Conformed Copy

                    U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                       ----------------------------------
                                  FORM 10-KSB

[X]      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
         OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
         [No Fee Required]

                                       OR

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934
         [No Fee Required]

                          Commission File No. 0-28122

                          TYSONS FINANCIAL CORPORATION
                 (Name of small business issuer in its charter)

        Virginia                                        54-1527945
  (State or Other Juris-                    (I.R.S. Employer Identification No.)
 diction of Incorporation)

8200 Greensboro Drive Suite 100
McLean, Virginia                                                         22102
(Address of Principal Executive Offices)                              (Zip Code)

Issuer's telephone number, including area code:      (703) 556-0015

Securities registered under Section 12(b) of the Exchange Act: Common Stock, par
value $5.00 per share. Securities registered under Section 12(g) of the Exchange
Act: NONE

         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days:
                                    Yes  [X]          No  [ ]

         Check if there is no  disclosure  of  delinquent  filers in response to
Item 405 of  Regulation  S-B contained in this form,  and no disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [x]

         Total revenues for the registrant's fiscal year ended December 31, 1996
were $6,556,092.

As of March 14, 1997,  1,071,119  shares of the  registrant's  common stock, par
value $5.00 per share, were outstanding. The common stock is traded on Nasdaq
SmallCap Market  under the symbol  TYFC.  Based on the average of the most
recent  sales price of $12.56 per share,  the  registrant  believes that the
aggregate  market value of voting stock held by non-affiliates was $10,065,257
on March 14, 1997.


Transitional Small Business Disclosure Format:  Yes ____  No _X___


<PAGE>

                                     PART I

               SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION

         Certain  statements  under the  caption  "Management's  Discussion  and
Analysis of Financial Condition and Results of Operations" and elsewhere in this
Annual  Report and the  documents  incorporated  herein by reference  constitute
"forward-looking  statements"  within the meaning of the United  States  Private
Securities  Litigation  Reform  Act of  1995.  Such  forward-looking  statements
involve known and unknown risks, uncertainties and other factors which may cause
the actual  results,  performance or  achievements  of the Company,  or industry
results,  to be materially  different from any future results,  performance,  or
achievements  expressed  or implied  by such  forward-looking  statements.  Such
factors  include,  among others,  the following:  general  economic and business
conditions in the Company's  market area,  inflation,  fluctuations  in interest
rates,  changes in government  regulations and  competition,  which will,  among
other things,  impact demand for loans and banking services;  the ability of the
Company to implement  its business  strategy;  and changes in, or the failure to
comply with, government regulations.

         Forward-looking  statements are intended to apply only at the time they
are made.  Moreover,  whether or not stated in connection with a forward-looking
statement,  the  Company  undertakes  no  obligation  to  correct  or  update  a
forward-looking  statement  should the Company later become aware that it is not
likely  to  be   achieved.   If  the  Company   were  to  update  or  correct  a
forward-looking  statement,  investors  and others  should not conclude that the
Company will make additional updates or corrections thereafter.

ITEM 1 - DESCRIPTION OF BUSINESS

General

         Tysons  Financial  Corporation  (the  "Company")  was  incorporated  in
Virginia on December 29, 1989 as a bank  holding  company to own and control all
of the capital stock of Tysons  National  Bank, a national  banking  association
(the "Bank").  The Bank  commenced its operations on July 1, 1991 in its primary
service area in Fairfax County,  Virginia.  The  headquarters of the Company and
the Bank are  located  in an area  known as  Tysons  Corner.  Tysons  Corner  is
approximately 13 miles due west of Washington,  D.C. and within 20 to 30 minutes
from other locations such as Dulles International  Airport,  Washington National
Airport and suburban  Maryland.  The Bank also operates two additional  branches
located in Reston and McLean,  Virginia.  At December 31, 1996,  the Company had
total assets of $87,837,000, total loans, net, of $56,983,000, total deposits of
$78,554,000 and stockholders' equity of $8,265,000.

         On May 24, 1996, the Company issued 402,500 shares of common stock in a
public offering for net proceeds of approximately $3,000,000.  See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

         The  executive  offices of the  Company and the main office of the Bank
are  located at 8200  Greensboro  Drive,  Suite  100,  McLean,  Virginia  22102,
telephone number (703)556-0015.

Primary Market Area

         The Bank draws most of its customer  deposits and conducts  most of its
lending  transactions  from and  within a  primary  service  area in the  Tysons
Corner/Reston corridor in Fairfax County, Virginia.

         The large cosmopolitan population that lives and works in this corridor
and in surrounding suburbs, as well as the area's accessibility,  make retailing
a significant  enterprise.  High  technology  firms are also located within this
corridor.  These  firms  include  businesses  engaged  in  operations  research,
computer programming and information  management.  The Bank actively targets and
solicits   relationships   from  the   professional   staff  employed  by  these
enterprises.  The corridor also attracts a  significant  amount of  professional
firms,  including  accounting and law firms. The Bank actively  solicits banking
relationships with these firms as well as their professional staff.

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<PAGE>

         The Company acquired an additional branch located in Reston,  Virginia,
in May 1995,  which is approximately  nine miles west of the Company's  existing
location.  See "Management's  Discussion and Analysis of Financial Condition and
Results of Operations."  The Reston area is experiencing  increases in its large
residential community and growing commercial business sectors which are expected
to contribute to the overall growth of the Company.

         On September 30, 1996, the Company opened its third branch  location in
McLean,  Virginia.  The McLean branch is located along a main commuter  route to
Washington,  D.C.  The  community  around  the  branch  is a  mixture  of  small
commercial  businesses  and  professional  service firms as well as  residential
areas.

Banking Services

         The Bank engages in general commercial banking business with particular
emphasis on the needs of professionals, entrepreneurs, and small to medium-sized
businesses  located in its primary service area. The Bank offers a comprehensive
range of banking services that are generally offered by other full service banks
and savings and loan associations. Such services include commercial and personal
checking  accounts,  Automated  Teller Machine (ATM) card services for the MOST,
Cirrus and Exchange ATM  networks,  savings  accounts,  and other time  deposits
including  individual  retirement  accounts  and  certificates  of deposit.  The
transaction  accounts and time  deposits  are  tailored to the Bank's  principal
market area at rates competitive to those offered in the area. The Bank solicits
these accounts from individuals,  businesses, professional firms, and public and
governmental  organizations.  The Bank is not currently  dependent upon a single
depositor or borrower the loss of which would have a material  adverse effect on
the Bank.

         The Bank also provides loans to businesses,  including both secured and
unsecured  short-term loans for working capital  purposes,  term loans for fixed
assets and expansion  needs such as real estate  acquisition  and  improvements,
real estate construction loans, and other commercial loans suitable to the needs
of its business  customers.  Loans to individuals  which are offered by the Bank
include short-term mortgage loans and installment loans for personal use such as
education and personal investments,  or for the purchase of automobiles or other
consumer items.  The Bank also acts as an issuing agent for U.S.  savings bonds,
travelers'  checks  and  cashier's  checks.  In  addition,  the Bank  offers its
customers bank-by-mail and direct deposit services,  safe deposit services, wire
transfer  services  and a  courier  service  which  picks up  non-cash  customer
deposits.

Lending Activities

         General.  At December 31, 1996, the Bank's net loan  portfolio  totaled
$56,983,000,   representing   approximately   64.9%  of  its  total   assets  of
$87,837,000.  The categories of loans in the Company's portfolio are commercial,
commercial  and  residential  real  estate,  and  consumer.   See  "Management's
Discussion    and   Analysis   of   Financial    Condition    and   Results   of
Operations-Composition of Loan Portfolio."

         Commercial  Loans. The Bank originates  secured and unsecured loans for
business purposes.  Additionally,  commercial business loans are made to provide
short-term working capital and acquisition capital to businesses in the forms of
lines of credit and term loans  which may be  secured  by  accounts  receivable,
inventory, equipment or other assets. At December 31, 1996, $17,308,000 or 30.0%
of the Bank's total gross loan portfolio consisted of commercial business loans.
The  financial  condition  and cash flow of  commercial  borrowers  are  closely
monitored  by  the  submission  of  corporate  financial  statements,   personal
financial statements,  income tax returns and other documents.  The frequency of
submissions of required  information depends upon the size and complexity of the
credit and the collateral  which secures the loan. It is also the Bank's general
policy  to  obtain  personal  guarantees  from the  principals  of its  business
borrowers.

         Commercial Real Estate Loans. The Bank also originates commercial loans
secured by real estate. At December 31, 1996, $13,872,000 or 24.0% of the Bank's
total gross loan portfolio consisted of commercial real estate loans. Such loans
are primarily secured by owner-occupied  office  condominiums,  retail buildings
and  warehouses and general  purpose  business  space.  Although terms vary, the
Bank's  commercial  real estate loans generally have maturities of five years or
less.

                                       2


<PAGE>

         Residential  Real Estate  Loans.  The Bank  originates  adjustable  and
fixed-rate  residential  mortgage  loans,  home equity loans and personal  loans
secured by residential  real estate in order to provide a full range of products
to its customers.  Home equity loans are originated by the Bank for typically up
to 80% of the appraised  value,  less the amount of any existing  prior liens on
the property. Home equity loans generally have maximum terms of 15 years and the
interest  rate is  generally  adjustable.  The Bank  secures  these  loans  with
mortgages on the borrowers' homes (generally a second mortgage). At December 31,
1996, $12,933,000 or 22.4% of the Bank's total gross loan portfolio consisted of
loans secured by residential real estate.

         Consumer Loans. The Bank offers a variety of consumer loans in order to
provide a full range of financial services to its customers.  The consumer loans
offered  by the Bank  include  loans  that are  secured  by  personal  property,
including  automobiles.  At December 31, 1996, $9,389,000 or 16.2% of the Bank's
total gross loan portfolio consisted of consumer loans.

         Construction  Loans.  The Bank  originates  loans for  construction  of
single  family  homes to builders  and  individuals.  These loans are  generally
secured  by the land on which the homes are to be  built.  The Bank  limits  its
lending to one speculative loan outstanding to one builder . Loans generally are
to be owner  occupied or have a sales  contract in  existence.  At December  31,
1996,  $4,255,000 or 7.4% of the Bank's total gross loan portfolio  consisted of
construction loans.

Credit Administration

         The Bank employs  extensive  written policies and procedures to enhance
management of credit risk.  The loan  portfolio is managed under a  specifically
defined  credit  process.  This  process  includes  formulation  of a  portfolio
management strategy,  guidelines for underwriting standards and risk assessment,
procedures for on-going  identification and management of credit  deterioration,
and  regular  portfolio  reviews to  estimate  loss  exposure  and to  ascertain
compliance with the Bank's policies.  The Bank's loan approval  policies provide
for various levels of individual officer lending authority. In general,  lending
authority  currently  granted by the Bank to any one  individual is $100,000.  A
combination  of approvals  from certain  officers may lend up to an aggregate of
$200,000.  The Board's Loan  Committee is  authorized to approve loans up to the
Bank's  internal  lending  limit  of  $1,000,000,  at  December  31 1996 and the
approval  of the full  Board is  required  for loans  which  exceed  the  Bank's
internal  lending  limit up to the Bank's legal  lending  limit of $1,184,000 at
December 31, 1996.

         A major  element of credit risk  management is the  diversification  of
risk.  The Bank's  objective  is to  maintain a diverse but  well-balanced  loan
portfolio to minimize  the impact of any single  event or set of  circumstances.
Concentration  parameters  are based  upon  individual  risk  factors,  industry
categories,  policy  constraints,  economic  conditions,   origination  sources,
collateral  and  products.  The Bank  generally  does not make loans outside its
market area unless the borrower has an  established  relationship  with the Bank
and conducts its principal  business  operations  within the Bank's market area.
Consequently,  the Bank and its borrowers are directly  affected by the economic
conditions  prevailing  in its market area.  However,  given the  diversity  and
balance within the Bank's loan portfolio, management does not believe that there
is any  significant  aggregation  or  concentration  of loans related to any one
industry,  client or sector which would adversely impact the overall performance
of the Bank's loan portfolio.

Supervision and Regulation

         The Company and the Bank are subject to state and federal  banking laws
and  regulations  which impose  specific  requirements  or  restrictions  on and
provide for general  regulatory  oversight with respect to virtually all aspects
of  operations.  These  laws and  regulations  are  generally  intended  for the
protection of depositors.

         Beginning  with the  enactment of the  Financial  Institutions  Reform,
Recovery and  Enforcement  Act of 1989 ("FIRREA") and following with the Federal
Deposit  Insurance  Corporation  Improvement  Act of 1991  ("FDICIA"),  numerous
additional  regulatory  requirements have been placed on the banking industry in
the past five years, and additional  changes have been proposed.  The operations
of the  Company  and the Bank may be  affected  by  legislative  changes and the
policies of various regulatory authorities. The Company is unable to predict the
nature

                                       3


<PAGE>

or the extent of the effect on its business and earnings that fiscal or monetary
policies,  economic control, or new federal or state legislation may have in the
future.

         The  following  is a brief  summary  of  certain  statutes,  rules  and
regulations affecting the Company and the Bank. To the extent that the following
summary  describes  statutory or regulatory  provisions,  it is qualified in its
entirety by reference to the particular statutory and regulatory provisions.

The Company

         The Company is a bank holding company within the meaning of the federal
Bank Holding  Company Act of 1956, as amended (the "BHCA") and Chapter 13 of the
Virginia Banking Act (the "Virginia Act").

         The  BHCA.   Under  the  BHCA,  the  Company  is  subject  to  periodic
examination  by the  Board of  Governors  of the  Federal  Reserve  System  (the
"Federal  Reserve") and is required to file periodic  reports of its  operations
and  such  additional  information  as the  Federal  Reserve  may  require.  The
Company's  and the  Bank's  activities  are  limited  to  banking,  managing  or
controlling  banks,  furnishing  services  to or  performing  services  for  its
subsidiaries,  or  engaging  in any  other  activity  that the  Federal  Reserve
determines to be so closely related to banking or managing or controlling  banks
as to be a proper incident thereto.

         With certain limited  exceptions,  the BHCA requires every bank holding
company to obtain the prior approval of the Federal Reserve before (i) acquiring
substantially  all the assets of any bank,  (ii)  acquiring  direct or  indirect
ownership or control of any voting shares of any bank if after such  acquisition
it would own or control  more than 5% of the voting  shares of such bank (unless
it already owns or controls the majority of such  shares),  or (iii)  merging or
consolidating with another bank holding company.

         In  addition,  and  subject  to  certain  exceptions,  the BHCA and the
Federal  Change in Bank  Control  Act,  together  with  regulations  thereunder,
require Federal Reserve approval (or, depending on the circumstances,  no notice
of  disapproval)  prior to any person or company  acquiring  "control" of a bank
holding company, such as the Company.  Control is conclusively presumed to exist
if an  individual  or  company  acquires  25% or more  of any  class  of  voting
securities  of the bank  holding  company.  With  respect to  corporations  with
securities registered under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"),  under Federal Reserve  regulations  control will be rebuttably
presumed  to exist if a person  acquires  at least  10% of any  class of  voting
securities of the corporation. The regulations provide a procedure for challenge
of the rebuttable  control  presumption.  The Company registered its stock under
the Exchange Act with its stock offering in May 1996.

         Under the BHCA, the Company is generally  prohibited  from engaging in,
or acquiring  direct or indirect control of more than 5% of the voting shares of
any company engaged in, non-banking  activities,  unless the Federal Reserve, by
order or  regulation,  has found those  activities  to be so closely  related to
banking or managing or  controlling  banks as to be a proper  incident  thereto.
Some of the activities  that the Federal Reserve has determined by regulation to
be proper incidents to the business of banking include making or servicing loans
and  certain  types of  leases,  engaging  in  certain  insurance  and  discount
brokerage  activities,  performing certain data processing  services,  acting in
certain circumstances as a fiduciary or investment or financial advisor,  owning
savings associations, and making investments in certain corporations or projects
designed primarily to promote community welfare.

         In accordance with Federal  Reserve policy,  the Company is expected to
act as a source of financial  strength and commit resources to support the Bank.
Under the BHCA,  the  Federal  Reserve  may  require a bank  holding  company to
terminate any activity or  relinquish  control of a non-bank  subsidiary  (other
than  a  non-bank  subsidiary  of a  bank)  upon  the  Federal  Reserve  Board's
determination  that such  activity or control  constitutes a serious risk to the
financial soundness or stability of any subsidiary depository institution of the
bank  holding  company.   Further,  federal  bank  regulatory  authorities  have
additional  discretion to require a bank holding company to divest itself of any
bank or non-bank  subsidiary if the agency  determines that  divestiture may aid
the depository institution's financial condition.

                                       4


<PAGE>

         In the  liquidation  or  other  resolution  by any  receiver  of a bank
insured by the FDIC,  the claims of  depositors  have  priority over the general
claims  of other  creditors.  Hence,  in the event of the  liquidation  or other
resolution  of a banking  subsidiary  of the  Company  (such as the  Bank),  the
general  claims of the Company as creditor of such banking  subsidiary  would be
subordinate to the claims of the depositors of such banking subsidiary,  even if
the claims of the Company were not by their terms so subordinated.

         The Virginia  Act. All Virginia  bank holding  companies  must register
with the Virginia State Corporation Commission (the "Virginia Commission") under
the Virginia  Act. A registered  bank holding  company must provide the Virginia
Commission  with  information  regarding  the financial  condition,  operations,
management,  and  intercompany  relationships  of the  holding  company  and its
subsidiaries. The Virginia Commission may also require additional information it
deems necessary to keep itself informed about whether the provisions of Virginia
law and the regulations and orders issued thereunder by the Virginia  Commission
have been complied with, and may make  examinations  of any bank holding company
and its subsidiaries.

         Under the Virginia  Act, it is unlawful  without the prior  approval of
the Virginia  Commission for any Virginia bank holding company to acquire direct
or indirect ownership or control of more than 5% of the voting securities of any
bank or other bank holding company. In addition,  Chapter 15 of the Virginia Act
allows  regional  interstate  banking by  permitting  banking  organizations  in
certain  Southeastern  states  to  acquire  Virginia  banking  organizations  if
Virginia banking  associations  are allowed to acquire banking  organizations in
their states and the Virginia  banking  organization  to be acquired has been in
existence and  continuously  operated as a bank for a period of two years.  As a
result of this reciprocal  banking  provision,  banking  organizations  in other
states  have  entered  the  Virginia  market  through  acquisitions  of Virginia
institutions.  Under federal legislation recently passed in Congress,  effective
September 29, 1995, bank holding companies will be permitted to acquire banks in
any state.

The Bank

         General.   The  Bank  operates  as  a  national   banking   association
incorporated  under the laws of the United States and is subject to  examination
by the Office of the  Comptroller  of the Currency (the "OCC").  Deposits in the
Bank are insured by the Federal Deposit Insurance Corporation (the "FDIC") up to
a maximum  amount  (generally  $100,000 per  depositor,  subject to  aggregation
rules.)  The OCC and the FDIC  regulate  or  monitor  all  areas  of the  Bank's
operations,   including   security   devices   and   procedures,   adequacy   of
capitalization  and loss reserves,  loans,  investments,  borrowings,  deposits,
mergers,  issuances of  securities,  payment of  dividends,  interest  rate risk
management, establishment of branches, corporate reorganizations, maintenance of
books and records,  and adequacy of staff  training to carry on safe lending and
deposit  gathering  practices.  The OCC  requires  the Bank to maintain  certain
capital  ratios and imposes  limitations on the Bank's  aggregate  investment in
real estate,  bank premises,  and furniture and fixtures.  The Bank is currently
required  by the  OCC to  prepare  quarterly  reports  on the  Bank's  financial
condition and to conduct an annual audit of its financial  affairs in compliance
with minimum standards and procedures prescribed by the OCC.

         Under FDICIA,  all insured  institutions  must undergo  regular on-site
examination by their appropriate banking regulator.  The cost of examinations of
insured  depository  institutions  and any  affiliates  may be  assessed  by the
appropriate  agency against each  institution or affiliate as it deems necessary
or appropriate.  Insured  institutions  are required to submit annual reports to
the FDIC and the appropriate agency or agencies. FDICIA also directs the FDIC to
develop  with other  agencies a method for insured  depository  institutions  to
provide supplemental disclosure of the estimated fair market value of assets and
liabilities,  to the extent  feasible  and  practicable,  in any balance  sheet,
financial  statement,  report of  condition  or any other  report of any insured
depository  institution.  FDICIA, as amended by the Riegle Community Development
and  Regulatory  Improvement  Act of 1994,  also  requires  the federal  banking
regulatory agencies to prescribe, by regulation or guidelines, standards for all
insured depository  institutions relating,  among other things, to: (i) internal
controls,  information  systems,  and audit systems;  (ii) loan  documentation ;
(iii) credit  underwriting;  (iv)  interest  rate risk  exposure;  and (v) asset
quality.  The regulatory  agencies adopted joint guidelines for all areas except
asset quality in July, 1995, and joint guidelines setting qualitative  standards
on asset quality and earnings in August, 1996.

