regulators and the current economic
         environment, there can be no assurance that in the future the Bank's
         regulators or its economic environment will not require further
         increases in the allowance.
    

         Other Real Estate Owned (OREO):

         OREO comprises properties acquired in partial or total satisfaction of
         problem loans. The properties are recorded at the lower of cost or fair
         value at the date acquired. Losses arising at the time of acquisition
         of such properties are charged against the allowance for credit losses.
         Subsequent write-downs that may be required and expenses of operation
         are included in non-interest expense. Gains and losses realized from
         the sale of OREO are included in non-interest income or expense.

         Depreciation:

         Depreciation is computed using the straight-line method over the
         estimated useful lives of assets.

         Intangible Assets:

         Costs incurred in the organization of the Company are being amortized
         over five years. Computer software is recorded at cost, and amortized
         over three to five years. A deposit acquisition premium is recorded at
         cost, and is being amortized over 10 years on the straight-line method.

         Income Taxes:

         The provision for Federal and State income taxes is based upon the
         results of operations, adjusted for tax-exempt income. Deferred income
         taxes are provided by applying enacted statutory tax rates to temporary
         differences between financial and taxable income.

         Temporary differences which give rise to deferred tax assets relate
         principally to the allowance for credit losses, unearned income on
         loans, other real estate owned, accrued compensation and benefits, tax
         deduction carryovers, and alternative minimum tax credit carryovers.

         Temporary differences which give rise to deferred tax liabilities
         relate principally to accumulated depreciation, accretion of discount
         on investment securities, and prepaid pension expense.



                                       35
<PAGE>




                      Glen Burnie Bancorp and Subsidiaries

                   Notes to Consolidated Financial Statements
                                   (Continued)


Note 1.  Summary of Significant Accounting Policies (continued)

         Credit Risk:

         The Bank has deposits in other financial institutions in excess of
         amounts insured by the Federal Deposit Insurance Corporation.

         Cash and Cash Equivalents:

   
         The Bank has included cash and due from banks, interest bearing
         deposits in other financial institutions, and Federal funds sold as
         cash and cash equivalents for the purpose of reporting cash flows. The
         Federal Reserve Board requires the Bank to maintain noninterest-bearing
         cash reserves against certain categories of average deposit
         liabilities. Such reserves averaged approximately $2,200,000 during the
         year ended December 31, 1996.
    

         Net Income Per Share:

   
         Net income per share of common stock has been computed on the
         weighted-average shares of common stock outstanding, giving retroactive
         effect to stock dividends declared. Shares issued under stock option
         plans are excluded from the computation, since the effect of those
         shares is immaterial.
    

         Financial Statement Presentation:

         Certain amounts in the prior years' financial statements have been
         reclassified to conform to the current year's presentation.

























                                       36
<PAGE>





                      Glen Burnie Bancorp and Subsidiaries

                   Notes to Consolidated Financial Statements
                                   (Continued)


Note 2.  Investment Securities

         Investment securities are summarized as follows:

<TABLE>
<CAPTION>



                                                                             Gross       Gross
                                                          Amortized       Unrealized   Unrealized        Fair
         December 31, 1996                                  Cost             Gains       Losses          Value
         -----------------                                ----------      ----------   ----------     ----------
         <S>                                             <C>             <C>            <C>          <C>   
         Available for sale                                            
            U.S. Treasury                                $ 6,575,244     $   54,518     $  7,793     $ 6,621,969
            U.S. Government agency                        20,625,552         43,627      199,626      20,469,553
            Mortgage-backed                                1,913,804         24,355       25,673       1,912,486
            State and municipal                           24,612,517        568,919       26,908      25,154,528
                                                         -----------     ----------     --------     -----------
                                                          53,727,117        691,419      260,000      54,158,536
            Federal Home Loan Bank stock                     748,300             --           --         748,300
                                                         -----------     ----------     --------     -----------
                                                                       
                                                         $54,475,417     $  691,419     $260,000     $54,906,836
                                                         ===========     ==========     ========     ===========
                                                                       
                                                                       
         Held to maturity                                              
            U.S. Treasury                                $ 6,485,244     $   59,711     $ 19,992     $ 6,524,963
            U.S. Government agency                        34,067,907        270,302       23,166      34,315,043
            Mortgage-backed                                       --             --           --              --
            State and municipal                            1,113,906         44,490           --       1,158,396
                                                         -----------     ----------     --------     -----------
                                                                       
                                                         $41,667,057     $  374,503     $ 43,158     $41,998,402
                                                         ===========     ==========     ========     ===========
                                                                       
                                                                       
         December 31, 1995                                             
                                                                       
         Available for sale                                            
            U.S. Treasury                                $10,067,337     $  142,506     $  7,845     $10,201,998
            U.S. Government agency                        26,187,078        287,223        3,601      26,470,700
            Mortgage-backed                                3,049,947         92,520           --       3,142,467
            State and municipal                           27,379,975        732,408       29,076      28,083,307
                                                         -----------     ----------     --------     -----------
                                                          66,684,337      1,254,657       40,522      67,898,472
            Federal Home Loan Bank stock                     698,700             --           --         698,700
                                                         -----------     ----------     --------     -----------
                                                                       
                                                         $67,383,037     $1,254,657     $ 40,522     $68,597,172
                                                         ===========     ==========     ========     ===========
                                                                       
         Held to maturity                                              
            U.S. Treasury                                $ 5,003,789     $   84,106     $  3,750     $ 5,084,145
            U.S. Government agency                           997,886         10,870           --       1,008,756
                                                         -----------     ----------     --------     -----------
                                                                       
                                                         $ 6,001,675     $   94,976     $  3,750     $ 6,092,901
                                                         ===========     ==========     ========     ===========
</TABLE>







                                       37
<PAGE>




                      Glen Burnie Bancorp and Subsidiaries

                   Notes to Consolidated Financial Statements
                                   (Continued)


  Note 2. Investment Securities (continued)


<TABLE>
<CAPTION>
                                                                                                                
                                                                                                                
                                                                           Gross         Gross
                                                          Amortized     Unrealized    Unrealized       Fair 
         December 31, 1994                                  Cost           Gains         Losses        Value  
         -----------------                                ---------     ---------     ----------     -----------
         <S>                                             <C>             <C>            <C>          <C>        

         Available for sale
            U.S. Treasury                               $ 1,494,530      $  4,272      $   24,102    $ 1,474,700
            U.S. Government agency                          500,000            --              --        500,000
            State and municipal                             608,832         5,678             834        613,676
                                                        -----------      --------      ----------    -----------
                                                          2,603,362         9,950          24,936      2,588,376
            Federal Home Loan Bank stock                    684,700            --              --        684,700
                                                        -----------      --------      ----------    -----------

                                                        $ 3,288,062      $  9,950      $   24,936    $ 3,273,076
                                                        ===========      ========      ==========    ===========

         Held to maturity
            U.S. Treasury                               $15,604,747      $ 18,616      $  590,301    $15,033,062
            U.S. Government agency                       19,767,888        40,982         700,178     19,108,692
            Mortgage-backed                               1,894,261        19,336          45,941      1,867,656
            State and municipal                          19,861,741       414,704         534,802     19,741,643
                                                        -----------      --------      ----------    -----------

                                                        $57,128,637      $493,638      $1,871,222    $55,751,053
                                                        ===========      ========      ==========    ===========
</TABLE>

   
         In 1995, the FASB granted a one-time opportunity to reclassify
         securities. The Bank reclassified securities with amortized cost
         approximating $41.2 million and net unrealized gains approximating $1.2
         million from held to maturity to available for sale.
    

