ANNUAL REPORT TO STOCKHOLDERS
                                DECEMBER 31, 2000




                              EASTON BANCORP, INC.


<PAGE>
                              Easton Bancorp, Inc.


                                   March 2001

To  our  Stockholders:

Easton Bancorp, Inc. reported record earnings and increased deposits, assets and
loans  for  the  year  ended  December  31,  2000.  Net interest income was $2.7
million,  up 19% from the prior year, and net operating income before taxes grew
7%  to  reach  $811,004.  Earnings  for  the  year  ended December 31, 2000 were
$503,745.  Net  loans  increased  18%  to $54.2 million with deposits growing by
21%.  Assets  totaled $64.5 million at year-end, up 15% from the prior year-end.
At  year-end, credit quality was excellent and strong loan loss reserves were in
place.  These  results  are significant in view of the highly competitive market
in  which  we  operate.

The  first  year  of the new millennium was clearly a good one for Easton Bank &
Trust  Company.  In  addition  to accomplishing our profit and growth objectives
for  the  year,  we  grew  the significance of our mortgage banking business and
positioned  the  Bank  for  further  expansion  in  2001.  Surely,  our greatest
accomplishment  was  the  payment  of  Easton Bancorp, Inc.'s first common stock
dividend  so that our shareholders could participate in the progress made during
the  year.  We  realize  additional  delivery  channels  are  needed  to support
customer  needs  and  to  develop new personal and small business relationships.
Several customer surveys produced a recurring call for another banking office on
the  northwest  side  of  Easton.  We  have, therefore, committed to expand to a
third  full-service  banking  location  as  soon  as  a lease can be negotiated.

The  year  2001  began  with  storm clouds on the horizon for both banks and the
economy  in general.  While we feel we are prepared to deal with the stress of a
challenged  economy,  we  are taking those steps necessary to proactively manage
credit  risk  in  our  loan  portfolio  and  credit  problems  as  they  arise.

The  banking  industry  will  likely  experience some earnings and asset quality
pressure  during  2001,  but  overall the industry appears healthy, particularly
when compared to the balance sheet problems experienced in the early 90's due to
overly  aggressive commercial real estate lending.  We continue to feel positive
about  the  markets we serve and the quality of our customer relationships.  Our
philosophy  of  putting  the  customer  first,  balanced  with  asset  quality
management, is expected to produce strong growth and increased shareholder value
in  2001.



/s/  R.  Michael  S.  Menzies,  Sr.                /s/ Dr.  William  David  Hill
R. Michael S. Menzies, Sr.                             Dr.  William  David  Hill
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.  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.  Income  before  income  taxes  increased  from  $755,137  in 1999 to
$811,004  in  2000.  Net  income  increased  from  $494,345  to  $503,745 due to
increased  net  interest  income,  which  was  offset  by  increased  loan  loss
provisions  and  increased  noninterest  expense.

RESULTS  OF  OPERATIONS

     The  Company  reported  net  income of $503,745, or $.90 per share, for the
year  ended  December  31, 2000, which represents an increase of $9,400, or $.02
per  share,  from  $494,345,  or $.88 per share, for the year ended December 31,
1999.  An increase in net interest income of $437,191 was offset by increases in
the  provision  for  loan  losses  of  $261,779  and other operating expenses of
$171,860.

     Net  interest  income  increased $437,191, or 19.37%, to $2,693,711 in 2000
from $2,256,520 in 1999.  This increase in net interest income was the result of
a  $1,043,203  increase  in  interest  income  offset by an increase in interest
expense  of $606,012.  During the year, the Company experienced a decreasing net
interest  spread  to  4.49% in 2000 from 4.70% in 1999.  The net interest margin
decreased to 4.65% in 2000 from 4.79% in 1999.  The interest spread and interest
margin decreased as deposit rates increased faster than loan and security rates.


                                        3
<PAGE>
     During  2000,  the  Company  recorded  modest  net loan loss charge-offs of
$57,271  compared  to  the  1999 net loan loss recoveries of $178,943.  The 1999
recovery  of a prior charge-off, related to a fraudulent loan, totaled $341,988.
Proceeds  of  $66,081 in excess of charge-offs related to this loan are included
in  other  noninterest  revenue.  As  a  result of these loan recoveries and the
decrease  in  nonperforming  loans,  the  Company  reversed prior provisions for
credit  losses  of $114,136 during 1999, compared to a provision for loan losses
of  $147,643  in  2000.  The  net  increase  in  the  provision recorded in 2000
compared  to  the  provision  recorded  in  1999  was  $261,779.

     The  Company  had loans over ninety days delinquent on which the accrual of
interest had been discontinued totaling $270,279 and $102,407 as of December 31,
2000  and 1999, respectively.  At December 31, 2000, the accrual of interest had
been  discontinued  on  loans  totaling  $86,616  where the loans were less than
ninety days delinquent.  The Company's allowance for loan losses as a percentage
of  its  year-end  loans  was  1.18%  at December 31, 2000, compared to 1.19% at
December  31,  1999.  Net charge-offs of $57,271 during 2000 resulted in a ratio
of  net  charge-offs to average loans of .11%.  During 1999, the Company had net
recoveries  of  $178,943,  which  was  .45%  of  average  loans.

     Noninterest  income  increased $52,315, or 21.72%, to $293,204 in 2000 from
$240,889  in  1999.  Origination  fee  income from mortgages originated for sale
increased  $33,679.  Management  increased  the  return and overdraft charges by
$43,890  in 2000 primarily as a result of an increase in the volume of accounts.
During  2000,  the  Company offered a VISA debit card, recording fees of $6,807.
During  1999,  the  Company  recorded  $66,081  as noninterest income from funds
recovered  in  excess  of  the  charge-off  of a fraudulent loan in prior years.

     Noninterest  expense  increased  $171,860,  or 9.26%, to $2,028,268 in 2000
from  $1,856,408  in 1999. The increase was the result of an increase of $56,868
in  compensation  and  related  expenses,  an  increase  of $22,374 for net rent
expense,  an  increase  of  $22,340 for furniture and equipment depreciation and
service  contracts  and  an  increase  of  $34,263  for  data  processing.

     The  Company's  efficiency  ratio,  which  is  noninterest  expense  as  a
percentage  of  the sum of net interest income and noninterest income, decreased
to  67.91%  in 2000, compared to 74.33% in 2000.  This improvement is the result
of  faster  growth  in  net  interest  income  than  in  other  expenses.

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 2000 and 1999 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  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 2000 was 4.65%,
compared  to  4.79%  for 1999.  The decrease is due primarily to the increase in
deposit  yields  while  loan  yields  declined.  As  a result of the significant
amount of fixed rate loans, the Bank's 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.


                                        4
<PAGE>
     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  2000  and  1999.

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

                                                For the Year  Ended             For  the Year Ended
                                                 December 31, 2000               December 31, 1999
                                       --------------------------------  --------------------------------

                                         Average     Income/    Yield/     Average     Income/    Yield/
ASSETS                                   Balance     Expenses    Rate      Balance     Expenses    Rate
                                       -----------  ----------  -------  -----------  ----------  -------
<S>                                    <C>          <C>         <C>      <C>          <C>         <C>
Federal funds sold                     $ 2,094,348  $  132,723    6.34%  $ 2,879,881  $  143,159    4.97%
Interest-bearing deposits                    9,567         508    5.31%            -           -       -
Investment securities:
  U.S. Government agency                 4,768,451     283,626    5.95%    4,514,306     256,150    5.67%
  Other                                    194,852      15,106    7.75%      151,407      11,456    7.57%
                                       -----------  ----------  -------  -----------  ----------  -------
    Total investment securities          4,963,303     298,732    6.02%    4,665,713     267,606    5.74%
                                       -----------  ----------  -------  -----------  ----------  -------
Loans:
  Demand and time                       11,273,091   1,036,328    9.19%    6,979,521     604,014    8.65%
  Mortgage                              36,701,229   3,326,279    9.06%   30,149,874   2,802,118    9.29%
  Installment                            3,619,704     367,538   10.15%    3,045,187     302,008    9.92%
                                       -----------  ----------  -------  -----------  ----------  -------
    Total loans                         51,594,024   4,730,145    9.17%   40,174,582   3,708,140    9.23%
Allowance for loan losses                  710,100           -       -       572,494           -       -
                                       -----------  ----------  -------  -----------  ----------  -------
    Total loans, net of allowance       50,883,924   4,730,145    9.30%   39,602,088   3,708,140    9.36%
                                       -----------  ----------  -------  -----------  ----------  -------
Total interest-earning assets           57,951,142   5,162,108    8.91%   47,147,682   4,118,905    8.74%
                                       -----------  ----------  -------  -----------  ----------  -------
Noninterest-bearing cash                 1,160,522                         1,039,218
Bank premises and equipment              1,682,820                         1,709,974
Other assets                               471,746                         1,080,394
                                       -----------                       -----------
        Total assets                   $61,266,230                       $50,977,268
                                       ===========                       ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing deposits:
  Savings and NOW deposits             $ 9,607,116  $  205,854    2.14%  $ 9,600,988  $  247,963    2.58%
  Money market                           8,658,405     409,971    4.73%    5,304,801     189,752    3.58%
  Other time deposits                   31,138,152   1,749,064    5.62%   25,392,048   1,320,764    5.20%
                                       -----------  ----------  -------  -----------  ----------  -------
    Total interest-bearing deposits     49,403,673   2,364,889    4.79%   40,297,837   1,758,479    4.36%
Noninterest-bearing deposits             4,531,033           -       -     3,823,863           -       -
                                       -----------  ----------  -------  -----------  ----------  -------
    Total deposits                      53,934,706   2,364,889    4.38%   44,121,700   1,758,479    3.99%
Borrowed funds                           1,904,553     103,508    5.43%    1,943,786     103,906    5.35%
                                       -----------  ----------  -------  -----------  ----------  -------
                                        55,839,259   2,468,397    4.42%   46,065,486   1,862,385    4.04%
                                                    ----------  -------               ----------  -------
Other liabilities                          231,194                           181,083
Stockholders' equity                     5,195,777                         4,730,699
                                       -----------                       -----------
     Total liabilities and
     stockholders equity               $61,266,230                       $50,977,268
                                       ===========                       ===========

