EXHIBIT 13


                          ANNUAL REPORT TO STOCKHOLDERS
                      FOR THE YEAR ENDED DECEMBER 31, 2001


<PAGE>




                          ANNUAL REPORT TO STOCKHOLDERS
                                DECEMBER 31, 2001









                              EASTON BANCORP, INC.




<PAGE>
                              EASTON BANCORP, INC.

                                   March 2002

Dear  Stockholders:

When we think of the year of 2001, we will recall the events of September 11 and
the  permanent  impact it made on our national, corporate, and individual lives.
Surely our responsibility for leadership has been redefined.  Surely we realized
we  had  become  lax.  Surely  we  are renewed in our commitment to preserve the
American  way.

With  respect  to  the  banking  industry,  September 11 was the final blow to a
receding  economy.  Immediately  after that tragic date the Federal Reserve Bank
injected  historic  levels of liquidity into the economy and the banking system.
Never  before has so much monetary stimulus been injected into our Republic.  As
a  consequence,  interest  rates  already  in  decline  fell  to  historic lows.
Interest  spreads (the difference between earning asset rates and deposit rates)
also  reached  historic  lows.

Notwithstanding  these  economic  pressures, we are pleased with our performance
during  2001.  The  enclosed financial report reflects total asset growth of 24%
and total deposit growth of 25%.  While we enjoy positive growth rates, earnings
were  reduced because of compression of spreads and net interest margin.  We are
hopeful  that  this  industry  trend  will  reverse  during  2002.

Our  greatest  success  for  2001  was  the  opening of Oxford Bank and Trust, a
division of Easton Bank and Trust.  This means we are represented with community
banking  solutions in Easton, Denton and Oxford, three premier community-banking
markets.

With  good  fortune, 2002 will be remembered as the year of the recovery.  While
several  storm  clouds  remain  on  the  economic  horizon, we are confident our
economy  will  rebound;  and  we  are confident we live and work in the greatest
nation  on  earth.

We  thank  you for your confidence in Easton Bank and Trust and we will continue
to  strive  to  grow  stockholder  value  in  the  coming  years.



/s/ R. Michael S. Menzies                /s/ William David Hill
R. Michael S. Menzies, Sr.               William David Hill, DDS
President/CEO                            Chairman of the Board


              501 Idlewild Avenue, P.O. Box 629, Easton, MD  21601
                       410/819-0300     FAX  410/819-8091


<PAGE>
                              EASTON BANCORP, INC.
                           EASTON BANK & TRUST COMPANY


                                   OUR MISSION

     Easton  Bank  & Trust Company is a community bank dedicated to the delivery
of  personal,  private,  and  professionally  designed  financial  solutions for
individual  and  small  business  needs.  Easton  Bank  &  Trust is committed to
attaining  superior  results  for  its  stockholders, customers, associates, and
community.


                                   CORE VALUES

     At  Easton  Bank & Trust, we believe our success is founded upon these core
values:

-    PROFITABILITY: We will constantly pursue profitability for the stakeholders
     of  the  Company,  including  its  stockholders, customers, associates, and
     community.

-    TEAMWORK:  As a team we will work together to produce a happy, healthy, and
     fun  work  environment which results in the accomplishment of our strategic
     objectives.

-    ABSOLUTE  INTEGRITY:  We  will  always  treat  customers,  prospects,  and
     associates  with respect, honesty, and confidentiality regarding everything
     we  say  or  do.

-    PROFESSIONALISM:  As professionals we are committed to continuous, lifelong
     learning, responsive and reliable quality service, personal responsibility,
     and  the  courage  to  seek  ambitious  aspirations.

-    RELATIONSHIPS:  We  are in the business of personal service, which is based
     upon  trusting  relationships.

-    EXCELLENCE: Our Core Values exist in pursuit of excellence and the practice
     of  the 7 Habits: Be Proactive, Begin with an End in Mind, Put First Things
     First,  Think Win Win, Seek First to Understand, Find Synergy, and Keep the
     Saw  Sharp.


                                        2
<PAGE>
     This  Annual  Report  contains  statements which constitute forward-looking
statements  within  the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. These statements appear in a
number  of places in this Annual Report and include all statements regarding the
intent,  belief  or  current  expectations  of the Company, its directors or its
officers with respect to, among other things: (i) the Company's financing plans;
(ii)  trends  affecting  the  Company's  financial  condition  or  results  of
operations; (iii) the Company's growth strategy and operating strategy; and (iv)
the  declaration and payment of dividends. Investors are cautioned that any such
forward-looking  statements are not guarantees of future performance and involve
risks  and  uncertainties,  and  that  actual results may differ materially from
those projected in the forward-looking statements as a result of various factors
discussed  herein and those factors discussed in detail in the Company's filings
with  the  Securities  and  Exchange  Commission.

                             BUSINESS OF THE COMPANY

     Easton  Bancorp,  Inc.  (the  "Company")  was  incorporated  as  a Maryland
corporation  on July 19, 1991, to become a one-bank holding company by acquiring
all  of  the  capital stock of Easton Bank & Trust Company (the "Bank") upon its
formation.  The  Bank  commenced business on July 1, 1993, and the only activity
of the Company since then has been the ownership and operation of the Bank.  The
Bank  was  organized  as  a  nonmember state bank under the laws of the State of
Maryland.  The  Bank  is  engaged  in  a  general  commercial  banking business,
emphasizing in its marketing the Bank's local management and ownership, from its
main  office  location  in  its  primary  service area, Talbot County, Maryland.
During  1999,  the Bank opened a full-service branch office in Denton, Maryland,
which  is  in  Caroline  County.  In  addition,  during  2001  the Bank opened a
full-service  branch office in Oxford, Maryland, which is in Talbot County.  The
Bank  offers  a  full  range of deposit services that are typically available in
most  banks  and savings and loan associations, including checking accounts, NOW
accounts,  savings  accounts  and  other time deposits of various types, ranging
from  daily  money  market  accounts to longer-term certificates of deposit.  In
addition,  the  Bank  offers  certain  retirement  account  services,  such  as
Individual  Retirement  Accounts.  The  Bank  offers  a  full range of short- to
medium-term  commercial  and personal loans.  The Bank also originates and holds
or  sells  into  the secondary market fixed and variable rate mortgage loans and
real  estate  construction  and  acquisition loans.  Other bank services include
cash  management  services,  safe  deposit boxes, travelers checks, debit cards,
credit  cards,  direct  deposit  of  payroll  and  social  security  checks, and
automatic  drafts  for  various  accounts.

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The  following  discussion of the Company's financial condition and results
of  operations  should  be  read  in  conjunction  with  the Company's financial
statements  and  related  notes  and  other  statistical  information  included
elsewhere  herein.

OVERVIEW

     Consolidated  income of the Company is derived primarily from operations of
the  Bank.  Net  income for 2001 decreased to $454,957 from $503,745 in 2000 due
to  increases  in  the provision for loan losses and other operating expenses in
excess  of  the  increases  in net interest income and other revenue.  Return on
equity  decreased  from  9.70%  for  2001  to  8.15%  in  2000.

RESULTS  OF  OPERATIONS

     The  Company  reported  net  income of $454,957, or $.81 per share, for the
year  ended  December  31, 2001, which represents a decrease of $48,788, or $.09
per  share,  from  $503,745,  or $.90 per share, for the year ended December 31,
2000.  Increases  in  net interest income of $80,707 and other operating revenue
of $297,397 were offset by increases in the provision for loan losses of $65,303
and  other  operating  expenses  of  $423,336.

     Net interest income increased $80,707, or 3.00%, to $2,774,418 in 2001 from
$2,693,711  in  2000.  This  increase in net interest income was the result of a
$283,815  increase  in interest income offset by an increase in interest expense
of  $203,108.  During  2001,  the  Company experienced a decreasing net interest


                                        3
<PAGE>
spread  to  4.07% in 2001 from 4.50% in 2000.  The net interest margin decreased
to  4.15%  in  2001 from 4.66% in 2000.  The interest spread and interest margin
decreased  as  loans  and  securities  repriced  faster  than  deposits.

     During  2001,  the  Company  recorded net loan loss charge-offs of $107,679
compared to the 2000 net loan loss charge-offs of $57,271.  As a result of these
net  loan  charge-offs, the increase in nonperforming loans, and the increase in
total  outstanding loans, the Company increased its provision for loan losses by
$65,303  to  $212,946  during  2001,  compared to a provision for loan losses of
$147,643  in  2000.

     The  Company  had loans over ninety days delinquent on which the accrual of
interest had been discontinued totaling $219,070 and $270,279 as of December 31,
2001  and  2000, respectively.  As of December 31, 2001, the accrual of interest
had  been discontinued on loans totaling $133,976 where the loans were less than
ninety  days delinquent compared to $86,616 as of December 31, 2000.  Loans over
ninety  days  delinquent but still accruing interest increased to $747,907 as of
December  31,  2001,  from  $97,987  as  of  December  31,  2000.  The Company's
allowance  for  loan  losses  as a percentage of its year-end loans was 1.18% at
both  December  31,  2001  and  December 31, 2000.  Net loan loss charge-offs of
$107,679  during 2001 resulted in a ratio of net charge-offs to average loans of
..18%.  During  2000,  the Company had net charge-offs of $57,271, which was .11%
of  average  loans.

     Noninterest income increased $297,397, or 101.43%, to $590,601 in 2001 from
$293,204  in  2000.  Origination  fee  income from mortgages originated for sale
increased  $217,562.  During  the  first  quarter,  the Company invested in life
insurance to fund supplemental retirement benefits of an executive officer.  The
$56,870 increase in the cash surrender value of this policy is included as other
noninterest revenue.  During 2001, which was the second year the Company offered
a  VISA  debit  card,  the  Company  recorded  increased  fees  of  $9,852.

     Noninterest  expense  increased  $423,336, or 20.87%, to $2,451,604 in 2001
from  $2,028,268 in 2000. The increase was the result of an increase of $280,535
in  compensation  and  related  expenses,  an  increase  of $22,426 for building
maintenance,  an  increase  of  $19,135  for  advertising  costs, an increase of
$14,872  for  loan  documentation  reports  and  collections, and an increase of
$25,981  for  data  processing.  These  increases  were  offset by a decrease of
$25,250  in  the  provision  for  loan  commitments.

     The  Company's  efficiency  ratio,  which  is  noninterest  expense  as  a
percentage  of  the sum of net interest income and noninterest income, increased
to 72.86% in 2001, compared to 67.91% in 2000.  This deterioration is the result
of  faster  growth  in  operating  expenses  than in net interest income growth.

NET  INTEREST  INCOME

     The  primary source of income for the Company is net interest income, which
is the difference between revenue on interest-earning assets, such as investment
securities  and  loans,  and  interest  incurred  on interest-bearing sources of
funds,  such  as  deposits  and borrowings.  The level of net interest income is
determined  primarily  by  the  average  balances of interest-earning assets and
funding sources and the various rate spreads between the interest-earning assets
and  the  Company's  funding  sources.  The  table "Average Balances, Income and
Expenses,  and  Rates"  which  follows  shows  the  Company's  average volume of
interest-earning  assets  and interest-bearing liabilities for 2001 and 2000 and
related interest income/expense and yields.  Changes in net interest income from
period  to  period  result  from  increases  or  decreases  in  the  volume  of
interest-earning  assets  and  interest-bearing  liabilities,  and  increases or
decreases  in  the average rates earned and paid on such assets and liabilities.
The  volume  of  interest-earning  assets  and  interest-bearing  liabilities is
affected  by  the  ability to manage the earning-asset portfolio (which includes
loans)  and the availability of particular sources of funds, such as noninterest
bearing  deposits.  The table "Analysis of Changes in Net Interest Income" shows
the  amount  of  net  interest income change from rate changes and from activity
changes.

     The  following  table depicts interest income on earning assets and related
average  yields  as well as interest expense on interest-bearing liabilities and
related  average  rates  paid  for  2001  and  2000.


                                        4
<PAGE>
<TABLE>
<CAPTION>
                AVERAGE BALANCES, INCOME AND EXPENSES, AND RATES

                                              For the Year Ended                For the Year Ended
                                              December  31,  2001               December  31,  2000
                                       --------------------------------  --------------------------------
                                         Average     Income/    Yield/     Average     Income/    Yield/
ASSETS                                   Balance     Expenses    Rate      Balance     Expenses    Rate
                                       -----------  ----------  -------  -----------  ----------  -------
<S>                                    <C>          <C>         <C>      <C>          <C>         <C>
Federal funds sold                     $ 2,954,612  $  111,011    3.76%  $ 2,094,348  $  132,723    6.34%
Interest-bearing deposits                   14,185         520    3.67%        9,567         532    5.56%
Investment securities:
  U.S. government agency                 4,340,131     247,076    5.69%    4,768,451     291,673    6.12%
  Other                                    407,241      28,726    7.05%      194,852      15,838    8.13%
                                       -----------  ----------  -------  -----------  ----------  -------
    Total investment securities          4,747,372     275,802    5.81%    4,963,303     307,511    6.20%
                                       -----------  ----------  -------  -----------  ----------  -------
Loans:
  Demand and time                       14,348,935   1,156,761    8.06%   11,273,091   1,036,328    9.19%
  Mortgage                              41,727,127   3,538,811    8.48%   36,701,229   3,326,279    9.06%
  Installment                            3,921,552     370,998    9.46%    3,619,704     367,538   10.15%
                                       -----------  ----------  -------  -----------  ----------  -------
    Total loans                         59,997,614   5,066,570    8.44%   51,594,024   4,730,145    9.17%
Allowance for loan losses                  692,655                           710,100
                                       -----------                       -----------
    Total loans, net of allowance       59,304,959   5,066,570    8.54%   50,883,924   4,730,145    9.30%
                                       -----------  ----------  -------  -----------  ----------  -------
Total interest-earning assets           67,021,128   5,453,903    8.14%   57,951,142   5,170,911    8.92%
                                       -----------  ----------  -------  -----------  ----------  -------
Noninterest-bearing cash                 1,242,388                         1,160,522
Bank premises and equipment              1,644,342                         1,682,820
Other assets                             1,747,942                           471,746
                                       -----------                       -----------
      Total assets                     $71,655,800                       $61,266,230
                                       ===========                       ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing deposits:
  Savings and NOW deposits             $10,714,080  $  203,333    1.90%  $ 9,607,116  $  205,854    2.14%
  Money market deposits                  9,278,602     226,973    2.45%    8,658,405     409,971    4.73%
  Other time deposits                   38,091,737   2,139,492    5.62%   31,138,152   1,749,064    5.62%
                                       -----------  ----------  -------  -----------  ----------  -------
    Total interest-bearing deposits     58,084,419   2,569,798    4.42%   49,403,673   2,364,889    4.79%
Noninterest-bearing deposits             5,625,745           -       -     4,531,033           -       -
                                       -----------  ----------  -------  -----------  ----------  -------
    Total deposits                      63,710,164   2,569,798    4.03%   53,934,706   2,364,889    4.38%
Borrowed funds                           1,987,899     101,707    5.12%    1,904,553     103,508    5.43%
                                       -----------  ----------  -------  -----------  ----------  -------
                                        65,698,063   2,671,505    4.07%   55,839,259   2,468,397    4.42%
                                                    ----------  -------               ----------  -------
Other liabilities                          373,538                           231,194
Stockholders' equity                     5,584,199                         5,195,777
                                       -----------                       -----------
      Total liabilities and
      stockholders equity              $71,655,800                       $61,266,230
                                       ===========                       ===========

Net interest spread                                               4.07%                             4.50%
                                                                =======                           =======
Net interest income                                 $2,782,398                        $2,702,514
                                                    ==========                        ==========
Net margin on interest-earning assets                             4.15%                             4.66%
                                                                =======                           =======
</TABLE>
________________________________________
Interest  on  tax-favored  investments and loans are reported on a fully taxable
equivalent  basis.