         Contractual maturities of investment securities at December 31, 1996,
         1995, and 1994, are shown below. Actual maturities may differ from
         contractual maturities because debtors may have the right to call or
         prepay obligations with or without call or prepayment penalties.


<TABLE>
<CAPTION>


                                                              Available for Sale            Held to Maturity     
                                                         ------------------------    ---------------------------
                                                         Amortized         Fair         Amortized        Fair
         December 31, 1996                                  Cost           Value          Cost           Value  
         -----------------                              -----------   -----------    -------------   -----------
            <S>                                         <C>             <C>            <C>              <C>        
            Due within one year                         $ 2,728,910   $ 2,733,114    $  1,500,791    $ 1,506,090
            Due over one to five years                   10,870,162    10,969,608      19,969,083     20,087,636
            Due over five to ten years                   12,578,991    12,838,012      15,113,223     15,265,730
            Due over ten years                           25,635,252    25,705,658       5,083,960      5,138,946
            Mortgage-backed, due in monthly
                installments                              1,913,802     1,912,144              --             --
                                                        -----------   -----------    ------------    -----------

                                                        $53,727,117   $54,158,536    $ 41,667,057    $41,998,402
                                                        ===========   ===========    ============    ===========
</TABLE>








                                       38
<PAGE>




                      Glen Burnie Bancorp and Subsidiaries

                   Notes to Consolidated Financial Statements
                                   (Continued)


  Note 2. Investment Securities (continued)



<TABLE>
<CAPTION>



                                                            Available for Sale                Held to Maturity     
                                                        --------------------------     -----------------------------
                                                        Amortized         Fair           Amortized          Fair
         December 31, 1995                                 Cost           Value            Cost             Value 
         -----------------                              ----------     -----------     -------------     -----------
            <S>                                        <C>             <C>              <C>              <C>
 
            Due within one year                        $ 6,239,463     $ 6,272,876      $        --       $       --
            Due over one to five years                  16,130,873      16,449,969        5,258,197        5,328,052
            Due over five to ten years                  15,308,097      15,747,636          743,478          764,849
            Due over ten years                          25,955,957      26,285,524               --               --
            Mortgage-backed, due in monthly
               installments                              3,049,947       3,142,467               --               --
                                                       -----------     -----------       ----------       ----------

                                                       $66,684,337     $67,898,472      $ 6,001,675       $6,092,901
                                                       ===========     ===========      ===========       ==========

</TABLE>


<TABLE>
<CAPTION>


                                                            Available for Sale                 Held to Maturity     
                                                         -------------------------     -----------------------------
                                                         Amortized         Fair          Amortized           Fair
         December 31, 1994                                  Cost           Value           Cost              Value  
         -----------------                              ----------     -----------     -------------     -----------
                    

            <S>                                         <C>            <C>              <C>             <C>   
            Due within one year                         $  499,490     $  503,750       $ 6,598,185      $ 6,604,743
            Due over one to five years                   1,495,040      1,470,950        34,059,243       33,071,197
            Due over five to ten years                          --             --         9,926,296        9,730,426
            Due over ten years                             608,832        613,676         4,650,652        4,477,031
            Mortgage-backed, due in monthly
               installments                                     --             --         1,894,261        1,867,656
                                                        ----------     ----------      ------------      -----------
                                                        $2,603,362     $2,588,376       $57,128,637      $55,751,053
                                                        ==========     ==========       ===========      ===========

</TABLE>

   
         Proceeds from sales of investment securities prior to maturity were
         $10,103,956, $20,109,830, and $2,530,156 for the years ended December
         31, 1996, 1995 and 1994, respectively. Gains of $154,119 and losses of
         $9,554 were realized on those sales for 1996. Gains of $563,764 and
         losses of $72,482 were realized on those sales for 1995. Gains of
         $62,385 and losses of $18,738 were realized on those sales for 1994.
         Income tax expense relating to net gains on sales of investment
         securities was $55,831, $189,733, and $16,856 for the years ended
         December 31, 1996, 1995, and 1994, respectively.
    

         Securities with amortized cost of approximately $4,999,000,
         $6,008,000, and $3,000,000 were pledged as collateral for short-term
         borrowings and financial instruments with off-balance sheet risk at
         December 31, 1996, 1995 and 1994, respectively.

         Investment securities include obligations of the State of Maryland and
         its subdivisions with an amortized cost of $16,982,447, $18,839,735,
         and $20,217,039 at December 31, 1996, 1995, and 1994, respectively.


                                       39
<PAGE>





                      Glen Burnie Bancorp and Subsidiaries

                   Notes to Consolidated Financial Statements
                                   (Continued)


  Note 3. Loans

          Major categories of loans are as follows:
<TABLE>
<CAPTION>

                                                                  1996                 1995             1994
                                                                -----------        ------------     ------------
         <S>                                                    <C>                <C>              <C>
          Mortgage
            Residential                                         $36,504,904        $ 38,142,356     $ 35,078,486
            Commercial                                           47,757,381          46,888,141       39,397,909
            Construction and land development                     5,514,565          14,264,761       21,014,457
          Lease financing                                         7,537,563          13,241,832       15,597,789
          Demand and time                                         9,557,470          13,123,542       12,680,512
          Installment                                            23,714,889          29,382,484       33,584,949
                                                                -----------        ------------      -----------
                                                                130,586,772         155,043,116      157,354,102
          Unearned income on loans                                 (853,766)           (873,077)        (775,806)
                                                                -----------        ------------      -----------

                                                                129,733,006         154,170,039      156,578,296
          Allowance for credit losses                            (5,060,592)         (3,698,271)      (2,763,874)
                                                                 -----------        ------------      -----------
                                                               $124,672,414        $150,471,768     $153,814,422
                                                               ============        ============     ============
</TABLE>

          The Bank makes loans to customers located primarily in Anne Arundel
          County and surrounding areas of Central Maryland. Although the loan
          portfolio is diversified, its performance will be influenced by the
          economy of the region.
   
          Executive officers, directors, and their affiliated interests enter
          into loan transactions with the Bank in the ordinary course of
          business. These loans are made on the same terms, including interest
          rates and collateral, as those prevailing at the time for comparable
          loans with unrelated borrowers. At December 31, 1996, 1995, and 1994,
          the amounts of such loans outstanding were $2,587,122, $2,878,742, and
          $685,613, respectively. During 1996 loan additions and repayments were
          $10,000 and $301,620, respectively.
    

          The allowance for credit losses is as follows:

<TABLE>
<CAPTION>

                                                                  1996                 1995             1994
                                                                -----------        ------------     ------------
         <S>                                                    <C>                <C>              <C>

          Balance, beginning of year                            $ 3,698,271         $ 2,763,874      $ 2,552,355
          Provision for credit losses                             6,596,000           7,925,000        1,120,000
          Recoveries                                                234,614              70,047           67,663
          Loans charged off                                      (5,468,293)         (7,060,650)        (976,144)
                                                                -----------         -----------      -----------

          Balance, end of year                                  $ 5,060,592         $ 3,698,271      $ 2,763,874
                                                                ===========         ===========      ===========
</TABLE>



          Loans on which the accrual of interest has been discontinued amounted
          to $4,545,581, $2,374,643, and $654,568 at December 31, 1996, 1995,
          and 1994, respectively. Interest that would have been accrued under
          the terms of these loans was $457,035, $191,200, and $38,469 for the
          years ended December 31, 1996, 1995, and 1994, respectively.



