SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                ________________
                                   FORM 10-KSB

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

     For the fiscal year ended December 31, 2000

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

         For the transition period from ________ to ________

                         Commission File Number: 0-24926

                               CECIL BANCORP, INC.
                  ---------------------------------------------
                 (Name of Small Business Issuer in its Charter)

        Maryland                                                 52-1883546
-------------------------------                              ------------------
(State or Other Jurisdiction of                               (I.R.S. Employer
 Incorporation or Organization)                              Identification No.)

 127 North Street, Elkton, Maryland                               21921-5547
----------------------------------------                          ----------
(Address of Principal Executive Offices)                          (Zip Code)

       Registrant's telephone number, including area code: (410) 398-1650
                                                           --------------

      Securities registered pursuant to Section 12(b) of the Exchange Act:
                                 Not applicable
                                 --------------

      Securities registered pursuant to Section 12(g) of the Exchange Act:
                     Common Stock, par value $.01 per share
                     --------------------------------------
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
by  Section  13 or 15(d)  of the  Securities  Exchange  Act of 1934  during  the
preceding 12 months (or 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
     -----        --------

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-B is not contained  herein,  and will not 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. [ ]

State issuer's revenues for its most recent fiscal year:  $9,936,544

As of March 20, 2001,  the  registrant had 624,020 shares of Common Stock issued
and  outstanding.  The aggregate market value of shares held by nonaffiliates on
such date was $8,018,536  based on the closing sale price of $19.50 per share of
the  Registrant's  Common  Stock  on  March  20,  2001.  For  purposes  of  this
calculation,  it is  assumed  that the  212,813  shares  held by  directors  and
officers of the Registrant, are shares held by affiliates.

Transitional small business disclosure format (check one):  Yes       No   X
                                                               -----     -----

                       DOCUMENT INCORPORATED BY REFERENCE

     1.   Portions  of the  Annual  Report to  Stockholders  for the year  ended
          December 31, 2000 (the "Annual Report"). (Parts I and II).

     2.   Portions  of the Proxy  Statement  for the  Registrant's  2001  Annual
          Meeting of Stockholders (the "Proxy Statement"). (Part III)

<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS
--------------------------------

GENERAL

     CECIL BANCORP,  INC. Cecil Bancorp,  Inc. (the "Company") was  incorporated
under the laws of the State of Maryland  in July 1994.  On  November  10,  1994,
Cecil Federal Savings Bank ("Cecil Federal") converted from mutual to stock form
and  reorganized  into the holding  company  form of ownership as a wholly owned
subsidiary of the Company. As a result of the conversion and reorganization, the
Company issued and sold 481,361 shares of its common stock ("Common Stock") at a
price of $10.00 per share to its depositors,  borrowers, stock benefit plans and
the public, thereby recognizing net proceeds of $4,315,057. The Company's common
stock is registered  with the Securities and Exchange  Commission  ("SEC") under
the  Securities  Exchange Act of 1934,  as amended  (the  "Exchange  Act").  The
Company is classified as a multiple savings  institution holding company subject
to regulation by the Office of Thrift  Supervision  ("OTS") of the Department of
the Treasury.

     On September 30, 1998, the Company  completed its  acquisition of Columbian
Bank, A Federal Savings Bank ("Columbian") through the exchange of 1.7021 shares
of Company common stock for each outstanding  share of Columbian common stock in
a  transaction  valued at  approximately  $2.8  million.  The Company  issued an
additional 128,155 shares of Common Stock in the acquisition of Columbian, which
is currently  held as a subsidiary of the Company.  The Company holds all of the
stock of Cecil Federal and  Columbian and operates them as two separate  savings
institutions.

     The Company is primarily engaged in the business of directing, planning and
coordinating the business  activities of Cecil Federal and Columbian  (together,
referred to herein as the "Banks").  Accordingly,  the  information set forth in
this report,  including financial statements and related data, relates primarily
to Cecil Federal and its subsidiaries and Columbian.  In the future, the Company
may  become  an  operating  company  or  acquire  or  organize  other  operating
subsidiaries,  including other financial  institutions.  Currently,  the Company
does not maintain  offices  separate  from those of Cecil  Federal or employ any
persons  other than its officers  who are not  separately  compensated  for such
service.  The Company's  main office and telephone  number are the same as Cecil
Federal's (see below).

     CECIL FEDERAL SAVINGS BANK. Cecil Federal is a community-oriented financial
institution  which commenced  operations in 1959 as a Federal mutual savings and
loan association.  It converted to a Federal mutual savings bank in January 1993
and,  effective  November 10, 1994, Cecil Federal converted from mutual to stock
form,  with the sale and  issuance of 100,000  shares of its Common Stock to the
Company.  Its deposits have been federally insured up to applicable  limits, and
it has been a member of the Federal Home Loan Bank  ("FHLB")  system since 1959.
Cecil  Federal's  deposits  are  currently  insured by the  Savings  Association
Insurance Fund ("SAIF") of the FDIC and it is a member of the FHLB of Atlanta.

     Cecil  Federal's  primary  business,  as conducted  through its two offices
located in Elkton and North East, Maryland, is the origination of mortgage loans
secured by  single-family  residential  real estate  located  primarily in Cecil
County,  Maryland,  with funds  obtained  through the  attraction  of  deposits,
primarily certificate accounts with terms of 60 months or less, savings accounts
and transaction  accounts. To a lesser extent, Cecil Federal also makes loans on
commercial  and  multi-family  real  estate,   construction  loans  on  one-  to
four-family  residences,  home equity loans and land loans.  Cecil  Federal also
makes consumer loans including education loans, personal and commercial lines of
credit,  automobile loans and loans secured by deposit  accounts.  Cecil Federal
purchases  mortgage-backed  securities  and invests in other  liquid  investment
securities when warranted by the level of excess funds.

     Cecil Federal has two wholly owned subsidiaries,  Cecil Service Corporation
and Cecil Financial Services  Corporation.  Cecil Service  Corporation's primary
business  is acting as leasing  agent for the North East Plaza  Branch and Cecil
Financial Services  Corporation's  primary business is the operation,  through a
partnership  with UVEST  Investment  Services,  of a full range of brokerage and
investment services.


                                       1
<PAGE>

     Cecil  Federal's   business  strategy  is  to  operate  as  an  independent
community-oriented  savings bank dedicated to residential mortgage lending, and,
to a lesser  extent,  construction  and consumer  lending,  funded  primarily by
retail  deposits.  Cecil  Federal has sought to implement  this  strategy by (1)
emphasizing   residential   mortgage   lending   through  the   origination   of
adjustable-rate  mortgage loans; (2) investing in adjustable-rate and short-term
liquid investments;  (3) reducing interest rate risk exposure by better matching
asset and liability  maturities and rates;  (4) maintaining  asset quality;  (5)
containing  operating  expenses;  and (6) maintaining "well capitalized"  status
combined with moderate growth.

     On  September  27,  1999,  Cecil  Federal  acquired  two branch  offices of
Susquehanna Bank, a subsidiary of Susquehanna Bancshares,  Inc. ("Susquehanna").
These two branch  offices  are  located in Elkton,  Maryland.  This  acquisition
represents  a  continuation  of the growth of Cecil  Federal's  existing  branch
network,  and is currently  expected to benefit  Cecil  Federal's  net income in
future periods.

     Under  the  terms  of the  agreement  Cecil  Federal  assumed  deposits  of
Susquehanna's two branch offices and certain other assets. The deposits of these
branch  offices  totaled $22.2 million at September  27, 1999.  The  transaction
resulted  in  the  acquisition  of  the  200  North  Street  office,  which  was
subsequently  combined with Cecil  Federal's main office,  and the assumption of
the lease of the Big Elk Mall office,  which is currently operating as the third
office of Cecil Federal.

     Cecil  Federal's  main  office  is  located  at 127 North  Street,  Elkton,
Maryland 21921 and its main telephone number is (410) 398-1650.

     COLUMBIAN BANK, A FEDERAL SAVINGS BANK.  Columbian was originally chartered
by the State of Maryland in 1893.  Columbian  became a member of the FHLB System
and  obtained  federal  deposit  insurance  in October  1985.  In January  1989,
Columbian  converted to a federal stock  institution  and on September 26, 1990,
Columbian  changed its name to Columbian Bank, a Federal Savings Bank and became
a federally chartered stock savings bank.

     Columbian's  principal  business  consists of accepting  deposits  from the
general public and investing those funds in mortgage loans and other investments
permitted to federal savings banks. Columbian's principal market area is Harford
County, Maryland.

     Columbian's executive offices are located at 303-307 St. John Street, Havre
de Grace,  Maryland  21078,  and its main  telephone  number is (410)  939-2313.
Columbian  opened a full service  branch office  located on Route 40 in Havre de
Grace in September of 2000.

RECENT EVENTS

     On March 13, 2001, the Board of Directors of Cecil Bancorp,  Inc. announced
the  Company's  intention  to merge  Columbian  into  Cecil  Federal so that the
Company would have only one subsidiary bank, Cecil Federal.  It is expected that
this would reduce the Company's  operating  expenses,  thereby having a positive
impact on net income.  The merger of Columbian into Cecil Federal is expected to
be completed in the second quarter of 2001.

MARKET AREA

     CECIL  FEDERAL.  Cecil  Federal's  home  office is  located  in the town of
Elkton,  Maryland,  which is in Cecil County.  Cecil  Federal  operates two full
service  branch  offices  one in North  East,  Maryland,  which is also in Cecil
County,  and one at the Big Elk Mall in Elkton.  Cecil Federal  considers  Cecil
County to be its  primary  market area as  substantially  all of its lending and
deposit gathering functions are performed within Cecil County.

     Cecil Federal attracts deposits through three full service offices in Cecil
County, Maryland each with drive-through facilities. Cecil Federal's main office
in Elkton has  served as Cecil  Federal's  largest  single  source of  deposits.
Elkton is the County seat and has a population of 11,893. Elkton is a center for
commerce and industry, education and health care for the County. Cecil Federal's
full  service  branches are located in the Big Elk Mall in Elkton and North East
Shopping  Plaza in North  East.  North  East has a  population  of 2,248  and is
geographically  located in the center of Cecil County.  The  population of Cecil
County was 85,961 as of the 2000 census.


                                       2
<PAGE>

     Major employers in Cecil County are Perry Point Veterans Hospital,  medical
services;  W.L. Gore & Associates,  GORE-TEX  fabric  products;  Union Hospital,
medical services; Thiokol Corporation;  Blue Chip Products, automotive products;
Terumo  Medical,   medical  products;   as  well  as  State,  County  and  Local
Governments.

     Cecil County is located in the extreme  northeast of the Chesapeake Bay, at
the crux of four  states -  Maryland,  Delaware,  Pennsylvania  and New  Jersey.
Elkton is located about 50 miles from  Philadelphia and Baltimore.  One-fifth of
the U.S. population resides within 300 miles of the County. Interstate I-95, the
main north-south East Coast artery,  bisects the County.  In addition,  the four
lane U.S.  40  parallels  the  Interstate.  Cecil  County  has over 200 miles of
waterfront between 5 rivers and the Chesapeake Bay.

     COLUMBIAN. Columbian's home office is in Havre de Grace, Maryland, which is
in Harford  County.  A new full  service  branch  office on Route 40 in Havre de
Grace opened in September of 2000. Harford County, in northeastern  Maryland, is
23  miles  from  Baltimore  and 20 miles  from  Wilmington,  Delaware.  Bel Air,
Maryland,  the county seat, is 80 miles from  Philadelphia.  Harford County is a
major  transportation  link;  Interstate  95 and  mainlines for CSX Railroad and
Conrail run through the County.  The County's major industrial centers along the
I-95 Corridor are Aberdeen,  Belcamp, Edgewood and Havre de Grace. Major private
employers in Harford County are Upper Chesapeake Health Systems, Inc., Bata Shoe
Co., Clorox Co.,  Constar/Crown,  Cork and Seal, Cy-tec  Industries,  Frito-Lay,
Inc., GAP Stores,  Mercedes,  N.A., Saks Fifth Avenue and General Electric.  The
U.S.  Army  Aberdeen  Proving  Ground is the major  government  employer  in the
county.

LENDING ACTIVITIES

     GENERAL.  Cecil Federal's  primary  business is the origination of mortgage
loans secured by  single-family  residential  real estate  located  primarily in
Cecil County,  Maryland.  To a lesser extent,  Cecil Federal also makes loans on
commercial  and  multi-family  real  estate,   construction  loans  on  one-  to
four-family  residences,  home equity loans and land loans.  Cecil  Federal also
makes consumer loans including education loans, personal and commercial lines of
credit, automobile loans, and loans secured by deposit accounts.

     The  principal   lending  activity  of  Columbian  is  the  origination  of
conventional  mortgage  loans  for the  purpose  of  purchasing  or  refinancing
owner-occupied, one- to four-family residential properties in its primary market
area. Columbian also originates or participates in loans for the construction or
renovation of  commercial  property and  residential  housing  developments  and
occasionally  originates  permanent  financing  upon  completion.  In  addition,
Columbian  originates  consumer loans secured by deposits,  second  mortgages on
residential  property,  or automobiles,  as well as unsecured personal loans and
occasionally  originates  loans secured by commercial  and  nonresidential  real
estate.



                                       3
<PAGE>
ANALYSIS OF LOAN AND MORTGAGE-BACKED SECURITIES PORTFOLIO

     Set forth below is selected data relating to the  composition of the Banks'
loan  and  mortgage-backed  securities  portfolio  by type of loan  and  type of
security  at the  dates  indicated.  At  December  31,  2000,  the  Banks had no
concentrations  of loans  exceeding  10% of total loans other than as  disclosed
below.
<TABLE>
<CAPTION>
                                                                                AT DECEMBER  31,
                                                              -------------------------------------------
                                                                     2000                     1999
                                                              -------------------      ------------------
                                                              AMOUNT         %         AMOUNT         %
                                                              ------       ------      ------      ------
                                                                          (DOLLARS IN THOUSANDS)
<S>                                                         <C>             <C>      <C>           <C>
Type of Loan - Cecil Federal
----------------------------
Real estate loans:
  Construction loans (1)..................................  $   5,437       6.73%    $  7,782      10.87%
  One- to four-family residential and home equity (2).....     56,786      70.27       51,450      71.85
  Multi-family residential................................        430       0.53          436       0.61
  Land....................................................      3,102       3.84          497       0.69
  Commercial..............................................      4,423       5.47        3,803       5.31
Commercial business loans.................................      4,716       5.84        4,173       5.82

Consumer loans:
  Automobile loans........................................      2,981       3.69        3,656       5.10
  Education loans.........................................         41       0.05           47       0.07
  Savings account loans...................................        790       0.98          739       1.03
  Home improvement loans..................................          2       0.00           11       0.02
  Personal loans..........................................      3,938       4.87        3,651       5.10
                                                            ---------      -----     --------      -----
      Subtotal loans......................................     82,646     102.27       76,245     106.47
Less:
  Loans held for sale.....................................         --       0.00           --        --
  Loans in process........................................      1,319       1.63        4,168       5.82
  Discounts and other.....................................        276       0.34          211       0.29
  Loan loss reserve.......................................        239       0.30          255       0.36
                                                            ---------      -----     --------      -----
     Total loans..........................................     80,812     100.00%      71,611     100.00%
                                                            =========     ======     ========     ======
Mortgage-backed securities................................  $   1,202                $  1,861
                                                            =========                ========
     Total loans and mortgage-backed  securities -
            Cecil Federal.................................  $  82,014                $ 73,472
                                                            =========                ========
</TABLE>
<TABLE>
<CAPTION>
                                                                                AT DECEMBER  31,
                                                              -------------------------------------------
                                                                     2000                     1999
                                                              -------------------      ------------------
                                                              AMOUNT         %         AMOUNT         %
                                                              ------       ------      ------      ------
                                                                          (DOLLARS IN THOUSANDS)
<S>                                                         <C>             <C>       <C>           <C>
Type of Loan - Columbian Bank
-----------------------------
Real estate loans:
 Construction loans (1)..................................  $     923       4.24%     $     837       4.08%
  One- to four-family residential and home equity (2).....     17,112      78.61        16,471      80.39
  Multi-family residential................................        532       2.44           312       1.52
  Land....................................................        823       3.78         1,193       5.82
  Commercial..............................................      1,876       8.62         1,335       6.52
Commercial business loans.................................        619       2.84           370       1.81

Consumer loans:
  Automobile loans........................................        255       1.17           347       1.69
  Education loans.........................................          0       0.00             0       0.00
  Savings account loans...................................         93       0.43            81       0.40
  Home improvement loans..................................          0       0.00             0       0.00
  Personal loans..........................................        134       0.62            24       0.12
                                                            ---------      -----      --------      -----
      Subtotal loans......................................     22,367     102.75        20,970     102.35
Less:
  Loans held for sale.....................................          0       0.00             0       0.00
  Loans in process........................................        294       1.35           168       0.82
  Discounts and other.....................................        124       0.57           134       0.65
  Loan loss reserve.......................................        180       0.83           180       0.88
                                                            ---------      -----      --------      -----
     Total loans..........................................     21,769     100.00%       20,488     100.00%
                                                            =========     ======      ========     ======
Mortgage-backed securities................................  $     827                 $  1,064
                                                            =========                 ========
     Total loans and mortgage-backed  securities -
            Columbian Bank................................  $  22,596                 $ 21,552
                                                            =========                 ========
<FN>
____________
(1)      All construction loans were for residential properties.
(2)      Includes home equity loans.
</FN>
</TABLE>


                                       4
<PAGE>

ONE- TO FOUR-FAMILY RESIDENTIAL REAL ESTATE LENDING

     CECIL FEDERAL.  The primary emphasis of Cecil Federal's lending activity is
the  origination  of   conventional   mortgage  loans  on  one-  to  four-family
residential  dwellings.  Most loans are originated in amounts up to $150,000, on
single-family properties located in Cecil Federal's primary market area of Cecil
County,  Maryland.  As of  December  31,  2000,  loans  on one-  to  four-family
residential properties accounted for approximately 70.3% of Cecil Federal's loan
portfolio.  Cecil Federal makes  conventional  mortgage  loans, as well as loans
guaranteed by the Rural  Development  (USDA Housing Loans) and loans  originated
under the Maryland Community Development Administration ("CDA") loan program.