     The  key  performance measure for net interest income is the "net margin on
interest-bearing  assets,"  or  net  interest  income  divided  by  average
interest-earning  assets.  The Company's net interest margin for 2001 was 4.15%,
compared  to  4.66%  for  2000.  The  decrease  is  due  primarily to the slower
decrease  in  deposit  yields  to  loan  yields.  As a result of the significant
amount  of  fixed  rate  loans, the Bank's net interest income may increase in a
falling  interest  rate  environment  and  decrease  in  a  rising interest rate
environment.  Management  of  the Company expects to maintain this net margin on
interest-earning  assets.  The  net  margin may decline, however, if competition
increases,  loan  demand or quality decreases, or the cost of funds rises faster
than  the return on loans.  Although such expectations are based on management's
judgment,  actual  results  will  depend  on  a number of factors that cannot be
predicted with certainty, and fulfillment of management's expectations cannot be
assured.


                                        5
<PAGE>
     The  following table reflects the amount of net interest income change from
rate  changes  and  from activity changes for 2001 compared to 2000 and for 2000
compared  to  1999.

<TABLE>
<CAPTION>
                           ANALYSIS OF CHANGES IN NET INTEREST INCOME

                                  Year Ended December 31, 2001        Year Ended December 31, 2000
                                       Compared with 2000                  Compared with 1999
                                       Variance  due  to                   Variance  due  to
                                ---------------------------------  ------------------------------------
EARNING ASSETS                    Total      Rate(1)     Volume       Total      Rate(1)      Volume
                                ----------  ----------  ---------  -----------  ----------  -----------
<S>                             <C>         <C>         <C>        <C>          <C>         <C>
  Interest-bearing deposits     $     (12)  $    (269)  $    257   $      508   $     508   $        -
  Federal funds sold              (21,712)    (76,229)    54,517      (10,436)     28,605      (39,041)
  Investment Securities:
    U.S. government agency        (44,597)    (18,398)   (26,199)      27,476      13,066       14,410
    Other                          12,888      (4,375)    17,263        3,650         361        3,289
  Loans:
    Demand and time               120,433    (162,327)   282,760      432,314      60,920      371,394
    Mortgage                      212,532    (242,972)   455,504      524,161     (84,460)     608,621
    Installment                     3,460     (27,189)    30,649       65,530       8,538       56,992
                                ----------  ----------  ---------  -----------  ----------  -----------
      Total interest income       282,992    (531,759)   814,751    1,043,203      27,538    1,015,665
                                ----------  ----------  ---------  -----------  ----------  -----------

INTEREST-BEARING LIABILITIES
  Savings and NOW deposits         (2,521)    (26,210)    23,689      (42,109)    (42,267)         158
  Money market deposits          (182,998)   (212,333)    29,335      220,219     100,160      120,059
  Other time deposits             390,428        (363)   390,791      428,300     129,503      298,797
  Federal funds purchased and
    short-term borrowings          (1,801)     (6,327)     4,526         (398)      1,701       (2,099)
                                ----------  ----------  ---------  -----------  ----------  -----------
      Total interest expense      203,108    (245,233)   448,341      606,012     189,097      416,915
                                ----------  ----------  ---------  -----------  ----------  -----------

  Net interest income           $  79,884   $(286,526)  $366,410   $  437,191   $(161,559)  $  598,750
                                ==========  ==========  =========  ===========  ==========  ===========
<FN>
-----------------------------------------------
(1)  The  variance  that  is  both  rate/volume  related  is  included  in  the  rate  variance.
</TABLE>

FOURTH  QUARTER  RESULTS

     Net  income  for  the Company for the three months ended December 31, 2001,
was  $185,175, compared to $165,690 for the corresponding period in 2000.  Fully
diluted  earnings  per  share for the fourth quarters of 2001 and 2000 were $.32
and $.29, respectively.  Increases in net interest income and noninterest income
for  the  three  months  ended  December 31, 2001, compared to the corresponding
period  in  2000,  were  offset  by increased loan loss provisions and operating
expenses.  Income  taxes decreased during the fourth quarter of 2001 compared to
the  fourth  quarter  of  2000  as  a  result  of lower taxable income and lower
effective  tax  rates.  The  Company  has  made several tax-exempt loans and the
increase in the cash surrender value of the life insurance policy is not subject
to  income  taxes.

     The increase in net interest income during the fourth quarter of 2001, when
compared  to  the  corresponding period of 2000, of $40,381 was due primarily to
the  maturity  of  higher yielding deposits that were renewed at lower rates and
from  the  lowering  of  savings  and  interest-bearing checking interest rates.
Yields  for  loans, securities and deposits declined throughout the year, but in
the  fourth  quarter  of  2001 the decline in deposit rates was greater than the
decline  in  yields  on  earning  assets.

     Noninterest  income increased $62,778 to $174,135 for the fourth quarter of
2001,  from  $111,357  for  the  fourth  quarter of 2000.  This increase was due
primarily  to  the increase of approximately $16,000 in the cash surrender value


                                        6
<PAGE>
of  the  life  insurance  policy  owned  by  the  Bank  and  increased  mortgage
origination  fees  of  approximately  $41,000.

     Total  operating  expenses  increased  $81,116  to $637,416 for the quarter
ended  December 31, 2001, from $556,300 for the quarter ended December 21, 2000.
The  increase  was primarily related to the increase of salaries and benefits of
approximately $75,000.  In addition to additional employees hired as a result of
the  asset  growth of the bank, two employees were hired late during the quarter
as  the  result  of  the  opening  of  the  new  branch  in  Oxford,  Maryland.

     The  Company  recorded  fourth  quarter loan loss provisions of $28,744 and
$(19,291)  during  2001 and 2000, respectively.  These provisions, or reversals,
were  the  result of an analysis of the loan portfolios at the end of each year.
At  each  year end, management determined that the allowance for loan losses was
adequate  at  1.18%  of  total  loans.

COMPOSITION  OF  LOAN  PORTFOLIO

     Because  loans  are  expected  to  produce  higher  yields  than investment
securities  and other interest-earning assets (assuming that loan losses are not
excessive), the absolute volume of loans and the volume as a percentage of total
earning  assets  is  an  important  determinant of net interest margin.  Average
loans,  net  of  the allowance for loan losses, were $59,304,959 and $50,883,924
during  2001  and  2000,  respectively,  which  constituted  88.49%  and 87.80%,
respectively,  of  average interest-earning assets for the periods.  At December
31,  2001, the Company's loan to deposit ratio was 88.23%, compared to 94.98% at
December 31, 2000.  The Bank extends loans primarily to customers located in and
near  Talbot and Caroline Counties.  There are no industry concentrations in the
Bank's  loan  portfolio.  The  Bank does, however, have a substantial portion of
its  loans  in  real  estate.  Performance  may be influenced by the real estate
market  in  the  region.

     The  following  table  sets  forth  the  composition  of the Company's loan
portfolio  as  of  December  31,  2001  and  2000,  respectively.

<TABLE>
<CAPTION>
                           COMPOSITION OF LOAN PORTFOLIO

                                                      December 31,
                                     ----------------------------------------------
                                              2001                    2000
                                     ----------------------  ----------------------
                                                   Percent                 Percent
                                       Amount     of Total     Amount     of Total
                                     -----------  ---------  -----------  ---------
<S>                                  <C>          <C>        <C>          <C>
Commercial                           $13,231,859     20.74%  $10,032,250     18.27%
Real estate - residential             18,287,644     28.67%   17,841,007     32.50%
Real estate - commercial              16,054,944     25.16%   14,732,481     26.83%
Construction                           7,573,805     11.87%    5,096,238      9.28%
Home equity                            3,412,440      5.35%    2,727,880      4.97%
Consumer                               5,239,150      8.21%    4,474,671      8.15%
                                     -----------  ---------  -----------  ---------
  Total loans                         63,799,842    100.00%   54,904,527    100.00%
                                                  =========               =========
Less deferred loan origination fees        4,167                   9,128
Less allowance for credit losses         750,768                 645,501
                                     -----------             -----------
  Net loans                          $63,044,907             $54,249,898
                                     ===========             ===========
</TABLE>

     The  following  table  sets  forth  the  maturity  distribution, classified
according  to  sensitivity to changes in interest rates, for selected components
of  the  Company's  loan  portfolio  as  of  December  31,  2001.


                                        7
<PAGE>
<TABLE>
<CAPTION>
       LOAN MATURITY SCHEDULE AND SENSITIVITY TO CHANGES IN INTEREST RATES

                                           December 31, 2001
                           -------------------------------------------------
                                         Over One
                            One Year      Through    Over Five
                             Or Less    Five Years     Years        Total
                           -----------  -----------  ----------  -----------
<S>                        <C>          <C>          <C>         <C>
Commercial                 $ 9,086,599  $ 3,563,916  $  581,344  $13,231,859
Real estate - residential    4,637,828   13,148,040     501,776   18,287,644
Real estate - commercial     3,866,346   10,353,290   1,835,308   16,054,944
Construction                 7,573,805            -           -    7,573,805
Home equity                  3,412,440            -           -    3,412,440
Consumer                     1,526,754    3,442,312     270,084    5,239,150
                           -----------  -----------  ----------  -----------
  Total                    $30,103,772  $30,507,558  $3,188,512  $63,799,842
                           ===========  ===========  ==========  ===========

Fixed interest rate        $19,556,544  $28,553,855  $3,111,052  $51,221,451
Variable interest rate      10,547,228    1,953,703      77,460   12,578,391
                           -----------  -----------  ----------  -----------
  Total                    $30,103,772  $30,507,558  $3,188,512  $63,799,842
                           ===========  ===========  ==========  ===========
</TABLE>

     As  of  December  31, 2001, $51,221,451, or 80.28%, of the total loans were
fixed  rate loans.  The significant amount of fixed rate loans was the result of
the  market  demand  of  the  Bank. With such a significant amount of fixed rate
loans,  the  Bank's  net interest income will decrease in a rising interest rate
environment,  but  will  increase in a falling interest rate environment, unless
the  loans  are  renegotiated.

     The  Company has the following commitments, lines of credit, and letters of
credit  outstanding  as  of  December  31,  2001  and  2000,  respectively.

<TABLE>
<CAPTION>
                                    2001         2000
                                 -----------  ----------
<S>                              <C>          <C>
     Construction loans          $ 3,757,443  $3,438,181
     Lines of credit               5,675,616   4,912,511
     Overdraft protection lines      364,390     306,314
     Standby letters of credit       725,018     410,636
                                 -----------  ----------
     Total                       $10,522,467  $9,067,642
                                 ===========  ==========
</TABLE>

     Loan  commitments  and lines of credit are agreements to lend to a customer
as  long  as  there  is  no  violation  of  any condition to the contract.  Loan
commitments  may  have  interest fixed at current rates, fixed expiration dates,
and  may  require the payment of a fee.  Lines of credit generally have variable
interest rates.  Such lines do not represent future cash requirements because it
is  unlikely  that all customers will draw upon their lines in full at any time.
Letters  of  credit  are  commitments  issued  to guarantee the performance of a
customer to a third party.  Loan commitments and lines and letters of credit are
made  on  the  same  terms,  including  collateral,  as  outstanding loans.  The
Company's exposure to credit loss in the event of nonperformance by the borrower
is  represented  by  the  contract  amount  of  the  commitment.  Management has
included  a  provision  for  potential  losses  from  funding these loans in the
noninterest  expense.

LOAN  QUALITY

     The  allowance for loan losses represents a reserve for potential losses in
the  loan portfolio.  The adequacy of the allowance for loan losses is evaluated
periodically  based  on  a  review  of  all significant loans, with a particular
emphasis  on  non-accruing,  past  due, and other loans that management believes
require  attention.  The  determination  of  the  reserve  level  rests  upon
management's judgment about factors affecting loan quality and assumptions about
the  economy.  Management  considers  the  year-end  allowance  appropriate  and
adequate  to  cover possible losses in the loan portfolio; however, management's
judgment  is  based  upon a number of assumptions about future events, which are
believed  to  be  reasonable, but which may or may not prove valid.  Thus, there
can  be  no  assurance  that  charge-offs  in future periods will not exceed the
allowance  for loan loss or that additional increases in the loan loss allowance
will  not  be  required.


