Table Of Contents
                          Union National Bancorp, Inc.


PART  I - FINANCIAL INFORMATION
Item 1. Financial Statements
         Consolidated Balance Sheet                                           2
         Consolidated Statement of Income                                     3
         Consolidated Statement of Cash Flows                                 4
         Consolidated Statement of Changes in Stockholders' Equity            5
         Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis                                6-9
PART  II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K                                     10



                                      - 1 -

<PAGE>




United States Securities and Exchange Commission Washington, DC 20549

FORM  10-Q  {X}  QUARTERLY  REPORT  PURSUANT  TO  SECTION  13 OR 15  (d)  OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 1997

{ }  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR 15 (d)  OF THE  SECURITIES
EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

COMMISSION FILE NUMBER:                     000-22523

UNION  NATIONAL  BANCORP,  INC.  (Exact name of  registrant  as specified in its
charter)

   Maryland                                       52-0514247
  (State of incorporation)                        (I.R.S. identification number)


   117 East Main Street, Westminster, MD 21157    (410) 848-7200
   (Address of principal executive offices)       (Telephone number)

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

                       YES {X}           NO {  }

         The number of shares of common stock outstanding as of November 12,1997
is 834,000 shares.


                                      - 2 -

<PAGE>



<TABLE>
Part 1 Financial Information  Item 1 Financial Statements

<CAPTION>
Union National Bancorp, Inc.
Consolidated Balance Sheets

                                                                                   September 30,            December 31,
                                                                                      1997                      1996
                                                                                   (Unaudited)
                                                                                   -----------              ------------
ASSETS

<S>                                                                                  <C>                     <C>       
Cash and due from banks                                                              $5,896,989              $6,910,561
Interest bearing deposits in other banks                                                  9,416                 160,821
Federal funds sold                                                                   25,543,290               8,882,550
Investment securities available for sale-at fair value                               50,403,950              38,866,761
Investment securities held to maturity-at amortized cost-fair value of
     $14,090,310 (1997) and $17,304,150 (1996)                                       13,867,045              17,073,011
Loans                                                                               148,820,474             147,350,540
Less: allowance for credit losses                                                    (1,842,734)             (1,772,433)

Loans - net                                                                         146,977,740             145,578,107
Bank premises and equipment                                                           4,030,638               3,928,561
Foreclosed real estate                                                                  481,528                 391,236
Accrued interest receivable                                                           1,461,810               1,292,194
Other assets                                                                          1,751,353               1,951,826


     TOTAL ASSETS                                                                  $250,423,757            $225,035,628
                                                                                   ============            ============

LIABILITIES
Deposits:
     Non-interest bearing deposits                                                  $24,828,820             $23,694,607
     Interest bearing deposits                                                      184,033,789             175,596,828


         Total deposits                                                             208,862,609             199,291,435
     Short-term borrowings
         Fed. funds purchased/securities sold under agreement to repurchase          10,963,911               6,808,596
         Federal Home Loan Bank Borrowing                                            10,000,007                      -
     Accrued expenses and other liabilities                                           1,022,237                 882,930

         Total liabilities                                                          230,848,764             206,982,961
                                                                                 ---------------            -----------

STOCKHOLDERS' EQUITY
Common stock - $.01 par; 10,000,000 shares authorized;
     834,000 shares issued and outstanding                                                8,340                   8,340
Surplus                                                                               8,342,055               8,342,055
Net unrealized appreciation (depreciation) on securities available
     for sale (net of related tax effects)                                               76,738                 (58,586)
Retained earnings                                                                    11,147,860               9,760,858


     Total stockholders' equity                                                      19,574,993              18,052,667


     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                    $250,423,757            $225,035,628
                                                                                 ================         ===============

</TABLE>


                                      - 3 -

<PAGE>



<TABLE>
<CAPTION>
Consolidated Statements of Income (Unaudited)

                                                                  Three Months Ended                 Nine Months Ended
                                                                     September 30,                     September 30,
                                                                  1997             1996             1997            1996
                                                                  ----             ----             ----            ----