     Cecil Federal's  mortgage loan  originations are generally for terms of 15,
20 and 30 years,  amortized on a monthly  basis with  interest and principal due
each  month.   Residential  real  estate  loans  often  remain  outstanding  for
significantly  shorter  periods than their  contractual  terms as borrowers  may
refinance  or  prepay  loans  at their  option,  without  penalty.  Conventional
residential   mortgage  loans  granted  by  Cecil  Federal  customarily  contain
"due-on-sale"  clauses which permit Cecil Federal to accelerate the indebtedness
of the loan upon transfer of ownership of the mortgaged property.

     Cecil  Federal  uses  standard  Federal  Home  Loan  Mortgage   Corporation
("FHLMC")  documents,  to allow for the sale of loans in the secondary  mortgage
market.   Cecil  Federal's   lending   policies   generally  limit  the  maximum
loan-to-value  ratio on mortgage loans secured by  owner-occupied  properties to
90% of the lesser of the appraised value or purchase price of the property, with
the  condition  that  private  mortgage  insurance  is  required on loans with a
loan-to-value  ratio in excess of 80%. Loans originated under Rural  Development
and CDA programs have  loan-to-value  ratios of up to 100% due to the guarantees
provided by those agencies. The substantial majority of loans in Cecil Federal's
loan portfolio have loan-to-value ratios of 80% or less.

     Cecil Federal offers adjustable-rate  mortgage loans with terms of up to 30
years.  Adjustable-rate  loans  offered by Cecil  Federal  include  loans  which
reprice every one, three or five years and provide for an interest rate which is
based on the interest rate paid on U.S.  Treasury  securities of a corresponding
term.  Cecil  Federal  also offers a loan  product  which  provides  for a fixed
interest  rate  for the  first  ten  years,  and  then  converts  to a one  year
adjustable rate loan.

     Cecil Federal retains all  adjustable-rate  mortgages it originates,  which
are designed to reduce Cecil  Federal's  exposure to changes in interest  rates.
Cecil Federal's adjustable rate mortgages include caps on increases or decreases
of  2%  per  year,  and  6%  over  the  life  of  the  loan.  The  retention  of
adjustable-rate  mortgage loans in Cecil  Federal's loan portfolio  helps reduce
Cecil  Federal's  exposure to increases in interest  rates.  However,  there are
unquantifiable  credit risks  resulting  from potential  increased  costs to the
borrower as a result of  repricing  of  adjustable-rate  mortgage  loans.  It is
possible that during periods of rising  interest  rates,  the risk of default on
adjustable-rate  mortgage  loans may  increase due to the upward  adjustment  of
interest cost to the borrower.

     Cecil Federal also originates  conventional fixed-rate mortgages with terms
of 15, 20 or 30 years.  Cecil Federal has  originated  all  fixed-rate  mortgage
loans  in  recent  years  for  sale  in the  secondary  mortgage  market,  and a
substantial  majority of all fixed-rate  loans  originated  since 1990 have been
sold,  primarily to the Federal Home Loan Mortgage Corporation  ("FHLMC"),  with
servicing  retained by Cecil  Federal.  Management  assesses its fixed rate loan
originations on an ongoing basis to determine whether Cecil Federal's  portfolio
position warrants the loans being sold or held in Cecil Federal's portfolio.

     During the year ended  December 31, 2000,  Cecil  Federal  originated  $9.5
million  in  adjustable-rate  mortgage  loans  and $2.7  million  in  fixed-rate
mortgage loans (no fixed-rate mortgage loans were sold in the secondary mortgage
market).   Approximately  17.2%  of  all  loan  originations  during  2000  were
refinancings of loans already in Cecil Federal's loan portfolio. At December 31,
2000,  Cecil Federal's loan portfolio  included $36.2 million in adjustable rate
one- to  four-family  residential  mortgages  or 44.8% of Cecil  Federal's  loan
portfolio, and $20.6 million in fixed rate one- to four-family residential loans
or 25.5% of Cecil Federal's portfolio.

     Cecil Federal also offers second mortgage loans. These loans are secured by
a junior lien on  residential  real estate.  The total of first and second liens
may not exceed a 90% loan to value ratio. Loans have terms of 5, 10


                                       5
<PAGE>

and 15 years and have fixed rates.  As of December 31, 2000,  Cecil  Federal had
$6.5 million outstanding in second mortgage loans.

     Cecil  Federal  offers home equity  lines of credit  which are secured by a
junior lien on  residential  real estate.  Customers  are approved for a line of
credit which  provides for an interest  rate which varies  monthly and customers
pay 2% of the  balance  per month.  At  December  31,  2000,  Cecil  Federal had
$700,000 in outstanding home equity lines.

     COLUMBIAN.  Columbian's principal lending activity has been the origination
of loans secured by first  mortgages on existing one- to four-family  residences
in Columbian's market area. Columbian also originates a limited number of second
mortgages and home equity loans secured by one- to four-family  residences.  The
average mortgage loan amount has been between $100,000 and $150,000. At December
31, 2000,  $16.0 million,  or 73.5%, of Columbian's  total loans were secured by
first liens on one- to four-family  residences,  a substantial majority of which
were existing,  owner-occupied,  single-family  residences in Columbian's market
area.  At December 31, 2000,  $1.3  million,  or 6.0%,  of  Columbian's  one- to
four-family residential loans were adjustable rate mortgages ("ARMs"), and $14.7
million, or 67.5%, carried fixed rates.

     Columbian's  one- to four-family  residential  mortgage loans generally are
for terms of 15 to 30 years,  amortized on a monthly  basis,  with principal and
interest due each month.  Columbian  also  originates  mortgages  with a balloon
feature which allows  Columbian to elect to  renegotiate  the loan after fifteen
years at  then-prevailing  interest rates.  Residential  real estate loans often
remain  outstanding for  significantly  shorter  periods than their  contractual
terms.  Borrowers may refinance or prepay loans at their option without penalty.
These loans customarily contain  "due-on-sale" clauses which permit Columbian to
accelerate  repayment  of a loan upon  transfer of  ownership  of the  mortgaged
property.

     Columbian's  lending  policies  generally  limit the maximum  loan-to-value
ratio  on  one-  to   four-family   residential   mortgage   loans   secured  by
owner-occupied  properties to 95% of the appraised value,  with private mortgage
insurance  required  on loans with  loan-to-value  ratios in excess of 80%.  The
maximum  loan-to-value  ratio on mortgage  loans  secured by  non-owner-occupied
properties is also limited to 80%.

     Columbian's fixed-rate,  one- to four-family residential mortgage loans are
underwritten in accordance with applicable  guidelines and requirements for sale
to the Federal Home Loan Mortgage Corporation ("FHLMC") in the secondary market.

     Columbian offers one- and three-year ARMs, one- to four-family  residential
mortgage loans.  These loans are indexed to the 52-week rate on the one-year and
three-year U.S. Treasury  securities,  respectively,  plus a margin of 200 basis
points.  The rates at which interest accrues on these loans are adjustable every
one or three years,  generally with limitations on adjustments of two percentage
points per  adjustment  period and six  percentage  points  over the life of the
mortgage.

     The retention of ARMs in  Columbian's  portfolio  helps reduce  Columbian's
exposure to increases in prevailing  market interest rates.  However,  there are
unquantifiable  credit  risks  resulting  from  potential  increases in costs to
borrowers in the event of upward  repricing of ARMs.  It is possible that during
periods of rising interest  rates,  the risk of default on ARMs may increase due
to increases in interest  costs to  borrowers.  Further,  ARMs which provide for
initial  rates of  interest  below the fully  indexed  rates may be  subject  to
increased risk of  delinquency  or default as the higher,  fully indexed rate of
interest  subsequently  replaces the lower,  initial  rate.  In order to qualify
borrowers  at a rate  equal  to  two  percentage  points  above  any  discounted
introductory  rate. In addition,  although ARMs allow  Columbian to increase the
sensitivity of its  interest-earning  assets to changes in interest  rates,  the
extent of this  interest  sensitivity  is limited by the  periodic  and lifetime
interest rate adjustment limitations and the ability of borrowers to convert the
loans to  fixed-rates.  Accordingly,  there can be no  assurance  that yields on
Columbian's  ARMs will fully adjust to compensate  for increases in  Columbian's
cost of funds.  Finally,  ARMs  increase  Columbian's  exposure to  decreases in
prevailing  market interest  rates,  although  decreases in Columbian's  cost of
funds would tend to offset this effect.

     Columbian  also  offers  home  equity  lines of credit and second  mortgage
loans.  Home equity lines of credit carry a variable rate,  indexed to the Prime
Rate as published in the Wall Street Journal plus 2.0%,  adjusted monthly

                                       6
<PAGE>


or may be originated on a fixed rate basis. Second mortgage loans are offered on
a fixed rate basis and require payments of principal and interest  monthly.  The
maximum  term for a home  equity  line of credit or second  mortgage  loan is 15
years.  Columbian  will lend up to 80% of the appraised  value of the underlying
property  less the amount  outstanding  on the first  mortgage.  At December 31,
2000,  home equity and second  mortgage loans totaled $1.1 million and comprised
5.1% of Columbian's gross loans outstanding.

CONSTRUCTION LENDING

     CECIL FEDERAL.  Cecil Federal's construction lending has primarily involved
lending to individuals for  construction of single-family  residences,  although
Cecil Federal does lend to builders, and has, on occasion,  loaned funds for the
construction of commercial  properties and multi-family  real estate.  All loans
for the  construction  of speculative  sale homes have a loan value ratio of not
more than 75%.  Substantially  all construction  loans  originated  convert to a
permanent loan. Cecil Federal has financed the  construction of  non-residential
properties  on a case by case basis.  At December 31, 2000,  the loan  portfolio
included $4.1 million in loans secured by properties under construction.

     A substantial majority of Cecil Federal's  construction loans (except loans
to builders)  are  structured to convert to permanent  loans upon  completion of
construction,  and usually have an initial  construction loan term of six months
prior to converting to a permanent loan.  Cecil Federal  originated $5.1 million
in construction loans during the year ended December 31, 2000. Loan proceeds are
disbursed  during the  construction  phase according to a draw schedule based on
the stage of completion.  Construction projects are inspected by Cecil Federal's
officers.  Construction  loans are  underwritten  on the basis of the  estimated
value of the property as completed and loan-to-value  ratios must conform to the
requirements for the permanent loan.

     COLUMBIAN. Columbian also offers construction loans to qualified developers
for  construction of one- to four-family  residences in Columbian's  market area
and has  purchased  participation  interests  in  construction  loans from other
institutions.  Typically,  Columbian has  emphasized  lending to  individuals to
refurnish  or  rehabilitate  multi-family  dwellings  or  church  buildings  and
construction of planned residential  developments.  Columbian lends on a limited
basis to private developers for speculative  single-family housing construction.
These loans  generally have  adjustable  interest rates and are  underwritten in
accordance  with  the  same  standards  as  Columbian's  mortgages  on  existing
properties, except the loans generally provide for disbursement in stages during
a construction period from six to 12 months, during which period the borrower is
required to make monthly  payments of accrued  interest on the outstanding  loan
balance. Construction loans generally have a maximum loan-to-value ratio of 80%.
Borrowers must satisfy all credit  requirements which would apply to Columbian's
permanent  mortgage loan financing for the subject  property.  While Columbian's
construction  loans generally  require  repayment in full upon the completion of
construction,  Columbian  occasionally  makes construction loans that convert to
permanent loans following construction.

     At  December  31,  2000,  Columbian  had  $629,000  in  construction  loans
outstanding,  comprising 2.9% of Columbian's  gross loan portfolio.  Columbian's
largest construction loan at December 31, 2000 was a $500,000 commitment to fund
construction of a single family residence,  of which $406,066 was outstanding at
December 31, 2000.

     Construction  financing  generally is considered to involve a higher degree
of risk of loss than long-term financing on improved, occupied real estate. Risk
of loss on a  construction  loan is  dependent  largely upon the accuracy of the
initial  estimate of the  property's  value at  completion  of  construction  or
development and the estimated cost (including interest) of construction.  During
the  construction  phase,  a number of factors  could  result in delays and cost
overruns.  If the  estimate  of  construction  costs  proves  to be  inaccurate,
Columbian  may be  required  to  advance  funds  beyond  the  amount  originally
committed  to permit  completion  of the  development.  If the estimate of value
proves  to be  inaccurate,  Columbian  may be  confronted,  at or  prior  to the
maturity of the loan,  with a project  having a value which is  insufficient  to
assure full  repayment.  The ability of a developer  to sell  developed  lots or
completed  dwelling units will depend on, among other things,  demand,  pricing,
availability  of comparable  properties and economic  conditions.  Columbian has
sought to  minimize  this risk by  limiting  construction  lending to  qualified
borrowers  in  Columbian's  market  area,   limiting  the  aggregate  amount  of
outstanding  construction  loans and  imposing  a stricter  loan-to-value  ratio
requirement than required for one- to four-family mortgage loans.

                                       7
<PAGE>

LAND LOANS

     Cecil  Federal  also,  from time to time,  originates  loans secured by raw
land.  Land loans  originated to  individuals  have a term of up to 10 years and
interest rates adjust every one, three or five years.  Land loans  originated to
developers have terms of up to three years.  All land loans have a loan-to-value
ratio not  exceeding  75%.  Cecil Federal may expand its lending on raw land, as
market conditions allow, to qualified borrowers,  experienced in the development
and sale of raw land.  At December 31, 2000 Cecil Federal had $3.1 in land loans
outstanding, or 3.8% of Cecil Federal's loan portfolio.

     Loans involving  construction financing and loans on raw land have a higher
level of risk than loans for the  purchase  of existing  homes since  collateral
values,  land  values,  development  costs  and  construction  costs can only be
estimated at the time the loan is approved. Cecil Federal has sought to minimize
its risk in construction  lending and in lending for the purchase of raw land by
offering  such  financing  primarily  to builders and  developers  to whom Cecil
Federal  has loaned  funds in the past and to  persons  who intend to occupy the
completed structure. Cecil Federal also limits construction lending and loans on
raw land to the Cecil County market area, with which management is familiar. All
construction  loans and loans on raw land in Cecil Federal's loan portfolio were
performing according to their terms at December 31, 2000.

MULTI-FAMILY AND COMMERCIAL REAL ESTATE LENDING

     Loans secured by  multi-family  and  commercial  real estate  generally are
larger and involve greater risks than one- to four-family  residential  mortgage
loans.  Because payments on loans secured by such properties are often dependent
on successful operation or management of the properties, repayment of such loans
may be subject  to a greater  extent to adverse  conditions  in the real  estate
market or the  economy.  The Banks seek to minimize  these risks in a variety of
ways,  including limiting the size and loan-to-value  ratios of its multi-family
and  commercial  real  estate  loans and  restricting  such loans to its primary
market  area.


     CECIL FEDERAL.  Cecil Federal's permanent  multi-family and commercial real
estate  loans  are  secured  by  improved  property  such as  office  buildings,
apartment  buildings  and  retail  establishments  which  are  located  in Cecil
Federal's  primary market area.  Multi-family  and commercial  real estate loans
generally  have terms of 20 years,  and provide for  interest  rate  adjustments
every one,  three or five  years.  Multi-family  and  commercial  mortgages  are
generally made in amounts not exceeding 75% of the lesser of the appraised value
or purchase  price of the  property.  All of Cecil  Federal's  multi-family  and
commercial property loans require regular payments of principal and interest. At
December 31, 2000,  loans secured by multi-family  (i.e.,  more than four units)
totaled  $400,000,  or 0.5%, of Cecil  Federal's  total loan portfolio and loans
secured by commercial  properties  constituted  approximately  $4.4 million,  or
5.5%,  of  Cecil  Federal's  total  loan  portfolio,  and all  such  loans  were
performing according to their terms.

     COLUMBIAN. Columbian's multi-family residential loans are primarily secured
by small  apartment  projects within  Columbian's  market area. The maximum loan
amounts for such loans are $500,000 and may not exceed 80% of the lesser of cost
or appraised  value or purchase price  whichever is less.  Such loans  generally
amortize  on the  basis of a 30 year  period  and  generally  require  a balloon
payment after three years.  Columbian  also makes a limited number of commercial
real estate  loans for terms of up to 15 years with  payments of  principal  and
interest  sufficient to fully repay the loan by maturity and may also underwrite
certain  commercial real estate loans for a shorter term with a balloon feature.
The  interest  rates  on  commercial  real  estate  loans  are  negotiated  on a
loan-by-loan  basis. At December 31, 2000,  Columbian's  largest commercial real
estate  loan was a first and second  mortgage  on a 25,000  square  foot  office
building.  At December 31, 2000,  multi-family and commercial loans totaled $2.4
million and comprised 11.06% of Columbian's  gross loan portfolio,  and all such
loans were performing according to their terms.

COMMERCIAL BUSINESS LOANS

     Cecil  Federal  offers  commercial  business  loans  and both  secured  and
unsecured loans and letters of credit, or lines of credit for businesses located
in its primary  market area.  Most business  loans have a six month term,  while
lines of credit can remain open for longer  periods.  All owners,  partners  and
officers must sign the loan agreement.  The security for a business loan depends
on the amount borrowed, the business involved and the


                                       8
<PAGE>

strength of the borrower's firm and position. At December 31, 2000 Cecil Federal
had $4.7 million  outstanding in commercial  business loans,  and all such loans
were performing according to their terms.

     Commercial  business lending entails  significant  risk, as the payments on
such  loans may  depend  upon the  successful  operation  or  management  of the
business involved.  Although Cecil Federal attempts to limit its risk of loss on
such  loans by  limiting  the  amount and the term,  and by  requiring  personal
guarantees of principals of the business (when additional  guarantees are deemed
necessary by management and such guarantees are allowed by regulation), the risk
of loss on commercial  business loans is substantially  greater than the risk of
loss from residential real estate lending.

CONSUMER LENDING

     Consumer  loans  generally  involve  more risk than first  mortgage  loans.
Repossessed  collateral for a defaulted loan may not provide an adequate  source
of repayment  of the  outstanding  loan  balance as a result of damage,  loss or
depreciation,  and the  remaining  deficiency  often  does not  warrant  further
substantial   collection  efforts  against  the  borrower.  In  addition,   loan
collections are dependent on the borrower's continuing financial stability,  and
thus are more likely to be adversely affected by job loss,  divorce,  illness or
personal bankruptcy. Further, the application of various federal and state laws,
including federal and state bankruptcy and insolvency laws, may limit the amount
which can be recovered. These loans may also give rise to claims and defenses by
a borrower  against the Banks,  and a borrower may be able to assert against the
Banks  claims and  defenses  which it has against  the seller of the  underlying
collateral.  In underwriting consumer loans,  Columbian considers the borrower's
credit history,  an analysis of the borrower's  income,  expenses and ability to
repay the loan and the value of the collateral.

