Exhibit 99



                                 [INSERT LOGO]

                     180 Admiral Cochrane Drive, Suite 300
                           Annapolis, Maryland 21401
                                 (410) 224-4455

March 20, 1998

Dear Shareholder:

     You are cordially invited and encouraged to attend the Annual Meeting of
Shareholders (the "Annual Meeting") of Annapolis National Bancorp, Inc. (the
"Company"), the holding company for Annapolis National Bank (the "Bank"), which
will be held on April 23, 1998, at 6:00 p.m., Eastern Daylight Savings Time, at
the Annapolis Holiday Inn, 210 Holiday Court, Annapolis, Maryland 21401.
Cocktails and hors d'oeuvres will be served.

     The attached Notice of the Annual Meeting and the Proxy Statement describe
the formal business to be transacted at the Annual Meeting. Directors and
officers of Annapolis National Bancorp, Inc., as well as a representative of
Rowles & Company, LLP, the Company's independent auditors, will be present at
the Annual Meeting to discuss the Company and the Bank and respond to any
questions that our shareholders may have.

     The Board of Directors of Annapolis National Bancorp, Inc. has determined
that the matters to be considered at the Annual Meeting are in the best
interests of the Company and its shareholders. FOR THE REASONS SET FORTH IN THE
PROXY STATEMENT, THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" EACH
MATTER CONSIDERED.

     PLEASE SIGN AND RETURN THE ENCLOSED PROXY CARD PROMPTLY. YOUR COOPERATION
IS APPRECIATED SINCE A MAJORITY OF THE COMPANY'S COMMON STOCK MUST BE
REPRESENTED, EITHER IN PERSON OR BY PROXY, TO CONSTITUTE A QUORUM FOR THE
CONDUCT OF BUSINESS.

     On behalf of the Board of Directors and all of the employees of the Company
and the Bank, I thank you for your continued interest and support.

Sincerely yours,

/s/ John W. Marhefka, Jr.
--------------------------
John W. Marhefka, Jr.
Chief Executive Officer

<PAGE>
                        ANNAPOLIS NATIONAL BANCORP, INC.
                          ---------------------------
                 NOTICE OF 1998 ANNUAL MEETING OF STOCKHOLDERS
                          TO BE HELD ON APRIL 23, 1998
                          ---------------------------

     NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Annapolis
National Bancorp, Inc. ("Company") will be held on April 23, 1998, at 6:00 p.m:
local time, at the Annapolis Holiday Inn, 210 Holiday Court, Annapolis, Maryland
21401, for the following purposes:

     (1) To elect four directors.

     (2) To approve the selection of Rowles & Company, LLP as independent
auditors for the fiscal year ending December 31, 1998; and

     (3) To transact any other business that may properly come before the
meeting, and any adjournments thereof, including whether or not to adjourn the
meeting.

     Only those holders of record of Common Stock as of the close of business on
March 12, 1998, (the "Record Date") are entitled to notice of and to vote at the
1998 Annual Meeting of Stockholders and any adjournments or postponements
thereof.

     Please sign, date and mail the accompanying proxy in the enclosed,
self-addressed, stamped envelope, whether or not you expect to attend the
meeting in person. You may withdraw your proxy at the meeting should you be
present and desire to vote your shares in person. All shareholders are cordially
invited to attend.

                                          By Order of the Board of Directors

                                          /s/ Lori J. Mueller
                                          ---------------------
                                          LORI J. MUELLER
                                          Secretary

Annapolis, Maryland
March 20, 1998

<PAGE>
                        ANNAPOLIS NATIONAL BANCORP, INC.
                          ---------------------------
                                PROXY STATEMENT
                         ANNUAL MEETING OF SHAREHOLDERS
                                 APRIL 23, 1998
                          ---------------------------

SOLICITATION AND VOTING OF PROXIES

     This Proxy Statement is being mailed on or about March 20, 1998, to the
stockholders of Annapolis National Bancorp, Inc. (the "Company") in connection
with the solicitation by the Board of Directors of proxies to be used at the
Annual Meeting of Stockholders to be held on April 23, 1998, at 6:00 p.m. local
time, and at any adjournments or postponements thereof, at the Annapolis Holdiay
Inn, 210 Holiday Court, Annapolis, Maryland 21401.

     Regardless of the number of shares of common stock owned, it is important
that record holders of a majority of the shares be represented by proxy or in
person at the Annual Meeting. Shareholders are requested to vote by completing
the enclosed proxy card and returning it signed and dated in the enclosed
postage-paid envelope. Shareholders are urged to indicate their vote in the
spaces provided on the proxy card. PROXIES SOLICITED BY THE BOARD OF DIRECTORS
OF THE COMPANY WILL BE VOTED IN ACCORDANCE WITH THE DIRECTIONS GIVEN THEREIN.
WHERE NO INSTRUCTIONS ARE INDICATED, SIGNED PROXY CARDS WILL BE VOTED FOR THE
APPROVAL AND RATIFICATION OF THE SPECIFIC PROPOSALS PRESENTED IN THIS PROXY
STATEMENT.