Net interest spread                                               4.49%                             4.70%
                                                                =======                           =======
Net interest income                                 $2,693,711                        $2,256,520
                                                    ==========                        ==========
Net margin on interest-earning assets                             4.65%                             4.79%
                                                                =======                           =======
</TABLE>


                                        5
<PAGE>
<TABLE>
<CAPTION>
                                     ANALYSIS  OF  CHANGES  IN  NET  INTEREST  INCOME

                                                     Year Ended December 31, 2000         Year Ended December 31, 1999
                                                         Compared with 1999                    Compared with 1998
                                                           Variance Due To                      Variance Due To
                                                 ------------------------------------  ----------------------------------
                                                    Total      Rate (1)      Volume       Total      Rate (1)     Volume
                                                 -----------  ----------  -----------  ----------  ----------  ----------
<S>                                              <C>          <C>         <C>          <C>         <C>         <C>
EARNING ASSETS

   Interest-bearing deposits                     $      508   $     508   $        -   $  (1,723)  $       -   $  (1,723)
   Federal funds sold                               (10,436)     28,605      (39,041)   (149,105)    (11,851)   (137,254)
   Investment Securities:
     U.S. Treasury                                        -           -            -           -           -           -
     U.S. Government Agency                          27,476      13,066       14,410      97,106      (3,297)    100,403
     Other                                            3,650         361        3,289         969         184         785
   Loans:
     Demand and time                                432,314      60,920      371,394     325,545       5,317     320,228
     Mortgage                                       524,161     (84,460)     608,621     302,436     208,788      93,648
     Installment                                     65,530       8,538       56,992      17,033     (27,478)     44,511
                                                 -----------  ----------  -----------  ----------  ----------  ----------
       Total interest income                      1,043,203      27,538    1,015,665     592,261     171,663     420,598
                                                 -----------  ----------  -----------  ----------  ----------  ----------

INTEREST-BEARING LIABILITIES
  Savings and NOW deposits                          (42,109)    (42,267)         158     (12,599)    (46,458)     33,859
  Money-market deposits                             220,219     100,160      120,059      24,780        (495)     25,275
  Other time deposits                               428,300     129,503      298,797     (83,325)   (121,860)     38,535
   Federal funds purchased and                         (398)      1,701       (2,099)     54,657       3,429      51,228
                                                 -----------  ----------  -----------  ----------  ----------  ----------
    short-term borrowings
      Total interest expense                        606,012     189,097      416,915     (16,487)   (165,384)    148,897
                                                 -----------  ----------  -----------  ----------  ----------  ----------

  Net interest income                            $  437,191   $(161,559)  $  598,750   $ 608,748   $ 337,047   $ 271,701
                                                 ===========  ==========  ===========  ==========  ==========  ==========

_______________________________________________
<FN>
(1)  The  variance  that  is  both  rate/volume  related  is  included  in  the  rate  variance.
</TABLE>

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 $50,883,924 and $39,602,088
during  2000  and  1999,  respectively,  which  constituted  87.80%  and 84.00%,
respectively,  of  average interest-earning assets for the periods.  At December
31,  2000, the Company's loan to deposit ratio was 94.98%, compared to 97.59% at
December 31, 1999.  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  and  its performance may be influenced by the real
estate  market  in  the  region.


                                        6
<PAGE>
     The  following  table  sets  forth  the  composition  of the Company's loan
portfolio  as  of  December  31,  2000  and  1999,  respectively.

<TABLE>
<CAPTION>
                          COMPOSITION  OF  LOAN  PORTFOLIO

                                                       December 31,
                                     ----------------------------------------------
                                               2000                    1999
                                     ----------------------  ----------------------
                                                   Percent                 Percent
                                       Amount     of Total     Amount     Of Total
                                     -----------  ---------  -----------  ---------
<S>                                  <C>          <C>        <C>          <C>
Commercial                           $10,032,250     18.27%  $ 7,476,729     16.05%
Real estate - residential             17,841,007     32.50%   15,704,767     33.72%
Real estate - commercial              14,732,481     26.83%   13,736,798     29.50%
Construction                           5,096,238      9.28%    3,177,267      6.82%
Home equity                            2,727,880      4.97%    2,421,584      5.20%
Consumer                               4,474,671      8.15%    4,054,684      8.71%
                                     -----------  ---------  -----------  ---------
   Total loans                        54,904,527    100.00%   46,571,829    100.00%
                                                  =========               =========
Less deferred loan origination fees        9,128                  25,135
Less allowance for credit losses         645,501                 555,129
                                     -----------             -----------
   Net loans                         $54,249,898             $45,991,565
                                     ===========             ===========
</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,  2000.

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

                                            December 31, 2000
                           -------------------------------------------------
                                         Over One
                            One Year      Through    Over Five
                             Or Less    Five Years     Years        Total
                           -----------  -----------  ----------  -----------
<S>                        <C>          <C>          <C>         <C>
Commercial                 $ 6,173,802  $ 3,737,553  $  120,895  $10,032,250
Real estate - residential    4,812,094   11,577,961   1,450,952   17,841,007
Real estate - commercial     3,672,516    8,860,814   2,199,151   14,732,481
Construction                 5,096,238            -           -    5,096,238
Home equity                  2,727,880            -           -    2,727,880
Consumer                       824,575    3,264,182     385,914    4,474,671
                           -----------  -----------  ----------  -----------
   Total                   $23,307,105  $27,440,510  $4,156,912  $54,904,527
                           ===========  ===========  ==========  ===========

Fixed interest rate        $12,691,932  $26,742,891  $4,092,182  $43,527,005
Variable interest rate      10,615,173      697,619      64,730   11,377,522
                           -----------  -----------  ----------  -----------
   Total                   $23,307,105  $27,440,510  $4,156,912  $54,904,527
                           ===========  ===========  ==========  ===========
</TABLE>

     As  of  December  31, 2000, $43,527,005, or 79.28%, 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  income will decrease in a rising interest rate environment,
but  will  increase  in  a  falling  interest  rate  environment.


                                        7
<PAGE>
     The  Company has the following commitments, lines of credit, and letters of
credit  outstanding  as  of  December  31,  2000  and  1999,  respectively.


                                     2000        1999
                                  ----------  ----------

      Construction loans          $3,438,181  $1,561,318
      Lines of credit              4,912,511   3,456,452
      Overdraft protection lines     306,314     275,035
      Standby letters of credit      410,636      86,244
                                  ----------  ----------
      Total                       $9,067,642  $5,379,049
                                  ==========  ==========

     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.

     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 is a relatively new institution without
a  long  history.  Its  current  policy is to maintain an allowance equal to the
greater  of one percent 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,  2000  and  1999,  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.  At  year-end 2000, the allowance for loan losses was 1.18% of
outstanding  loans,  compared  to  1.19%  at  year-end  1999.


