SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-QSB

                  QUARTERLY REPORT UNDER SECTION 12 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 1997


                         Commission file number 0-22536

                            Monocacy Bancshares, Inc.
             (Exact Name of Registrant as Specified in its Charter)

            Maryland                                        52-1824297
(State or Other Jurisdiction                             (I.R.S. Employer
of Incorporation or Organization)                       Identification No.)

      222 E. Baltimore Street
       Taneytown, Maryland                                     21787
(Address of Principal Executive Offices)                     (Zip Code)

                                 (410) 756-2655
              (Registrant's Telephone Number, Including Area Code)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                               Yes   X       No
                                    ---          ---
Indicate  the  number of shares  outstanding  of each of the  classes  of common
stock, as of the latest practical date.

1,622,330 shares of Common Stock, $5 par value per share, were outstanding as of
April 30, 1997.


<PAGE>



                            MONOCACY BANCSHARES, INC.

                           Index to Form 10-QSB Report

<TABLE>
<S> <C>
PART I              -      FINANCIAL INFORMATION

         Item 1. Financial Statements

                           Consolidated Balance Sheets . . . . . . . . . . . . . .. .1

                           Consolidated Income Statements . . . . . . . . . . . . .  2

                           Consolidated Statements of Stockholders' Equity . . . . ..3

                           Consolidated Statements of Cash Flow . . . . . . . . . .  4

                           Notes to Consolidated Financial Statements . . . . . . .  5

         Item 2. Management's Discussion and Analysis of Financial
                           Condition and Results of Operations . . . . . . . . .  . .6

PART II   -                OTHER INFORMATION

         Item 1.   Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . .10
         Item 2.  Changes in Securities . . . . . . . . . . . . . . . . . . . .  . .10
         Item 3.  Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . 10
         Item 4.  Submission of Matters to a Vote of Security Holders . . . . .  . .10
         Item 5.  Other Information . . . . . . . . . . . . . . . . . . . . . . . . 10
         Item 6.  Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . .. . 10

         Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . .11
</TABLE>


<PAGE>

                                     Part I

Item 1.  Financial Statements

                    Monocacy Bancshares, Inc. and Subsidiary
                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                      March 31,       December 31,
                                                                        1997             1996
                                                                   --------------    -------------
                                                                     (unaudited)
<S> <C>
                           Assets
                           ------
Cash and due from banks ........................................   $   8,458,804    $  10,373,937
Federal funds sold .............................................         550,000        2,000,000
Interest-bearing deposits with other banks .....................         410,251          108,490
Loans held for sale ............................................       2,785,386       10,117,718
Securities available for sale ..................................      46,999,779       45,917,686
Investment securities (approximate fair value of
     $23,648,149 and $23,860,226) ..............................      24,037,775       24,042,079
Loans, less allowance for loan losses of
     $2,250,337 and $2,100,301 .................................     160,939,083      156,689,585
Bank premises and equipment ....................................       8,437,318        8,435,314
Other real estate owned ........................................         650,184          655,684
Deferred income taxes ..........................................       1,090,080          899,000
Accrued interest receivable ....................................       1,862,422        1,939,177
Other assets ...................................................       1,640,156        1,836,207
                                                                   -------------    -------------
                                          Total assets .........   $ 257,861,238    $ 263,014,877
                                                                   =============    =============

Liabilities and Stockholders' Equity

Liabilities:
  Non-interest bearing deposits ................................   $  23,620,300    $  24,001,887
  Interest bearing deposits ....................................     202,133,828      201,037,216
                                                                   -------------    -------------
                                                                     225,754,128      225,039,103
  Federal funds purchased ......................................            --               --
  Other borrowings .............................................       8,706,675       15,338,564
  Accrued interest and other expenses payable ..................       1,325,687          555,067
  Dividends payable ............................................         178,155          146,859
  Other liabilities ............................................          25,126          286,899
                                                                   -------------    -------------
                                     Total liabilities .........     235,989,771      241,366,492