     Other than the matters listed on the attached Notice of Annual Meeting of
Shareholders, the Board of Directors knows of no additional matters that will be
presented for consideration at the Annual Meeting. EXECUTION OF A PROXY,
HOWEVER, CONFERS ON THE DESIGNATED PROXY HOLDERS DISCRETIONARY AUTHORITY TO VOTE
THE SHARES IN ACCORDANCE WITH THEIR BEST JUDGMENT ON SUCH OTHER BUSINESS, IF
ANY, THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING AND AT ANY ADJOURNMENTS
THEREOF, INCLUDING WHETHER OR NOT TO ADJOURN THE ANNUAL MEETING.

     A proxy may be revoked at any time prior to its exercise by filing a
written notice of revocation with the Corporate Secretary of the Company, by
delivering to the Company a duly executed proxy bearing a later date, or by
attending the Annual Meeting and voting in person. However, if you are a
shareholder whose shares are not registered in your own name, you will need
appropriate documentation from your record holder to vote personally at the
Annual Meeting.

     The cost of solicitation of proxies on behalf of management will be borne
by Annapolis National Bank (the "Bank"). Proxies may be solicited personally or
by telephone by directors, officers and other employees of the Company and its
subsidiary, the Bank, without compensation therefor. The Company will also
request persons, firms and corporations holding shares in their names, or in the
name of their nominees, which are beneficially owned by others, to send proxy
material to and obtain proxies from such beneficial owners, and the Bank will
reimburse such holders for their reasonable expenses in doing so.

VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF

     Stockholders are entitled to one vote for each share of common stock, par
value $.01 per share (the "Common Stock") registered in their names on the stock
transfer books of the Company at the close of business on March 12, 1998, the
record date fixed by the Board of Directors. At March 12, 1998, the Company had
outstanding 2,312,306 shares of Common Stock entitled to vote at the Annual
Meeting.

                                       1

<PAGE>
     As to the election of a director, the proxy card being provided by the
Board of Directors enables a shareholder to vote "FOR" the election of the
nominee proposed by the Board of Directors, or to "WITHHOLD" authority to vote
for the nominee being proposed. Under the Company's Bylaws, directors are
elected by a plurality of votes cast, without regard to either (i) broker
non-votes, or (ii) proxies as to which authority to vote for the nominee being
proposed is withheld.

     As to the ratification of Rowles & Company, LLP as independent auditors of
the Company and all other matters that may properly come before the Annual
Meeting, by checking the appropriate box, you may: (i) vote "FOR" the item; (ii)
vote "AGAINST" the item; or (iii) "ABSTAIN" with respect to the item. Under the
Company's Bylaws, unless otherwise required by law, all such matters shall be
determined by a majority of the votes cast, without regard to either (i) broker
non-votes, or (ii) proxies marked "ABSTAIN" as to that matter.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth information regarding the beneficial
ownership of Common Stock as of March 12, 1998, the Record Date, by each of the
Company's and Bank's directors and nominees and by each person known by the
Company to own beneficially more than 5% of the Company's voting securities, and
by the officers and directors of the Company as a group, including the number of
shares beneficially owned by, and percentage ownership of each such person as of
that date. Other than those persons listed below, the Company is not aware of
any person, as such term is defined in the Securities Exchange Act of 1934, as
amended, that owns more than 5% of the Company's Common Stock as of the Record
Date.

<TABLE>
<CAPTION>
                                                                                           NUMBER OF       PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER                                                    SHARES OWNED(1)      CLASS
------------------------------------                                                    ---------------    ----------
<S>                                                                                     <C>                <C>
Ronald E. Gardner....................................................................         25,000           1.07%
1405 Goldenrain Drive
Crofton, Md. 21114

Stanley H. Katsef....................................................................         29,150           1.25%
2703 Coriander Place
Edgewater, Md. 21037

Stanley J. Klos, Jr..................................................................         20,000           0.86%
76 Chautaugua Road
Arnold, Md. 21012

Lawrence E. Lerner...................................................................        881,453          37.85%
2711 Washington Avenue
Chevy Chase, Md. 20815

Richard M. Lerner....................................................................        100,000           4.29%
5447 Grove Ridge Way
Rockville, Md. 20852

Dimitri P. Mallios...................................................................         12,000           0.52%
3204 Ellicott Street, N.W.
Washington, D.C. 20008

John W. Marhefka, Jr. (2)............................................................         74,290           3.19%
1905 White Heron Road
Annapolis, Md. 21401

Albert Phillips......................................................................         18,500           0.79%
118 Riverside Drive
Cambridge, Md. 21613

Lawrence W. Schwartz.................................................................         18,566           0.80%
10854 Country Pond Lane
Oakton, Va. 22124
Officers and directors as a group (14)...............................................      1,189,292          51.07%
</TABLE>

                                       2

<PAGE>
---------------

(1) Information relating to beneficial ownership of Common Stock is based upon
    "beneficial ownership" concepts set forth in rules of the SEC under Section
    13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
    Act"). Under these rules, a person is deemed to be a "beneficial owner" of a
    security if that person has or shares "voting power" which includes the
    power to vote or direct the voting of such security, or "investment power"
    which includes the power to dispose or to direct the disposition of such
    security. A person is deemed to be a beneficial owner of any security of
    which that person has the right to acquire beneficial ownership within sixty
    days. Under the rules, more than one person may be deemed to be a beneficial
    owner of the same securities, and a person may be deemed to be a beneficial
    owner of securities in which he has no beneficial interest. For instance,
    beneficial ownership may include spouses, minor children and other relatives
    residing in the same household, and trusts, partnerships, corporations, or
    deferred compensation plans which are affiliated with the principal. Unless
    otherwise indicated by footnote, each individual has sole voting and
    dispositive powers to all shares indicated.