                                        8
<PAGE>
<TABLE>
<CAPTION>
     ALLOCATION OF ALLOWANCE FOR LOAN LOSSES

                     2000                    1999
              ------------------      ------------------
               Amount   Percent        Amount   Percent
              --------  --------      --------  --------
<S>           <C>       <C>           <C>       <C>
Commercial    $153,566    23.79%      $ 94,209    16.97%
Real estate    167,380    25.93%       230,382    41.50%
Construction    25,481     3.95%        15,886     2.86%
Home equity     65,379    10.13%        61,608    11.10%
Consumer        67,772    10.50%        82,013    14.77%
General        165,923    25.70%        71,031    12.80%
              --------  --------      --------  --------
    Total     $645,501   100.00%      $555,129   100.00%
              ========  ========      ========  ========
</TABLE>

<TABLE>
<CAPTION>
                         ALLOWANCE  FOR  LOAN  LOSSES

                                                   2000        1999
                                                 ---------  ----------
<S>                                              <C>        <C>
Balance at beginning of year                     $555,129   $ 490,322

Loan losses:
    Commercial                                     11,697      41,536
    Real Estate                                         -      80,942
    Consumer                                       60,977     128,647
                                                 ---------  ----------
        Total loan losses                          72,674     251,125
                                                 ---------  ----------

Recoveries on loans previously charged off
    Commercial                                      1,803     362,751
    Real Estate                                     3,649           -
    Consumer                                        9,951      67,317
                                                 ---------  ----------
        Total loan recoveries                      15,403     430,068
                                                 ---------  ----------

Net loan losses/(recoveries)                       57,271    (178,943)
Provision for loan losses charged to expense      147,643    (114,136)
                                                 ---------  ----------
Balance at end of year                           $645,501   $ 555,129
                                                 =========  ==========

Allowance for loan losses to loans outstanding
    at end of year                                   1.18%       1.19%

Net charge-offs/(recoveries) to average loans        0.11%      (.45)%
</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  90 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.


                                        9
<PAGE>
     The  Company  had  nonperforming loans totaling $356,895 and $108,770 as of
December  31,  2000  and  1999,  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  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, 2000, the Company had thirty-three borrowers with loans considered
by  management  to  be  potential problem loans totaling approximately $670,170.
The  level  of potential problem loans is factored into the determination of the
adequacy  of  the  allowance  for  loan  losses.

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
15.26%  of average deposits for 2000, compared to 19.46% of average deposits for
1999.  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,  which
approximates the current cash surrender value of the policy.  The cash surrender
value of the policy 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.


                                       10
<PAGE>
     The  interest  rate sensitivity position at December 31, 2000, 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.

<TABLE>
<CAPTION>
                                    INTEREST  SENSITIVITY  ANALYSIS

                                                              December 31, 2000
                                    ---------------------------------------------------------------------
                                                   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                $ 1,325,552   $          -   $         -   $         -   $ 1,325,552
  Investment securities
   available for sale                   185,156        247,930     3,182,139     1,363,703     4,978,928
  Loans                              15,911,167      7,395,938    27,440,510     4,156,912    54,904,527
                                    ------------  -------------  ------------  ------------  ------------
Total earning assets                $17,421,875   $  7,643,868   $30,622,649   $ 5,520,615   $61,209,007
                                    ============  =============  ============  ============  ============

LIABILITIES
Interest-bearing liabilities:
  Money market and NOW              $15,424,518   $          -   $         -   $         -   $15,424,518
  Savings deposits                    3,320,497              -             -             -     3,320,497
  Club accounts                               -         50,740             -             -        50,740
  Certificates $100,000 and over      3,748,299      4,127,645     3,644,410             -    11,520,354
  Certificates under $100,000         2,627,045     12,441,198     6,685,474             -    21,753,717
  Securities sold under
   agreements to repurchase              69,984              -             -             -        69,984
  Federal Home Loan Bank Note             1,800          5,417        34,480     1,588,395     1,630,092
                                    ------------  -------------  ------------  ------------  ------------
Total interest-bearing liabilities  $25,192,143   $ 16,625,000   $10,364,364   $ 1,588,395   $53,769,902
                                    ============  =============  ============  ============  ============

Period gap                          $(7,770,268)  $ (8,981,132)  $20,258,285   $ 3,932,220   $ 7,439,105

Cumulative gap                      $(7,770,268)  $(16,751,400)  $ 3,506,885   $ 7,439,105   $ 7,439,105

Ratio of cumulative gap to total
  earning assets                        (12.69)%       (27.37)%         5.73%        12.15%        12.15%
</TABLE>

     As  noted  in the table "Composition of Loan Portfolio," as of December 31,
2000  approximately  $29,860,969,  or 54.39%, of the loan portfolio consisted of
commercial  loans,  commercial  real  estate loans, and real estate construction
loans.  Of  this  amount,  $14,942,556,  or  50.04%,  matures  within  one year.

     The  table  "Investment  Securities Maturity Distribution and Yields" shows
that  as  of December 31, 2000, 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."  The  equity  securities  are
comprised  of  Federal  Home  Loan  Bank  stock  which  is  also  classified  as
"available-for-sale" even though the Company must hold this stock to borrow from
the Federal Home Loan Bank.  Another source of liquidity is the $5,750,000 lines
of  credit  the Company has from a correspondent bank. The Company may borrow up
to  $9,033,000  from  the  Federal  Home  Loan  Bank.


                                       11
<PAGE>
<TABLE>
<CAPTION>
          INVESTMENT  SECURITIES  MATURITY  DISTRIBUTION  AND  YIELDS

                                            December 31, 2000      December 31, 1999
                                         ----------------------  ----------------------
                                                      Year-end                Year-end
                                         Book Value    Yields    Book Value    Yields
                                         -----------  ---------  -----------  ---------
<S>                                      <C>          <C>        <C>          <C>
U.S. Government Agency securities
  One year or less                       $   433,086      5.74%  $         -         -
  Over one through five years              3,182,139      5.71%    4,203,828       5.6%
  Over five years through ten years                -         -             -         -
  Over ten years                           1,363,703      7.09%            -         -
                                         -----------  ---------  -----------  ---------
Total U.S. Government Agency securities  $ 4,978,928      6.09%  $ 4,203,828       5.6%
                                         ===========  =========  ===========  =========
</TABLE>

DEPOSITS  AND  OTHER  INTEREST-BEARING  LIABILITIES

     Average  interest-bearing  liabilities  increased $9,066,603, or 21.46%, to
$51,308,226  in  2000,  from  $42,241,623  in  1999.  Average  interest-bearing
deposits  increased  $9,105,836,  or  22.60%,  to  $49,403,673  in  2000,  from
$40,297,837  in  1999.  These  increases  in  all categories of interest-bearing
deposits,  except  savings  accounts,  resulted  from  the continued promotional
efforts  of  management  to  increase  the  deposits  and loans of the Bank.  At
December  31,  2000, total deposits were $57,118,430, compared to $47,126,446 at
December  31,  1999,  an  increase  of  21.20%.

     The  following  table sets forth the deposits of the Company by category as
of  December  31,  2000  and  1999,  respectively.

<TABLE>
<CAPTION>
                                DEPOSITS
                                               December 31,
                           --------------------------------------------------
                                     2000                      1999
                           ------------------------  ------------------------
                                        Percent of                Percent of
                             Amount      Deposits      Amount      Deposits
                           -----------  -----------  -----------  -----------
<S>                        <C>          <C>          <C>          <C>
Demand deposit accounts    $ 5,048,604        8.84%  $ 3,678,246        7.81%
NOW accounts                 6,018,901       10.54%    5,116,224       10.86%
Money market accounts        9,405,617       16.47%    6,557,630       13.91%
Savings accounts             3,371,237        5.90%    3,915,780        8.31%
Time deposits less than
   $100,000                 21,753,717       38.08%   19,931,934       42.29%
Time deposits of $100,000
   or over                  11,520,354       20.17%    7,926,632       16.82%
                           -----------  -----------  -----------  -----------
     Total deposits        $57,118,430      100.00%  $47,126,446      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 $6,398,262 during
2000.  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.  The
Company's  loan-to-deposit  ratio was 94.98% at December 31, 2000, and 97.59% at
the  end  of  1999,  with  a  2000 ratio of average loans to average deposits of
94.34%.  The  maturity distribution of the Company's time deposits over $100,000
at  December  31,  2000,  is  shown  in  the  following  table.


                                       12
<PAGE>
<TABLE>
<CAPTION>
                         MATURITIES OF CERTIFICATES OF DEPOSIT
                      AND OTHER TIME DEPOSITS OF $100,000 OR MORE

                                              December 31, 2000
                          -------------------------------------------------------------
                                      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    $3,748,299  $  1,152,437  $2,975,208  $3,644,410  $11,520,354
                          ==========  ============  ==========  ==========  ===========
</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 $1,904,553 and $1,943,786 during 2000 and
1999, respectively. As previously noted, the Company's primary funding source is
core  deposits, and it does not depend heavily on purchased funds to support its
earning  asset  base.