Stockholders' Equity:
  Common stock .................................................       8,096,335        7,341,620
  Common stock dividend to be distributed ......................            --          3,699,159
  Surplus ......................................................      11,711,419        9,145,192
  Retained earnings ............................................       3,185,969        2,235,364
  Net unrealized gain (loss) on
    securities available for sale ..............................      (1,122,256)        (772,950)
                                                                   -------------    -------------
                            Total stockholders' equity .........      21,871,467       21,648,385
                                                                   -------------    -------------

Total liabilities and stockholders' equity .....................   $ 257,861,238    $ 263,014,877
                                                                   =============    =============
</TABLE>

See the accompanying Notes to Consolidated Financial Statements

                                       1

<PAGE>

                    Monocacy Bancshares, Inc. and Subsidiary
                         Consolidated Income Statements
               For the three months ended March 31, 1997 and 1996
                                   (unaudited)


<TABLE>
<CAPTION>
                                                                       1997          1996
                                                                   ------------   ------------
<S> <C>
Interest income:
      Loans, including fees ....................................   $ 4,000,968    $ 3,270,267
      Interest-bearing deposits with other banks ...............         6,553         31,753
      Federal funds sold .......................................        27,141        125,800
      Securities available for sale ............................       714,297      1,136,457
      Investment securities ....................................       288,683        186,159
                                                                   -----------    -----------
         Total interest income .................................     5,037,642      4,750,436
                                                                   -----------    -----------

Interest expense:
      Deposits .................................................     2,330,620      2,406,959
      Federal funds purchased ..................................         5,629              0
      Other borrowings .........................................       178,199        276,105
                                                                   -----------    -----------
         Total interest expense ................................     2,514,448      2,683,064
                                                                   -----------    -----------
             Net interest income ...............................     2,523,194      2,067,372
Provision for loan losses ......................................       180,000         75,000
                                                                   -----------    -----------
             Net interest income after provision for loan losses     2,343,194      1,992,372
                                                                   -----------    -----------

Noninterest income:
      Service charges on deposit accounts ......................       106,406         84,841
      Other service charges ....................................       155,015        167,786
      Trust department fees ....................................        38,375         34,265
      Gains and fees on sales of loans .........................       353,400         59,023
      Gains (losses) on sales of securities ....................        (2,550)        33,695
      Other ....................................................       126,348         59,391
                                                                   -----------    -----------
         Total noninterest income ..............................       776,994        439,001
                                                                   -----------    -----------
Noninterest expense:
      Salaries & employee benefits .............................     1,360,655      1,085,674
      Occupancy ................................................       200,834        148,175
      Equipment ................................................       186,822        175,401
      Deposit insurance ........................................        15,000         24,463
      Professional fees ........................................        94,502         66,901
      Other ....................................................       444,958        337,973
                                                                   -----------    -----------
         Total noninterest expense .............................     2,302,771      1,838,587
                                                                   -----------    -----------

Income before income taxes .....................................       817,417        592,786
Provision for income taxes .....................................       150,176        124,560
                                                                   -----------    -----------
Net income .....................................................   $   667,241    $   468,226
                                                                   ===========    ===========

Net income per common share ....................................   $      0.41    $      0.29
                                                                   ===========    ===========
</TABLE>

See the accompanying Notes to Consolidated Financial Statements.


                                        2


<PAGE>

                    Monocacy Bancshares, Inc. and Subsidiary
                 Consolidated Statements of Stockholders' Equity
      (Information for the three months ended March 31, 1997 is unaudited)


<TABLE>
<CAPTION>
                                                                                                   Net Unrealized
                                                                                                    Gain(Loss) on
                                                        Common Stock                                  Securities        Total
                                           Common      Dividend to be                  Retained       Available      Stockholders'
                                            Stock       Distributed      Surplus       Earnings       for Sale          Equity
                                        -------------   ------------   -----------   ------------  ---------------   -------------

<S> <C>
Balance at December 31, 1994 ........... $  6,574,145   $         --    $6,610,009   $  5,931,893    $   (506,364)   $ 18,609,683

