Page 11 of Annual Report

Southern Financial Bancorp. Inc.
Financial statements As of
December 31, 1996 and 1995
Together with Auditors' Report

Report of Independent Public Accountants

To the Board of Directors of
Southern Financial Bancorp, Inc.:

We have audited the accompanying consolidated statements of condition of
Southern Financial Bancorp, Inc. (a Virginia corporation) as of December 31,
1996 and 1995, and the related consolidated statements of income, changes
in stockholders' equity and
cash flows for the year ended December 31, 1996, for the six months ended
December 31, 1995, and for the year ended June 30, 1995. These financial
statements are the responsibility of the Bancorp'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 an 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 financial statements referred to above present fairly,
in all material respects, the financial position of Southern Financial
Bancorp, Inc. as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for the year ended December 31, 1996, for the
six months ended December 31, 1995, and for the year ended June 30, 1995,
in conformity with generally accepted
accounting principles.


Washington, D.C.,
February 4, 1997


Page 12 of Annual Report   

Consolidated Statements of Condition
As of December 31, 1996 and 1995



Assets                                             Dec. 31, 1996  Dec. 31,1995

Cash and due from banks                               $4,004,149    $3,894,884
Overnight earning deposits                             2,395,574     1,795,902
Investment securities, available-for-sale              4,205,287     2,827,625
Investment securities, held-to-maturity
  (estimated market value of $2,001,875
   and $0, respectively)                               2,000,000             -
Mortgage-backed securities, available-for-sale           894,332     1,045,098
Mortgage-backed securities, held-to-maturity
  (estimated market value of $62,972,202 and
   $45,674,350, respectively)                         63,217,243    45,997,777
Loans held for sale                                      444,500       170,000
Loans receivable, net                                108,286,903   104,251,481
Federal Home Loan Bank stock, at cost                    867,600       950,000
Bank premises and equipment, net                       1,487,446     1,146,553
Interest receivable                                    1,328,551     1,167,022
Real estate owned                                        340,023       357,023
Other assets                                           1,337,114     1,197,385
Total assets                                        $190,808,722  $164,800,750

Liabilities and Stockholders' Equity               Dec. 31, 1996 Dec. 31, 1995
Liabilities:		
Deposits                                            $164,279,105  $143,813,686
Advances from Federal Home Loan Bank                   8,500,000     4,000,000
Advances from borrowers for taxes and insurance          105,292       113,631
Other liabilities                                      1,523,373     1,098,362
Total liabilities                                    174,407,770   149,025,679
Commitments		
Stockholders' equity:		
	6% Cumulative convertible preferred stock,
 	$.01 par value, 500,000 shares authorized,
 	15,634 shares issued and outstanding,
	$241,193 aggregate liquidation preference,
        respectively                                        156            166
Common stock, $.01 par value,
	5,000,000 shares authorized,
	1,594,122 and 1,564,248 shares issued
	and outstanding, respectively, as
        of December 31, 1996                             15,941         13,912
Capital in excess of par value                       15,276,373     12,796,014
Retained earnings                                     1,655,575      3,050,284
Net unrealized gain on securities available-for-sale    (76,006)        14,685
Treasury stock, at cost                                (471,087)       (99,990) 
Total stockholders' equity                           16,400,952     15,775,071
Total liabilities and stockholders' equity         $190,808,722   $164,800,750

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

Page 13 of Annual Report

Consolidated Statements of Income
For the Year Ended December 31, 1996,
For the Six Months Ended December 31, 1995, and
For the Year Ended June 30, 1995

                                                         Six Months
                                            Year Ended     Ended    Year Ended
                                               Dec. 31,   Dec. 31,    June 30,
                                                1996        1995        1995
Interest income:			
   Loans                                   $10,308,273  $4,967,233  $7,523,092
   Mortgage-backed securities and
      other investments                      4,306,296   1,763,665   3,503,555
           Total interest  income           14,614,569   6,730,898  11,026,647
Interest expense:			
   Deposits                                  7,433,334   3,439,788   5,232,831
   Borrowings                                  342,078     189,675     698,457
           Total interest expense            7,775,412   3,629,463   5,931,288
Net interest income                          6,839,157   3,101,435   5,095,359
Provision for loan losses                      695,000     150,000      60,000
Net interest income after provision
   for loan losses                           6,144,157   2,951,435   5,035,359
Other income:			
   Gain on sale of loans                       209,962     108,846     267,728
   Fee income                                  886,747     302,992     503,693
   Gain on sale of mortgage-backed
      securities, net -                              -      63,208           -
      Other                                     89,553      39,301      43,063
           Total other income                1,186,262     514,347     814,484
Other expense:			
   Employee compensation and benefits        2,147,974     907,371   1,579,581
   Premises and equipment                    1,591,235     637,105   1,012,374
   Deposit insurance assessments             1,085,536     174,145     276,816
   Professional fees                            93,223      84,209     100,294
   Other                                       989,139     513,233     746,991
           Total other expense               5,907,107   2,316,063   3,716,056
Income before income taxes                   1,423,312   1,149,719   2,133,787
Provision for income taxes                     469,600     414,400     833,070
Net income                                 $   953,712  $  735,319  $1,300,717
Earnings per common share:			
   Primary earnings per share                   $ 0.59      $ 0.46      $ 0.82

   Fully diluted earnings per share             $ 0.59      $ 0.46      $ 0.81
Weighted average shares outstanding          1,546,179   1,508,370   1,505,016

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

Page 14 of Annual Report
<TABLE>
Consolidated Statements of Changes in Stockholders' Equity
For the Year Ended December 31, 1996,
For the Six Months Ended December 31, 1995, and
For the Year Ended June 30, 1995
<CAPTION>	