NONINTEREST  INCOME

     Noninterest income for 2000 was $293,204, compared to noninterest income in
1999  of  $240,889,  an increase of $52,315, or 21.72%.   Origination fee income
from  mortgages  originated  for  sale increased $33,679.  The Company hired its
originator  in  April,  1999,  realizing  income  of  $29,785  in  1999.  As the
originator  increased  her  contacts  in  the  local  real  estate  market,  the
origination  fees generated increased to $63,464 during 2000.  The Company plans
to  hire  an additional originator in 2001.  Management increased the return and
overdraft charges by $43,890 in 2000 primarily as a result of an increase in the
volume  of  accounts.  During  2000,  the  Company  offered  a  VISA debit card,
recording  fees  of  $6,807.  During  1999,  the  Company  recorded  $66,081  as
noninterest  income  from  funds  recovered  in  excess  of  the charge-off of a
fraudulent  loan  in  prior  years.

     The following table presents the principal components of noninterest income
for  the  years  ended  December  31,  2000  and  1999,  respectively.

<TABLE>
<CAPTION>
                                 NONINTEREST  INCOME

                                                              2000       1999
                                                            ---------  ---------
<S>                                                         <C>        <C>
Service charges on deposit accounts                         $165,874   $128,705
Other noninterest revenue                                    127,330    112,184
                                                            ---------  ---------
Total noninterest income                                    $293,204   $240,889
                                                            =========  =========

Noninterest income as a percentage of average total assets      0.48%      0.47%
                                                            =========  =========
</TABLE>


                                       13
<PAGE>
NONINTEREST  EXPENSE

     Noninterest  expense  increased  $171,860,  or 9.26%, to $2,028,268 in 2000
from  $1,856,408  in 1999. The increase was the result of an increase of $56,868
in  compensation  and  related  expenses,  an  increase  of $22,374 for net rent
expense,  an  increase  of  $22,340 for furniture and equipment depreciation and
service  contracts  and  an  increase of $34,263 for data processing.  The 5.10%
increase  in  compensation and related expenses is due to annual increases.  Net
rent expense increased because the year 2000 represented the first full year for
the  Denton  branch  lease  and  one of the tenants at the main office moved out
during  2000.  The  Company  has  expanded  into  this  space.  Depreciation  on
furniture and equipment increased from a full year of depreciation on the Denton
office  items  and  as  a  result  of  the  replacement of many of the Company's
personal  computers.  As  the Company and its equipment age, the related service
contracts  become more expensive.  The Company anticipates opening an additional
branch  in  Easton  in  2001.  As  a  result, noninterest expense is expected to
increase  in  2001.

     The  following  table  presents  the  principal  components  of noninterest
expense  for  the  years  ended  December  31,  2000  and  1999,  respectively.

<TABLE>
<CAPTION>
                                  NONINTEREST  EXPENSE

                                                                2000         1999
                                                             -----------  -----------
<S>                                                          <C>          <C>
Compensation and related expenses                            $1,170,847   $1,113,979
Occupancy expense                                               114,246       75,793
Furniture and equipment expense                                 103,043       80,626
Advertising                                                      51,713       47,446
Professional fees                                                85,258      109,104
Data processing                                                 138,047      103,784
Deposit assessment                                               10,085        4,896
Insurance                                                        11,891       13,042
Loan reports and collection costs                                12,517       10,095
Postage                                                          38,456       30,677
Provision for loan commitments                                   25,250       15,589
Proxy and transfer agent costs                                   17,061       16,911
Stationery and supplies                                          72,819       72,800
Telephone and postage                                            29,807       28,781
Training                                                         19,277       22,103
Travel and entertainment                                         26,967       33,358
Other                                                           100,984       77,424
                                                             -----------  -----------
     Total noninterest expense                               $2,028,268   $1,856,408
                                                             ===========  ===========

Noninterest expense as a percentage of average total assets        3.31%        3.64%
                                                             ===========  ===========
</TABLE>

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 3%,
but  this  minimum  ratio is increased by 100 to 200 basis points for other than
the  highest-rated  institutions.

     At  December  31,  2000, the Company and the Bank exceeded their regulatory
capital  ratios,  as  set  forth  in  the  following  table.


                                       14
<PAGE>
<TABLE>
<CAPTION>
                       ANALYSIS  OF  CAPITAL

                                                  Required
                                 Company   Bank   Minimums
                                 --------  -----  ---------
<S>                              <C>       <C>    <C>
Tier 1 risk-based capital ratio     10.7%  10.6%       4.0%
Total risk-based capital ratio      11.9%  11.8%       8.0%
Tier 1 leverage ratio                8.4%   8.3%       3.0%
</TABLE>

ACCOUNTING  RULE  CHANGES

     Summarized  below  are  the  accounting  rule  changes  impacting financial
institutions  that  were  approved  during  2000.

     FASB  Statement  No. 137, Accounting for Derivative Instruments and Hedging
Activities  -  Deferral  of the Effective Date of FASB Statement No. 133, delays
the  effective  date  of  FASB  Statement  No.  133 for one year to fiscal years
beginning  after  June  15,  2000.  The  Company  elected early adoption of FASB
Statement  No.  133  in  1998.

     FASB  Statement  No. 138, Accounting for Certain Derivative Instruments and
Certain  Hedging  Activities,  is  an  amendment of FASB Statement No. 133. This
statement  addresses  a  limited  number  of  issues  causing  implementation
difficulties  for  entities  that apply FASB Statement No. 133. Specifically, it
expands  the  normal sales and normal purchase exception, redefines the specific
risks  that  can  be  identified  as  a  hedge  risk,  revises
foreign-currency-denominated  assets and liabilities, and discusses intercompany
derivatives.  The effective date of the Statement is the first fiscal quarter of
fiscal  years  beginning  after  June  15,  2000. The accounting policies of the
Company  did  not  need  amending as a result of the issuance of this statement.

     FASB Statement No. 140, Accounting for Transfers and Servicing of Financial
Assets  and  Extinguishments  of Liabilities, is a replacement of FASB Statement
No.  125.  This  Statement  is intended to develop standards to aid in resolving
existing  financial  accounting and reporting issues when transfers of financial
assets  occur. Specifically, the Statement addresses issues where the transferor
has  a continuing involvement with the transferred asset or with the transferee,
as  in  transfers  with  recourse,  servicing  rights,  agreements to reacquire,
options written or withheld, or pledges of collateral. The effective date of the
Statement is for transfers and servicing of financial assets and extinguishments
of  liabilities  occurring  after  March  31,  2001.

     FASB  Interpretation  No. 44, Accounting for Certain Transactions involving
Stock  Compensation,  clarifies  the  application  of  APB  Opinion  No. 25. The
Interpretation  addresses  issues  such  as  the  definition of an employee, the
criteria  for  determining  if  a  plan qualifies as a noncompensatory plan, the
consequence  of modifications to the terms of a fixed stock option or award, and
the  accounting  for  an  exchange  of  stock  compensation awards in a business
combination.  The  Interpretation,  which  was  effective  July 1, 2000, did not
require  a change in the accounting for the options and warrants of the Company.

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.


                                       15
<PAGE>
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.


                     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, 2001, there were approximately 560 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 $28,015.90.  The Company also paid a cash dividend
of  $.05  per share in the first quarter of 2001 to stockholders of record as of
January  29,  2001.  The  total  dividend  paid  was  $28,015.90.  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.


                                       16
<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, 2000, 1999, and 1998, 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 generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing  the  accounting  principles  used  and  significant estimates made by
management,  as well as evaluating the overall financial statement presentation.
We  believe  that  our  audits  provide  a  reasonable  basis  for  our opinion.

     In  our  opinion,  the  consolidated financial statements referred to above
present  fairly,  in  all  material  respects,  the financial position of Easton
Bancorp,  Inc.  and  Subsidiary as of December 31, 2000, 1999, and 1998, and the
results  of  their  operations and their cash flows for the years then ended, in
conformity  with  generally  accepted  accounting  principles.