(2) Includes options to purchase 10,000 and 6,600 shares of Company Common Stock
    which are currently exercisable at an exercise price of $5.00 per share and
    $10.38 per share, respectively, and are deemed to be outstanding for the
    purpose of computing the percentage of outstanding Common Stock beneficially
    owned by all directors and executive officers as a group.

                    PROPOSALS TO BE VOTED ON AT THE MEETING

                       PROPOSAL 1. ELECTION OF DIRECTORS

     The Board of Directors of the Company currently consists of nine (9)
directors. The Company's Articles of Incorporation provide that the Board of
Directors shall be divided into three classes, as nearly equal in number as the
then total number of directors constituting the entire board shall permit, with
directors of each class being elected for three-year terms at each Annual
Meeting. The terms of three directors of the Company will expire at the time of
the Annual Meeting of Stockholders. The positions of these three directors are
to be filled at the Annual Meeting of Stockholders. Therefore, three incumbent
directors have been nominated to be elected to hold office until the 2001 Annual
Meeting of Stockholders or until their respective successors are elected and
qualified or until their earlier resignation or removal. The nominees are
Stanley J. Klos, Jr., Richard M. Lerner and John W. Marhefka, Jr.

     At a Board of Directors' meeting on April 25, 1997, pursuant to authority
contained under the Company's Articles of Incorporation and Bylaws, the
directors elected Stanley H. Katsef to the Board. Consistent with the laws of
the State of Maryland, Mr. Katsef will stand for election by the stockholders at
this Annual Meeting of Stockholders. Mr. Katsef has been nominated to be elected
and hold office as members of the class of directors whose terms are expected to
expire at the 2000 Annual Meeting of Stockholders or until his respective
successor is elected and qualified or until his earlier resignation or removal.

     The proxies solicited hereby, unless directed to the contrary, will be
voted FOR the election as directors of all four nominees listed in the following
table. In order to be elected, a majority of the shares voted must be voted FOR
the election of each nominee. Each nominee has consented to serve as a director,
if elected. The Board of Directors has no reason to believe that any nominee
will be unwilling or unable to serve as a director but, if for any reason any
nominee is not willing or able to serve as a director, the accompanying proxy
will be voted FOR a substitute nominee chosen by the Board of Directors.

     THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE FOUR
NOMINEES NAMED IN THIS PROXY STATEMENT.

                                       3

<PAGE>
INFORMATION CONCERNING NOMINEES

     The following table sets forth information as of the Record Date concerning
persons nominated by the Board of Directors for election as directors of the
Company to serve until the 2001 Annual Meeting of Stockholders or until their
successors have been elected and qualified or until their earlier resignation or
removal. Except as indicated, the nominees have been officers of the
organizations named below or of affiliated organizations as their principal
occupations for more than five years.

NOMINEES

<TABLE>
<CAPTION>
NAME OF DIRECTORS                          AGE, PRINCIPAL OCCUPATION, POSITION WITH THE COMPANY AND THE BANK
-----------------                     ---------------------------------------------------------------------------
<S>                                   <C>

Stanley J. Klos, Jr.................  Mr. Klos, age 46, has been a practicing attorney in Anne Arundel and Prince
                                      George's Counties since 1977. He is currently a principal of the Annapolis
                                      law firm of Klos & Selle, P.A. He is a member of the Maryland, District of
                                      Columbia, Anne Arundel County, and Prince George's County Bar Associations.
                                      He has been a Director of the Company and the Bank since April 1997. Mr.
                                      Klos is active in community affairs and serves on the Boards of Directors
                                      of Leadership Anne Arundel, the American Heart Association Anne Arundel
                                      County Chapter and the Anne Arundel County YMCA.

Richard M. Lerner...................  Mr. Lerner, age 38, has been President of White Flint Builders, Inc. since
                                      1984. White Flint Builders, Inc. is located in Bethesda, Maryland and is
                                      engaged in high-end residential development and construction. He has been a
                                      Director of the Company and the Bank since their inception. Richard Lerner
                                      is the son of Lawrence E. Lerner, a Director of the Company and the Bank.

John W. Marhefka, Jr................  Mr. Marhefka, age 43, was appointed Chief Executive Officer and Vice
                                      President of the Company and President and Chief Executive Officer of the
                                      Bank on February 21, 1997. He has held high level positions in the Maryland
                                      financial institution industry since 1978. Most recently, he was a founder
                                      of Annapolis Bancshares, Inc. and Bank of Annapolis in 1988. As President
                                      and Chief Executive Officer of those companies, he led them through more
                                      than seven years of earnings and asset growth before they merged with Sandy
                                      Spring Bancorp, Inc. in 1996. Mr. Marhefka also served as Chairman of the
                                      Board of both companies from 1988 to 1992. He is active in community
                                      affairs and serves on the Board of Directors of Leadership Anne Arundel.
</TABLE>

                                       4

<PAGE>
     The following table sets forth information as of the Record Date concerning
the person elected as a director of the Company by the Board of Directors
subsequent to the 1997 Annual Meeting of Stockholders. This person has been
nominated by the Board of Directors for election as members of the class of
directors of the Company whose terms are expected to expire at the 2000 Annual
Meeting of Stockholders or until their successors have been elected and
qualified or until their earlier resignation or removal.