                                                                               Net Unrealized
                                                                 Capital in                        Gain (Loss)         Total
                                        Preferred  Common       Excess of   Retained     Treasury  on Securities       Stockholders'
                                          Stock    Stock        Par Value   Earnings      Stock    Available for-sale  Equity
<S>                                       <C>      <C>          <C>         <C>           <C>      <C>                 <C>
Balance, June 30, 1994                    $174     $7,454,696   $3,364,588  $3,242,751         $-   $(43,601)           $14,018,608
  Dividends on preferred                                                                        
    and common stock                         -              -            -    (258,477)        -          -               (258,477)
  Conversion of preferred                                                                     
  shares to common stock                    (8)         6,032       (6,024)          -         -          -                      -
  Options exercised                          -          8,000        4,080           -         -          -                 12,080
  Four-for-three stock split                                                                   
  effected in the form of a dividend         -      2,488,720   (2,488,720)          -         -          -                      -
  Stock dividend of 10%                      -        995,744      809,041  (1,804,785)        -          -                      -
  Net unrealized gain on                                                                    
  securities available-for-sale              -              -            -           -         -     99,895                 99,895
  Net income                                 -              -            -   1,300,717         -          -              1,300,717
Balance, June 30, 1995                     166     10,953,192    1,682,965   2,480,206         -     56,294             15,172,823
  Dividends on preferred                                                                     
  and common stock                           -              -            -    (165,241)        -          -               (165,241)
  Options exercised                          -         58,811      114,958           -         -          -                173,769
  Treasury stock                             -              -            -           -   (99,990)         -                (99,990)
  Net unrealized loss on                                                                      
  securities available-for-sale              -              -            -           -         -    (41,609)               (41,609)
  Change in par value to 0.01 per share      -    (10,998,091)  10,998,091           -         -          -                      -
  Net income                                 -              -            -     735,319         -          -                735,319
Balance, December 31, 1995                 166         13,912   12,796,014   3,050,284   (99,990)    14,685             15,775,071
  Dividends on preferred                                                                       
  and common stock                           -              -            -    (360,971)        -          -               (360,971)
  Conversion of preferred                                                                   
  shares to common stock                   (10)            16           (6)          -         -          -                      -
  Options exercised                          -            594      494,778           -         -          -                495,372
  Stock dividend of 10%                      -          1,419    1,985,587  (1,987,006)        -          -                      -
  Treasury stock                             -              -            -        (444) (371,097)         -               (371,541)
  Net unrealized gain on                                                                   
  securities available-for-sale              -              -            -           -         -    (90,691)               (90,691)
  Net income                                 -              -            -     953,712         -          -                953,712
Balance, December 31, 1996                $156        $15,941  $15,276,373  $1,655,575 $(471,087)  $(76,006)           $16,400,952
</TABLE>
The accompanying notes are an integral part of these financial statements.

Page 15 of annual Report

Southern Financial Bancorp, Inc.
Consolidated Statements of Cash Flows
For the Year Ended December 31, 1996,
For the Six Months Ended December 31, 1995, and
For the Year Ended June 30, 1995
                                                         Six Months
                                            Year Ended     Ended    Year Ended
                                             Dec. 31,     Dec. 31,    June 30,
                                               1996         1995         1995
Cash flows from operating activities:			
  Net income                            $    953,712 $    735,319 $  1,300,717
  Adjustments to reconcile net income to
  net cash provided by operating activities-               
    Depreciation and amortization            251,249      141,577      451,660
    Provision for loan losses                695,000      150,000       60,000
    (Benefit) provision for
    deferred income taxes                    (13,849)      61,488       53,590
    Gain on sale of loans                   (209,962)    (108,846)    (267,728)
    Loss on real estate owned                 17,000       30,000            -
    Gain on sale of securities, net                -      (63,208)           -
    Amortization of deferred loan fees      (431,247)    (290,978)    (652,294)
    Originations of loans held for sale  (10,676,888)  (4,328,475) (11,613,600)
    Proceeds from sales of loans          10,612,350    4,422,321   12,324,528
    Increase in interest receivable         (161,529)    (112,442)    (381,240)
    Increase in other assets                 (94,036)    (562,596)    (144,454)
    Increase (decrease) in other
    liabilities                              438,861      (46,886)     343,113
       Net cash provided by
       operating activities                1,380,661       27,274    1,474,292
Cash flows from investing activities:			
Net  fundings of loans receivable         (4,299,175) (12,030,737) (24,530,444)
Purchases of investment securities        (3,499,810)  (1,807,000)    (381,630)
Purchases of mortgage-backed securitie   (28,927,466)  (3,151,005) (10,271,977)
Sales of mortgage-backed securities
available-for-sale                                 -    4,848,694            -
Paydowns of mortgage-backed securities    11,844,529    4,439,860    6,373,360
(Increase) decrease in overnight
earning deposits, net                       (599,672)   1,104,111     (404,563)
Investment in real estate owned                    -            -     (387,023)
Increase in bank premises
and equipment, net                          (592,142)     (41,942)    (433,014)
Decrease (increase) in Federal
Home Loan Bank stock                          82,400      (82,400)    (136,100)
       Net cash used in investing
       activities                        (25,991,336)  (6,720,419) (30,171,391)
Cash flows from financing activities:			
  Increase in deposits, net               20,465,419    6,134,062   37,117,664
  Increase (decrease) in advances from
  Federal Home Loan Bank                   4,500,000    1,000,000   (5,500,000)
  Decrease in advances from borrowers
  for taxes and insurance                     (8,339)     (89,780)     (21,674)
  Net proceeds from stock options exercised  495,372      173,768       12,080
  Repurchase of common stock                (371,541)     (99,990)           -
  Dividends on preferred and common stock   (360,971)    (165,240)    (258,477)
       Net cash provided by financing
       activities                         24,719,940    6,952,820   31,349,593
Net increase in cash and due from banks      109,265      259,675    2,652,494
Cash and due from banks,
beginning of period                        3,894,884    3,635,209      982,715
Cash and due from banks, end of period  $  4,004,149 $  3,894,884 $  3,635,209