         Transactions  With Affiliates and Insiders.  The Bank is subject to the
provisions of Section 23A of the Federal Reserve Act, which places limits on the
amount of loans or extensions of credit to, or investments  in, or

                                       5

<PAGE>

certain other transactions with,  affiliates including the Company. In addition,
limits are placed on the amount of advances to third parties  collateralized  by
the securities or  obligations  of  affiliates.  Most of these loans and certain
other  transactions  must be secured  in  prescribed  amounts.  The Bank is also
subject to the provisions of Section 23B of the Federal Reserve Act that,  among
other  things,  prohibits an  institution  from  engaging in  transactions  with
certain affiliates unless the transactions are on terms  substantially the same,
or at least as  favorable  to such  institution  or its  subsidiaries,  as those
prevailing  at  the  time  for  comparable   transactions  with   non-affiliated
companies.  The Bank is  subject  to  restrictions  on  extensions  of credit to
executive officers, directors, certain principal shareholders, and their related
interests.  Such extensions of credit (i) must be made on substantially the same
terms, including interest rates and collateral,  as those prevailing at the time
for  comparable  transactions  with third parties and (ii) must not involve more
than the normal risk of repayment or present other unfavorable features.

         Branching.  National  banks are  required by the  National  Bank Act to
adhere to branch  banking laws  applicable to state banks in the states in which
they are located.  Under current  Virginia law, the Bank may open branch offices
throughout Virginia with the prior approval of the OCC. In addition,  with prior
approval of the OCC and any other agency as appropriate under the circumstances,
the Bank will be able to acquire existing banking operations in Virginia.

         Under  the  recently  passed  federal   legislation   discussed  above,
effective  June 1, 1997,  banks may merge or  consolidate  across  state  lines,
unless both of the states involved either authorize such merger or consolidation
at an earlier  date or either of the states  involved  elects to  prohibit  such
merger or consolidation  prior to May 31, 1997.  Under the federal  legislation,
states may authorize banks from other states to engage in branching across state
lines.  The Virginia  General  Assembly passed the "opt-in" law which adopts the
general  legislation  before it automatically  takes effect on June 1, 1997. The
"opt-in" law became effective on July 1, 1995.

         Community  Reinvestment  Act. The Federal  Community  Reinvestment  Act
requires that, in connection with examinations of financial  institutions within
their  jurisdiction,  the Federal  Reserve,  the FDIC, the OCC, or the Office of
Thrift  Supervision  (the  "OTS")  shall  evaluate  the record of the  financial
institutions in meeting the credit needs of their local  communities,  including
low and  moderate  income  neighborhoods,  consistent  with the  safe and  sound
operation of those institutions. These factors are also considered in evaluating
mergers, acquisitions, and applications to open a branch or facility.

         Other  Regulations.  Interest and certain  other  charges  collected or
contracted  for by the Bank are subject to state usury laws and certain  federal
laws concerning  interest rates.  The Bank's loan operations are also subject to
certain  federal laws  applicable  to credit  transactions,  such as the federal
Truth-In-Lending   Act  governing   disclosures  of  credit  terms  to  consumer
borrowers,  the  Home  Mortgage  Disclosure  Act  of  1975  requiring  financial
institutions to provide information to enable the public and public officials to
determine  whether a financial  institution is fulfilling its obligation to help
meet the housing needs of the community it serves,  the Equal Credit Opportunity
Act prohibiting  discrimination  on the basis of race, creed or other prohibited
factors in extending credit, the Fair Credit Reporting Act of 1978 governing the
use and provision of information  to credit  reporting  agencies,  the Fair Debt
Collection  Act governing the manner in which consumer debts may be collected by
collection  agencies,  and the  rules and  regulations  of the  various  federal
agencies charged with the  responsibility of implementing such federal laws. The
deposit  operations  of the Bank  also are  subject  to the  Right to  Financial
Privacy  Act,  which  imposes a duty to  maintain  confidentiality  of  consumer
financial  records and prescribes  procedures for complying with  administrative
subpoenas of financial records, the Electronic Funds Transfer Act and Regulation
E issued by the  Federal  Reserve  Board to  implement  that act,  which  govern
automatic  deposits to and  withdrawals  from deposit  accounts  and  customers'
rights and  liabilities  arising from the use of automated  teller  machines and
other electronic banking services,  and the Truth-in Savings Act, which requires
accurate disclosures of certain items related to deposit accounts such as annual
percentage  yield ("APY"),  duration of APY,  minimum balance  requirements  and
information about fees and penalties.

Deposit Insurance

         The deposits of the Bank are currently insured to a maximum of $100,000
per depositor,  subject to certain aggregation rules. The FDIC has implemented a
risk-related  assessment system for deposit insurance  premiums.  All depository
institutions  have been assigned to one of nine risk assessment  classifications
based  upon  certain  capital

                                       6

<PAGE>

and supervisory measures.  Except to the extent indicated below, the deposits of
the Bank are  subject  to the rates of the Bank  Insurance  Fund  ("BIF") of the
FDIC. On August 8, 1995, in view of the success in  recapitalizing  the BIF, the
FDIC  reduced  the  lowest  assessment  rate for the BIF from  $0.23 per $100 of
domestic deposits to $0.04, so that the revised schedule of BIF assessment rates
now ranges from $0.04 per $100 of domestic  deposits to $0.31 (the  highest rate
remaining  unchanged).  This  reduction  in the lowest BIF  assessment  rate was
effective  retroactive to June 1, 1995 (the FDIC having  determined that the BIF
achieved the statutory  required reserve ratio of 1.25% on May 31, 1995).  These
base  assessment  rates were  reaffirmed by the FDIC December 24, 1996.  For the
second  semiannual  period  of 1996 and the  first  semiannual  period  of 1997,
however,  the  FDIC  has  used an  adjusted  assessment  schedule  lowering  the
applicable  rates, so that BIF assessment  rates would range from $0.00 per $100
of  domestic  deposits  to $0.27  per $100 of  domestic  deposits.  These  lower
adjusted  rates will terminate at the end of June,  1997.  Based upon the Bank's
current risk classification, the Bank is now required to pay a BIF assessment of
$0.04 per $100 of domestic deposits.

 Dividends

         The  principal  source  of  the  Company's  cash  revenues  comes  from
dividends  received from the Bank.  The amount of dividends  that may be paid by
the Bank to the Company depends on the Bank's earnings and capital  position and
is limited by federal law, regulations,  and policies. In addition,  the Federal
Reserve has stated that bank  holding  companies  should  refrain  from or limit
dividend increases or reduce or eliminate dividends under circumstances in which
the bank holding company fails to meet minimum capital  requirements or in which
its earnings are impaired.

         As  a  national   bank,  the  Bank  may  not  pay  dividends  from  its
paid-in-capital.  All  dividends  must be paid out of undivided  profits then on
hand, after deducting expenses,  including reserves for losses and bad debts. In
addition,  a national bank is prohibited from declaring a dividend on its shares
of common stock until its surplus  equals its stated  capital,  unless there has
been  transferred to surplus no less than one-tenth of the bank's net profits of
the  preceding  two  consecutive  half-year  periods  (in the case of an  annual
dividend).  The  approval of the OCC is  required if the total of all  dividends
declared by a national  bank in any  calendar  year exceeds the total of its net
profits for that year  combined  with its retained net profits for the preceding
two years, less any required  transfers to surplus.  Under FDICIA,  the Bank may
not  pay  a  dividend  if,  after  paying  the  dividend,   the  Bank  would  be
undercapitalized. See "Capital Regulations" below.

Capital Regulations

         The federal bank regulatory authorities have adopted risk-based capital
guidelines  for banks  and bank  holding  companies  that are  designed  to make
regulatory  capital  requirements  more sensitive to differences in risk profile
among banks and bank holding companies,  account for off-balance sheet exposure,
and minimize  disincentives  for holding  liquid assets.  The resulting  capital
ratios  represent  qualifying  capital as a  percentage  of total  risk-weighted
assets and off-balance sheet items. The guidelines are minimums, and the federal
regulators  have  noted  that  banks and bank  holding  companies  contemplating
significant  expansion  programs  should not allow  expansion to diminish  their
capital ratios and should  maintain  ratios well in excess of the minimums.  The
current  guidelines  require all bank holding companies and  federally-regulated
banks to maintain a minimum risk-based total capital ratio equal to 8%, of which
at least 4% must be Tier 1 capital. Tier 1 capital includes common shareholders'
equity,  qualifying  perpetual preferred stock, and minority interests in equity
accounts of  consolidated  subsidiaries,  but  excludes  goodwill and most other
intangibles and excludes the allowance for loan and lease losses. Tier 2 capital
includes  the  excess of any  preferred  stock not  included  in Tier 1 capital,
mandatory convertible securities, hybrid capital instruments, certain qualifying
subordinated  debt and intermediate  term-preferred  stock, and general reserves
for loan and lease losses up to 1.25% of risk-weighted assets.

         Under these guidelines,  banks' and bank holding  companies' assets are
given risk-weights of 0%, 20%, 50%, and 100%. In addition,  certain  off-balance
sheet  items  are given  credit  conversion  factors  to  convert  them to asset
equivalent  amounts  to which  an  appropriate  risk-weight  will  apply.  These
computations result in the total  risk-weighted  assets. Most loans are assigned
to the 100% risk  category,  except for first  mortgage  loans fully  secured by
residential property and, under certain circumstances,  residential construction
loans, both of which carry a 50% rating. Most investment securities are assigned
to the 20% category,  except for municipal or state revenue bonds,

                                       7


<PAGE>

which have a 50% rating, and direct obligations of or obligations  guaranteed by
the United States Treasury or United States Government agencies, which have a 0%
rating. On September 6, 1996, the OCC revised its risked-based  capital rules to
supplement  and adjust its  risk-based  capital  ratios for certain  banks whose
trading  activity  equals 10  percent  or more of total  assets or $1 billion or
more.  These new rules became  effective  January 1, 1997 but  compliance is not
required  until  January 1, 1998.  As of December  31,  1996,  the Bank does not
conduct  trading  activities  and therefore is not required to comply with these
rules.

         The  federal  bank  regulatory  authorities  have  also  implemented  a
leverage ratio,  which is Tier 1 capital as a percentage of average total assets
less intangibles,  to be used as a supplement to the risk-based guidelines.  The
principal  objective  of the  leverage  ratio  is to place a  constraint  on the
maximum  degree to which a bank holding  company may leverage its equity capital
base. The minimum required leverage ratio for top-rated  institutions is 3%, but
most institutions are required to maintain an additional cushion of at least 100
to 200 basis points.

         FDICIA  established a new  capital-based  regulatory scheme designed to
promote early  intervention  for troubled  banks and requires the FDIC to choose
the  least  expensive  resolution  of  bank  failures.   The  new  capital-based
regulatory  framework  contains five  categories of compliance  with  regulatory
capital requirements,  including "well capitalized,"  "adequately  capitalized,"
"undercapitalized,"     significantly    undercapitalized"    and    "critically
undercapitalized."  To qualify as a "well  capitalized"  institution,  a bank or
bank  holding  company  must have a leverage  ratio of no less than 5%, a Tier 1
risk-based ratio of no less than 6%, and a total risk-based  capital ratio of no
less than 10%,  and the bank must not be under any order or  directive  from the
appropriate regulatory agency to meet and maintain a specific capital level.

         Under  the  FDICIA  regulations,  the  applicable  agency  can treat an
institution  as if it were in the next lower  category if the agency  determines
(after  notice and an  opportunity  for hearing) that the  institution  is in an
unsafe or unsound condition or is engaging in an unsafe or unsound practice. The
degree of regulatory scrutiny of a financial institution will increase,  and the
permissible  activities of the institution  will decrease,  as it moves downward
through the  capital  categories.  Institutions  that fall into one of the three
undercapitalized  categories may be required to (i) submit a capital restoration
plan; (ii) raise additional capital; (iii) restrict their growth, interest rates
on deposits, and other activities;  (iv) improve their management; (v) eliminate
management fees; or (vi) divest  themselves of all or part of their  operations.
Bank holding companies controlling financial  institutions can be called upon to
boost the  institutions'  capital and to partially  guarantee the  institution's
performance under their capital  restoration  plans. As of December 31, 1996 and
1995, the Company and the Bank met regulatory minimum capital requirements.

         In August of 1995, the federal bank regulatory  agencies  revised their
capital adequacy  guidelines to provide explicitly for consideration of interest
rate risk in the overall  determination of a bank's minimum capital requirement.
The intended effect is to ensure that banking  institutions  effectively measure
and monitor their interest rate risk and that they maintain adequate capital for
the risk. A banking  institution  deemed to have  excessive  interest  rate risk
exposure may be required to maintain  additional  capital.  The Company does not
believe  that this  revision  in the  capital  adequacy  guidelines  will have a
material adverse effect on the Company.

         These capital guidelines can affect the Company in several ways. If the
Bank begins to grow at a rapid  pace,  a premature  "squeeze"  on capital  could
occur,  making a capital infusion  necessary.  The requirements could impact the
Company's  ability to pay dividends.  The Company currently is well capitalized.
Previously,  when the Company  received  regulatory  approval to acquire certain
assets and assume certain  deposits and other  liabilities of Suburban Bank, the
Company's  leverage and risk-based  capital ratios  decreased due to the overall
increase in asset size.  Although the Company anticipates that its current level
of capital  will be  adequate  to absorb  anticipated  growth,  this is based on
management's  expectations  and  there  can be no  assurance  that the  level of
capital will at current levels. In addition,  rapid growth,  poor loan portfolio
performance,  or poor earnings  performance  or a  combination  of these factors
could change the Bank's capital position in a relatively short period of time.

Uniform Financial Institutions Rating System (UFIRS)

         UFIRS is a  supervisory  rating  system  used by the OCC and the  other
federal  regulators to evaluate the soundness of  depository  institutions  on a
uniform basis.  The agencies have  implemented this system through CAMEL ratings
that evaluate banks according to five factors:  capital adequacy, asset quality,
management,

                                       8


<PAGE>

earnings,  and liquidity.  The OCC and the other  regulators  have added a sixth
factor, sensitivity to market risk, effective January 1, 1997. The rating system
is now referred to as CAMELS.

Governmental Monetary Policies and Economic Controls

         The Company is affected by monetary  policies of  regulatory  agencies,
including the Federal  Reserve,  which  regulates  the national  money supply in
order to mitigate recessionary and inflationary pressures.  Among the techniques
available  to the Federal  Reserve are engaging in open market  transactions  in
United  States  Government  securities,  changing  the  discount  rate  on  bank
borrowings,  changing  reserve  requirements  against bank deposits and limiting
interest rates that banks may pay on time and savings deposits. These techniques
are used in varying  combinations to influence the overall growth of bank loans,
investments  and deposits.  Their use may also affect  interest rates charged on
loans or paid on deposits.  The effect of governmental  policies on the earnings
of the Company cannot be predicted;  however,  modest short-term  changes should
have  little  effect  so long as the  Company  maintains  its  current  interest
sensitivity gap position.

Recent Legislative Developments

         From time to time,  various  bills are  introduced in the United States
Congress  with respect to the  regulation of financial  institutions,  including
proposals to consolidate the federal bank regulatory agencies.  Certain of these
proposals,  if adopted,  could significantly  change the regulation of banks and
the financial services industry. In particular,  during 1996 Congress considered
financial  services  legislation that would,  among other things,  substantially
amend the  Glass-Steagall  Act and the Bank Holding  Company Act,  statutes that
restrict  the ability of banks and bank  holding  companies to engage in certain
activities, including the underwriting of and dealing in various securities, and
to affiliate with entities not engaged in activities  related to the business of
banking.  Already in 1997, there have been at least three comparable legislative
proposals made in Congress that would permit  affiliation  of banks,  securities
firms and insurance companies and possibly permit affiliations between banks and
any  commercial  entity.  These  proposals  also  provide for the  abolition  of
separate  and  distinct  charters  for banks and savings  associations.  If such
statutory  reform  is  enacted,  it  could  cause a  significant  change  in the
financial  services  industry and expand the ability of the Bank and the Company
to offer a broader  range of  financial  products.  The Company  cannot  predict
whether  any of these  proposals  will be  adopted  or,  if  adopted,  how these
proposals would affect the Company.

Competition

         The Bank encounters strong competition among financial  institutions in
the northern Virginia and metropolitan Washington,  D.C. area for both loans and
deposits.  Competition  also exists with savings and loan  associations,  credit
unions,  mutual funds, and insurance  companies.  Principal  competitors include
other community commercial banks and larger financial institutions with branches
in the Bank's  Primary  Service area.  This intense  competition  is expected to
continue  as  bank  mergers  and  acquisitions  of  smaller  banks  into  larger
institutions  in the  Washington,  D.C.  metropolitan  area may be  expected  to
continue for the foreseeable future.

         The  areas  of  business  activities  in  which  banking  and  non-bank
institutions  may engage have been expanding in recent years.  Consequently,  to
the  extent  that  other  banks  and  financial   institutions  engage  in  such
activities,  the  competition  for deposits and loans has  increased  and may be
expected to increase in the future.

Employees

         The Company conducts its operations  through its subsidiary,  the Bank.
Consequently,  the Company has no employees.  At December 31, 1996, the Bank had
36 full-time employees and 3 part-time employees.

ITEM 2 - DESCRIPTION OF PROPERTY

         The  Company's,  as well as the  Bank's,  main office is located on the
ground floor of a 14 story office building in a two building office park at 8200
Greensboro Drive in McLean,  Virginia.  The Company occupies approximately 7,000
square feet of space at this location  pursuant to a lease with 8200  Greensboro
Associates.  The

                                       9


<PAGE>

Bank's second branch in Reston occupies approximately 2,000 square feet of space
on the ground  level of a  multi-story  office  complex.  The term of the Reston
branch  lease  was  renegotiated  in 1996.  The new term is from  April 1,  1997
through March 31, 2002.  The lease term for the Bank's third branch in McLean is
from  September  1,  1996  through  August  31,  2003.  This  location  occupies
approximately  1,900  square feet at ground  level in a shopping  center  corner
building.

         Recently the Company has committed to  approximately  4,100 square feet
of additional  space in a building  adjoining the main office  building.  Due to
increased  growth in both loans and deposits the Bank requires  additional space
to house increased  employees and operations to adequately serve its clients. In
management's  opinion,  with the  addition of the  lending  and lending  support
space,  facilities  will be adequate  for the present and near term needs of the
Company  and  Bank.  See  Note  (7)  to  the  Company's  financial   statements,
Commitments and Contingencies, for information relating to commitments under the
long-term lease.

ITEM 3 - LEGAL PROCEEDINGS

         Neither  the  Company  nor the Bank is a party to,  nor is any of their
property the subject of, any material  pending legal  proceedings  incidental to
the business of the Company and its  subsidiary  other than those arising in the
ordinary course of business.  Although the amount of any ultimate liability with
respect to such matters cannot be determined, in the opinion of management,  any
such  liability  will not have a  material  adverse  effect on the  consolidated
financial position or results of operations of the Company.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None.

PART II

ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         As of March 14, 1997, there were approximately 524 holders of record of
the  Company's  common  stock,  par value $5 per share (the "Common  Stock") and
1,071,119 shares of Common Stock issued and outstanding. In addition, as of such
date there were 347,580  shares of Common Stock  issuable  pursuant to currently
outstanding  warrants and stock  options.  The Common Stock trades on the Nasdaq
SmallCap  Market under the symbol TYFC.  The Company became listed on the Nasdaq
SmallCap Market with its offering in May 1996.  Prior to this offering trades in
the  Company's  stock  occurred  infrequently  on a local  basis  and  generally
involved  a  relatively  small  number  of  shares.  Based on  information  made
available  to it, the Company  believes  that the  selling  price for the Common
Stock ranged  during 1995,  from $6.50 to $8.25 and from January 1, 1996 through
April 30,  1996,  from  $6.875 to $7.125.  Based on the Nasdaq  SmallCap  Market
information  the selling  price for the Common Stock  ranged  during May 1, 1996
through  June 30,  1996,  from  $8.50 to  $9.75;  during  July 1,  1996  through
September  30,  1996,  from $8.00 to $9.75;  and during  October 1, 1996 through
December 31, 1996, from $9.00 to $10.75.

Dividends

         The Company has not paid any dividends. It is anticipated that earnings
will be retained for several years to expand the Bank's  capital base to support
asset growth and that no cash dividends will be paid on the Company's  stock for
the foreseeable  future. In making any determination with respect to the payment
of dividends in the future,  the  Company's  earnings,  financial  condition and
capital  requirements will be taken into consideration.  Moreover,  the National
Bank Act limits dividend  payments by national banks,  which in turn could limit
the Company's ability to pay dividends. See also the discussion under Business -
Supervision and Regulation in Item 1 above.

ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

                                       10


<PAGE>

Overview

         The  following  discussion  of the  Company's  financial  condition and
results of operations should be read in conjunction with the Company's financial
statements  and  related  notes  and  other  statistical   information  included
elsewhere  herein.  Results  reflect the  operations of the Company and the Bank
during the year ended December 31, 1996 and 1995.

         The year  ended  December  31,  1996  represented  the  Company's  most
successful  year since  commencement  of operations by the Bank on July 1, 1991.
Record earnings of $1,062,000 for the year were posted, and the Company reported
net income for each of the fiscal  quarters  during the year ended  December 31,
1996.

         On a per share basis, earnings were $1.23 per share in 1996 as compared
to $0.92 in 1995.  Return on average assets was 1.35% in 1996 and 1.07% in 1995.
Return on  average  equity  was  16.17% in 1996 as  compared  to 15.45% in 1995.
Equity to average assets was 10.47% in 1996 and 7.74% in 1995.