/s/  Rowles & Company, LLP
Salisbury,  Maryland
January  25,  2001


                                       17
<PAGE>
<TABLE>
<CAPTION>
                                    EASTON BANCORP, INC. AND SUBSIDIARY

                                        CONSOLIDATED BALANCE SHEETS

                                                                            December 31,
                                                                  2000          1999          1998
                                                              ------------  ------------  ------------
                                      ASSETS
<S>                                                           <C>           <C>           <C>
Cash and due from banks                                       $ 1,202,011   $ 2,576,335   $   976,682
Federal funds sold                                              1,325,552       824,727     7,269,903
Investment in Federal Home Loan Bank stock                        204,200       179,000       145,600
Investment securities available for sale                        4,978,928     4,203,828     4,840,026
Loans held for sale                                               353,110        70,000             -
Loans, less allowance for loan losses of
  $645,501, $555,129, and $490,322                             54,249,898    45,991,565    33,294,486
Premises and equipment                                          1,670,019     1,694,652     1,662,127
Intangible assets                                                  10,856        15,691         1,853
Accrued interest receivable                                       397,492       300,536       246,470
Loan payment held in escrow                                             -             -     1,175,000
Other assets                                                      104,216        46,004        92,924
Deferred income taxes                                              40,211       177,017       401,551
                                                              ------------  ------------  ------------
        Total assets                                          $64,536,493   $56,079,355   $50,106,622
                                                              ============  ============  ============

                                LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
  Noninterest-bearing                                         $ 5,048,604   $ 3,678,246   $ 4,682,618
  Interest-bearing                                             52,069,826    43,448,200    39,436,342
                                                              ------------  ------------  ------------
        Total deposits                                         57,118,430    47,126,446    44,118,960
Accrued interest payable                                          138,693       108,888        95,611
Securities sold under agreements to repurchase                     69,984       280,667       281,019
Notes payable                                                   1,630,092     3,578,493     1,000,000
Other liabilities                                                 153,025       101,231       151,363
                                                              ------------  ------------  ------------
        Total liabilities                                      59,110,224    51,195,725    45,646,953
                                                              ------------  ------------  ------------
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)                                     153,211      (322,518)     (816,863)
                                                              ------------  ------------  ------------
                                                                5,436,730     4,961,001     4,466,656
  Accumulated other comprehensive income                          (10,461)      (77,371)       (6,987)
                                                              ------------  ------------  ------------
      Total stockholders' equity                                5,426,269     4,883,630     4,459,669
                                                              ------------  ------------  ------------
      Total liabilities and stockholders' equity              $64,536,493   $56,079,355   $50,106,622
                                                              ============  ============  ============
</TABLE>


   The accompanying notes are an integral part of these financial statements.
                                       18
<PAGE>
<TABLE>
<CAPTION>
                                EASTON BANCORP, INC. AND SUBSIDIARY

                                 CONSOLIDATED STATEMENTS OF INCOME

                                                                    Years Ended December 31,
                                                                 2000        1999         1998
                                                              ----------  -----------  -----------
<S>                                                           <C>         <C>          <C>
INTEREST REVENUE
  Loans, including fees                                       $4,730,145  $3,708,140   $3,063,126
  Deposits in banks                                                  508           -        1,723
  U.S. government agency securities                              283,626     256,150      159,044
  Federal funds sold                                             132,723     143,159      292,264
  Other                                                           15,106      11,456       10,487
                                                              ----------  -----------  -----------
      Total interest revenue                                   5,162,108   4,118,905    3,526,644
                                                              ----------  -----------  -----------

INTEREST EXPENSE
  Interest on deposits                                         2,364,889   1,758,479    1,831,543
  Interest on borrowed funds                                     103,508     103,906       49,249
                                                              ----------  -----------  -----------
      Total interest expense                                   2,468,397   1,862,385    1,880,792
                                                              ----------  -----------  -----------

      Net interest income                                      2,693,711   2,256,520    1,645,852

PROVISION FOR LOAN LOSSES                                        147,643    (114,136)     184,603
                                                              ----------  -----------  -----------
      Net interest income after provision for loan losses      2,546,068   2,370,656    1,461,249
                                                              ----------  -----------  -----------

OTHER OPERATING REVENUE
  Service charges on deposit accounts                            165,874     128,705       99,654
  Other noninterest revenue                                      127,330     112,184       37,066
                                                              ----------  -----------  -----------
      Total other operating revenue                              293,204     240,889      136,720
                                                              ----------  -----------  -----------

OTHER EXPENSES
  Compensation and related expenses                            1,170,847   1,113,979      909,209
  Occupancy                                                      114,246      75,793       70,782
  Furniture and equipment                                        103,043      80,626       87,647
  Other operating                                                640,132     586,010      484,238
                                                              ----------  -----------  -----------
      Total other expenses                                     2,028,268   1,856,408    1,551,876
                                                              ----------  -----------  -----------

Income before income taxes                                       811,004     755,137       46,093
Income tax expense (benefit)                                     307,259     260,792     (397,951)
                                                              ----------  -----------  -----------
NET INCOME                                                    $  503,745  $  494,345   $  444,044
                                                              ==========  ===========  ===========

Earnings per common share
  Basic                                                       $     0.90  $     0.88   $     0.79
  Diluted                                                     $     0.87  $     0.88   $     0.74
</TABLE>


   The accompanying notes are an integral part of these financial statements.
                                       19
<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, 1997             559,328  $   55,933  $5,217,686  $(1,260,907)  $      -

Net income                                   -           -           -      444,044          -   $444,044
Unrealized loss on investment
  securities available for sale net
  of income taxes of ($3,600)                -           -           -            -     (6,987)    (6,987)
                                      --------  ----------  ----------  ------------  ---------  ---------
Comprehensive income                                                                              $437,057
                                                                                                  ========
Stock options exercised                    990          99       9,801            -          -

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)
                                      ========  ==========  ==========  ============  =========
</TABLE>


   The accompanying notes are an integral part of these financial statements.
                                       20
<PAGE>
<TABLE>
<CAPTION>
                                     EASTON BANCORP, INC. AND SUBSIDIARY

                                    CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                           Years Ended December 31,
                                                                       2000          1999           1998
                                                                   ------------  -------------  ------------
<S>                                                                <C>           <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Interest received                                                $ 5,032,585   $  4,059,452   $ 3,506,575
  Proceeds from loan sales                                           5,591,940              -             -
  Fees, commissions, and rent received                                 298,503        290,292       145,640
  Loans originated for sale                                         (5,875,050)       (70,000)            -
  Interest paid                                                     (2,438,592)    (1,849,108)   (1,885,161)
  Payments to suppliers and employees                               (1,902,206)    (1,812,384)   (1,376,221)
  Taxes paid                                                          (206,100)             -             -
                                                                   ------------  -------------  ------------
                                                                       501,080        618,252       390,833
                                                                   ------------  -------------  ------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Loans originated, net of principal repayments                     (8,395,862)   (12,575,193)       50,677
  Receipt of funds held in escrow                                            -      1,175,000             -
  Purchase of investment securities
    Available for sale                                              (4,128,049)    (1,502,035)   (5,772,279)
    Held to maturity                                                         -              -      (250,100)
  Proceeds from calls and maturities of investment securities
    Available for sale                                               2,167,738      1,995,828     1,400,081
    Held to maturity                                                         -              -     1,250,000
  Proceeds from sales of available for sale investment securities    1,263,844              -             -
  Proceeds from sale of other real estate                                    -         61,699             -
  Purchase of premises, equipment, and software                        (85,804)      (144,251)      (44,234)
  Purchase of other real estate                                         (1,330)       (60,450)         (978)
                                                                   ------------  -------------  ------------
                                                                    (9,179,463)   (11,049,402)   (3,366,833)
                                                                   ------------  -------------  ------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Increase (decrease) in
    Time deposits                                                    5,706,197      1,954,334     2,786,249
    Other deposits                                                   4,285,787      1,053,152     3,244,559
    Securities sold under agreements to repurchase                    (210,683)          (352)     (200,471)
  Advances under note payable, net of repayments                    (1,948,401)     2,578,493     1,000,000
  Proceeds from stock options exercised                                      -              -         9,900
  Dividends paid                                                       (28,016)             -             -
                                                                   ------------  -------------  ------------
                                                                     7,804,884      5,585,627     6,840,237
                                                                   ------------  -------------  ------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                  (873,499)    (4,845,523)    3,864,237

Cash and cash equivalents at beginning of year                       3,401,062      8,246,585     4,382,348
                                                                   ------------  -------------  ------------
Cash and cash equivalents at end of year                           $ 2,527,563   $  3,401,062   $ 8,246,585
                                                                   ============  =============  ============
</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
                                      (Continued)

                                                           Years Ended December 31,
                                                         2000       1999        1998
                                                      ----------  ---------  ----------
<S>                                                   <C>         <C>        <C>
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY
   OPERATING ACTIVITIES
     Net income                                       $ 503,745   $494,345   $ 444,044

ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
  PROVIDED BY OPERATING ACTIVITIES
   Provision for credit losses                          172,893    (98,547)    224,281
   Depreciation                                         110,437     94,890      95,790
   Amortization of intangibles                            6,156      2,998      29,386
   Securities amortization, net of accretion            (12,792)     2,363       2,812
   Deferred income taxes                                102,337    260,792    (397,951)
   Gain on sale of other real estate owned                    -     (1,249)          -
   Gain on sales and calls of securities                 10,338          -      (2,227)
   Net loans originated for sale                       (283,110)   (70,000)          -
   Decrease (increase) in
     Accrued interest receivable                        (96,956)   (54,066)      1,833
     Other assets                                       (21,926)    46,920     (34,601)
   Increase (decrease) in
     Deferred loan origination fees                     (30,113)    (7,750)    (22,487)
     Accrued interest payable                            29,805     13,277      (4,369)
     Accrued income taxes, net of prepaid taxes          (1,178)         -           -
     Other liabilities                                   11,444    (65,721)     54,322
                                                      ----------  ---------  ----------
                                                      $ 501,080   $618,252   $ 390,833
                                                      ==========  =========  ==========



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


   The accompanying notes are an integral part of these financial statements.
                                       22
<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.