<TABLE>
<CAPTION>
NAME OF NOMINEE                            AGE, PRINCIPAL OCCUPATION, POSITION WITH THE COMPANY AND THE BANK
---------------                       ---------------------------------------------------------------------------
<S>                                   <C>
Stanley H. Katsef...................  Mr. Katsef, age 53, became a Director and Vice Chairman of the Board of the
                                      Company and the Bank in April 1997. He was previously a founding Director
                                      of Annapolis Bancshares, Inc. and Bank of Annapolis in 1988, where he
                                      served as Chairman of the Board and a full-time employee of both companies
                                      from 1992 to 1996. Mr. Katsef was the owner of Katsef Sales, Inc., an
                                      Annapolis based distributor of janitorial supply products until July 1,
                                      1990.
</TABLE>

INFORMATION CONCERNING CONTINUING DIRECTORS

     The following table sets forth information as of the Record Date concerning
directors of the Company whose terms of office will continue after the 1998
Annual Meeting of Stockholders. As indicated, some directors will serve until
the 1999 Annual Meeting of Stockholders, and other directors will serve until
the 2000 Annual Meeting of Stockholders. Except as indicated, the directors have
been officers of the organizations named below or of affiliated organizations as
their principal occupations for more than five years.

DIRECTORS SERVING UNTIL 1999

<TABLE>
<CAPTION>
NAME OF DIRECTORS                          AGE, PRINCIPAL OCCUPATION, POSITION WITH THE COMPANY AND THE BANK
-----------------                     ---------------------------------------------------------------------------
<S>                                   <C>
Ronald E. Gardner...................  Mr. Gardner, age 44, was an owner, Director and Vice President of E.L.
                                      Gardner, Inc. from 1969 to 1996, at which time he sold his interest in the
                                      company and resigned. He was responsible for day to day operations of E.L.
                                      Gardner, Inc., which is a producer of ready mix concrete in Anne Arundel
                                      County. He has been a Director of the Company and the Bank since April
                                      1997. Mr. Gardner is also an Officer and Director of Arundel Management
                                      Corporation located in Annapolis, Maryland, a real estate and management
                                      company and President and principal owner of Washington Street Pub located
                                      in Easton, Maryland.
Lawrence E. Lerner..................  Mr. Lerner, age 65 has been active in real estate development in the
                                      Washington, D.C. metropolitan area for 30 years. He has been involved in
                                      the development and construction of two regional shopping centers, several
                                      other commercial developments, and more than 2,800 apartment units. Mr.
                                      Lerner manages his real estate investments, comprised of various
                                      partnership interests in entities which own real estate. He has been a
                                      Director of the Company and the Bank since their inception. Mr. Lerner is
                                      the father of Richard M. Lerner, a Director of the Company and Bank.
</TABLE>

                                       5

<PAGE>
<TABLE>
<CAPTION>
NAME OF DIRECTORS                          AGE, PRINCIPAL OCCUPATION, POSITION WITH THE COMPANY AND THE BANK
-----------------                     ---------------------------------------------------------------------------
<S>                                   <C>
Lawrence W. Schwartz................  Mr. Schwartz, age 43, is a certified public accountant who has operated CPA
                                      firms since 1984 and is currently Managing Partner of Schwartz, Albert &
                                      Company, Chartered, a CPA firm based in Bethesda, Maryland. Additionally,
                                      he was Executive Vice President and Chief Financial Officer of Federal
                                      Supply Contracts Group, Inc., a reseller of furniture to the government,
                                      from 1993 to 1995. Mr. Schwartz has been a Director of the Company since
                                      April 1997 and a Director of the Bank since its inception.
</TABLE>

DIRECTORS SERVING UNTIL 2000

<TABLE>
<S>                                   <C>
Dimitri P. Mallios..................  Mr. Mallios, age 65, is an attorney who has practiced law since 1960, and
                                      is a member of the Bars of the State of Maryland and the District of
                                      Columbia. He is presently a senior partner of the law firm of Margolius,
                                      Mallios, Davis, Rider & Tomar, located in Washington, D.C. Mr. Mallios has
                                      been a Director of the Company and the Bank since their inception.

Albert Phillips.....................  Mr. Phillips, age 71, has been the Chairman of the Board of The Phillips
                                      Corporation, a manufacturer and supplier of manufacturing technology
                                      products headquartered in Columbia, Maryland since 1963. He has been a
                                      Director of the Company and the Bank since their inception. Mr. Phillips
                                      serves as Chairman of the Board of the Company and the Bank as well as
                                      President of the Company.
</TABLE>

COMMITTEES

     The Company and the Bank have standing Audit, Compensation, Executive,
Facilities and Nominating Committees of the Board of Directors. The members of
each of the named committees serve at the discretion of the Board of Directors.