         The Company's total assets were  $87,837,000 as of December 31, 1996 as
compared to $70,611,000 as of December 31, 1995 which represented an increase of
24.4%.  The 1996 growth of  $17,266,000  was less than the growth of $31,622,000
from  December  31,  1994 to  December  31,  1995.  The growth  during  1995 was
primarily due to the  acquisition  of certain  loans and  assumption of deposits
from  Suburban  Bank,  N.A. of Virginia  ("Suburban  Bank") in May of 1995.  The
Bank's  overall  asset size and customer  base,  both  individual  and business,
increased significantly during 1996.

         Total  loans,  net of allowance  for loan losses,  at December 31, 1996
were  $56,983,000  as  compared  to  $43,775,000  at December  31,  1995,  which
represented an increase of 30.2%.  The  $13,208,000  increase in loans is due to
the Bank's  continued  focus on its core lending  activities  such as commercial
loans,  real estate  loans,  home equity lines of credit,  and  consumer  loans.
Average loans as a percentage of average total  earning  assets  decreased  from
1995 to 1996,  representing 67.6% of average total earning assets as of December
31, 1996, as compared to 71.4% as of December 31, 1995. The higher ratio in 1995
reflects the May 1995 purchase of $13,000,000 in loans from Suburban Bank.

         Federal  funds sold and cash and due from banks at  December  31,  1996
totaled $13,625,000  compared to $14,399,000 at December 31, 1995,  representing
an  decrease  of  $774,000,  or  5.4%.  Cash  and due from  banks  increased  by
$1,325,000,  or 24.1% and federal funds sold decreased by  $2,100,000,  or 23.6%
during  such  period.  The  increase  in cash and due  from  banks is due to the
increase in overall  volume of the Bank's  deposit base and the Bank's  internal
growth during 1996. The decrease in federal funds sold was the result of a shift
in funds from such lower  yielding  assets to higher  yielding  investments  and
loans.

         Total  deposits  were   $78,554,000  at  December  31,  1996,  up  from
$65,493,000 at December 31, 1995,  representing an increase of 19.9%. The growth
of  $13,061,000  was related to the Bank's normal growth and marketing  efforts.
Interest-bearing   deposit  accounts  accounted  for  the  largest  increase  of
$11,010,000.

Results of Operations

         The  Company's  net income for the year ended  December 31,  1996,  was
$1,062,000,  a $494,000 increase from the $568,000 net income for the year ended
December 31, 1995. The net income represents a return on average assets of 1.35%
in 1996 as  compared  to 1.07% in 1995.  Return on average  equity  improved  to
16.17% in 1996 from 15.45% in 1995. The primary reason for the $494,000 increase
in net income from 1996 to 1995 is net interest income due to the growth and mix
in interest earning assets and interest bearing liabilities. Average assets rose
from  $53,313,000  in 1995 to  $78,415,000  in 1996.  The  growth in assets  and
liabilities  contributed  to a  $1,110,000,  or 37.8%,  increase in net interest
income.  Non-interest income decreased by $59,000 or 17.4% due to a reduction in
overdraft and return check income from several deposit accounts  incurring these
charges during the last half of 1995. This management of overdrafts  reduces the
losses  on  deposit  accounts  balances  to a  minimum.  Although  there  was  a
substantial  increase in assets in 1996,  management was able to limit growth in
non-interest  expenses to  $603,000,  or 23.5% as compared to the  $853,000,  or
49.8% increase in 1995.

                                       11


<PAGE>

         In addition, the Company recognized a net income tax benefit of $74,000
in 1996, as compared to $250,000 in 1995, related to a reduction in the deferred
tax asset valuation  allowance.  Based upon the Company's  profitability in 1996
and  projected  profitability  for 1997,  management  believes that deferred tax
assets are more likely than not  realizable  in the future.  See Note (5) to the
Company's  consolidated  financial statements.  Also in 1996, the Company made a
provision  of $172,000  for loan losses as compared to a $394,000  provision  in
1995. The Company's purchase of approximately $13,000,000 of loans from Suburban
Bank in May of 1995 required additional provision for that year.

         The 1996  increase in net income over that of 1995 is  reflected in the
Company's net income per share even though there are 402,500  additional  shares
outstanding due to the May 1996 common stock  offering.  Net income per share in
1996 was $1.23, which is a significant improvement from $0.92 per share in 1995.

Net Interest Income/Margins

         The primary  source of revenue for the Company is net interest  income,
which is the difference between income earned on  interest-earning  assets, such
as loans and investment  securities,  and interest incurred on  interest-bearing
liabilities,  such as deposits and borrowings.  The level of net interest income
is determined  primarily by the average balances  ("volume") of interest-earning
assets and the various rate spreads between the interest-earning  assets and the
Company's funding sources.  Table 1: "Comparative  Average Balances - Yields and
Rates"  indicates the Company's  average volume of  interest-earning  assets and
interest-bearing  liabilities  for 1996 and 1995 and  average  yields and rates.
Changes in net interest  income from period to period  result from  increases or
decreases  in  the  volume  of  interest-earning   assets  and  interest-bearing
liabilities, increases or decreases in the average rates earned and paid on such
assets and liabilities,  the ability to manage the earning-asset  portfolio, and
the availability of particular  sources of funds,  such as non-interest  bearing
deposits. Table 2: "Rate/Volume Variance" indicates the changes in the Company's
net interest income as a result of changes in volume and rates from 1995 to 1996
and from 1994 to 1995.

         Net interest  income was $4,048,000 for 1996, a 37.8% increase from the
$2,938,000 earned in 1995. Earning assets averaged  $72,389,000 in 1996, a 47.1%
increase as compared to $49,196,000 in 1995. The increase in net interest income
is due to the  growth of the loan  portfolio  and an  increase  in the volume of
investment  securities.  Average loans as a percentage of total average  earning
assets,  decreased  to  67.6% in 1996 as  compared  with  71.4%  in 1995.  Total
investment  securities as a percent of total average earning assets decreased in
1996 representing 16.8% as compared to 17.8% in 1995. Average federal funds sold
increased to 15.5% of total average earning assets in 1996 from 10.5% in 1995.

         Interest income on loans of $4,879,000 in 1996,  increased  $1,258,000,
or 34.7% from  $3,621,000 in 1995,  constituting  the largest dollar increase in
interest  income and  reflecting an increase in the average  balance of loans to
$48,931,000  in 1996 from  $35,127,000  in 1995.  The  increase in net  interest
income was  partially  reduced by a decrease in the net  interest  spread due to
increased  competition  for  loans.  The  net  interest  spread,  which  is  the
difference between the yield on earning assets and the cost of  interest-bearing
liabilities, decreased to 4.62% in 1996 from 5.00% in 1995.

         The  key  performance  measure  for net  interest  income  is the  "net
interest margin," or net interest income divided by average earning assets.  The
Company's net interest  margin  decreased to 5.59% for 1996 from 5.97% for 1995.
The  Company's  net  interest  margin  is  affected  by  loan  pricing,   credit
administration,  and deposit  pricing.  The 1996  decrease  was due to increased
competition  for loans which reduced the yield on net loans to 9.97% as compared
to 10.31% in 1995. The yield on  interest-bearing  liabilities  also   decreased
in 1996, although to a lesser degree to 4.05% as compared to 4.07% in 1995.

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                                       12

<PAGE>


Table 1:  Comparative Average Balances - Yields and Rates

<TABLE>
<CAPTION>
                                                         1996                                   1995
                                        -------------------------------------- ---------------------------------------
                                        Average       Income/      Yield/       Average      Income/       Yield/
(dollars in thousands)                  Balances      Expense)      Rates       Balance      Expense        Rates
                                        ------------ ------------- -----------  ------------ ------------  -----------
<S> <C>
Assets:
  Loans (net of unearned income)(1)     $48,931         $4,879       9.97%       $35,127       $3,621       10.31%
  Investment securities:
    Available-for-sale                    7,929            523       6.60%         3,727          239        6.41%
    Held-to-maturity                      4,210            261       6.20%         5,032          290        5.76%
  Federal funds sold                     11,219            607       5.41%         5,155          301        5.84%
  Interest bearing deposits in banks        100              6       6.00%           155            9        5.81%
                                        ------------ ------------- -----------  ------------ ------------  -----------
  Total earning assets (2)              $72,389         $6,276       8.67%       $49,196       $4,460        9.07%
                                                     ============= ===========               ============  ===========
  Allowance for loan losses                (617)                                    (407)
  Other assets                            6,643                                    4,524
                                        ------------                            ------------

  Total assets                          $78,415                                  $53,313
                                        ============                            ============
Liabilities and stockholders'
equity:
  Deposits:
    Interest-bearing demand               5,496            113       2.06%         5,371          125        2.33%
    Savings                               3,081             91       2.95%         3,860          119        3.08%
    Money market accounts                27,976            914       3.26%        15,086          511        3.39%
    Time deposits                        18,000          1,066       5.92%        12,608          716        5.68%
                                        ------------ ------------- -----------  ------------ ------------  -----------
  Total interest-bearing deposits       $54,553         $2,184       4.00%       $36,925       $1,471        3.98%
  Federal funds purchased                    75              3       4.00%            34            2        5.88%
  Other borrowed funds                      402             41      10.20%           452           49       10.84%
                                        ------------ ------------- -----------  ------------ ------------  -----------
  Total interest-bearing liabilities    $55,030         $2,228       4.05%       $37,411       $1,522        4.07%
                                                     ============= ===========               ============  ===========
  Demand deposits                        16,322                                   11,874
  Other liabilities                         495                                      354
  Stockholders' equity                    6,568                                    3,674
                                        ------------                            ------------
  Total liabilities and stockholders'
    equity                              $78,415                                  $53,313
                                        ============                            ============
Interest spread
  (Average rate earned less average
    rate paid)                                                       4.62%                                   5.00%
Net interest income
  (Interest earned less interest paid)                  $4,048                                 $2,938
Net interest margin
  (Net interest income/total earning
    assets)                                                          5.59%                                   5.97%
</TABLE>

(1)Loans on non-accrual are included in the calculation of average balance.

(2)From  inception  through  December  31,  1996,  the Company  made no loans or
   investments that qualify for tax-exempt  treatment and,  accordingly,  has no
   tax-exempt income.


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                                       13


<PAGE>


         Table 2:  Rate/Volume Analysis

                  Changes in  interest  income and  interest  expense can result
from variances in both volume and rates.  The Company has an asset and liability
management  policy  designed to provide a proper balance  between rate sensitive
needs.

                  The following  table presents the changes in the Company's net
interest  income as a result of changes in volume and rate from 1995 to 1996 and
from 1994 to 1995.

<TABLE>
<CAPTION>
                                            1996 Compared to 1995                1995 Compared to 1994
                                            ---------------------                ---------------------
                                                (variances in)                       (variances in)
                                                --------------                       --------------
   (dollars in thousands)                                      Net                                       Net
                                Average       Average       Increase/      Average       Average       Increase/
                                Volume         Rate        (Decrease)       Volume         Rate       (Decrease)
                              ------------  ------------  -------------- ------------- ------------- --------------
<S> <C>
Interest Income:

Loans                              $1,372       ($114)          $1,258         $1,607         $ 399        $2,006
Investment securities:
     Available-for-sale               277           7              284            116             5           121
     Held-to-maturity                 (54)         25              (29)           (62)           82            20
Federal funds sold                    327         (21)             306            185            42           227
Interest bearing bank
 balances                              (3)          -               (3)           (24)            7           (17)
                              ------------  ------------  -------------- ------------- ------------- --------------
     Total interest  income        $1,919       ($103)          $1,816         $1,822         $ 535        $2,357
Interest Expense:
Interest bearing  demand
 accounts                               3         (16)             (13)            42            (1)           41
Savings                               (23)         (5)             (28)             9            13            22
Money market                          421         (18)             403            199            80           279
Time deposits                         318          32              350            482            98           580
Federal funds purchased                 1           -                1              1             -             1
Other borrowed funds                   (5)         (2)              (7)            17             6            23
                              ------------  ------------  -------------- ------------- ------------- --------------
     Total interest expense        $  715         ($9)          $  706         $  750         $ 196        $  946
                              ------------  ------------  -------------- ------------- ------------- --------------
 Change in net interest
 income                            $1,204        ($94)          $1,110         $1,072         $ 339        $1,411
                              ============  ============  ============== ============= ============= ==============
</TABLE>

Note:  The  change  in  interest  income  due to both rate and  volume  has been
allocated  proportionally between volume and rate. Loan fees are included in the
interest income computation.

Non-Interest Income

         Non-interest income consists of revenues generated from service charges
on deposit accounts,  as well as servicing fees on real estate  mortgages,  wire
transfer fees, official check fees, and collection fees.  Non-interest income in
1996 was $280,000,  a decrease of $59,000,  or 17.4%, from $339,000 in 1995. The
decrease was  primarily  due to  decreases in the number of returned  checks and
overdraft fees. Management carefully reviews accounts incurring these charges to
prevent losses due to this type of activity.

                                       14

<PAGE>

Table 3:  Non-Interest Income:
<TABLE>
<CAPTION>
                                                               1996                              1995
                                                               ----                              ----
            (dollars in thousands)                   Amount          % Change           Amount          % Change
                                                ----------------- ---------------- ----------------- ---------------

<S> <C>
Deposit service charges                                    $ 188          (20.3%)             $ 236          174.4%
Other operating income                                        92          (10.7%)               103           98.1%
                                                ================= ================ ================= ===============
  Total non-interest income                                $ 280          (17.4%)             $ 339          147.4%
                                                ================= ================ ================= ===============
Non-interest income as a percent of average
  total assets                                               0.4%                               0.6%
</TABLE>

Non-Interest Expense

         Non-interest  expense  totaled  $3,169,000  for 1996,  as  compared  to
$2,566,000  for  1995,  an  increase  of  $603,000,  or  23.5%.  Although  total
non-interest expense increased during 1996, non-interest expense as a percentage
of average total assets decreased to 4.0% in 1996 as compared to 4.8% in 1995.

         As shown in  Table 4,  salaries  and  employee  benefits  continued  to
account for the largest component of non-interest  expense,  comprising 49.5% of
total  non-interest  expenses for 1996 and 49.7% in 1995.  Salaries and employee
benefits  increased by $291,000,  or 22.8%,  from 1995 to 1996, and increased by
$465,000,  or  57.3%,  from  1994 to  1995.  The  increase  in 1995  was  mainly
attributable  to  increased  staffing as a result of the  addition of the Reston
branch and additional  staffing needed to adequately  service increased deposits
and loans due to the  Suburban  Bank  transaction,  while the 1996  increase was
reflective of increases in staffing,  wage increases,  and increases in employee
health  insurance.  In addition,  the 1995  salaries and employee  benefits also
increased  due to payments on the  leveraged  ESOP which was funded  during June
1994.  As  described  in  "ITEM  10 -  EXECUTIVE  COMPENSATION,  Employee  Stock
Ownership Plan" a lump sum payment is due in June 1998. The Company  anticipates
refinancing the loan at or before such time, although this cannot be assured.

         Data processing  expenses increased by $33,000,  or 14.6%, from 1995 to
1996, as compared to an increase of $113,000,  or 100.7%, from 1994 to 1995. The
increases in data processing  expenses are primarily volume driven. The increase
during  1995 was related to the  addition  of the Reston  branch and the overall
increase in the Bank's transaction volume during 1995.

         Occupancy and equipment expenses  increased by $95,000,  or 31.8%, from
1995 to 1996, as compared to a decrease of $92,000, or 44.2%, from 1994 to 1995.
The increase in 1995 was due to the addition of the Reston  Branch in May.  Four
months of the new branch in McLean as well as one full year of the Reston branch
increased occupancy and equipment expenses to the 1996 totals.

         Legal and professional  expenses  increased by $81,000,  or 36.3%, from
1995 to 1996,  as compared to an  increase  of $55,000,  or 32.6%,  from 1994 to
1995.  The  increases in 1996 and 1995 were  primarily due to increases in audit
fees paid to the external auditors and regulators as a result of the increase in
the  Bank's  asset  size.  Increases  in the  size of the  loan  portfolio  also
increased  the costs of legal fees  expended to maintain the Bank's lower losses
on those loans.

         Amortization of the premium paid on deposits acquired totaling $126,000
in 1996 and $77,000 in 1995 resulted from the $1,200,000 premium recorded in the
Suburban Bank transaction.  The premium is being amortized over a 10 year period
based upon the Company's estimated life of the acquired deposit base.

         Business  development  expenses  increased $8,000, or 6.8% in 1996. The
increase  was  primarily   attributable   to  an  increase  in  advertising  and
newsletters sent to the Bank's larger customer base and the Company's  increased
number of shareholders.

                                       15


<PAGE>

         The following  table presents the principal  components of non-interest
expense for the last two fiscal years.

Table 4:  Non-Interest Expenses

<TABLE>
<CAPTION>
                                                             1996                            1995
                                              ---------------------------------  -----------------------------
           (dollars in thousands)                 Amount          % Change           Amount        % Change
                                              ---------------- ----------------  ---------------  ------------
<S> <C>
Salaries and employee benefits                         $1,567           22.8 %           $1,276        57.3 %
Data processing                                           259           14.6 %              226       100.7 %
Occupancy and equipment                                   394           31.8 %              299        44.2 %
Office and operations expenses                            355            23.6%              287         3.1 %
Legal and professional                                    305           36.2 %              224        32.6 %
Amortization of premium paid for deposits                 126           63.6 %               77       100.0 %
Deposit insurance                                          41          (34.9%)               63        10.1 %
Business development                                      122             7.0%              114        47.8 %
                                              ---------------- ----------------  ---------------  ------------
  Total non-interest expense                           $3,169            23.5%           $2,566        49.8 %
                                              ================ ================  ===============  ============
Non-interest expense as a
  percentage of average total assets                     4.0%                              4.8%
</TABLE>

Income Tax Benefit

         The Company  recognized a net income tax benefit of $74,000 in 1996, as
compared to $250,000 in 1995,  related to a reduction  in the deferred tax asset
valuation  allowance and  utilization of net operating loss  carryforwards.  See
Note (5) to the Company's  financial  statement,  Income Taxes,  for  additional
information.

Composition of Loan Portfolio

         Because  loans are expected to produce  higher  yields than  investment
securities and other  interest-earning  assets, the absolute volume of loans and
the volume as a percentage of total earning  assets is an important  determinant
of net  interest  margin.  During  1996,  average  loans  were  $48,931,000  and
constituted  67.6% of average  earning assets and 62.4% of average total assets.
This represents  increases of  $13,804,000,  or 39.3% over 1995 average loans of
$35,127,000  which  represented  71.4% of  average  earning  assets and 65.9% of
average total assets.  At December 31, 1996, the Company's loan to deposit ratio
was 73.4% as compared to 67.7% at December 31, 1995.  Loan growth during 1996 of
$13,318,000 was more than total deposit growth of $13,061,000  which contributed
to the decrease in the loan to deposit ratio.

         Commercial loans represent the largest category with 30.0% of the total
loan  portfolio.  Residential  real estate loans  experienced the largest volume
increase of  $3,708,000  raising the category to 22.4%,  or  $12,933,000  of the
total loan  portfolio  as of December 31, 1996.  Consumer  loans also  increased
$2,750,000 to 16.2% of the total loans to $9,389,000.

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                                       16

<PAGE>

         The following  table sets forth the  composition  of the Company's loan
portfolio, and the related percentage composition of total loans, as of December
31, 1996 and 1995.

Table 5:  Loan Portfolio Composition:

<TABLE>
<CAPTION>
                                                                         December 31,
                                               -------------------------------------------------------------------
                  (dollars in thousands)                     1996                             1995
                                               --------------------------------- ---------------------------------
Type of Loans                                      Amount         % of Total        Amount         % of Total
-------------                                  ---------------- ---------------- --------------- -----------------
<S> <C>
Commercial                                            $17,308            30.0%         $14,352             32.2%
Real estate-construction                                4,255             7.4%           1,991              4.5%
Residential real estate                                12,933            22.4%           9,225             20.7%
Commercial real estate                                 13,872            24.0%          12,311             27.7%
Consumer                                                9,389            16.2%           6,639             14.9%
                                               ---------------- ---------------- --------------- -----------------
  Total loans                                         $57,757           100.0%         $44,518            100.0%
Less:
  Unearned income                                          80                              159
                                               ----------------                  ---------------
  Loans net of unearned  income                       $57,677                          $44,359
  Allowance for loan losses                               694                              585
                                               ----------------                  ---------------

     Net loans                                        $56,983                          $43,775
                                               ================                  ===============
</TABLE>

         Approximately  93.0% of the Company's  commercial and real estate loans
have  adjustable  rates,  the majority of which are tied to the prime rate. This
allows  the  Bank to  adjust  the  interest  rates on its  loans to the  current
interest rate environment, whereas fixed rates do not allow this flexibility. If
interest  rates were to  increase in the future,  the  interest  earned on loans
would  improve,  and if rates were to fall,  the interest  earned would decline,
thus impacting the Company's  income.  (See also the discussion  under Liquidity
and Interest Rate Sensitivity below.)

         The following  table sets forth the maturity  distribution,  classified
according to sensitivity to changes in interest  rates,  for commercial and real
estate  components of the Company's loan portfolio at December 31, 1996. Some of
the loans may be renewed or repaid prior to maturity.  Therefore,  the following
table should not be used as a forecast of future cash collections.