Page 16 of annual Report

Notes to Consolidated Financial Statements
As of December 31, 1996 and 1995

1. Organization and Significant Accounting Policies:
Southern Financial Bancorp, Inc. (the "Bancorp"), was incorporated in the
state of Virginia on December 1, 1995.  On December 1, 1995, the Bancorp
acquired all of the outstanding shares of the Southern Financial Bank (the
"Bank").  The Bank, formerly Southern Financial Federal Savings Bank,
converted from a savings bank to a state chartered commercial bank
effective December 1, 1995.  The amounts presented as of June 30, 1995, and
for the year ended June 30, 1995 represent the financial position and
results of operations of Southern Financial Federal Savings Bank.
The principal activities of the Bank are to attract deposits, originate
loans and conduct mortgage banking activities as permitted for state
chartered banks by applicable regulations.  The Bank conducts full-service
banking operations in Fairfax, Herndon, Leesburg, Middleburg, Warrenton,
Winchester and Woodbridge, Virginia.
The accounting and reporting policies of the Bancorp are in accordance with
generally accepted accounting principles and conform to general practices
within the banking industry.  The more significant of these policies are
discussed below. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reported period.  Actual results could differ from
those estimates.

Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Bancorp and the Bank as of December 31, 1996 and 1995, and for the year
ended December 31, 1996, and for the six months ended December 31, 1995.
All significant intercompany accounts and transactions have been
eliminated.

Cash and Due From Banks and Overnight Earning Deposits
Amounts represent actual cash balances held by or due to the Bank.

Investment and Mortgage-Backed Securities
The Bancorp accounts for its investment and mortgage-backed securities in
accordance with Statement of Financial Accounting Standards ("SFAS") No.
115, "Accounting for Certain Investments in Debt and Equity Securities."
Investments in debt securities are classified as held-to-maturity when the
Bancorp has the positive intent and ability to hold those securities to
maturity.  Held-to-maturity investments are measured at amortized cost.
The amortization of premiums and accretion of discounts are computed using
a method that approximates the level yield method.  Investment and
mortgage-backed securities classified as available-for-sale are reported at
fair value, with unrealized gains and losses excluded from earnings and
reported as a separate component of stockholders' equity on an after-tax
basis.  Trading securities are reported at fair value with unrealized gains
and losses included in earnings.  The specific identification method is
used to determine gains or losses on sales of investment and
mortgage-backed securities.

Loans Held for Sale
Mortgage loans originated which are intended for sale in the secondary
market are carried at the lower of cost or estimated market value in the
aggregate.

Impaired Loans
Effective July 1, 1995, the Bancorp implemented SFAS No. 114, "Accounting
by Creditors for Impairment of a Loan" and SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan - Income Recognition and Disclosures."
A loan is considered impaired when, based on all current information and
events, it is probable that the Bancorp will be unable to collect all
amounts due according to the contractual terms of the agreement, including
all scheduled principal and interest payments.  Such impaired loans are
measured based on the 

Page 17 of Annual Report

present value of expected future cash flows,
discounted at the loan's effective interest rate or, as a practical
expedient, impairment may be measured based on the loan's observable market
price, or if, the loan is collateral-dependent, the fair value of the
collateral.  When the measure of the impaired loan is less than the
recorded investment in the loan, the impairment is recorded through a
valuation allowance.  Loans for which foreclosure is probable continue to
be accounted for as loans.
Each impaired loan is evaluated individually to determine the income
recognition policy.  Generally, payments received are applied in accordance
with the contractual terms of the note or as a reduction of principal.
At December 31, 1996, the Bancorp had identified impaired loans with a
carrying value of $1,676,064.  At December 31, 1996, estimated collateral
proceeds were in excess of the carrying value of the loans and related
allowance for losses of $333,834.  The Bancorp calculates the need for an
allowance for impaired loans based upon historical charge-offs, repayment
experience and specific factors concerning the impaired loans.  The average
recorded investment in impaired loans for the year ended December 31, 1996
was $1,322,450.  The Bancorp recognized interest income of $44,700 on its
impaired loans for the year ended December 31, 1996.

Loan Origination Fees
Nonrefundable loan fees and direct origination costs are deferred and
recognized over the lives of the related loans as adjustments of yield.

Allowance for Loan Losses
The allowance for loan losses is established through a provision for loan
losses which is charged to expense.  Loans are charged against the
allowance for loan losses when management believes that the collectibility
of the principal is unlikely.  The allowance is a current estimate of the
losses inherent in the present portfolio based upon management's evaluation
of the loan portfolio.  Estimates of losses inherent in the portfolio
involve the exercise of judgment and the use of assumptions.  The
evaluations take into consideration such factors as changes in the nature,
volume and quality of the loan portfolio, prior loss experience, level of
nonperforming loans, current and anticipated general economic conditions
and the value and adequacy of collateral.  Changes in the estimate of
future losses may occur due to changing economic conditions and the
economic conditions of borrowers.
Accrual of interest is discontinued when management believes, after
considering economic and business conditions and collection efforts, that
the borrower's financial condition is such that collection of interest is
doubtful.

Premises and Equipment
The Bancorp's premises and equipment are stated at cost less accumulated
depreciation and amortization.  Expenditures for maintenance and repairs
which do not materially prolong the useful lives of the assets are charged
to expense.
Depreciation is computed using the straight-line method over estimated
useful lives of three to ten years for furniture and equipment and 30 years
for buildings.  Amortization of leasehold improvements is computed using
the straight-line method over the shorter of ten years or the lease term.

Real Estate Owned
The Bancorp records and carries real estate acquired through foreclosure at
the lower of the recorded investment in the loan or fair value less
estimated selling costs.  Costs relating to development and improvement of
property are capitalized, provided that the resulting carrying value does
not exceed fair value.  Costs relating to holding the assets are expensed.

Core Deposit Intangibles
The Bancorp amortizes its core deposit intangibles over five years, which
represents the estimated lives of the depository accounts acquired.

Income Taxes
The Bancorp accounts for certain income and expense items differently for
financial reporting purposes than for income tax reporting purposes,
principally the provision for loan losses and loan related fees.  Deferred
income taxes are provided in recognition of these temporary differences.