INTEREST INCOME:
<S>                                                           <C>              <C>              <C>            <C>        
     Interest and fees on loans                               $3,395,098       $3,410,723       $10,129,567    $10,347,508
     Interest and dividends on investment securities:
         Taxable interest on mortgage backed securities          314,961          354,076           961,921      1,110,853
         Other taxable interest & dividends                      639,220          381,546         1,779,464        947,580
         Nontaxable interest                                      75,248           86,499           228,180        278,061
     Interest on deposits in other banks                             740            1,807             3,496         59,203
     Interest on federal funds sold                               86,452          100,884           286,349        256,972
                                                                  ------          -------           -------        -------

     Total interest income                                     4,511,719        4,335,535        13,388,977     13,000,177
                                                               ---------        ---------        ----------     ----------


INTEREST EXPENSE:
     Interest on deposits:
         Time certificates of deposit of $100,000 and more       233,588          286,267           809,156        906,971
         Other deposits                                        1,706,128        1,756,626         4,944,411      4,856,594
                                                               ---------        ---------         ---------      ---------


              Total interest on deposits                       1,939,716        2,042,893         5,753,567      5,763,565
     Interest on short-term borrowings                           138,469           96,245           370,175        252,285
     Interest on Federal Home Loan Bank borrowings                 1,228                0             1,228         26,300
                                                                   -----        ---------             -----         ------

         Total interest expense                                2,079,413        2,139,138         6,124,970      6,042,150
                                                               ---------        ---------         ---------      ---------


NET INTEREST INCOME AFTER                                      2,432,306        2,196,397         7,264,007      6,958,027
   PROVISION FOR CREDIT LOSSES                                    30,000           60,000           145,000        251,000
                                                                  ------           ------           -------        -------

NET INTEREST INCOME AFTER
   PROVISION FOR CREDIT LOSSES                                 2,402,306        2,136,397         7,119,007      6,707,027
                                                               ---------        ---------         ---------      ---------

NON INTEREST INCOME:
     Service charges on deposit accounts                         264,334          225,071           725,186        557,176
     Other service charges                                        36,118           31,379           125,251        111,256
     Gains on sales of loans                                           -                -                 -         15,726
     Other operating income                                        8,885           22,473            95,255         91,796
                                                                   -----           ------            ------         ------

         Total non interest income                               309,337          278,923           945,692        775,955
                                                                 -------          -------           -------        -------

NON-INTEREST EXPENSES:
     Salaries and employee benefits                            1,102,150          985,246         3,166,820      2,876,112
     Occupancy expense of bank premises                          183,466          201,817           542,051        589,086
     Equipment expenses                                          117,311           79,596           314,319        259,354
     Other operating expenses                                    390,190          687,299         1,373,062      1,640,542
                                                                 -------          -------         ---------      ---------
         Total non interest expenses                           1,793,117        1,953,958         5,396,252      5,365,094
                                                               ---------        ---------         ---------      ---------

INCOME BEFORE INCOME TAXES                                       918,526          461,362         2,668,448      2,117,888
PROVISION FOR INCOME TAXES                                       297,589          212,511           872,784        739,078
                                                                 -------          -------           -------        -------

NET INCOME                                                      $620,937         $248,851        $1,795,664     $1,378,810
                                                                ========         ========        ==========     ==========

EARNINGS PER COMMON SHARE                                          $0.74            $0.30             $2.15          $1.65

</TABLE>


                                      - 4 -

<PAGE>



<TABLE>
<CAPTION>
Union National Bancorp, Inc.  Consolidated  Statements of Cash Flows (Unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30,

                                                                                  1997                        1996
                                                                                  ----                        ----


CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                           <C>                        <C>       
     Net income                                                               $1,795,663                 $1,378,810
     Adjustments to reconcile net income to net cash
           provided by operating activities:
         Provision for credit losses                                             145,000                    251,000
         Depreciation and amortization                                           475,694                    421,794
         Gain on sales of other real estate and other assets                     (21,357)                   (23,784)
         Deferred income taxes                                                   342,583                    209,424
         Net decrease (increase) in accured interest receivable                 (169,616)                    49,528
         Net increase (decrease) in accrued expenses & other liabilities         139,307                    135,944
         Other - net                                                             (18,226)                    90,022
                                                                                 -------                     ------

         Net cash provided by operating activities                             2,689,048                  2,512,738
                                                                               ---------                  ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchases of available for sale securities                              (22,878,503)               (12,000,000)
     Proceeds from maturities of available for sale securities                10,849,120                  3,572,945
     Purchase of held to maturity securities                                           0                  (2,650,00)
     Proceeds from maturities of held to maturity securities                   3,308,122                  6,170,741
     Proceeds from sale of other real estate and other assets                    306,066                    326,405
     Net increase in loans                                                    (1,544,634)                  (671,109)
     Bank premises and equipment acquired                                       (577,771)                  (591,437)
     Foreclosed real estate acquired                                                   0                   (124,451)
                                                                               ---------                   -------- 

     Net cash used in investing activities                                   (10,537,601)                (5,966,906)
                                                                             -----------                  --------- 

CASH FLOWS FROM FINANCING ACTIVITIES:
     Net increase (decrease) in deposits                                       9,597,654                  4,827,524
     Net increase (decrease) in short-term borrowings                          4,155,322                 12,968,409
     Borrowing (Repayments) of Federal Home Loan Bank borrowings              10,000,000                 (5,000,000)
     Cash dividends paid                                                        (408,660)                  (350,280)
                                                                                --------                   -------- 

     Net cash provided by financing activities                                23,344,316                 12,445,653
                                                                              ----------                 ----------

NET INCREASE (DECREASE) IN CASH AND CASH
     EQUIVALENTS                                                              15,495,763                  8,991,485

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                15,953,932                 13,641,267
                                                                              ----------                 ----------

CASH AND CASH EQUIVALENTS AT END OF YEAR                                     $31,449,695                $22,632,752
                                                                             ===========                ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

                                      - 5 -

<PAGE>



     Interest paid                                                            $6,124,970                 $6,042,151
                                                                              ==========                 ==========

     Income taxes paid                                                           771,000                    827,525
                                                                                 =======                    =======


NON-CASH INVESTING ACTIVITIES
     Transfer from loans to foreclosed real estate                              $375,000                   $191,083
                                                                                --------                   --------
     Transfer from available for sale securities
         to held to maturity securities                                        $    -                      $    -
                                                                               =========                   =========
</TABLE>





                                      - 6 -

<PAGE>



<TABLE>
<CAPTION>
Union National Bancorp
Consolidated Statements of Changes in Stockholers' Equity

                                                                               Unrealized
                                                                               Appreciated
                                                                             (Depreciation)
                                                                              on Securities
                                                    Common                      Available
                                                    Stock        Surplus        for Sale        Profits                 Total
                                                    -----        -------        --------        -------                 -----

<S>                 <C> <C>                        <C>          <C>             <C>           <C>                   <C>        
Balance at December 31, 1995                       $8,340       $8,342,055      ($183,075)    $8,372,716            $16,540,036
     Net income                                       -               -              -         1,378,810              1,378,810
     Cash dividends ($.42 per share)                  -               -              -          (350,280)              (350,280)
     Unrealized depreciation on securities
       available for sale (net of tax)                -               -          (122,540)           -                 (122,540)
                                                   ------        ---------       --------      ---------              ----------

Balance at September 30, 1996                       8,340        8,342,055       (305,615)     9,401,246             17,446,026
     Net income                                       -               -              -           484,712                484,712
     Cash dividends ($.42 per share)                  -               -              -          (125,100)              (125,100)
     Unrealized appreciation on securities
       available for sale (net of tax)                -               -           247,029             -                 247,029
                                                   ------       ----------        -------      ----------            ----------