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                                       17

<PAGE>

Table 6:  Maturity Schedule of Selected Loans

<TABLE>
<CAPTION>
                                                                         As of December 31,
                                                                            1996
                                       ----------------------------------------------------------------------
(dollars in thousands)                    < 1 Year        1 to 5 Years        5+ Years            Total
                                       ----------------  ----------------  ----------------  ----------------
<S> <C>
Commercial                                     $16,266         $     896            $  148           $17,310
Real estate                                     28,202             2,856                 -            31,058
                                       ----------------  ----------------  ----------------  ----------------
  Total                                        $44,468         $   3,752            $  148           $48,368
                                       ================  ================  ================  ================
Fixed interest rate                            $   258         $   2,941            $  148          $  3,347
Variable interest rate                          44,210               811                 -            45,021
                                       ----------------  ----------------  ----------------  ----------------
  Total                                        $44,468         $   3,752            $  148           $48,368
                                       ================  ================  ================  ================
</TABLE>

<TABLE>
<CAPTION>
                                                                       1995
                                          < 1 Year        1 to 5 Years        5+ Years            Total
                                       ----------------  ----------------  ----------------  ----------------
<S> <C>
Commercial                                     $13,053         $   1,250           $    49           $14,352
Real estate                                     19,539             3,313               675            23,527
                                       ----------------  ----------------  ----------------  ----------------
  Total                                        $32,592         $   4,563            $  724           $37,879
                                       ================  ================  ================  ================
Fixed interest rate                            $   176         $   3,507            $  724           $ 4,407
Variable interest  rate                         32,416             1,056                 -            33,472
                                       ----------------  ----------------  ----------------  ----------------
  Total                                        $32,592         $   4,563            $  724           $37,879
                                       ================  ================  ================  ================
</TABLE>

Loan Quality

         The  Bank  attempts  to  manage  the risk  characteristics  of its loan
portfolio  through  various  control  processes,  such as credit  evaluation  of
borrowers,   establishment   of  lending  limits  and   application  of  lending
procedures,  including the holding of adequate collateral and the maintenance of
compensating  balances.  However,  the Bank seeks to rely  primarily on the cash
flow of its borrowers as the  principal  source of  repayment.  Although  credit
policies are designed to minimize risk,  management  recognizes that loan losses
will occur and that the amount of these losses will  fluctuate  depending on the
risk  characteristics  of the loan  portfolio  as well as general  and  regional
economic conditions.

         The allowance for loan losses represents a reserve for potential losses
in the  loan  portfolio.  The  adequacy  of the  allowance  for loan  losses  is
evaluated  periodically  based  on a review  of all  significant  loans,  with a
particular  emphasis on  non-accruing,  past due and other loans that management
believes may not be paid in full. As of December 31, 1996, the Company had loans
totaling  $193,000 in  non-accrual  loans as compared to $266,000 as of December
31, 1995.

         For  significant   problem  loans,   management's  review  consists  of
evaluation of the financial  strengths of the borrower,  the related collateral,
and the effects of economic conditions.  Specific reserves against the remaining
loan  portfolio  are based on  analysis of  historical  loan loss  ratios,  loan
charge-offs,  delinquency trends, and previous collection experience, along with
an  assessment  of  the  effects  of  external  economic  conditions.  Table  8:
"Allowance for Loan Loss  Allocation,"  which is set forth below,  indicates the
specific reserves  allocated by loan type and also the general reserves included
in the year-end 1996 allowance for loan losses.

         The  provision  for loan  losses is a charge to earnings in the current
period to replenish  the  allowance  and maintain it at a level  management  has
determined to be adequate.  The Company's provision for loan losses for 1996 was
$172,000,  as  compared  to  $394,000  in 1995.  The Bank's  total loan  balance
increased to  $57,677,000  as of December 31, 1996 as compared to $44,359,000 as
of December 31, 1995.  The increase in provision for loan losses during 1995 was
related primarily to the growth in the loan portfolio due to the loans purchased
from Suburban Bank.

                  The Bank  charged  off $88,000 in 1996 as compared to $107,000
in 1995. The charge-offs  resulted from $50,000 in real estate loans,  $3,000 in
commercial loans and $35,000 in consumer loans. There were $25,000 in

                                       18


<PAGE>

recoveries  on loans  previously  charged  off during  1996,  as  compared to no
recoveries  during 1995.  The  following  Table 7:  "Allowance  for Loan Losses"
summarized  the allowance  activities  for the years ended December 31, 1996 and
1995.

Table 7:  Allowance for Loan Losses:
<TABLE>
<CAPTION>
                                                          1996           1995
                                                     ------------    ------------
              (dollars in thousands)
<S> <C>
Allowance for loan losses, January 1                    $   585       $     298
Loans charged off:
     Commercial                                              (3)           (102)
     Real estate                                            (50)              -
     Consumer                                               (35)             (5)
                                                     ------------    ------------
          Total loans charged off                      $    (88)        $  (107)
Recoveries:
     Commercial                                              25               -
                                                     ------------    ------------
     Net (charge-offs) recoveries                      $    (63)        $  (107)
Provision for loan losses                                   172             394
                                                     ------------    ------------
 Allowance for loan losses, December 31                $    694       $     585
                                                     ============    ============
Loans (net of discount):
     Year-end balance                                   $57,677         $44,359
     Average balance during the year                    $48,931         $35,127
     Allowance as a percent of year-end loan balance       1.20%           1.32%
Percent of average loans:
     Provision for loan losses                             .35%           1.12%
     Net charge-offs                                       .13%           0.30%
</TABLE>

         As of December 31,  1996,  the  allowance  for loan losses was 1.20% of
outstanding  loans,  which was a decrease from  December 31, 1995  percentage of
1.32%.  Management's judgment as to the level of future losses on existing loans
is based on management's  internal  review of the loan  portfolio,  including an
analysis of the borrower's  current  financial  position,  the  consideration of
current and  anticipated  economic  conditions  and their  potential  effects on
specific  borrowers,  an evaluation of the existing  relationships  among loans,
potential  loan losses,  and the present level of the loan loss  allowance,  and
results  of  examinations  by  independent   consultants.   In  determining  the
collectibility of certain loans, management also considers the fair value of any
underlying collateral.  However,  management's  determination of the appropriate
allowance level is based upon a number of assumptions about future events, which
are believed to be reasonable, but which may or may not prove valid. Thus, there
can be no  assurance  that  charge-offs  in future  periods  will not exceed the
allowance for loan loss or that additional  increases in the loan loss allowance
will  not  be  required.  The  following  Table  8:  "Allowance  for  Loan  Loss
Allocation" summarizes the allocation of allowance by loan type.

            [The remainder of this page is intentionally left blank]

                                       19

<PAGE>


Table 8:  Allowance for Loan Loss Allocation:

<TABLE>
<CAPTION>
                                                    As of December 31, 1996:
                                             ----------------------------------------
           (dollars in thousands)                 Amount               % of Total
                                             ------------------     -----------------
<S> <C>
Commercial                                                $169                24.35%
Real estate                                                255                36.76%
Consumer                                                   105                15.10%
Unallocated                                                165                23.79%
                                             ------------------     -----------------
  Total                                                   $694               100.00%
                                             ==================     =================
</TABLE>

<TABLE>
<CAPTION>
                                                    As of December 31, 1995:
                                             ----------------------------------------
                                                  Amount               % of Total
                                             ------------------     -----------------
<S> <C>
Commercial                                               $  87                14.87%
Real estate                                                105                17.95%
Consumer                                                    43                 7.35%
Unallocated                                                350                59.83%
                                             ------------------     -----------------
  Total                                                   $585               100.00%
                                             ==================     =================
</TABLE>

         Non-performing  loans are defined as non-accrual and renegotiated loans
which are past due. When real estate  acquired by foreclosure  and held for sale
is  included   with   non-performing   loans,   such  category  is  reported  as
non-performing  assets.  Non-performing assets as of December 31, 1996 consisted
of loans totaling $193,000.  The  non-performing  loans as of December 31, 1996,
were  classified for regulatory  purposes as  substandard  and doubtful,  and as
such,  management  had  allocated a portion of its  allowance  for possible loan
losses  for  future  potential  loss.  There was one  non-performing  loan as of
December  31,  1995 for  $266,000.  Table 9:  "Non-Performing  Assets"  presents
information on these assets for the past two years.

         There were three  impaired  loans with a unpaid  principal  balances of
$182,000 at December  31,  1996.  These  loans are on  nonaccrual,  and there is
$16,000 in related  impairment  reserves.  The average balance of impaired loans
during 1996 was $140,000, which had an average impairment reserve of $20,000. No
income was recognized on impaired loans during 1996.

         As a result of management's ongoing review of the loan portfolio, loans
are  classified as  non-accrual  when  collection of full principal and interest
under  the  original  terms is not  expected.  These  loans  are  classified  as
non-accrual,  even though the presence of collateral or the borrower's financial
strength  may be  sufficient  to provide  for  ultimate  repayment.  Interest on
non-accrual  loans  is  recognized  only  when  received.  Table  10:  "Foregone
Interest" indicates the amount of interest that would have been recorded had all
loans  classified as non-accrual  been current in accordance with their original
terms and the amount of interest actually accrued.

Table 9:  Non-Performing Assets

<TABLE>
<CAPTION>
                                                                      As of December 31,
                                                                      -----------------
        (dollars in thousands)                                      1996           1995
                                                                -------------   ------------
<S> <C>
Loans on non-accrual basis                                            $  193         $  266
Renegotiated or restructured loans                                         -              -
Real estate acquired by foreclosure                                        -              -
                                                                -------------   ------------
    Total non-performing assets                                       $  193         $  266
                                                                =============   ============
</TABLE>

Table 10:  Foregone Interest

<TABLE>
<CAPTION>
                                                                For the Year Ended December 31,
                                                                ------------------------------
        (dollars in thousands)                                      1996             1995
                                                                -------------    ------------
<S> <C>
Interest income that would have been accrued at original terms      $  7             $ 13
Interest recognized                                                 $  -             $  -
</TABLE>

                                       20


<PAGE>

Capital Resources

         Stockholders'  equity  was  $8,265,000  as of  December  31,  1996,  as
compared to  $4,140,000 as of December 31, 1995.  The  $4,125,000  increase,  or
99.6%, was partially the result of net income of $1,062,000,  a reduction in the
ESOP Trust debt,  and a change in the unrealized  gain on investment  securities
available-for-sale  of $37,000.  The remaining increase in stockholders'  equity
was due to the net proceeds of $2,976,000 from the May 1996 stock  offering.  No
dividends  have been declared by the Company  since its inception  (See also the
discussion  under  Business - Supervision  and  Regulation in Item 1 above).  In
addition,  no stock  warrants have been exercised and no options under the Stock
Option Plan have been exercised.

         Under the Federal  Reserve's  capital  regulations,  for as long as the
Company's  assets are under  $150  million,  the  Company's  capital  ratios are
reviewed  on  a  bank-only   basis.  The  Bank  exceeded  its  capital  adequacy
requirements as of December 31, 1996 and 1995 (See also the capital  regulations
discussion  and  capital   analysis  table  under  Business  -  Supervision  and
Regulation  in Item 1 above).  The  Company  continually  monitors  its  capital
adequacy ratios to assure that the Bank remains within the guidelines.

Liquidity and Interest Rate Sensitivity

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

         The measurement of the Company's  interest rate sensitivity,  or "gap,"
is  one  of  the  principal  techniques  used  in  asset/liability   management.
Interest-sensitive  gap is the dollar difference  between assets and liabilities
which  are  subject  to  interest-rate  repricing  within a given  time  period,
including  both floating rate or adjustable  rate  instruments  and  instruments
which are approaching maturity.

         In  theory,  interest  rate risk can be  diminished  by  maintaining  a
nominal level of interest rate sensitivity.  In practice, this is made difficult
by a number of factors,  including cyclical variations in loan demand, different
impacts on interest-sensitive assets and liabilities when interest rates change,
and the availability of funding sources.  Accordingly, the Company undertakes to
manage the  interest-rate  sensitivity  gap by  adjusting  the  maturity  of and
establishing   rate  prices  on  the  earning   asset   portfolio   and  certain
interest-bearing  liabilities to keep it in line with management's  expectations
relative to market interest rates.  Management  generally attempts to maintain a
balance between  rate-sensitive assets and liabilities as the exposure period is
lengthened to minimize the overall interest rate risk to the Company.

         The Bank's  Executive  Committee  which  oversees  the  asset/liability
management  function meets  periodically  to monitor and manage the structure of
the  balance  sheet,  control  interest  rate  exposure,  and  evaluate  pricing
strategies  for the Company.  The asset mix of the balance sheet is  continually
evaluated in terms of several  variables:  yield,  credit  quality,  appropriate
funding  sources and  liquidity.  Management of the liability mix of the balance
sheet focuses on expanding the various funding sources.

         The interest rate sensitivity position at year-end 1996 is presented in
Table 11 - "Rate Sensitivity  Analysis." The difference  between  rate-sensitive
assets and rate-sensitive  liabilities, or the interest rate sensitivity gap, is
shown at the bottom of the table.  The Company  would  benefit  from  increasing
market  rates of interest  when it is asset  sensitive  and would  benefit  from
decreasing market rates of interest when it is liability sensitive.  At year-end
1996,  the  Company had an asset  sensitive  gap (more  assets than  liabilities
subject to repricing within the stated timeframe) of $3,835,000 which represents
109.2% of earning  assets over a 30 day period.  This  suggests that if interest
rates were to increase over this period,  the net interest margin would improve,
and if interest rates were to decrease,  the net interest  margin would decline.
Since all interest rates and yields do not adjust at the same velocity,  the gap
is only a general indicator of interest rate sensitivity.  The analysis presents
only a static  view of the timing of  maturities  and  repricing  opportunities,
without taking into  consideration  that changes in interest rates do not affect

                                       21

<PAGE>

all assets and liabilities equally. Net interest income may be impacted by other
significant  factors in a given interest rate environment,  including changes in
the volume and mix of earning assets and interest-bearing liabilities.

Table 11:  Rate Sensitivity Analysis


<TABLE>
<CAPTION>
                                                               December 31, 1996
                                    -----------------------------------------------------------------------
(dollars in thousands)                                                            Total     1 Yr.+ or
                                30 Days      31-90      91-180     181 Days-    One Year      Non-
                                or Less      Days        Days      One Year      or Less    Sensitive    Total
                               ----------- ----------  ---------- ------------  ---------- ----------- -----------
<S> <C>
Earning Assets:
Fed funds sold                    $ 6,810    $     -      $    -      $     -     $ 6,810     $           $ 6,810
Interest bearing  deposits              -          -         100            -         100           -         100
Investment securities:
  Available-for-sale                    -          -           -        2,315       2,315       8,726      11,041
  Held-to-maturity                      -        999         251          750       2,000       1,727       3,727
Loans:
  Variable rate                    38,787        568       2,772        2,562      44,689       1,230      45,919
  Fixed rate                           36         13         271          70          390      11,175      11,565
                               ----------- ----------  ---------- ------------  ---------- ----------- -----------
    Total earning assets          $45,633    $ 1,580      $3,394      $ 5,697     $56,304     $22,858     $79,162

Source of Funds:
Savings                           $ 2,438    $     -      $    -      $     -     $ 2,438     $     -     $ 2,438
NOW accounts                        5,774          -           -            -       5,774           -       5,774
Money market accounts              32,182          -           -            -      32,182           -      32,182
CDs                                   566        899       1,278        3,941       6,684       5,500      12,184
CDs 100,000 & over                    371        104         213        1,460       2,148       2,226       4,374
IRAs                                   92        127         126          371         716         773       1,489
                               ----------- ----------  ---------- ------------  ---------- ----------- -----------
  Total rate-sensitive deposits   $41,423    $ 1,130      $1,617      $ 5,772     $49,942     $ 8,499     $58,441

Long-term borrowings                  375          -           -            -         375           -         375
                               ----------- ----------  ---------- ------------  ---------- ----------- -----------
  Total rate-sensitive
    liabilities                   $41,798    $ 1,130      $1,617      $ 5,772     $50,317     $ 8,499     $58,816

Noninterest-bearing
  liabilities                     $     -    $     -      $    -      $     -     $     -     $20,113     $20,113

Interest rate sensitivity gap     $ 3,835    $   450      $1,777      $  (75)     $ 5,987
Ratio of rate sensitive
assets to rate sensitive
  liabilities                     109.18%    139.82%     209.89%       98.70%     111.90%
</TABLE>

         Liquidity represents the ability to provide steady sources of funds for
loan  commitments and investment  activities,  as well as to provide  sufficient
funds  to  cover  deposit   withdrawals   and  payment  of  debt  and  operating
obligations.  These  funds can be obtained  by  converting  assets to cash or by
attracting new deposits.  Cash flows from financing  activities,  which included
funds  received  from new and  existing  depositors,  provided a large source of
liquidity  in 1996 and 1995 as  increases in deposits  totaled  $13,061,000  and
$30,600,000,  respectively.  The Bank seeks to rely  primarily on core  deposits
from  customers  to  provide  stable  and  cost-effective  sources of funding to
support asset  growth.  The Bank also seeks to augment such deposits with higher
yielding  certificates  of deposit.  Certificates of deposit of $100,000 or more
are summarized by maturity in Table 12 - "Maturity of Time Deposits  $100,000 or
More."  Other  sources  of  funds  available  to  the  Bank  include  short-term
borrowings, primarily in the form of federal funds purchased.

                                       22

<PAGE>

Table    12:  Maturity of Time Deposits $100,000 or More

<TABLE>
<CAPTION>
                                                 December 31,
                                         ----------------------------
        (dollars in thousands)               1996            1995
                                         ------------   -------------
<S> <C>
Under 3 months                             $     475      $      613
3 to 6 months                                    213               -
6 to 12 months                                 1,460             704
Over 12 months                                 2,226           1,821
                                         ------------   -------------

Total                                       $  4,374        $  3,138
                                         ============   =============
</TABLE>

         In the normal  course of  business,  the Bank enters  into  various off
balance sheet credit  facilities  with its customers,  including  commitments to
extend credit at a future date and letters of credit. Details of the commitments
of this nature may be found in Note 12 of the accompanying Notes to Consolidated
Financial  Statements.  Since many of the  commitments can be expected to expire
without  being  drawn  upon,  the total  commitment  amounts do not  necessarily
represent future cash requirements.

         Average   liquid   assets   (cash   and   amounts   due   from   banks,
interest-bearing  deposits  in  other  banks,  federal  funds  sold,  investment
securities and other short-term  investments) were 39.4% of average deposits for
1996, as compared to 35.4% for 1995.  Liquidity  levels increased during 1996 as
funds were  maintained in liquid assets to be available for volatility in escrow
type deposit accounts. Average loans were 69.0% of average deposits for 1996, as
compared  to 72.0% for 1995.  Average  deposits  were 97.9% of  average  earning
assets for 1996 as opposed  to 99.2% for 1995.  As noted in Table 6 -  "Maturity
Schedule of Selected Loans,"  approximately  $48,368,000,  or 83.7%, of the loan
portfolio  consisted of commercial  loans and real estate loans. Of this amount,
$44,468,000, or 92.0%, matures within one year.

         Table 13 - "Maturity  Distribution and Yields of Investment Securities"
indicates that $1,001,000,  or 26.9%, of held-to-maturity  investment securities
and  $846,000,  or 7.7%,  of  available-for-sale  investment  securities  mature
within  one  year  or  less.  Securities  maintained  in the  available-for-sale
portfolio  may be sold prior to maturity in order to provide the Company and the
Bank with increased liquidity.  Available-for-sale investment securities totaled
$11,041,000 and $4,966,000 as of December 31, 1996 and 1995, respectively.

            [The remainder of this page is intentionally left blank]

                                       23

<PAGE>


Table 13:  Maturity Distribution and Yields of Investment Securities



<TABLE>
<CAPTION>
                                                                     December 31, 1996
                                                   -------------------------------------------------------
                                                       Available-for-sale            Held-to-maturity
                                                       ------------------            ----------------
        (dollars in thousands)                        Book                           Book
                                                      Value        Yield             Value        Yield
                                                   -----------   ----------       -----------   ----------
<S> <C>
U.S. Treasury:
 One year or less                                   $       -            -          $    751        5.82%
 Over one through five years                                -            -               748        5.98%
 Over five through ten years                                -            -                 -           -
 Over ten years                                             -            -                 -           -
                                                   -----------                    -----------
  Total U.S. Treasury                               $       -            -          $  1,499        5.90%
U.S. Government Agencies:
 One year or less                                   $       -            -          $      -           -
 Over one through five years                                -            -               250        6.81%
 Over five through ten years                            1,117         6.96%                -           -
 Over ten years                                           986         7.07%                -           -
                                                   ----------                     ----------
                                                     $  2,103         7.01%         $    250        6.81%
Mortgage-backed Securities of Government
Sponsored Enterprises:
 One year or less                                    $    568         6.83%         $    250        5.17%
 Over one through five years                            3,860         6.85%              686        5.91%
 Over five through ten years                            1,055         6.98%              289        4.98%
 Over ten years                                         2,677         6.97%                3        4.70%
                                                   -----------                    -----------
  Total U.S. government-sponsored enterprises        $  8,160         6.90%          $ 1,228        5.54%

Other Securities:
 One year or less                                   $     278         5.04%          $     -           -
 Over one through five years                              500         7.01%              750        6.46%
                                                   -----------                    -----------
    Total other securities                           $    778         6.31%          $   750        6.46%

Total investment securities                           $11,041         6.63%           $3,727        5.95%
                                                   ===========                    ===========
</TABLE>

           [The remainder of this page is intentionally left blank.]