                                        8
<PAGE>
     For  significant  problem  loans,  management's  review  consists  of  an
evaluation  of  the  financial  strengths  of  the borrowers and guarantors, the
related  collateral,  and  the  effects of economic conditions.  The Bank uses a
loan  grading system where all loans are graded based on management's evaluation
of  the  risk associated with each loan.  Based on the loan grading, a factor is
applied  to  the  loan  balance  to  reserve  for  potential losses. The overall
evaluation of the adequacy of the total allowance for loan losses is based on an
analysis  of  historical loan loss ratios, loan charge-offs, delinquency trends,
and  previous  collection experience, along with an assessment of the effects of
external  economic  conditions.  The  Bank's  current  policy  is to maintain an
allowance  equal  to  the  greater  of approximately 1.15% of gross loans or the
results  of management's evaluation of the risk associated with each loan.  This
allowance is increased for reserves for specific loans identified as substandard
during  management's  loan  review.

     The table "Allocation of Allowance for Loan Losses" which follows shows the
specific  reserves  applied by loan type and also the general allowance included
in  the  December  31,  2001  and  2000,  allowance  for  loan  losses.

     The provision for loan losses is a charge to earnings in the current period
to  replenish the allowance and maintain it at a level management has determined
to be adequate.  The allowance for loan losses was 1.18% of outstanding loans as
of  December  31,  2001  and  2000.

<TABLE>
<CAPTION>
                     ALLOCATION OF ALLOWANCE FOR LOAN LOSSES

                         2001                2000
                   ------------------  ------------------
                    Amount   Percent    Amount   Percent
                   --------  --------  --------  --------
<S>                <C>       <C>       <C>       <C>
     Commercial    $195,112    25.99%  $153,566    23.79%
     Real estate    375,240    49.98%   167,380    25.93%
     Construction    37,869     5.04%    25,481     3.95%
     Home equity     19,286     2.57%    65,379    10.13%
     Consumer        62,912     8.38%    67,772    10.50%
     General         60,349     8.04%   165,923    25.70%
                   --------  --------  --------  --------
         Total     $750,768   100.00%  $645,501   100.00%
                   ========  ========  ========  ========
</TABLE>


                                        9
<PAGE>
<TABLE>
<CAPTION>
                            ALLOWANCE FOR LOAN LOSSES

                                                        2001       2000
                                                     ---------  ---------
<S>                                                  <C>        <C>
     Balance at beginning of year                    $645,501   $555,129

     Loan losses:
         Commercial                                    19,537     11,697
         Real Estate                                   71,492          -
         Consumer                                     104,442     60,977
                                                     ---------  ---------
            Total loan losses                         195,471     72,674
                                                     ---------  ---------

     Recoveries on loans previously charged off
         Commercial                                       200      1,803
         Real Estate                                   64,550      3,649
         Consumer                                      23,042      9,951
                                                     ---------  ---------
            Total loan recoveries                      87,792     15,403
                                                     ---------  ---------

     Net loan losses                                  107,679     57,271
     Provision for loan losses charged to expense     212,946    147,643
                                                     ---------  ---------
     Balance at end of year                          $750,768   $645,501
                                                     =========  =========

     Allowance for loan losses to loans outstanding
         at end of year                                  1.18%      1.18%

     Net charge-offs/(recoveries) to average loans       0.18%      0.11%
</TABLE>

     As a result of management's ongoing review of the loan portfolio, loans are
classified  as  nonaccrual  when  it  is  not reasonable to expect collection of
interest  under  the  original  terms.  These loans are classified as nonaccrual
even  though the presence of collateral or the borrower's financial strength may
be  sufficient  to provide for ultimate repayment.  Interest on nonaccrual loans
is  recognized  only  when  received.  A  delinquent loan is generally placed in
nonaccrual  status when it becomes ninety days or more past due.  When a loan is
placed in nonaccrual status, all interest which has been accrued on the loan but
remains unpaid is reversed and deducted from earnings as a reduction of reported
interest  income.  No  additional  interest is accrued on the loan balance until
the  collection of both principal and interest becomes reasonably certain.  When
a  problem loan is finally resolved, there ultimately may be an actual writedown
or  charge-off  of  the  principal  balance  of the loan which would necessitate
additional  charges  to  earnings.

     The  Company had nonperforming loans totaling $1,100,953 and $454,879 as of
December  31,  2001  and  2000,  respectively.   Where  real  estate acquired by
foreclosure  and  held for sale is included with nonperforming loans, the result
comprises  nonperforming  assets.  Loans  are  classified  as  impaired when the
collection  of  contractual  obligations,  including  principal and interest, is
doubtful.  Management  has  identified  impaired  loans  totaling $158,002 as of
December  31, 2001, compared to no significant impaired loans as of December 31,
2000.

     A  potential  problem  loan  is  one in which management has serious doubts
about  the  borrower's  future performance under the terms of the loan contract.
These  loans are current as to principal and interest and, accordingly, they are
not  included in the nonperforming assets categories.  Management monitors these
loans closely in order to ensure that the Company's interests are protected.  At
December  31,  2001, the Company had eighteen borrowers with loans considered by
management  to  be potential problem loans totaling approximately $927,390.  The
level  of  potential  problem  loans  is  factored into the determination of the
adequacy  of  the  allowance  for  loan  losses.


                                       10
<PAGE>
LIQUIDITY  AND  INTEREST  RATE  SENSITIVITY

     The primary objective of asset/liability management is to ensure the steady
growth  of  the  Company's primary source of earnings, net interest income.  Net
interest  income  can  fluctuate  with  significant interest rate movements.  To
lessen the impact of these margin swings, the balance sheet should be structured
so that repricing opportunities exist for both assets and liabilities in roughly
equivalent  amounts  at  approximately  the  same time intervals.  Imbalances in
these  repricing  opportunities  at  any  point in time constitute interest rate
sensitivity.

     Liquidity  represents  the  ability  to provide steady sources of funds for
loan  commitments  and  investment  activities, as well as to provide sufficient
funds  to  cover  deposit  withdrawals  and  payment  of  debt  and  operating
obligations.  These  funds  can  be  obtained by converting assets to cash or by
attracting  new  deposits.

     Average  liquid  assets  (cash and amounts due from banks, interest-bearing
deposits  in  other  banks,  federal  funds sold and investment securities) were
14.06%  of average deposits for 2001, compared to 15.26% of average deposits for
2000.  The  Company  considers  its  loan  portfolio  as  an alternate source of
liquidity  since  it  has available third parties who will buy participations in
loans.  In  January  2001,  the  Company invested in a bank owned life insurance
policy  on  the  life  of  Jeffrey  N.  Heflebower, an officer of the Bank.  The
beneficiaries  of  the  policy  include  both  the Bank and certain heirs of Mr.
Heflebower.  To  fund  the  policy,  the  Bank contributed $1,225,000.  The cash
surrender  value of the policy, which was $1,281,871 as of December 31, 2001, is
not  considered  a  liquid  asset  of  the  Company.  The  policy  also provides
supplemental  retirement  benefits  for  Mr.  Heflebower.

     Interest  rate  sensitivity may be controlled on either side of the balance
sheet.  On  the  asset side, management can exercise some control on maturities.
Also,  loans  may  be  structured with rate floors and ceilings on variable rate
notes  and  by  providing  for repricing opportunities on fixed rate notes.  The
Company's  investment portfolio, including federal funds sold, probably provides
the  most  flexible and fastest control over rate sensitivity since it generally
can  be  restructured  more  quickly  than  the  loan  portfolio.

     On  the liability side, deposit products can be restructured so as to offer
incentives  to  attain  the  maturity distribution desired.  Competitive factors
sometimes  make  control  over  deposits  more  difficult  and  less  effective.

     Interest  rate sensitivity refers to the responsiveness of interest-bearing
assets  and liabilities to changes in market interest rates.  The rate-sensitive
position,  or  gap, is the difference in the volume of rate-sensitive assets and
liabilities  at  a given time interval.  The general objective of gap management
is to actively manage rate-sensitive assets and liabilities to reduce the impact
of  interest rate fluctuations on the net interest margin.  Management generally
attempts  to maintain a balance between rate-sensitive assets and liabilities as
the  exposure period is lengthened to minimize the overall interest rate risk to
the  Company.

     The  asset  mix  of  the balance sheet is continually evaluated in terms of
several  variables;  yield,  credit  quality,  appropriate  funding sources, and
liquidity.  Management  of  the  liability  mix  of the balance sheet focuses on
expanding  the  various  funding  sources.

     The  interest  rate sensitivity position at December 31, 2001, is presented
in  the  table  "Interest  Sensitivity  Analysis."  The  difference  between
rate-sensitive  assets  and  rate-sensitive  liabilities,  or  the interest rate
sensitivity  gap,  is  shown  at  the  bottom  of  the  table.  The  Company was
liability-sensitive  through  the one-year period but asset-sensitive for longer
time  horizons.  For  liability-sensitive institutions, if interest rates should
increase, the net interest margins should decline.  Since all interest rates and
yields  do  not adjust at the same velocity, the gap is only a general indicator
of  rate  sensitivity.


                                       11
<PAGE>
<TABLE>
<CAPTION>
                          INTEREST SENSITIVITY ANALYSIS

                                                              December 31, 2001
                                    ----------------------------------------------------------------------
                                                    After Three
                                       Within       but Within     After One
                                        Three         Twelve       but Within    After Five
                                       Months         Months       Five Years      Years         Total
                                    -------------  -------------  ------------  ------------  ------------
<S>                                 <C>            <C>            <C>           <C>           <C>
ASSETS
Earning assets:
  Federal funds sold                $  4,831,188   $          -   $         -   $         -   $ 4,831,188
  Investment securities
    available for sale                         -        163,200     4,165,095     1,603,576     5,931,871
  Loans                               22,051,291      8,052,481    30,507,558     3,188,512    63,799,842
                                    -------------  -------------  ------------  ------------  ------------
Total earning assets                $ 26,882,479   $  8,215,681   $34,672,653   $ 4,792,088   $74,562,901
                                    =============  =============  ============  ============  ============

LIABILITIES
Interest-bearing liabilities:
  Money market and NOW              $ 21,250,869   $          -   $         -   $         -   $21,250,869
  Savings deposits                     5,198,692              -             -             -     5,198,692
  Club accounts                                -         50,719             -             -        50,719
  Certificates $100,000 and over       6,821,070      4,805,549     2,568,153             -    14,194,772
  Certificates under $100,000          7,235,563      9,497,827     7,425,843             -    24,159,233
  Securities sold under
    agreements to repurchase              65,486              -             -             -        65,486
  Federal Home Loan Bank Note              1,884        605,855        36,972     1,578,164     2,222,875
                                    -------------  -------------  ------------  ------------  ------------
Total interest-bearing liabilities  $ 40,573,564   $ 14,959,950   $10,030,968   $ 1,578,164   $67,142,646
                                    =============  =============  ============  ============  ============

Period gap                          $(13,691,085)  $ (6,744,269)  $24,641,685   $ 3,213,924   $ 7,420,255

Cumulative gap                      $(13,691,085)  $(20,435,354)  $ 4,206,331   $ 7,420,255   $ 7,420,255

Ratio of cumulative gap to total
  earning assets                         (18.36)%       (27.41)%         5.64%         9.95%         9.95%
</TABLE>

     As  noted  in the table "Composition of Loan Portfolio," as of December 31,
2001  approximately  $36,860,608,  or 57.77%, of the loan portfolio consisted of
commercial  loans,  commercial  real  estate loans, and real estate construction
loans.  Of  this  amount,  $20,526,750,  or  55.69%,  matures  within  one year.

     The  table  "Investment  Securities Maturity Distribution and Yields" shows
that  as  of December 31, 2001, the majority of the investment portfolio matures
in more than one year but within five years.  All debt securities of the Company
have  been  classified as "available-for-sale."   Another source of liquidity is
the  $5,750,000  lines  of  credit the Company has from correspondent banks. The
Company  may  borrow  up  to  $11,173,000  from  the  Federal  Home  Loan  Bank.


                                       12
<PAGE>
             INVESTMENT SECURITIES MATURITY DISTRIBUTION AND YIELDS
<TABLE>
<CAPTION>

                                                December 31, 2001      December 31, 2000
                                             ----------------------  ----------------------
                                                          Year-end                Year-end
                                             Book Value    Yields    Book Value    Yields
                                             -----------  ---------  -----------  ---------
<S>                                          <C>          <C>        <C>          <C>
U.S. government agencies
  One year or less                           $   163,200      6.08%  $   433,086      5.74%
  Over one through five years                  4,165,095      4.10%    3,182,139      5.71%
  Over five years through ten years              145,583      5.77%            -         -
  Over ten years                               1,457,993      6.64%    1,363,703      7.09%
                                             -----------  ---------  -----------  ---------
Total U.S. Treasury and Government Agencies  $ 5,931,871      4.82%  $ 4,978,928      6.09%
                                             ===========  =========  ===========  =========
</TABLE>

DEPOSITS  AND  OTHER  INTEREST-BEARING  LIABILITIES

     Average  interest-bearing  liabilities  increased $8,764,092, or 17.08%, to
$60,072,318  in  2001,  from  $51,308,226  in  2000.  Average  interest-bearing
deposits  increased  $8,680,746,  or  17.57%,  to  $58,084,419  in  2001,  from
$49,403,673  in  2000.  These  increases  in  all categories of interest-bearing
deposits  are  the  result  of  continued  promotional  efforts by management to
increase  the deposits and loans of the Bank, as well as a loss of confidence in
the  stock  market  by  customers.  At  December  31,  2001, total deposits were
$71,455,256,  compared  to  $57,118,430  at  December  31,  2000, an increase of
25.10%.

     The  following  table sets forth the deposits of the Company by category as
of  December  31,  2001  and  2000,  respectively.