Balance at December 31, 1996                       $8,340       $8,342,055       $(58,586)     $9,760,858           $18,052,667
     Net income                                       -               -              -          1,795,663             1,795,663
     Cash dividends ($.57 per share)                  -               -              -           (408,660)             (408,660)
     Unrealized appreciation on securities
       available for sale (net of tax)                -               -           135,323             -                 135,323
                                                   ------       ----------        -------     -----------               -------

Balance at September 20, 1997                      $8,340       $8,342,055        $76,737     $11,147,861           $19,574,993
                                                   ======       ==========        =======     ===========           ===========
</TABLE>




                                      - 7 -

<PAGE>



Union National Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Note 1 - The accompanying  unaudited consolidated financial statements for Union
National  Bancorp,  Inc.  ("Company")  have been prepared in accordance with the
instructions  for Form 10-Q and,  therefore do not include all  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial  statements.  The  interim  financial  statements  have been  prepared
utilizing the interim basis of reporting and, as such,  reflect all  adjustments
which are normal and recurring in nature and are, in the opinion of  management,
necessary for fair  presentation of the results for the periods  presented.  The
results of operations for the interim periods are not necessarily  indicative of
the results for the full year.

Note 2 - Recent  accounting  pronouncements:  The FASB has issued  Statements of
Financial  Accounting Standards No. 128 "Earning Per Share" in February 1997 for
the  year  ending  on or  after  December  15,  1997,  and No.  130 "  Reporting
Comprehensive  Income" in June 1997, and No. 131 "Disclosures  about Segments of
an Enterprise and Related  Information"  in June 1997,  with effective dates for
years beginning after December 15,1997 for each  pronouncement.  The Company has
determined that the adoption of these Statements will not have a material effect
on its disclosures.

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


Overview

         In 1994,  Union  National  Bancorp,  Inc.  commenced  operations as the
parent company of its sole  subsidiary,  The Union National Bank of Westminster,
("Bank") which has conducted the business of banking since 1816.  Since the Bank
is the primary possession of the holding company,  the assets and liabilities of
the holding company are made up almost entirely of the assets and liabilities of
the Bank.  The same is true for the income and expense of the  Company  with the
exception of activities  conducted at the holding  company  level only,  such as
mergers and acquisitions.

         This section of the report contains forward looking  statements  within
the meaning of the Private Securities  Litigation Reform Act of 1995,  including
statements  relating to the Company's beliefs,  expectations,  anticipations and
plans regarding,  among other things,  general economic trends,  interest rates,
product  expansions and other matters.  Such  statements are subject to numerous
uncertainties,   such  as  federal  monetary  policy,   inflation,   employment,
profitability and consumer  confidence levels, the health of the real estate and
construction  market in the  Company's  market area,  the  Company's  ability to
develop and market new products and to enter new markets, and other factors, and
as such, there can be no assurance that future events will develop in accordance
with the forward looking statements contained herein.

         Total assets were $250.4  million at September 30, 1997, an increase of
$29.7 million or 11.9% over one year earlier. The primary funding source for the
asset  growth was  certificates  of deposit.  Growth in deposits has declined in
recent years as  depositors  have sought other  avenues of investment to enhance
their  yields.  Loan growth  slowed  during the second half of 1996 and remained
sluggish  throughout 1997.  Other  investments have increased as loan growth has
slowed. Recently,  management has made personal changes they believe will revive
loan growth.  As loan volume  increases other funding sources are being explored
to sustain this growth. For example, the Bank has taken advantage of competitive
rate on borrowings from the Federal Home Loan Bank.


                                      - 8 -

<PAGE>



         Net income  rose 30.2% in the first nine  months of 1997 to  $1,795,663
from net income of $1,378,810 in the same period of 1996.  The return on average
assets for the nine month period ended September 30, 1997 and 1996 was 1.05% and
 .95%, respectively.  The return on average equity was 12.97% for the nine months
ended  September  30,1997  and was 12.29% for the nine  months  ended  September
30,1996.