Net income .............................           --             --            --      2,350,776              --       2,350,776
Issuance of shares of common stock
     in connection with employee benefit
     and dividend reinvestment plans ...       43,630             --       167,167             --              --         210,797
Cash dividend ..........................           --             --            --       (528,287)             --        (528,287)
10% stock dividend to be distributed ...           --      2,845,643            --     (2,845,643)             --              --
Increase in fair value of securities
     available for sale ................           --             --            --             --         525,112         525,112
                                         ------------   ------------  ------------   ------------    ------------    ------------
Balance at December 31, 1995 ...........    6,617,775      2,845,643     6,777,176      4,908,739          18,748      21,168,081

Net income .............................           --             --            --      1,610,804              --       1,610,804
Issuance of shares of common stock
     in connection with employee benefit
     and dividend reinvestment plans ...       63,440             --       182,778             --              --         246,218
Issuance of 10% common stock dividend ..      660,405     (2,845,643)    2,185,238                                             --
Cash dividend ..........................           --             --            --       (585,020)             --        (585,020)
10% stock dividend to be distributed ...           --      3,699,159            --     (3,699,159)             --              --
Decrease in fair value of securities
     available for sale ................           --             --            --             --        (791,698)       (791,698)
                                         ------------   ------------  ------------   ------------    ------------    ------------
Balance at December 31, 1996 ...........    7,341,620      3,699,159     9,145,192      2,235,364        (772,950)     21,648,385

Net income for three months ............           --             --            --        667,241              --         667,241
Issuance of shares of common stock
     in connection with employee benefit
     and dividend reinvestment plans ...       20,580             --        70,168             --              --          90,748
Issuance of 10% common stock dividend ..      734,135     (3,699,159)    2,496,059        461,483              --          (7,482)
Cash dividend ..........................           --             --            --       (178,119)             --        (178,119)
Decrease in fair value of securities
     available for sale ................           --             --            --             --        (349,306)       (349,306)
                                         ============   ============  ============   ============    ============    ============
Balance at March 31, 1997 .............. $  8,096,335   $         --  $ 11,711,419   $  3,185,969    $ (1,122,256)   $ 21,871,467
                                         ============   ============  ============   ============    ============    ============
</TABLE>


                                       3

<PAGE>

                    Monocacy Bancshares, Inc. and Subsidiary
                      Consolidated Statements of Cash Flows
            For the three month periods ended March 31, 1997 and 1996
                                   (unaudited)


<TABLE>
<CAPTION>
                                                                      Three Months Ended March 31,
                                                                         1997             1996
                                                                     -------------    ------------
<S> <C>
Cash flows from operating activities:
     Net income ..................................................   $    667,241    $    468,226
     Adjustments to reconcile net income to net
          cash provided by operating activities:
          Depreciation and amortization ..........................        204,608          15,297
          Provision for loan losses ..............................        180,000          75,000
          Deferred income taxes ..................................       (191,080)        200,571
          (Gains)losses on sales of securities available for sale           2,550         (33,695)
          Proceeds from sales of loans originated for sale .......     12,844,622       3,231,030
          Disbursements for loans originated for sale ............     (5,162,095)     (3,172,007)
          Gains on sale of loans .................................       (350,195)        (59,023)
          Decrease in unearned income,  net of origination costs .        (75,507)       (195,045)
          Gain on sale of other real estate owned ................             --              --
          Writedown of other real estate owned ...................          5,500              --
          (Increase)decrease in accrued interest receivable ......         76,755        (541,768)
          Increase in accrued interest and other
              expenses payable ...................................        770,620         296,060
     Other, net ..................................................        (65,722)        649,177
                                                                     ------------    ------------
                         Net cash provided by operating activities      8,907,297         933,823
                                                                     ------------    ------------