<TABLE>
<CAPTION>
                                 DEPOSITS

                                              December  31,
                           --------------------------------------------------
                                     2001                      2000
                           ------------------------  ------------------------
                                        Percent of                Percent of
                             Amount      Deposits      Amount      Deposits
                           -----------  -----------  -----------  -----------
<S>                        <C>          <C>          <C>          <C>
Demand deposit accounts    $ 6,600,971        9.24%  $ 5,048,604        8.84%
NOW accounts                11,184,109       15.65%    6,018,901       10.54%
Money market accounts       10,066,760       14.09%    9,405,617       16.47%
Savings accounts             5,249,411        7.35%    3,371,237        5.90%
Time deposits less than
  $100,000                  24,159,233       33.81%   21,753,717       38.08%
Time deposits of $100,000
  or over                   14,194,772       19.86%   11,520,354       20.17%
                           -----------  -----------  -----------  -----------
    Total deposits         $71,455,256      100.00%  $57,118,430      100.00%
                           ===========  ===========  ===========  ===========
</TABLE>

     Core  deposits,  which exclude certificates of deposit of $100,000 or more,
provide  a relatively stable funding source for the Company's loan portfolio and
other  earning assets.  The Company's core deposits increased $11,662,408 during
2001.  Deposits, and particularly core deposits, have been the Company's primary
source  of  funding and have enabled the Company to meet both its short-term and
long-term  liquidity  needs.  Management  anticipates  that  such  deposits will
continue  to  be  the  Company's  primary  source  of funding in the future, but
management  anticipates  more  borrowings  from  the Federal Home Loan Bank as a
secondary  funding  source.  The  Company's  loan-to-deposit ratio was 88.23% at
December  31,  2001, and 94.98% at the end of 2000, with a 2001 ratio of average
loans to average deposits of 93.09%.  The maturity distribution of the Company's
time  deposits  over  $100,000  at  December 31, 2001, is shown in the following
table.


                                       13
<PAGE>
<TABLE>
<CAPTION>
                           MATURITIES OF CERTIFICATES OF DEPOSIT
                        AND OTHER TIME DEPOSITS OF $100,000 OR MORE

                                                 December 31, 2001
                         -----------------------------------------------------------------
                                     After Three      After Six
                           Within      Through         Through       After
                           Three         Six           Twelve        Twelve
                           Months       Months         Months        Months       Total
                         ----------  ------------  --------------  ----------  -----------
<S>                      <C>         <C>           <C>             <C>         <C>
Certificates of deposit
 of $100,000 or more     $6,821,070  $  1,830,341  $    2,975,208  $2,568,153  $14,194,772
                         ==========  ============  ==============  ==========  ===========
</TABLE>

     Large  certificate  of  deposit customers tend to be extremely sensitive to
interest rate levels, making these deposits less reliable sources of funding for
liquidity  planning  purposes  than  core deposits.  Some financial institutions
partially fund their balance sheets using large certificates of deposit obtained
through  brokers.  These  brokered  deposits  are  generally  expensive  and are
unreliable  as  long-term  funding  sources.  Accordingly,  the Company does not
accept  brokered  deposits.

     Borrowed  funds  consist  primarily of short-term borrowings in the form of
securities  sold  under agreements to repurchase and notes from the Federal Home
Loan  Bank.  Average  borrowings  were $1,987,899 and $1,904,553 during 2001 and
2000, respectively. As previously noted, the Company's primary funding source is
core  deposits.

NONINTEREST  INCOME

     Noninterest income for 2001 was $590,601, compared to noninterest income in
2000  of  $293,204, an increase of $297,397, or 101.43%.  Origination fee income
from mortgages originated for sale increased $217,562.  During much of 2001, the
Company  had  two  mortgage originators, compared to one originator during 2000.
During  the  first  quarter,  the  Company  invested  in  life insurance to fund
supplemental  retirement benefits of an executive officer.  The $56,870 increase
in  the  cash  surrender  value  of this policy is included as other noninterest
income.  During 2001, which was the second year the Company offered a VISA debit
card,  the  Company  recorded  increased  fees  of  $9,852.

     The following table presents the principal components of noninterest income
for  the  years  ended  December  31,  2001  and  2000,  respectively.

<TABLE>
<CAPTION>
                               NONINTEREST INCOME
                                                                   2001       2000
                                                                 ---------  ---------
<S>                                                              <C>        <C>

     Service charges on deposit accounts                         $171,384   $165,874
     Mortgage banking fees                                        304,953     87,391
     Other noninterest income                                     114,264     39,939
                                                                 ---------  ---------
     Total noninterest income                                    $590,601   $293,204
                                                                 =========  =========

     Noninterest income as a percentage of average total assets      0.82%      0.48%
                                                                 =========  =========
</TABLE>


                                       14
<PAGE>
NONINTEREST  EXPENSE

     Noninterest  expense  increased $423,336, or 20.87%, to $2,451,604 in 2001,
from $2,028,268 in 2000. The increase was the result of an increase of $280,535,
or  23.96%,  in  compensation  and  related expenses, an increase of $22,426, or
37.23%,  for  building  maintenance,  an  increase  of  $19,135,  or 37.00%, for
advertising  costs,  an  increase of $14,872, or 118.81%, for loan documentation
reports  and  collections,  and  an  increase  of  $25,981,  or 18.82%, for data
processing.  These  increases  were  offset  by  a  decrease  of  $25,250 in the
provision  for loan commitments.  During the fourth quarter of 2001, the Company
opened  a  second  Talbot  County  branch in Oxford, Maryland.  Personnel costs,
occupancy  costs,  data  processing  costs  and  especially  advertising  costs
increased  as  a  result  of  the  opening  of  the  new  branch.  In  addition,
compensation  costs  increased as a result of additional commissions paid to the
mortgage  originators and because the bank filled its senior lender position for
six  months  of  the  year.  Annual  pay  raises  and four additional staff also
contributed  to  the  increased personnel costs.  Finally, data processing costs
have  increased  as  the Company's deposit base has grown and as the Company has
purchased  additional  services  from  the  processor.

     As  the  Company  experienced  greater  net  loan  losses, it also incurred
greater  collection costs.  The increased collection costs were more than offset
by  the decrease in the provision for loan commitments.  Management reviewed the
outstanding commitments as of December 31, 2001, determining that the reserve of
$80,518,  or  .77%  of  outstanding commitments, was adequate.  No provision was
recorded  for  loan  commitment  losses  during  2001.

     The  following  table  presents  the  principal  components  of noninterest
expense  for  the  years  ended  December  31,  2001  and  2000,  respectively.

<TABLE>
<CAPTION>
                               NONINTEREST EXPENSE

                                                                     2001         2000
                                                                  -----------  -----------
<S>                                                               <C>          <C>
     Compensation and related expenses                            $1,451,382   $1,170,847
     Occupancy expense                                               156,775      114,246
     Furniture and equipment expense                                 120,254      103,043
     Advertising                                                      70,848       51,713
     Professional fees                                                94,166       85,258
     Data processing                                                 164,028      138,047
     Deposit assessment                                               11,154       10,085
     Insurance                                                         9,991       11,891
     Loan reports and collection costs                                27,389       12,517
     Postage                                                          47,590       38,456
     Provision for loan commitments                                        -       25,250
     Proxy and transfer agent costs                                   22,658       17,061
     Stationery and supplies                                          71,651       72,819
     Telephone and postage                                            30,495       29,807
     Training                                                         17,909       19,277
     Travel and entertainment                                         32,565       26,967
     Other                                                           122,749      100,984
                                                                  -----------  -----------
        Total noninterest expense                                 $2,451,604   $2,028,268
                                                                  ===========  ===========

     Noninterest expense as a percentage of average total assets        3.42%        3.31%
                                                                  ===========  ===========
</TABLE>


                                       15
<PAGE>
CAPITAL

     Under the capital guidelines of the Federal Reserve Board and the FDIC, the
Company  and  the  Bank  are currently required to maintain a minimum risk-based
total  capital  ratio  of  8%,  with  at  least 4% being Tier 1 capital.  Tier 1
capital  consists of common stockholders' equity, qualifying perpetual preferred
stock,  and  minority interests in equity accounts of consolidated subsidiaries,
less certain intangibles.  In addition, the Company and the Bank must maintain a
minimum  Tier  1 leverage ratio (Tier 1 capital to total assets) of at least 4%.

     At  December  31,  2001, the Company and the Bank exceeded their regulatory
capital  ratios,  as  set  forth  in  the  following  table.

<TABLE>
<CAPTION>
                         ANALYSIS  OF  CAPITAL

                                                      Required
                                      Company  Bank   Minimums
                                      -------  -----  --------
<S>                                   <C>      <C>    <C>
     Tier 1 risk-based capital ratio     9.0%   9.0%      4.0%
     Total risk-based capital ratio     10.2%  10.1%      8.0%
     Tier 1 leverage ratio               7.6%   7.5%      4.0%
</TABLE>

ACCOUNTING  RULE  CHANGES

     Summarized  below  are  the  accounting  rule  changes  impacting financial
institutions  that  were  approved  during  2001.

     FASB  Statement  No. 142, Goodwill and Other Intangible Assets, changes the
accounting  for  acquired  goodwill and other intangibles.  Annually, management
should  review  these  items  to  determine  if  they  should  be reduced due to
impairment.  Systematic amortization is no longer permitted.  The effective date
of  the  Statement  is for fiscal years beginning after December 15, 2001.  Core
deposit  intangibles  are  not  goodwill  and  are  still  amortizable.

     FASB  Statement  No.  143,  Accounting  for  Asset  Retirement Obligations,
applies to legal obligations associated with retirement of a tangible long-lived
asset.  The  Statement  requires  that management recognize the fair value of an
asset  retirement  obligation  in  the period incurred, adding capitalization of
this  cost  to  the  cost  of  the  asset.  Annually  the  asset,  including the
capitalized  cost, should be reviewed for impairment.  The effective date of the
Statement  is  for  years  beginning  after  June  15,  2002.

IMPACT  OF  INFLATION

     Unlike  most  industrial companies, the assets and liabilities of financial
institutions,  such  as  the  Company  and  the  Bank, are primarily monetary in
nature.  Therefore,  interest  rates  have  a  more  significant  affect  on the
Company's  performance  than  do  the  effects of changes in the general rate of
inflation and changes in prices.  In addition, interest rates do not necessarily
move  in  the same direction or in the same magnitude as the prices of goods and
services.  As discussed previously, management seeks to manage the relationships
between  interest  sensitive  assets and liabilities in order to protect against
wide  interest rate fluctuations, including those resulting from inflation.  See
"Interest  Rate  Sensitivity"  table  above.

INDUSTRY  DEVELOPMENTS

     Certain  recently  enacted and proposed legislation could have an effect on
both  the  costs  of  doing  business  and  the  competitive  factors facing the
financial  institutions  industry.  The Company is unable at this time to assess
the  impact  of  this  legislation  on  its  financial  condition  or results of
operations.


                                       16
<PAGE>
                MARKET  FOR  COMPANY'S  COMMON  EQUITY  AND
                       RELATED  STOCKHOLDER  MATTERS

     The  Company's  Articles  of  Incorporation  authorize  it  to  issue up to
5,000,000  shares  of  its  common stock, par value $0.10 per share (the "Common
Stock").  The  Company  closed  its  initial  public  offering  (the  "Initial
Offering")  of  Common  Stock on December 31, 1992, in which the Company offered
for  sale  a  minimum  of  535,000  shares  and a maximum of 700,000 shares at a
purchase  price  of  $10.00  per  share.  As  a  result of the Initial Offering,
559,328  shares  of  the  Common  Stock  were  issued.

     As of March 15, 2002, there were approximately 457 holders of record of the
Common  Stock  and  560,318  shares  of Common Stock issued and outstanding.  In
addition,  there  were  approximately  224,600  shares  of Common Stock issuable
pursuant to options and warrants which may be issued in the next 60 days.  There
is no established public trading market in the stock, and there is no likelihood
that  a  trading  market  will develop in the near future.  The development of a
trading  market may be inhibited because a large portion of the Company's shares
is  held  by  insiders.  Transactions in the Common Stock are infrequent and are
negotiated  privately  between  the  persons  involved  in  those  transactions.

     All outstanding shares of Common Stock of the Company are entitled to share
equally  in dividends from funds legally available, when, as, and if declared by
the  Board of Directors.  In the fourth quarter of 2000, the Company paid a cash
dividend  of  $.05  per  share to stockholders of record as of October 31, 2000.
The  total  dividend  paid was $28,016.  The Company also paid cash dividends of
$.05  per  share  during each quarter of 2001.  The total 2001 dividend paid was
$112,064.  The  Company  currently  has no source of income other than dividends
and  other  payments  received  from the Bank.  The Company does intend to pay a
quarterly  cash  dividend;  however,  any  future dividends will depend upon the
Company's  financial  performance  and  capital  requirements.


                                       17
<PAGE>
                         REPORT OF INDEPENDENT AUDITORS



The Board of Directors and Stockholders
Easton Bancorp, Inc. and Subsidiary
Easton, Maryland



     We have audited the consolidated balance sheets of Easton Bancorp, Inc. and
Subsidiary as of December 31, 2001, 2000, and 1999, and the related consolidated
statements of income, changes in stockholders' equity, and cash flows for the
years then ended. These consolidated 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 auditing standards generally
accepted in the United States of America. 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 financial position of Easton
Bancorp, Inc. and Subsidiary as of December 31, 2001, 2000, and 1999, and the
results of their operations and their cash flows for the years then ended, in
conformity with accounting principles generally accepted in the United States of
America.