                                       24

<PAGE>


ITEM 7 - FINANCIAL STATEMENTS

                         INDEX TO FINANCIAL STATEMENTS

                                                                    Page(s)



Independent Auditors' Report                                          26


Consolidated Statements of Financial Condition
 as of December 31, 1996 and 1995                                     27


Consolidated Statements of Operations for the
 years ended December 31, 1996 and 1995                               28


Consolidated Statements of Changes in Stockholders'
 Equity for the years ended December 31, 1996  and 1995               29


Consolidated Statements of Cash Flows for the
 years ended December 31, 1996 and 1995                               30


Notes to Consolidated Financial Statements                         31-45

                                       25


<PAGE>

Independent Auditors' Report



The Board of Directors
Tysons Financial Corporation:


We have audited the accompanying  consolidated statements of financial condition
of Tysons Financial Corporation and subsidiary as of December 31, 1996 and 1995,
and the related consolidated statements of operations,  changes in stockholders'
equity, and cash flows for the years then ended. These financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of Tysons Financial
Corporation  and subsidiary as of December 31, 1996 and 1995, and the results of
their  operations  and their cash flows for the years then ended,  in conformity
with generally accepted accounting principles.




                                                 KPMG Peat Marwick LLP



January  24, 1997


                                       26

<PAGE>


TYSONS FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated Statements of Financial Condition

December 31, 1996 and 1995

================================================================================
Assets                                                       1996          1995
--------------------------------------------------------------------------------

Cash and due from banks (note 6)                      $ 6,814,233     5,489,076
Federal funds sold (note 13)                            6,810,371     8,910,000
Interest-bearing deposits in other banks                  100,000       100,000
Investment securities available-for-sale,
  at fair value (note 3)                               11,040,897     4,965,773
Investment securities held-to-maturity, at cost,
  fair value of $3,734,415 in 1996 and $5,300,167
  in 1995 (note3)                                       3,726,535     5,273,850
Loans, net (note 4)                                    56,982,848    43,774,810
Property and equipment, net                               499,977       319,845
Premium paid for deposits acquired (note 3)               982,067     1,108,471
Accrued interest receivable and other assets              879,782       669,474
--------------------------------------------------------------------------------
                                                      $87,836,710    70,611,299
================================================================================
Liabilities and Stockholders' Equity
--------------------------------------------------------------------------------
Liabilities:
   Deposits:
      Noninterest-bearing demand                      $20,113,231    17,618,859
      NOW and money market accounts                    37,956,032    26,945,735
      Savings                                           2,438,259     3,215,240
      Certificates of deposit, under $100,000          13,672,085    14,575,624
      Certificates of deposit, $100,000 and over        4,374,231     3,137,699
--------------------------------------------------------------------------------

   Total deposits                                      78,553,838    65,493,157

   Accrued interest payable and other liabilities         642,787       552,673
   Long-term debt (notes 8 and 11)                        375,000       425,000
--------------------------------------------------------------------------------
Total liabilities                                      79,571,625    66,470,830
--------------------------------------------------------------------------------
Stockholders' equity:
   Common stock, par value $5; 10,000,000 shares
     authorized; 1,071,119 and 668,619 shares
     issued and outstanding at December 31, 1996
     and 1995, respectively (notes 9 and 10)            5,355,595     3,343,095
   Additional paid-in capital                           4,035,209     3,071,860
   ESOP Trust, 42,878 and 48,595 shares at
     December 31, 1996 and 1995, respectively
     (note 11)                                           (375,000)     (425,000)
   Accumulated deficit                                   (802,960)   (1,864,784)
   Unrealized gain on investment securities
     available-for-sale                                    52,241        15,298
--------------------------------------------------------------------------------
Total stockholders' equity                              8,265,085     4,140,469
--------------------------------------------------------------------------------
Commitments and contingencies (notes 7 and 12)
                                                      $87,836,710    70,611,299
================================================================================

                                       27

<PAGE>

TYSONS FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated Statements of Operations

Years ended December 31, 1996 and 1995

================================================================================
                                                             1996          1995
--------------------------------------------------------------------------------
Interest income:
   Loans                                               $4,878,836     3,620,751
   Investment securities:
      Available-for-sale                                  522,406       238,986
      Held-to-maturity                                    261,413       290,491
   Federal funds sold                                     606,997       301,564
   Deposits in other banks                                  5,952         8,662
--------------------------------------------------------------------------------
Total interest income                                   6,275,604     4,460,454
--------------------------------------------------------------------------------
Interest expense:
   Interest on deposits:
      NOW and money market accounts                     1,026,113       636,423
      Savings accounts                                     90,922       118,976
      Certificates of deposit, under $100,000             859,579       579,103
      Certificates of deposit, $100,000 and over          206,727       136,861
   Interest on federal funds purchased and repurchase
     agreements                                             2,667         2,123
   Interest on long-term debt (note 8)                     41,441        48,964
--------------------------------------------------------------------------------

Total interest expense                                  2,227,449     1,522,450
--------------------------------------------------------------------------------

Net interest income                                     4,048,155     2,938,004

Provision for loan losses (note 4)                        172,193       393,580
--------------------------------------------------------------------------------

Net interest income after provision for loan losses     3,875,962     2,544,424

Noninterest income                                        280,488       339,226
Noninterest expense                                     3,168,644     2,566,052
--------------------------------------------------------------------------------

Income before income taxes                                987,806       317,598

Income tax benefit                                        (74,018)     (250,000)
--------------------------------------------------------------------------------

Net income                                             $1,061,824       567,598
================================================================================

Net income per share                                   $     1.23          0.92
================================================================================

Weighted average shares outstanding                       857,436       616,926
================================================================================

See accompanying notes to consolidated financial statements.

                                       28

<PAGE>


TYSONS FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated Statements of Changes in Stockholders' Equity

Years ended December 31, 1996 and 1995
<TABLE>
--------------------------------------------------------------------------------------------------------------------------------
                                                                                                    Unrealized
                                                                                                    gain (loss)
                                                           Additional                                   on
                                                 Common      paid-in        ESOP    Accumulated     investment
                                   Shares         stock      capital      trust       deficit       securities       Total
--------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Balance, December 31, 1994           668,619 $   3,343,095   3,071,860   (475,000)    (2,432,382)      (121,881)      3,385,692

ESOP Trust (note 11)                       -             -           -      50,000              -              -         50,000
Net income                                 -             -           -           -        567,598              -        567,598
Unrealized gain on investment
  securities available-for-sale            -             -           -           -              -        137,179        137,179
--------------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1995           668,619     3,343,095   3,071,860   (425,000)    (1,864,784)         15,298      4,140,469

ESOP Trust (note 11)                                                        50,000                                       50,000
Net income                                                                              1,061,824                     1,061,824
Issuance of common stock             402,500     2,012,500     963,349                                                2,975,849
Unrealized gain on investment
  securities available-for-sale                                                                           36,943         36,943
--------------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1996         1,071,119 $   5,355,595   4,035,209   (375,000)      (802,960)         52,241      8,265,085
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to consolidated financial statements.

                                       29

<PAGE>

TYSONS FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated Statements of Cash Flows

Years ended December 31, 1996 and 1995

================================================================================
                                                             1996          1995
--------------------------------------------------------------------------------
Cash flows from operating activities:
   Net income                                        $  1,061,824       567,598
   Adjustments to reconcile net income to
     net cash provided by operating activities:
        Depreciation and amortization                     228,843       167,471
        Provision for loan losses                         172,193       393,580
        Income tax benefit                                (74,018)     (250,000)
        Compensation expense for ESOP Trust                52,988        50,000
        Increase in accrued interest receivable and
          other assets                                   (210,308)     (409,423)
        Increase in accrued interest payable and
          other liabilities                                90,114       291,997
--------------------------------------------------------------------------------
Net cash provided by operating activities               1,321,636       811,223
--------------------------------------------------------------------------------
Cash flows from investing activities:
   Purchases of available-for-sale securities         (10,408,528)   (1,891,809)
   Purchases of held-to-maturity securities              (995,000)   (2,960,241)
   Proceeds from maturities and principal payments
     of available-for-sale securities                   4,373,925       514,396
   Proceeds from maturities and principal payments
     of held-to-maturity securities                     2,549,624     2,464,166
   Net decrease in interest-bearing deposits in banks           -       200,000
   Acquisition of deposits net of assets and cash
     acquired                                                   -     5,846,618
   Purchase of property and equipment                    (285,321)     (101,821)
   Net increase in loan portfolio                     (13,317,338)   (7,172,268)
--------------------------------------------------------------------------------
Net cash used in investing activities                 (18,082,638)   (3,100,959)
--------------------------------------------------------------------------------
Cash flows from financing activities:
   Issuance of common stock                             2,975,849             -
   Net increase in deposits                            13,060,681    10,497,172
   Repayments of long-term debt                           (50,000)      (50,000)
--------------------------------------------------------------------------------
Net cash provided by financing activities              15,986,530    10,447,172
--------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents     (774,472)    8,157,436

Cash and cash equivalents, beginning of year           14,399,076     6,241,640
================================================================================
Cash and cash equivalents, end of year               $ 13,624,604    14,399,076
================================================================================
Supplemental disclosures of cash flow information:
   Interest paid                                     $  2,214,273     1,451,528
   Income taxes paid                                          721             -
================================================================================
In 1995, the Company acquired loans of $13,032,431, equipment of $43,965,  other
assets  of $19,828,  and assumed  deposits  of $20,101,513,  and  liabilities of
$26,649. The Company paid a premium of $1,185,320 for deposits acquired.

See accompanying notes to consolidated financial statements.

                                       30

<PAGE>

   (1)   Organization and Summary of Significant Accounting Policies

                Tysons  Financial  Corporation  (the "Company") was incorporated
         December 29, 1989 under the laws of the  Commonwealth  of Virginia as a
         holding  company whose  activities  consist of investment in its wholly
         owned subsidiary, Tysons National Bank (the "Bank"). In connection with
         the formation of the Company,  10,000,000  shares of $5 par value stock
         were  authorized and 668,619 shares were  originally  issued.  The Bank
         commenced  regular  operations  on July 1, 1991 as a  national  banking
         association  primarily  supervised by the Office of the  Comptroller of
         the Currency.  The Bank is a member of the Federal  Reserve  System and
         the Federal Deposit Insurance Corporation.

         Basis of Financial Statement Presentation

                The financial statements have been prepared on the accrual basis
         and in conformity with generally  accepted  accounting  principles.  In
         preparing  the  financial  statements,  management  is required to make
         estimates and  assumptions  that affect the reported  amounts of assets
         and  liabilities  as of the date of the balance  sheet and revenues and
         expenses for the period. Actual results could differ significantly from
         those estimates.

         Consolidation

                The consolidated  financial  statements  include the accounts of
         the Company and the Bank.  All  significant  intercompany  accounts and
         transactions have been eliminated in consolidation.

         Cash and Cash Equivalents

                For  purposes of reporting  cash flows,  the Company has defined
         cash and cash  equivalents  as those  amounts  included in cash and due
         from banks and federal funds sold.

         Investment Securities

                The Company classifies its debt and marketable equity securities
         in  one  of   three   categories:   trading,   available-for-sale,   or
         held-to-maturity.  Trading  securities are bought and held  principally
         for the  purpose  of selling  them in the near  term.  Held-to-maturity
         securities  are those  securities for which the Company has the ability
         and intent to hold until maturity.  All other securities not classified
         as trading or  held-to-maturity  are classified as  available-for-sale.
         The Company does not engage in trading activities and, accordingly, has
         no trading portfolio.

                Available-for-sale   securities  are  recorded  at  fair  value.
         Unrealized  holding gains and losses on  available-for-sale  securities
         are excluded  from  earnings  and  reported as a separate  component of
         stockholders'  equity until realized.  A decline in the market value of
         any available-for-sale or held-to-maturity  security below cost that is
         deemed other than  temporary  is charged to earnings,  resulting in the
         establishment of a new cost basis for the security.

                Held-to-maturity  securities are recorded at cost,  adjusted for
         the  amortization  or accretion of premiums or discounts.  Premiums and
         discounts  are  amortized  or  accreted  over the  life of the  related
         security as an adjustment to yield using the effective interest method.
         Dividend and interest income are recognized when earned. Realized gains
         and  losses  for  securities  classified  as   available-for-sale   and
         held-to-maturity  are  included in earnings  and are derived  using the
         specific  identification  method for determining the cost of securities
         sold.

                Prepayment of the mortgages securing the collateralized mortgage
         obligations  may affect the maturity  date and yield to  maturity.  The
         Company uses actual  principal  prepayment  experience and estimates of
         future  principal  prepayments  in calculating  the yield  necessary to
         apply the effective interest method.

                                       31

<PAGE>

     (1)  Continued

         Income Recognition on Loans

                Interest  on  loans is  credited  to  income  as  earned  on the
         principal amount outstanding.  When, in management's judgment, the full
         collectibility  of principal  or interest on a loan becomes  uncertain,
         that loan is placed on nonaccrual. Any accrued but uncollected interest
         on nonaccrual loans is charged against current income.  Interest income
         is then recognized as cash is received.

                Interest  accruals  are resumed on such loans only when they are
         brought  fully current with respect to principal and interest and when,
         in the judgment of the  management,  the loans have  demonstrated a new
         period of performance  and are estimated to be fully  collectible as to
         both principal and interest.

         Allowance for Loan Losses

                The allowance for loan losses is a valuation allowance available
         for losses  incurred on loans.  It is  established  through  charges to
         earnings in the form of  provisions  for loan  losses.  Loan losses are
         charged to the allowance for loan losses when a  determination  is made
         that  collection is unlikely to occur.  Recoveries  are credited to the
         allowance at the time of recovery.

                Prior to the beginning of each year,  and  quarterly  during the
         year,  management  estimates  whether the  allowance for loan losses is
         adequate  to absorb  losses  that can be  anticipated  in the  existing
         portfolio.  Based on these  estimates,  an  amount  is  charged  to the
         provision for loan losses to adjust the allowance to a level determined
         to be adequate to absorb currently anticipated losses.

                Management's  judgment  as to the  level  of  future  losses  on
         existing  loans is based on  management's  internal  review of the loan
         portfolio,  including an analysis of the borrowers'  current  financial
         position,   the  consideration  of  current  and  anticipated  economic
         conditions  and their  potential  effects  on  specific  borrowers,  an
         evaluation of the existing  relationships  among loans,  potential loan
         losses,  and the present level of the loan loss allowance;  and results
         of  examinations  by  independent   consultants.   In  determining  the
         collectibility  of certain  loans,  management  also considers the fair
         value of any underlying  collateral.  In addition,  various  regulatory
         agencies,   as  an  integral   part  of  their   examination   process,
         periodically review the Bank's allowance for loan losses. Such agencies
         may require the Bank to recognize  additions to the allowance  based on
         their  judgments  about  information  available  to them at the time of
         their examination.

         Loan Fees

                Loan  origination  fees and direct  loan  origination  costs are
         deferred and  amortized as an  adjustment to yield over the life of the
         loan.

         Property and Equipment

                Property,  leasehold  improvements,  and equipment are stated at
         cost, less accumulated  depreciation and amortization.  Amortization of
         leasehold  improvements is computed using the straight-line method over
         the  estimated  useful  lives of the  improvements  or the lease  term,
         whichever  is  shorter.  Depreciation  of  property  and  equipment  is
         computed using the  straight-line  method over their  estimated  useful
         lives ranging from 3 to 25 years.

         Income Taxes

                Deferred  tax  assets and  liabilities  are  recognized  for the
         future  tax  consequences   attributable  to  differences  between  the
         financial statement carrying amounts of existing assets and liabilities
         and  their  respective  tax  bases and  operating  loss and tax  credit
         carryforwards.  Deferred tax assets and  liabilities are measured using
         enacted tax rates  expected to apply to taxable  income in the years in
         which those  temporary  differences  are  expected to be  recovered  or
         settled.  Deferred tax assets are  recognized  subject to  management's
         judgment that realization of the asset is more likely than not.

                                       32

<PAGE>

(1)      Continued

         Income Per Common Share

                Income per common  share is computed  by dividing  net income by
         the  weighted  average  number of common and common  equivalent  shares
         (using the treasury stock method)  outstanding  during the year. Shares
         held by the ESOP Trust are  included  in the  income  per common  share
         calculation as they become committed to be released.  Common equivalent
         shares include stock options and warrants and are therefore  considered
         in earnings per share calculations if dilutive.

         New Accounting Standards

                In March 1995, the Financial  Accounting  Standards Board (FASB)
         issued  Statement of  Financial  Accounting  Standards  (SFAS) No. 121,
         Accounting for the  Impairment of Long-Lived  Assets and for Long-Lived
         Assets to be Disposed  Of, which was  effective  in 1996.  SFAS No. 121
         requires  that assets to be held and used be evaluated  for  impairment
         whenever events or  circumstances  indicate that the carrying value may
         not be  recoverable.  SFAS No.  121 also  requires  that  assets  to be
         disposed of be reported at the lower of cost or fair value less selling
         costs. Implementation of SFAS No. 121 did not have a material impact on
         the Company's results of operations or financial position.

                In May  1995,  the FASB  issued  SFAS No.  122,  Accounting  for
         Mortgage Servicing Rights, which became effective in 1996. SFAS No. 122
         provides  accounting  for mortgage  servicers  that sell or  securitize
         loans  and  retain  servicing  rights.  The  Company  does  not sell or
         securitize mortgage loans and therefore  implementation of SFAS No. 122
         does not have a material impact.

                In October 1995,  the FASB issued SFAS No. 123,  Accounting  for
         Stock-Based Compensation,  which became effective in 1996. SFAS No. 123
         encourages  companies  to record an expense for all stock  compensation
         awards based on fair value at grant date; however,  companies may elect
         to continue to follow the accounting  standards  existing prior to SFAS
         No. 123 with the  additional  requirement  that they disclose pro forma
         net income and  earnings  per share as if they had  adopted the expense
         recognition  provisions  of SFAS  No.  123.  The  Company  follows  the
         existing accounting standards for these plans.

         Reclassifications

                Certain  amounts for 1995 have been  reclassified  to conform to
         the presentation for 1996.

(2)      Acquisition

                On May  12,  1995,  the  Company  acquired  certain  assets  and
         deposits from Suburban  Bank of Virginia,  N.A.,  including its Reston,
         Virginia  branch,  comprising  approximately  $13,000,000  of loans and
         $20,100,000 of deposits.  All assets acquired and  liabilities  assumed
         were recorded at fair value at the date of acquisition.

                The Company paid a premium of  approximately  $1,200,000 for the
         deposits  acquired.  This premium is being amortized on a straight-line
         basis  over 10 years  based  on  management's  estimate  of the life of
         deposits acquired.  The Company reviews the unamortized  balance of the
         premium on a quarterly  basis for  possible  impairment  when events or
         changed   circumstances   may  affect  the  underlying   basis  of  the
         liabilities assumed. Amortization of the premium was $126,404 in 1996.

            [The remainder of this page is intentionally left blank]

                                       33

 <PAGE>

   (3)   Investment Securities

                The  carrying  value  and fair  value of  investment  securities
         held-to-maturity at December 31, 1996 and 1995, are as follows:

<TABLE>
<CAPTION>
                                                                                 1996                     1995
                                                                          ------------------       -------------------
                                                                          Carrying     Fair        Carrying      Fair
     (dollars in thousands)                                                value       value        value        value
-----------------------------------------------------------------------------------------------------------------------
<S> <C>
U.S. Treasury securities                                           $       1,499       1,505        1,472        1,482
Obligations of U.S. government agencies                                      250         251          250          253
Mortgage-backed securties of government sponsored enterprises              1,228       1,227        2,302        2,305
Other corporate securities                                                   750         752        1,250        1,260
-----------------------------------------------------------------------------------------------------------------------

                                                                   $       3,727       3,735        5,274        5,300
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

         The carrying value and fair value of held-to-maturity
         investment  securities  at December 31, 1996 and 1995,  by  contractual
         maturity are shown in the  following  table.  Expected  maturities  may
         differ from contractual  maturities because many issuers have the right
         to call  or  prepay  obligations  with or  without  call or  prepayment
         penalties.


<TABLE>
<CAPTION>
                                                1996                     1995
                                       ------------------------ ----------------------
                                         Carrying      Fair       Carrying      Fair
     (dollars in thousands)               value        value        value       value
--------------------------------------------------------------------------------------
<S> <C>
Maturing within 1 year             $       1,001       1,001        1,303       1,308
After 1 but within 5 years                 2,434       2,444        3,473       3,495
After 5 but within 10 years                  289         287          289         289
After 10 years                                 3           3          209         208
--------------------------------------------------------------------------------------

                                   $       3,727       3,735        5,274       5,300
--------------------------------------------------------------------------------------
</TABLE>


                Gross    unrealized    losses    in    investment     securities
         held-to-maturity  at December 31, 1996 and 1995 were $4,735 and $5,569,
         respectively.  Gross  unrealized  gains  were  $12,615  and  $31,886 at
         December  31,  1996  and  1995,  respectively.  There  were no sales or
         transfers  of  held to  maturity  securities  during  the  years  ended
         December 31, 1996 and 1995.