     CECIL FEDERAL. Consumer loans comprise the second largest category of loans
outstanding  for Cecil  Federal.  Cecil  Federal's  consumer  loans  consist  of
automobile loans, savings account loans, education loans, home improvement loans
and other  consumer  loans.  At December 31, 2000,  the consumer loan  portfolio
totaled $7.8  million,  or 9.6%,  of total loans.  Consumer  loans are generally
offered  for  terms  of up to five  years at fixed  interest  rates.  Management
expects to continue to promote consumer loans as part of its strategy to provide
a wide range of personal  financial  services to its customers and as a means to
increase the yield on Cecil Federal's loan portfolio.

     Cecil Federal makes loans for automobiles and recreational  vehicles,  both
new and used, directly to the borrowers.  The loans can be for up to 100% of the
purchase  price or the retail value listed by the  National  Automobile  Dealers
Association.  The terms of the loans are  determined by the age and condition of
the collateral.  Collision  insurance  policies are required on all these loans,
unless the borrower  has  substantial  other assets and income.  At December 31,
2000, the total amount of automobile loans was $3.0 million.

     Cecil Federal  makes  savings  account loans for up to 90% of the amount of
the depositor's  savings account  balance.  The maximum amount of the loan takes
into  consideration  the amount of interest  due. The term of the loan is either
interest  due  monthly  on  demand,  or a term loan not to  exceed 5 years.  The
interest rate is 2% higher than the rate being paid on the savings account.

     Cecil Federal's education loans are made to existing deposit customers,  in
amounts  of up to  $10,000,  and are paid  out  over  four  years,  with  $2,500
disbursed per year. Interest is payable annually until the student leaves school
and amortization over an eight year period then begins.

     Cecil  Federal  also makes other  consumer  loans,  which may or may not be
secured.  The term of the loans  usually  depends on the  collateral.  Unsecured
loans  usually  do not  exceed  $100,000  and have a term of no  longer  than 12
months.  At December 31, 2000,  the total amount of other  consumer loans (which
consist of personal loans) was $3.9 million.

     Consumer  loans are  generally  originated  at higher  interest  rates than
residential  mortgage loans but also tend to have a higher risk than residential
loans due to the loan being unsecured or secured by rapidly  depreciable  assets
(see discussion  below).  Despite these risks, Cecil Federal's level of consumer
loan delinquencies  generally


                                       9
<PAGE>

has  been  low.  No  assurance  can be  given,  however,  that  Cecil  Federal's
delinquency rate on consumer loans will continue to remain low in the future.

     COLUMBIAN. Columbian's consumer loans primarily consist of loans secured by
deposit accounts at Columbian,  automobile loans and personal loans. At December
31, 2000,  Columbian had  approximately  $400,000 in consumer loans, or 2.2%, of
Columbian's gross loan portfolio.

     Columbian  makes  loans  secured by deposit  accounts  for up to 90% of the
amount  of the  deposit.  The  interest  rate on these  loans  generally  is two
percentage  points above the rate paid on the deposit  account,  and interest is
billed on a monthly  basis.  These loans are payable on demand,  and the deposit
account must be pledged as collateral to secure the loan.  Columbian offers both
new and used  automobile  loans.  Columbian's  automobile  loans  are  generally
underwritten  in  amounts  not to exceed the loan  value of the  automobile,  as
published by the National  Automobile  Dealers  Association for used vehicles or
the Black Invoicing Book for new  automobiles.  A minimum down payment of 20% is
required.  The  terms  of such  loans  vary  based on the age of the car and the
amount financed up to a maximum of 60 months.

MORTGAGE-BACKED SECURITIES

     The Banks maintain a portfolio of mortgage-backed securities in the form of
Government National Mortgage Association ("GNMA"),  FNMA and FHLMC participation
certificates  and  securities  issued  by other  nonagency  organizations.  GNMA
certificates  are  guaranteed as to principal and interest by the full faith and
credit  of the  United  States,  while  FNMA  and  FHLMC  certificates  are each
guaranteed by their respective  agencies.  Mortgage-backed  securities generally
entitle  the  Banks to  receive a pro rata  portion  of the cash  flows  from an
identified pool of mortgages.  Although mortgage-backed securities yield from 30
to 100 basis points less than the loan which are exchanged for such  securities,
they present substantially lower credit risk and are more liquid than individual
mortgage  loans  and may be  used to  collateralize  obligations  of the  Banks.
Because the Banks  receive  regular  payments of principal and interest from its
mortgage-backed securities, these investments provide more consistent cash-flows
than  investments in other debt securities which generally only pay principal at
maturity.   Mortgage-backed   securities   also  help  the  Banks  meet  certain
definitional  tests for  favorable  treatment  under federal  banking laws.  See
"Regulation -- Qualified Thrift Lenders Test" and "Regulation -- Taxation."

     Mortgage-backed  securities,  however,  expose the Banks to certain  unique
risks.  In a  declining  rate  environment,  accelerated  prepayments  of  loans
underlying  these  securities  expose  the  Banks to the risk  that they will be
unable to obtain  comparable  yields upon  reinvestment of the proceeds.  In the
event the  mortgage-backed  security  has been funded  with an  interest-bearing
liability  with a maturity  comparable  to the  original  estimated  life of the
mortgage-backed  security,  the Banks'  interest  rate spread could be adversely
affected.  Conversely,  in a rising  interest  rate  environment,  the Banks may
experience a lower than estimated rate of repayment on the underlying mortgages,
effectively  extending the estimated  life of the  mortgage-backed  security and
exposing  the Banks to the risk that it may be required to fund the asset with a
liability  bearing a higher rate of  interest.  The Banks seek to  minimize  the
effect of extension risk by focusing on investments  in  adjustable-rate  and/or
relatively   short-term  (seven  years  or  shorter  maturity)   mortgage-backed
securities.

     The Banks have historically  invested in  mortgage-backed  securities as an
alternative  to  supplement  its lending  efforts and maintain  compliance  with
certain regulatory requirements. As of December 31, 2000 the total investment in
mortgage-backed securities for Cecil Federal and Columbian were $1.2 million and
$800,000, respectively.

     The OTS has adopted a statement  of policy with respect to  investments  in
mortgage  derivative  products  which  are  defined  to  include  collateralized
mortgage  obligations  ("CMOs"),  REMICs,  CMO and REMIC  residuals and stripped
mortgage-backed securities ("SMBSs"). The policy distinguishes between high-risk
and  nonhigh-risk  mortgage  securities.  Mortgage  derivative  products with an
average   life  or  price   volatility   in  excess  of  a   benchmark   30-year
mortgage-backed   pass-through   security  are  considered   high-risk  mortgage
securities.  Under the policy, savings associations may generally only invest in
high-risk  mortgage  securities  in order  to  reduce  interest  rate  risk.  In
addition, all high-risk mortgage securities acquired after February 9, 1992 must
be carried in the  institution's  trading account or as assets held for sale. At
December 31, 2000 neither of the Banks had mortgage  derivative  products  which
met the definition of high risk mortgage securities.


                                       10
<PAGE>

LOAN MATURITY SCHEDULE

     The  following  tables set forth certain  information  at December 31, 2000
regarding the dollar amount of loans maturing in the Banks'  portfolio  based on
their  contractual  terms  to  maturity,   including  scheduled   repayments  of
principal.  Demand loans,  loans having no stated  schedule of repayments and no
stated maturity, and overdrafts are reported as due in one year or less.

     The following  table sets forth the estimated  maturity of Cecil  Federal's
loan  portfolio  at  December  31,  2000  based  on their  contractual  terms to
maturity.  The table does not include any estimate of  prepayments  or scheduled
principal  repayments  which  significantly  shorten  the  average  life  of all
mortgage loans and may cause Cecil Federal's repayment experience to differ from
that shown below. Demand loans, loans having no stated maturity,  and overdrafts
are reported as due in one year or less. The following information is not net of
deferred loan fees and  allowance  for loan losses,  and does include loans held
for sale.
<TABLE>
<CAPTION>
                                                          DUE AFTER
                                   DUE WITHIN             1 THROUGH             DUE AFTER
                                 ONE YEAR AFTER         5 YEARS AFTER         5 YEARS AFTER
                                DECEMBER 31, 2000     DECEMBER 31, 2000     DECEMBER 31, 2000        TOTAL
                                -----------------     -----------------     -----------------      -------
                                                       (IN THOUSANDS)
<S>                                 <C>                   <C>                <C>                   <C>
Real estate - mortgage:
   Real estate mortgage.........   $     469              $   3,635          $    53,481           $  57,585
    Construction.................      1,370                  2,513                  235               4,118
    Home equity and second
       mortgages.................         39                    845                6,272               7,156
Commercial.......................      3,415                  1,020                  281               4,716
Consumer.........................      2,701                  4,368                  683               7,752
                                    --------              ---------          -----------           ---------
     Total.......................   $  7,994              $  12,381          $    60,952           $  81,327
                                    ========              =========          ===========           =========
</TABLE>

     The following table sets forth the estimated  maturity of Columbian's  loan
portfolio at December 31, 2000 based on their contractual terms to maturity. The
table does not  include any  estimate  of  prepayments  or  scheduled  principal
repayments  which  significantly  shorten the average life of all mortgage loans
and may cause Columbian's  repayment experience to differ from that shown below.
Demand loans,  loans having no stated  maturity,  and overdrafts are reported as
due in one year or less.  The following  information is not net of deferred loan
fees and allowance for loan losses.
<TABLE>
<CAPTION>
                                                          DUE AFTER
                                   DUE WITHIN             1 THROUGH             DUE AFTER
                                 ONE YEAR AFTER         5 YEARS AFTER         5 YEARS AFTER
                                DECEMBER 31, 2000     DECEMBER 31, 2000     DECEMBER 31, 2000        TOTAL
                                -----------------     -----------------     -----------------      -------
                                                       (IN THOUSANDS)
<S>                                 <C>                   <C>                <C>                   <C>
Real estate - mortgage:
    Real estate mortgage.........   $    157              $   1,555          $    17,649           $  19,361
    Construction.................          0                    223                  405                 629
    Home equity and second
       mortgages.................          4                    355                  623                 982
Commercial.......................        358                      0                  261                 619
Consumer.........................         54                    378                   50                 482
                                    --------              ---------          -----------           ---------
     Total.......................   $    573              $   2,511          $    18,989           $  22,073
                                    ========              =========          ===========           =========
</TABLE>

                                       11
<PAGE>
     The next table sets forth at December  31, 2000,  the dollar  amount of all
loans due after  December 31, 2000 which have  predetermined  interest rates and
have floating or adjustable interest rates.
<TABLE>
<CAPTION>
                                            PREDETERMINED               FLOATING OR
                                                RATES                 ADJUSTABLE RATES
                                            -------------             ----------------
                                                          (IN THOUSANDS)
<S>                                         <C>                        <C>
Cecil Federal
-------------
Real estate mortgage......................  $    32,198                $     32,543
Real estate construction (1)..............        4,103                          15
Consumer and commercial business..........        7,680                       4,788
                                            -----------                ------------
    Total.................................  $    43,981                $     37,346
                                            ===========                ============

Columbian
Real estate mortgage......................  $    17,948                $      2,395
Real estate construction (1)..............          629                           0
Consumer and commercial business..........          738                         363
                                            -----------                ------------
    Total.................................  $    19,315                $      2,758
                                            ===========                ============
<FN>
---------
(1)   Net of loans in process.
</FN>
</TABLE>

LOAN SOLICITATION AND PROCESSING

     The Banks' lending  activities  are subject to written,  non-discriminatory
underwriting standards and loan origination procedures outlined in loan policies
established by the Banks' boards of directors.  Detailed loan  applications  are
obtained to determine the borrower's  ability to repay, and the more significant
items on these  applications  are  verified  through the use of credit  reports,
financial  statements and  confirmations.  Property  valuations are performed by
independent outside appraisers approved by the Banks' boards of directors.

     The aggregate  amount of loans which a federal  institution may make on the
security of liens on  non-residential  real  property may not exceed 400% of the
institution's  capital as determined under the capital standards mandated by OTS
regulations.  The  Director  of OTS is  authorized  to  permit  federal  savings
institutions to exceed the 400% of capital limit in certain circumstances.  This
restriction has not had a material impact on the Banks operations.

     With certain limited  exceptions,  the maximum amount the Banks may lend to
any borrower  (including  certain  related  entities of the borrower) at any one
time  may  not  exceed  15%  of  the  unimpaired  capital  and  surplus  of  the
institution,  plus an additional 10% of unimpaired capital and surplus for loans
fully  secured by  readily  marketable  collateral.  The Home  Owners'  Loan Act
("HOLA")  additionally  authorizes  savings  institutions  to make  loans to one
borrower,  for any purpose,  in an amount not to exceed $500,000 or, by order of
the Director of the OTS, in an amount not to exceed the lesser of $30,000,000 or
30% of unimpaired capital and surplus to develop residential  housing,  provided
(i) the purchase price of each  single-family  dwelling in the development  does
not exceed  $500,000,  (ii) the savings  institution  is in compliance  with its
regulatory  capital  requirements,   (iii)  the  loans  comply  with  applicable
loan-to-value  requirements,  and (iv) the aggregate  amount of loans made under
this authority does not exceed 150% of unimpaired capital and surplus. HOLA also
authorizes loans to any one borrower to finance sales of real property  acquired
in  satisfaction  of debts in an  amount  up to 50% of  unimpaired  capital  and
surplus. Loans-to-one borrower limits do not apply to purchase money notes taken
from the purchaser of real property  acquired by the institution in satisfaction
of debts previously  contracted if no new funds are advanced to the borrower and
the  savings  association  is not placed in a more  detrimental  position as the
result of such sale.  Under these limits,  at December 31, 2000, Cecil Federal's
loans-to-one  borrower  cannot exceed  $1,045,500 and  Columbian's  loans-to-one
borrower cannot exceed $500,000.

     CECIL  FEDERAL.  The Board of  Directors of Cecil  Federal has  established
written  lending  policies  for  Cecil  Federal  and has  delegated  to its Loan
Committee the authority to approve all loans up to $250,000. Secured loans of up
to  $50,000  and  unsecured  loans of up to  $25,000  may be  approved  by Chief
Executive  Officer Mary Halsey or


                                       12
<PAGE>

Chief Operating Officer Brian Hale. Secured loans of up to $25,000 and unsecured
loans  of up to  $15,000  may be  approved  by Vice  President  Sandra  Feltman.
Assistant  Treasurer  Barbara Howard may approve  secured loans of up to $25,000
and unsecured loans up to $5,000. Consumer Loan officer Carole Allen may approve
secured  loans of up to $15,000  and  unsecured  loans of up to  $5,000.  Branch
managers may approve  secured loans up to $10,000 and  unsecured  loans of up to
$2,500.  The Loan Committee  consists of Chief Executive Officer Halsey,  Senior
Vice President Hale, Chief Lending Officer  Feltman,  two or three directors and
the  chairman  of the  Appraisal  Committee.  All loans  over  $200,000  must be
approved by the full board of Directors.  Interest  rates on approved  loans are
subject to change if the loan is not funded within 60 days of approval, unless a
written  commitment  has  been  made for a longer  period  of time.  It has been
management's experience that substantially all approved loans are funded.

     COLUMBIAN.  The Board of  Directors of Columbian  has  established  written
lending policies for Columbian.  Columbian's President and Chief Lending Officer
have authority to approve all consumer  loans below  $25,000,  and the executive
committee of the Board of Directors must approve loans at or above $25,000.  All
mortgage  loans must be approved by the full Board of Directors.  Interest rates
on approved loans are subject to change if the loan is not funded within 60 days
of approval,  unless a written  commitment  has been made for a longer period of
time. It has been management's  experience that substantially all approved loans
are funded.

LOAN ORIGINATIONS AND SALES

     Loan  originations  are  derived  from a  number  of  sources.  Residential
mortgage loan  originations  primarily come from walk-in customers and referrals
by realtors,  depositors and borrowers.  Applications  are taken at all offices,
but are processed by the Banks and submitted for approval, as noted above.

     Cecil Federal has not purchased loans in the secondary mortgage market. All
fixed-rate loans are originated  according to FHLMC guidelines and, depending on
market conditions, may be sold to FHLMC after origination. Cecil Federal retains
servicing on all loans sold.

                                       13
<PAGE>
     Set forth below is a table showing Cecil Federal's and Columbian's loan and
origination, purchase and sale activity for the periods indicated.
<TABLE>
<CAPTION>
                                                                              AT DECEMBER 31,
                                                                       ---------------------------
                                                                         2000               1999
                                                                       --------           --------
                                                                               (IN THOUSANDS)
<S>                                                                    <C>                <C>
Cecil Federal
-------------
Loans originated:
   Real estate loans:
     Construction loans..............................................  $   5,130          $   1,443
     One- to four-family.............................................     12,244             18,459
     Multi-family....................................................         --                 --
     Non-residential and other.......................................      5,822              6,001
   Consumer loans....................................................      3,517              7,634
   Commercial loans..................................................      7,231              3,087
                                                                       ---------          ---------
     Total loans originated .........................................  $  33,944          $  36,624
                                                                       =========          =========

Loans sold:
   Whole loans.......................................................  $      --          $   1,134
                                                                       ---------          ---------
     Total loans sold................................................  $      --          $   1,134
                                                                       =========          =========

Columbian
---------
Loans originated:
   Real estate loans:
     Construction loans..............................................  $     225          $   2,230
     One- to four-family.............................................      2,412              4,081
     Multi-family....................................................        925                 --
     Non-residential and other.......................................      1,461                 --
   Consumer loans....................................................        412                324
   Commercial loans..................................................        663                 --
                                                                       ---------          ---------
     Total loans originated .........................................  $   6,098          $   6,635
                                                                       =========          =========

Loans sold:
   Whole loans.......................................................  $      --          $      --
                                                                       ---------          ---------
     Total loans sold................................................  $      --          $      --
                                                                       =========          =========
</TABLE>

INTEREST RATES AND LOAN FEES

     Interest  rates  charged by Cecil  Federal on mortgage  loans are primarily
determined by competitive  loan rates offered in its market area.  Mortgage loan
interest rates reflect factors such as general market interest rate levels,  the
supply of money available to the financial  institutions industry and the demand
for  such  loans.  These  factors  are in  turn  affected  by  general  economic
conditions, the monetary policies of the Federal government, including the Board
of Governors of the Federal Reserve System (the "Federal  Reserve  Board"),  and
general supply of money in the economy.