                                       40
<PAGE>




                      Glen Burnie Bancorp and Subsidiaries

                   Notes to Consolidated Financial Statements
                                   (Continued)


  Note 3. Loans (continued)

         Information regarding loans classified by the Bank as impaired as of
         and for the year ended December 31, 1996 follows:

             Loans classified as impaired                            $5,953,621
             Allowance for credit losses on impaired loans            1,232,366
             Average balance of impaired loans                        6,563,679

         Following is a summary of cash receipts for 1996 on impaired loans and
         how they were applied:

             Cash receipts applied to reduce principal balance       $  194,535
             Cash receipts recognized as interest income                182,795
                                                                     -----------

                       Total cash receipts                           $  377,330
                                                                     ===========

         The Bank has no commitments to loan additional funds to the borrowers
         of impaired or non-accrual loans.

         The Bank identified impaired loans of $407,597 as of December 31, 1995.
         No specific allowance for credit losses related to impaired loans was
         provided. These loans were identified as impaired near the end of 1995,
         and no payments were received on these loans since they were classified
         as impaired.

         Outstanding loan commitments, unused lines of credit and letters of
         credit are as follows:


                                             1996         1995           1994
                                         -----------   -----------   -----------
Loan commitments
   Construction and land development     $ 1,865,000   $ 3,145,000   $ 2,354,000
   Other mortgage loans                      185,000       703,000     1,181,900
   Lease financing                              --         395,000       750,000
                                         -----------   -----------   -----------

                                         $ 2,050,000   $ 4,243,000   $ 4,285,900
                                         ===========   ===========   ===========

Unused lines of credit
   Home-equity lines                     $ 2,944,867   $ 2,678,990   $ 2,561,861
   Commercial lines                        8,030,635    13,430,907    18,424,323
   Unsecured consumer lines                3,434,501     2,419,052     1,886,600
                                         -----------   -----------   -----------

                                         $14,410,003   $18,528,949   $22,872,784
                                         ===========   ===========   ===========

Letters of credit                        $ 3,132,661   $ 4,297,760   $ 4,467,523
                                         ===========   ===========   ===========












                                       41
<PAGE>




                      Glen Burnie Bancorp and Subsidiaries


                   Notes to Consolidated Financial Statements
                                   (Continued)

  Note 3. Loans (continued)

         Loan commitments and lines of credit are agreements to lend to
         customers as long as there is no violation of any conditions of the
         contracts. Loan commitments generally have interest rates fixed at
         current market amounts, fixed expiration dates, and may require payment
         of a fee. Lines of credit generally have variable interest rates.
         Letters of credit are commitments issued to guarantee the performance
         of a customer to a third party.

   
         The Bank's exposure to credit loss in the event of nonperformance by
         the customer is the contractual amount of the commitment. Loan
         commitments, lines of credit and letters of credit are made on the same
         terms, including collateral, as outstanding loans. As of December 31,
         1996 and 1995, $139,382 and $108,000, respectively, has been provided
         as an allowance for credit losses related to these financial
         instruments with off-balance sheet risk, which is reflected as a
         reduction of loans.
    

  Note 4. Premises and Equipment

         A summary of premises and equipment is as follows:

<TABLE>
<CAPTION>

                                               Useful
                                                lives             1996         1995            1994
                                                -----         ----------    ----------     -----------
         <S>                                   <C>            <C>            <C>            <C>
         Land                                                 $   509,803    $   509,803    $   896,170
         Buildings                             5-50 years       3,713,427      3,494,122      3,467,732
         Equipment and fixtures                5-30 years       3,640,241      3,430,771      3,037,146
         Construction in progress                                  46,505         29,019         65,024
                                                              -----------     ----------    -----------
                                                                7,909,976      7,463,715      7,466,072
         Accumulated depreciation                              (3,755,511)    (3,214,885)    (2,804,728)
                                                              -----------     ----------     ----------

                                                              $ 4,154,465    $ 4,248,830    $ 4,661,344
                                                              ===========    ===========    ===========

</TABLE>

         Depreciation expense was $543,393, $533,197, and $511,919 for the years
         ended December 31, 1996, 1995, and 1994, respectively. Amortization of
         software and intangible assets was $110,602, $50,332, and $24,686 for
         the years ended December 31, 1996, 1995, and 1994, respectively.

         The Bank leases its South Crain Highway branch. Minimum obligations
         under the lease are $23,460 per year until the lease expires in June
         2000. The Bank is also required to pay maintenance costs. Rent expense
         totaled $37,188 and $11,681 for the years ended December 31, 1996 and
         1995, respectively.

  Note 5. Short-Term Borrowings

         Short-term borrowings are as follows:

<TABLE>
<CAPTION>


                                                                  1996          1995           1994
                                                              ----------     ----------      ---------

         <S>                                                  <C>            <C>            <C>       
         Notes payable - U.S. Treasury                        $  547,937     $  282,722     $  726,568
         Federal funds purchased                                     --         975,000           --
         Securities sold under repurchase agreement                  --         500,000           --
         Federal Home Loan Bank notes                                --             --       1,500,000
                                                              ----------     ----------     ----------

                                                              $  547,937     $1,757,722     $2,226,568
                                                              ==========     ==========     ==========
</TABLE>

                                       42
<PAGE>




                      Glen Burnie Bancorp and Subsidiaries

                   Notes to Consolidated Financial Statements
                                   (Continued)


  Note 5. Short-Term Borrowings  (continued)

         The Bank may borrow up to $26 million under a line of credit with the
         Federal Home Loan Bank. The line of credit is secured by a floating
         lien on the Bank's residential mortgage loans and by investment
         securities with an amortized cost of $2,001,304 at December 31, 1996.

         Notes payable to the U.S. Treasury are Federal treasury tax and loan
         deposits accepted by the Bank from its customers to be remitted on
         demand to the Federal Reserve Bank. The Bank pays interest on these
         balances at a slight discount to the Federal funds rate. The note
         payable is secured by investment securities with an amortized cost of
         approximately $1,497,000 at December 31, 1996.

         The Bank also has available $2,000,000 in short-term secured credit and
         a $1,000,000 letter of credit facility from another bank.


  Note 6. Deposits

         Major classifications of interest-bearing deposits are as follows:


<TABLE>
<CAPTION>
                                                1996           1995          1994
                                            ------------   ------------   ------------

          <S>                               <C>            <C>            <C>         
          NOW and SuperNOW                  $ 22,792,376   $ 22,289,849   $ 22,272,708
          Money market                        26,210,655     27,602,041     32,880,823
          Savings                             48,192,967     46,752,665     52,830,352
          Certificates of deposit, 
           $100,000 or more                    8,620,096      9,844,841      7,804,644
          Other time deposits                 77,516,951     69,484,344     51,696,007
                                            ------------   ------------   ------------
                                            $183,333,045   $175,973,740   $167,484,534
                                            ============   ============   ============
</TABLE>



         At December 31, 1996, the scheduled maturities of time deposits are as
         follows:

                                                 1996
                                         
          1997                             $  54,112,139
          1998                                 9,679,941
          1999                                 8,444,168
          2000                                 8,895,663
          2001 and thereafter                  5,005,136
                                           -------------
                                           $  86,137,047
                                           =============

         Interest expense on certificates of deposit of $100,000 or more was
         $484,267, $394,092, and $312,993, for the years ended December 31,
         1996, 1995, and 1994, respectively.

         Deposit balances of executive officers and directors and their
         affiliated interests totaled approximately $1,067,000 at December 31,
         1996.

         The Bank had no brokered deposits as of and for the years ended
         December 31, 1996, 1995, and 1994.