                                            /s/  Rowles & Company LLP

Salisbury, Maryland
January 25, 2002


                                       18
<PAGE>
<TABLE>
<CAPTION>
                      EASTON BANCORP, INC. AND SUBSIDIARY

                          CONSOLIDATED BALANCE SHEETS

                                                                           December 31,
                                                                2001           2000           1999
                                                             -----------  --------------  ------------
                                   ASSETS
<S>                                                          <C>          <C>             <C>
Cash and due from banks                                      $ 1,415,318  $   1,202,011   $ 2,576,335
Federal funds sold                                             4,831,188      1,325,552       824,727
Investment in Federal Home Loan Bank stock                       431,500        204,200       179,000
Investment securities available for sale                       5,931,871      4,978,928     4,203,828
Loans held for sale                                              622,000        353,110        70,000
Loans, less allowance for loan losses of
  $750,768, $645,501, and $555,129                            63,044,907     54,249,898    45,991,565
Cash value of life insurance                                   1,281,871              -             -
Premises and equipment                                         1,624,379      1,670,019     1,694,652
Accrued interest receivable                                      432,134        397,492       300,536
Other assets                                                     135,173        115,072        61,695
Deferred income taxes                                             70,262         40,211       177,017
                                                             -----------  --------------  ------------
     Total assets                                            $79,820,603  $  64,536,493   $56,079,355
                                                             ===========  ==============  ============

                   LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits
  Noninterest-bearing                                        $ 6,600,971  $   5,048,604   $ 3,678,246
  Interest-bearing                                            64,854,285     52,069,826    43,448,200
                                                             -----------  --------------  ------------
     Total deposits                                           71,455,256     57,118,430    47,126,446
Accrued interest payable                                         112,507        138,693       108,888
Securities sold under agreements to repurchase                    65,486         69,984       280,667
Notes payable                                                  2,222,875      1,630,092     3,578,493
Other liabilities                                                149,775        153,025       101,231
                                                             -----------  --------------  ------------
     Total liabilities                                        74,005,899     59,110,224    51,195,725
                                                             -----------  --------------  ------------
Stockholders' equity
 Common stock, par value $.10 per share; authorized
  5,000,000 shares, issued and outstanding 560,318 shares         56,032         56,032        56,032
 Additional paid-in capital                                    5,227,487      5,227,487     5,227,487
 Retained earnings (deficit)                                     496,104        153,211      (322,518)
                                                             -----------  --------------  ------------
                                                               5,779,623      5,436,730     4,961,001
Accumulated other comprehensive income                            35,081        (10,461)      (77,371)
                                                             -----------  --------------  ------------
     Total stockholders' equity                                5,814,704      5,426,269     4,883,630
                                                             -----------  --------------  ------------
     Total liabilities and stockholders' equity              $79,820,603  $  64,536,493   $56,079,355
                                                             ===========  ==============  ============
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       19
<PAGE>
<TABLE>
<CAPTION>
                      EASTON BANCORP, INC. AND SUBSIDIARY

                        CONSOLIDATED STATEMENTS OF INCOME

                                                                    Years Ended December 31,
                                                                  2001        2000        1999
                                                               ----------  ----------  -----------
<S>                                                            <C>         <C>         <C>
INTEREST REVENUE
  Loans, including fees                                        $5,063,793  $4,730,145  $3,708,140
  Deposits in banks                                                   496         508           -
  U.S. government agency securities                               243,224     283,626     256,150
  Federal funds sold                                              111,011     132,723     143,159
  Dividends                                                        27,399      15,106      11,456
                                                               ----------  ----------  -----------
       Total interest revenue                                   5,445,923   5,162,108   4,118,905
                                                               ----------  ----------  -----------
INTEREST EXPENSE
  Interest on deposits                                          2,569,798   2,364,889   1,758,479
  Interest on borrowed funds                                      101,707     103,508     103,906
                                                               ----------  ----------  -----------
       Total interest expense                                   2,671,505   2,468,397   1,862,385
                                                               ----------  ----------  -----------

       Net interest income                                      2,774,418   2,693,711   2,256,520

PROVISION FOR LOAN LOSSES                                         212,946     147,643    (114,136)
                                                               ----------  ----------  -----------
       Net interest income after provision for loan losses      2,561,472   2,546,068   2,370,656
                                                               ----------  ----------  -----------

NONINTEREST REVENUE
  Service charges on deposit accounts                             171,384     165,874     128,705
  Mortgage banking fees                                           304,953      87,391      29,785
  Other noninterest revenue                                       114,264      39,939      82,399
                                                               ----------  ----------  -----------
       Total other noninterest revenue                            590,601     293,204     240,889
                                                               ----------  ----------  -----------

NONINTEREST EXPENSE
  Compensation and related expenses                             1,451,382   1,170,847   1,113,979
  Occupancy                                                       156,775     114,246      75,793
  Furniture and equipment                                         120,254     103,043      80,626
  Other operating                                                 723,193     640,132     586,010
                                                               ----------  ----------  -----------
       Total other noninterest expense                          2,451,604   2,028,268   1,856,408
                                                               ----------  ----------  -----------

Income before income taxes                                        700,469     811,004     755,137

Income tax expense                                                245,512     307,259     260,792
                                                               ----------  ----------  -----------

NET INCOME                                                     $  454,957  $  503,745  $  494,345
                                                               ==========  ==========  ===========

Earnings per common share
  Basic                                                        $     0.81  $     0.90  $     0.88
  Diluted                                                      $     0.80  $     0.87  $     0.88
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       20
<PAGE>
<TABLE>
<CAPTION>
                                       EASTON BANCORP, INC. AND SUBSIDIARY

                          CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                                                                                    Accumulated
                                                         Additional    Retained        other
                                      Common stock         paid-in     earnings    comprehensive    Comprehensive
                                    Shares   Par value     capital    (deficit)       income           income
                                    -------  ----------  -----------  ----------  ---------------  ---------------
<S>                                 <C>      <C>         <C>          <C>         <C>              <C>
Balance, December 31, 1998          560,318  $   56,032  $ 5,227,487  $(816,863)  $       (6,987)

Net income                                -           -            -    494,345                -   $      494,345
Unrealized loss on investment
  securities available for sale
  net of income taxes of ($36,258)        -           -            -          -          (70,384)         (70,384)
                                                                                                   ---------------
Comprehensive income                      -           -            -          -                -   $      423,961
                                    -------  ----------  -----------  ----------  ---------------  ===============
Balance, December 31, 1999          560,318      56,032    5,227,487   (322,518)         (77,371)

Net income                                -           -            -    503,745                -   $      503,745
Unrealized gain on investment
  securities available for sale
  net of income taxes of $34,470          -           -            -          -           66,910           66,910
                                                                                                   ---------------
Comprehensive income                      -           -            -          -                -   $      570,655
                                                                                                   ===============
Cash dividend, $.05 per share             -           -            -    (28,016)               -
                                    -------  ----------  -----------  ----------  ---------------
Balance, December 31, 2000          560,318      56,032    5,227,487    153,211          (10,461)

Net income                                -           -            -    454,957                -   $      454,957
Unrealized gain on investment
  securities available for sale
  net of income taxes of $23,461          -           -            -          -           45,542           45,542
                                                                                                   ---------------
Comprehensive income                      -           -            -          -                -   $      500,499
                                                                                                   ===============
Cash dividend, $.20 per share             -           -            -   (112,064)               -
                                    -------  ----------  -----------  ----------  ---------------
Balance, December 31, 2001          560,318  $   56,032  $ 5,227,487  $ 496,104   $       35,081
                                    =======  ==========  ===========  ==========  ===============
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       21
<PAGE>
<TABLE>
<CAPTION>
                                EASTON BANCORP, INC. AND SUBSIDIARY

                               CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                            Years Ended December 31,
                                                                       2001           2000           1999
                                                                   -------------  ------------  --------------
<S>                                                                <C>            <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Interest received                                                $  5,416,584   $ 5,032,585   $   4,059,452
  Proceeds from loan sales                                           17,181,217     5,591,940               -
  Fees, commissions, and rent received                                  538,465       298,503         290,292
  Loans originated for sale                                         (17,450,107)   (5,875,050)        (70,000)
  Interest paid                                                      (2,754,562)   (2,438,592)     (1,849,108)
  Payments to suppliers and employees                                (2,298,145)   (1,902,206)     (1,812,384)
  Income taxes paid                                                    (289,286)     (206,100)              -
                                                                   -------------  ------------  --------------
                                                                        344,166       501,080         618,252
                                                                   -------------  ------------  --------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Loans originated, net of principal repayments                      (9,002,995)   (8,395,862)    (12,575,193)
  Receipt of funds held in escrow                                             -             -       1,175,000
  Purchase of investment securities available for sale               (5,584,603)   (4,102,849)     (1,468,635)
  Proceeds from calls and maturities of investment securities
    available for sale                                                4,690,401     2,167,738       1,995,828
  Proceeds from sales of investment securities available for sale             -     1,263,844               -
  Purchase of Federal Home Loan Bank stock                             (227,300)      (25,200)        (33,400)
  Investment in life insurance contract                              (1,225,000)            -               -
  Proceeds from sale of other real estate and repossessions              18,505             -          61,699
  Purchase of premises, equipment, and software                        (107,278)      (85,804)       (144,251)
  Purchase of other real estate                                               -        (1,330)        (60,450)
                                                                   -------------  ------------  --------------
                                                                    (11,438,270)   (9,179,463)    (11,049,402)
                                                                   -------------  ------------  --------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Increase (decrease) in
    Time deposits                                                     5,079,934     5,706,197       1,954,334
    Other deposits                                                    9,256,892     4,285,787       1,053,152
    Securities sold under agreements to repurchase                       (4,498)     (210,683)           (352)
  Advances under note payable, net of repayments                        592,783    (1,948,401)      2,578,493
  Dividends paid                                                       (112,064)      (28,016)              -
                                                                   -------------  ------------  --------------
                                                                     14,813,047     7,804,884       5,585,627
                                                                   -------------  ------------  --------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                  3,718,943      (873,499)     (4,845,523)

Cash and cash equivalents at beginning of year                        2,527,563     3,401,062       8,246,585
                                                                   -------------  ------------  --------------
Cash and cash equivalents at end of year                           $  6,246,506   $ 2,527,563   $   3,401,062
                                                                   =============  ============  ==============
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       22
<PAGE>
<TABLE>
<CAPTION>
                                     EASTON BANCORP, INC. AND SUBSIDIARY

                                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                 (continued)

                                                                              Years Ended December 31,
                                                                        2001          2000            1999
                                                                   -------------  ------------  --------------
<S>                                                                <C>            <C>           <C>
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY
  OPERATING ACTIVITIES
    Net income                                                     $    454,957   $   503,745   $     494,345

ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY
    OPERATING ACTIVITIES
    Provision for loan losses                                           212,946       172,893         (98,547)
    Depreciation                                                        121,742       110,437          94,890
    Amortization of intangibles                                           9,663         6,156           2,998
    Securities amortization, net of accretion                            10,263       (12,792)          2,363
    Deferred income taxes                                               (53,513)      102,337         260,792
    Increase in cash surrender value of life insurance                  (56,871)            -               -
    Loss (gain) on sale of other real estate owned
      and repossessions                                                   1,495             -          (1,249)
    Loss on sales and calls of securities                                     -        10,338               -
    Net loans originated for sale                                      (268,890)     (283,110)        (70,000)
    Decrease (increase) in
      Accrued interest receivable                                       (34,642)      (96,956)        (54,066)
      Other assets                                                      (34,865)      (21,926)         46,920
    Increase (decrease) in
      Deferred loan origination fees                                     (4,960)      (30,113)         (7,750)
      Accrued interest payable                                          (26,186)       29,805          13,277
      Accrued income taxes, net of prepaid taxes                          9,739        (1,178)              -
      Other liabilities                                                   3,288        11,444         (65,721)
                                                                   -------------  ------------  --------------
                                                                   $    344,166   $   501,080   $     618,252
                                                                   =============  ============  ==============

Noncash financing and investing activities
  Other assets acquired through repossession                       $          -   $    20,000   $           -
                                                                   =============  ============  ==============
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       23
<PAGE>
                       EASTON BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          The accounting and reporting policies in the financial statements
     conform to generally accepted accounting principles and to general
     practices within the banking industry. Management makes estimates and
     assumptions that affect the reported amounts of assets and liabilities and
     disclosure of contingent assets and liabilities at the date of the
     financial statements. These estimates and assumptions may affect the
     reported amounts of revenues and expenses during the reporting period.
     Actual results could differ from these estimates.

     Business
     --------
          Easton Bancorp, Inc. is a one-bank holding company. Easton Bank &
     Trust Company is a financial institution operating primarily in Talbot and
     Caroline Counties on the Eastern Shore of Maryland. The Bank offers deposit
     services and loans to individuals, small businesses, associations, and
     government entities. Other services include direct deposit of payroll and
     social security checks, automatic drafts from accounts, automated teller
     machine services, cash management services, safe deposit boxes, money
     orders, and travelers cheques. The Bank also offers credit and debit card
     services and discount brokerage services through a correspondent.

     Principles of consolidation
     ---------------------------
          The consolidated financial statements of Easton Bancorp, Inc. include
     the accounts of its wholly owned subsidiary, Easton Bank & Trust Company.
     Intercompany accounts and transactions have been eliminated.

     Cash equivalents
     ----------------
          For purposes of reporting cash flows, cash and cash equivalents
     include cash on hand, amounts due from banks, and federal funds sold.

     Investment securities
     ---------------------
          As securities are purchased, management determines if the securities
     should be classified as held to maturity or available for sale. Securities
     which management has the intent and ability to hold to maturity are
     recorded at amortized cost which is cost adjusted for amortization of
     premiums and accretion of discounts to maturity. Securities which may be
     sold before maturity are classified as available for sale and carried at
     fair value with unrealized gains and losses included in stockholders'
     equity on an after tax basis.

     Loans held for sale
     -------------------
          The Company originates loans that are sold to investors. Because of
     the short holding period, these loans are carried at cost, which
     approximates market value.

     Loans and allowance for loan losses
     -----------------------------------
          Loans are stated at face value, plus deferred origination costs, less
     deferred origination fees and the allowance for loan losses. Interest on
     loans is credited to income based on the principal amounts outstanding.
     Origination fees are recorded as income over the contractual life of the
     related loans as an adjustment of yield. The accrual of interest is
     discontinued when any portion of the principal or interest is ninety days
     past due and collateral is insufficient to discharge the debt in full.


                                       24
<PAGE>
                       EASTON BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Loans and allowance for loan losses (continued)
     -----------------------------------------------
          The Bank maintains an allowance for loan losses that is adequate to
     provide for potential loan losses based on management's review and analysis
     of the loan portfolio. For significant problem loans, management's review
     consists of an evaluation of the financial strengths of the borrowers and
     guarantors, the related collateral, and the effects of economic conditions.
     The Bank uses a loan grading system where all loans are graded based on
     management's evaluation of the risk associated with each loan. Based on the
     loan grading, a factor is applied to the loan balance to provide for
     potential losses. The overall evaluation of the adequacy of the total
     allowance for loan losses is based on an analysis of historical loan loss
     ratios, loan charge-offs, delinquency trends, and previous collection
     experience, along with an assessment of the effects of external economic
     conditions.

          If the current economy or real estate market were to suffer a severe
     downturn, the estimate for uncollectible accounts would need to be
     increased. Loan losses are charged to the allowance when management
     believes that collectibility is unlikely. Collections of loans previously
     charged off are added to the allowance at the time of recovery.

          Loans are considered impaired when, based on current information,
     management considers it unlikely that the collection of principal and
     interest payments will be made according to contractual terms. Generally,
     loans are not reviewed for impairment until the accrual of interest has
     been discontinued.