Page 18 of annual Report

Earnings Per Share
Primary earnings per common share were computed by dividing income, less
dividends on preferred stock, by the average weighted number of shares of
common stock and common stock equivalents outstanding during the periods.
Common stock equivalents included the number of shares issuable on exercise
of outstanding options less the number of shares that could have been
purchased with the proceeds from the exercise of the options based on the
average price of common stock during the period.  Fully diluted earnings
per common share were determined in the same manner except that common
stock equivalents also included the number of shares issuable on conversion
of the convertible preferred shares to common shares.

Financial Instruments with Off-Balance Sheet Risk
The Bancorp, in the normal course of business, is a party to financial
instruments with off-balance sheet risk primarily to meet the financing
needs of its customers.  These financial instruments involve, to varying
degrees, elements of credit risk that are not recognized in the balance
sheet.
Exposure to credit loss in the event of nonperformance by the other party
to the financial instrument for commitments to extend credit and letters of
credit written is represented by the contractual amount of those
instruments.  The Bancorp generally requires collateral to support such
financial instruments in excess of the contractual amount of those
instruments and essentially uses the same credit policies in making
commitments as it does for on-balance sheet instruments.

Issued But Not Yet Adopted Statements of Financial Accounting Standards
SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities" was issued in June 1996 and is
effective for transactions on a prospective basis beginning January 1,
1997.  Earlier or retroactive application is not permitted.  This statement
provides accounting and reporting standards for transfers and servicing of
financial assets extinguishments of liabilities.  Those standards are based
on consistent application of a financial-components approach that focuses
on control.  Adoption of this Statement is not expected to have a material
impact on the Bancorp.

Reclassifications
Certain reclassifications were made to the prior year financial statements
to conform to the current year presentation.

2.	Investment Securities:

The portfolio consists of the following securities:
                                              December 31, 1996
                                               Gross      Gross      Estimated
                                Amortized   Unrealized  Unrealized     Fair
                                   Cost        Gains      Losses       Value
Available-for-sale:
  FHLMC preferred stock         $4,310,235    $11,355    $116,303    $4,205,287

                                              December 31, 1995
                                               Gross      Gross      Estimated
                                Amortized   Unrealized  Unrealized     Fair
                                   Cost        Gains      Losses       Value
Available-for-sale:
  FHLMC preferred stock         $2,810,425    $31,200    $14,000     $2,827,625

                                              December 31, 1996
                                               Gross      Gross      Estimated
                                Amortized   Unrealized  Unrealized     Fair
                                   Cost        Gains      Losses       Value
Held-to-Maturity:				
  FHLB Agency Callables         $2,000,000    $ 1,875    $     -     $2,001,875

The portfolio balance of FHLB Agency Callable Securities was $0 as of
December 31, 1995.

Page 19 of Annual Report

3. Mortgage-Backed Securities:
The portfolio consists of the following securities:

                                              December 31, 1996
                                               Gross      Gross      Estimated
                                Amortized   Unrealized  Unrealized     Fair
                                   Cost        Gains      Losses       Value
Available-for-sale:				
  FNMA participation
  certificates                    $902,824     $    -     $8,492       $894,332
                            
                                              December 31, 1995
                                               Gross      Gross     Estimated
                                Amortized   Unrealized  Unrealized    Fair
                                   Cost        Gains      Losses      Value
Available-for-sale:
  FNMA participation
  certificates                  $1,039,353     $5,745     $    -     $1,045,098

                                              December 31, 1996
                                               Gross      Gross     Estimated
                                Amortized   Unrealized  Unrealized    Fair
                                   Cost        Gains      Losses      Value
Held-to-maturity:				
  FHLMC participation
  certificates                $  7,300,246   $ 20,736   $ 52,650    $ 7,268,332
  FNMA participation
  certificates                  21,981,743     42,607    183,797     21,840,553
  GNMA participation
  certificates                  27,387,797     95,893     46,549     27,437,141
  Collateralized mortgage
  obligations                    6,547,457      8,215    129,496      6,426,176
  Total                        $63,217,243   $167,451   $412,492    $62,972,202

                                              December 31, 1995
                                               Gross      Gross     Estimated
                                Amortized   Unrealized  Unrealized    Fair
                                   Cost        Gains      Losses      Value
Held-to-maturity:				
  FHLMC participation
  certificates                $  9,397,071    $22,335 $   72,688   $  9,346,718
  FNMA participation
  certificates                  12,065,698          -    185,819     11,879,879
  GNMA participation
  certificates                  17,612,474     25,094     82,645     17,554,923
  Collateralized mortgage
  obligations                    6,922,534     34,380     64,084      6,892,830
  Total                        $45,997,777    $81,809   $405,236    $45,674,350

Held-to-maturity securities are carried at cost adjusted for amortization
of premiums and accretion of discounts.  All of the held-to-maturity
securities other than $8.5 million of 15-year fixed rate securities have
adjustable rates of interest.  The rates on approximately 17 percent of the
portfolio are tied to the 11th District and national cost of funds indices
and adjust monthly.  The remaining rates are tied to the one year constant
maturity treasury index.
Available-for-sale securities are carried at fair value with unrealized
losses reported as a separate
component of stockholders' equity, net of the tax effect.  All of the
available-for-sale securities have fixed interest rates.
There were no sales of mortgage-backed securities during the year ended
December 31, 1996.
During the six months ended December 31, 1995, net proceeds from sales of
available-for-sale
mortgage-backed securities were $4,848,694.  Gross gains of $63,208 were
realized on the sale of
mortgage-backed securities during the six months ended December 31, 1995.