     The Audit Committee consists of Messrs. Gardner, Katsef, and Schwartz and
reviews and reports to the Board of Directors on examinations of the Bank and
its subsidiaries by regulatory authorities, recommends independent accountants
for appointment by the Boards of the Company and the Bank, reviews the scope of
the work of the independent accountants and their reports, and reviews the
activities and actions of the Bank's internal auditors. The Audit Committee met
one time during 1997.

     The Compensation Committee, formed on April 25, 1997, consists of Messrs.
Gardner, Klos, R. Lerner and Mallios, and Mr. Marhefka as a non-voting member,
and reviews and determines salaries and other benefits for executive and senior
management of the Company and its subsidiaries, reviews and determines employees
to whom stock options are to be granted and the terms of such grants, and
reviews the selection of officers who participate in incentive and other
compensatory plans and arrangements. The Compensation Committee met three times
during 1997.

     The Executive Committee consists of Messrs. Katsef, L. Lerner, R. Lerner,
Mallios, Marhefka, Phillips, Schwartz and Klos (alternate) and considers new
loan applications which are in excess of the limits granted by the Board of
Directors to the Officers Loan Committee. The Executive Committee met twenty
three (23) times during 1997.

     The Facilities Committee, formed on November 20, 1997, consists of Messrs.
Gardner, Katsef, R. Lerner and Marhefka and advises the Board on matters
concerning branching, facilities, and relocations. The Facilities Committee did
not meet during 1997.

                                       6

<PAGE>
     The Nominating Committee, consisting of the full Board of Directors,
nominates persons for election to the Board of Directors of the Company and the
Bank. The Nominating Committee will consider shareholder recommendations
submitted to it in writing in care of the Company. The Nominating Committee met
one time during 1997.

DIRECTORS' COMPENSATION

     The Board of Directors of the Company and the Bank held twelve (12)
meetings during 1997. All of the directors of the Company with the exception of
Director Lawrence E. Lerner attended at least 75% of the total number of the
board meetings held and committee meetings of which such director served during
1997. The Company pays no board or committee fees. Members of the Bank's
Executive Committee received a fee of $400 per month during 1997. The Bank paid
no other board or committee fees during 1997. Directors of the Bank began
receiving fees for each board and committee meeting attended in 1998 in the
amount of $200 per Board of Directors meeting, $150 per Executive Committee
meeting, and $100 per other committee meeting. Mr. Marhefka and Mr. Katsef,
receive no fees for attendance at board or committee meetings.

EXECUTIVE COMPENSATION

     The following table sets forth the compensation paid or allocated to the
Chief Executive Officer for services rendered to the Company and the Bank in all
capacities during the years ended December 31, 1995, 1996 and 1997. No other
executive officers of the Company or the Bank received total salary and bonus in
excess of $100,000 in 1995, 1996 and 1997.

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                                                              LONG-TERM COMPENSATION
                                                                         ---------------------------------
                                              ANNUAL COMPENSATION                AWARDS            PAYOUTS
                                          ----------------------------   -----------------------   -------
                                                                OTHER                 SECURITIES                ALL
                                                               ANNUAL    RESTRICTED   UNDERLYING               OTHER
                                                               COMPEN-     STOCK       OPTIONS/     LTIP      COMPEN-
                                           SALARY     BONUS    SATION      AWARDS        SARS      PAYOUTS    SATION
              NAME                 YEAR     ($)        ($)     ($)(3)       ($)          (#)         ($)        ($)
---------------------------------  -----  --------   -------   -------   ----------   ----------   -------   ---------
<S>                                <C>    <C>        <C>       <C>       <C>          <C>          <C>       <C>
John W. Marhefka, Jr. (1)........   1997  $113,715   $16,979   $3,551     $     --      16,600     $   --     $    --
Richard J. Morgan (2)............   1997    72,302        --       --           --          --         --       1,827(4)
                                    1996   105,000        --       --           --          --         --       2,307(4)
                                    1995    93,720    30,000       --           --          --         --          --
</TABLE>

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

(1) Mr. Marhefka became Chief Executive Officer and Vice President of the
    Company and President and Chief Executive Officer of the Bank on February
    21, 1997.

(2) Mr. Morgan resigned from his position of Chief Executive Officer and Vice
    President of the Company and President and Chief Executive Officer of the
    Bank effective February 20, 1997.

(3) Represents the personal use of a Company automobile.

(4) Represents amounts contributed to Mr. Morgan by the Bank's 401(k) Plan for
    1997 and 1996.

    For 1997, 1996 and 1995, there were no (a) perquisites over the lesser of
    $50,000 or 10% of the individual's total salary and bonus for the years; (b)
    payments of above market preferential earnings on deferred compensation; (c)
    payments of earnings with respect to long term incentive plans prior to
    settlement or maturation; (d) tax payment reimbursements; or (e)
    preferential discounts in stock.

                                       7

<PAGE>
EMPLOYMENT AGREEMENT

     On February 21, 1997, the Bank and Mr. Marhefka entered into a five year
employment agreement (the "Employment Agreement"). Pursuant to the Employment
Agreement, Mr. Marhefka receives a base salary of $132,500 per year, and such
base salary increases on each anniversary of the Employment Agreement by an
amount determined by multiplying the then base salary by the annual percentage
increase of the most recently released Consumer Price Index for Urban Consumers.
Additionally, the Bank provides and maintains an automobile for Mr. Marhefka's
use.