                The  carrying  value and  amortized  cost of  available-for-sale
         securities  at December  31, 1996 and 1995,  are shown  below.  Because
         available-for-sale  securities are marked-to market, the carrying value
         is equal to fair value.

<TABLE>
<CAPTION>

                                                                                   1996                      1995
                                                                       --------------------------- ----------------------
                                                                          Carrying     Amortized     Carrying   Amortized
     (dollars in thousands)                                                value          cost         value       cost
-------------------------------------------------------------------------------------------------------------------------
<S> <C>
Obligations of U.S. government agencies                            $        2,103         2,078        1,577       1,565
Mortgage-backed securities of government sponsored enterprises              8,161         8,106        2,985       2,981
Other corporate securities                                                    777           778          404         404
-------------------------------------------------------------------------------------------------------------------------

Total                                                              $       11,041        10,962        4,966       4,950
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       34

<PAGE>

(3)      Continued

                The  carrying  value and  amortized  cost of  available-for-sale
         investment  securities by contractual maturity at December 31, 1996 and
         1995, are shown below.  Expected maturities may differ from contractual
         maturities  because  many  issuers  have the  right  to call or  prepay
         obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>

                                                              1996                       1995
                                                   --------------------------- ----------------------
                                                     Carrying       Amortized    Carrying   Amortized
     (dollars in thousands)                            value          cost         value       cost
-----------------------------------------------------------------------------------------------------
<S> <C>
Maturing within 1 year                         $          568           564          248         250
After 1 but within 5 years                              4,360         4,335        1,417       1,407
After 5 but within 10 years                             2,172         2,153        1,891       1,887
After 10 years                                          3,663         3,632        1,256       1,252
Marketable equity securities                              278           278          154         154
-----------------------------------------------------------------------------------------------------

Total                                          $       11,041        10,962        4,966       4,950
-----------------------------------------------------------------------------------------------------
</TABLE>


                Gross unrealized losses in the available-for-sale  securities at
         December 31, 1996 and 1995 were $1,612 and $14,712, respectively. Gross
         unrealized  gains were  $80,765 and  $30,010 at  December  31, 1996 and
         1995, respectively.

                There  were  no  sales  or   transfers   of   available-for-sale
         securities during the years ended December 31, 1996 and 1995.

                Securities  with  carrying  values of $747,145  and  $661,371 at
         December  31,  1996 and  1995,  respectively,  were  pledged  to secure
         Treasury tax and loan  payments  and for other  purposes as required by
         law.

                As a member of the Federal Reserve System,  the Bank is required
         to hold stock in the Federal  Reserve Bank of  Richmond.  This stock is
         carried at cost since no active trading markets exist.

   (4)   Loans Receivable

                The loan portfolio at December 31, 1996 and 1995 consists of the
         following:


     (dollars in thousands)                              1996           1995
-----------------------------------------------------------------------------

Commercial                                     $       17,308         14,352
Real estate - commercial                               13,872         12,311
Real estate - residential                              12,933          9,225
Real estate - construction                              4,254          1,991
Consumer                                                9,390          6,639
-----------------------------------------------------------------------------
Gross loans                                            57,757         44,518
Unearned income                                           (80)          (159)
-----------------------------------------------------------------------------
Loans, net unearned income                             57,677         44,359
Allowance for loan losses                                (694)          (584)
-----------------------------------------------------------------------------
Loans, net                                     $       56,983         43,775
-----------------------------------------------------------------------------





            [The remainder of this page in intentionally left blank]


                                       35

<PAGE>

(4)      Continued

                Analysis of the activity in the  allowance for loan losses is as
         follows:


     (dollars in thousands)                                  1996         1995
-------------------------------------------------------------------------------

Balance, beginning of year                           $        585          298
Provision for loan losses                                     172          394
Loans charged off                                             (88)        (107)
Recoveries                                                     25            -
-------------------------------------------------------------------------------
Balance, end of year                                 $        694          585
-------------------------------------------------------------------------------


                Loans on which the accrual of interest has been  discontinued or
         reduced  amounted to  $193,246  and  $265,661 at December  31, 1996 and
         1995,  respectively.  Interest  lost  on  these  nonaccrual  loans  was
         approximately $6,598 for 1996 and $13,465 for 1995.

                At December 31, 1996,  the Company had three impaired loans with
         unpaid principal balances of $182,000.  The loans are on nonaccrual and
         there is $16,000 in related  impairment  reserves  against these loans.
         The average  balance of impaired  loans during 1996 was $140,000  which
         had an average  impairment  reserve of $20,000.  There was one impaired
         loan with an unpaid principal balance of $266,000 at December 31, 1995.
         This loan was on nonaccrual, but had no related impairment reserve. The
         average balance of impaired loans during 1995 was $334,000 which had an
         average impairment reserve of $26,000.

                All of the Bank's  loans,  commitments  and  standby  letters of
         credit have been granted to customers  located in the Washington,  D.C.
         metropolitan area. The concentrations of credit by type of loan are set
         forth above.  The Bank, as a matter of policy,  does not extend credit,
         net of participated amounts, to any single borrower or group of related
         borrowers in excess of $1,000,000.

(5)      Income Taxes

                Deferred  income tax assets and  liabilities  are recognized for
         differences  between  financial  statement  and tax bases of assets and
         liabilities  that will result in future tax  consequences.  A valuation
         allowance  is required to reduce  deferred tax assets to an amount more
         likely than not realizable.

                Based upon the  profitability  of the  Company in 1995 and 1996,
         and  projected   profitability  of  the  Company  in  1997,  management
         reassessed the need for a valuation allowance and management  considers
         that all of the benefit is more likely than not to be realized.

                The  provision  for income tax for the years ended  December 31,
         1996 and 1995 consists of:


     (dollars in thousands)                                  1996         1995
-------------------------------------------------------------------------------

Current income tax expense                            $        16            -
Deferred income tax benefit                                   (90)        (250)
-------------------------------------------------------------------------------

Income tax benefit                                    $       (74)        (250)
-------------------------------------------------------------------------------





            [The remainder of this page is intentionally left blank]

                                       36

<PAGE>


(5)      Continued

                A reconciliation of tax at the statutory federal tax rate to the
         income tax  provision is presented  below for the years ended  December
         31, 1996 and 1995:


     (dollars in thousands)                                  1996         1995
-------------------------------------------------------------------------------

Tax applicable to total income at statutory rate      $       336          108
Adjustments due to:
     Nondeductible expenses                                     7            5
     Change in valuation allowance                           (408)        (363)
     Other                                                     (9)           -
-------------------------------------------------------------------------------

Income tax benefit                                    $       (74)        (250)
-------------------------------------------------------------------------------


                Deferred tax assets and liabilities  consist of the following at
         December 31, 1996 and 1995:

<TABLE>
<CAPTION>

     (dollars in thousands)                                        1996         1995
-------------------------------------------------------------------------------------
<S> <C>
Alternative minimum tax carryforward                         $       15            -
Premium paid for deposits acquired                                   22            9
Bad debt expense                                                    196          148
Amortization                                                          -           28
Net operating loss carryforward                                     134          510
Other                                                                 7            -
-------------------------------------------------------------------------------------
Gross deferred tax assets                                           374          695
Less - valuation allowance                                            -         (408)
-------------------------------------------------------------------------------------
Depreciation                                                         35           37
Unrealized gain on securities available-for-sale                     27            -
-------------------------------------------------------------------------------------
Gross deferred tax liabilities                                       62           37
-------------------------------------------------------------------------------------

Net deferred tax assets                                      $      312          250
-------------------------------------------------------------------------------------
</TABLE>


                At December 31, 1996,  the Company had  completely  used its net
         operating loss carryforward for financial statement purposes.

(6)      Regulatory Matters

                The  Bank,  as a  national  bank,  is  subject  to the  dividend
         restrictions  set forth by the Comptroller of the Currency.  Under such
         restrictions,  the Bank may not,  without  the  prior  approval  of the
         Comptroller of the Currency,  declare dividends in excess of the sum of
         the current year's earnings (as defined) plus the retained earnings (as
         defined) from the prior two years. At December 31, 1996 and 1995, there
         were no net earnings against which dividends could be charged.

                The Bank is  required  to  maintain  a minimum  average  reserve
         balance  with the  Federal  Reserve  Bank.  The  average  amount of the
         required  reserve  was  $754,269  and  $1,046,000  for 1996  and  1995,
         respectively.

                As a member of the  Federal  Reserve  Bank  system,  the Bank is
         required to subscribe to shares of $100 par value Federal  Reserve Bank
         stock equal to 6 percent of the Bank's capital and surplus. The Bank is
         required to pay for one-half of the subscription.  The remaining amount
         is subject to call when deemed  necessary  by the Board of Governors of
         the Federal Reserve.

                                       37

<PAGE>

(6)      Continued

                The Federal  Deposit  Insurance  Corporation  Improvement Act of
         1991 ("FDICIA")  requires the regulators to stratify  institutions into
         five quality tiers based upon their relative  capital  strengths and to
         increase  progressively  the  degree  of  regulation  over  the  weaker
         institutions,  limits the pass through deposit  insurance  treatment of
         certain types of accounts,  adopts a "truth in savings" program,  calls
         for the  adoption  of  risk-based  premiums  on deposit  insurance  and
         requires the Bank to observe  insider credit  underwriting  products no
         less strict than those applied to comparable noninsider transactions.

                At December  31, 1996 and 1995,  the Company and its  subsidiary
         bank met all  regulatory  capital  requirements.  The key  measures  of
         capital  are:  (1) Tier I capital  (stockholders'  equity less  certain
         deductions)  as a percent of total  risk  adjusted  assets;  (2) Tier I
         capital as a percent of total  assets,  and (3) total  capital  (Tier I
         capital plus the allowance  for loan losses up to certain  limitations)
         as a percent of total risk adjusted assets.  The capital ratios for the
         Bank at December 31, 1996 and 1995 are as follows:

<TABLE>
<CAPTION>
                                                              Analysis of Capital
                                    -------------------------------------------------------------------------
      (dollars in thousands)         Required     Required     Actual      Actual      Excess       Excess
                                      Amount         %         Amount        %         Amount         %
                                    ------------ ----------- ----------- ----------- ------------ -----------
<S> <C>
As of December 31, 1996
     Tier 1 risk-based capital ratio  $ 2,516      4.00%      $ 7,231      11.50%      $ 4,715      7.50%
     Total risk-based capital ratio   $ 5,032      8.00%      $ 7,925      12.60%      $ 2,893      4.60%
     Tier 1 leverage ratio            $ 2,504      3.00%      $ 7,231       8.66%      $ 4,727      5.66%

As of December 31, 1995
     Tier 1 risk-based capital ratio  $ 1,873      4.00%      $ 3,436      7.34%       $ 1,563      3.34%
     Total risk-based capital ratio   $ 3,745      8.00%      $ 4,021      8.59%       $   276      0.59%
     Tier 1 leverage ratio            $ 1,887      3.00%      $ 3,436      5.46%       $ 1,549      2.46%
</TABLE>

(7)      Commitments and Contingencies

                The Bank  entered  into a lease for office  space at its current
         location  for a term of ten years  beginning  May 1993.  This  lease is
         subject to 3 percent annual  increases,  as well as allocations of real
         estate taxes and certain operating expenses.  In addition,  the Company
         has two  additional  branch leases also subject to annual  increases as
         well as allocations of real estate taxes and operating expenses.

                Minimum future rental payments under the noncancelable operating
         leases,  as of December 31, 1996 for each of the next five years and in
         the aggregate, are as follows:


                                                       (dollars in thousands)
                Year ending December 31,                         Amount
                --------------------------------------------------------
                1997                                     $          315
                1998                                                357
                1999                                                366
                2000                                                375
                2001                                                384
                Thereafter                                          412
                --------------------------------------------------------
                                                         $        2,209
                --------------------------------------------------------


                The total rent  expense was  $209,039  and  $162,286 in 1996 and
         1995, respectively.

(8)      Related-Party Transactions

                Officers,  directors,   employees  and  their  related  business
         interests  are loan  customers in the ordinary  course of business.  In
         management's  opinion,  these loans are made on substantially  the same
         terms, including interest rates and collateral,  as those prevailing at
         the time for  comparable  loans with other  persons  and do not involve
         more than normal risk of  collectibility  or present other  unfavorable
         features.

                                       38

<PAGE>

(8)      Continued

                Analysis of activity for loans to related parties is as follows:


     (dollars in thousands)                                  1996         1995
-------------------------------------------------------------------------------

Balance, beginning of year                          $       1,081          558

New loans                                                     236          659
Loans paid off or paid down                                  (208)        (136)
-------------------------------------------------------------------------------

Balance, end of year                                $       1,109        1,081
-------------------------------------------------------------------------------


                Effective  January 1, 1993, the Company  established an Employee
         Stock  Ownership Plan (ESOP),  as further  described in Note 11. During
         June 1994, the Company purchased 32,949 and 22,722 shares of its common
         stock  from  several of the  Company's  current  and former  directors,
         respectively, at $8.75 per share, for the ESOP.

                The loan used to fund the ESOP was provided by a director of the
         Company in the original amount of $500,000. As of December 31, 1996 the
         outstanding balance of the loan was $375,000.  In management's opinion,
         the loan is at market  terms.  The loan  requires  quarterly  principal
         payments  of  $12,500,  quarterly  interest  payments  at prime  plus 2
         percent,  and a balloon payment for the remaining  principal balance on
         June 1, 1998.

(9)      Stock Warrants

                Associated  with the  Company's  initial  public  offering,  the
         organizers  were  granted one  warrant  for each share of common  stock
         purchased for cash in the offering. The stock purchase warrants entitle
         the holder of the warrants to purchase  Company stock at $10 per share,
         at any time during the term of the warrant. The warrants expire on July
         1, 2001.

                In the event of a capital call upon the Bank,  the Office of the
         Comptroller  of the Currency will require the Company stock warrants to
         be exercised at a price no less than current book value or the warrants
         will be forfeited.  The Company had 228,250 stock  warrants  issued and
         outstanding at December 31, 1996. No warrants have been exercised.

  (10)   Stock Option Plan

                In 1992,  the  stockholders  approved a stock  option  plan that
         provides for incentive stock options,  non-qualified stock options, and
         restricted  stock.  The plan was amended and restated in 1996 to effect
         certain  technical  changes in connection  with revisions to Rule 166-3
         promulgated  under the  Exchange  Act of 1934 as amended.  A designated
         committee of the Board of Directors is  authorized  to grant options to
         employees,  officers,  directors and advisory board members. A total of
         160,058  shares of common stock have been  reserved for this plan.  All
         options are immediately  exercisable and expire 10 years from the grant
         date.

                At  December   31,  1996,   the  Company  had  the   stock-based
         compensation  plan described above. The Company applies APB Opinion No.
         25 and related Interpretations in accounting for its plan. Accordingly,
         no compensation cost has been recognized for its stock option plan. Had
         compensation cost for the Company's stock-based  compensation plan been
         recorded  consistent  with FASB  Statement  No. 123, the  Company's net
         income and  earnings per share would have been reduced to the pro forma
         amounts indicated as follows:

                                       39

<PAGE>

(10)     Continued

<TABLE>
<CAPTION>
                                                                              December 31,
                                                                              -----------
                (dollars in thousands except per share data)              1996             1995
           -------------------------------------------------------- ----------------- ----------------
<S> <C>
           Net income                        As reported                 $1,062            $ 568
                                             Pro forma                   $  565            $ 550

           Primary earnings per share        As reported                 $ 1.23            $ .92
                                             Pro forma                   $  .66            $ .89
</TABLE>

                The fair value of each option grant was estimated on the date of
         grant  using an option-pricing  model  with the  following assumptions
         for both years;  risk-free  interest rate of 5.25 percent; dividend
         yield of zero percent;  expected life of ten years  and  volatility  of
         25 percent.

                A summary of the status of the Company's performance-based stock
         option  plan as of December  31,  1995 and 1996 and changes  during the
         years ended on those dates is presented below:

<TABLE>
<CAPTION>
                                                              for the years ended December 31,
                                                              1996                       1995
                                                     --------------------------------------------------
                                                                   Weighted                 Weighted
                                                                   average                  average
                                                                   exercise                 exercise
                  Performance Options                   Shares      price        Shares      price
         ----------------------------------------------------------------------------------------------
<S> <C>
         Outstanding at beginning of the year             12,500       $8.75        6,000       $8.75
         Granted                                         109,830       $9.19        6,500       $8.75
         Exercised                                             0           0            0           0
         Forfeited                                         3,000       $8.71            0           0
         Outstanding at end of year                      119,330       $9.18       12,500       $8.75
         Options exercisable at year-end                 119,330       $9.18       12,500       $8.75
         Weighted average fair value of options
            granted during the year                                    $4.54                    $4.33
         Weighted average remaining contractual life   9.9 years                  9 years
</TABLE>

              As of December 31, 1996, the 119,330 performance  options under
         the plan,  have exercise prices between $8.50 and $11.00.

(11)     Employee Stock Ownership Plan

                The Company has  established  the Employee Stock  Ownership Plan
         and Trust  (ESOP)  which  became  effective  on January  1,  1993,  for
         employees  of the Bank who have at least one year of  credited  service
         and have attained the age of twenty-one  (21). The ESOP is to be funded
         by the  Bank's  annual  contributions  made in cash  or  common  stock.
         Contributions  to the plan are made at the  discretion  of the Board of
         Directors.  Shares purchased by the ESOP are held in a suspense account
         for  allocation  among  the  participants  as the  loan is  repaid.  As
         described in note 8, during 1994 the ESOP  purchased  57,171  shares of
         company stock using  $500,000 of funds  borrowed from a director of the
         Company.  Compensation  expense  relating to the ESOP for 1996 and 1995
         was $52,988 and $50,000,  respectively. No dividends have been declared
         on the  Company's  stock;  therefore  dividends  had no  effect  on the
         compensation  expense  relating to the ESOP.  As of December  31, 1996,
         14,293 shares have been  allocated to  participants.  The fair value of
         unearned shares at December 31, 1996 is approximately $460,939.

                Contributions  to the ESOP and shares released from the suspense
         account are allocated among the  participants on the basis of salary in
         the year of  allocation.  Benefits  become 20 percent  vested after the
         third year of credited  service,  with an additional 20 percent vesting
         each year thereafter  until 100 percent vesting after seven years.  For
         any year in which the aggregate of benefits to key employees exceeds 60
         percent  of  the  aggregate  benefits  accrued  to  non-key  employees,
         benefits  allocated to participants in that year will become 20 percent
         vested  after  two  years,  increasing  to 100  percent  after 6 years.
         Forfeitures will

                                       40

<PAGE>

         be  reallocated  annually  among  remaining  participating   employees.
         Benefits  may be payable  upon  retirement,  separation  from  service,
         disability or death.

(12)     Financial Instruments with Off Balance Sheet Risk

                The   Company  is  a  party  to   financial   instruments   with
         off-balance-sheet  risk in the normal  course of  business  to meet the
         financing needs of its customers.  These financial  instruments include
         commitments  to  extend  credit  and  standby  letters  of  credit  and
         financial  guarantees.  Commitments  to extend credit are agreements to
         lend to a customer so long as there is no  violation  of any  condition
         established in the contract.  Commitments usually have fixed expiration
         dates up to one  year or  other  termination  clauses  and may  require
         payment of a fee. Since many of the  commitments are expected to expire
         without  being  drawn  upon,  the  total  commitment   amounts  do  not
         necessarily represent future cash requirements.

                Standby letters of credit are conditional  commitments issued by
         the Company to guarantee the performance of the contractual obligations
         by a customer to a third party. The majority of these guarantees extend
         until   satisfactory   completion   of   the   customer's   contractual
         obligations.  All standby letters of credit outstanding at December 31,
         1996, are collateralized.

                Those instruments represent obligations of the Company to extend
         credit or guarantee borrowings, therefore, they are not recorded on the
         consolidated statements of financial condition.  The rates and terms of
         these  instruments are  competitive  with others in the market in which
         the Company  operates.  Almost all of these  instruments as of December
         31, 1996 have floating rates,  therefore  significantly  mitigating the
         market risk.

                Those instruments may involve,  to varying degrees,  elements of
         credit and interest rate risk in excess of the amount recognized in the
         consolidated statements of financial condition.  Credit risk is defined
         as the  possibility of sustaining a loss because the other parties to a
         financial  instrument  fail to perform in accordance  with the terms of
         the  contract.  The  Company's  maximum  exposure  to credit loss under
         standby   letters  of  credit  and  commitments  to  extend  credit  is
         represented by the contractual amounts of those instruments.

<TABLE>
<CAPTION>

                                                                                  Contractual
     (dollars in thousands)                                                          amount
----------------------------------------------------------------------------------------------
<S> <C>
Financial instruments whose contract amounts represent potential credit risk:
        Commitments to extend credit                                           $       17,330
        Standby letters of credit                                              $          222
----------------------------------------------------------------------------------------------
</TABLE>


                At December  31,  1997,  the Company did not have any  financial
         instruments whose contractual amounts exceed the amount of credit risk.

                The Company uses the same credit policies in making  commitments
         and   conditional   obligations   as  it  does   for   on-balance-sheet
         instruments.  The Company evaluates each customer's creditworthiness on
         a  case-by-case  basis and  requires  collateral  to support  financial
         instruments when deemed  necessary.  The amount of collateral  obtained
         upon  extension of credit is based on  management's  evaluation  of the
         counterparty.  Collateral held varies but may include  deposits held by
         the Company;  marketable  securities;  accounts receivable;  inventory;
         property,   plant  and  equipment;   and  income-producing   commercial
         properties.