Page 20 of Annual Report

As of December 31, 1996 and December 31, 1995, mortgage-backed securities
having a book value of $49,743,572 and $30,124,830, respectively, were
pledged as collateral for advances from the Federal Home Loan Bank of
Atlanta ("FHLB") and as collateral for escrow deposits in accordance with
Federal and state requirements.
A comparison of amortized cost and market value for securities, along with
the contractual dates of maturity, by category of security as of December
31, 1996 is as follows:
	
                                                                     Aggregate
                                                          Amortized    Market
                                                             Cost      Value
Available-for-sale securities:		
  Investment securities-                                  $       -   $       -
  Mortgage-backed securities-      
  Maturing after ten years                                  902,824     894,332
  Total available-for-sale securities                      $902,824    $894,332
Held-to-maturity securities:                        
  Investment securities-   
    Maturing after one year, but within five years       $2,000,000  $2,001,875
	Mortgage-backed securities-		
    Maturing after ten years                             63,217,243  62,972,202
    Total held-to-maturity securities                   $65,217,243 $64,974,077

As of December 31, 1995, all investment and mortgage-backed securities had
maturity dates of after ten years.

4.Loans Receivable:

Loans receivable consist of the following:
                                                      December 31, December 31,
                                                           1996         1995
Mortgages:       
  Residential                                         $ 35,032,684 $ 37,583,119
  Nonresidential                                        46,548,847   36,742,339
Construction:		
  Residential                                            5,616,121    8,515,853
  Nonresidential                                         7,510,374   11,028,772
Nonmortgages:		
  Business                                              12,197,921    9,265,345
  Consumer                                               3,294,171    2,760,636
    Total loans receivable                             110,200,11 8 105,896,064
  Less:    
    Deferred loan fees, net                               (412,274)    (454,334)
    Allowance for loan losses                           (1,500,941)  (1,190,249)
  Loans receivable, net                               $108,286,903 $104,251,481

Page 21 of annual Report

The following sets forth information regarding the allowance for loan losses:

                                                       December 31, December 31,
                                                           1996         1995
Balance, beginning of period                            $1,190,249   $1,057,445
  Charge-offs, net                                        (384,308)     (17,196)
  Provision charged to income                              695,000      150,000
Balance, end of period                                  $1,500,941   $1,190,249

The Bancorp's loan portfolio is concentrated in the Northern Virginia area.
At December 31, 1996 and 1995, the average yield on loans receivable was
9.18 percent and 9.32 percent, respectively.  The amount
of loans being serviced for others was $4,121,734 and $3,384,496 at
December 31, 1996 and 1995, respectively. At December 31, 1996, there were
no loans on which the Bancorp was still accruing interest which had
payments ninety days or more past due.  At December 31, 1995, there were
seven loans on which the Bancorp was still accruing interest with a total
balance of approximately $881,028 which had payments ninety days or more
past due.
The loan portfolio includes loans on which the Bancorp is not currently
accruing any interest income.  The total outstanding principal and
uncollected interest on these loans consists of the following:
                                                       December 31, December 31,
                                                           1996         1995
Principal outstanding                                   $1,676,064     $591,049
Uncollected interest                                       220,461       27,675

 There were no sales of real estate owned during the year ended December
31, 1996, the six months ended December 31, 1995, or the year ended June
30, 1995.

5.Bancorp Premises and Equipment:

The Bancorp's premises and equipment consists of the following:

                                                       December 31, December 31,
                                                            1996         1995
Land                                                    $  125,647   $   50,000
Building and improvements                                  587,980      350,424
Furniture and equipment                                  1,335,548    1,105,650
Leasehold improvements                                     996,885      947,843
                                                         3,046,060    2,453,917
Less- Accumulated depreciation and amortization         (1,558,614)  (1,307,364)
Bancorp premises and equipment, net                     $1,487,446   $1,146,553

Depreciation and amortization expense aggregated $251,249 and $111,303 for
the year ended December 31, 1996, and for the six months ended December 31,
1995, respectively.

6. Interest Receivable:

Accrued interest receivable consists of the following:

                                                      December 31, December 31,
                                                            1996         1995
Interest on loans                                       $  890,133   $  840,385
Interest on mortgage-backed securities
  and other investments                                    438,418      326,637
    Total                                               $1,328,551   $1,167,022

Page 22 of annual Report

7. Real Estate Owned:

The following activity occurred during the year ended December 31, 1996 and
the six months ended December 31, 1995:


                                                      December 31, December 31,
                                                            1996         1995
Beginning balance                                         $357,023     $387,023
Additions                                                        -            -
Holding period write-down                                  (17,000)     (30,000)
Ending balance                                            $340,023     $357,023

Balance represents one property in Loudoun County, Virginia.

8. Deposits:

Deposits consist of the following:

                                   1996                    1995
                                 Weighted                Weighted
                                 Average                 Average
                                 Interest                Interest
                                   Rate        Amount      Rate        Amount
Checking accounts                  0.65%    $23,424,025    1.74%    $18,881,792
Money market and savings accounts  3.23      21,502,863    3.37      19,302,329
Certificates of deposit            5.59     119,352,217    5.73     105,629,565
                                   4.57%   $164,279,105    4.89%   $143,813,686

As of December 31, 1996, certificates of deposit have scheduled fiscal year
maturity dates as follows:
1997         $101,212,198
1998           10,791,485
1999	          	4,336,878
2000	          	3,011,656
             $119,352,217

Deposits totaling approximately $24,135,017 and $19,611,149 had balances
greater than $100,000 at December 31, 1996 and 1995, respectively, of which
$13,861,572 and $11,595,231 represented certificates of deposit at December
31, 1996 and 1995, respectively.

Interest expense by deposit category follows:
                                                         1996            1995
Checking accounts                                    $  238,279      $  135,574
Money market and savings accounts                       683,839         314,728
Certificates of deposit                               6,511,216       2,989,486
                                                     $7,433,334      $3,439,788

Total cash paid for interest aggregated approximately $2,628,853 and
$1,292,324 for the year ended December 31, 1996, and the six months ended
December 31, 1995, respectively.