     Pursuant to the Employment Agreement, on April 25, 1997, Mr. Marhefka was
granted incentive stock options to purchase 10,000 shares of Company Common
Stock at an exercise price of $5.00 per share. In addition, Mr. Marhefka will
have an opportunity to be granted additional options at the close of each
calendar year during the term of the Employment Agreement (the "Annual
Options"). The exercise price of the Annual Options will be granted at not less
than the fair market value of the Company's Common Stock at the close of the
calendar year and the number of Annual Options will be determined as a function
of the Company's return on average equity ("ROE") for the calendar year. Should
the Company's ROE for the calendar year be calculated greater than the specified
target, the amount of Annual Options to be granted will be 1,000 plus 10
additional options for each 0.01% by which the Company's ROE exceeds the
specified target for that calendar year.

     Pursuant to the Employment Agreement, the Bank may pay a bonus to Mr.
Marhefka following the close of each calendar year during the term of the
Employment Agreement (the "Annual Bonus"). The amount of each Annual Bonus will
be calculated as 5% of the amount by which the Company's ROE exceeds the
specified target during that calendar year.

     No Annual Options or Annual Bonus will be paid for any calendar year in
which (i) the Company's ROE is less than the specified target during that year,
or (ii) the amount of the Bank's non-performing assets, as defined in the
Employment Agreement, exceeds 0.75% of its total assets at the end of the
calendar year just completed, or (iii) the amount of the Bank's allowance for
loan losses is less than 150% of its non-accrual loans after deducting any
portion thereof which are government guaranteed.

     Pursuant to the Employment Agreement, the Bank has reimbursed State Capital
Bancorp, Inc. $50,000 in expenses related to a public offering of State Capital
Bancorp, Inc. which was abandoned by Mr. Marhefka in order to accept employment
with the Bank. Mr. Marhefka was the sole stockholder of State Capital Bancorp,
Inc.

     The Employment Agreement may be terminated by either party with or without
"cause". The Employment Agreement provides that, except in certain
circumstances, if Mr. Marhefka terminates the Employment Agreement by voluntary
resignation, or his employment is terminated without cause, Mr. Marhefka will
not, without the Bank's written consent, participate or be connected with any
competing institution that has offices or does business in Anne Arundel County,
Maryland for the remaining term of the Employment Agreement, not to exceed one
year in the case of resignation, or eight months if employment is terminated
without cause. The Employment Agreement further provides that if the Bank
terminates the Employment Agreement for any reason, other than for "cause" or
due to Mr. Marhefka's death, disability or resignation, Mr. Marhefka will be
paid an amount equal to his base salary for the twelve months immediately
preceding termination of the Employment Agreement. Notwithstanding the above, in
the event of a "change in control" of the Companies (as defined in the
Employment Agreement), Mr. Marhefka will have the option within six months of
the "change in control" to continue under the terms of the Employment Agreement
with the consent of the Bank, enter into a new employment agreement with the
Bank, on mutually agreeable terms, or receive a payment equal to one and
one-half (1.5) times the base salary and bonus earned during the preceding
twelve month period. The Employment Agreement does not provide benefits to Mr.
Marhefka in the event of his death or disability, his discharge by the Companies
for "cause," or his resignation.

                                       8

<PAGE>
STOCK OPTION PLAN

     The Company maintains an Employee Stock Option Plan (the "Option Plan") as
an inducement to attract, retain, and motivate qualified officers. The option
plan provides for discretionary awards of up to an aggregate of 100,000 options
to purchase Company Common Stock to officers and key employees of the Bank as
determined by a committee of disinterested directors at the fair market value of
the Common Stock on the date of grant. The Option Plan is not qualified under
Section 401(a) of the Internal Revenue Code and is not subject to any provisions
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
The Option Plan was approved by the Company's stockholders on April 25, 1997,
therefore, no grants were made in 1996. During 1997 the Company granted Mr.
Marhefka options to purchase 10,000 shares and 6,600 shares of Company Common
Stock at an exercise price of $5.00 and $10.38 per share respectively.
Additionally, during 1997, the Company granted to other officers options to
purchase an aggregate of 54,000 shares of Company Common Stock at exercise
prices ranging from $6.00 to $9.88 per share. These options are subject to a
vesting schedule and will become exercisable in five equal annual installments
beginning one year from the date of grant. The Company intends to grant
additional options to certain key Bank employees in the future, however, the
timing and amount of such grants has yet to be determined. All such options will
be granted at not less than the fair market value of the Common Stock at the
time of the grant.

STOCK OPTION GRANTS

     The following table lists all grants of options under the Stock Option Plan
to the Named Executive Officers for 1997.

                       OPTIONS GRANTS IN LAST FISCAL YEAR

                               INDIVIDUAL GRANTS

<TABLE>
<CAPTION>
                                                                NUMBER OF       % OF TOTAL
                                                                SECURITIES     OPTION/SARS      EXERCISE
                                                                UNDERLYING      GRANTED TO         OR
                                                               OPTIONS/SARS    EMPLOYEES IN    BASE PRICE    EXPIRATION
NAME                                                              GRANTED       FISCAL YEAR       ($/SH)       DATE(1)
----                                                           ------------    ------------    ----------    ----------
<S>                                                            <C>             <C>             <C>           <C>
John W. Marhefka, Jr........................................      10,000           14.2%         $ 5.00        2/21/07
                                                                   6,600            9.4%         $10.38       12/31/07
</TABLE>

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

(1) The option term is 10 years.