     Premises and equipment
     ----------------------
          Premises and equipment are recorded at cost less accumulated
     depreciation and amortization. Depreciation and amortization are computed
     over the estimated useful lives using the straight-line method. Leasehold
     improvements are amortized over the terms of the lease or the estimated
     useful lives of the improvements, whichever is shorter.

     Advertising
     -----------
          Advertising costs are expensed over the life of ad campaigns. General
     purpose advertising is charged to expense as incurred.

     Income taxes
     ------------
          The provision for income taxes includes taxes payable for the current
     year and deferred income taxes. Deferred income taxes are provided for the
     temporary differences between financial and taxable income.

          Deferred tax assets and liabilities are determined based on the
     difference between the financial statement and tax bases of assets and
     liabilities using enacted tax rates in effect for the year in which the
     differences are expected to reverse.

     Earnings per share
     ------------------
          Basic earnings per common share are determined by dividing net income
     by the weighted average number of shares of common stock outstanding.
     Diluted earnings per share are calculated including the average dilutive
     common stock equivalents outstanding during the period.

          Dilutive common equivalent shares consist of stock options and
     warrants, calculated using the treasury stock method. In loss periods,
     dilutive common equivalent shares are excluded since the effect would be
     antidilutive.


                                       25
<PAGE>
                       EASTON BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Stock options
     -------------
          The Company accounts for stock options under Accounting Principles
     Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB No.
     25").

2.   CASH AND DUE FROM BANKS

          The Bank normally carries balances with other banks that exceed the
     federally insured limit. The average balances carried in excess of the
     limit, including unsecured federal funds sold to the same banks, were
     $2,968,797, $2,094,348, and $1,736,947 for 2001, 2000, and 1999,
     respectively.

          Banks are required to carry noninterest-bearing cash reserves at
     specified percentages of deposit balances. The Bank's normal amount of cash
     on hand and on deposit with other banks is sufficient to satisfy the
     reserve requirements.

3.   INVESTMENT SECURITIES

          Investment securities, comprised of U.S. government agencies, are
     summarized as follows:

<TABLE>
<CAPTION>
                      2001        2000        1999
                   ----------  ----------  ----------
<S>                <C>         <C>         <C>
Amortized cost     $5,878,717  $4,994,778  $4,321,057
Unrealized gains       63,727      16,747           -
Unrealized losses      10,573      32,597     117,229
                   ----------  ----------  ----------
Market value       $5,931,871  $4,978,928  $4,203,828
                   ==========  ==========  ==========
</TABLE>

          The amortized cost and estimated market value of investment
     securities, by contractual maturity, are shown below. Actual maturities may
     differ from contractual maturities because borrowers may have the right to
     call or prepay obligations. Mortgage pass-through securities are due in
     monthly installments.

          Proceeds from the sale of investments for sale in 2000 were
     $1,263,844. Gross gains of $10,338 were recorded on these sales.

<TABLE>
<CAPTION>
                                 2001                    2000                    1999
                        ---------------------   ----------------------  ----------------------
                        Amortized     Market    Amortized     Market    Amortized     Market
                           cost       value        cost       value        cost       value
                        ----------  ----------  ----------  ----------  ----------  ----------
<S>                     <C>         <C>         <C>         <C>         <C>         <C>
Due
  One year or less      $  159,966  $  163,200  $  250,000  $  247,930  $        -  $        -
  After one year
    through five years   3,910,516   3,932,301   3,205,948   3,182,139   4,106,822   3,997,034
Mortgage pass-through
  securities             1,808,235   1,836,370   1,538,830   1,548,859     214,235     206,794
                        ----------  ----------  ----------  ----------  ----------  ----------
                        $5,878,717  $5,931,871  $4,994,778  $4,978,928  $4,321,057  $4,203,828
                        ==========  ==========  ==========  ==========  ==========  ==========
</TABLE>

          Securities totaling $1,430,697 were pledged as collateral for
     repurchase agreements and to secure government deposits as of December 31,
     2001.


                                       26
<PAGE>
                       EASTON BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements


4.   LOANS AND ALLOWANCE FOR LOAN LOSSES

          Major classifications of loans are as follows:

<TABLE>
<CAPTION>
                                                         2001         2000          1999
                                                      -----------  -----------  ------------
<S>                                                   <C>          <C>          <C>
Commercial                                            $13,231,859  $10,032,250  $ 7,476,729
Real estate                                            34,342,588   32,573,488   29,441,565
Construction                                            7,573,805    5,096,238    3,177,267
Home equity                                             3,412,440    2,727,880    2,421,584
Consumer                                                5,239,150    4,474,671    4,054,684
                                                      -----------  -----------  ------------
                                                       63,799,842   54,904,527   46,571,829
Less deferred loan origination fees, net of deferred
  origination costs                                         4,167        9,128       25,135
Less allowance for credit losses                          750,768      645,501      555,129
                                                      -----------  -----------  ------------
Loans, net                                            $63,044,907  $54,249,898  $45,991,565
                                                      ===========  ===========  ============

     The  residential mortgage portfolio is pledged as collateral under lines of
credit  from  correspondents  and  the  Federal  Home  Loan  Bank.

     The rate repricing distribution of the loan portfolio follows:

Immediately                                           $17,857,739  $11,846,512  $ 7,113,209
Within one year                                        12,246,033   11,460,593   10,914,323
Less deferred loan origination fees, net of deferred   30,507,558   27,440,510   24,736,541
Over five years                                         3,188,512    4,156,912    3,807,756
                                                      -----------  -----------  ------------
                                                      $63,799,842  $54,904,527  $46,571,829
                                                      ===========  ===========  ============

     Transactions in the allowance for loan losses are as follows:

Beginning balance                                     $   645,501  $   555,129  $   490,322
Provision charged (credited) to operations                212,946      147,643     (114,136)
Less deferred loan origination fees, net of deferred       87,792       15,403      430,068
                                                      -----------  -----------  ------------
                                                          946,239      718,175      806,254
Charge-offs                                               195,471       72,674      251,125
                                                      -----------  -----------  ------------
Ending balance                                        $   750,768  $   645,501  $   555,129
                                                      ===========  ===========  ============
</TABLE>


                                       27
<PAGE>
                       EASTON BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements


4.   LOANS  AND  ALLOWANCE  FOR  LOAN  LOSSES  (Continued)

          Nonaccrual  loans  and  loans past due 90 days or more are as follows:

<TABLE>
<CAPTION>
                                                 2001         2000        1999
                                              -----------  ----------  ----------
<S>                                           <C>          <C>         <C>
Nonaccrual
  Commercial                                  $   116,106  $   88,886  $        -
  Mortgage                                        213,355     228,499     100,000
  Installment                                      23,585      39,510       8,770
                                              -----------  ----------  ----------
                                              $   353,046  $  356,895  $  108,770
                                              ===========  ==========  ==========

Interest not accrued                          $    19,654  $   28,931  $    4,658
                                              ===========  ==========  ==========
Loans past due ninety days or more,
  still accruing interest                     $   747,907  $   97,984  $    4,942
                                              ===========  ==========  ==========

          Included in nonaccrual loans at December 31, 2001, are impaired loans
     totaling $158,002 with average outstanding balances of $179,538. Management
     allocated $52,578 of the allowance for loan losses to impaired loans and
     charged-off $29,492 in 2001. No interest was recognized on these loans in
     2001.

          The  following commitments, lines of credit, and letters of credit are
     outstanding as of December 31:

Construction loans                            $ 3,757,443  $3,438,181  $1,561,318
Lines of credit, including home equity lines    5,675,616   4,912,511   3,456,452
Overdraft protection lines                        364,390     306,314     275,035
Standby letters of credit                         725,018     410,636      86,244
                                              -----------  ----------  ----------
                                              $10,522,467  $9,067,642  $5,379,049
                                              ===========  ==========  ==========
</TABLE>

          Loan commitments and lines of credit are agreements to lend to a
     customer as long as there is no violation of any condition to the contract.
     Loan commitments may have rates fixed at current market amounts, fixed
     expiration dates, and may require payment of a fee. Lines of credit
     generally have variable interest rates. Such lines do not represent future
     cash requirements because it is unlikely that all customers will draw upon
     their lines in full at any time.

          Letters of credit are commitments issued to guarantee the performance
     of a customer to a third party.

          Loan commitments, lines of credit and letters of credit are made on
     the same terms, including collateral, as outstanding loans. The Company's
     exposure to credit loss in the event of nonperformance by the borrower is
     represented by the contract amount of the commitment. Management includes a
     provision for potential loss from funding these commitments in other
     operating expenses.


                                       28
<PAGE>
                       EASTON BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements


5.   PREMISES  AND  EQUIPMENT

          A summary of premises and equipment and the related depreciation
     expense is as follows:

<TABLE>
<CAPTION>
                                     Estimated
                                    useful lives     2001        2000        1999
                                    ------------  ----------  ----------  ----------
<S>                                 <C>           <C>         <C>         <C>
Land                                        -     $  295,211  $  295,211  $  295,211
Land improvements                      20 years       40,512      40,512      40,512
Building                             10-40 years   1,304,503   1,304,503   1,304,503
Furniture, fixtures, and equipment    5-10 years     749,934     703,428     663,715
                                                  ----------  ----------  ----------
                                                   2,390,160   2,343,654   2,303,941
Accumulated depreciation                             765,781     673,635     609,289
                                                  ----------  ----------  ----------
Net premises and equipment                        $1,624,379  $1,670,019  $1,694,652
                                                  ==========  ==========  ==========

Depreciation expense                              $  121,742  $  110,437  $   94,890
                                                  ==========  ==========  ==========
</TABLE>

6.   LEASE  COMMITMENTS

          The  Company  is  currently  leasing  branch facilities from a related
     party. The lease term, for a period of five years, began July 1, 2000. Rent
     is fixed at $300 per month. The landlord is responsible for real estate
     taxes.

          The  Company  leases  retail  property  in  which the Denton branch is
     located. The lease, dated June 4, 1999, expires August 31, 2004. The lease
     has three 5-year renewal options with rent increases of 10% for each
     renewal period. The Company is responsible for real estate taxes. If the
     landlord decides to sell the building in which the Company's branch is
     located, the lease provides the Company the right to purchase the building
     at terms comparable to third party offers.

          Lease  obligations  will  require  payments  as  follows:

<TABLE>
<CAPTION>
        Minimum
Period  rentals
------  --------
<S>     <C>
2002    $ 39,395
2003      29,595
2004      20,930
2005       1,800
        --------
        $ 91,720
        ========
</TABLE>

          Rent expense was $32,022 for 2001, $29,595 for 2000, and $16,221 for
     1999.


                                       29
<PAGE>
                       EASTON BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements


7.   DEPOSITS

          Major classifications of interest-bearing deposits are as follows:

<TABLE>
<CAPTION>
                                                                 2001          2000          1999
                                                             ------------  ------------  ------------
<S>                                                          <C>           <C>           <C>
Money market and NOW                                         $21,250,869   $15,424,518   $11,673,854
Savings                                                        5,249,411     3,371,237     3,915,780
Other time                                                    38,354,005    33,274,071    27,858,566
                                                             ------------  ------------  ------------
                                                             $64,854,285   $52,069,826   $43,448,200
                                                             ============  ============  ============
</TABLE>

          Included  in other time deposits are certificates of deposit issued in
     denominations of $100,000 or more. The maturities and related interest
     expense of these deposits follow:

<TABLE>
<CAPTION>
                                                                 2001          2000          1999
                                                             ------------  ------------  ------------
<S>                                                          <C>           <C>           <C>
Three months or less                                         $ 6,821,070   $ 3,748,299   $ 4,224,208
Three to twelve months                                         4,805,549     4,127,645     1,814,162
One to five years                                              2,568,153     3,644,410     1,888,262
                                                             ------------  ------------  ------------
                                                             $14,194,772   $11,520,354   $ 7,926,632
                                                             ============  ============  ============

Interest expense                                             $   809,945   $   659,468   $   291,479
                                                             ============  ============  ============
</TABLE>

          At December 31, 2001, one NOW account had a balance representing 5.06%
     of total deposits.

8.   SECURITIES  SOLD  UNDER  AGREEMENTS  TO  REPURCHASE

          Securities sold under agreements to repurchase represent overnight
     borrowings from customers. The government agency securities that are the
     collateral for these agreements are owned by the Company and maintained in
     the custody of a nonaffiliated bank designated by the Company. Additional
     information is as follows:

<TABLE>
<CAPTION>
                                                                 2001          2000          1999
                                                             ------------  ------------  ------------
<S>                                                          <C>           <C>           <C>
Maximum amount outstanding                                   $    79,999   $    77,808   $   387,868
Average amount outstanding                                        62,059        50,836       139,200
Average rate paid during the year                                   4.01%         3.99%         3.79%
Investment securities underlying the agreements at year end
  Carrying value                                             $   163,200   $    99,875   $   317,212
  Estimated fair value                                           163,200        99,875       317,212
</TABLE>


                                       30
<PAGE>
                       EASTON BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements


9.   NOTES  PAYABLE  AND  LINES  OF  CREDIT

          The  Company  may  borrow up to $11,173,000 from the Federal Home Loan
     Bank (FHLB) through any combination of notes or line of credit advances.
     The line of credit interest rate is a variable rate set daily by the
     lender. Both the notes payable and the line of credit are secured by a
     floating lien on all of the Company's residential first mortgage loans. The
     Company was required to purchase shares of capital stock in the FHLB as a
     condition to obtaining the line of credit.

          The  Company's  borrowings  from  the  Federal  Home  Loan  Bank  are
     summarized:

<TABLE>
<CAPTION>
                       Maturity                                    Interest
                         date              Rate         Balance    frequency
                   -----------------       -----       ----------  ---------
<S>                <C>                     <C>         <C>         <C>
                   December 2, 2002        2.60%          600,000  Quarterly
                   June 23, 2008           5.51%        1,000,000  Quarterly
                   February 11, 2019       5.00%          622,875  Monthly
                                                       ----------
                                                       $2,222,875
                                                       ==========

          These notes will require principal repayments as follows:

                         Year                             Amount
                   -----------------                   ----------

                         2002                          $  607,739
                         2003                               8,298
                         2004                               8,900
                         2005                               9,542
                         2006                              10,232
                  Remaining balance                     1,578,164
                                                       ----------
                                                       $2,222,875
                                                       ==========
</TABLE>

          The $1,000,000 note due June 23, 2008 is callable June 23, 2003, but
     reported above based on its final maturity without considering the call
     date.