                                       43
<PAGE>




                      Glen Burnie Bancorp and Subsidiaries

                   Notes to Consolidated Financial Statements
                                   (Continued)


  Note 7. Income Taxes

         The components of income tax expense (benefits) for the years ended
         December 31, 1996, 1995, and 1994 are as follows:

<TABLE>
<CAPTION>
                                                    1996           1995          1994
                                                 -----------    -----------   -----------
         <S>                                    <C>            <C>             <C>  
         Current
           Federal                              $  (936,608)   $(1,494,542)    $1,204,547
           State                                   (266,880)      (240,172)       345,654
                                                -----------    -----------    -----------
                                                 (1,203,488)    (1,734,714)     1,550,201
         Deferred                                  (276,704)        40,270         56,560
                                                -----------    -----------    -----------

         Income tax expense (benefits)          $(1,480,192)   $(1,694,444)    $1,606,761
                                                ===========    ===========    ===========
</TABLE>

         A reconciliation of income tax expense (benefits) computed at the
         statutory rate of 34 percent to the actual income tax expense for the
         years ended December 31, 1996, 1995, and 1994 is as follows:
                                                                              

<TABLE>
<CAPTION>

                                                    1996           1995           1994
                                                ------------   ------------   -----------
         <S>                                    <C>            <C>            <C>        
         Income (loss) before income taxes      $(2,500,369)   $(3,421,192)   $ 5,123,354
                                                ===========    ===========    ===========

         Taxes computed at Federal income  
           tax rate                             $  (850,125)   $(1,163,205)   $ 1,741,940
         Increase (decrease) resulting from
           Tax-exempt income                       (541,681)      (384,915)      (377,591)
         State income taxes, net of 
           Federal benefit                          (90,739)      (154,710)       237,724
         Non-deductible expenses                      2,353          8,386          4,688
                                                -----------    -----------    -----------

         Income tax expense (benefits)          $(1,480,192)   $(1,694,444)   $ 1,606,761
                                                ===========    ===========    ===========
</TABLE>

         Sources of deferred income taxes and the tax effects of each for the
         years ended December 31, 1996, 1995, and 1994 are as follows:

<TABLE>
<CAPTION>
                                                    1996         1995        1994
                                                 ---------     --------    ---------

         <S>                                     <C>             <C>            <C>       
         Depreciation                            $ (30,990)      $  (5,786)     $  (1,155)
         Securities discount accretion               9,380          (7,465)         4,714
         Provision for credit losses              (241,077)        149,670       (107,971)
         Unearned income on loans                  106,816         (16,343)       150,535
         Deferred compensation and benefit 
          plans                                    (56,096)        (79,806)        10,437
         Charitable contributions                  (35,987)           --             --
         Write-downs on other real estate owned    (28,192)           --             --
         Deferred rent                                (558)           --             --
                                                 ---------       ---------      ---------

         Deferred income tax expense (benefits)   $(276,704)      $ 40,270      $  56,560
                                                  =========      =========      =========
</TABLE>



                                       44
<PAGE>




                      Glen Burnie Bancorp and Subsidiaries

                   Notes to Consolidated Financial Statements
                                   (Continued)

  Note 7. Income Taxes (Continued)

          The components of the net deferred tax asset as of December 31, 1996,
          1995, and 1994 are as follows:

<TABLE>
<CAPTION>

                                                                                 1996          1995        1994
                                                                              ----------    ---------   ----------
         <S>                                                                  <C>          <C>          <C>
          Deferred tax assets:
            Allowance for credit losses                                       $1,078,459   $  837,381   $  987,052
            Unearned income on loans                                              31,469      138,285      121,942
            Deferred compensation and benefit plans                              122,116       87,543        7,443
            Other real estate owned                                               28,192         --           --
            Charitable contributions                                              35,987         --           --
            Alternative minimum tax credits                                      538,117         --           --
            Deferred rent                                                            558         --           --
            Net unrealized depreciation on investment
               securities available for sale                                        --           --          5,788
                                                                              ----------   ----------   ----------
                                                                               1,834,898    1,063,209    1,122,225
                                                                              ----------   ----------   ----------
         
          Deferred tax liabilities:
            Accumulated depreciation                                             214,211      245,201      250,987
            Securities discount accretion                                         34,750       25,370       32,835
            Prepaid pension contributions                                         38,357       59,879       59,585
            Net unrealized appreciation on investment
               securities available for sale                                     166,614      468,899         --
                                                                              ----------   ----------   ----------
                                                                                 453,932      799,349      343,407
                                                                              ----------   ----------   ----------
         
          Net deferred tax asset                                             $ 1,380,966   $  263,860   $  778,818
                                                                             ===========   ==========   ==========
    </TABLE>
    










                                       45
<PAGE>




                      Glen Burnie Bancorp and Subsidiaries

                   Notes to Consolidated Financial Statements
                                   (Continued)

  Note 8.  Pension and Profit Sharing Plans

         The Bank has a defined benefit pension plan covering substantially all
         of its employees. Benefits are based on the employee's average rate of
         earnings for the five consecutive years before retirement. The Bank's
         funding policy is to contribute annually an amount between the minimum
         and maximum actuarially determined contribution, using the frozen entry
         age actuarial cost method. Assets of the plan are held in a trust fund
         principally comprised of growth and income mutual funds managed by
         another bank.

         The following table sets forth the financial status of the plan at
         December 31, 1996, 1995, and 1994:


<TABLE>
<CAPTION>

                                                                                1996            1995            1994
                                                                            -----------     -----------     -----------

<S>                                                                        <C>             <C>             <C>
         Accumulated benefit obligation
            Vested                                                          $ 2,244,790     $ 2,183,088     $ 2,003,059
            Nonvested                                                           280,661          63,366          98,277
                                                                            -----------     -----------     -----------
                                                                            $ 2,525,451     $ 2,246,454     $ 2,101,336
                                                                            ===========     ===========     ===========
         Plan assets at fair value                                          $ 3,720,145     $ 3,399,653     $ 2,767,215
         Projected benefit obligation                                        (3,804,330)     (3,365,078)     (3,085,573)
                                                                            -----------     -----------     -----------
         Plan assets in excess of (less than)
            projected benefit obligation                                        (84,185)         34,575        (318,358)
         Unrecognized prior service cost                                        174,327         199,924         225,521
         Unrecognized net (gain) loss                                            70,020          (6,440)        332,303
         Unamortized net asset from transition                                  (60,843)        (73,012)        (85,181)
                                                                            -----------     -----------     -----------
         Prepaid pension expenses included in other assets                  $    99,319     $   155,047     $   154,285
                                                                            ===========     ===========     ===========
         Net pension expense includes the following:
             Service cost                                                   $   208,566     $   177,998     $   175,424
             Interest cost                                                      286,590         256,958         232,123
             Actual return on assets                                           (284,900)       (577,586)         96,951
             Net amortization and deferral                                       15,472         364,911        (314,269)
                                                                            -----------     -----------     -----------

         Net pension expense                                                $   225,728     $   222,281     $   190,229
                                                                            ===========     ===========     ===========

         Assumptions used in the accounting for net pension expense were:

         Discount rates                                                             8.5%            8.5%            8.5%
         Rate of increase in compensation levels                                    6.5%            6.5%            6.5%
         Long-term rate of return on assets                                         8.5%            8.5%            8.5%

</TABLE>



         The Bank also has a defined contribution retirement plan qualifying
         under Section 401(k) of the Internal Revenue Code that is funded
         through a profit sharing agreement and voluntary employee
         contributions. The Bank's contributions to the plan are determined
         annually by the Board of Directors. The plan covers substantially all
         employees. The Bank's contributions to the plan included in expense
         were $165,100 and $154,900 for the years ended December 31, 1995 and
         1994, respectively. No contributions were made for 1996.