STOCK OPTION EXERCISES AND HOLDINGS

     There were no stock options exercised during 1997. The following table
reflects the number of shares covered by all remaining unexercised stock options
which were exercisable as of December 31, 1997. Also reported are the values for
"in-the-money" options which represent the difference between the exercise price
of any such remaining unexercised options and the year-end market price of the
Common Stock.

                                       9

<PAGE>
              AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
                      AND FISCAL YEAR-END OPTION/SAR VALUE

<TABLE>
<CAPTION>
                                              NUMBER OF SECURITIES                  VALUE OF UNEXERCISED
                                             UNDERLYING UNEXERCISED              IN-THE-MONEY OPTIONS/SARS
                                          OPTIONS/SARS AT FY-END(#)(1)                AT FY-END($)(2)
                                      ------------------------------------  ------------------------------------
NAME                                        EXERCISABLE/UNEXERCISABLE             EXERCISABLE/UNEXERCISABLE
----                                  ------------------------------------  ------------------------------------
<S>                                   <C>                                   <C>
John W. Marhefka, Jr................                16,600/0                             $55,792/0
</TABLE>

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

(1) 10,000 options have an exercise price of $5.00 per share and 6,600 options
    have an exercise price of $10.38 and are immediately exercisable. The
    options will expire on February 21, 2007 and December 31, 2007 respectively,
    ten (10) years from the date of grant.

(2) Based on market value of the underlying stock at fiscal year-end minus the
    exercise price. The closing price of the Common Stock on December 31, 1997
    was $10.50.

OTHER COMPENSATION PLANS

     Executive officers participate in the Bank's qualified 401K retirement plan
on the same terms as non-executive employees who meet the applicable eligibility
criteria, subject to any legal limitations on the amounts that may be
contributed or the benefits that may be payable under these plans. In addition,
all full-time employees are covered as a group for comprehensive
hospitalization, including major medical, long-term disability and dismemberment
insurance and group term life insurance. Additionally, executive officers of the
Bank participate in incentive compensation plans based on the accomplishment of
specific performance goals as established by the Compensation Committee.

CERTAIN TRANSACTIONS WITH MANAGEMENT

     The Bank grants loans to directors and officers in the normal course of
business. The Bank has adopted a policy which requires that all loans or
extensions of credit to executive officers and directors must be made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with the general public and
must not involve more than the normal risk of repayment or present other
unfavorable features.

     In June 1990, Mr. Lawrence E. Lerner, a director of the Company and Bank,
made a $3.2 million unsecured loan to the Company which accrued interest at a
rate of the Bank's prime rate less 2.0%. In December 1994, 907,143 shares of
Company Common Stock were issued to Mr. Lerner in exchange for retirement of the
principal portion of the debt. A new note was issued to Mr. Lerner in the amount
of $848,000 to cover the accrued interest portion of the loan that remained
outstanding, which note accrued interest at the WSJ prime rate plus 1.0%. The
Company repayed the debt owed to Mr. Lerner in full using a portion of the
proceeds from its initial public offering which closed on September 30, 1997.

                    PROPOSAL 2. TO APPROVE THE SELECTION OF
                     INDEPENDENT AUDITORS FOR THE YEAR 1998

     The Board of Directors of the Company has appointed the firm of Rowles &
Company LLP, certified public accountants, as independent auditors for the
Company for the year 1998, subject to the approval of the stockholders. Rowles &
Company LLP, which has served as independent auditors for the Company and the
Bank since April 25, 1997, has advised the Company that neither the firm nor any
of its partners or associates has any direct financial interest in or any
connection with the Company or any of its subsidiaries other than as independent
auditors. Representatives of Rowles & Company LLP are expected to be present at
the Annual Meeting and will have the opportunity to make a statement if they
desire to do so and to respond to appropriate questions.

                                       10

<PAGE>
     For the year ended December 31, 1996 the Company's financial statements
were audited by C.W. Amos & Company. C.W. Amos & Company was replaced on April
25, 1997 and Rowles & Company, LLP was engaged and continues as the independent
auditors of the Company. The decision to change auditors was approved by the
Board of Directors of the Company and Bank. The financial statements of the
Company and its subsidiaries as of December 31, 1996 and for each of the two
years in the period ended December 31, 1996 were audited by C.W. Amos & Company.

     For the two year period ended December 31, 1996 and up to the date of
replacement of C.W. Amos & Company, there were no disagreements with C.W. Amos &
Company on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure which, not resolved to the
satisfaction of C.W. Amos & Company, would have caused it to make reference to
the subject matter of the disagreement in connection with its report. The
independent auditors' report on the financial statements for the year ended
December 31, 1996 did not contain an adverse opinion or a disclaimer of opinion,
and was not qualified or modified as to uncertainty, audit scope or accounting
principles.

     Proxies will be voted FOR the Proposal unless otherwise instructed by the
Stockholders.

     THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF ROWLES & COMPANY LLP AS ITS INDEPENDENT AUDITORS TO THE COMPANY
FOR THE YEAR ENDING DECEMBER 31, 1998.