Cash flows from investing activities:
     Net (increase)decrease in interest-bearing
          deposits with other banks ..............................       (301,761)        388,893
     Proceeds from maturities of investment securities ...........          4,304       5,236,993
     Proceeds from sales of securities available for sale ........      1,383,549       3,448,477
     Proceeds from maturities of securities available for sale ...      1,591,416         822,479
     Purchases of securities available for sale ..................     (4,408,914)    (29,613,572)
     Purchases of investment securities ..........................             --     (15,521,461)
     Loan originations, net of principal repayments ..............     (4,353,991)        175,443
     Purchases of bank premises and equipment ....................       (206,612)     (1,095,185)
     Additions to real estate owned ..............................             --          (8,432)
     Proceeds from real estate owned .............................             --           7,500
                                                                     ------------    ------------
                         Net cash used in investing activities ...     (6,292,009)    (36,158,865)
                                                                     ------------    ------------

Cash flows from financing activities:
     Net increase in deposits ....................................        715,025       2,302,715
     Repayments of other borrowings ..............................     (6,631,889)     (2,213,110)
     Issuance of common stock ....................................         90,748          29,786
     Dividends paid on common stock ..............................       (154,305)       (145,829)
                                                                     ------------    ------------
                         Net cash used in financing activities ...     (5,980,421)        (26,438)
                                                                     ------------    ------------

Net decrease in cash and cash equivalents ........................     (3,365,133)    (35,251,480)

Cash and cash equivalents at beginning of period .................     12,373,937      47,143,615

                                                                     ============    ============
Cash and cash equivalents at end of period .......................   $  9,008,804    $ 11,892,135
                                                                     ============    ============

Supplemental disclosures of cash flow information:
     Interest paid on deposits and borrowings ....................   $  2,167,329    $  2,366,723
     Income taxes paid ...........................................             --             934
</TABLE>


See the accompanying Notes to Consolidated Financial Statements.

                                       4

<PAGE>

                    MONOCACY BANCSHARES, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements
                   (Information as of and for the three months
                       ended March 31, 1997 is unaudited)

         NOTE 1 - BASIS OF PRESENTATION

         The accompanying  consolidated  financial statements have been prepared
         in accordance with the instructions for Form 10-QSB and, therefore,  do
         not include all information and notes necessary for a fair presentation
         of  financial  condition,  results  of  operations  and  cash  flows in
         conformity  with  generally   accepted   accounting   principles.   The
         consolidated  financial  statements  should be read in conjunction with
         the audited financial  statements included in the Monocacy  Bancshares,
         Inc., (the "Company") 1997 Annual Report on Form 10-KSB.

         The  consolidated  financial  statements  include  the  accounts of the
         Company's  subsidiary,  Taneytown Bank & Trust Company (the "Bank). All
         significant   intercompany   balances   and   transactions   have  been
         eliminated.

         The consolidated financial statements as of March 31, 1997, and for the
         three month  periods  ended March 31, 1997 and 1996 are  unaudited  but
         include  all   adjustments   (consisting   only  of  normal   recurring
         adjustments)   which  the  Company  considers   necessary  for  a  fair
         presentation of financial  position and results of operations for those
         periods.  The  Consolidated  Statements  of Income for the three months
         ended March 31, 1997 are not necessarily indicative of the results that
         will be achieved for the entire year.

         NOTE 2 - EARNINGS PER COMMON SHARE

         Earnings per common share are based upon the weighted average number of
         common shares  outstanding  during the periods,  adjusted by any common
         stock equivalents and giving retroactive effect to stock dividends.

         NOTE 3 - ALLOWANCE FOR LOAN LOSSES

         The  Allowance for Loan Losses is  established  through a provision for
         loan  losses  charged  to  expenses.  Loans  are  charged  against  the
         allowance  when  management  believes  that the  collectibility  of the
         principal  is  unlikely.  The  allowance  is an amount that  management
         believes will be adequate to absorb  possible  losses on existing loans
         that  may   become   uncollectible,   based  on   evaluations   of  the
         collectibility   of  loans  and  prior  loan  loss  experience.   While
         management  uses available  information  to recognize  losses on loans,
         future  additions to the allowance may be necessary based on changes in
         economic conditions.  In addition,  various regulatory agencies,  as an
         integral part of their  examination  process,  periodically  review the
         Bank's allowance for loan losses. Such agencies may require the Bank to
         recognize  additions to the allowance  based on their  judgments  about
         information available to them at the time of their examinations.