                                       46
<PAGE>




                      Glen Burnie Bancorp and Subsidiaries

                   Notes to Consolidated Financial Statements
                                   (Continued)


  Note 9. Post-Retirement Health Care Benefits

         The Bank provides health care benefits to employees who retire at age
         65. The plan is funded only by the Bank's monthly payments of insurance
         premiums due. The following table sets forth the financial status of
         the plan at December 31, 1996 and 1995:


<TABLE>
<CAPTION>

                                                                                  1996          1995
                                                                                ---------     ---------
<S>                                                                             <C>           <C>
         Accumulated post-retirement benefit obligation
            Retirees                                                            $ 229,258     $ 185,057
            Other active participants, not fully eligible                         648,414       482,922
                                                                                ---------     ---------
                                                                                  877,672       667,979
         Unrecognized net gain                                                     23,715          --
         Unrecognized transition obligation                                      (601,181)     (535,126)
                                                                                ---------     ---------
         Accrued post-retirement benefit cost                                   $ 300,206     $ 132,853
                                                                                =========     =========
         Net post-retirement benefit expense for the years ended December 31,
         1996 and 1995 includes the following:

         Service cost                                                           $  71,381     $  55,885
         Interest cost                                                             69,792        56,778
         Amortization of unrecognized transition obligation                        33,399        33,399
                                                                                ---------     ---------
         Net post-retirement benefit expense                                    $ 174,572     $ 146,062
                                                                                =========     =========
         Assumptions used in the accounting for net post-retirement benefit
         expense were:

         Health care cost trend rate                                                  8.0%          8.0%
         Discount rate                                                                8.5%          8.5%

</TABLE>

         If the assumed health care cost trend rate were increased to 9.0%, the
         total of the service and interest cost components of net periodic
         post-retirement health care benefit cost would increase by $36,816 and
         $28,808, for the years ended December 31, 1996 and 1995, respectively,
         and the accumulated post-retirement benefit obligation would increase
         by $200,496 and $161,117 as of December 31, 1996 and 1995,
         respectively.










                                       47
<PAGE>




                      Glen Burnie Bancorp and Subsidiaries

                   Notes to Consolidated Financial Statements
                                   (Continued)


  Note 10.  Other Operating Expenses

         Other operating expenses include the following:
<TABLE>
<CAPTION>

                                                1996        1995          1994
                                            ----------     --------   ----------

<S>                                         <C>            <C>        <C>       
 Professional services                      $1,454,449     $329,849   $  245,932
 Stationery, printing and supplies             218,397      278,366      235,500
 Postage and delivery                          271,050      253,253      201,094
 FDIC assessment                                33,595      237,565      455,250
 Directors fees and expenses                   196,622      133,202      159,518
 Marketing                                     124,897      118,948       97,671
 Data processing                               129,449       97,608       92,237
 Correspondent bank services                   115,864       78,631       53,285
 Telephone                                      59,808       49,021       38,598
 Liability insurance                            71,015       45,075       48,405
 Losses and expenses on real estate owned       45,445       23,733      107,553
 Other                                         395,881      342,154      285,730
                                            ----------   ----------   ----------
                                            $3,116,472   $1,987,405   $2,020,773
                                            ==========   ==========   ==========
</TABLE>


  Note 11. Litigation and Restructuring Charges

         In 1995, two opposing groups ran for election to the Board of
         Directors. The Company incurred legal expenses and entered into a
         severance agreement with a former executive officer in connection with
         this restructuring at costs totaling $687,841. The Company also
         incurred losses of $719,800 to settle the claim of a borrower who
         asserted damages for discrimination. These nonrecurring charges are
         included as a separate line item in operating expenses for 1995.


  Note 12. Contingencies

         The Bank is a defendant in certain claims and legal actions arising in
         the course of business. The Bank is being sued for a total of
         approximately $4,000,000 in five separate cases for allegedly honoring
         checks with invalid endorsements. The Bank is also being sued for
         alleged fraud by a customer in bankruptcy seeking $5,000,000 in
         compensatory damages and $50,000,000 in punitive damages. Legal counsel
         has advised the Bank that this plaintiff has failed to produce any
         evidence to support these claims. The Bank has also filed a claim with
         a former insurance provider seeking to recover in excess of $5,000,000
         from loan losses sustained over the prior two years. In the opinion of
         management, after consultation with legal counsel, the ultimate
         disposition of these matters is not known at this time.






                                       48
<PAGE>




                      Glen Burnie Bancorp and Subsidiaries

                   Notes to Consolidated Financial Statements
                                   (Continued)


Note 13. Stockholders' Equity

   
         At December 31, 1996, the Company had two types of stock-based
         compensation plans, which are described below. The bank applies
         Accounting Principles Board Opinion ("APB") No. 25 and related
         Interpretations in accounting for these plans. No compensation cost has
         been recognized in the accompanying Consolidated Financial Statements
         for those plans. If compensation cost for the Company's two types of
         stock-based compensation plans had been determined based on the fair
         value at the grant dates for awards under those plans consistent with
         the methods outlined in SFAS No. 123, "Accounting for Stock-Based
         Compensation," there would be no change to 1996 net income, as no
         options were granted during 1996.

         Employees who have completed one year of service are eligible to
         participate in the employee stock option purchase plan. The plan allows
         employees to buy stock at 85 percent of the fair market value on the
         date the option is granted. The director stock purchase plan allows
         directors to buy stock at the fair market value on the date the option
         is granted. Activity under these plans is as follows:

                                    Employees                 Directors
                                -----------------         ------------------
                                Shares     Prices         Shares      Prices
                                ------     ------         ------      ------

          January 1, 1994        2,245     $24.17           --        $  --
          Granted                7,625      24.08          2,850       28.33
          Exercised             (3,426)                   (2,100)
                                ------                    ------

          December 31, 1994      6,444      24.08            750       28.33
          Granted                6,479      26.92          3,300       31.67
          Expired               (1,782)                     (150)
          Exercised             (6,586)                   (3,600)
                                ------                    ------

          December 31, 1995      4,555      26.92            300       31.67
          Expired               (4,355)                     --
          Exercised               (200)                     (300)
                                ------                    ------

          December 31, 1996        --                       --
                                ======                    ======

         Shares reserved for issuance under the plans:

          December 31, 1994      8,566                    21,300
          December 31, 1995     31,980                    17,700
          December 31, 1996     31,780                    17,700


         The number of shares and prices per share for 1995 and 1994 have been
         retroactively adjusted for the stock dividend declared December 14,
         1995.

         Purchase options granted on July 1, 1994 and 1995 expired on October 1,
         1995 and 1996, respectively.

         The Company's dividend reinvestment and stock purchase plan allows
         participating stockholders to invest their cash dividends in stock at
         95 percent of the fair market value on the dividend payment date.
         During 1996 and 1995, 10,820 and 10,795 shares of common stock,
         respectively, were purchased under the plan. At December 31, 1996,
         there were 94,370 shares of common stock reserved for issuance under
         the plan.

         In October 1996, Glen Burnie Bancorp suspended participation in the
         dividend reinvestment and stock purchase plans until the Company
         completes additional filings with the Securities and Exchange
         Commission.

         The Board of Directors may suspend or discontinue any of the plans at
         its discretion.