                             ADDITIONAL INFORMATION

STOCKHOLDER PROPOSALS -- 1999 ANNUAL MEETING

     Any proposal of a stockholder intended to be presented at the 1999 Annual
Meeting of the Company must be received by the Company at 180 Admiral Cochrane
Drive, Suite 300, Annapolis, Maryland 21401 prior to November 21, 1998, to be
eligible for inclusion in the proxy statement and form of proxy. In order to
curtail controversy as to compliance with this requirement, stockholders are
urged to submit proposals to the Secretary of the Company by Certified
Mail-Return Receipt Requested. Any such proposal will be subject to 17 C.F.R.
(section mark)240.14a-8 of the Rules and Regulations under the Exchange Act.

                                 ANNUAL REPORTS

     THE COMPANY'S 1997 ANNUAL REPORT TO STOCKHOLDERS ACCOMPANIES THIS PROXY
STATEMENT. COPIES OF THE REPORTS MAY BE OBTAINED UPON WRITTEN REQUEST TO THE
SECRETARY OF THE COMPANY, 180 ADMIRAL COCHRANE DRIVE, SUITE 300, ANNAPOLIS,
MARYLAND 21401, AND WILL BE AVAILABLE AT THE ANNUAL MEETING.

                                          By Order of the Board of Directors

                                          /s/ Lori J. Mueller
                                          ----------------------
                                          LORI J. MUELLER
                                          Secretary

Annapolis, Maryland
March 20, 1998

                                       11

<PAGE>
<TABLE>
<S> <C>
                                                                                                                  ___
[X] PLEASE MARK VOTES            REVOCABLE PROXY                                                                     |
    AS IN THIS EXAMPLE    ANNAPOLIS NATIONAL BANCORP, INC.
                                                                                                       With-  For All
                                                                                                For    hold    Except
    ANNUAL MEETING OF SHAREHOLDERS                              1. ELECTION AS DIRECTORS, to    [ ]     [ ]     [ ]
           APRIL 23, 1998                                          elect four (4) nominees as
                                                                   directors listed below (except
  The undersigned hereby appoints the                              as marked to the contrary below)
  official Proxy Committee of the Board
  of Directors of Annapolis National                               Stanley J. Klos, Jr., Richard M.
  Bancorp, Inc. with full powers of                                Lerner, John W. Marhefka, Jr. and
  substitution, as attorneys and proxies                           Stanley H. Katsef
  for the undersigned, to vote all shares
  of common stock of Annapolis National                            INSTRUCTION: To withhold authority to vote for any
  Bancorp, Inc. which the undersigned is                           individual nominee, mark "Except" and write that
  entitled to vote at the Annual Meeting                           nominee's name in the space provided below.
  of Shareholders, to be held at the                               ___________________________________________________
  Annapolis Holiday Inn, 210 Holiday Court,
  Annapolis, Maryland 21401 on Thursday,
  April 23, 1998, at 6:00 p.m., Eastern                                                         For  Against  Abstain
  Daylight Savings Time, and at any and                         2. To approve the selection of  [ ]    [ ]      [ ]
  all adjournments thereof, as indicated                           Rowles & Company, LLP as
  to the right:                                                    independent auditors for the
                                                                   fiscal year ending December 31,
                                                                   1998;

                                                                   The Board of Directors recommends a vote "FOR" the
                                                                above proposals.

                                                                   THIS PROXY, PROPERLY SIGNED AND DATED, WILL BE VOTED
                                                                AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
                                                                PROXY WILL BE VOTED FOR THE PROPOSAL STATED, IF ANY OTHER
                                              -----------       BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE
  Please be sure to sign and date             | Date    |       VOTED BY THOSE NAMED IN THIS PROXY IN THEIR BEST JUDGMENT.
    this Proxy in the box below.              |         |       AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO
---------------------------------------------------------       OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
                                                        |
                                                        |       THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
                                                        |
--Stockholder sign above--Co-holder (if any) sign above--
+                                                                                                                        +
--------------------------------------------------------------------------------------------------------------------------
         (up arrow) Detach above card, sign, date and mail in postage paid envelope provided. (up arrow)

                                           ANNAPOLIS NATIONAL BANCORP, INC.

--------------------------------------------------------------------------------------------------------------------------
    Should the above signed be present and elect to vote at the Annual Meeting of Shareholders or at any adjournment
  thereof and after notification to the Secretary of the Corporation at the Meeting of the shareholder's decision to
  terminate this proxy, then the power of said attorneys and proxies shall be deemed terminated and of no further force
  and effect.
    The above signed acknowledges receipt from the Corporation, prior to the execution of this proxy, of the Notice of
  the Annual Meeting of Shareholders, a proxy statement for the Annual Meeting of Shareholders, and an Annual Report to
  Shareholders.
    Please sign exactly as your name appears on this proxy card. When signing as attorney, executor, administrator,
  trustee or guardian, please give your full title. If share are held jointly, only one signature is required but each
  holder should sign, if possible.

                                                  PLEASE ACT PROMPTLY
                                        SIGN, DATE & MAIL YOUR PROXY CARD TODAY
--------------------------------------------------------------------------------------------------------------------------
</TABLE>