     In  addition  to  interest  earned on  loans,  the  Banks  receive  fees in
connection with loan  commitments and  originations,  loan  modifications,  late
payments and for miscellaneous  services related to its loans. Income from these
activities  varies  from  period to  period  with the  volume  and type of loans
originated, which in turn is dependent on prevailing mortgage interest rates and
their  effect on the demand for loans in the  markets  served by the Banks.  The
Banks also  receive  servicing  fees of .25% to .375% of the loan  amount of the
loans that it services.  At December 31, 2000, Cecil Federal was servicing $16.7
million in loans for other financial institutions.  For the years ended December
31, 2000 and 1999 Cecil Federal recognized gross servicing income of $38,000 and
$35,000,   respectively,   and  total  fee  income  of  $354,000  and  $256,000,
respectively.


                                       14
<PAGE>

     Interest  rates  charged  by  Columbian  on  mortgage  loans are  primarily
determined  by  competitive  loan rates  offered in its market  area and minimum
yield requirements for loans purchased by the FHLMC. Mortgage loan rates reflect
factors such as  prevailing  market  interest  rate levels,  the supply of money
available to the savings  industry and the demand for such loans.  These factors
are in turn affected by general economic  conditions,  the monetary  policies of
the federal government,  including the Board of Governors of the Federal Reserve
System  (the  "Federal  Reserve  Board"),  the  general  supply  of money in the
economy, tax policies and governmental budget matters.

     Columbian   charges  fees  in   connection   with  loan   commitments   and
originations,  rate lock-ins,  loan modifications,  late payments and changes of
property  ownership and for  miscellaneous  services related to its loans.  Loan
origination fees are calculated as a percentage of the loan principal. Columbian
typically  receives  fees of between  zero and three  points  (one  point  being
equivalent  to 1% of the principal  amount of the loan) in  connection  with the
origination of fixed-rate and  adjustable-rate  residential  mortgage loans. The
loan  origination  fee,  net of certain  direct loan  origination  expenses,  is
deferred and accreted  into income over the  contractual  life of the loan using
the interest  method.  If a loan is prepaid,  refinanced or sold,  all remaining
deferred fees with respect to such loan are taken into income at such time.

NON-PERFORMING LOANS AND OTHER PROBLEM ASSETS

     The Banks'  managements  review their  respective  portfolios  on a regular
basis. The Banks' collection procedures provide that when a loan becomes 10 days
past due a written  notification  of the late payment is sent.  When the loan is
past due 30 days,  the  borrower  is  contacted  by  telephone,  and  payment is
requested.  After 45 days past due, a property  inspection  and  customer  visit
takes  place.  If payment is not  received  by the time the loan is 90 days past
due, the loan is placed on non-accrual  status, the borrower is contacted again,
and efforts are made to formulate an affirmative  plan to cure the  delinquency.
After a loan  becomes  past due 60 days,  the Banks also  provide a final notice
that it will initiate  legal  proceedings  in 30 days,  after which  foreclosure
procedures  commence.  Loans are charged-off when management concludes that they
are uncollectible.

     Real estate  acquired by the Banks as a result of foreclosure is classified
as real  estate  owned  until  such time as it is sold.  When such  property  is
acquired,  it is recorded at the lower of its unpaid  principal  balance or fair
value. Any required write-down of the loan to its fair value upon foreclosure is
charged against the allowance for losses.


                                       15
<PAGE>

     The  following  table sets  forth  information  with  respect to the Banks'
non-performing assets at the dates indicated.  At the dates shown, Cecil Federal
and  Columbian,  had no  impaired  loans  within  the  meaning of  Statement  of
Financial Accounting Standards No. 114.
<TABLE>
<CAPTION>
                                                                              AT DECEMBER 31,
                                                                       ---------------------------
                                                                         2000               1999
                                                                       --------           --------
                                                                              (IN THOUSANDS)
<S>                                                                    <C>                <C>
Cecil Federal
-------------
Loans accounted for on a nonaccrual basis: (1)
   Real estate - mortgage:
      Single-family residential......................................  $     264          $     874
      Construction...................................................         --                 --
      Home equity and second mortgages...............................         --                 --
      Commercial.....................................................         --                 --
   Consumer..........................................................         --                 --
                                                                       ---------          ---------
      Total..........................................................  $     264          $     874
                                                                       =========          =========

Accruing loans which are  contractually
   past due 90 days or more:
   Real estate - mortgage:
      Single-family residential......................................  $      --          $      --
      Construction...................................................         --                 --
      Home equity and second mortgages...............................         --                 --
      Commercial.....................................................         32                 --
   Consumer..........................................................        191                331
                                                                       ---------          ---------
      Total..........................................................  $     223          $     331
                                                                       =========          =========
      Total nonperforming loans......................................  $     487          $   1,206
                                                                       =========          =========
Percentage of total loans............................................       0.60%              1.68%
                                                                       =========          =========
Other nonperforming assets (2).......................................  $      --          $     116
                                                                       =========          =========

Columbian
---------
Loans accounted for on a nonaccrual basis: (1)
   Real estate - mortgage:
      Single-family residential......................................  $      95          $      45
      Construction...................................................         --                 --
      Home equity and second mortgages...............................         --                 --
      Commercial.....................................................         37                 35
   Consumer..........................................................         --                 --
                                                                       ---------          ---------
      Total..........................................................  $     132          $      80
                                                                       =========          =========

Accruing loans which are  contractually  past due 90 days or more:
   Real estate - mortgage:
      Single-family residential......................................  $      --          $      --
      Construction...................................................         --                 --
      Home equity and second mortgages...............................         --                 --
      Commercial.....................................................         --                 --
   Consumer..........................................................         16                 --
                                                                       ---------          ---------
      Total..........................................................  $      16          $      --
                                                                       =========          =========
      Total nonperforming loans......................................  $     148          $      80
                                                                       =========          =========
Percentage of total loans............................................       0.68%               .39%
                                                                       =========          =========
Other nonperforming assets (2).......................................  $     255          $     255
                                                                       =========          =========
<FN>
_____________
(1)      Non-accrual   status  denotes  loans  on  which,   in  the  opinion  of
         management, the collection of additional interest is unlikely. Payments
         received on a non-accrual  loan are either  applied to the  outstanding
         principal  balance  or  recorded  as  interest  income,   depending  on
         assessment of the collectibility of the loan.

                                       16
<PAGE>


(2)      Other  nonperforming  assets represents  property acquired by Columbian
         through  foreclosure or  repossession or accounted for as a foreclosure
         in-substance.  This property is carried at the lower of its fair market
         value or the principal balance of the related loan, whichever is lower.
</FN>
</TABLE>

     Except as discussed below, at December 31, 2000, Cecil Federal did not have
any loans which were not currently  classified as non-accrual,  90 days past due
or restructured  but where known  information  about possible credit problems of
borrowers  caused  management to have serious  concerns as to the ability of the
borrowers  to comply  with  present  loan  repayment  terms and would  result in
disclosure as non-accrual, 90 days past due or restructured.

     At December 31, 2000, Cecil Federal's  nonaccruing loans and accruing loans
more than 90 days past due totaled $487,000, which consisted of 10 single-family
residential  properties,  15 consumer loans, and one commercial loan. During the
year ended December 31, 2000,  gross interest  income of $27,000 would have been
recorded on loans  accounted for on a  non-accrual  basis if such loans had been
current  throughout  the  respective  period.  Four of the  existing  delinquent
single-family  residential  properties,   totaling  $23,000,  are  currently  in
bankruptcy.

     At December 31, 2000, Cecil Federal's had no other non-performing assets.

     At December 31, 2000, Columbian's nonaccruing loans and accruing loans more
than 90 days past due totaled $148 thousand,  which consisted of 4 single-family
residential  properties and 3 consumer loans. During the year ended December 31,
2000,  gross  interest  income  of $2,000  would  have  been  recorded  on loans
accounted for on a non-accrual  basis if such loans had been current  throughout
the  respective  period.   Three  of  the  existing   delinquent   single-family
residential properties, totaling $97,000, are currently in bankruptcy.

     Columbian's  other  nonperforming  assets of  $255,000  consisted  of three
properties acquired through foreclosure.  Such properties consisted of two small
multi-family dwellings,  which were carried at $226,000 at December 31, 2000 and
Columbian's  participation in a townhouse project,  which was carried at $30,000
at December 31, 2000.

ASSET CLASSIFICATION AND ALLOWANCE FOR LOAN LOSSES

     GENERAL.  Federal regulations require savings  associations to review their
assets on a regular basis and to classify them as  "substandard,"  "doubtful" or
"loss," if warranted.  Assets  classified as substandard or doubtful require the
institution to establish general and specific  allowances for loan losses. If an
asset or portion thereof is classified loss, the insured institution must either
establish  a  specified  allowance  in the  amount of the  portion  of the asset
classified  loss,  or charge off such amount.  An asset which does not currently
warrant classification, but which possesses weaknesses or deficiencies deserving
close attention,  is required to be designated as "special mention."  Currently,
general loss allowances established to cover losses related to assets classified
substandard  or  doubtful  may  be  included  in  determining  an  institution's
regulatory capital,  while specific valuation  allowances for loan losses do not
qualify  as  regulatory  capital.  See  "Regulation  of the Banks --  Regulatory
Capital Requirements."

     In making loans,  management recognizes the fact that credit losses will be
experienced  and that the risk of loss will vary with,  among other things,  the
type of loan being made, the  creditworthiness  of the borrower over the term of
the loan and, in the case of a secured loan, the quality of the security for the
loan.

     It is  management's  policy to maintain  reserves for  estimated  losses on
loans and real estate  acquired.  General loan loss reserves are provided  based
on,  among other  things,  estimates  of the  historical  loan loss  experience,
evaluation  of  economic  conditions  in general  and in various  sectors of the
Company's  personnel.  Specific  reserves will be provided for individual  loans
where the ultimate  collection is considered  questionable  by management  after
reviewing  the  current  status of loans  which are  contractually  past due and
considering the net realizable  value of the security of the loan or guarantees,
if applicable.  It is  management's  policy to establish  specific  reserves for
estimated  losses on  delinquent  loans and real estate owned when it determines
that losses are  anticipated  to be incurred on the  underlying  properties.  At
December 31, 2000,  Cecil  Federal's and  Columbian's  allowance for loan losses
amounted to $239,000 and $180,000, respectively.

                                       17
<PAGE>

     Future   reserves  may  be  necessary  if  economic   conditions  or  other
circumstances  differ  substantially  from the  assumptions  used in making  the
initial determinations.  There can be no assurance that regulators, in reviewing
the Banks' loan  portfolios  in the  future,  will not ask the Banks to increase
their allowance for loan losses for the periods indicated.

         The  following  table sets forth an  analysis  of Cecil  Federal's  and
Columbian's allowance for loan losses for the periods indicated.
<TABLE>
<CAPTION>
                                                                         YEAR ENDED DECEMBER 31,
                                                                       ---------------------------
                                                                         2000               1999
                                                                       --------           --------
                                                                             (IN THOUSANDS)
<S>                                                                    <C>                <C>
Cecil Federal
-------------
Balance at beginning of period.......................................  $     254          $     222
                                                                       ---------          ---------

Loans charged-off:
  Residential real estate mortgage loans.............................         --                 --
  Commercial.........................................................         39                 --
  Consumer...........................................................        295                107
                                                                       ---------          ---------
Total charge-offs....................................................        334                107
                                                                       ---------          ---------

Recoveries:
  Residential real estate mortgage loans.............................         --                 --
  Consumer...........................................................         14                 14
                                                                       ---------          ---------
Total recoveries.....................................................         14                 14
                                                                       ---------          ---------

Net loans charged-off................................................        320                 93
                                                                       ---------          ---------
Provision for loan losses............................................        305                125
                                                                       ---------          ---------
Balance at end of period.............................................  $     239          $     254
                                                                       =========          =========

Ratio of net charge-offs to average loans
  outstanding during the period......................................       0.39%               .14%
                                                                       =========          =========

Columbian
---------
Balance at beginning of period.......................................  $     180          $     180

Loans charged-off:
  Residential real estate mortgage loans.............................         --                 --
  Commercial.........................................................         --                 --
  Consumer...........................................................         --                 --
                                                                       ---------          ---------
Total charge-offs....................................................         --                 --
                                                                       ---------          ---------

Recoveries:
  Residential real estate mortgage loans.............................         --                 --
  Consumer...........................................................         --                 --
                                                                       ---------          ---------
Total recoveries.....................................................         --                 --
                                                                       ---------          ---------

Net loans charged-off................................................         --                 --
                                                                       ---------          ---------
Provision for loan losses............................................         --                 --
                                                                       ---------          ---------
Balance at end of period.............................................  $     180          $     180
                                                                       =========          =========

Ratio of net charge-offs to average
    loans outstanding during the period..............................         --%                --%
                                                                       =========          =========
</TABLE>

                                       18

<PAGE>
         The  following  table  allocates  the allowance for loan losses by loan
category  at the  dates  indicated.  The  allocation  of the  allowance  to each
category is not  necessarily  indicative  of future losses and does not restrict
the use of the allowance to absorb losses in any category.
<TABLE>
<CAPTION>
                                                                       AT DECEMBER 31,
                                                     -------------------------------------------------------
                                                              2000                          1999
                                                     ---------------------------  --------------------------
                                                                     PERCENT OF                   PERCENT OF
                                                                      LOANS IN                     LOANS IN
                                                                    CATEGORY TO                  CATEGORY TO
                                                     AMOUNT         TOTAL LOANS   AMOUNT         TOTAL LOANS
                                                     ------         ------------  ------         -----------
                                                                    (DOLLARS IN THOUSANDS)
<S>                                                  <C>                <C>       <C>                 <C>
Cecil Federal
-------------
Real estate loans:
  Construction loans...............................  $    14            6.73 %    $     5             10.87%
  One- to four-family residential..................       38           70.27          144             71.85
  Multi-family residential.........................        2            0.53            1              0.61
  Land.............................................        4            3.84            2              0.69
  Commercial.......................................        7            5.47           15              5.31
Commercial loans...................................       69            5.84           30              5.82
Automobiles........................................       54            3.69           27              5.10
Education loans....................................       --            0.05           --              0.07
Savings account loans..............................       --            0.98           --              1.03
Home improvement loans.............................       --            0.00           --              0.02
Personal loans.....................................       51            4.87           30              5.10
                                                     -------                      -------

Less:
  Loans held for sale..............................       --              --           --                --
  Loans in process.................................       --           (1.63)          --             (5.82)
  Discounts and other..............................       --           (0.34)          --             (0.29)
  Loan loss reserve................................       --           (0.30)          --             (0.36)
                                                     -------          -------     -------           -------
Total allowance for loan losses....................  $   239          100.00%     $   254            100.00%
                                                     =======          ======      =======            ======

Columbian
---------
Real estate loans:
  Construction loans...............................  $    30            4.24 %    $    40              4.08%
  One- to four-family residential..................       90           78.61           95             80.39
  Multi-family residential.........................        2            2.44           --              1.52
  Land.............................................        3            3.78           --              5.82
  Commercial.......................................       25            8.62           33              6.52
Commercial loans...................................        5            2.84           --              1.81
Automobiles........................................       15            1.17            9              1.69
Education loans....................................       --            0.00           --              0.00
Savings account loans..............................       --            0.43           --              0.40
Home improvement loans.............................       --            0.00           --              0.00
Personal loans.....................................       10            0.62            3              0.12
                                                     -------                      -------

Less:
  Loans held for sale..............................       --            0.00           --                --
  Loans in process.................................       --           (1.35)          --             (0.82)
  Deferred loan origination fees...................       --           (0.57)          --             (0.65)
  Loan loss reserve................................       --           (0.83)          --             (0.88)
                                                     -------          --------    -------           -------
Total allowance for loan losses....................  $   180          100.00%     $   180            100.00%
                                                     =======          ======      =======            ======
</TABLE>

                                       19


<PAGE>

INVESTMENT ACTIVITIES

     CECIL  FEDERAL.  Cecil  Federal is required  under federal  regulations  to
maintain a minimum amount of liquid  assets,  which can be invested in specified
short-term securities,  and is also permitted to make certain other investments.
See  "Regulation."  It has generally been Cecil  Federal's  policy to maintain a
liquidity  portfolio  substantially  in excess of the amount required to satisfy
regulatory  requirements.   Liquidity  levels  may  be  increased  or  decreased
depending upon the yields on investment  alternatives,  Management's judgment as
to the  attractiveness  of the  yields  then  available  in  relation  to  other
opportunities,  its expectations of the level of yield that will be available in
the future and its  projections as to the short term demand for funds to be used
in Cecil Federal's loan origination and other activities.

     The general  objectives  of Cecil  Federal's  investment  policy are to (i)
maintain  liquidity  levels  sufficient  to meet  the  operating  needs of Cecil
Federal and applicable regulatory requirements, (ii) minimize interest rate risk
by  managing  the  repricing  characteristics  of  Cecil  Federal's  assets  and
liabilities,  (iii) reduce credit risk by investing  primarily in U.S.  Treasury
and agency  securities and (iv) absorb excess  liquidity when loan demand is low
and/or  deposit  growth  is high.  Cecil  Federal's  investment  activities  are
conducted by senior management (specifically Chief Executive Officer Halsey) and
supervised by the Board of Directors.  Investments are governed by an investment
policy  adopted by the Board,  which  currently  provides for  maintenance of an
investment portfolio for the purposes of providing earnings,  ensuring a minimum
liquidity reserve and facilitating  Cecil Federal's  asset/liability  management
objectives  (e.g.,  limiting the weighted average terms to maturity or repricing
of Cecil  Federal's  interest-earning  assets).  In accordance  with the policy,
management  has  primarily  invested  in U.S.  Treasury,  government  and agency
securities and mutual funds.

     Cecil Federal carries its investments at cost as adjusted for discounts and
unamortized  premiums.  Cecil  Federal's  intention  is to hold all  investments
available for sale.

     COLUMBIAN.  Columbian  is  permitted  under  federal  law to  make  certain
investments,  including  investments  in  securities  issued by various  federal
agencies and state and municipal  governments,  deposits at the FHLB of Atlanta,
certificates of deposits in federally  insured  institutions,  certain  bankers'
acceptances  and federal  funds.  Columbian may also invest,  subject to certain
limitations,  in  commercial  paper  having  one of the two  highest  investment
ratings of a nationally recognized credit rating agency, and certain other types
of corporate  debt  securities  and mutual funds.  Federal  regulations  require
Columbian  to  maintain  an  investment  in FHLB of Atlanta  stock and a minimum
amount of liquid assets which may be invested in cash and specified  securities.
From time to time, the OTS adjusts the percentage of liquid assets which savings
are  required to  maintain.  For  additional  information,  see  "Regulation  --
Liquidity Requirements."