          The  financial  statements  for  the years ended December 31, 1999 and
     1998,  have  been  restated  to conform to the classifications for the year
     ended  December  31, 2000, which includes the provision for possible losses
     on  unfunded  commitments  as  part of other expenses and the allowance for
     unfunded  commitments  as  other  liabilities.  Prior  to  the change these
     amounts  were  included  in the provision for loan losses and the allowance
     for  loan  losses.

     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 which are sold to an investor. 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.


                                       23
<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.


                                       24
<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
     approximately  $2,094,348,  $1,736,947,  and $5,244,225 for 2000, 1999, and
     1998,  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:

                                                 2000        1999        1998
                                              ----------  ----------  ----------
     Amortized cost                           $4,994,778  $4,321,057  $4,850,613
     Unrealized gains                             16,747           -       7,311
     Unrealized losses                            32,597     117,229      17,898
                                              ----------  ----------  ----------
     Market value                             $4,978,928  $4,203,828  $4,840,026
                                              ==========  ==========  ==========

          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 losses of  $10,338  were  recorded  on  these  sales.

<TABLE>
<CAPTION>
                                      2000                    1999                   1998
                             ======================  ======================  ======================
                             Amortized     Market    Amortized     Market    Amortized     Market
                                cost       value        cost       value        cost       value
                             ----------  ----------  ----------  ----------  ----------  ----------
<S>                          <C>         <C>         <C>         <C>         <C>         <C>
     Due
       One year or less      $  250,000  $  247,930  $        -  $        -  $  449,898  $  451,673
       After one year
         through five years   3,205,948   3,182,139   4,106,822   3,997,034   4,150,155   4,137,728
       After five years               -           -           -           -     250,560     250,625
     Mortgage pass-through
        Securities            1,538,830   1,548,859     214,235     206,794           -           -
                             ----------  ----------  ----------  ----------  ----------  ----------
                             $4,994,778  $4,978,928  $4,321,057  $4,203,828  $4,850,613  $4,840,026
                             ==========  ==========  ==========  ==========  ==========  ==========
</TABLE>

          Securities  totaling  $1,334,095  were  pledged  as  collateral  for
     repurchase  agreements and to secure government deposits as of December 31,
     2000.


                                       25
<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>
                                                              2000         1999         1998
                                                           -----------  -----------  -----------
<S>                                                        <C>          <C>          <C>
     Commercial                                            $10,032,250  $ 7,476,729  $ 4,405,479
     Real estate                                            32,573,488   29,441,565   22,174,739
     Construction                                            5,096,238    3,177,267    2,459,322
     Home equity                                             2,727,880    2,421,584    2,067,068
     Consumer                                                4,474,671    4,054,684    2,725,190
                                                           -----------  -----------  -----------
                                                            54,904,527   46,571,829   33,831,798
     Less deferred loan origination fees, net of deferred
       origination costs                                         9,128       25,135       46,990
     Less allowance for credit losses                          645,501      555,129      490,322
                                                           -----------  -----------  -----------
     Loans, net                                            $54,249,898  $45,991,565  $33,294,486
                                                           ===========  ===========  ===========
</TABLE>

          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                           $11,846,512  $ 7,113,209  $ 3,558,109
     Within one year                        11,460,593   10,914,323   14,121,270
     Over one to five years                 27,440,510   24,736,541   15,728,660
     Over five years                         4,156,912    3,807,756      423,759
                                           -----------  -----------  -----------
                                           $54,904,527  $46,571,829  $33,831,798
                                           ===========  ===========  ===========

          Transactions in the allowance for loan losses are as follows:

     Beginning balance                           $555,129  $ 490,322   $378,000
     Provision charged (credited) to operations   147,643   (114,136)   184,603
     Recoveries                                    15,403    430,068     25,500
                                                 --------  ----------  --------
                                                  718,175    806,254    588,103
     Charge-offs                                   72,674    251,125     97,781
                                                 --------  ----------  --------
     Ending balance                              $645,501  $ 555,129   $490,322
                                                 ========  ==========  ========

          Management  has  identified  no  significant  impaired  loans.


                                       26
<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:

                                                    2000      1999       1998
                                                  --------  --------  ----------
       Nonaccrual
         Commercial                               $ 88,886  $      -  $   64,707
         Mortgage                                  228,499   100,000   2,184,971
         Installment                                39,510     8,770      68,574
                                                  --------  --------  ----------
                                                  $356,895  $108,770  $2,318,252
                                                  ========  ========  ==========

       Interest not accrued                       $ 28,931  $  4,658  $  237,114
                                                  ========  ========  ==========
       Loans past due ninety days or more,
         still accruing interest                  $ 97,984  $  4,942  $   25,022
                                                  ========  ========  ==========

          The  interest  not  accrued in 1998 includes $113,226 of interest from
     the  nonaccrual  loan  which  was  paid  off  from the loan payment held in
     escrow.

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

    Construction loans                        $3,438,181  $1,561,318  $1,639,393
    Lines of credit, including home equities   4,912,511   3,456,452   2,012,998
    Overdraft protection lines                   306,314     275,035     186,670
    Standby letters of credit                    410,636      86,244     535,166
                                              ----------  ----------  ----------
                                              $9,067,642  $5,379,049  $4,374,227
                                              ==========  ==========  ==========

          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.


                                       27
<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     2000       1999        1998
                                         ------------  ----------  ----------  ----------
<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   1,298,872
     Furniture, fixtures, and equipment    5-10 years     703,428     663,715     542,701
                                                       ----------  ----------  ----------
                                                        2,343,654   2,303,941   2,177,296
     Accumulated depreciation                             673,635     609,289     515,169
                                                       ----------  ----------  ----------
     Net premises and equipment                        $1,670,019  $1,694,652  $1,662,127
                                                       ==========  ==========  ==========

     Depreciation expense                              $  110,437  $   94,890  $   95,790
                                                       ==========  ==========  ==========
</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:

                                                   Minimum
                             Period                rentals
                            --------            -------------

                              2001              $      29,595
                              2002                     29,595
                              2003                     29,595
                              2004                     20,930
                              2005                      1,800
                                                -------------
                                                $     111,515
                                                =============


          Rent  expense  was  $29,595 for 2000, $16,221 for 1999, and $3,600 for
     1998.


                                       28
<PAGE>
                       EASTON BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements


7.   DEPOSITS

          Major  classifications  of  interest-bearing  deposits are as follows:


                                               2000         1999         1998
                                           -----------  -----------  -----------

       Money market and NOW                $15,424,518  $11,673,854  $ 9,008,316
       Savings                               3,371,237    3,915,780    4,523,794
       Other time                           33,274,071   27,858,566   25,904,232
                                           -----------  -----------  -----------
                                           $52,069,826  $43,448,200  $39,436,342
                                           ===========  ===========  ===========

          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:

       Three months or less                  $ 3,748,299  $4,224,208  $1,890,405
       Three to twelve months                  4,127,645   1,814,162   1,949,654
       One to five years                       3,644,410   1,888,262   1,238,331
                                             -----------  ----------  ----------
                                             $11,520,354  $7,926,632  $5,078,390
                                             ===========  ==========  ==========

       Interest expense                      $   659,468  $  291,479  $  265,607
                                             ===========  ==========  ==========

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 and maintained in the custody of
     the  Company.  Additional  information  is  as  follows:

<TABLE>
<CAPTION>
                                                                    2000      1999       1998
                                                                  --------  ---------  ---------
<S>                                                               <C>       <C>        <C>
     Maximum amount outstanding                                   $77,808   $387,868   $540,941
     Average amount outstanding                                    50,836    139,200    466,466
     Average rate paid during the year                               3.99%      3.79%      4.81%
     Investment securities underlying the agreements at year end
       Carrying value                                             $99,875   $317,212   $426,649
       Estimated fair value                                        99,875    317,212    426,649
</TABLE>

9.   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 2000, 1999, and 1998, the Board of Directors approved
     contributions  that  totaled  $9,492,  $6,583,  and  $4,794,  respectively,
     matching  25%  of  employee  contributions.

          In  January  2001,  the  Bank  purchased  bank  owned  life insurance,
     investing  $1,225,000  in  the  policy. The policy was purchased to provide
     supplemental  retirement  benefits  for  an  executive officer of the Bank.