         NOTE 4 - ACQUISITIONS

         On April 19,  1996,  Royal Oak Savings  Bank ("the  Savings  Bank"),  a
         separate subsidiary of Monocacy  Bancshares,  Inc., was merged into the
         operations  of the Bank,  with the  Savings  Bank's  branches  becoming
         branches  of the Bank.  The two (2) new branch  offices  are located in
         Eldersburg, Maryland and Randallstown,  Maryland. As of the date of the
         merger,  the Savings Bank had total assets of approximately $46 million
         and total deposits of approximately $38 million.

         On April 1,  1996,  the  Bank  acquired  Classic  Mortgage  Company,  a
         mortgage-banking operation. The mortgage company is being operated as a
         division of the Bank.



                                        5




<PAGE>



ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS (dollars in thousands)

FINANCIAL CONDITION

Total assets at March 31, 1997,  were  $257,861 a 1.96% or $5,154  decrease from
December  31,  1996.  The  decrease in assets from  December  31, 1996  occurred
primarily  in  liquid  assets  as the Bank  repaid  short-term  borrowings  from
proceeds of an $8.8 million sale of residential  mortgage loans during the first
quarter.  The  securities   portfolios,   including  investment  securities  and
securities  available  for sale,  which  totaled  $71,038 at March 31,  1997 and
$69,960 at December 31, 1996 , were at  approximately  the same level. Net loans
were  $160,939,  which  reflects a 2.71%  increase  from  December  31, 1996 due
primarily to increases in both the commercial  and  commercial  real estate loan
portfolios. Deposits increased $715 or .32% from December 31, 1996, primarily in
the  time  deposit  category  due to a  first  quarter  certificate  of  deposit
campaign.

ALLOWANCE FOR LOAN LOSSES

The allowance  for loan losses was $2,250 at March 31, 1997,  which was 1.38% of
loans.  During the first three months of 1997, Monocacy had a $180 provision for
loan losses and had net  charge-offs of $30. At December 31, 1996, the allowance
for loan losses was $2,100 or 1.32% of loans.

Table 1,  "Non-Performing  Assets and Past Due Loans" for  Monocacy  shows total
non-performing assets of $1,522 at March 31, 1997. The allowance for loan losses
is 258.03% of non-accrual  loans and 147.83% of  non-performing  assets at March
31, 1997, indicating substantial coverage.

Based upon the  latest  quarterly  analysis  of the loan  portfolio,  Management
considers the allowance for loan losses to be adequate to absorb any reasonable,
foreseeable loan losses.

Table 2,  "Changes in the  Allowance  for Loan Losses" shows the activity in the
allowance  for loan losses for the three month  periods ended March 31, 1997 and
1996.

LIQUIDITY

Liquidity  describes the ability of the Company to meet  financial  obligations,
including lending  commitments and  contingencies,  that arise during the normal
course of  business.  Liquidity is primarily  needed to meet the  borrowing  and
deposit withdrawal  requirements of the customers of the Company,  as well as to
meet current and planned expenditures.

The Company's  liquidity is derived  primarily  from its deposit base and equity
capital.  Core deposits,  defined as all deposits except certificates of deposit
of $100 or more, totaled $218,722 or 96.89% of total deposits at March 31, 1997.

Liquidity is also provided through the Company's portfolios of cash and interest
bearing deposits in other banks, federal funds sold,  investment  securities due
within one year and securities  available for sale.  Such assets totaled $59,204
or 22.96% of total assets at March 31, 1997.

In addition,  the Bank has established lines of credit totaling $30,000 with the
Federal  Home Loan Bank of  Atlanta  (the  "FHLB")  as an  additional  source of
liquidity.  At March 31, 1997, the Bank had $8,006 outstanding with the FHLB and
had sufficient  collateral  necessary to borrow the full amount  available under
the lines of credit.