Securities Portfolio

         Total  holdings in the investment  portfolio at September  30,1997 were
$64,270,995 and at year-end were  $55,939,772 in 1996. In aggregate,  investment
securities  increased  $8,331,223 or 14.9% in the first nine months of 1997. The
table below  presents to  securities  portfolio  mix as September  30, 1997 when
compared to 1996 at year end.

<TABLE>
<CAPTION>
                                                      Available for-Sale                             Held-to-Maturity
                                            September 30, 1997     December 31, 1996      September 30, 1997     December 31, 1996
                                            ------------------     -----------------      ------------------     -----------------
<S>                                             <C>                      <C>              <C>                    <C>          
U.S. government securities                      $2,993,765               $5,489,035       $              -       $           -
U.S. government agencies                        29,978,922               18,075,915                  939,096           2,550,751
Government mortgaged-backed                     15,437,197               13,494,132                7,690,949           8,874,027
State & county municipals                          581,000                  602,500                5,237,000           5,648,233
Other securities                                 1,413,065                1,205,179                       -                   -
                                            ------------------    ------------------      -------------------      -------------

     Total Investment Securities               $50,403,949              $38,866,761              $13,867,045         $17,073,011
                                            ------------------    ------------------      -------------------      -------------
</TABLE>


Loan Portfolio

         Total loans  outstanding on September  30,1997 were $148,820,474 and on
December 31,1996 were $147,350,540.  The loan portfolio  increased  1,469,994 or
1.0% in the first nine months of the year. The loan portfolio  represented 59.4%
of total  assets on  September  30,1997  and 64.7% of total  assets on  December
31,1996.

         The Bank's loan  portfolio is composed of  commercial  and  residential
real estate secured loans,  commercial  loans, and consumer  installment  loans.
Most  residential  mortgages are held for  investment  purposes and the majority
have a loan to value  ratio of less than 80%.  For those  residential  mortgages
with loan to value  ratios  greater  than 80%,  Private  Mortgage  Insurance  is
required to reduce risk.  Both  commercial  real estate  secured and  commercial
loans  consist  of  well  seasoned  credits  and  new  ventures  that  are  well
collateralized.  The consumer  portfolio is comprised of  installment  loans for
purposes such as vehicle purchases,  debt consolidation,  home improvement,  and
indirect auto loans purchased from approximately  nine dealerships.  An emphasis
during the first nine months of 1997 has been in home equity  loans (fixed term)
which are  secured  by the  residence.  Use of debt to income  ratios and recent
Credit Bureau scores assist to minimize  losses in the consumer  portfolio.  The
Company does not engage in foreign  lending,  and involvement  with  speculative
real estate and land  development  are minimal.  The Company strives to meet the
needs of the community by lending in the Carroll County market area.




                                      - 9 -

<PAGE>



                                      September 30, 1997      December 31, 1996
                                      ------------------      -----------------

Construction and land development          $4,042,095             $1,842,538
Residential real estate - mortgages        44,745,483             40,686,314
Commercial real estate - mortgages         51,639,969             50,575,745
Commercial                                 24,760,230             27,563,398
Consumer                                   23,632,697             27,219,780
                                           ----------             ----------

         Total Loans                      148,820,474            147,887,775
                                          -----------            -----------


Allowance for Credit Losses

         The allowance for loan losses on September  30,1997 was  $1,842,734 and
on December  31,1996 was $1,772,433.  This is an increase of 70,301 or 4.1%. The
ratio of  allowance  to total  loans was 1.20% at year end 1996 and 1.24% at the
end of the first nine months of 1997.