Page 23 of Annual Report

9. Advances from Federal Home Loan Bank:

The Bancorp has a credit availability agreement with FHLB totaling
$25,000,000.  The agreement does not have a maturity date and advances are
made at FHLB's discretion.  At December 31, 1996 and 1995, advances from
FHLB totaled $8,500,000 and $4,000,000, respectively.  Advances are made at
variable interest rates.  The weighted average rates of interest were 6.57
percent and 5.85 percent at December 31, 1996 and 1995, respectively.
Advances outstanding at December 31, 1996, mature on February 14, 1997,
October 15, 1997, and January 30, 1998, and are secured by mortgage-backed
securities having a book value of $49,732,572.
The Bancorp has entered into interest rate cap agreements whereby the
counterparty institution agreed to cap the cost of a component of the FHLB
advances outstanding floating-rate debt for an agreed upon period of time.
The cap agreement was accounted for as a hedge.  The cost of the interest
rate caps were amortized into interest expense on a straight-line basis
over the terms of the agreements.  At December 31, 1996 and 1995,
respectively, the Bancorp had outstanding interest rate caps with a total
notional amount of $0 and $1,000,000.

10. Stockholders' Equity:

Each share of the Bancorp's preferred stock is convertible to 1.61 shares
of common stock.  The preferred stock has an annual dividend rate of 6
percent. Dividends are payable quarterly and are cumulative.
The Bancorp's Board of Directors declared a 10 percent stock dividend in
July 1996 and 1995 and a four-for-three stock split in February 1995, which
was effected in the form of a dividend.  All earnings per share amounts
have been calculated as if these distributions occurred on July 1, 1992,
the beginning of fiscal year 1993.
In December 1995, the Bancorp changed the par value of its common stock
from $8.00 per common share to $0.01 per common share.  This resulted in a
decrease in common stock of $10,998,091.
In fiscal year 1987, the Bancorp's stockholders approved an incentive stock
option plan under which options to purchase up to 83,660 shares of common
stock could be granted.  During fiscal year 1994, this plan was amended to
allow an additional 100,000 shares of common stock to be granted.  In
accordance with the plan agreement, the exercise price for stock options
equals the stock's market price on the date of grant.  The maximum term of
all options granted under the plans is ten years and vesting occurs after
one year.
The Bancorp accounts for its stock option plan under APB Opinion No. 25,
under which no compensation cost has been recognized. Had compensation cost
for the plan been determined consistent with Statement of Financial
Accounting Standards("SFAS") No. 123, "Accounting for Stock-Based
Compensation", the Bancorp's net income and earnings per share in the
Consolidated Statements of Income, would have been reduced to the following
pro forma amounts:

                                                             December 31,
                                                         1996            1995
Net income:		
        As reported                                    $953,712        $735,319
        Pro forma                                       603,344         522,390
Earnings per share:		
        As reported                                        0.62            0.49
        Pro forma                                          0.39            0.35
Weighted-average assumptions:		
        Expected lives (years)                            10.00           10.00
        Risk-free interest rate (%)                        6.06%           6.22%
        Expected volatility (%)                           45.00%          45.00%
        Expected dividends (annual per share)              -               -

Page 24 of annual Report

The Bancorp did not record any compensation costs in 1996 or 1995 related
to its stock option plan.  In addition, no significant modifications to the
plan were made during the periods.  The fair values of the stock options
outstanding used to determine the pro forma impact of the options to
compensation expense, and thus, net income and earnings per share, were
based on the Noreen-Wolfson option pricing model for each grant made in
1996 and 1995, using the key assumptions detailed above.
	Compensation cost charged against historical net income in the above table
was increased by the fair value of stock-based compensation grants.  The
compensation cost amounted to $350,368 and $212,929 for the year ended
December 31, 1996 and the six months ended December 31, 1995, respectively.
During the initial phase-in period, the effects of applying SFAS No. 123
to historical net income to provide pro forma disclosures are not likely to
be representative of the effects on reported net income for future years
because the SFAS No. 123 method of accounting has not been applied to
options granted prior to January 1, 1995.
	A summary of the status of the Bancorp's stock option plan as of December
31, 1996 and 1995, and changes during the year ended December 31, 1996, and
the six months ended December 31, 1995, is presented below.  Average prices
and shares subject to options have been adjusted to reflect stock
dividends.

                                                       1996              1995
                                                     Weighted          Weighted
                                                     Average           Average
                                                     Exercise          Exercise
                                            Shares     Price   Shares    Price
Outstanding at beginning of year            188,792    $9.94   171,871   $9.82
Granted                                      66,029    13.43    45,980   13.18
Exercised                                    65,373     8.18    24,219    7.92
Forfeited                                         -                  -
Expired                                      12,121    13.04     4,840   12.08
Outstanding at December 31,                 177,327    11.02   188,792    9.94
Options exercisable at December 31,         112,127            125,891      
Weighted average fair value
of options granted during the period                   $5.92             $6.01

The following table summarizes information about fixed stock options
outstanding at December 31, 1996.

	Options Outstanding	Options Exercisable
						Weighted
				Remaining		Average
		Exercise	Number	Contractual	Number	Exercise
		Price	Outstanding	Life	Exercisable	Price
				months
         $7.49          8,874        42          8,874        $7.49       
          7.75         12,907         6         12,907         7.75
          8.83         30,653        90         30,653         8.83
          8.99          4,840        18          4,840         8.99
          9.30          7,260        30          7,260         9.30
          9.61         16,940        78         16,940         9.61
         11.98         30,653       103         30,653        11.98
         12.73         15,403       115              -            -
         13.64         43,195       109              -            -
         13.64          6,602       112              -            -
					
                      177,327                  112,127 

Page 25 of Annual Report

There were 10 option holders at December 31, 1996.  Options exercised
during 1996 had exercise prices ranging from $6.81 to $10.57.  Options
exercised during 1995 had exercise prices ranging from $6.81 to $10.57.
The closing price of the Bancorp's stock at December 31, 1996 was $13.50
per share.
On May 28, 1996, the Bancorp acquired 9,374 shares of its own stock at a
market price of $16.00 in a stock swap transaction with the Chief Executive
Officer. The shares acquired were accepted as payment to redeem 22,026
options to purchase common stock. This purchase was accounted for as
treasury stock by the Bancorp.
On July 30, 1996, the Bancorp acquired 14,771 shares of its own stock at a
market price of $15.31 in a stock swap transaction with the Controller. The
shares acquired were accepted as payment to redeem 22,000 options to
purchase common stock. The purchase was accounted for as treasury stock by
the Bancorp.