CAPITAL RESOURCES

The Federal  Reserve Board has adopted  risk-based  capital  guidelines for bank
holding  companies.  As of March 31, 1997, the required minimum ratio of capital
to risk-adjusted  assets  (including  certain  off-balance  sheet items, such as
standby  letters of credit) was 8%. At least half of the total  capital  must be
comprised of common equity,  retained earnings and a limited amount of perpetual
preferred stock, after subtracting goodwill and making certain other adjustments
("Tier I capital").




                                        6



<PAGE>





The  remainder  may  consist  of  perpetual  debt,  mandatory  convertible  debt
securities, a limited amount of subordinated debt, remaining preferred stock and
a limited amount of loan loss reserves ("Tier 2 capital"). The maximum amount of
supplementary capital elements that qualify as Tier 2 capital is limited to 100%
of Tier 1 capital  net of goodwill  and certain  other  intangible  assets.  The
Federal Reserve Board also has adopted a minimum  leverage ratio (Tier 1 capital
to  assets)  of 3% for  bank  holding  companies  that  meet  certain  specified
criteria,  including having the highest  regulatory  rating.  The rule indicates
that the  minimum  leverage  ratio  should be at least  1.0% to 2.0%  higher for
holding  companies that do not have the highest  rating or that are  undertaking
major expansion programs. Failure to meet the capital guidelines could subject a
banking  institution to a variety of enforcement  remedies  available to federal
regulatory authorities.

The table below presents the Company's  capital position relative to its various
minimum statutory and regulatory capital requirements at March 31, 1997.


                                                                Minimum
                               Monocacy Bancshares, Inc.       Regulatory
                                    March 31, 1997            Requirements
                               -------------------------      ------------

Risk-based capital ratios
  Tier I capital ...........            10.74%                    4.00%
  Total capital ............            12.02%                    8.00%
Leverage capital ratio .....             7.23%                    3.00%


RESULTS OF OPERATIONS

Net income was $667 for the first three  months of 1997,  up from $468 or 42.52%
for the same period last year. Net interest  income was up by $456 for the first
three months of 1997, a result of the higher net interest  margin because of the
changing mix of earning assets and interest-bearing liabilities and the interest
rate  environment.  The  provision  for loan losses was $180 for the first three
months of 1997 and $75 for the same period last year.

Non-interest  income  increased  by $338 or 76.99% for the first three months of
1997 with higher  deposit  service  charges,  loan servicing fees and more gains
realized on the sales of loans. In addition,  a gain of $100,000 was realized on
the sale of a lease purchase option during January of 1997.

Mortgage-banking  activities were more profitable  during the three month period
ended March 31, 1997, as evidenced by a 51.34%  increase in servicing fees and a
179.66% increase in gains on sales of loans for that period over the same period
in 1996.  This increase is  attributable  to the operations of Classic  Mortgage
Company,  which the Company acquired in April, 1996. In addition to the increase
in normal operating gains on sales of loans, the Company realized a $188 gain on
a bulk sale of residential mortgage loans in the first quarter of 1997.

The Company realized losses on sales of securities  available for sale of $3 for
the three  months  ended March 31, 1997 as compared to gains of $34 for the same
period in 1996.

Non-interest  expenses  grew by $464 or 25.23% for the three month  period ended
March 31, 1997,  with higher staff levels and related  costs and the  additional
investments  in other  resources made in late 1996.  Deposit  insurance was down
38.68% from 1996 due to the more  favorable  rate  structure in effect since the
recapitalization  of the FDIC funds.  Professional  fees are up 41.26% primarily
due to the ongoing  litigation  noted in Note 13 to the  Company's  Consolidated
Financial Statements in the Company's 1996 Annual Report to Shareholders.

Income  taxes were $150 for an  effective  tax rate of 18.37% in the first three
months of 1997.  The  effective  tax rate for the first three months of 1996 was
21.01%.  The  decreased  effective  tax rate is due  primarily to the  increased
investment in tax-exempt municipal securities by the Company.