         Columbian  invests in  investment  securities in order to diversify its
assets, manage cash flow, obtain yield and maintain the minimum levels of liquid
assets required by regulatory  authorities.  Such investments  generally include
sales  of  federal  funds,  and  purchases  of  federal  government  and  agency
securities and qualified  deposits in other financial  institutions.  Investment
decisions  generally  are made by the President in  accordance  with  investment
strategies  approved by the  Investment  Committee  of the Board of Directors of
Columbian.



                                       20
<PAGE>


     For additional  information,  see Note 4 of Notes to Consolidated Financial
Statements.

     The following table sets forth the carrying value of the Banks'  investment
securities portfolio at the dates indicated.
<TABLE>
<CAPTION>
                                                            CECIL FEDERAL                      COLUMBIAN
                                                            AT DECEMBER 31,                   AT DECEMBER 31,
                                                     ---------------------------       --------------------------
                                                       2000               1999           2000             1999
                                                     --------           --------       ---------         --------
                                                                           (IN THOUSANDS)
<S>                                                  <C>               <C>              <C>               <C>
Investment securities:
  U.S. government and agency securities............  $      998        $   1,973        $   4,006         $  3,988
  Other............................................         748              697              166              150
                                                     ----------        ---------        ---------         --------
    Total investment securities ...................       1,746            2,670            4,172            4,138
Federal funds sold.................................          --               --               --               50
Interest-earning deposits and certificates
  of deposit.......................................       2,292            3,465               58               50
FHLB stock.........................................         588              471              317              187
                                                     ----------        ---------        ---------         --------
     Total investments.............................  $    4,626        $   6,606        $   4,547         $  4,425
                                                     ==========        =========        =========         ========
</TABLE>


                                       21
<PAGE>

     The following table sets forth the scheduled  maturities,  carrying values,
market values and average  yields for Cecil  Federal's  investment  portfolio at
December 31, 2000.
<TABLE>
<CAPTION>
                                                                          FIVE TO        MORE THAN
                                ONE YEAR OR LESS   ONE TO FIVE YEARS    TEN  YEARS        TEN YEARS       TOTAL INVESTMENT PORTFOLIO
                                ----------------   -----------------  ----------------  ----------------  --------------------------
                                        WEIGHTED            WEIGHTED          WEIGHTED          WEIGHTED                    WEIGHTED
                                BOOK    AVERAGE    BOOK     AVERAGE   BOOK    AVERAGE   BOOK    AVERAGE    BOOK     MARKET  AVERAGE
                                VALUE    YIELD     VALUE     YIELD    VALUE    YIELD    VALUE    YIELD     VALUE    VALUE    YIELD
                                -----   --------   -----    --------  -----   --------  -----   --------   -----    ------  --------
                                                                            (DOLLARS IN THOUSANDS)
<S>                           <C>        <C>      <C>         <C>    <C>       <C>     <C>         <C>     <C>       <C>      <C>
Cecil Federal
-------------
Securities available for sale:
  U.S. government and
    agency securities.......  $     --      -- %  $    --     -- %   $    --    -- %   $     --     -- %   $    --   $    --   -- %
  Other.....................       748    6.03         --     --          --    --           --     --         748       748   6.03
                              --------            -------            -------           --------            -------   -------
Total.......................  $    748            $    --            $    --           $     --            $   748   $   748
                              ========            =======            =======           ========            =======   =======

Securities held to maturity:
  U.S. government and
    agency securities.......  $    998    6.18%   $    --     -- %   $    --    -- %   $     --     -- %   $   998   $ 1,003   6.18%
Interest-earning deposits
    and certificates of
    deposits................     2,292    6.74         --     --          --    --           --     --       2,292     2,292   6.74
FHLB stock .................       588    7.56         --     --          --    --           --     --         588       588   7.56
                              --------            -------            -------           --------            -------   -------
    Total...................  $  3,878            $    --            $    --           $     --            $ 3,878   $ 3,883
                              ========            =======            =======           ========            =======   =======
</TABLE>

                                       22
<PAGE>


The following table sets forth the scheduled maturities, carrying values, market
values and average yields for Columbian's  investment  portfolio at December 31,
2000.

<TABLE>
<CAPTION>
                                                                          FIVE TO        MORE THAN
                                ONE YEAR OR LESS   ONE TO FIVE YEARS    TEN  YEARS        TEN YEARS       TOTAL INVESTMENT PORTFOLIO
                                ----------------   -----------------  ----------------  ----------------  --------------------------
                                        WEIGHTED            WEIGHTED          WEIGHTED          WEIGHTED                    WEIGHTED
                                BOOK    AVERAGE    BOOK     AVERAGE   BOOK    AVERAGE   BOOK    AVERAGE    BOOK     MARKET  AVERAGE
                                VALUE    YIELD     VALUE     YIELD    VALUE    YIELD    VALUE    YIELD     VALUE    VALUE    YIELD
                                -----   --------   -----    --------  -----   --------  -----   --------   -----    ------  --------
                                                                            (DOLLARS IN THOUSANDS)
<S>                           <C>        <C>      <C>         <C>    <C>       <C>     <C>         <C>     <C>       <C>      <C>
Columbian
---------
Securities available for sale:
  U.S. government and
    agency securities.......  $     --      -- %  $    --     -- %   $   499   7.02%   $     --     -- %   $   499   $   499   7.02%
  Other.....................       166    6.28         --     --          --    --           --     --         166       166   6.28
                              --------            -------            -------           --------            -------   -------
Total.......................  $    166            $    --            $   499           $     --            $   665   $   665
                              ========            =======            =======           ========            =======   =======

Securities held to maturity:
  U.S. government and
    agency securities.......  $    481    7.26%   $   300    6.14%   $ 1,225   6.83%   $  2,000    6.94%   $ 3,507   $ 3,475   6.89%
Interest-earning deposits
    and certificates of
    deposits................        58    4.44         --     --          --    --           --     --          58        58   4.44
FHLB stock .................       317    7.15         --     --          --    --           --     --         317       317   7.15
                              --------            -------            -------           --------            -------   -------
    Total...................  $    856            $   300            $   726           $  2,000            $ 3,882   $ 3,850
                              ========            =======            =======           ========            =======   =======
</TABLE>


                                       23
<PAGE>


DEPOSIT ACTIVITY AND OTHER SOURCES OF FUNDS

     GENERAL. Deposits are the primary source of Cecil Federal's and Columbian's
funds for lending and other investment  purposes.  In addition to deposits,  the
Banks  derive funds from loan  principal  repayments  and interest  payments and
maturing  investment  securities.  Loan  repayments and interest  payments are a
relatively  stable  source of funds,  while  deposit  inflows and  outflows  are
significantly  influenced by general interest rates and money market conditions.
Borrowings may be used on a short-term basis to compensate for reductions in the
availability of funds from other sources,  or on a longer term basis for general
business  purposes.  The Banks primarily use advances from the Federal Home Loan
Bank of Atlanta for borrowings.

     DEPOSITS. Deposits are attracted principally from within the Banks' primary
market areas through the offering of a variety of deposit instruments, including
savings  accounts and certificates of deposit ranging in term from 91 days to 60
months,  as well as regular  checking,  NOW,  passbook and money market  deposit
accounts.  Deposit  account terms vary,  principally on the basis of the minimum
balance  required,  the time  periods  the funds must  remain on deposit and the
interest rate. The Banks also offer individual retirement accounts ("IRAs").

     The Banks' policies are designed  primarily to attract  deposits from local
residents.  The Banks do not accept  deposits from brokers due to the volatility
and rate  sensitivity of such deposits.  Interest  rates paid,  maturity  terms,
service fees and withdrawal penalties are established by the Banks on a periodic
basis.  Determination  of rates and terms are predicated upon funds  acquisition
and liquidity requirements,  rates paid by competitors, growth goals and federal
regulations.

     The  following  table sets forth the change in dollar amount of deposits in
the  various  types of  accounts  offered  by Cecil  Federal  between  the dates
indicated.
<TABLE>
<CAPTION>
                                                                      INCREASE
                                                                     (DECREASE)
                                     BALANCE AT                         FROM             BALANCE AT
                                    DECEMBER 31,           %         DECEMBER 31,      DECEMBER 31,          %
                                        2000            DEPOSITS        1999                1999         DEPOSITS
                                      --------          --------      --------            -------        --------
                                                              (DOLLARS IN THOUSANDS)

<S>                                 <C>                  <C>         <C>              <C>                  <C>
Regular checking.................   $    4,834           6.49%       $      452       $    4,382           5.66%
NOW accounts.....................        7,205           9.67              (321)           7,526           9.73
Passbook.........................        8,702          11.69              (551)           9,253          11.97
Statement savings................        2,488           3.34                62            2,426           3.14
Commercial checking..............          316           0.42               177              139            .18
Money market.....................        3,186           4.28              (639)           3,825           4.95
Christmas and Vacation club......           67           0.09                 6               61            .08
91 day CD........................        4,660           6.26              (257)           4,917           6.36
6 month CD.......................        4,604           6.18            (1,902)           6,506           8.41
9 month CD.......................        5,471           7.35             5,471                0           0.00
1 year CD........................        8,945          12.01               (85)           9,030          11.67
18 month CD......................        2,555           3.43            (1,000)           3,555           4.60
30 month CD......................        4,111           5.52            (1,656)           5,767           7.46
36 month CD......................          153           0.21               (60)             213            .28
60 month CD......................        4,289           5.76              (521)           4,810           6.22
18 month IRA CD..................        6,867           9.22              (525)           7,392           9.56
14 month variable CD.............        1,634           2.19             1,170              464            .60
12 month access CD...............        2,496           3.35              (958)           3,454           4.47
Over 60 month CD.................          245           0.33                (2)             247            .32
Susque IRAs......................        1,649           2.21            (1,534)           3,183           4.11
Susque Access IRA................            0           0.00              (121)             121            .16
Susq MMFA IRA....................            0           0.00               (60)              60            .07
                                    ----------          -----        ----------       ----------         ------
                                    $   74,477         100.00%       $   (2,854)      $   77,331         100.00%
                                    ==========         ======        ==========       ==========         ======
</TABLE>

                                       24
<PAGE>

TIME DEPOSITS BY RATES

     The  following  table  sets  forth  the  time  deposits  in  Cecil  Federal
classified by rates at the dates indicated.
<TABLE>
<CAPTION>
                                                                              AT DECEMBER 31,
                                                                       ---------------------------
                                                                         2000               1999
                                                                       --------           --------
                                                                               (IN THOUSANDS)

                  <S>                                                  <C>                <C>
                  2 - 3.99% (1)......................................  $     167          $     310
                  4 - 5.99%..........................................     27,685             43,040
                  6 - 7.99%..........................................     19,895              6,220
                  8 - 9.99%..........................................          0                 63
                                                                       ---------          ---------
                                                                       $  47,747          $  49,633
                                                                       =========          =========
                  <FN>
                  ___________
                  (1)  Includes Club Accounts.
                  </FN>
</TABLE>
                                                  -

TIME DEPOSIT MATURITY SCHEDULE

     The following  table sets forth the amount and  maturities of time deposits
at December 31, 2000 for Cecil Federal.
<TABLE>
<CAPTION>
                                                                  AMOUNT DUE
                                  ------------------------------------------------------------------------
                                  LESS THAN                                          AFTER
           RATE                   ONE YEAR         1-2 YEARS      2-3 YEARS         3 YEARS          TOTAL
           ----                   --------         ---------      ---------         -------         ------
                                                                (IN THOUSANDS)
<S>                               <C>              <C>            <C>              <C>             <C>
2 - 3.99% (1)...................  $      167       $       0      $        0       $       0       $     167
4 - 5.99%.......................      21,103           3,949           1,511           1,122          27,685
6 - 7.99%.......................      16,309           1,992             433           1,161          19,895
                                  ----------       ---------      ----------       ---------       ---------
                                  $   37,579       $   5,941      $    1,944       $   2,283       $  47,747
                                  ==========       =========      ==========       =========       =========
<FN>
_____________
(1)  Includes Club Accounts.
</FN>
</TABLE>

     The following table indicates the amount of Cecil Federal's certificates of
deposit of $100,000 or more by time remaining  until maturity as of December 31,
2000.

                                                              CERTIFICATES
           MATURITY PERIOD                                    OF DEPOSITS
           ---------------                                    -----------
                                                            (IN THOUSANDS)

           Three months or less.............................  $    2,483
           Over three through six months....................       5,332
           Over six through twelve months...................       3,091
           Over twelve months...............................       1,586
                                                              ----------
              Total.........................................  $   12,492
                                                              ==========


                                       25
<PAGE>


     The  following  table sets forth the change in dollar amount of deposits in
the various types of accounts offered by Columbian between the dates indicated.
<TABLE>
<CAPTION>
                                                                      INCREASE
                                                                     (DECREASE)
                                     BALANCE AT                         FROM             BALANCE AT
                                    DECEMBER 31,           %         DECEMBER 31,      DECEMBER 31,          %
                                        2000            DEPOSITS        1999                1999         DEPOSITS
                                      --------          --------      --------            -------        --------
                                                              (DOLLARS IN THOUSANDS)

<S>                                 <C>                  <C>         <C>              <C>                   <C>
Christmas and Vacation Club......   $        6           0.03 %      $       (1)      $        7            .03%
Commercial Checking..............          148           0.69                51               97            .41
Passbook Accounts................        1,594           7.44              (118)           1,712           7.17
Six Month Certificates...........           31           0.14              (194)             225            .94
Twelve Month Certificates........           29           0.14              (135)             164            .68
Twelve Month Access
 Certificates....................          802           3.74               802                0              0
Thirteen Month Certificates......        4,967          23.17              (791)           5,758          24.10
Eighteen Month Certificates......          170           0.79            (1,597)           1,767           7.40
Nineteen Month Certificates......        2,435          11.36               735            1,700           7.12
Twenty Five Month Certificates...        1,670           7.79               (46)           1,716           7.18
Thirty Month Certificates........           22           0.10               (38)              60            .25
Thirty Seven Month Certificates..          880           4.10               207              673           2.82
Forty Two Month Certificates.....           85           0.40              (102)             187            .78
Forty Nine Month Certificates....          489           2.28              (113)             602           2.52
Sixty Month Certificates.........          917           4.28            (1,151)           2,068           8.66
Sixty One Month Certificates.....        1,794           8.37               (70)           1,864           7.80
Chesapeake Accounts..............        1,618           7.55              (472)           2,090           8.75
Statement Savings................        1,359           6.34              (559)           1,918           8.03
Regular Checking.................            8           0.04                8                 0              0
NOW Checking.....................        1,159           5.41                37            1,122           4.70
IRA's............................        1,253           5.84             1,096              157            .66
                                    ----------         ------        ----------       ----------         ------
                                    $   21,436         100.00%       $   (2,451)      $   23,887         100.00%
                                    ==========         ======        ===========      ==========         ======
</TABLE>


     The  following  table  sets  forth  the  term   certificates  in  Columbian
classified by rates at the dates indicated.
<TABLE>
<CAPTION>
                                                                             AT DECEMBER 31,
                                                                       ---------------------------
                                                                         2000               1999
                                                                       --------           --------
                                                                                 (IN THOUSANDS)

                  <S>                                                  <C>                <C>
                  2.00 -  3.99%......................................  $     215          $     300
                  4.00 -  5.99%......................................      7,132             13,735
                  6.00 -  7.99%......................................      8,204              2,906
                                                                       ---------          ---------
                                                                       $  15,551          $  16,941
                                                                       =========          =========
</TABLE>

                                       26
<PAGE>

     The  following   table  sets  forth  the  amount  and  maturities  of  term
certificates at December 31, 2000 for Columbian.
<TABLE>
<CAPTION>
                                                                 AMOUNT DUE
                                  ------------------------------------------------------------------------
                                  LESS THAN                                          AFTER
           RATE                   ONE YEAR         1-2 YEARS      2-3 YEARS         3 YEARS          TOTAL
           ----                   --------         ---------      ---------         -------         ------
                                                                (IN THOUSANDS)
<S>                               <C>              <C>            <C>              <C>             <C>
2.00 -  3.99% (1)...............  $      130       $      57      $        0       $      28       $     215
4.00 -  5.99%...................       4,964           1,052             838           2,787           7,132
6.00 -  7.99%...................       2,788           3,476           1,275             665           8,204
                                  ----------       ---------      ----------       ---------       ---------
                                  $    7,882       $   4,585      $    2,113       $     971       $  15,551
                                  ==========       =========      ==========       =========       =========
</TABLE>


     The following table indicates the amount of Columbian's  term  certificates
of $100,000 or more by time remaining until maturity as of December 31, 2000.

                                                             CERTIFICATES
          MATURITY PERIOD                                    OF DEPOSITS
          ---------------                                    -----------
                                                            (IN THOUSANDS)

          Three months or less.............................  $      306
          Over three through six months....................         312
          Over six through twelve months...................         702
          Over twelve months...............................         709
                                                             ----------
             Total.........................................  $    2,029
                                                             ==========

SAVINGS DEPOSIT ACTIVITY

     The following table sets forth the savings  activities of the Banks for the
periods indicated.
<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31,
                                                              -----------------------------------
                                                                 2000                     1999
                                                              ----------               ----------
<S>                                                       <C>                     <C>
Deposits...............................................   $   205,737,883         $ 201,113,000
Withdrawals............................................       215,205,625           191,398,018
                                                          ---------------         -------------
  Net increase (decrease) before interest credited.....        (9,467,742)            9,714,982
Interest credited .....................................         4,162,656             3,828,321
                                                          ---------------         -------------
  Net increase (decrease) in savings deposits..........   $    (5,305,086)        $  13,543,303
                                                          ===============         =============
</TABLE>

     Management attributes the decrease in deposits (prior to interest credited)
for the year ended December 31, 2000 to conservative pricing policies.

     BORROWINGS.  Savings deposits  historically have been the primary source of
funds for the Banks'  lending  and  investment  activities  and for its  general
business activities. The Banks are authorized, however, to use advances from the
FHLB of Atlanta to supplement  its supply of lendable  funds and to meet deposit
withdrawal  requirements.  Advances from the FHLB typically  would be secured by
the Banks' stock in the FHLB and a portion of the Banks' mortgage  loans.  Cecil
Federal utilized short-term advances from FHLB during the year.