  (13)   Significant Concentrations of Credit

                At December  31,  1996,  the  Company had federal  funds sold to
         three correspondent banks totaling  approximately  $6,810,000,  each of
         which  had  a  balance  of  $453,000  or  more.   These  are  overnight
         investments and are rolled-over on a daily basis.  The Company does not
         normally require collateral for this type of investment.

                                       41

<PAGE>

(14)     Noninterest Expense

                Noninterest expenses consist of the following:

<TABLE>
<CAPTION>

     (dollars in thousands)                                          1996         1995
---------------------------------------------------------------------------------------
<S> <C>
Salaries and employee benefits                              $       1,567        1,276
Occupancy and equipment                                               394          299
Office and operations expenses                                        355          287
Data processing                                                       259          226
Legal and professional fees                                           305          224
Business development                                                  122          114
Amortization of premium paid for deposits                             126           77
Deposit insurance                                                      41           63
---------------------------------------------------------------------------------------

                                                            $       3,169        2,566
---------------------------------------------------------------------------------------
</TABLE>


(15)     Disclosures of Fair Value of Financial Instruments

                The  assumptions  used  and the  estimates  disclosed  represent
         management's  best judgment of  appropriate  valuation  methods.  These
         estimates are based on pertinent information available to management as
         of December 31, 1996. In certain cases,  fair values are not subject to
         precise  quantification  or verification and may change as economic and
         market factors, and management's evaluation of those factors change.

                Although  management  uses its best judgment in  estimating  the
         fair  value  of  these  financial   instruments,   there  are  inherent
         limitations in any estimation  technique.  Therefore,  these fair value
         estimates  are not  necessarily  indicative  of the  amounts  that  the
         Company  would  realize  in a market  transaction.  Because of the wide
         range of valuation  techniques and the numerous estimates which must be
         made,  it  may be  difficult  to  make  reasonable  comparisons  of the
         Company's   fair  value   information   to  that  of  other   financial
         institutions.  It is important  that the many  uncertainties  discussed
         above be considered when using the estimated fair value disclosures and
         to realize  that because of these  uncertainties,  the  aggregate  fair
         value amount  should in no way be construed  as  representative  of the
         underlying value of the Company.

         Fair Value of Financial Instruments

                The  following  summarizes  the  significant  methodologies  and
         assumptions  used  in  estimating  the  fair  values  presented  in the
         accompanying table.

                  Cash and Cash Equivalents

                  The carrying amount of cash and cash equivalents was used as a
                  reasonable estimate of fair value.

                  Investments

                  Fair values of the Company's  investment  portfolio were based
                  on actual quoted prices or prices quoted for similar financial
                  instruments.

                                       42

 <PAGE>

         (15)     Continued

                  Loans

                  To  determine  the  fair  market  value  for  loans,  the loan
                  portfolio was segmented based on loan type, credit quality and
                  maturities.   For   certain   variable   rate  loans  with  no
                  significant credit concerns and frequent repricings, estimated
                  fair  values are based on current  carrying  values.  The fair
                  values of other loans are estimated using discounted cash flow
                  analysis,  using  interest  rates  that  were  offered  as  of
                  December 31, 1996 for loans with similar terms to borrowers of
                  similar credit quality.

                  Deposits

                  The fair value of deposits with no stated maturity is equal to
                  the amount payable on demand.  The fair value of  certificates
                  of deposit are estimated  using  discounted cash flow analysis
                  using  interest  rates that were  offered as of  December  31,
                  1996.

                  Long-Term Debt

                  As described in Note 8, the long-term debt is variable rate at
                  market  terms;  therefore,  the carrying  amount was used as a
                  reasonable estimate of fair value.

                  Commitments

                  The fair value of these financial  instruments is based on the
                  credit  quality  and  relationship,   fees,   interest  rates,
                  probability  of  funding,   compensating   balance  and  other
                  convenants or requirements.  These commitments  generally have
                  fixed   expiration   dates  expiring  within  one  year.  Many
                  commitments  are expected to, and typically do, expire without
                  being drawn upon. The rates and terms of these instruments are
                  competitive  with  others in the  market in which the  Company
                  operates. The carrying amounts are reasonable estimates of the
                  fair  value  of  these  financial  instruments.  The  carrying
                  amounts of these instruments are zero at December 31, 1996.

         Fair Value of Financial Instruments as of December 31, 1996


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

                                                         December 31, 1996
                                                    --------------------------
                                                       Carrying     Estimated
     (dollars in thousands)                              Amount    Fair Value
------------------------------------------------------------------------------

Financial assets:
     Cash and cash equivalents                   $       13,625        13,625
     Investments                                         14,767        14,775
     Loans                                               56,983        56,955

Financial liabilities:
     Noninterest-bearing demand deposits                 20,113        20,113
     NOW and money market accounts                       37,956        37,956
     Savings                                              2,438         2,438
     Certificates of deposit                             18,046        17,751
     Long-term debt                                         375           375

Commitments                                      $            -             -
------------------------------------------------------------------------------



                                       43

<PAGE>

(16)     Holding Company Only Financial Statements

         Balance Sheets as of December 31, 1996 and 1995: (dollars in thousands)

<TABLE>
<CAPTION>


Assets                                                                1996             1995
--------------------------------------------------------------------------------------------
<S> <C>
Assets:
     Cash                                                   $           50               12
     Federal funds sold                                                384                -
     Prepaids and other assets                                          10                -
     Investment in subsidiary bank                                   8,182            4,560
--------------------------------------------------------------------------------------------

Total assets                                                $        8,626            4,572
--------------------------------------------------------------------------------------------

Liabilities and Stockholders' Equity
--------------------------------------------------------------------------------------------

Liabilities:
     Long term debt                                         $          375              425
     Other liabilities                                                  38                6
--------------------------------------------------------------------------------------------

Total liabilities                                                      413              431
--------------------------------------------------------------------------------------------

Stockholders' equity
     Common stock                                                    5,356            3,343
     Additional paid-in capital                                      4,035            3,072
     Employee stock ownership plan trust                              (375)            (425)
     Retained earnings                                                (803)          (1,849)
--------------------------------------------------------------------------------------------

Total stockholders' equity                                           8,213            4,141
--------------------------------------------------------------------------------------------

Total liabilities and stockholders' equity                  $        8,626            4,572
--------------------------------------------------------------------------------------------
</TABLE>


         Statements  of  Operations  for the years ended  December  31, 1996 and
1995:


<TABLE>
<CAPTION>

                                                                         1996        1995
------------------------------------------------------------------------------------------
<S> <C>
Income:
     Equity in undistributed earnings of subsidiary             $       1,070         576
     Interest income                                                       10           -
------------------------------------------------------------------------------------------

Total income                                                            1,080         576

Expenses                                                                   18           8
------------------------------------------------------------------------------------------

Total expenses                                                             18           8
------------------------------------------------------------------------------------------

Net income (loss)                                               $       1,062         568
------------------------------------------------------------------------------------------
</TABLE>


                                       44

<PAGE>


(16)     Continued

         Statements  of Cash Flows for the years  ended  December  31,  1996 and
1995:


<TABLE>
<CAPTION>


     (dollars in thousands)                                                 1996            1995
-------------------------------------------------------------------------------------------------
<S> <C>
Operating activities:
     Net income                                                $           1,062             568
     Adjustments to reconcile net income to net cash
        provided by operating activities:
        Equity in undistributed net income of subsidiary                  (1,070)           (576)
        Compensation expense for ESOP trust                                   53              50
        Other                                                                 18               -
-------------------------------------------------------------------------------------------------
Net cash provided by operating activities                                     63              42
-------------------------------------------------------------------------------------------------

Cash flows from financing activities:
     Issuance of common stock                                              2,976               -
     Increased investment in subsidiary                                   (2,567)              -
     Payments on ESOP trust debt                                             (50)            (50)
-------------------------------------------------------------------------------------------------
Net cash provided ( used) by financing activities                            359             (50)
-------------------------------------------------------------------------------------------------

Increase (decrease) in cash                                                  422              (8)

Cash and cash equivalents, beginning of year                                  12              20
-------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year                         $             434              12
-------------------------------------------------------------------------------------------------
</TABLE>


================================================================================


ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

         None

                                    PART III

ITEM 9 - DIRECTORS,  EXECUTIVE  OFFICERS,  PROMOTERS  AND CONTROL  PERSONS;
COMPLIANCE  WITH SECTION 16(a) OF THE EXCHANGE ACT

         The following table sets forth certain  information with respect to the
directors,  and  executive  officers of the Company and the Bank.  The Company's
articles of incorporation  and by-laws provide for staggered terms for the Board
of  Directors.  The  Company's  Board of  Directors  has been divided into three
classes so that,  after their  initial  terms,  approximately  one-third  of the
directors are elected to a three-year term at each annual shareholders  meeting.
Members of the Bank's Board of  Directors  will serve  one-year  terms until the
next  annual  meeting of the Bank's  shareholders,  and  thereafter  until their
successors  are elected  and  qualified.  Executive  officers of the Company are
elected by the Company's Board of Directors,  and executive officers of the Bank
are elected by the Bank's Board of  Directors,  in each case for one-year  terms
and to serve  until  their  successors  are  elected  and  qualified.  Except as
otherwise indicated,  each person has been or was engaged in his present or last
principal  occupation,  in the same or a  similar  position,  for more than five
years.

                                       45

<PAGE>

<TABLE>
<CAPTION>
Name                      Age     Position Held and Principal Occupations
----                      ---     ---------------------------------------
<S> <C>
George Assaf              35      Mr. Assaf  joined the Bank in 1993 as a commercial lender and
                                  became  the Chief Lending Officer in April, 1996.  Prior to joining
                                  the Bank, he was with Barnett Bank from 1991 to 1993.  Mr. Assaf
                                  has over ten years of banking experience in lending, credit analysis,
                                  branch operations, and management.

Joel M. Birken            49      Mr.  Birken has been a Class I director  of the  Company and a director
                                  of the Bank since 1995.  Mr.  Birken is a founding  shareholder  of the
                                  law  firm of Rees,  Broome & Diaz,  P.C.,  and has  practiced  law with
                                  that firm in Vienna,  Virginia since 1974.  Rees,  Broome & Diaz,  P.C.
                                  serves as the Company's corporate counsel.

David M. Cordingley       50      Mr.  Cordingley  joined the  Company in May 1996.  He has over 20 years
                                  experience  in banking  including  the  founding  of Bank 1st,  N.A. in
                                  McLean,  Virginia  in  1987.  Additionally,  Mr.  Cordingley  spent  15
                                  years in various  positions with First  American Bank of Virginia.  Mr.
                                  Cordingley  graduated  from C.W.  Post College in  Greenvale,  New York
                                  with a B. A. in economics.

Michael Farnum            51      Mr.  Farnum has been a Class II  director of the Company and a director
                                  of the Bank since 1991.  He has been,  since 1991,  self-employed  with
                                  the  Farnum  Company  and  concentrates  on the  sales and  leasing  of
                                  commercial  and  industrial  real  estate.  From  1973 to 1991,  he was
                                  vice  president  and sales  manager of two regional  real estate firms,
                                  including Weaver Bros., Inc.

Alben G. Goldstein, M.D.  51      Dr.  Goldstein  has been a Class I director of the  Company  since 1989
                                  and was a director  of the Bank from 1991  through  January  15,  1997.
                                  He  has  been  the  owner  and  senior   physician  of  the   Arthritis
                                  Associates  of  Northern  Virginia,  P.C.  for more  than the past five
                                  years.

Zachary A. Kaye, M.D.     49      Dr. Kaye has been a Class I director  of the  Company  since 1989 and a
                                  director of the Bank since 1991.  He is  currently a physician  in sole
                                  practice  in   Woodbridge,   Virginia.   He  has  been  an   individual
                                  practitioner for more than the past fifteen years.

Beth W. Newburger(1)      59      Ms.  Newburger  has been a Class II director
                                  of the  Company  and a director  of the Bank since  1991.  She has been
                                  President  of Corabi  International  Telemetrics,  Inc.,  a  biomedical
                                  instrumentation  company,  for more than the past five  years.  She was
                                  appointed  Chief of Staff,  White House  Office of Women's  Initiatives
                                  and  Outreach,  in October  1995 and she assumed the position of Deputy
                                  Administrator, General Services Administration on April 15, 1996.

J. Patrick Rowland        59      Mr.  Rowland  has been a Class III  director  and Vice  Chairman of the
                                  Board of  Directors  of the  Company  since  1989,  and a director  and
                                  Chairman of the Board of the Bank since 1991.  Since  January  1995, he
                                  has  been a  business  consultant  with  offices  in  Washington,  D.C.
                                  Prior to this,  Mr.  Rowland was director of  government  relations for
                                  the  Borg-Warner   Security  Corporation  from  September  of  1993  to
                                  December  of 1994.  For five years prior to that,  he was the  Chairman
                                  of Rowland & Sellery, a Washington, D.C. business consulting firm.
</TABLE>

-------------------------
(1)Ms. Newburger is married to Mr. Schwartz.

                                       46

<PAGE>

<TABLE>
<CAPTION>
Name                      Age     Position Held and Principal Occupations
----                      ---     ---------------------------------------
<S> <C>
Fred J. Rubin             35      Mr.  Rubin joined the Bank as its Vice  President  of Credit  Policy in
                                  July,  1996.  Prior to his  employment  by the  Bank,  Mr.  Rubin was a
                                  National  Bank  Examiner  with the  Office  of the  Comptroller  of the
                                  Currency.  Mr. Rubin has over thirteen  years of banking  experience in
                                  lending, credit and regulatory relations.


Richard Schwartz(2)       67     Mr.  Schwartz  has been a Class III  director and Chairman of the Board
                                  of the  Company,  and  director  and Vice  Chairman of the Bank,  since
                                  1991.  He is the  founder,  and for  more  than the  past  five  years,
                                  President   of  Boat   Owners   Association   of  The   United   States
                                  ("BOAT/U.S.").  He is also the  Chairman  of the Board and CEO, of Boat
                                  America  Corporation,  a service  company.  Mr. Schwartz is an attorney
                                  and is  admitted  to the New York,  Florida,  and  District of Columbia
                                  Bars, and the Supreme Court of the United States.

William C. Sellery, Jr.   49      Mr.  Sellery has been a Class II  director  of the  Company  since 1989
                                  and  director  of the  Bank  since  1991.  He  has  been  President  of
                                  Sellery  Associates,  Inc.,  since  September  1993.  Prior to this, he
                                  was president of Rowland & Sellery,  Inc., a Washington  D.C.  business
                                  consulting firm, from 1988 to 1993.

Samuel E. Smith, Jr.      41      Mr.  Smith  joined  the  Bank in June  1994 as its  Vice  President  of
                                  Credit   Administration  and  Operations.   Mr.  Smith  previously  was
                                  Assistant  Vice  President at Citizens Bank of Washington  from 1991 to
                                  1994.   From  1986  to  1991,   Mr.  Smith  served  as  Assistant  Vice
                                  President  of  Citizens  Bank of  Virginia.  Mr Smith as over  nineteen
                                  years of banking experience in lending,  compliance,  credit and branch
                                  administration.

Terrie G. Spiro           40      Ms. Spiro, who is the founding  President,  has been  President/CEO and
                                  a Class III director of the Company since 1989, and  President/CEO  and
                                  director of the Bank since 1991.  Ms.  Spiro has over  seventeen  years
                                  of commercial banking experience.

St. Clair J. Tweedie      59      Mr.  Tweedie  has  been  a  Class  II  director  of the  Company  and a
                                  director  of  the  Bank  since  1991.  He  is  currently  a  management
                                  consultant.   Prior  to  this,   he  was  the  Director  of  Government
                                  Relations  for  American  Cyanamid  Company for more than the past five
                                  years.

Janet A. Valentine        45      Ms.  Valentine  serves as Senior  Vice  President  and Chief  Financial
                                  Officer of the Bank since  February  1996.  From 1991 to 1996,  she was
                                  Vice  President and  Controller  at Patriot  National Bank of Virginia.
                                  Ms.  Valentine has over nineteen  years of experience in bank financial
                                  reporting, budgeting and management.

Stephen A. Wannall        49      Mr.  Wannall  was  appointed  to  serve  as a Class I  director  of the
                                  Company  and a director  of the Bank at the  December  1995  meeting of
                                  the Board of  Directors  and  subsequently  elected at the 1996  Annual
                                  Shareholders  Meeting.  He is the Managing  Shareholder of Brown, Dakes
                                  & Wannall,  P.C.,  an  accounting  firm  located in Northern  Virginia.
                                  Mr.  Wannall is a Certified  Public  Account and has over twenty  years
                                  of experience in public accounting.
</TABLE>

(2)Ms. Newburger is married to Mr. Schwartz.

                                       47

<PAGE>

ITEM 10 - EXECUTIVE COMPENSATION

Summary of Cash and Certain Other Compensation

         The following  table sets forth for the fiscal years ended December 31,
1994,  and 1995,  the cash  compensation  paid or accrued by the Company and the
Bank, as well as certain other compensation paid or accrued for those years, for
services in all capacities to the chief executive officer of the Company and the
Bank,  Terrie G. Spiro and chief lending  officer,  George  Assaf.  No executive
officers of the Company or the Bank, other than Ms. Spiro and Mr. Assaf,  earned
total annual compensation, including salary and bonus, for the fiscal year ended
December 31, 1996, in excess of $100,000.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                            Long Term
                                               Annual Compensation          Compensation
                                                                            Securities
Name and Principal                                                          Underlying       All other
Position               Year                 Salary($)         Bonus($)      Options (#)      Compensation
------------------     ----                 ---------         --------      -----------      ------------
<S> <C>
Terrie G. Spiro -      1996                 $130,000          $25,000          9,400         $19,222(3)
  President and
  Chief Executive      1995                 $105,663          $40,000          3,000         $18,609
  Officer
                       1994                 $102,731                -          6,000         $14,383
-----------------
George Assaf           1996                 $ 65,502          $47,636            500               -(2)
  Vice President
  and Chief            1995                 $ 50,000          $18,564            500               -
  Lending Officer
                       1994                 $ 45,000          $ 8,037              -               -
</TABLE>

(1) See "Option  Grants,"  "Option  Exercises  and  Year-End  Values" and "Stock
Option Plan" for disclosure regarding outstanding stock options.

(2) In accordance with SEC rules,  perquisites constituting less than the lesser
of $50,000 or 10% of total salary and bonuses are not reported.

(3) Comprises  employer  contributions  of term life insurance  premium of $296,
disability insurance premium of $2,900,  health insurance premium of $2,306, car
lease payments of $6,316, fuel and parking allowance of $3,600, and club dues of
$3,804.

            [The remainder of this page is intentionally left blank]

                                       48

<PAGE>

OPTION GRANTS

         Options  granted to the Named  Executive  Officers  during 1996 are set
forth in the  following  table.  For  disclosure  regarding  the  terms of stock
options see "Stock Option Plan."

Options Grants in Last Fiscal Year - Individual Grants

<TABLE>
<CAPTION>
                                         Percent                                  Potential Realizable
                                           of                                      Value at Assumed
                                          Total                                     Annual Rates of
                        Shares          Number of                                     Stock Price
                        Under-           Options                                      Appreciation
                         lying           Granted       Exercise                    for Option Term (2)
                        Options         Employees       Price       Expiration   -----------------------
Name                    Granted          in 1996     ($/share)(1)      Date         5% ($)     10% ($)
----                    --------         -------     ------------   -----------  ----------   ----------
<S> <C>
Terrie G. Spiro           3,400           27.4%         $ 8.50       Feb. 2006     $18,175     $ 46,059
Terrie G. Spiro           6,000           48.4%         $11.00       Oct. 2006     $41,507     $105,187
N. George Assaf             500            4.0%         $ 8.50       Feb. 2006     $ 2,673     $  6,773
</TABLE>

(1) The  exercise  price  of  each  option  was the  fair  market  value  of the
    underlying  Common Stock on the date of the grant, as determined by the
    Board of Directors of the Company.

(2) Future value of current-year grants assuming the indicated  percentage rates
    per year over the  applicable  option  term.  The actual  value  realized
    may be greater  than or less  than the  potential  realizable  values  set
    forth in the table.

OPTION EXERCISES AND YEAR-END VALUES

         No stock options were exercised by the Named Executive  Officers during
1996.  There were no stock  appreciation  rights  outstanding  during 1996.  The
following table sets forth certain  information  regarding  unexercised  options
held by the Named Executive Officers as of December 31, 1996:

<TABLE>
<CAPTION>
                                               Aggregated Fiscal Year-End Option Values
                                               ----------------------------------------
                                  Number of Securities                         Value of Unexercised
                                 Underlying Unexercised                       In-the-Money Options at
                             Options at Fiscal Year-End (#)                    Fiscal Year-End ($)(1)
                             ------------------------------                  -------------------------
Name                          Exercisable     Unexercisable           Exercisable      Unexercisable
----                         ------------     -------------           -----------      -------------
<S> <C>
Terrie G. Spiro                9,000(2)             0                   $18,000               N/A
Terrie G. Spiro                3,400(3)             0                   $ 7,650               N/A
Terrie G. Spiro                6,000(4)             0                   $     0               N/A
Terrie G. Spiro                2,630(5)             0                   $ 4,274               N/A
N. George Assaf                  500(2)             0                   $ 1,000               N/A
N. George Assaf                  500(3)             0                   $ 1,125               N/A
</TABLE>

(1)      Value determined by the Board of Directors of the Company.
(2)      The exercise price of these options is $8.75 per share.
(3)      The exercise price of these options is $8.50 per share.
(4)      The exercise price of these options is $11.00 per share.
(5)      The exercise price of these options is $9.125 per share.