         In 1994, an institutional holder of Glen Burnie Bancorp stock desired
         to dispose of a large block of shares it held in trust. The Company
         purchased and retired the 10,558 shares from this block that were not
         promptly sold in the open market.
    

  Note 14. Regulatory Capital Requirements

         The Bank is subject to various regulatory capital requirements
         administered by federal and state banking agencies. Failure to meet
         minimum capital requirements can initiate certain mandatory--and
         possibly additional discretionary--actions by regulators that, if
         undertaken, could have a direct material effect on the Bank's financial
         statements. The Bank must meet specific capital guidelines that involve
         quantitative measures of the Bank's assets, liabilities, and certain
         off-balance sheet items as calculated under regulatory accounting
         principles. The Bank's capital amounts and classification are also
         subject to qualitative judgments by the regulators about components,
         risk weightings, and other factors.

         Quantitative measures established by regulation to ensure capital
         adequacy require the Bank to maintain minimum amounts and ratios (as
         defined in the regulations) of total and Tier I capital to
         risk-weighted assets and of Tier I capital to average assets.
         Management believes, as of December 31, 1996, 1995, and 1994, that the
         Bank meets all capital adequacy requirements to which it is subject.

         As of December 31, 1996, the most recent notification from the FDIC
         categorized the Bank as well capitalized under the regulatory framework
         for prompt corrective action. To be categorized as well capitalized the
         Bank must maintain minimum total risk-based, Tier I risk-based, Tier I
         leverage ratios. There are no conditions or events since that
         notification that management believes have changed the institution's
         category.



                                       49
<PAGE>



                      Glen Burnie Bancorp and Subsidiaries

                   Notes to Consolidated Financial Statements
                                   (Continued)


  Note 14. Regulatory Capital Requirements (Continued)

         A comparison of the Bank's capital as of December 31, 1996, 1995, and
         1994 with its minimum requirements is approximately as follows:


                                                                 For Capital
                                              Actual          Adequacy Purposes
                                        ------------------    ------------------
                                        Amount       Ratio      Amount     Ratio
                                        ------       -----      ------     -----
                                                           
As of December 31, 1996                                    
     Total Capital                   $18,109,000     12.5%   $11,590,000    8.0%
       (to Risk-Weighted Assets)                           
                                                           
                                                           
     Tier I Capital                   17,367,000     12.0%     5,789,000    4.0%
       (to Risk-Weighted Assets)                           
                                                           
                                                           
     Tier I Capital                   17,367,000      7.0%    14,886,000    6.0%
       (to Average Assets)                                 
                                                           
                                                           
As of December 31, 1995                                    
     Total Capital                    21,168,000     13.6%    12,437,000    8.0%
       (to Risk-Weighted Assets)                           
                                                           
                                                           
     Tier I Capital                   19,203,000     12.4%     6,218,000    4.0%
       (to Risk-Weighted Assets)                           
                                                           
                                                           
     Tier I Capital                   19,203,000      8.2%     9,367,000    4.0%
       (to Average Assets)                                 
                                                           
                                                           
As of December 31, 1994                                    
     Total Capital                                         
       (to Risk-Weighted Assets)      23,677,000     15.3%    12,341,000    8.0%
                                                           
                                                           
     Tier I Capital                                        
       (to Risk-Weighted Assets)      21,728,000     14.1%     6,171,000    4.0%
                                                           
                                                           
     Tier I Capital                                        
       (to Average Assets             21,728,000      9.4%     9,246,000    4.0%







                                       50
<PAGE>




                      Glen Burnie Bancorp and Subsidiaries

                   Notes to Consolidated Financial Statements
                                   (Continued)


  Note 15. Regulatory Matters

         In June, 1996 the Bank entered into a Memorandum of Understanding with
         the Federal Deposit Insurance Corporation and the State Bank
         Commissioner of the State of Maryland to accomplish corrective actions
         regarding matters including violations of law, loan collection and
         delinquencies, loan administration, methodology for allowance for
         credit loss calculations, management reporting, strategic planning, and
         maintenance of capital.


  Note 16. Fair Values of Financial Instruments

         The following table shows the estimated fair value and the related
         carrying values of the Company's financial instruments at December 31,
         1996. Items which are not financial instruments are not included.


                                                              1996
                                                  ---------------------------
                                                    Carrying         Fair
                                                     Amount          Value
                                                  ------------   ------------

Financial assets:
   Cash and due from banks                        $ 10,665,680   $ 10,665,680
   Interest-bearing deposits in other financial
      institutions                                   1,836,981      1,836,981
   Federal funds sold                               10,175,000     10,175,000
   Investment securities available for sale         54,906,836     54,906,836
   Investment securities held to maturity           41,667,057     41,993,324
   Loans, less allowance for credit losses         124,672,414    120,992,000
   Ground rents                                        267,974        267,974
   Accrued interest receivable                       1,937,928      1,937,928


Financial liabilities:
   Deposits                                        232,745,975    232,702,000
   Short-term borrowings                               547,937        547,937
   Accrued interest payable                            214,977        214,977

Unrecognized financial instruments:
   Commitments to extend credit                     16,460,003     16,460,003
   Standby letters of credit                         3,132,661      3,132,661


         For purposes of the disclosures of estimated fair value, the following
         assumptions were used.

         Loans:

         The estimated fair value for loans is determined by discounting future
         cash flows using current rates at which similar loans would be made to
         borrowers with similar credit ratings and for the same remaining
         maturities.

         Investment securities:

         Estimated fair values are based on quoted market prices.



                                       51
<PAGE>




                      Glen Burnie Bancorp and Subsidiaries

                   Notes to Consolidated Financial Statements
                                   (Continued)


  Note 16.  Fair Values of Financial Instruments (continued)

         Deposits:

         The estimated fair value of deposits with no stated maturity, such as
         noninterest-bearing demand deposits, savings, NOW accounts and money
         market accounts, is equal to the amount payable on demand at the
         reporting date (that is, their carrying amounts). The fair value of
         certificates of deposit is based on the rates currently offered for
         deposits of similar maturities. The fair value estimates do not include
         the benefit that results from the low-cost funding provided by the
         deposit liabilities compared to the cost of borrowing funds in the
         market.

         Other assets and liabilities:

         The estimated fair values for cash and due from banks, interest-bearing
         deposits in other financial institutions, Federal funds sold, accrued
         interest receivable and payable, and short-term borrowings are
         considered to approximate cost because of their short-term nature.

         Other assets and liabilities of the Bank that are not defined as
         financial instruments are not included in the above disclosures, such
         as property and equipment. Also, non-financial instruments typically
         not recognized in the financial statements nevertheless may have value
         but are not included in the above disclosures. These include, among
         other items, the estimated earnings power of core deposit accounts, the
         trained work force, customer goodwill, and similar items.

         The estimated fair values of the Company's financial instruments for
         1995 and 1994 are as follows:


<TABLE>
<CAPTION>

                                          December 31, 1995            December 31, 1994
                                    ---------------------------   ---------------------------
                                      Carrying          Fair        Carrying         Fair
                                       Amount           Value        Amount          Value
                                    ------------   ------------   ------------   ------------
<S>                                 <C>            <C>            <C>            <C>
Financial assets
   Cash and due from banks          $  9,450,021   $  9,450,021   $  7,806,316   $  7,806,316
   Federal funds sold                       --             --        1,800,000      1,800,000
   Investment securities              74,598,847     74,690,073     60,401,713     59,024,129
   Variable rate loans                35,148,040     35,148,040     40,448,637     40,448,637
   Accrued interest receivable         2,154,599      2,154,599      2,236,803      2,236,803

Financial liabilities
   Noninterest-bearing deposits       45,147,023     45,147,023     41,081,119     41,081,119
   Variable rate deposits             96,644,555     96,644,555    107,983,883    107,983,883
   Short-term borrowings               1,757,722      1,757,722      2,226,568      2,226,568
   Interest and dividends payable        447,923        447,923        356,810        356,810

</TABLE>


         The fair values of investment securities were estimated using a matrix
         that considers yield to maturity, credit quality, and marketability.
         This method of valuation is permitted by the FASB, but may not be
         indicative of net realizable or liquidation values.