     The FHLB of Atlanta  functions as a central  reserve bank providing  credit
for savings  institutions  and certain other member financial  institutions.  As
members,  the  Banks  are  required  to own  capital  stock  in the FHLB and are
authorized  to apply for  advances on the  security of such stock and certain of
its  home  mortgages  and  other  assets  (principally,   securities  which  are
obligations of, or guaranteed by, the United States) provided certain  standards
related to creditworthiness have been met.


                                       27
<PAGE>

     The following table sets forth certain information  regarding the Company's
short-term borrowings at the dates and for the periods indicated:
<TABLE>
<CAPTION>
                                                                        YEAR ENDED DECEMBER 31,
                                                                       ---------------------------
                                                                         2000               1999
                                                                       --------           --------
                                                                          (DOLLARS IN THOUSANDS)
<S>                                                                    <C>                <C>
Cecil
-----
Amounts outstanding at period end:
  FHLB advances......................................................  $   7,750          $       0

Weighted average rate paid at period end:
  FHLB advances......................................................       6.35%                 0%

Maximum amount of borrowings outstanding at any month end:

  FHLB advances......................................................  $  10,500          $   4,250

Approximate average amounts outstanding during period:
  FHLB advances......................................................  $   7,166          $   2,642

Approximate weighted average rate paid during period (1):
  FHLB advances......................................................       6.09%              6.26%

Columbian
---------
Amounts outstanding at period end:
  FHLB advances......................................................  $   5,500          $   1,500

Weighted average rate paid at period end:
  FHLB advances......................................................       6.35%              4.55%

Maximum amount of borrowings outstanding at any month end:
  FHLB advances......................................................  $   6,200          $   1,500

Approximate average amounts outstanding during period:
  FHLB advances......................................................  $   5,078          $      72

Approximate weighted average rate paid during period (1):
  FHLB advances......................................................       5.29%              5.74%
<FN>
___________
(1)      The  approximate  weighted  average  rate paid  during  the  period was
         computed by dividing the average amounts  outstanding  into the related
         interest expense for the period.
</FN>
</TABLE>

SUBSIDIARY ACTIVITIES

     As federally  chartered savings banks, the Banks may invest up to 2% of its
assets in subsidiaries, with an additional investment of 1% of assets where such
investment serves primarily  community,  inner-city,  and community  development
purposes.  Under such  limitations,  as of December 31, 2000,  Cecil Federal was
authorized to invest up to approximately  $1.8 million in the stock of or in the
loans to subsidiaries.  In addition,  institutions  meeting  regulatory  capital
requirements  and certain  other tests may invest up to 50% of their  regulatory
capital in



                                       28
<PAGE>

conforming  first mortgage loans to  subsidiaries.  At December 31, 2000,  Cecil
Federal had $106,000 invested in its subsidiaries.

     Cecil Federal's wholly owned  subsidiaries,  Cecil Service  Corporation and
Cecil  Financial  Services  Corporation  were each  established  in 1971.  Cecil
Service  Corporation's primary business is acting as leasing agent for the North
East Plaza  Branch.  The dollar amount  invested in this  business  activity was
$35,000 for 2000. In 1997, Cecil Financial  Services,  a service  corporation of
Cecil  Federal  Savings  Bank,  began  offering  a full range of  brokerage  and
investment  services  in all our  branches,  through a  partnership  with  UVEST
Investment Services. UVEST Investment Services is a registered broker-dealer and
member of both the National Association of Securities Dealers and the Securities
Investment  Protection  Corporation  (SIPC).  Headquartered in Charlotte,  North
Carolina,  UVEST has been providing  bank-based  investment services through the
Southeast since 1982. The dollar amount  invested in this business  activity was
$71,000 for 2000.

     SAIF-insured  savings  institutions  are  required to give the FDIC and the
Director of the OTS 30 days' prior notice before establishing or acquiring a new
subsidiary, or commencing any new activity through an existing subsidiary.  Both
the FDIC and the  Director of the OTS have  authority  to order  termination  of
subsidiary  activities  determined  to pose a risk to the safety or soundness of
the institution.  In addition,  savings  institutions are required to deduct the
amount of their investments in and extensions of credit to subsidiaries  engaged
in activities  not  permissible  to national  banks from capital in  determining
regulatory  capital  compliance.  See  "Regulation  of the  Banks --  Regulatory
Capital Requirements."

COMPETITION

     The  Banks  experience  substantial  competition  both  in  attracting  and
retaining savings deposits and in the making of mortgage and other loans. Direct
competition for savings deposits comes from other savings  institutions,  credit
unions,  regional  bank holding  companies and  commercial  banks located in its
primary  market  area.  Significant  competition  for the Banks'  other  deposit
products and services  comes from money market  mutual funds,  brokerage  firms,
insurance  companies  and retail  stores.  The primary  factors in competing for
loans are  interest  rates and loan  origination  fees and the range of services
offered by various financial  institutions.  Competition for origination of real
estate loans normally comes from other savings  institutions,  commercial banks,
mortgage bankers, mortgage brokers and insurance companies.

     Cecil  Federal is one of 7  financial  institutions  with  offices in Cecil
County,   Maryland.   Cecil  Federal's  primary  competition  comes  from  those
institutions as well as numerous additional regional commercial banks and thrift
institutions,  which have branch offices near Cecil Federal's  market area. Many
of these financial  institutions have financial resources  substantially greater
than Cecil Federal.

     Cecil Federal is able to compete  effectively in its primary market area by
offering competitive interest rates and loan fees, and a wide variety of deposit
products  and  by  emphasizing   personal   customer   service  and  cultivating
relationships with the local businesses.  Management  believes that, as a result
of Cecil  Federal's  commitment  to  competitive  pricing,  varied  products and
personal service,  Cecil Federal has developed a solid base of core deposits and
Cecil Federal's loan origination activities are an asset to the community.

     Columbian  faces  strong  competition  both  in  originating  real  estate,
consumer and other loans and in attracting deposits. Columbian competes for real
estate and other loans  principally on the basis of interest rates, the types of
loans it  originates  and the quality of service it provides to  borrowers.  Its
competition   in   originating   loans  comes   primarily   from  other  savings
institutions, commercial banks and mortgage bankers making loans secured by real
estate located in Columbian's market area.  Commercial banks,  credit unions and
finance companies provide vigorous competition in consumer lending.  Competition
may  increase as a result of the  continuing  reduction of  restrictions  on the
interstate operations of financial institutions.


                                       29
<PAGE>

REGULATION OF THE BANKS

     GENERAL. As federally chartered savings institutions, the Banks are subject
to extensive regulation by the OTS. The lending activities and other investments
of the Banks must comply with various federal regulatory  requirements.  The OTS
periodically   examines  the  Banks  for  compliance  with  various   regulatory
requirements. The FDIC also has the authority to conduct special examinations of
the Banks  because their  deposits are insured by the SAIF.  The Banks must file
reports with OTS describing their activities and financial condition.  The Banks
are also  subject to certain  reserve  requirements  promulgated  by the Federal
Reserve Board.  This  supervision  and regulation is intended  primarily for the
protection of depositors.  As a savings institution holding company, the Company
is  subject  to  OTS   regulation,   examination,   supervision   and  reporting
requirements.  Certain of these regulatory requirements are referred to below or
appear elsewhere herein.

     FINANCIAL  MODERNIZATION  LEGISLATION.  On  November  12,  1999,  President
Clinton  signed  legislation  which  could  have a  far-reaching  impact  on the
financial services  industry.  The  Gramm-Leach-Bliley  ("G-L-B") Act authorizes
affiliations between banking, securities and insurance firms and authorizes bank
holding  companies  and national  banks to engage in a variety of new  financial
activities.  Among the new  activities  that will be  permitted  to bank holding
companies are  securities  and  insurance  brokerage,  securities  underwriting,
insurance  underwriting  and merchant  banking.  The Federal  Reserve Board,  in
consultation  with  the  Secretary  of  the  Treasury,  may  approve  additional
financial activities.  The G-L-B Act, however,  prohibits future acquisitions of
existing unitary savings and loan holding companies,  like the Company, by firms
which are engaged in commercial activities and limits the permissible activities
of unitary savings and loan holding companies formed after May 4, 2000.

     The G-L-B Act imposes  new  requirements  on  financial  institutions  with
respect to customer  privacy.  The G-L-B Act generally  prohibits  disclosure of
customer  information  to  non-affiliated  third parties unless the customer has
been given the  opportunity  to object and has not objected to such  disclosure.
Financial  institutions  are further required to disclose their privacy policies
to customers  annually.  Financial  institutions,  however,  will be required to
comply  with state law if it is more  protective  of customer  privacy  than the
G-L-B Act.  The G-L-B Act directs the federal  banking  agencies,  the  National
Credit Union Administration,  the Secretary of the Treasury,  the Securities and
Exchange  Commission and the Federal Trade Commission,  after  consultation with
the National Association of Insurance Commissioners,  to promulgate implementing
regulations  within six  months of  enactment.  The  privacy  provisions  became
effective in November 2000 with full compliance required by July 1, 2001.

     The G-L-B Act contains significant  revisions to the FHLB System. The G-L-B
Act imposes new capital  requirements  on the FHLBs and authorizes them to issue
two classes of stock with differing dividend rates and redemption  requirements.
The G-L-B Act deletes the current requirement that the FHLBs annually contribute
$300 million to pay interest on certain government obligations in favor of a 20%
of net  earnings  formula.  The G-L-B Act expands the  permissible  uses of FHLB
advances by community  financial  institutions (under $500 million in assets) to
include   funding   loans  to  small   businesses,   small   farms   and   small
agri-businesses.  The G-L-B  Act  makes  membership  in the FHLB  voluntary  for
federal savings associations.

     The  G-L-B  Act  contains  a  variety  of  other  provisions   including  a
prohibition  against ATM surcharges  unless the customer has first been provided
notice of the  imposition  and  amount of the fee.  The  G-L-B Act  reduces  the
frequency of Community  Reinvestment Act  examinations for smaller  institutions
and imposes certain reporting requirements on depository  institutions that make
payments  to   non-governmental   entities  in  connection  with  the  Community
Reinvestment  Act.  The  G-L-B  Act  eliminates  the SAIF  special  reserve  and
authorizes a federal  savings  association  that converts to a national or state
bank charter to continue to use the term "federal" in its name and to retain any
interstate branches.

     The Company is unable to predict the impact of the G-L-B Act on its and the
Bank's operations and competitive  environment at this time.  Although the G-L-B
Act reduces the range of companies with which the Company may affiliate,  it may
facilitate affiliations with companies in the financial services industry.

     REGULATORY  CAPITAL  REQUIREMENTS.  Under OTS  capital  standards,  savings
institutions  must maintain  "tangible"  capital equal to 1.5% of adjusted total
assets,  "core"  capital  equal  to 4% of  adjusted  total  assets  (3%  if  the
institution  has received the highest  rating,  "composite 1 CAMELS" on its most
recent   examination)   and  "total"   capital  (a   combination   of  core  and
"supplementary"  capital)  equal  to  8%  of  risk-weighted  assets.


                                       30
<PAGE>

The  OTS  regulation  defines  core  capital  as  common   stockholders'  equity
(including  retained  earnings),  noncumulative  perpetual  preferred  stock and
related surplus, minority interests in the equity accounts of fully consolidated
subsidiaries,   certain  nonwithdrawable   accounts  and  pledged  deposits  and
"qualifying  supervisory  goodwill," less  intangible  assets other than certain
qualifying  supervisory  goodwill and certain mortgage  servicing rights.  Cecil
Federal had  qualifying  goodwill of $2.8 million as of September  30, 1999 as a
result of the purchase of two branches from Susquehana Bank. Cecil is amortizing
the goodwill over a 10 year period. At December 31, 2000 remaining  goodwill was
$2.5 million.  Tangible capital is the same as core capital,  except it excludes
qualifying  supervisory  goodwill and other intangible assets other than certain
mortgage servicing rights.

     The OTS capital rule  requires  that core and  tangible  capital be further
reduced  by  an  amount  equal  to  a  savings  institution's  debt  and  equity
investments in any subsidiary engaged in activities not permissible for national
banks,  other than a subsidiary  engaged in  activities  undertaken as agent for
customers or in mortgage banking  activities and certain  subsidiary  depository
institutions  or  their  holding  companies  ("nonincludable   subsidiary").  At
December 31, 2000,  the Banks had no  investments  in or extensions of credit to
subsidiaries engaged in activities not permissible for national banks.

     Adjusted  total  assets  are  a  savings   association's  total  assets  as
determined under generally accepted  accounting  principles adjusted for certain
goodwill  amounts  and  increased  by a pro  rated  portion  of  the  assets  of
subsidiaries  in which the savings  association  holds a minority  interest  and
which  are not  engaged  in  activities  for  which the  capital  rules  require
deduction of its debt and equity investments.  Adjusted total assets are reduced
by the amount of assets that have been deducted from capital, the portion of the
savings  association's  investments in  subsidiaries  that must be deducted from
capital  under  the  capital  rules  and,  for  purposes  of  the  core  capital
requirement, qualifying supervisory goodwill.

     In  determining  compliance  with the  risk-based  capital  requirement,  a
savings  association  is  allowed  to use both core  capital  and  supplementary
capital  provided the amount of  supplementary  capital used does not exceed the
savings association's core capital.  Supplementary capital is defined to include
certain  preferred stock issues,  nonwithdrawable  accounts and pledged deposits
that do not qualify as core capital, certain approved subordinated debt, certain
other capital instruments,  a portion of the savings  association's general loss
allowances and up to 45% of unrealized  gains on equity  securities.  Total core
and supplementary  capital are reduced by the amount of capital instruments held
by other depository  institutions pursuant to reciprocal arrangements and by the
amount of the  savings  association's  high  loan-to-value  ratio land loans and
non-residential  construction  loans and  equity  investments  other  than those
deducted from core and tangible capital.  At December 31, 2000, the Banks had no
high  ratio  land  or  nonresidential  construction  loans  and  had  no  equity
investments for which OTS regulations require deduction from total capital.

     The  risk-based  capital  requirement  is  measured  against  risk-weighted
assets,   which   equal  the  sum  of  each   on-balance-sheet   asset  and  the
credit-equivalent  amount of each  off-balance-sheet item after being multiplied
by an  assigned  risk  weight.  Under the OTS  risk-weighting  system,  cash and
securities backed by the full faith and credit of the U.S.  Government are given
a 0% risk weight.  Mortgage-backed  securities issued, or fully guaranteed as to
principal  and  interest,  by the FNMA or FHLMC are  assigned a 20% risk weight.
One- to  four-family  first  mortgages  not  more  than 90 days  past  due  with
loan-to-value  ratios  under 80%,  multi-family  mortgages  (maximum 36 dwelling
units) with  loan-to-value  ratios under 80% and average annual  occupancy rates
over  80%,  and  certain  qualifying  loans  for  the  construction  of  one- to
four-family residences pre-sold to home purchasers are assigned a risk weight of
50%.  Consumer loans,  commercial  loans,  non-qualifying  mortgage loans,  most
commercial  real estate loans,  repossessed  assets and assets more than 90 days
past due, as well as all other assets not specifically categorized, are assigned
a risk weight of 100%. The portion of equity  investments not deducted from core
or supplementary capital is assigned a 100% risk-weight. OTS capital regulations
require savings  institutions to maintain  minimum total capital,  consisting of
core capital plus supplemental  capital,  equal to 8.0% of risk-weighted assets.
As of December 31, 2000, the risk weighted assets of Cecil Federal and Columbian
were approximately $67.4 million and $16.4 million, respectively.


                                       31
<PAGE>


     OTS risk-based capital rules require savings  institutions with more than a
"normal" level of interest rate risk to maintain  additional  total  capital.  A
savings institution's interest rate risk is measured in terms of the sensitivity
of its "net portfolio  value" to changes in interest rates.  Net portfolio value
is defined,  generally,  as the  present  value of expected  cash  inflows  from
existing  assets and  off-balance  sheet  contracts  less the  present  value of
expected  cash  outflows from existing  liabilities.  A savings  institution  is
considered  to have a  "normal"  level of  interest  rate risk  exposure  if the
decline in its net portfolio  value after an immediate 200 basis point  increase
or decrease in market interest rates (whichever  results in the greater decline)
is less than two percent of the current estimated  economic value of its assets.
A savings  institution with a greater than normal interest rate risk is required
to deduct from total capital, for purposes of calculating its risk-based capital
requirement,  an amount (the "interest rate risk  component")  equal to one-half
the difference  between the  institution's  measured  interest rate risk and the
normal level of interest  rate risk,  multiplied  by the  economic  value of its
total assets.

     The OTS calculates the sensitivity of a savings institution's net portfolio
value based on data submitted by the  institution in a schedule to its quarterly
Thrift  Financial  Report and using the  interest  rate risk  measurement  model
adopted by the OTS. The amount of the interest rate risk  component,  if any, to
be  deducted  from  a  savings  institution's  total  capital  is  based  on the
institution's  Thrift Financial Report filed two quarters earlier.  Institutions
with less than $300 million in assets and a risk-based  capital ratio above 12%,
like the Banks, generally are exempt from filing the interest rate risk schedule
with their Thrift Financial  Reports.  However,  the OTS will require any exempt
institution  that it  determines  may have a high  level of  interest  rate risk
exposure to file such  schedule  on a  quarterly  basis and may be subject to an
additional  capital  requirement  based upon its level of interest  rate risk as
compared to its peers.  Based upon  calculations  as of December 31,  2000,  the
Banks are not required to deduct an  interest-rate  risk capital  component from
total capital.

     In addition to requiring generally applicable capital standards for savings
associations,  the Director of OTS is  authorized to establish the minimum level
of  capital  for a  savings  association  at such  amount  or at such  ratio  of
capital-to-assets  as the Director determines to be necessary or appropriate for
such  association in light of the particular  circumstances  of the association.
Such  circumstances  would  include a high degree of  exposure to interest  rate
risk,  prepayment  risk,  credit risk,  concentration of credit risk and certain
risks arising from non-traditional activities. The Director of OTS may treat the
failure of any savings association to maintain capital at or above such level as
an unsafe or unsound  practice and may issue a directive  requiring  any savings
association  which  fails to  maintain  capital  at or above the  minimum  level
required by the Director to submit and adhere to a plan for increasing  capital.
Such an order may be enforced in the same manner as an order issued by the FDIC.