11. Regulatory Matters:

The Bancorp's primary supervisory agent is the Federal Reserve Bank.  The
Federal Reserve Bank has mandated certain capital standards for the
industry. In addition, the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA") outlines various levels of capital
adequacy for the industry.
Effective January 1, 1994, the Bancorp implemented SFAS No. 115.  This
pronouncement requires, among other items, the reporting of unrealized
gains and losses in available-for-sale securities in stockholders' equity.
At December 31, 1996, the Bank reported net unrealized losses of $76,006,
net of tax, in stockholder's equity. These net unrealized losses were
excluded from Tier I and Tier II capital for regulatory reporting in
accordance with current regulatory agency guidance.
The Bancorp is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory - and possibly
additional discretionary - actions by regulation that, if undertaken, could
have a direct material effect on the Bancorp's financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Bancorp must meet specific capital guidelines that
involve quantitative measures of the Bancorp's assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. The Bancorp's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitaive measures established by regulation to ensure capital adequacy
require the Bancorp to maintain minimum amounts and ratios (set forth in
the table below) of total and Tier I capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier I capital
(as defined) to average assets (as defined). Management believes, as of
December, 31, 1996, that the Bancorp meets all capital adequacy
requirements to which it is subject.
As of December 31, 1996, the most recent notification from the Federal
Reserve Bank categorized the Bancorp as adequately capitalized under the
regulatory framework for prompt corrective action. To be categorized as
adequately capitalized the Bancorp must maintain minimum total risk-based,
Tier I risk- based, and Tier I leverage ratios as set forth in the table.
There are no conditions or events since that notification that management
believes have changed the institution's category.
The Bancorp's actual capital amounts and ratios are also presented in the
tables below. (All dollar amounts are in 000s).


Page 26 of Annual Report
                                                                To be Well
                                               For Capital   Capitalized Under
                                                 Adequacy    Prompt Corrective
                                  Actual         Puproses    Action Provisions
                              Amount  Ratio   Amount  Ratio   Amount   Ratio
As of December 31, 1996:
  Total Capital:
  (to risk weighted assets)  $17,554  16.6% =>$8,431 =>8.0% =>$10,539 =>10.0%
  Tier I Capital
  (to risk weighted assets)  $16,234  15.4% =>$4,216 =>4.0%  =>$6,323  =>6.0%
  Tier I Capital
  (to average assets)        $16,234   8.7% =>$7,477 =>4.0%  =>$9,346  =>5.0%
As of December 31, 1995:
  Total Capital:
  (to risk weighted assets)  $16,628  15.9% =>$8,355 =>8.0  =>$10,443 =>10.0%
  Tier I Capital
  (to risk weighted assets)  $15,438  14.8% =>$4,177 =>4.0%  =>$6,266  =>6.0%
  Tier I Capital
  (to average assets)        $15,438   9.6% =>$6,424 =>4.0%  =>$8,030  =>5.0%

Legislation was enacted on September 30, 1996 that imposed on thrift
institutions a one-time assessment of 65.7 basis points on their
SAIF-insured deposits to capitalize the SAIF.  The Bancorp was required to
pay the assessment since it was considered a thrift institution at the time
the SAIF legislation was initiated. During 1996, the Bank paid
approximately $830,270 for the SAIF assessment which is included in deposit
insurance assessments on the accompanying Consolidated Statements of
Income.

12. Parent Company Activity:

The Bancorp owns all of the outstanding shares of the Bank. The statement
of condition and statement of income are as follows:
                             Statement of Condition
                             As of December 31, 1996
Assets:	
Investment in bank                              $16,443,483
Other assets                                         36,925
Total assets                                    $16,480,408

Liabilities:
Other liabilities                               $     3,450
Total liabilities                               $     3,450

Stockholders' equity:
Preferred stock                                 $       156
Common stock                                         15,941
Capital in excess of par                         15,276,373
Retained earnings                                 1,655,575
Treasury stock                                     (471,087)
Total stockholders' equity                       16,476,958

Total liabilities and stockholders' equity	$16,480,408

Page 27 of Annual Report

                              Statement of Income
                      For the Year Ended December 31, 1996
Equity in earnings of Bank                      $  953,712

13. Estimated Fair Value of Financial Instruments:

Effective December 31, 1995, the Bancorp implemented SFAS No. 107,
"Disclosures About Fair Value of Financial Instruments."  SFAS No. 107
requires all entities to disclose the fair value of financial instruments,
both assets and liabilities recognized and not recognized in the statement
of financial position, for which it is practicable to estimate fair value.
If estimating fair value is not practicable, the statement requires
disclosure of descriptive information pertinent to estimating the value of
a financial instrument.
Some of the Bancorp's assets and liabilities are financial instruments;
however, certain of these financial instruments lack an available trading
market.  Significant estimates, assumptions and present value calculations
were therefore used for the purposes of the following disclosure, resulting
in a great degree of subjectivity inherent in the indicated fair value
amounts.  Comparability among financial institutions may be difficult due
to the wide range of permitted valuation techniques and the numerous
estimates and assumptions which must be made.  The estimated fair values of
the Bancorp's financial instruments at December 31, 1996 are as follows:

                                                December 31, 1996
                                            Carrying           Fair
                                             Amount            Value
Financial assets:		
  Cash and amounts due from banks        $  4,004,149     $  4,004,149
  Available-for-sale securities             5,099,619        5,099,619
  Held-to-maturity securities              65,217,243       64,974,077
  Loans receivable, net of reserve        108,286,903      108,336,794
  Loans held for sale                         444,500          444,500
Financial liabilities:		
  Deposits-
    Checking accounts                      23,424,025       23,424,025
    Money market and savings accounts      21,502,863       21,502,863
    Certificates of deposit               119,352,217      119,442,477      

The following methods and assumptions were used to estimate the fair value
amounts at December 31, 1996:

Cash and Due From Banks
Carrying amount approximates fair value.