         It was not practicable to estimate the fair value of loans with fixed
         maturities, deposit liabilities with fixed maturities, or outstanding
         credit commitments. The Company did not have available resources to
         estimate fair values based on quoted prices or discounted cash flows
         for individual accounts or groups of accounts.








                                       52
<PAGE>




                      Glen Burnie Bancorp and Subsidiaries

                   Notes to Consolidated Financial Statements
                                   (Continued)


Note 16.  Fair Values of Financial Instruments (continued)

         Maturities and weighted-average interest rates on loans and deposits
         with fixed maturities were as follows:


<TABLE>
<CAPTION>
  
                                                December 31, 1995           December 31, 1994
                                            ----------------------       --------------------
                                            Amount            Rate       Amount           Rate
                                            ------            ----       ------           ----
<S>                                       <C>                 <C>     <C>                  <C>
Loans                                                                                 
   Maturing within one year               $ 21,326,466        8.7%    $ 20,520,984         8.7%
   Maturing over one to five years          48,258,718        9.0%      48,715,788         8.8%
   Maturing over five years                 50,309,892        9.1%      47,668,693         9.3%
                                          ------------                ------------             
                                          $119,895,076                $116,905,465
                                          ============                ============
 Deposits                                                                              
   Maturing within three months           $ 17,035,145        5.7%    $ 13,342,709         4.0%
   Maturing over three to six months        16,598,147        5.8%      12,985,504         4.8%
   Maturing over six months to one year     13,014,695        5.7%      12,643,752         5.0%
   Maturing over one to five years          32,681,198        6.5%      20,528,686         5.8%
                                          ------------                ------------
                                          $ 79,329,185                $ 59,500,651
                                          ============                ============
</TABLE>

  Note 17.  Adoption of Recently Issued Accounting Pronouncements

         Statement of Financial Accounting Standards No. 121, "Accounting for
         the Impairment of Long-Lived Assets and for Long-Lived Assets to be
         Disposed of" (SFAS No. 121), requires that certain long-lived assets be
         reviewed for impairment whenever events or circumstances indicate that
         the carrying amount of an asset may not be recoverable. An impairment
         loss is recognized if the sum of expected future cash flows is less
         than the carrying amount of the asset and its face value. An impairment
         loss is measured based on the difference between the carrying amount of
         the asset and its fair value. The Bank adopted this pronouncement in
         1996, and there are no asset impairment adjustments reflected in the
         1996 consolidated financial statements.

         Statement of Financial Accounting Standards No. 122, "Accounting for
         Mortgage Servicing Rights" (SFAS No. 122), requires that rights to
         serviced mortgage loans be recognized as an intangible asset when the
         underlying loans are sold and the servicing rights related to these
         loans are retained. The standard also requires that capitalized
         mortgage servicing rights be assessed for impairment based on the fair
         value of such rights. The Bank has not sold any loans for which it has
         maintained servicing rights and, accordingly, the adoption of this
         pronouncement has no effect on the 1996 consolidated financial
         statements.















                                       53
<PAGE>




                      Glen Burnie Bancorp and Subsidiaries

                   Notes to Consolidated Financial Statements
                                   (Continued)

  Note 18.  Parent Company Financial Information

         The Balance Sheets, Statements of Income, and Statements of Cash Flows
         for Glen Burnie Bancorp (Parent Only) are presented below:

<TABLE>
<CAPTION>

                                 Balance Sheets
-------------------------------------------------------------------------------------------------------------

  December 31,                                                        1996            1995           1994

-------------------------------------------------------------------------------------------------------------
                                               Assets

<S>                                                                <C>            <C>            <C>       
Cash                                                               $    122,167   $    264,757   $       --
Investment in The Bank of Glen Burnie                                18,109,107     20,478,884     21,718,390
Investment in GBB Properties, Inc.                                      373,357           --            1,899
Land                                                                       --             --          384,700
Other assets                                                             25,932         27,142         16,582
                                                                   ------------   ------------   ------------

      Total assets                                                 $ 18,630,563   $ 20,770,783   $ 22,121,571
                                                                   ============   ============   ============

                            Liabilities and Stockholders' Equity

Dividend payable                                                   $     44,193   $    218,208   $    169,987
Due to affiliates                                                          --           15,189        274,551
                                                                   ------------   ------------   ------------
      Total liabilities                                                  44,193        233,397        444,538
                                                                   ------------   ------------   ------------

Stockholders' equity
   Common Stock                                                       8,838,588      7,273,664      7,080,834
   Stock dividend to be distributed                                        --        1,454,719           --
   Surplus                                                            6,192,900      5,917,043      5,450,852
   Retained earnings                                                  3,290,077      5,146,724      9,154,546
   Net unrealized appreciation (depreciation) on
      securities available for sale, net of
      income taxes                                                      264,805        745,236         (9,199)
                                                                   ------------   ------------   ------------
            Total stockholders' equity                               18,586,370     20,537,386     21,677,033
                                                                   ------------   ------------   ------------
            Total liabilities and stockholders'
                equity                                             $ 18,630,563   $ 20,770,783   $ 22,121,571
                                                                   ============   ============   ============
</TABLE>

<TABLE>
<CAPTION>
                                                Statements of Income
-------------------------------------------------------------------------------------------------------------

  Years Ended December 31,                                            1996            1995           1994

-------------------------------------------------------------------------------------------------------------
      <S>                                                           <C>            <C>             <C>      
      Dividend from subsidiaries                                    $   885,000    $   315,000     $      --
      Expenses                                                            6,632         61,775          7,060
                                                                    -----------    -----------     ----------
      Income (loss) before income taxes and equity in
         undistributed net income (losses) of subsidiaries              878,368        253,225         (7,060)
      Income tax benefit                                                  2,255         21,056          5,970
      Equity in undistributed net income (losses)
         of subsidiaries                                             (1,900,800)    (2,001,029)     3,517,683
                                                                    -----------    -----------     ----------

              Net income (loss)                                     $(1,020,177)   $(1,726,748)    $3,516,593
                                                                    ===========    ===========     ==========
</TABLE>


                                       54
<PAGE>




                      Glen Burnie Bancorp and Subsidiaries

                   Notes to Consolidated Financial Statements
                                   (Continued)


  Note 18.  Parent Company Financial Information (Continued)

                            Statements of Cash Flows
<TABLE>
<CAPTION>

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


  Years Ended December 31,                                        1996           1995          1994

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


<S>                                                           <C>            <C>            <C>
 Cash flows from operating activities:
    Net income (loss)                                         $(1,020,177)   $(1,726,748)   $ 3,516,593
    Adjustments to reconcile net income (loss)
       to net cash provided (used) by operating activities:
          (Increase) decrease in other assets                       1,210        (10,560)        (3,588)
          (Decrease) increase in due to subsidiaries              (10,000)      (264,551)       274,551
          Equity in net (income) losses of subsidiaries         1,900,800      2,001,029     (3,517,684)
                                                               ----------    -----------     ----------