     PROMPT CORRECTIVE  REGULATORY  ACTION.  Under the Federal Deposit Insurance
Corporation  Improvement Act of 1991 ("FDICIA"),  the federal banking regulators
are  required  to  take  prompt  corrective  action  if  an  insured  depository
institution  fails  to  satisfy  certain  minimum  capital   requirements.   All
institutions, regardless of their capital levels, are restricted from making any
capital  distribution  or paying any management  fees if the  institution  would
thereafter   fail  to  satisfy  the  minimum  levels  for  any  of  its  capital
requirements.  An  institution  that  fails to meet the  minimum  level  for any
relevant capital measure (an "undercapitalized" institution) may be: (i) subject
to increased  monitoring by the  appropriate  federal  banking  regulator;  (ii)
required to submit an acceptable capital  restoration plan within 45 days; (iii)
subject to asset growth  limits;  and (iv)  required to obtain prior  regulatory
approval for  acquisitions,  branching and new lines of businesses.  The capital
restoration plan must include a guarantee by the  institution's  holding company
that the  institution  will  comply  with the plan until it has been  adequately
capitalized on average for four  consecutive  quarters,  under which the holding
company would be liable up to the lesser of 5% of the institution's total assets
or the amount necessary to bring the institution  into capital  compliance as of
the date it failed to comply with its capital restoration plan. A "significantly
undercapitalized"  institution, as well as any undercapitalized institution that
did not  submit an  acceptable  capital  restoration  plan,  may be  subject  to
regulatory demands for recapitalization,  broader application of restrictions on
transactions  with  affiliates,  limitations on interest rates paid on deposits,
asset  growth  and other  activities,  possible  replacement  of  directors  and
officers,  and restrictions on capital distributions by any bank holding company
controlling the institution.  Any company controlling the institution could also
be required to divest the  institution or the  institution  could be required to
divest   subsidiaries.   The  senior  executive   officers  of  a  significantly
undercapitalized   institution   may  not  receive   bonuses  or   increases  in
compensation  without prior  approval and the  institution  is  prohibited  from
making  payments of principal  or interest on its  subordinated  debt.  In their
discretion,  the  federal  banking  regulators  may also  impose  the  foregoing
sanctions on an  undercapitalized  institution if the regulators  determine that
such actions are  necessary  to carry out the purposes of the prompt  corrective
action provisions. If an institution's ratio of


                                       32
<PAGE>

tangible  capital to total  assets falls below a "critical  capital  level," the
institution will be subject to  conservatorship  or receivership  within 90 days
unless periodic  determinations are made that forbearance from such action would
better  protect the deposit  insurance  fund.  Unless  appropriate  findings and
certifications are made by the appropriate federal bank regulatory  agencies,  a
critically  undercapitalized  institution  must be placed in  receivership if it
remains  critically  undercapitalized  on average  during the  calendar  quarter
beginning 270 days after the date it became  critically  undercapitalized.  If a
savings  institution is in compliance with an approved  capital plan on the date
of  enactment  of FDICIA,  however,  it will not be required to submit a capital
restoration  plan if it is  undercapitalized  or become subject to the statutory
prompt corrective  action provisions  applicable to significantly and critically
undercapitalized institutions prior to July 1, 1994.

         The federal banking regulators, including the OTS, have adopted uniform
regulations  implementing  the prompt  corrective  action  provisions of FDICIA.
Under such  regulations,  the federal  banking  regulators  measure a depository
institution's   capital  adequacy  on  the  basis  of  the  institution's  total
risk-based  capital  ratio  (the  ratio of its total  capital  to  risk-weighted
assets),  Tier 1  risk-based  capital  ratio (the  ratio of its core  capital to
risk-weighted  assets)  and  leverage  ratio (the  ratio of its core  capital to
adjusted total assets).

         The  following  table shows the  capital  ratio  requirements  for each
prompt corrective action category:
<TABLE>
<CAPTION>
                                                     ADEQUATELY                                  SIGNIFICANTLY
                           WELL CAPITALIZED          CAPITALIZED         UNDERCAPITALIZED       UNDERCAPITALIZED
                           ----------------          -----------         ----------------       ----------------
<S>                        <C>                       <C>                 <C>                     <C>
Total risk-based capital   10.0% or more             8.0% or more        Less than 8.0%          Less than 6.0%
Tier 1 risk-based
    capital ratio           6.0% or more             4.0% or more        Less than 4.0%          Less than 3.0%
Leverage ratio              5.0% or more             4.0% or more*       Less than 4.0%          Less than 3.0%
<FN>
--------
o  3.0% if institution has a composite 1 CAMELS rating.
</FN>
</TABLE>

     The table below presents Cecil Federal's  capital position  relative to its
various regulatory capital requirements at December 31, 2000.
<TABLE>
<CAPTION>
                                                                              REQUIRED FOR      TO BE WELL
                                                           ACTUAL           ADEQUATE CAPITAL    CAPITALIZED
                                                           AMOUNT    RATIO   AMOUNT   RATIO   AMOUNT    RATIO
                                                           ------    -----   ------   -----   ------    -----
                                                                            (IN THOUSANDS)
<S>                                                         <C>     <C>       <C>      <C>     <C>      <C>
         Total risk-based capital (to risk-weighted assets) 6,959   10.32%    5,393    8.0%    6,741    10.0%
         Tier 1 capital (to risk-weighted assets)           6,724    9.97     2,696    4.0     4,045     6.0
         Core capital (to adjusted total assets)            6,724    7.45     2,708    3.0     4,514     5.0
         Core capital (to adjusted tangible assets)         6,724    7.45     1,806    2.0      N/A      N/A
         Tangible capital (to adjusted total assets)        6,724    7.45     1,354    1.5      N/A      N/A
</TABLE>

     The table below provides information with respect to Columbian's compliance
with its regulatory capital requirements at December 31, 2000.
<TABLE>
<CAPTION>
                                                                              REQUIRED FOR      TO BE WELL
                                                           ACTUAL           ADEQUATE CAPITAL    CAPITALIZED
                                                           AMOUNT    RATIO   AMOUNT   RATIO   AMOUNT    RATIO
                                                           ------    -----   ------   -----   ------    -----
<S>                                                         <C>     <C>       <C>      <C>     <C>      <C>
                                                                             (IN THOUSANDS)
         Total risk-based capital (to risk-weighted assets) 2,187    13.35%   1,310    8.0%    1,638    10.0%
         Tier 1 capital (to risk-weighted assets)           2,051    12.52      655    4.0       983     6.0
         Core capital (to adjusted total assets)            2,051    7.00       879    3.0     1,466     5.0
         Core capital (to adjusted tangible assets)         2,051    7.00       586    2.0      N/A      N/A
         Tangible capital (to adjusted total assets)        2,051    7.00       440    1.5      N/A      N/A
</TABLE>


                                       33
<PAGE>

     SAFETY AND  SOUNDNESS  STANDARDS.  Under  FDICIA,  as amended by the Riegle
Community  Development and Regulatory  Improvement Act of 1994 (the "CDRI Act"),
each  Federal  banking  agency is required  to  establish  safety and  soundness
standards for  institutions  under its authority.  On July 10, 1995, the federal
banking  agencies,  including the OTS and the Federal  Reserve  Board,  released
Interagency  Guidelines  Establishing  Standards  for Safety and  Soundness  and
published  a final rule  establishing  deadlines  for  submission  and review of
safety and soundness  compliance  plans.  The final rule and the guidelines went
into effect on August 9, 1995. The guidelines require depository institutions to
maintain  internal  controls and information  systems and internal audit systems
that are  appropriate  for the  size,  nature  and  scope  of the  institution's
business.  The  guidelines  also  establish  certain  basic  standards  for loan
documentation,  credit  underwriting,  interest  rate risk  exposure,  and asset
growth.  The guidelines  further  provide that  depository  institutions  should
maintain  safeguards to prevent the payment of  compensation,  fees and benefits
that are  excessive or that could lead to material  financial  loss,  and should
take  into  account  factors  such  as  comparable   compensation  practices  at
comparable  institutions.  If the appropriate  federal banking agency determines
that a depository institution is not in compliance with the safety and soundness
guidelines,  it may  require the  institution  to submit an  acceptable  plan to
achieve compliance with the guidelines.  A depository institution must submit an
acceptable  compliance plan to its primary federal  regulator  within 30 days of
receipt  of a  request  for  such a plan.  Failure  to  submit  or  implement  a
compliance plan may subject the institution to regulatory sanctions.

     Additionally  under FDICIA, as amended by the CDRI Act, the federal banking
agencies are required to establish  standards  relating to the asset quality and
earnings that the agencies  determine to be  appropriate.  On July 10, 1995, the
federal  banking  agencies,  including  the OTS and the Federal  Reserve  Board,
issued  proposed  guidelines  relating to asset quality and earnings.  Under the
proposed  guidelines,  an FDIC insured  depository  institution  should maintain
systems,  commensurate with its size and the nature and scope of its operations,
to identify problem assets and prevent  deterioration in those assets as well as
to evaluate and monitor  earnings and ensure that  earnings  are  sufficient  to
maintain  adequate  capital and  reserves.  Management  believes  that the asset
quality and earnings  standards,  in the form proposed by the banking  agencies,
would not have a material effect on the operations of the Banks.

     DEPOSIT  INSURANCE.  The Banks are required to pay  assessments  based on a
percent of its insured deposits to the FDIC for insurance of its deposits by the
SAIF.  Under the  Federal  Deposit  Insurance  Act,  the FDIC is required to set
semi-annual  assessments for  SAIF-insured  institutions at a level necessary to
maintain the designated  reserve ratio of the SAIF at 1.25% of estimated insured
deposits or at a higher  percentage of estimated  insured  amounts that the FDIC
determines  to  be  justified  for  that  year  by  circumstances  indicating  a
significant  risk of  substantial  future  losses  to the  SAIF.  The FDIC  also
administers  the Bank  Insurance  Fund  ("BIF"),  which has the same  designated
reserve ratio as the SAIF.

         Under the FDIC's risk-based  deposit insurance  assessment  system, the
assessment rate for an insured depository  institution depends on the assessment
risk classification assigned to the institution by the FDIC, which is determined
by the  institution's  capital level and supervisory  evaluations.  Based on the
data reported to regulators  for the date closest to the last day of the seventh
month preceding the semi-annual assessment period,  institutions are assigned to
one of  three  capital  groups - well  capitalized,  adequately  capitalized  or
undercapitalized  -  using  the  same  percentage  criteria  as  in  the  prompt
corrective action  regulations.  See "-- Prompt Corrective  Regulatory  Action."
Within each capital group,  institutions  are assigned to one of three subgroups
on the basis of supervisory evaluations by the institution's primary supervisory
authority and such other  information  as the FDIC  determines to be relevant to
the  institution's  financial  condition  and  the  risk  posed  to the  deposit
insurance fund.  Subgroup A consists of financially sound institutions with only
a few minor  weaknesses.  Subgroup B consists of institutions  that  demonstrate
weaknesses which, if not corrected, could result in significant deterioration of
the  institution  and

                                       34
<PAGE>

increased  risk of loss to the deposit  insurance  fund.  Subgroup C consists of
institutions  that  pose a  substantial  probability  of  loss  to  the  deposit
insurance fund unless effective corrective action is taken.

     The FDIC has set an assessment schedule for SAIF deposit insurance pursuant
to which the assessment rate for well-capitalized  institutions with the highest
supervisory  ratings are zero and  institutions  in the lowest  risk  assessment
classification  are  assessed  at the rate of 0.27% of insured  deposits.  Until
December 31, 1999, SAIF-insured institutions were required to pay assessments to
the FDIC at the rate of 6.5  basis  points  to help fund  interest  payments  on
certain  bonds  issued by the  Financing  Corporation  ("FICO") an agency of the
federal government established to finance takeovers of insolvent thrifts. During
this period,  BIF members were assessed for these obligations at the rate of 1.3
basis points. After December 31, 1999, both BIF and SAIF members are assessed at
the same rate for FICO payments.

     QUALIFIED THRIFT LENDER TEST. A savings  institution that does not meet the
Qualified  Thrift Lender  ("QTL") test must either  convert to a bank charter or
comply with the following  restrictions on its  operations:  (i) the institution
may not  engage in any new  activity  or make any new  investment,  directly  or
indirectly,  unless such activity or investment  is  permissible  for a national
bank; (ii) the branching powers of the institution  shall be restricted to those
of a national bank; and (iii) payment of dividends by the  institution  shall be
subject to the rules regarding payment of dividends by a national bank. Upon the
expiration of three years from the date the  institution  ceases to be a QTL, it
must cease any  activity and not retain any  investment  not  permissible  for a
national bank and a savings association.

     To  qualify  as a QTL,  a savings  institution  must  either  qualify  as a
"domestic  building and loan  association"  under the  Internal  Revenue Code or
maintain at least 65% of its "portfolio assets" in Qualified Thrift Investments.
Portfolio  assets are  defined as total  assets less  intangibles,  the value of
property used by a savings institution in its business and liquidity investments
in an amount not exceeding 20% of assets.  Qualified Thrift Investments  consist
of (i) loans,  equity positions or securities  related to domestic,  residential
real estate or manufactured  housing and educational,  small business and credit
card loans;  and (ii) subject to an aggregate  20% of  portfolio  assets  limit,
shares of stock in the FHLMC and the FNMA, loans for personal, family, household
purposes,  50% of the dollar amount of residential mortgage loans originated and
sold within 90 days of origination,  and 200% of an institution's investments in
loans to finance  "starter  homes" and loans for  construction,  development  or
improvement of housing and community  service  facilities or for financing small
businesses in "credit-needy" areas. In order to maintain QTL status, the savings
institution  must  maintain a weekly  average  percentage  of  Qualified  Thrift
Investments to portfolio  assets equal to 65% on a monthly average basis in nine
out of 12 months.  A savings  institution that fails to maintain QTL status will
be permitted to requalify  once,  and if it fails the QTL test a second time, it
will become  immediately  subject to all penalties as if all time limits on such
penalties  had expired.  Failure to  qualifying  as a QTL results in a number of
sanctions, including the imposition of certain operating restrictions imposed on
national banks and a restriction on obtaining  additional advances from the FHLB
system.  Upon failure to qualify as a QTL for two years,  a savings  institution
must convert to a commercial bank.

     At December 31, 2000,  approximately 84.7% of Cecil Federal's and 100.0% of
Columbian's assets were invested in Qualified Thrift Investments,  which were in
excess of the percentage required to qualify the Banks under the QTL test.

     LIMITS ON LOANS TO ONE BORROWER. Savings institutions generally are subject
to the  lending  limits  applicable  to national  banks.  With  certain  limited
exceptions,  a savings  institution's loans and extensions of credit outstanding
to any borrower  (including certain related entities of the borrower) at any one
time  shall  not  exceed  15% of  the  unimpaired  capital  and  surplus  of the
institution.  A savings institution may lend an additional amount,  equal to 10%
of  unimpaired  capital and  surplus,  if such loan is fully  secured by readily
marketable collateral.  Savings institutions are additionally authorized to make
loans to one borrower,  for any purpose, in an amount not to exceed $500,000 or,
by order of the  Director  of OTS,  in an  amount  not to exceed  the  lesser of
$30,000,000  or 30% of


                                       35
<PAGE>

unimpaired capital and surplus to develop residential housing, provided: (i) the
purchase price of each single-family dwelling in the development does not exceed
$500,000;  (ii) the savings  institution  is in compliance  with its  regulatory
capital  requirements;  (iii) the loans  comply  with  applicable  loan-to-value
requirements,  and; (iv) the aggregate amount of loans made under this authority
does not exceed 150% of  unimpaired  capital  and  surplus.  The lending  limits
generally do not apply to purchase money mortgage notes taken from the purchaser
of real property  acquired by the savings  institution in  satisfaction of debts
previously  contracted  if no new funds are  advanced  to the  borrower  and the
institution  is not  placed in a more  detrimental  position  as a result of the
sale.  Certain  types of loans are excepted from the lending  limits,  including
loans secured by savings deposits. The loans-to-one borrower limits have not had
a significant  impact on the operations of the Banks.  The Banks have no lending
relationships in excess of applicable  loans-to-one borrower limits. At December
31, 2000, Cecil Federal's regulatory loans-to-one-borrower limit was $1,045,500,
and Columbian's limit was $500,000.

     DIVIDEND RESTRICTIONS.  Under regulations of the OTS, the Banks may not pay
dividends  on its  capital  stock if its  regulatory  capital  would  thereby be
reduced below the amount then required for the liquidation  account  established
for the  benefit  of  certain  depositors  of the  Banks  at the  time of  their
conversions  to stock form. In addition,  savings  institution  subsidiaries  of
savings and loan holding  companies  are required to give the OTS 30 days' prior
notice of any proposed declaration of dividends to the holding company.

     Savings  associations  must  submit  notice  to the OTS  prior to  making a
capital  distribution (which includes  dividends,  stock repurchases and amounts
paid to stockholders in another  institution in a cash merger) if (a) they would
not be well  capitalized  after the  distribution,  (b) the  distribution  would
result in the retirement of any of the  association's  common or preferred stock
or  debt  counted  as its  regulatory  capital,  or  (c)  the  association  is a
subsidiary of a holding company. A savings  association must make application to
the OTS to pay a  capital  distribution  if (x)  the  association  would  not be
adequately  capitalized following the distribution,  (y) the association's total
distributions  for the calendar year exceed the association's net income for the
calendar year to date plus its net income (less distributions) for the preceding
two years, or (z) the  distribution  would otherwise  violate  applicable law or
regulation or an agreement with or condition imposed by the OTS.

     Under the OTS' prompt  corrective  action  regulations,  the Banks are also
prohibited   from  making  any  capital   distributions   if  after  making  the
distribution, the Banks would have: (i) a total risk-based capital ratio of less
than 8.0%; (ii) a Tier 1 risk-based  capital ratio of less than 4.0%; or (iii) a
leverage  ratio of less than 4.0%. The OTS,  after  consultation  with the FDIC,
however,  may  permit  an  otherwise  prohibited  stock  repurchase  if  made in
connection  with the issuance of additional  shares in an equivalent  amount and
the repurchase will reduce the institution's  financial obligations or otherwise
improve the institution's financial condition.

     In addition to the  foregoing,  earnings of the Banks  appropriated  to bad
debt reserves and deducted for federal income tax purposes are not available for
payment of cash dividends or other distributions to stockholders without payment
of taxes at the then  current  tax rate by the Banks on the  amount of  earnings
removed from the reserves for such distributions. See "Taxation."