Available-for-Sale Securities
Fair value is based on quoted market prices.

Held-to-Maturity Securities
Fair value is based on quoted market prices, dealer quotes or estimates
using dealer quoted market prices for similar securities.

Loans Receivable, Net of Reserve
Fair value of certain homogeneous groups of loans (e.g., single-family
residential, automobile loans, home improvement loans and fixed-rate
commercial and multifamily loans) is estimated using discounted cash flow
analyses based on contractual repayment schedules.  The discount rates used
in these analyses are based on either the interest rates paid on U.S.
Treasury securities of comparable maturities adjusted for credit risk and
non-interest operating costs or the interest rates currently offered by the
Bancorp for loans with similar terms to borrowers of similar credit
quality.  For loans which reprice frequently at market rates (e.g., home
equity, variable-rate commercial and multifamily, real estate construction
and ground loans), the carrying amount approximates fair value.

Page 28 of annual Report

Loans Held for Sale
Fair Value is determined using quoted market prices for loans or outstanding
commitment prices from investors.

Deposits
Deposit liabilities payable on demand, consisting of NOW accounts, money
market deposits, statement savings and other deposit accounts, are assumed
to have an estimated fair value equal to carrying value.  The indicated
fair value does not consider the value of the Bancorp's estimated deposit
customer relationships.
Fair value of fixed-rate certificates of deposit is estimated based on
discounted cash flow analyses using the remaining maturity of the
underlying accounts and interest rates currently offered on certificates of
deposit with similar maturities.

Off-Balance Sheet Instruments
The difference between the original fees charged by the Bank for
commitments to extend credit and letters of credit and the current fees
charged to enter into similar agreements is immaterial.

14. Savings Plan:

In fiscal year 1993, the Bancorp began an employee savings plan (the
"Savings Plan") that qualifies as a deferred salary arrangement under
Section 401(k) of the Internal Revenue Code.  Under the Savings Plan,
participating U.S. employees may defer a portion of their pretax earnings,
up to the Internal Revenue Service annual contribution limit.  The Bancorp
matches each employee's contributions on a discretionary basis, based on
Bancorp profits up to a maximum of 6 percent of the employee's earnings.
The Bancorp expects to make a cash contribution by March 15, 1997, covering
the year ended December 31, 1996.  The Bancorp's cash contributions to the
Savings Plan were $22,943 and $28,385 for the years ended December 31, 1996
and 1995, respectively.

15. Provision for Income Taxes:

The provision for income taxes consists of the following:

                            Year Ended    Six Months Ended   Year Ended
                            December 31,     December 31,     June 30,
                                1996            1995            1995
Current provision:		
Federal                       $483,449        $320,154        $760,309
State                                -          32,758          90,771
                               483,449         352,912         851,080
Deferred (benefit) provision:		
Federal                        (13,849)         58,072         (16,929)
State                                -           3,416          (1,081)
                               (13,849)         61,488         (18,010)
                              $469,600        $414,400        $833,070

Deferred income taxes reflect temporary differences in the recognition of
revenue and expenses for tax reporting and financial statement purposes,
principally because certain items, such as the allowance for loan losses
and loan fees, are recognized in different periods for financial reporting
and tax return purposes.  Realization of the deferred tax asset is
dependent on generating sufficient taxable income. Although realization is
not assured, management believes it is more likely than not that all of the
deferred tax asset will be realized.  The amount of the deferred tax asset
considered realizable, however, could be reduced in the near term if
estimates of future taxable income are reduced.  Total cash paid for taxes
aggregated $916,000 and $550,350 for the year ended December 31, 1996,
and for the six months ended December 31, 1995, respectively.

Page 29 of Annual Report

Deferred tax assets and liabilities were comprised of the following
significant components as of December 31, 1996 and 1995:

                                                        1996         1995
Assets:		
Provision for losses on loans and real estate owned   $198,125     $ 53,526
Deferred loan fees                                     161,820      219,676
Depreciation                                            83,923       67,308
Gross deferred tax assets                              443,868      340,510
		
Liabilities:		
FHLB dividend                                           35,771       35,771
Valuation of Loans and Securities                       39,074          -
Other                                                   64,577       14,142
Gross deferred tax liabilities                         139,422       49,913

Net deferred tax assets                               $304,446     $290,597

The provision for income taxes differs from the amount of income tax
determined by applying the applicable U.S. statutory Federal income tax
rate to pretax income as a result of the following differences:

                       Year Ended        Six Months Ended      Year Ended
                    December 31, 1996    December 31, 1995    June 31, 1995
Pretax income              34%                 34%                  34%
State taxes                 -                   2%                   5% 
Dividends received
  deduction                (1%)                 -                    -
Effective tax rate         33%                 36%                  39%

16. Commitments:

The Bank leases its corporate headquarters and branch facilities under
operating lease agreements expiring through 2001.  As of December 31, 1996,
future minimum lease payments required under these arrangements, assuming
no extension options are exercised, are as follows:

Years Ending
December 31,	Minimum Lease Payments
1997		$440,549
1998		377,892
1999		244,041
2000		218,487
2001		168,148
Thereafter

Rent expense aggregated $504,647 and $240,976 for the year ended December
31, 1996, and for the six months ended December 31, 1995, respectively.
Outstanding loan commitments amounted to $9,119,150 and $6,402,500 at
December 31, 1996 and 1995, respectively.  The Bank had commitments from
investors of $2,769,800 and $4,525,600 to purchase loans from the Bank at
December 31, 1996 and 1995, respectively.
At December 31, 1996, the Bank had commercial letters of credit outstanding
in the amount of approximately $251,907.
At December 31, 1996, the Bank had unfunded lines of credit of $10,724,839.