                                       49

<PAGE>

Compensation of Directors

         Directors of the Bank receive $150 for every Board of Directors meeting
attended,  paid  quarterly in arrears.  In 1996,  options  totaling  97,430 were
awarded as follows to the listed directors and advisory board directors.

                         Shares Underlying
Name                      Options Granted    Exercise Price    Termination Date
----                     -----------------   --------------    ----------------

Michael Farnum                  9,500            $9.125            8/26/2006
Alben G. Goldstein, M.D.        4,350            $9.125            8/26/2006
George Hill*                    9,500            $9.125            8/26/2006
Zachary A. Kaye, M.D.           1,350            $9.125            8/26/2006
Letitia Marks*                  5,230            $9.125            8/26/2006
Beth W. Newburger               1,450            $9.125            8/26/2006
J. Patrick Rowland             22,350            $9.125            8/26/2006
Richard Schwartz               10,350            $9.125            8/26/2006
William C. Sellery, Jr.        15,300            $9.125            8/26/2006
Terrie G. Spiro                 2,650            $9.125            8/26/2006
St. Clair J. Tweedie            5,300            $9.125            8/26/2006
Nicholas Van Nelson*           10,100            $9.125            8/26/2006

*Advisory board director

Employment Contracts and Termination of Employment Agreements

         In  October  1996,  Terrie G.  Spiro  and the  Company  executed  a new
employment  agreement.  The following is a summary of the material  terms of the
employment  agreement.  The term of  employment  was  deemed  to have  commenced
January 1, 1996,  and  continues  for a period of four years unless  terminated.
After completion of the initial four years, the agreement will  automatically be
extended  for  an  additional  year,  and  shall  thereafter  be  extended  on a
year-to-year  basis  unless  either  party  gives  six  months  prior  notice of
intention to terminate.  According to the terms of the employment agreement, Ms.
Spiro  receives a base salary of $130,000  for 1996  (increasing  to $140,000 in
1997) and benefits including, but not limited to, individual contributory health
insurance,  term life insurance  policy,  the cost of annual dues to one country
club and one dining club membership.  Ms. Spiro's employment  agreement entitles
her to receive  incentive stock options annually based upon certain  performance
objectives.  The employment agreement also provides for both short term and long
term incentive  bonus  compensation  if, during each relevant  period,  the Bank
meets certain  performance  objectives,  including but not limited to: (i) asset
quality; (ii) asset growth; and (iii) net income before taxes. In the event of a
hostile  takeover  or a change  in  control  of the  Company  or the  Bank,  the
Company/Bank  will pay to Ms. Spiro an amount equal to two (2) times base salary
and bonuses.  The Company maintains a key-person insurance policy on the life of
Ms. Spiro.  Upon Ms.  Spiro's  death,  proceeds of $500,000 under the policy are
payable to the Company.

Stock Option Plan

         During 1992,  the Board of Directors  of the Company  adopted,  and the
shareholders  approved,  the Tysons Financial Corporation Stock Option Plan (the
"Plan").  The Plan was amended in 1996 by the Board of  Directors to comply with
revisions to Rule 166-3 promulgated  under the Securities  Exchange Act of 1934,
as amended,  and to effect certain other  technical  changes.  The Plan provides
that restricted stock and stock options may be granted for the purchase of up to
160,058  shares  of  Common  Stock,   subject  to  adjustment  upon  changes  in
capitalization.  The  Plan is  intended  as an  incentive  for and as a means of
encouraging share ownership by certain persons who are employees or directors of
the  Company  or the Bank.  Options  may be  granted  to  certain  employees  or
directors  of the  Company or the Bank or any  subsidiary  of the Company or the
Bank and may be granted  either as incentive  stock options  (which  qualify for
certain favorable tax consequences),  or as non-qualified stock options. Options
may not be transferred except by will or by the laws of descent and distribution
or a  Domestic  Relations  Order,  and  during  an  optionee's  lifetime  may be
exercised   only  by  the   optionee  (or  by  his  or  her  guardian  or  legal
representative, should one be appointed). See also the accompanying notes to the
financial statements "(10) Stock Option Plan".

                                       50

<PAGE>

         The Plan is  administered  by a  committee  consisting  of at least two
members of the Board of Directors. Insofar as discretionary options or shares of
restricted  stock are  granted to persons  who are  subject to Section 16 of the
Exchange  Act, the  committee  will consist of at least two directors who within
the preceding  year have not received  discretionary  grants under the Plan. The
committee  determines  the employees  and directors who will receive  options or
restricted  stock and,  based on each such  person's  position  and  current and
potential  contribution  to the  Company or the Bank,  the amount of  restricted
stock or the  number  of shares  that  will be  covered  by their  options.  The
committee also  determines the periods of time (not exceeding ten years from the
date of grant in the case of an incentive  stock  option)  during which  options
will  be  Exercisable  and  determines  whether  termination  of  an  optionee's
employment under various circumstances would terminate options granted under the
Plan to that person.  In addition,  the  committee  determines  the  restriction
period  and  vesting   conditions,   the  consequences  of  any  termination  of
employment,  and the other terms of any grant of  restricted  stock.  The option
price per share is an amount  determined  by the  Committee but will not be less
than 100% of the fair market value per share on the date of grant for  incentive
stock options.  The option price is payable in full upon  exercise.  The Company
and the Bank receive no consideration upon the granting of an option.

         The Board of Directors  has the right at any time to terminate or amend
the Plan without shareholder approval , but no such action may terminate, except
for certain  amendments,  options already granted or otherwise affect the rights
of any optionee under any outstanding option without the optionee's consent. The
Board of Directors  must obtain  shareholder  approval to adopt any amendment of
the Plan that would (i) increase the total number of shares issuable pursuant to
incentive  stock options under the Plan or materially  increase the total number
of shares of Common Stock subject to options, (ii) change or modify the class of
employees  eligible to receive  incentive  stock options that may participate in
the  Plan or  materially  change  or  modify  the  class  of  persons  that  may
participate,  or (iii) otherwise  materially  increase the benefits  accruing to
participants thereunder.

Employee Stock Ownership Plan

         Effective January 1, 1993, the Company established the Tysons Financial
Corporation  Employee  Stock  Ownership  Plan  (the  "ESOP")  for  all  eligible
employees.  The  ESOP  covers  all  salaried  employees  of the  Company  or its
subsidiaries,  21 years of age or older,  who work a minimum of 1,000  hours per
year and who have  completed  at least  one year of  service  with the  Company.
Contributions are at the discretion of, and determined annually by, the Board of
Directors based on the Company's  performance.  Contributions  are not to exceed
the maximum  amount  deductible  under the  applicable  section of the  Internal
Revenue Code of 1986 (the "Code").  Contributions under the ESOP will be used to
purchase  Common Stock which is allocated  to  participants  on the basis of the
participant's  compensation  for the year compared to total  compensation of all
eligible employees. An employee's interest in the amount contributed becomes 20%
vested after three years of service and increases  incrementally  to become 100%
vested after seven years of service.

         During the second  quarter of 1994,  the ESOP  purchased  shares of the
Company's  Common Stock using  $500,000 of funds borrowed from a director of the
Company.  The  long-term  borrowing  of $500,000  requires  quarterly  principal
payments of $12,500 and quarterly interest payments of prime plus 2% with a lump
sum payment in June 1998. As of December 31, 1996,  the  outstanding  balance of
the loan was $375,000.

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                                       51

<PAGE>

    ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following  table sets forth the  ownership of the Company's  Common
Stock as of February 28, 1997,  by each  director,  by directors  and  executive
officers as a group, and by each person known to the Company to own beneficially
more than 5% of such Common Stock.


<TABLE>
<CAPTION>
                                           Number of             Percent
Name of Beneficial Owner                Shares Owned (1)       of Class (2)
------------------------                ----------------       ------------
<S> <C>
Joel M. Birken                               12,050                1.12%
8133 Leesburg Pike, Suite 900
Vienna, VA  22182

Michael Farnum                               30,931(3)             2.85%
1138 Swinks Mill Road
McLean, VA  22102

Alben G. Goldstein, M.D.                     19,582(4)             1.81%
6305 Castle Place
Falls Church, VA  22044

Zachary A. Kaye, M.D.                        10,036(5)             0.93%
14904 Jeff Davis Highway
Woodbridge, VA  22191

Beth W. Newburger                            14,504(6)             1.35%
880 South Pickett Street
Alexandria, VA  22304

J. Patrick Rowland                           75,290(7)             6.79%
1023 15th St. NW, 7th Floor
Washington, D.C.  20005

Richard Schwartz                             46,517(8)             4.26%
880 South Pickett Street
Alexandria, VA  22304

William C. Sellery, Jr.                      62,818(9)             5.70%
1023 15th St. NW,  7th Floor
Washington, D.C.  20005

Terrie G. Spiro                              41,828(10)            3.79%
8200 Greensboro Drive, Suite 100
McLean, VA  22102

St. Clair J. Tweedie                         41,117(11)            3.77
2665 Marcey Rd.
Arlington, VA  22207

Tysons Financial ESOP Trust (12)             57,171                5.34%
8200 Greensboro Drive, Suite 100
McLean, VA  22102

Stephen A. Wannall                            9,000                0.84%
3025 Hamaker Ct.
Fairfax, VA   22031

                                       52

<PAGE>

Officers and directors as a group of 17     430,142(13)           34.48%

------------------------------------------
(1)      Information  relating to beneficial  ownership of Common Stock is based
         upon  "beneficial  ownership"  concepts  set  forth in rules of the SEC
         under Section 13(d) of the Securities Exchange Act of 1934. Under these
         rules,  a person is deemed to be a "beneficial  owner" of a security if
         that person has or shares  "voting  power," which includes the power to
         vote or direct  the voting of such  security,  or  "investment  power,"
         which  includes  the power to dispose or to direct the  disposition  of
         such security.  A person is also deemed to be a beneficial owner of any
         security  of which  that  person  has the right to  acquire  beneficial
         ownership within sixty days. Under the rules,  more than one person may
         be deemed to be a beneficial owner of the same securities, and a person
         may be deemed to be a beneficial owner of securities as to which he has
         no beneficial  interest.  For instance,  beneficial  ownership includes
         spouses,  minor  children  and  other  relatives  residing  in the same
         household,   and  trusts,   partnerships,   corporations   or  deferred
         compensation plans which are affiliated with the principal. Included in
         the amount of shares  beneficially  owned are shares  issuable upon the
         exercise of stock purchase  warrants that were issued to the organizers
         of the Bank and the Company.  The stock purchase  warrants  entitle the
         holder of the warrants to purchase  Common Stock at $10.00 per share at
         any  time  during  the  term  of  the  warrant.   The  warrants  became
         exercisable  on January 2, 1992, and have a term of ten years from July
         1,  1991,  the date the Bank  opened  for  business.  In the event of a
         capital  call upon the Bank,  the OCC will  require the  warrants to be
         exercised at a price no less than current book value or be forfeited.

 (2)     Percent is calculated by treating shares subject to options or warrants
         held by the named  individual  for whom the  percentage  is  calculated
         which are exercisable  within the next 60 days as if  outstanding,  but
         treating  shares  subject to warrants or options  held by others as not
         outstanding.

 (3)     Includes  warrants  to  purchase  4,054  shares and options to purchase
         9,500 shares.

 (4)     Includes  warrants  to  purchase  5,160  shares and options to purchase
         4,350 shares.

 (5)     Includes  warrants  to  purchase  3,686  shares and options to purchase
         1,350 shares.

 (6)     Includes  warrants  to  purchase  4,054  shares and options to purchase
         1,450 shares.

 (7)     Includes  warrants  to purchase  14,743  shares and options to purchase
         22,350 shares.

 (8)     Includes  warrants  to purchase  10,688  shares and options to purchase
         10,350 shares.

 (9)     Includes  warrants  to purchase  14,743  shares and options to purchase
         15,300 shares.

(10)     Includes  warrants  to  purchase  7,371  shares and options to purchase
         25,205 shares.

(11)     Includes  warrants  to purchase  14,743  shares and options to purchase
         5,300 shares.

(12)     Pursuant to the documents  governing the ESOP, each  participant in the
         ESOP is entitled  to direct the  trustees as to the manner in which the
         Common Stock which is allocated to such  participant is to be voted. In
         the absence of such  instruction,  the trustees  shall vote all Company
         Stock  held by it as part of the ESOP  assets  at such time and in such
         manner as the  Executive  Committee  shall  direct.  Terrie  G.  Spiro,
         President and  Principal  Executive  Officer and Director,  and Janet A
         Valentine,  Principal  Financial and  Accounting  Officer,  function as
         co-trustees and the Executive Committee of the ESOP.

(13)     Includes  total warrants of 79,242 and stock options of 97,155 of which
         all are outstanding.

ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         There  are no  agreements  in  existence  or  anticipated  between  any
Director  or  officer  of the  Bank or the  Company  relating  to the  premises,
furnishings, equipment, fixtures or any other property or service of the Bank or
the Company.  During 1996 certain directors and executive officers were indebted
to the Bank. This  indebtedness  resulted from loans made in the ordinary course
of  business  on  substantially  the same terms  (including  interest  rates

                                       53

<PAGE>

and collateral)  as those  prevailing at the time for comparable  transactions
with unrelated   parties  and  did  not   involve   more  than  the  normal
risk  of collectibility or present other unfavorable  features.  As of December
31, 1996, loans to directors and executive officers of the Company,  and their
affiliates, including  loans  guaranteed  by such  persons and  unfunded
commitments  made, aggregated  $1,370,073,  or approximately  16.6% of
stockholders'  equity of the Company.

         In June 1994,  the  Company  funded its ESOP with a loan  provided by a
director of the Company.  The original  amount of the loan totaled  $500,000 and
terms of the loan include quarterly  principal payments of $12,500 and quarterly
interest  payments  at prime plus 2% with a final  payment  on June 1, 1998.  In
management's  opinion,  the loan is at market terms. The outstanding  balance at
December 31, 1996 was $375,000.

         Joel M. Birken, a Director of the Company,  is a shareholder in the law
firm of Rees,  Broome & Diaz,  P.C.,  which  regularly  acts as  counsel  to the
Company and the Bank. During the years ended 1995 and 1996, Rees, Broome & Diaz,
P.C.  performed  legal  services for the Bank and was paid $99,490 and $112,156,
respectively.

            [The remainder of this page is intentionally left blank]

                                       54

<PAGE>


                                    PART IV

ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits.

                  3(a)     Articles of  Incorporation  (incorporated  by
                                    reference to Exhibit 3(a) to the Company's
                                    Registration Statement No. 33-33051-A on
                                    Form S-18).

                  3(b)     By-laws of the Company  amended  through May 27, 1992
                                    (incorporated  by reference to the exhibits
                                    to the Tysons Financial Corporation Annual
                                    Report on Form 10-KSB for the fiscal year
                                    ended December 31, 1992).

                  4        Common stock certificate.

                  10(a)    Consulting  agreement  between the Bank and Terrie G.
                                    Spiro  (incorporated  by reference to
                                    Exhibit 10(a) to the  Company's
                                    Registration  Statement  No.  33-33051-A on
                                    Form S-18).

                  10(b)    Organizers'  Agreement  (incorporated  by  reference
                                    to Exhibit  10(b) to the  Company's
                                    Registration Statement No. 33-33051-A on
                                    Form S-18).

                  10(c)    Employment   Agreement  between  the  Company  and
                                    Terrie  G.  Spiro  (incorporated  by
                                    reference  to  Exhibit  10(c)  to  the
                                    Company's  Registration  Statement  No.
                                    33-33051-A on Form S-18)(superseded by
                                    exhibit 10(m)).

                  10(d)    Lease  Terms  Letter  (incorporated  by  reference
                                    to  Exhibit  10(d) to the  Company's
                                    Registration Statement No. 33-33051-A on
                                    Form S-18).

                  10(e)    Escrow Agreement  (incorporated  by reference to
                                    Exhibits 10(e),  10e.1 and 10e.2 to the
                                    Company's Registration Statement No.
                                    33-33051-A on Form S-18).

                  10(f)    Consolidation  Agreement  (incorporated  by reference
                                    to Exhibit  10(f) to the Company's
                                    Registration Statement No. 33-33051-A on
                                    Form S-18).

                  10(g)    Stock    Option    Plan   of   the   Company
                                    (incorporated  by  reference to the exhibits
                                    to the Tysons Financial  Corporation  Annual
                                    Report on Form  10-KSB for the  fiscal  year
                                    ended  December  31,   1992)(superseded   by
                                    Exhibit 10(r)).

                  10(h)    Employee Stock Ownership Plan of the Company
                                    (incorporated  by  reference to the exhibits
                                    to the Tysons Financial  Corporation  Annual
                                    Report on Form  10-KSB for the  fiscal  year
                                    ended December 31, 1993).

                  10(i)    Amended  Employment  Agreement  between  the Company
                                    and Terrie G. Spiro (incorporated by
                                    reference  to the  exhibits  to  the  Tysons
                                    Financial  Corporation Annual Report on Form
                                    10-KSB  for the fiscal  year ended  December
                                    31, 1992).

                  10(j)    Lease  Agreement  dated  October  12,  1992, between
                                    the Company and  Eighty-Two  Hundred
                                    Greensboro   Associates   (incorporated   by
                                    reference  to the  exhibits  to  the  Tysons
                                    Financial  Corporation Annual Report on Form
                                    10-KSB  for the fiscal  year ended  December
                                    31, 1992).

                  10(k)    Purchase and Assumption  Agreement  dated as of
                                    February 2, 1995, between Tysons National
                                    Bank and Suburban  Bank of  Virginia,  N.A.,
                                    and joined in by the  Company  and  Suburban
                                    Bancshares,  Inc. (incorporated by reference
                                    to  the  exhibits  to the  Tysons  Financial
                                    Corporation Annual Report on Form 10-KSB for
                                    the fiscal year ended December 31, 1994).

                                       55

<PAGE>

                  10(l)    Agreement for Information Technology Services dated
                                    July 16, 1993 between  Electronic  Data
                                    Systems  Corporation and Tysons National
                                    Bank (incorporated by reference to Exhibit
                                    10(l) to the Tysons Financial  Corporation
                                    Annual Report for the fiscal year ended
                                    December 31, 1995).

                  10(m)    Employment Agreement between the Company and Terrie
                                    G. Spiro  (incorporated  by reference to
                                    Exhibit 10 to the Company Form 10-QSB for
                                    the quarter ended September 30, 1996).

                  10(r)    Stock    Option    Plan   of   the   Company
                                    (incorporated by reference to Exhibit to the
                                    Company's  registration  Statements  on Form
                                    S-8).

                  21       Subsidiaries of the Company (incorporated by
                                    reference   from   the   Tysons    Financial
                                    Corporation  Annual  Report on Form 10-K for
                                    the fiscal  year ended  December  31,  1990,
                                    Exhibit 21).

                  27       Financial Data Schedule

         (b)      Report on Form 8-K.

                  No reports on Form 8-K were filed during the fourth quarter of
                  the year ended December 31, 1996.


           [The remainder of this space is intentionally left blank.]

                                       56

<PAGE>

                                   SIGNATURES


         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                               TYSONS FINANCIAL CORPORATION
                                   (Registrant)
                               BY: /s/ Terrie G. Spiro  ,
                                   -------------------------------------
                                       Terrie  G.  Spiro,  President,
                                       Principal  Executive Officer, and
                                       Director

                               BY: /s/Janet A. Valentine,
                                   -------------------------------------
                                       Janet A. Valentine,  Principal Financial
                                       and Accounting  Officer

Date:  March 19, 1997

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the dates indicated:

Signature                       Title                    Date
---------                       -----                    ----

 /s/ Joel M. Birken
---------------------------     Director                 March 19, 1997
Joel M. Birken

/s/ Michael Farnum
---------------------------     Director                 March 19, 1997
Michael Farnum

/s/ Alben G. Goldstein
---------------------------     Director                 March 19, 1997
Alben G. Goldstein

/s/ Zachary A. Kaye
--------------------------      Director                 March 19, 1997
Zachary A. Kaye

/s/ Beth W. Newburger
---------------------------     Director                 March 19, 1997
Beth W. Newburger

/s/ J. Patrick Rowland
---------------------------     Director                 March 19, 1997
J. Patrick Rowland

/s/ Richard Schwartz
---------------------------     Director                 March 19, 1997
Richard Schwartz

/s/ William C. Sellery, Jr.
---------------------------     Director                 March 19, 1997
William C. Sellery, Jr.

/s/ Terrie G. Spiro             President,               March 19, 1997
---------------------------     Principal Executive
Terrie G. Spiro                 Officer, and Director


/s/ St. Clair J. Tweedie
---------------------------     Director                 March 19, 1997
St. Clair J. Tweedie


/s/ Janet A. Valentine          Principal
---------------------------     Financial and
Janet A. Valentine              Accounting Officer       March 19, 1997


/s/ Stephen A. Wannall
---------------------------     Director                 March 19, 1997
Stephen A. Wannall

                                       58


</TABLE>