          In addition to the line of credit available from the FHLB, the Company
     has federal funds lines and other lines of credit from correspondent banks
     totaling $5,750,000.

10.  INCOME  TAXES

          The components of income tax expense, are as follows:

<TABLE>
<CAPTION>
             2001       2000      1999
           ---------  --------  --------
<S>        <C>        <C>       <C>
Current
  Federal  $248,263   $162,724  $      -
  State      50,762     42,199         -
           ---------  --------  --------
            299,025    204,923         -
Deferred    (53,513)   102,336   260,792
           ---------  --------  --------
           $245,512   $307,259  $260,792
           =========  ========  ========
</TABLE>


                                       31
<PAGE>
                       EASTON BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements


10.  INCOME  TAXES  (Continued)

          The components of the deferred tax (benefit) are as follows:
<TABLE>
<CAPTION>
                                                      2001       2000       1999
                                                    ---------  ---------  --------
<S>                                                 <C>        <C>        <C>
Provision for loan losses                           $(82,239)  $(84,280)  $ 33,506
Net operating loss carryforward                            -    132,368    184,216
Pension reserve                                       (3,797)         -          -
Depreciation                                           6,343     19,226      7,075
Cash method of accounting                             26,180     35,022     35,995
                                                    ---------  ---------  --------
                                                    $(53,513)  $102,336   $260,792
                                                    =========  =========  ========
</TABLE>

          The  components  of  the  deferred  tax  assets  and liabilities as of
     December 31, are as follows:

<TABLE>
<CAPTION>
Deferred tax assets
<S>                                                 <C>        <C>        <C>
  Allowance for loan losses                         $295,370   $213,131   $128,851
  Net operating loss carryforward                          -          -    132,368
  Pension reserve under life insurance contract        3,797          -          -
  Unrealized loss on securities available for sale         -      5,388     39,858
                                                    ---------  ---------  --------
                                                     299,167    218,519    301,077
                                                    ---------  ---------  --------
Deferred tax liabilities
  Depreciation                                        76,925     70,582     51,356
  Cash method of accounting                          133,908    107,726     72,704
  Unrealized gain on securities available for sale    18,072          -          -
                                                    ---------  ---------  --------
                                                     228,905    178,308    124,060
                                                    ---------  ---------  --------
Net deferred tax asset                              $ 70,262   $ 40,211   $177,017
                                                    =========  =========  ========
</TABLE>

          The statutory federal income tax rate was 34% for 2001, 2000, and
     1999. The provision for income taxes is reconciled as follows:

<TABLE>
<CAPTION>
Income before income taxes                          $700,469   $811,004   $755,137
                                                    ---------  ---------  --------
<S>                                                 <C>        <C>        <C>
Tax provision at statutory rates                    $238,159   $275,741   $256,747
Increase (decrease) resulting from
  State income taxes, less federal benefit            27,251     33,989          -
  Nondeductible expenses                               4,286      4,161      4,045
  Tax-exempt income                                  (20,712)         -          -
  Recognize change in expected tax reversal rate      (3,472)    (7,751)         -
  Other                                                    -      1,119          -
                                                    ---------  ---------  --------
Provision for income taxes                          $245,512   $307,259   $260,792
                                                    =========  =========  ========
</TABLE>


                                       32
<PAGE>
                       EASTON BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements


11.  OTHER  OPERATING  EXPENSES

          Other operating expenses are comprised as follows:

<TABLE>
<CAPTION>
                                           2001          2000         1999
                                        -----------  ------------  -----------
<S>                                     <C>          <C>           <C>
Advertising                             $   70,848   $    51,713   $   47,446
Professional fees                           94,166        85,258      109,104
Data processing                            164,028       138,047      103,784
Deposit assessment                          11,154        10,085        4,896
Insurance                                    9,991        11,891       13,042
Loan reports and collection costs           27,389        12,517       10,095
Provision for loss on loan commitments           -        25,250       15,589
Postage                                     47,590        38,456       30,677
Proxy and transfer agent costs              22,658        17,061       16,911
Software amortization                        9,664         6,155        2,998
Stationery and supplies                     71,651        72,819       72,800
Telephone                                   30,495        29,807       28,781
Training                                    17,909        19,277       22,103
Travel and entertainment                    32,565        26,967       33,358
Other                                      113,085        94,829       74,426
                                        -----------  ------------  -----------
                                        $  723,193   $   640,132   $  586,010
                                        ===========  ============  ===========
</TABLE>

12.  RELATED  PARTY  TRANSACTIONS

          The executive officers and directors of the Company enter into loan
     transactions with the Bank in the ordinary course of business. The terms of
     these transactions are similar to the terms provided to other borrowers
     entering into similar loan transactions. A summary of the activity of loans
     to officers and directors follows:

<TABLE>
<CAPTION>
                                           2001          2000         1999
                                        -----------  ------------  -----------
<S>                                     <C>          <C>           <C>
Beginning balance                       $1,691,783   $ 1,686,228   $2,018,872
Advances                                   407,889     1,059,786      267,372
Repayments                                (271,203)   (1,034,124)    (581,341)
Other changes                               57,044       (20,107)     (18,675)
                                        -----------  ------------  -----------
Ending balance                          $1,885,513   $ 1,691,783   $1,686,228
                                        ===========  ============  ===========
</TABLE>

          The Company paid rent to a company that is owned by a director. Annual
     rental payments of $3,600 were paid for each of the three years ended
     December 31, 2001.

          The Company engaged a firm owned by one of the organizers to remodel
     the second floor of the main office. The general contractor was paid $5,631
     in 1999.

          Officers, directors, and employees are depositors of the Bank,
     receiving the same deposit rate and terms as other customers with similar
     deposits. As of December 31, 2001, the deposits of executive officers and
     directors were approximately 3.5 % of total deposits.


                                       33
<PAGE>
                       EASTON BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements


12.  RELATED  PARTY  TRANSACTIONS  (CONTINUED)

          During 2001, 2000, and 1999, the Bank leased office space to a
     director for $7,938 each year.

          A director is a partner in a law firm that periodically provides
     services to the Company or Bank. During 2001 payments to that law firm
     total $3,840.

13.  STOCK  OPTION  AND  STOCK  WARRANT  PLANS

          During 1999, the Company granted 56,000 non-qualified stock options to
     the chief executive officer of the Bank. The options vest at 10% per year.
     These options, with an exercise price of $10, expire December 31, 2009.

          The Company has adopted a stock option plan, covering 35,000 shares of
     common stock, intended to qualify as incentive stock options under Section
     422 of the Internal Revenue Code. The plan provides for granting options to
     purchase shares of the common stock to the officers and other key employees
     of the Company and the Bank. No options have been granted.

          The organizers of the Company and certain partnerships controlled by
     the organizers have purchased 272,574 shares of common stock sold in the
     initial offering and hold warrants to purchase up to 207,800 additional
     shares of common stock. The warrants are exercisable at a price of $10 per
     share for a period of 10 years, expiring June 30, 2003.

          A summary of the status of the Company's performance-based stock
     option plans follows:

<TABLE>
<CAPTION>
                       Shares                           2001    2000    1999
-----------------------------------------------------  ------  ------  ------
<S>                                                    <C>     <C>     <C>
Outstanding, beginning of year                         56,000  56,000       -
Granted                                                     -       -  56,000
Exercised                                                   -       -       -
Forfeited                                                   -       -       -
                                                       ------  ------  ------

Outstanding, end of year                               56,000  56,000  56,000
                                                       ======  ======  ======

Total vested                                           16,800  11,200   5,600
                                                       ======  ======  ======
</TABLE>

          The Bank applies APB No. 25 in accounting for the stock option plan.
     Accordingly, no compensation expense has been recognized for the stock
     options granted. Statement of Financial Accounting Standards No. 123,
     Accounting for Stock-Based Compensation (SFAS No. 123), was issued in
     October, 1995 to establish accounting and reporting standards for
     stock-based employee compensation plans. SFAS No. 123 requires measurement
     of compensation expense provided by stock-based plans using a fair value
     based method of accounting, and recognition of the compensation expense in
     the statement of income or disclosure in the notes to the financial
     statements.


                                       34
<PAGE>
                       EASTON BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements


13.  STOCK  OPTION  AND  STOCK  WARRANT  PLANS  (CONTINUED)

          The weighted average fair value of options granted during 1999 has
     been estimated using the Black-Scholes option-pricing model with the
     following assumptions:

<TABLE>
<CAPTION>
                              1999
                            ---------
<S>                         <C>
Dividend yield                  0.00%
Risk-free interest rate         5.75%
Expected volatility            33.01%
Expected life in years          10.5
</TABLE>

          Had compensation been determined in accordance with the provisions of
     SFAS No. 123, the Company's net income and earnings per share during 1999,
     would have been reduced to the following pro forma amounts:

<TABLE>
<CAPTION>
                              1999
                            ---------
<S>                         <C>
Net income
    As reported             $494,345
    Pro forma                443,614
Basic earnings per share
    As reported                 0.88
    Pro forma                   0.79
Diluted earnings per share
    As reported                 0.88
    Pro forma                   0.79
</TABLE>

14.  PROFIT  SHARING  AND  RETIREMENT  PLANS

          In 1996, the Bank adopted a defined contribution profit sharing plan
     under Section 401(k) of the Internal Revenue Code. The plan covers
     substantially all of the employees and allows discretionary Bank
     contributions. During 2001, 2000, and 1999, the Board of Directors approved
     contributions that totaled $11,575, $9,492, and $6,583, respectively,
     matching 25% of employee contributions.

          In February 2001, the Bank purchased life insurance, investing
     $1,225,000 to fund supplemental retirement benefits for an executive
     officer of the Bank. Vesting occurs at the rate of 10% per year. During
     2001 the Bank incurred expenses of $10,621 related to this benefit.


                                       35
<PAGE>
                       EASTON BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements


15.  FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS

          The estimated fair values of the Company's financial instruments are
     summarized below. The fair values of a significant portion of these
     financial instruments are estimates derived using present value techniques
     and may not be indicative of the net realizable or liquidation values.
     Also, the calculation of estimated fair values is based on market
     conditions at a specific point in time and may not reflect current or
     future fair values.

          The fair value of financial instruments equals the carrying value of
     the instruments except for the following:

<TABLE>
<CAPTION>
                                        2001                      2000                      1999
                              ----------------------------------------------------------------------------
                               Carrying       Fair       Carrying       Fair       Carrying       Fair
                                amount        value       amount        value       amount        value
                              -----------  -----------  -----------  -----------  -----------  -----------
<S>                           <C>          <C>          <C>          <C>          <C>          <C>
Financial assets
  Loans, net                  $63,044,907  $63,963,437  $54,249,898  $54,153,821  $45,991,565  $46,017,471

Financial liabilities
  Interest-bearing deposits
   and securities sold under
   agreements to repurchase   $64,919,771  $65,542,890  $52,139,810  $52,368,199  $43,728,867  $44,018,746
  Notes payable                 2,222,875    2,238,502    1,630,092    1,579,782    3,578,493    3,578,493
</TABLE>

          The fair values of U.S. government agency securities, as disclosed in
     Note 3, are determined using market quotations.

          The fair value of fixed-rate loans is estimated to be the present
     value of scheduled payments discounted using interest rates currently in
     effect. The fair value of variable-rate loans, including loans with a
     demand feature, is estimated to equal the carrying amount. The valuation of
     loans is adjusted for possible loan losses.

          The fair value of interest-bearing checking, savings, and money market
     deposit accounts is equal to the carrying amount. The fair value of
     fixed-maturity time deposits is estimated based on interest rates currently
     offered for deposits of similar remaining maturities.

          It is not practicable to estimate the fair value of outstanding loan
     commitments, unused lines, and letters of credit.


                                       36
<PAGE>
                       EASTON BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements


16.  CAPITAL  STANDARDS

          The Federal Reserve Board and the Federal Deposit Insurance
     Corporation have adopted risk-based capital standards for banking
     organizations. These standards require ratios of capital to assets for
     minimum capital adequacy and to be classified as well capitalized under
     prompt corrective action provisions. The capital ratios and minimum capital
     requirements of the Bank are as follows:

<TABLE>
<CAPTION>
                                                     Minimum           To be
                                   Actual       capital adequacy  well capitalized
(in thousands)                 Amount   Ratio    Amount   Ratio   Amount   Ratio
                               -------  ------  --------  ------  -------  ------
<S>                            <C>      <C>     <C>       <C>     <C>      <C>
DECEMBER 31, 2001
------------------------
  Total capital
    (to risk-weighted assets)  $ 6,470   10.1%  $  5,110    8.0%  $ 6,387   10.0%
  Tier 1 capital
    (to risk-weighted assets)  $ 5,752    9.0%  $  2,555    4.0%  $ 3,832    6.0%
  Tier 1 capital
    (to average fourth
      quarter assets)          $ 5,752    7.5%  $  3,061    4.0%  $ 3,826    5.0%

December 31, 2000
------------------------
  Total capital
    (to risk-weighted assets)  $ 6,016   11.8%  $  4,075    8.0%  $ 5,094   10.0%
  Tier 1 capital
    (to risk-weighted assets)  $ 5,379   10.6%  $  2,038    4.0%  $ 3,056    6.0%
  Tier 1 capital
    (to average fourth
      quarter assets)          $ 5,379    8.3%  $  2,585    4.0%  $ 3,232    5.0%

December 31, 1999
------------------------
  Total capital
    (to risk-weighted assets)  $ 5,363   12.4%  $  3,450    8.0%  $ 4,312   10.0%
  Tier 1 capital
    (to risk-weighted assets)  $ 4,822   11.2%  $  1,725    4.0%  $ 2,587    6.0%
  Tier 1 capital
    (to average fourth
      quarter assets)          $ 4,822    8.9%  $  2,167    4.0%  $ 2,709    5.0%
</TABLE>

          Tier 1 capital consists of capital stock, surplus, and undivided
     profits. Total capital includes a limited amount of the allowance for loan
     losses. In calculating risk-weighted assets, specified risk percentages are
     applied to each category of asset and off-balance sheet items.