<TABLE>
<CAPTION>
                   Analysis of the Allowance for Credit Losses
             Description                                      Amount

<S>                            <C> <C>                        <C>              <C>         <C>       
Balance at beginning of period 1/1/97                                                     $1,772,433
     Charge-offs first quarter 1997                          (48,024)
     Charge-offs second quarter 1997                         (15,338)
     Charge-offs third quarter 1997                          (55,665)
                                                              -------
Gross Charge-offs for first nine months of 1997                               (119,027)
                                                                              --------

     Recoveries first quarter 1997                            20,267
     Recoveries second quarter 1997                            3,838
     Recoveries third quarter 1997                            20,223
                                                              ------

     Allocation first quarter 1997                            60,000
     Allocation second quarter 1997                           55,000
     Allocation third quarter 1997                            30,000
                                                              ------
Gross Recoveries and Allocations                                               189,328
                                                                               -------

Net Changes since end of 1996                                                                $70,301
                                                                                             -------
Balance at end of period 9/30/97                                                          $1,842,734

Net Charge-offs as a percentage of average total loan       First nine months                  1.24%
</TABLE>


         The  methodology  used  in  determining  the  allowance  is  calculated
quarterly  and is applied in accordance  with Banking  Circular 201 and assesses
risk based on the following categories: trend, in delinquencies and nonaccruals;
experience,  ability,  and depth of lending  management and staff;  national and
local economic  trends and  conditions;  and  concentrations  of credit that may
affect loss experience. In addition,  historical loss data for both our bank and
peers are  considered.  A "reserve  range" is determined  from this  process.  A
comparison  is then  made  of the  actual  allowance  balance  to the  estimated
potential loss in the entire portfolio to determine the current period provision
for credit losses.


                                     - 10 -

<PAGE>




Deposits

         The Company  uses  deposits as the  primary  source for funding  assets
growth. The Company has experienced continuous growth of deposits, especially in
certificates of deposit.

Total  deposits  were  $208,862,609  on September  30,1997 and  $199,291,435  on
December  31,  1996.  The  primary  source of deposits in both 1997 and 1996 was
certificates of deposits which grew $3.4 million or 3.1%. In addition,  checking
accounts  rose $2.3  million or 5.1%.  Both  regular  savings  and money  market
accounts remained  approximately the same,  increasing  $257,820 or .81% in 1997
and $112,211 or .64% in 1996.


Short-Term Borrowings

         Short-term   borrowings   can  consist  of  Federal  funds   purchased,
repurchase  agreements,  and  borrowings  from the Federal  Reserve  Bank or the
Federal Home Loan Bank and correspondent bank lines.

         Securities sold under agreement to repurchase have averaged $10,035,933
during 1997 compared to $8,555,503 in 1996. At September 30, 1997, they totaled
$10,963,911 and, at year-end 1996, they totaled $6,808,596.

         In the third quarter of 1997,  the Bank borrowed  $10,000,000  from the
Federal Home Loan Bank.  These funds were obtained to promote  further growth in
the loan portfolio.  Management believes the spread between the cost of funds on
these  borrowings and investment  return in the loan portfolio will increase the
Bank's net interest margin.


Liquidity

         Traditionally,  the Bank has maintained a strong liquidity position due
to its  concentration  of core  deposits  such as regular  savings and  checking
accounts.  The Bank considers a high percentage of its money market accounts and
certificates of deposit as core deposits.  Federal funds sold is the Bank's most
liquid earning asset. Other sources include  securities  classified as available
for sale. In addition to these  sources,  the Bank has lines of credit  totaling
$33 million available from correspondent banks as of September 30,1997.

         On September 30, 1997,  securities available for sale and federal funds
sold totaled  $75,947,240  compared with 47,749,311 on December 31, 1996.  These
assets  averaged  $59,278,299  at  September  30,1997 and  $40,304,499  in 1996.
Liquidity is also provided by managing the maturities of loans, securities,  and
certificates of deposit.