                                        7


<PAGE>

Table 1

                            Monocacy Bancshares, Inc.
                    Non-Performing Assets and Past Due Loans



                                        March 31,     March 31,  December 31,
                                          1997          1996         1996
                                        --------      --------   -----------

Non-accrual loans:
Real Estate
     Commercial mortgage ...........      $  618       $1,013       $  735
     Residential mortgage ..........          94           --           --
Commercial .........................         158          210           52
Consumer ...........................           2            5            6
                                          ------       ------       ------
Total non-accrual loans ............         872        1,228          793
Foreclosed properties ..............         650        1,312          656
                                          ------       ------       ------
Total non-performing assets ........      $1,522       $2,540       $1,449
                                          ======       ======       ======

Allowance for loan losses to:
     Non-accrual loans .............      258.03%      160.42%      264.82%
                                          ======       ======       ======
     Non-performing assets .........      147.83%       77.56%      144.93%
                                          ======       ======       ======

Accruing loans past due
     90 days or more ...............      $1,119       $  210       $  757
                                          ======       ======       ======

Allowance for loan losses ..........      $2,250       $1,970       $2,100
                                          ======       ======       ======

                                       8
<PAGE>

Table 2

                            Monocacy Bancshares, Inc.
                            Allowance For Loan Losses



                                                    Three months ended March 31,
                                                      1997               1996
                                                    --------           --------

Allowance for loan losses
     at beginning of period ................         $ 2,100           $ 1,904
Provision for loan losses ..................             180                75
Charge-offs ................................             (33)              (10)
Recoveries .................................               3                 1
                                                     -------           -------
Allowance for loan losses
     at end of period ......................         $ 2,250           $ 1,970
                                                     =======           =======

Allowance for loan losses
     as a percentage of loans
     receivable, net of
     unearned income .......................            1.38%             1.41%
                                                     =======           =======

                                       9

<PAGE>


                                     PART II


Item 1.  Legal Proceedings

         As  previously  reported,  the Bank has been named as a defendant  in a
         legal  proceeding in the Circuit Court for Baltimore City wherein it is
         alleged that the Bank permitted the improper  withdrawal or transfer of
         funds from a deposit account  containing  escrow monies at the Bank. It
         is also  alleged  that the  Bank  misapplied  certain  sums of money by
         depositing them in an unrelated  account holder's deposit account.  The
         complaint  seeks  recovery  against the Bank in the amount of $482,000.
         Management, after consultation with the legal counsel, believes that it
         has defenses  available  and intends to vigorously  defend  against the
         claims.  Although the amount of any ultimate  liability with respect to
         these claims  cannot be  determined,  management is of the opinion that
         any losses  resulting  form the  disposition  of these matters will not
         have a  material  adverse  effect  on the  financial  condition  of the
         Company.

Item 2.  Changes in Securities

         None

Item 3.  Defaults Upon Senior Securities

         None

Item 4.  Submission of Matters to a Vote of Security Holders
         None

Item 5.  Other Information

         On March 31, 1997,  the Board of  Directors of the Company  declared an
         $.11 per share cash dividend to common  stockholders of record on April
         14, 1997, payable April 28, 1997.

Item 6.  Exhibits and Reports on Form 8-K

         (a)  Exhibits
              Exhibit No.
              ----------

              11.0  Information used in the computation             Page 12
                                       of net income per share

              27.0 Financial Data Schedule                          Page 13


         (b)  Reports on Form 8-K

              None.


* Exhibits incorporated by reference






                                       10


<PAGE>




                                   SIGNATURES



Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.



                                 MONOCACY BANCSHARES, INC.
                                 Registrant

                                 Principal Executive Officer:


                                 By:_________________________________
                                    Frank W. Neubauer, President/CEO


                                 Date: April 30, 1997


                                 Principal Financial and Accounting Officer:



                                 By:___________________________________________
                                    Michael K. Walsch, Executive Vice President


                                 Date: April 30, 1997




                                       11