          Failure to meet the capital requirements could affect the Bank's
     ability to pay dividends and accept deposits and may significantly affect
     the operations of the Bank.

          In the most recent regulatory report, the Bank was categorized as well
     capitalized under the prompt corrective action regulations. Management
     knows of no events or conditions that should change this classification.


                                       37
<PAGE>
                       EASTON BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements


17.  EARNINGS  PER  SHARE

          Basic earnings per share is computed by dividing net income by the
     weighted average number of common shares outstanding for the period.
     Diluted earnings per share reflects the potential dilution of earnings per
     share under the treasury stock method which could occur if options or
     warrants representing contracts to issue common stock were exercised.

          Earnings per share (EPS) are calculated as follows:

<TABLE>
<CAPTION>
                                    2001      2000      1999
                                  --------  --------  --------
<S>                               <C>       <C>       <C>
Net income                        $454,957  $503,745  $494,345
Weighted average basic shares      560,318   560,318   560,318
Basic EPS                         $   0.81  $   0.90  $   0.88
Weighted average dilutive shares     8,427    15,634     3,862
Diluted EPS shares                 568,745   575,952   564,180
Diluted EPS                       $   0.80  $   0.87  $   0.88
</TABLE>

18.  PARENT  COMPANY  FINANCIAL  INFORMATION

          The balance sheets and statements of income and cash flows for Easton
     Bancorp, Inc. (Parent Only) follow:

<TABLE>
<CAPTION>
                                                                    December 31,
BALANCE SHEETS                                             2001          2000         1999
                                                       -------------  -----------  -----------
<S>                                                    <C>            <C>          <C>
                                     Assets
Cash                                                   $      11,986  $   42,843   $    5,988
Investment in subsidiary                                   5,787,384   5,368,717    4,797,526
Refundable taxes, net of refund due bank                      15,334      14,709            -
Deferred income taxes                                              -           -       80,116
                                                       -------------  -----------  -----------
          Total assets                                    $5,814,704  $5,426,269   $4,883,630
                                                       =============  ===========  ===========

                      Liabilities and Stockholders' Equity

Stockholders' equity
  Common stock                                         $      56,032  $   56,032   $   56,032
  Additional paid-in capital                               5,227,487   5,227,487    5,227,487
  Retained earnings (deficit)                                496,104     153,211     (322,518)
                                                       -------------  -----------  -----------
                                                           5,779,623   5,436,730    4,961,001
Accumulated other comprehensive income                        35,081     (10,461)     (77,371)
                                                       -------------  -----------  -----------
          Total stockholders' equity                       5,814,704   5,426,269    4,883,630
                                                       -------------  -----------  -----------
          Total liabilities and stockholders' equity       5,814,704  $5,426,269   $4,883,630
                                                       =============  ===========  ===========
</TABLE>


                                       38
<PAGE>
<TABLE>
<CAPTION>
                      EASTON BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

18.  PARENT  COMPANY  FINANCIAL  INFORMATION  (Continued)

                                                            Years Ended December 31,
STATEMENTS OF INCOME                                     2001        2000        1999
                                                      ----------  ----------  ----------
<S>                                                   <C>         <C>         <C>

Revenue
  Interest revenue                                    $     643   $   1,955   $     556
  Dividends                                             112,064      28,016           -
  Equity in undistributed income of subsidiary          373,125     504,280     517,221
                                                      ----------  ----------  ----------
                                                        485,832     534,251     517,777
                                                      ----------  ----------  ----------
Expenses
  Furniture and equipment                                    50          54          49
  Other                                                  46,159      45,161      35,167
                                                      ----------  ----------  ----------
                                                         46,209      45,215      35,216
                                                      ----------  ----------  ----------
Income before income taxes                              439,623     489,036     482,561
Income tax benefit                                       15,334      14,709      11,784
                                                      ----------  ----------  ----------
Net income                                            $ 454,957   $ 503,745   $ 494,345
                                                      ==========  ==========  ==========

                                                            Years Ended December 31,
STATEMENTS OF CASH FLOWS                                   2001        2000        1999
                                                      ----------  ----------  ----------

CASH FLOWS FROM OPERATING ACTIVITIES
  Interest received                                   $     643   $   1,955   $     556
  Dividends received                                    112,064      28,016           -
  Income taxes refunded                                  14,709      80,116           -
  Cash paid for operating expenses                      (46,209)    (45,216)    (35,216)
                                                      ----------  ----------  ----------
                                                         81,207      64,871     (34,660)
                                                      ----------  ----------  ----------
CASH FLOWS FROM FINANCING ACTIVITIES
  Dividends paid                                       (112,064)    (28,016)          -
                                                      ----------  ----------  ----------

NET INCREASE (DECREASE) IN CASH                         (30,857)     36,855     (34,660)
                                                      ----------  ----------  ----------

Cash at beginning of year                                42,843       5,988      40,648
                                                      ----------  ----------  ----------
Cash at end of year                                   $  11,986   $  42,843   $   5,988
                                                      ==========  ==========  ==========

RECONCILIATION OF NET INCOME TO NET CASH
  PROVIDED BY OPERATING ACTIVITIES
   Net income                                         $ 454,957   $ 503,745   $ 494,345
   Adjustments to reconcile net income to net
     cash provided by (used in) operating activities
     Undistributed net income of subsidiary            (373,125)   (504,280)   (517,221)
     Deferred income taxes                                    -      80,116     (11,784)
     Increase in other assets                              (625)    (14,710)          -
                                                      ----------  ----------  ----------
                                                      $  81,207   $  64,871   $ (34,660)
                                                      ==========  ==========  ==========
</TABLE>


   The accompanying notes are an integral part of these financial statements.


                                       39
<PAGE>
                       EASTON BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements


19.  QUARTERLY  RESULTS  OF  OPERATIONS  (UNAUDITED)

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

<TABLE>
<CAPTION>
                                               Three months ended
                               December 31,    September 30,    June 30,   March 31,
                              --------------  ---------------  ----------  ----------
<S>                           <C>             <C>              <C>         <C>
2001
----
Interest revenue              $   1,330,409   $    1,381,884   $1,384,313  $1,349,317
Interest expense                    602,697          682,549      705,325     680,934
Net interest income                 727,712          699,335      678,988     668,383
Provision for loan losses            28,744           79,814       56,034      48,354
Net income                          185,175           93,648       75,715     100,419
Comprehensive income                166,000          122,220       77,066     135,213
Earnings per share - basic    $        0.33   $         0.17   $     0.14  $     0.18
Earnings per share - diluted  $        0.32   $         0.16   $     0.14  $     0.18

2000
----
Interest revenue              $   1,379,233   $    1,369,086   $1,259,278  $1,154,511
Interest expense                    691,902          675,368      567,022     534,105
Net interest income                 687,331          693,718      692,256     620,406
Provision for loan losses           (19,291)          47,670       65,331      53,933
Net income                          165,690          136,029      101,633     100,393
Comprehensive income                208,489          163,651      108,796      89,719
Earnings per share - basic    $        0.30   $         0.24   $     0.18  $     0.18
Earnings per share - diluted  $        0.29   $         0.24   $     0.17  $     0.17

1999
----
Interest revenue              $   1,131,539   $    1,140,479   $  944,892  $  901,995
Interest expense                    508,370          483,768      423,570     446,677
Net interest income                 623,169          656,711      521,322     455,318
Provision for loan losses                 -         (139,744)      12,804      12,804
Net income                           95,477          284,872       69,568      44,428
Comprehensive income                 76,891          280,154       37,194      29,722
Earnings per share - basic    $        0.17   $         0.51   $     0.12  $     0.08
Earnings per share - diluted  $        0.17   $         0.51   $     0.12  $     0.08
</TABLE>


THE  FOLLOWING COMMENT IS REQUIRED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION:

"This  statement has not been reviewed or confirmed for accuracy or relevance by
the  Federal  Deposit  Insurance  Corporation."


                                       40
<PAGE>
            DIRECTORS  AND  EXECUTIVE  OFFICERS  OF
                      EASTON  BANCORP,  INC.

W. DAVID HILL, DDS                 PRESIDENT, WILLIAM HILL MANOR, INC.
CHAIRMAN/CHIEF EXECUTIVE OFFICER

R. MICHAEL S. MENZIES, SR.         PRESIDENT AND CHIEF EXECUTIVE OFFICER
PRESIDENT                          EASTON  BANK  &  TRUST  COMPANY

SHEILA A. WAINWRIGHT               CHIEF  ADMINISTRATIVE  OFFICER
SECRETARY                          CAULK  MANAGEMENT  COMPANY

JERRY L. WILCOXON, CPA             CERTIFIED PUBLIC ACCOUNTANT
TREASURER                          ANTHONY, WALTER, DUNCAN & WILCOXON, LLP

JACK H. BISHOP, DDS                DENTIST,  JACK  H.  BISHOP,  DDS

J. PARKER CALLAHAN, JR.            FARMER

STEPHEN W. CHITTY                  PRESIDENT, TALBOT CROWN AND BRIDGE DENTAL
                                   LABORATORY

J. FREDRICK HEATON, DMD            ENDODONTIST, J. FREDRICK HEATON, DMDPA

THOMAS E. HILL                     INVESTMENT BANKER, LEGG MASON WOOD & WALKER

WILLIAM C. HILL, P.D.              PRESIDENT, HILL'S DRUG STORE, INC.

WILLIAM R. HOUCK, DDS              PEDIATRIC DENTIST, WILLIAM R. HOUCK, DDS

DAVID F. LESPERANCE                PRESIDENT, LESPERANCE CONSTRUCTION COMPANY

VINODRAI MEHTA, MD                 PHYSICIAN, VINODRAI MEHTA, MD

ROGER A. ORSINI, MD                PLASTIC & RECONSTRUCTIVE SURGEON, PRESIDENT,
                                   SHORE AESTHETIC & RECONSTRUCTIVE ASSOCIATES

MAHMOOD S. SHARIFF, MD             CARDIOLOGIST, MAHMOOD S. SHARIFF, MD

JAMES B. SPEAR, SR.                CHIEF EXECUTIVE OFFICER, J.B. SALES CO., INC.

MYRON J. SZCZUKOWSKI, JR., MD      ORTHOPAEDIC  SURGEON
                                   DELMARVA  ORTHOPAEDIC  CLINIC

ALL OF THE PERSONS NOTED ABOVE ARE DIRECTORS OF EASTON BANCORP, INC.


                                      41
<PAGE>
<TABLE>
<CAPTION>
                                 DIRECTORS, OFFICERS AND ASSOCIATES OF
                                     EASTON BANK & TRUST COMPANY

                                                DIRECTORS
                                                ---------

                                           W. DAVID HILL, DDS
                                            CHAIRMAN OF THE BOARD

                                   SHEILA A. WAINWRIGHT, CPS - SECRETARY

<S>                                                         <C>
                          JACK H. BISHOP, DDS               M. LINDA KILDEA
                          J. PARKER CALLAHAN, JR.           PAMELA H. LAPPEN
                          CHARLES T. CAPUTE                 DAVID F. LESPERANCE
                          WALTER E. CHASE, SR.              R. MICHAEL S. MENZIES, SR.
                          DELIA B. DENNY                    MARIAN H. SHANNAHAN
                          J. FREDRICK HEATON, DMD           MAHMOOD S. SHARIFF, MD
                          JEFFREY N. HEFLEBOWER             JAMES B. SPEAR, SR.
                          WILLIAM C. HILL                   JERRY L. WILCOXON, CPA

                                                 OFFICERS
                                                 --------

                          R. MICHAEL S. MENZIES, SR.         DELIA B. DENNY
                          PRESIDENT/CHIEF EXECUTIVE OFFICER  EXECUTIVE VICE PRESIDENT
                          JEFFREY N. HEFLEBOWER              PAMELA A. MUSSENDEN
                          EXECUTIVE VICE PRESIDENT           SENIOR VICE PRESIDENT/TREASURER
                          ROSE K. KLECKNER                   KATHLEEN A. KURTZ
                          VICE PRESIDENT                     VICE PRESIDENT
                          LISA A. IRONS                      TERRI L. BRANNOCK
                          MORTGAGE OFFICER                   ASSISTANT TREASURER
                          SUSAN D. HASCHEN                   JACQUELINE D. WILSON
                          ASSISTANT TREASURER                ASSISTANT TREASURER

                                                  ASSOCIATES
                                                  ----------

WENDY A. BUCKLER, CREDIT ADMINISTRATIVE ASSISTANT            CAMILLE A. PECORAK, ADMINISTRATIVE ASSISTANT
ROCHELLE L. CORKELL, CUSTOMER SERVICE REPRESENTATIVE         CASEY A. PINDER, CUSTOMER SERVICE REPRESENTATIVE
BRENDA L. FORBES, LOAN PROCESSOR                             KIMBERLY D. RADA, SENIOR CUSTOMER SERVICE REPRESENTATIVE
BEVERLY A. FORT, INFORMATION MANAGER                         BRENDA S. RASH, OPERATIONS ASSISTANT
CHRISTINE L. FOXWELL, CREDIT ADMINISTRATIVE ASSISTANT        KELLY A. REED, FINANCIAL SERVICE REPRESENTATIVE
VERLYNN A. HANEKE, CUSTOMER SERVICE REPRESENTATIVE
ERIC L. HONTZ, OPERATIONS ASSISTANT                          AVONDA N.F. ROUNDS, CUSTOMER SERVICE REPRESENTATIVE
ANNE H. HUGHES, CREDIT ADMINISTRATIVE ASSISTANT              BRIDGET A. SCHETTINI, CUSTOMER SERVICE REPRESENTATIVE
LAURA M. KING, OPERATIONS ASSISTANT                          BEVERLY M. THOMAS, FINANCIAL SERVICE REPRESENTATIVE
TRACY T. LEDNUM, CUSTOMER SERVICE REPRESENTATIVE SUPERVISOR  SUZANNE W. WIELAND, CUSTOMER SERVICE REPRESENTATIVE
AMY C. LYNCH, MORTGAGE COORDINATOR                           JAMES W. WILLEY, FINANCIAL SERVICE REPRESENTATIVE
STEPHEN J. MAYES, DOCUMENT TRANSPORTATION MANAGER            SHERRY L. WINSTEAD, CUSTOMER SERVICE REPRESENTATIVE
</TABLE>


                                        42
<PAGE>