                                       29
<PAGE>
                       EASTON BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements


10.  NOTES PAYABLE AND LINES OF CREDIT

          The  Company  may  borrow  up to $9,033,000 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:

            Maturity                          Interest
               date        Rate      Balance  frequency
           -----------  ---------  ---------  ---------

         June 23, 2008     5.51%     1,000,000  Quarterly
     February 11, 2019     5.00%       630,092   Monthly
                                     ----------
                                    $1,630,092
                                    ===========

          These  notes  will  require  principal  repayments  as  follows:

                         Period                              Amount
                         ------                          -------------
                          2001                           $       7,217
                          2002                                   7,739
                          2003                                   8,299
                          2004                                   8,900
                          2005                                   9,542
                    remaining balance                        1,588,395
                                                         -------------
                                                         $   1,630,092
                                                         =============

          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.

11.  INCOME  TAXES

          The  components  of income tax expense, including taxes related to the
     change  in  accounting  method  for  organization  costs,  are  as follows:

                                        2000      1999       1998
                                      --------  --------  ----------

        Current
          Federal                     $162,724  $      -  $       -
          State                         42,199         -          -
                                      --------  --------  ----------
                                       204,923         -          -
        Deferred                       102,336   260,792   (397,951)
                                      --------  --------  ----------
                                      $307,259  $260,792  $(397,951)
                                      ========  ========  ==========


                                       30
<PAGE>
                       EASTON BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements


11.  INCOME  TAXES  (Continued)

          The components of the deferred tax benefit are as follows:

                                          2000       1999       1998
                                        ---------  --------  ----------
       Provision for credit losses      $(84,280)  $ 33,506  $ (37,508)
       Net operating loss carryforward   132,368    184,216    119,137
       Deferred loan origination fees          -          -        992
       Start-up costs                          -          -      8,238
       Depreciation                       19,226      7,075     (1,256)
       Cash method of accounting          35,022     35,995    (22,708)
       Reverse valuation allowance             -          -   (464,846)
                                        ---------  --------  ----------
                                        $102,336   $260,792  $(397,951)
                                        =========  ========  ==========

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

<TABLE>
<CAPTION>
<S>                                                               <C>       <C>       <C>
       Deferred tax assets
         Allowance for credit losses                              $213,131  $128,851  $162,357
         Net operating loss carryforward                                 -   132,368   316,584
         Unrealized loss on securities available for sale            5,388    39,858     3,600
                                                                 ---------  --------  --------
                                                                   218,519   301,077   482,541
                                                                 ---------  --------  --------
       Deferred tax liabilities
         Depreciation                                               70,582    51,356    44,281
         Cash method of accounting                                 107,726    72,704    36,709
                                                                 ---------  --------  --------
                                                                   178,308   124,060    80,990
                                                                 ---------  --------  --------
       Net deferred tax asset                                    $  40,211  $177,017  $401,551
                                                                 =========  ========  ========
</TABLE>

          The  statutory  federal  income  tax  rate was 34% for 2000, 1999, and
     1998.  The  provision  (benefit) for income taxes is reconciled as follows:

<TABLE>
<CAPTION>
<S>                                                      <C>        <C>       <C>
     Income before income taxes                          $811,004   $755,137   $46,093
                                                         ---------  --------  ----------

       Tax provision at statutory rates                  $275,741   $256,747  $  15,671
       Increase (decrease) resulting from
         State income taxes, less federal benefit          33,989          -          -
         Nondeductible expenses                             4,161      4,045      2,313
         Recognize change in expected tax reversal rate    (7,751)         -          -
         Net operating loss carryover and adjustment of
           valuation allowance                                  -          -   (415,935)
         Other                                              1,119          -          -
                                                         ---------  --------  ----------
       Provision (benefit) for income taxes              $307,259   $260,792  $(397,951)
                                                         =========  ========  ==========
</TABLE>


                                       31
<PAGE>
                       EASTON BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements


12.  OTHER  OPERATING  EXPENSES

          Other  operating  expenses  are  comprised  as  follows:

                                              2000      1999      1998
                                            --------  --------  --------

       Advertising                          $ 51,713  $ 47,446  $ 41,667
       Professional fees                      85,258   109,104    72,110
       Data processing                       138,047   103,784    84,332
       Deposit assessment                     10,085     4,896     4,620
       Insurance                              11,891    13,042    13,023
       Loan reports and collection costs      12,517    10,095     6,598
       Provision for loan commitments         25,250    15,589    39,678
       Organizational expense amortization         -         -    23,482
       Postage                                38,456    30,677    27,128
       Proxy and transfer agent costs         17,061    16,911    16,762
       Software amortization                   6,155     2,998     5,904
       Stationery and supplies                72,819    72,800    46,339
       Telephone                              29,807    28,781    17,225
       Training                               19,277    22,103    13,024
       Travel and entertainment               26,967    33,358    13,658
       Other                                  94,829    74,426    58,688
                                            --------  --------  --------
                                            $640,132  $586,010  $484,238
                                            ========  ========  ========


13.  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:

                                              2000         1999         1998
                                          ------------  -----------  -----------

       Beginning balance                  $ 1,686,228   $2,018,872   $2,052,138
       Advances                             1,059,786      267,372      412,312
       Repayments                          (1,034,124)    (581,341)    (393,577)
       Other changes                          (20,107)     (18,675)     (52,001)
                                          ------------  -----------  -----------
       Ending balance                     $ 1,691,783   $1,686,228   $2,018,872
                                          ============  ===========  ===========


          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,  2000.

          The Company engaged a firm owned by one of the organizers to construct
     the Bank's main office and remodel the second floor. The general contractor
     was  paid  $5,631  in  1999  and  $457  in  1998.


                                       32
<PAGE>
                       EASTON BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements


13.  RELATED  PARTY  TRANSACTIONS  (CONTINUED)

          During  2000,  1999,  and  1998,  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.

14.  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:

              Shares                                      2000    1999    1998
      -------------------------------                    ------  ------  -------

       Outstanding, beginning of year                    56,000       -   8,390
       Granted                                                -  56,000       -
       Exercised                                              -       -    (990)
       Forfeited                                              -       -  (7,400)
                                                         ------  ------  -------

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

       Total vested                                      11,200   5,600       -
                                                         ======  ======  =======

          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.


                                       33
<PAGE>
                       EASTON BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements


14.  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:

                                              1999
                                             ------

       Dividend yield                         0.00%
       Risk-free interest rate                5.75%
       Expected volatility                   33.01%
       Expected life in years                 10.5

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

                                                     1999
                                                   --------

       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

15.  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:

                                       2000      1999      1998
                                     --------  --------  --------

       Net income                    $503,745  $494,345  $444,044
       Basic EPS shares               560,318   560,318   560,071
       Basic EPS                     $   0.90  $   0.88  $   0.79
       Dilutive shares                 15,634     3,862    41,966
       Dultes EPS shares              575,952   564,180   602,037
       Diluted EPS                   $   0.87  $   0.88  $   0.74


                                       34
<PAGE>
                       EASTON BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements


16.  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  as  noted:

<TABLE>
<CAPTION>
                                                 2000                      1999                      1998
                                     ------------------------------------------------------------------------------
                                         Carrying      Fair       Carrying       Fair       Carrying       Fair
                                          amount       value       amount        value       amount        value
                                     ------------------------------------------------------------------------------
<S>                                  <C>            <C>          <C>          <C>          <C>          <C>
     Financial assets
       Loans, net                    $  54,249,898  $54,153,821  $45,991,565  $46,017,471  $33,294,486  $33,310,996

     Financial liabilities
       Interest-bearing deposits
        and securities sold under
        agreements to repurchase     $  52,139,810  $52,368,199  $43,728,867  $44,018,746  $39,717,361  $41,076,792
       Notes payable                     1,630,092    1,579,782    3,578,493    3,578,493    1,000,000    1,000,000
</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.


                                       35
<PAGE>
                       EASTON BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements


17.  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, 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%

       December 31, 1998
       ------------------
    Total capital
      (to risk-weighted assets)             $ 4,691   13.7%  $ 2,733    8.0%  $ 3,417   10.0%
    Tier 1 capital
      (to risk-weighted assets)             $ 4,263   12.5%  $ 1,367    4.0%  $ 2,050    6.0%
    Tier 1 capital
      (to average fourth
        quarter assets)                     $ 4,263    8.8%  $ 1,943    4.0%  $ 2,429    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.