Capital Management

         The Company's capital position is presented in the following table:

<TABLE>
<CAPTION>
                                                                 September 30,     December 31        Regulatory
                                                                     1997             1996           Requirement
                                                             ---------------------------------------------------
<S>  <C>                                                             <C>              <C>                <C> 
Tier 1 capital to risk weighted assets                               12.0%            11.7%              4.0%
Total capital to risk weighted assets                                13.1%            12.9%              8.0%
Capital leverage ratio                                                8.4%             8.0%              3.0%
</TABLE>


                                     - 11 -

<PAGE>




Net Interest Income

         Net interest income is the major component of the Bank's earnings,  and
it  consists  of the excess of  interest  income  from  earning  assets less the
expense of interest bearing  liabilities.  Earning assets are composed primarily
of loans and securities,  while deposits and short-term borrowings represent the
major portion of interest bearing liabilities.  Changes in the volume and mix of
these assets and liabilities,  as well as changes in the yields earned and rates
paid, are determinants of the changes in net interest  income.  The net interest
margin is calculated  bases on  tax-equivalent  net interest income (income plus
the tax  savings  from  tax-exempt  loans and  investments)  divided  by average
earning assets and represents the Bank's net yield on its earning assets.

         For the first nine months,  net interest  income  before  provision for
loan losses was  $7,264,007  in 1997,  $6,958,027  in 1996.  This  represents an
increase of $305,980 (4.4%) for 1997. Managing the net interest margin is one of
the primary focuses of the Asset/ Liability  Committee.  Monthly,  the committee
examines the "gap" and it's  assumptions  for their  validity,  and assesses the
margins movement  relative to these factors.  The net interest spread represents
the  difference  between  the yield of net  earning  assets  and the cost of net
interest  bearing  liabilities,  which rose to 4.03% in the first nine months of
1997 from 4.01% in the same period of 1996.


Noninterest Income

         Total noninterest income for the first nine months of 1997 was $945,692
up $169,737 or 21.9% from  $775,955  for the first nine months in 1996.  Service
charges on deposit  accounts  increased  $168,010  or 30.1%.  This  increase  in
service  charges on deposit  accounts  is a trend the Bank feels will  continue.
Beginning in the fourth  quarter,  the Bank began service  charging  foreign ATM
activity, a practice all other local competitors have been practicing. Also, the
bank plans to introduce its debit card product in the last quarter of 1997.


Noninterest Expense

         Noninterest expense for the first nine months of 1997 was $5,396,252, a
slight increase of $31,158 or .58% from $5,365,094 in 1996.

         In the  first  nine  months  of 1997,  salaries  and  benefits  totaled
$3,166,820,  up  $290,708 or 10.1% from  $2,876,112  in the first nine months of
1996.  Personnel  expense is the  largest  segment of  noninterest  expense.  It
represented 58.7% of the total for the nine months ended September 30, 1997.

         Occupancy  and  equipment  expenses  for the first nine months  totaled
$856,370 in 1997,  an increase of $7,930 or .9% from $848,440 for the first nine
months of 1996. This increase is primarily due to depreciation expense and start
up cost of our new Eldersburg  branch,  and bringing item processing "in house".
We will be expanding into the Mount Airy region early in 1998, we anticipate the
slight increase in noninterest  expenses will be offset by a greater increase in
noninterest income.

         Other operating expense totaled $1,373,062 for the first nine months of
1997, a decrease of $267,480 or 16.3% from  $1,640,542 for the first nine months
of 1996.  The main  factor in the  reduction  is due to a decrease  in  computer
service expense of $167,298 or 36.6% over the same period in 1996. This decrease
was  partially  offset by an  increase  in  checks,  accounts,  and cash loss of
$42,194 in the first nine  months of 1997  compared  to the first nine months of
1996.



                                     - 12 -

<PAGE>




PART II - OTHER INFORMATION

Item 1. Exhibits and Reports on Form 8-K

A Report on Form-8K

(a) Changes in Registrant's Certifying accountant on form 8K was filed for item
four of 8K on October 1, 1997



SIGNATURES

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

Union National Bancorp (Registrant)


October 18, 1997                    By: /s/ Virginia W. Smith
                                    -------------------------
                                    Virginia W. Smith
                                    President and Chief Executive Officer


October 18,1997                     By: /s/ Gabrielle M. Peregoy
                                    ----------------------------
                                    Gabrielle M. Peregoy
                                    Vice President

                                     - 13 -