        Net cash provided (used) by operating activities          871,833           (830)       269,872
                                                               ----------    -----------     ----------

 Cash flows from investing activities:
    Disposal of land                                                 --          384,700           --
    Capital contributed                                          (390,000)          --          (10,000)
                                                               ----------    -----------     ----------

       Net cash provided (used) in investing activities          (390,000)       384,700        (10,000)
                                                               ----------    -----------     ----------

 Cash flows from financing activities:
    Proceeds from dividend reinvestment plan                      380,678        382,967        430,487
    Proceeds from sales of common stock                             5,384        276,054        142,297
    Shares retired                                                   --             --         (343,154)
    Dividends paid                                             (1,010,485)      (778,134)      (663,965)
                                                               ----------    -----------     ----------

       Net cash used in financing activities                     (624,423)      (119,113)      (434,335)
                                                              -----------    -----------     ---------- 

Increase (decrease) in cash                                      (142,590)       264,757       (174,463)

Cash, beginning of year                                           264,757           --          174,463
                                                              -----------    -----------    ------------

Cash, end of year                                             $   122,167    $   264,757    $         --
                                                              ===========    ===========    ============

</TABLE>







                                       55
<PAGE>




                      Glen Burnie Bancorp and Subsidiaries

                   Notes to Consolidated Financial Statements
                                   (Continued)


  Note 19.  Quarterly Results of Operations  (Unaudited)

         The following is a summary of the Company's unaudited quarterly results
         of operations:

<TABLE>
<CAPTION>


                    1996                                                Three months ended
-----------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share amounts)  December 31   September 30      June 30   March 31
-----------------------------------------------------------------------------------------------------

<S>                                               <C>            <C>             <C>        <C>    
Interest income                                   $ 4,567        $ 4,789         $ 4,466    $ 4,824
Interest expense                                    1,925          1,947           1,917      1,973
Net interest income                                 2,642          2,842           2,549      2,851
Provision for credit losses                         3,771            375           2,075        375
Net securities gains                                   50              6               2         87
Income (loss) before income taxes                  (2,599)           585          (1,342)       856
Net income (loss)                                  (1,436)           450            (671)       637
Net income (loss) per share                       $ (1.64)       $   .51         $  (.76)   $   .73

</TABLE>



<TABLE>
<CAPTION>

                             1995                                       Three months ended
-----------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share amounts)  December 31   September 30      June 30   March 31
-----------------------------------------------------------------------------------------------------

<S>                                               <C>            <C>             <C>        <C>    
Interest income                                   $ 4,667        $ 4,739         $ 4,661    $ 4,534
Interest expense                                    1,973          1,874           1,768      1,647
Net interest income                                 2,694          2,865           2,893      2,887
Provision for credit losses                         7,275            150             225        275
Net securities gains                                  377             16             106          8
Income (loss) before income taxes                  (6,987)         1,262           1,214      1,090
Net income (loss)                                  (4,185)           855             847        756
Net income (loss) per share                       $ (4.87)       $   .99          $  .99    $   .88
</TABLE>

<TABLE>
<CAPTION>

                    1994                                               Three months ended
-----------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share amounts)  December 31   September 30     June 30    March 31
-----------------------------------------------------------------------------------------------------

<S>                                               <C>            <C>              <C>       <C>   
Interest income                                   $4,701         $4,589           $4,422    $4,233
Interest expense                                   1,595          1,533            1,489     1,460
Net interest income                                3,106          3,056            2,933     2,773
Provision for credit losses                          300            370              225       225
Net securities gains                                   5             49                1        23
Income before income taxes                         1,215          1,359            1,386     1,163
Net income                                           838            927              947       805
Net income per share                               $1.00          $1.11            $1.14    $  .97

</TABLE>




                                       56
<PAGE>

                                    PART IV


Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K.

          (a)  List of Documents Filed as Part of this Report

          (1)  Financial Statements. The following consolidated financial
               statements are filed under Item 8 hereof:

          Independent Auditors' Reports

          Consolidated Balance Sheets as of December 31, 1996 and 1995

          Consolidated Statements of Income for the Years Ended December 31,
          1996, 1995 and 1994

          Consolidated Statements of Changes in Stockholders' Equity for the
          Years Ended December 31, 1996, 1995 and 1994

          Consolidated Statements of Cash Flows for the Years Ended December 31,
          1996, 1995 and 1994

          Notes to Consolidated Financial Statements

          (2) Financial Statement Schedules. All schedules for which provision
is made in the applicable accounting regulations of the Securities and Exchange
Commission are omitted because of the absence of conditions under which they are
required or because the required information is included in the consolidated
financial statements and related notes thereto.

          (3) Exhibits. The following is a list of exhibits filed as part of
this Annual Report on Form 10-K and is also the Exhibit Index.

         No.     Description
         ---     -----------

         3.1     Articles of Incorporation. Incorporated herein by reference to
                 Exhibit 3.1 to the Annual Report on Form 10-K of Glen Burnie
                 Bancorp for its Fiscal Year Ended December 31, 1995, SEC File
                 Number 33-62278 (the "1995 Form 10-K")
         3.2     By-Laws. Incorporated herein by reference to Exhibit 3.2 to the
                 1995 Form 10-K
         10.1    Glen Burnie Bancorp Stockholder Purchase Plan. Incorporated
                 herein by reference from Exhibit 10.1 to Registrant's
                 Registration Statement on Form S-1 (Commission File No.
                 333-37073) (the "Form S-1")
         10.2    Glen Burnie Bancorp Dividend Reinvestment and Stock Purchase
                 Plan. Incorporated herein by reference to Exhibit 10.2 to the
                 Form S-1.
         10.3    Glen Burnie Bancorp Director Stock Purchase Plan. Incorporated
                 herein by reference to Exhibit 10.3 to the 1995 Form 10-K
         10.4    The Bank of Glen Burnie Employee Stock Purchase Plan.
                 Incorporated herein by reference Exhibit 10.4 to Amendment No.
                 1 to the 1995 Form 10-K
         10.5    The Bank of Glen Burnie Pension Plan. Incorporated herein by
                 reference to Exhibit 10.5 to the 1995 Form 10-K
         16      Letter re: change in certifying public accountant. Incorporated
                 herein by reference to Exhibit 16 to the 1995 Form 10-K
         21      Subsidiaries of the registrant. Incorporated herein by
                 reference to Exhibit 21 to the 1995 Form 10-K
         23.1    Consent of Trice & Geary LLC
         23.2    Consent of Rowles & Company, LLP.
         27      Financial Data Schedule. Incorporated herein by reference to
                 Exhibit 27 to the Annual Report on Form 10-K of Glen Burnie
                 Bancorp for its fiscal year ended December 31, 1996.

          (b) Reports on Form 8-K. The Company did not file a current report on
Form 8-K during the quarter ended December 31, 1996.

          (c) Exhibits. The exhibits required by Item 601 of Regulation S-K are
either filed as part of this Annual Report on Form 10-K or incorporated by
reference herein.

          (d) Financial Statements and Schedules Excluded from Annual Report.
There are no other financial statements and financial statement schedules which
were excluded from the Annual Report to Stockholders pursuant to Rule
14a-3(b)(1) which are required to be included herein.




                                       57
<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.

                                     GLEN BURNIE BANCORP


Date:  January 8, 1998               By: /s/ John E. Porter
---------------------                    -------------------------------------
                                         John E. Porter
                                         Treasurer and Chief Financial Officer
                                         (Duly Authorized Representative)