                                       36
<PAGE>
                       EASTON BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements


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                                              2000         1999         1998
                                                         -----------  -----------  -----------
<S>                                                      <C>          <C>          <C>
                                         Assets

  Cash                                                   $   42,843   $    5,988   $   40,648
  Investment in subsidiary                                5,368,717    4,797,526    4,350,689
  Refundable taxes                                           14,709            -            -
  Deferred income taxes                                           -       80,116       68,332
                                                         -----------  -----------  -----------
            Total assets                                 $5,426,269   $4,883,630   $4,459,669
                                                         ===========  ===========  ===========

                           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)                             153,211     (322,518)    (816,863)
                                                         -----------  -----------  -----------
                                                          5,436,730    4,961,001    4,466,656
  Accumulated other comprehensive income                    (10,461)     (77,371)      (6,987)
                                                         -----------  -----------  -----------
        Total stockholders' equity                        5,426,269    4,883,630    4,459,669
                                                         -----------  -----------  -----------
        Total liabilities and stockholders' equity       $5,426,269   $4,883,630   $4,459,669
                                                         ===========  ===========  ===========
</TABLE>

<TABLE>
<CAPTION>
STATEMENTS OF INCOME                              Years Ended December 31,
                                                  2000      1999      1998
                                                --------  --------  --------
<S>                                             <C>       <C>       <C>
  Interest revenue                              $  1,955  $    556  $  1,921
  Dividends                                       28,016         -         -
  Equity in undistributed income of subsidiary   504,280   517,221   412,035
                                                --------  --------  --------
                                                 534,251   517,777   413,956
                                                --------  --------  --------

  Expenses
    Furniture and equipment                           54        49        68
    Other                                         45,161    35,167    38,176
                                                --------  --------  --------
                                                  45,215    35,216    38,244
                                                --------  --------  --------
  Income before income taxes                     489,036   482,561   375,712
  Income tax benefit                              14,709    11,784    68,332
                                                --------  --------  --------
  Net income                                    $503,745  $494,345  $444,044
                                                ========  ========  ========
</TABLE>


                                       37
<PAGE>
                       EASTON BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements


18.  PARENT  COMPANY  FINANCIAL  INFORMATION  (Continued)

<TABLE>
<CAPTION>
                                                             Years Ended December 31,
  STATEMENTS OF CASH FLOWS                                 2000        1999        1998
                                                        ----------  ----------  ----------
<S>                                                     <C>         <C>         <C>
  CASH FLOWS FROM OPERATING ACTIVITIES
    Interest received                                   $   1,955   $     556   $   1,921
    Dividends received                                     28,016           -           -
    Taxes received                                         80,116           -           -
    Cash paid for operating expenses                      (45,216)    (35,216)    (35,664)
                                                        ----------  ----------  ----------
                                                           64,871     (34,660)    (33,743)
                                                        ----------  ----------  ----------
  CASH FLOWS FROM FINANCING ACTIVITIES
    Dividends paid                                        (28,016)          -           -
    Proceeds from options exercised                             -           -       9,900
                                                        ----------  ----------  ----------
                                                          (28,016)          -       9,900
                                                        ----------  ----------  ----------

  NET INCREASE (DECREASE) IN CASH                          36,855     (34,660)    (23,843)
                                                        ----------  ----------  ----------

  Cash at beginning of year                                 5,988      40,648      64,491
                                                        ----------  ----------  ----------
  Cash at end of year                                   $  42,843   $   5,988   $  40,648
                                                        ==========  ==========  ==========

  RECONCILIATION OF NET INCOME TO NET CASH
    PROVIDED BY OPERATING ACTIVITIES
     Net income                                         $ 503,745   $ 494,345   $ 444,044
     Adjustments to reconcile net income to net
       cash provided by (used in) operating activities
       Undistributed net income of subsidiary            (504,280)   (517,221)   (412,035)
       Deferred income taxes                               80,116     (11,784)    (68,332)
       Increase in other assets                           (14,710)
       Amortization                                             -           -       2,580
                                                        ----------  ----------  ----------
                                                        $  64,871   $ (34,660)  $ (33,743)
                                                        ==========  ==========  ==========
</TABLE>


                                       38
<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>
  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

  1998
  ----
  Interest revenue              $     918,254   $      920,983   $  857,747  $  829,660
  Interest expense                    482,515          488,958      461,264     448,055
  Net interest income                 435,739          432,025      396,483     381,605
  Provision for loan losses            51,806           81,292       24,892      26,613
  Net income                           63,880          343,547        9,018      27,599
  Comprehensive income                 54,198          347,835        7,425      27,599
  Earnings per share - basic    $        0.11   $         0.61   $     0.02  $     0.05
  Earnings per share - diluted  $        0.10   $         0.57   $     0.02  $     0.05
</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."


                                       39
<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                                EASTERN  SHORE  RETIREMENT  ASSOCIATES

JERRY  L.  WILCOXON,  CPA                CERTIFIED  PUBLIC  ACCOUNTANT
TREASURER                                ANTHONY  &  WALTER,  C.P.A.

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

J.  PARKER  CALLAHAN,  JR.               FARMER

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

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

DAVID  F.  LESPERANCE                    PRESIDENT,
                                         LESPERANCE  CONSTRUCTION  COMPANY

VINODRAI  MEHTA,  MD                     PHYSICIAN,  VINODRAI  MEHTA,  MD

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

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

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


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


                                       40
<PAGE>
                      DIRECTORS, OFFICERS AND ASSOCIATES OF
                           EASTON BANK & TRUST COMPANY

                                    DIRECTORS
                                    ---------

                               W. DAVID HILL, DDS
                              CHAIRMAN OF THE BOARD

                      SHEILA A. WAINWRIGHT, CPS - SECRETARY



          JACK H. BISHOP, DDS                WILLIAM R. HOUCK, DDS
          J. PARKER CALLAHAN, JR.            M. LINDA KILDEA
          CHARLES T. CAPUTE                  PAMELA H. LAPPEN
          WALTER E. CHASE, SR.               DAVID F. LESPERANCE
          STEPHEN W. CHITTY                  VINODRAI MEHTA, MD
          DELIA B. DENNY                     R. MICHAEL S. MENZIES, SR.
          J. FREDRICK HEATON, DMD            ROGER A. ORSINI, MD
          JEFFREY N. HEFLEBOWER              MARIAN H. SHANNAHAN
          THOMAS E. HILL                     MAHMOOD S. SHARIFF, MD
          WILLIAM C. HILL                    JAMES B. SPEAR, SR.

                                    OFFICERS
                                    --------

          R. MICHAEL S. MENZIES, SR.         JEFFREY N. HEFLEBOWER
          PRESIDENT/CHIEF EXECUTIVE OFFICER  EXECUTIVE VICE PRESIDENT

          DELIA B. DENNY                     PAMELA A. MUSSENDEN
          EXECUTIVE VICE PRESIDENT           SENIOR VICE PRESIDENT/TREASURER

          BARBARA M. OSTRANDER               ROSE K. KLECKNER
          VICE PRESIDENT                     VICE PRESIDENT

          SUSAN D. HASCHEN                   KATHLEEN A. KURTZ
          ASSISTANT TREASURER                VICE PRESIDENT

          ELIZABETH A. SANDERSON             TERRI L. BRANNOCK
          SENIOR MORTGAGE OFFICER            ASSISTANT TREASURER

          STEVEN D. DROBYSH                  JACQUELINE D. WILSON
          VICE PRESIDENT                     ASSISTANT TREASURER


                                   ASSOCIATES
                                   ----------

                    ROXANNE M. ATWATER, OPERATIONS ASSISTANT
               MARCY L. BLAZEJAK, CUSTOMER SERVICE REPRESENTATIVE
                WENDY A. BUCKLER, CREDIT ADMINISTRATIVE ASSISTANT
              ROCHELLE L. CORKELL, CUSTOMER SERVICE REPRESENTATIVE
                   BRENDA L. FORBES, ADMINISTRATIVE ASSISTANT
               BEVERLY A. FORT, FINANCIAL SERVICE REPRESENTATIVE
                   LESTA R. GUNTHER, OPERATIONS ADMINISTRATOR
                ERIC L. HONTZ, FINANCIAL SERVICE REPRESENTATIVE
                ANNE H. HUGHES, CREDIT ADMINISTRATIVE ASSISTANT
                       PATRICIA E. HURLEY, RECEPTIONIST
                 LAURA M. KING, CUSTOMER SERVICE REPRESENTATIVE
          TRACY T. LEDNUM, CUSTOMER SERVICE REPRESENTATIVE SUPERVISOR
                  AMY C. LYNCH, CREDIT ADMINISTRATIVE ASSISTANT
                  S. CAMILLE A. PECORAK, INFORMATION MANAGER
            KIMBERLY D. RADA, SENIOR CUSTOMER SERVICE REPRESENTATIVE
                       BRENDA S. RASH, OPERATIONS ASSISTANT
                KELLY A. REED, FINANCIAL SERVICE REPRESENTATIVE
              AVONDA N.F. ROUNDS, CUSTOMER SERVICE REPRESENTATIVE
              BRIDGET A. SCHETTINI, CUSTOMER SERVICE REPRESENTATIVE
               SHERRY L. WINSTEAD, CUSTOMER SERVICE REPRESENTATIVE


                                       41
<PAGE>