     FEDERAL  HOME LOAN BANK  SYSTEM.  The FHLB  System  consists of 12 district
FHLBs subject to supervision and regulation by the Federal Housing Finance Board
("FHFB").  The FHLBs  provide a central  credit  facility  primarily  for member
institutions.  As  members of the FHLB of  Atlanta,  the Banks are  required  to
acquire and hold shares of capital  stock in the FHLB of Atlanta in an amount at
least  equal to 1% of the  aggregate  unpaid  principal  of their home  mortgage
loans, home purchase contracts, and similar obligations at the beginning of each
year, or 1/20 of its advances  (borrowings) from the FHLB of Atlanta,  whichever
is greater.  The Banks were in compliance with this requirement with investments
in FHLB of Atlanta  stock at December  31,  2000,  of $588,000  and $318,000 for
Cecil  Federal  and  Columbian,  respectively.  The FHLB of Atlanta  serves as a
reserve  or  central



                                       36
<PAGE>

bank for its member  institutions  within its  assigned  district.  It is funded
primarily from proceeds derived from the sale of consolidated obligations of the
FHLB  System.  It offers  advances to members in  accordance  with  policies and
procedures  established  by the FHFB and the Board of  Directors  of the FHLB of
Atlanta.  Long-term advances may only be made for the purpose of providing funds
for residential housing finance. The Banks use short term advances from the FHLB
of Atlanta during the year.

     FEDERAL  RESERVE  SYSTEM.  Pursuant to regulations  of the Federal  Reserve
Board,  all  FDIC-insured  depository  institutions  must maintain average daily
reserves  equal to 3% on the first $42.8 million of transaction  accounts,  plus
10% on all  remaining  transaction  accounts.  This  percentage  is  subject  to
adjustment  by the Federal  Reserve  Board.  Because  required  reserves must be
maintained  in the form of vault cash or in a noninterest  bearing  account at a
Federal  Reserve Bank,  the effect of the reserve  requirement  is to reduce the
amount of the institution's  interest-earning  assets. At December 31, 2000, the
Banks met their reserve requirements.

REGULATION OF THE COMPANY

     The Company is  registered  as a savings and loan holding  company with the
OTS and subject to OTS  regulations,  examinations,  supervision  and  reporting
requirements.  As a subsidiary of a savings and loan holding company,  the Banks
are  subject  to certain  restrictions  in its  dealings  with the  Company  and
affiliates thereof.

     ACTIVITIES  RESTRICTIONS.  The Board of Directors of the Company  presently
operates  the  Company as a multiple  savings  and loan  holding  company and is
subject to certain  activities  restrictions.  Among other  things,  no multiple
savings and loan holding  company or  subsidiary  thereof which is not a savings
association  shall  commence  or  continue  for a limited  period of time  after
becoming a multiple savings and loan holding company or subsidiary thereof,  any
business activity, upon prior notice to, and no objection by the OTS, other than
(i)  furnishing  or  performing  management  services for a  subsidiary  savings
association,  (ii)  conducting  an insurance  agency or escrow  business,  (iii)
holding,  managing, or liquidating assets owned by or acquired from a subsidiary
savings  institution,  (iv) holding or managing properties used or occupied by a
subsidiary savings institution, (v) acting as trustee under deeds of trust, (vi)
those  activities  previously  directly  authorized by regulation as of March 5,
1987 to be engaged in by multiple holding  companies,  or (vii) those activities
authorized  by the  Federal  Reserve  Board  as  permissible  for  bank  holding
companies,  unless the  Director of OTS by  regulation  prohibits or limits such
activities for savings and loan holding companies. Those activities described in
(vii) above must also be approved by the Director of OTS prior to being  engaged
in by a multiple holding company.

     TRANSACTIONS WITH AFFILIATES. Transactions between savings associations and
any affiliate  are governed by Sections 23A and 23B of the Federal  Reserve Act.
An affiliate of a savings  association is any company or entity which  controls,
is controlled by or is under common control with the savings  association.  In a
holding company  context,  the parent holding  company of a savings  association
(such as the  Company) and any  companies  which are  controlled  by such parent
holding company are affiliates of the savings association.  Generally,  Sections
23A and 23B (i)  limit  the  extent  to which  the  savings  institution  or its
subsidiaries may engage in "covered  transactions"  with any one affiliate to an
amount equal to 10% of such institution's capital stock and surplus, and contain
an aggregate  limit on all such  transactions  with all  affiliates to an amount
equal to 20% of such  capital  stock and surplus and (ii)  require that all such
transactions be on terms  substantially  the same, or at least as favorable,  to
the  institution  or subsidiary as those provided to a  non-affiliate.  The term
"covered transaction" includes the making of loans, purchase of assets, issuance
of a guarantee  and  similar  other  types of  transactions.  In addition to the
restrictions  imposed by Sections  23A and 23B, no savings  association  may (i)
loan or otherwise extend credit to an affiliate,  except for any affiliate which
engages only in activities which are permissible for bank holding companies,  or
(ii)  purchase  or invest in any  stocks,  bonds,  debentures,  notes or similar
obligations of any affiliate,  except for affiliates  which are  subsidiaries of
the savings  association.  Section 106 of the Bank Holding  Company Act ("BHCA")
which also applies to the Bank  prohibits the Bank from  extending  credit to or
offering any other  services,  or fixing or varying the  consideration  for such
extension of credit or service,  on the condition that the customer  obtain some
additional  service from the  institution  or certain of its  affiliates  or not
obtain  services  of  a  competitor  of  the  institution,  subject  to  certain
exceptions.

     Savings  associations  are also  subject to the  restrictions  contained in
Section  22(h)  of the  Federal  Reserve  Act on loans  to  executive  officers,
directors and principal stockholders. Under Section 22(h), loans to an executive
officer  and to a greater  than 10%  stockholder  of a savings  association  and
certain affiliated  entities of either, may


                                       37
<PAGE>

not  exceed,  together  with all  other  outstanding  loans to such  person  and
affiliated  entities the  association's  loan to one borrower  limit  (generally
equal  to  15%  of the  institution's  unimpaired  capital  and  surplus  and an
additional  10% of such  capital and surplus for loans fully  secured by certain
readily  marketable  collateral).  Section  22(h) also  prohibits  loans,  above
amounts  prescribed by the appropriate  federal  banking  agency,  to directors,
executive  officers and greater than 10% stockholders of a savings  association,
and their  respective  affiliates,  unless such loan is approved in advance by a
majority of the board of  directors  of the  association  with any  "interested"
director  not  participating  in the  voting.  The  Federal  Reserve  Board  has
prescribed the loan amount (which includes all other  outstanding  loans to such
person), as to which such prior board of director approval if required, as being
the greater of $25,000 or 5% of capital and surplus (up to  $500,000).  Further,
the Federal  Reserve  Board  pursuant to Section  22(h)  requires  that loans to
directors,  executive  officers  and  principal  stockholders  be made on  terms
substantially  the same as offered in comparable  transactions to other persons.
Section 22(h) also generally prohibits a depository  institution from paying the
overdrafts of any of its executive officers or directors.

     Section  22(g) of the Federal  Reserve Act requires that loans to executive
officers of depository  institutions  not be made on terms more  favorable  than
those  afforded to other  borrowers,  requires  approval for such  extensions of
credit by the board of  directors  of the  institution,  and  imposes  reporting
requirements  for and additional  restrictions on the type,  amount and terms of
credits  to such  officers.  In  addition,  Section  106 of the  BHCA  prohibits
extensions  of credit to  executive  officers,  directors,  and greater than 10%
stockholders of a depository  institution by any other  institution  which has a
correspondent  banking relationship with the institution,  unless such extension
of credit is on substantially the same terms as those prevailing at the time for
comparable  transactions  with other  persons and does not involve more than the
normal risk of repayment or present other unfavorable features.

     RESTRICTIONS  ON  ACQUISITIONS.  Savings  and loan  holding  companies  are
generally  prohibited from acquiring,  without prior approval of the Director of
OTS, (i) control of any other  savings  association  or savings and loan holding
company  or  substantially  all the  assets  thereof or (ii) more than 5% of the
voting shares of a savings association or holding company thereof which is not a
subsidiary.  Except with the prior  approval of the Director of OTS, no director
or officer of a savings and loan holding company or person owning or controlling
by proxy or otherwise  more than 25% of such company's  stock,  may also acquire
control of any savings association, other than a subsidiary savings association,
or of any other savings and loan holding  company.

     The  Director  of  OTS  may  only  approve  acquisitions  resulting  in the
formation of a multiple  savings and loan holding company which controls savings
institutions  in more than one  state  if:  (i) the  multiple  savings  and loan
holding company involved controls a savings institution which operated a home or
branch  office in the state of the  institution  to be  acquired  as of March 5,
1987;  (ii) the  acquiror  is  authorized  to  acquire  control  of the  savings
institution  pursuant to the  emergency  acquisition  provisions  of the Federal
Deposit  Insurance  Act;  or (iii)  the  statutes  of the  state  in  which  the
institution to be acquired is located  specifically  permit  institutions  to be
acquired by  state-chartered  institutions or savings and loan holding companies
located in the state  where the  acquiring  entity is  located  (or by a holding
company that controls such state-chartered savings institutions).

     The OTS regulations  permit federal  associations to branch in any state or
states of the United States and its territories.  Except in supervisory cases or
when interstate branching is otherwise permitted by state law or other statutory
provision, a federal association may only establish an out-of-state branch under
such OTS  regulation  if (i) the federal  association  qualifies  as a Qualified
Thrift Lender or a "domestic building and loan association" under ss.7701(a)(19)
of the  Internal  Revenue  Code of 1986,  as amended  (the "Code") and the total
assets  attributable  to all  branches  of the  association  in the state  would
qualify  such  branches  taken as a whole for  treatment  as a Qualified  Thrift
Lender or for  treatment as a domestic  building and loan  association  and (ii)
such  branch  would not  result in (a)  formation  of a  prohibited  multi-state
multiple  savings  and  loan  holding  company  or (b) a  violation  of  certain
statutory  restrictions  on branching  by savings  association  subsidiaries  of
banking holding companies.  Federal associations generally may not establish new
branches unless the  association  meets or exceeds  minimum  regulatory  capital
requirements.  The OTS will also consider the association's record of compliance
with the Community Reinvestment Act in connection with any branch application.

     The BHCA  specifically  authorizes the Federal  Reserve Board to approve an
application  by a bank  holding  company  to  acquire  control  of  any  savings
association. Pursuant to rules promulgated by the Federal Reserve Board, owning,
controlling  or operating a savings  association  is a permissible  activity for
bank   holding   companies,


                                       38
<PAGE>

if the savings association engages only in deposit-taking activities and lending
and other activities that are permissible for bank holding companies.

     A bank holding  company that  controls a savings  association  may merge or
consolidate  the assets and  liabilities  of the savings  association  with,  or
transfer assets and liabilities to, any subsidiary bank which is a member of the
BIF with the approval of the appropriate  federal banking agency and the Federal
Reserve  Board.  The  resulting  bank  will  be  required  to  continue  to  pay
assessments to the SAIF at the rates prescribed for SAIF members on the deposits
attributable to the merged savings  association plus an annual growth increment.
In addition,  the  transaction  must comply with the  restrictions on interstate
acquisitions of commercial banks under the BHCA.

TAXATION

     GENERAL.  The  Company and its  subsidiaries  file a  consolidated  federal
income tax return on a fiscal year basis.  Consolidated  returns have the effect
of  eliminating  intercompany  distributions,   including  dividends,  from  the
computation  of  consolidated  taxable  income for the taxable year in which the
distributions occur.

     In August 1996, the  provisions  repealing the then current thrift bad debt
rules were passed by Congress.  The new rules eliminate the 8% of taxable income
method for deducting  additions to the tax bad debt reserves for all thrifts for
tax years beginning  after December 31, 1995.  These rules also require that all
thrift  institutions  recapture  all or a portion of their tax bad debt reserves
added since the base year (last taxable year beginning  before January 1, 1988).
The  Corporation  has previously  recorded a deferred tax liability equal to the
tax bad debt  recapture  and as such,  the new rules  will have no effect on net
income or federal income tax expense.

     Earnings appropriated to an institution's bad debt reserve and claimed as a
tax  deduction  were not  available  for the  payment of cash  dividends  or for
distribution to  shareholders  (including  distributions  made on dissolution or
liquidation),  unless such amount was included in taxable income, along with the
amount deemed necessary to pay the resulting federal income tax.

     Beginning  with the first taxable year  beginning  after December 31, 1995,
savings  institutions,  such as the Banks,  are treated  the same as  commercial
banks.  Institutions  with $500  million or more in assets  will only be able to
take a tax deduction when a loan is actually charged off. Institutions with less
than $500 million in assets will still be permitted to make  deductible bad debt
additions to reserves, but only using the experience method.

     The Banks'  federal  income tax returns  have not been  audited in the last
five years. For further information  regarding federal income taxes, see Note 12
of the Notes to Consolidated Financial Statements in the Annual Report.

     The  unrecaptured  base year  reserves  will not be subject to recapture as
long as the  Corporation  continues  to carry on the  business  of  banking.  In
addition,  the  balance of the  pre-1998  tax bad debt  reserves  continue to be
subject to  provisions  of present  law that  require  recapture  in the case of
certain excess  distributions to stockholders.  For federal income tax purposes,
the  Corporation  has designated  $551,280 of net worth as a reserve for tax bad
debts on loans.  The use of this amount for purposes other than to absorb losses
on loans would result in taxable  income and financial  statement tax expense at
the then current tax rate.

     STATE  INCOME  TAXATION.  The State of  Maryland  imposes  an income tax of
approximately 7% on income measured  substantially the same as federally taxable
income.  The Banks' state  income tax returns  have not been audited  during the
past five fiscal years. For additional information,  see Note 12 of the Notes to
Consolidated Financial Statements in the Annual Report.

EMPLOYEES

     Cecil Federal had 30 full-time  employees and two part-time employees as of
December  31, 2000,  none of whom was  represented  by a  collective  bargaining
agreement.  Cecil Federal believes that it enjoys  excellent  relations with its
personnel.


                                       39
<PAGE>

     As of December  31, 2000,  Columbian  had 13  full-time  employees  and two
part-time  employees,  none of whom was  represented by a collective  bargaining
agreement. Management believes its relations with its employees are good.

ITEM 2.  DESCRIPTION OF PROPERTY
--------------------------------

     CECIL  FEDERAL.  The  following  table sets forth the  location and certain
additional  information  regarding  Cecil  Federal's  offices  and  property  at
December 31, 2000. Cecil Federal owns the Elkton office and currently leases the
North East office.
<TABLE>
<CAPTION>
                                             YEAR        SQUARE
                                            OPENED       FOOTAGE           DEPOSITS              NET BOOK VALUE
                                            ------       -------           --------              --------------
                                                                                  (IN THOUSANDS)
<S>                                          <C>          <C>              <C>                     <C>
Main Office:
127 North Street
Elkton, Maryland                             1969         3,500            $  53,034               $     265

Loan Center
135 North Street
Elkton, MD  21922                            1995  (2)    3,000                   --                      68

Branch Offices:
108 North East Plaza
North East, Maryland  21901                  1975  (1)    2,000               13,742                      36

Big Elk Office
108 Big Elk Mall
Elkton, MD 21922                             1977  (3)    1,200                7,701                       9

Susquehanna Building
200 North Street
Elkton, Maryland 21922                       1999  (4)    2,282                   --                     592
                                                                           ---------               ---------
                                                                           $  74,477               $     970
                                                                           =========               =========
<FN>
-------------
(1)  Original lease signed 11/74 for 20 years with five year renewals. Currently
     paying $1,540 per month. A lease  extension was signed 1/16/95 for 10 years
     with 5 year renewals.
(2)  Original  lease signed  5/23/95 for five years with three  successive  five
     year renewals. Currently paying $1,785 per month.
(3)  Lease  assumed  as a result of  branch  purchase  on  September  30,  1999.
     Currently paying $1,568 per month until March 2003.
(4)  Building  acquired  by Cecil  Federal  as a result  of the  acquisition  of
     Susquehanna  Branches  in  September  1999.  The  Bank  plans  to hold  the
     property, which is adjacent to its main office, for future expansion.
</FN>
</TABLE>

     The net book value of Cecil's office furniture, fixtures, and equipment was
$422,126 as of December 31, 2000.


                                       40
<PAGE>

     COLUMBIAN.  The following table sets forth certain  additional  information
regarding Columbian's office facilities as of December 31, 2000.
<TABLE>
<CAPTION>
                                             YEAR           SQUARE
                                            OPENED          FOOTAGE        DEPOSITS              NET BOOK VALUE
                                            ------          -------        --------              --------------
                                                                                    (IN THOUSANDS)
<S>                                         <C>             <C>            <C>                      <C>
Main Office:
303-307 St. John Street
Havre de Grace, Maryland  21078             1970            3,335          $ 20,668                 $    105

Route 40 Office:
1609 Pulaski Hwy
Havre de Grace, Maryland                    2000            2,500               768                      753
                                                                           ---------                --------
                                                                           $  21,436                $    858
                                                                           =========                ========
</TABLE>

     The net book value of Columbian's office furniture,  fixtures and equipment
was $252,817 as of December 31, 2000.

ITEM 3.  LEGAL PROCEEDINGS
--------------------------

     There are currently no pending legal  proceedings to which the Company is a
party or to which any of its property is subject, although from time to time the
Banks are involved in routine legal proceedings occurring in the ordinary course
of business.

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

     No matters were  submitted to a vote of security  holders during the fourth
quarter of fiscal 1999.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
-----------------------------------------------------------------

     The information  contained under the section captioned "Market and Dividend
Information" in the Annual Report is incorporated herein by reference.


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
------------------------------------------------------------------

     The information contained in the section captioned "Management's Discussion
and Analysis of Financial  Condition  and Results of  Operations"  in the Annual
Report  filed as  Exhibit  13 to this  Form  10-KSB  is  incorporated  herein by
reference.

                                       41

<PAGE>

ITEM 7.  FINANCIAL STATEMENTS
-----------------------------


                       [LETTERHEAD OF STEGMAN & COMPANY]


                          INDEPENDENT AUDITORS' REPORT



To the Board of Directors and Stockholders
Cecil Bancorp, Inc.
Elkton, Maryland


     We have  audited  the  accompanying  consolidated  statement  of  financial
condition of Cecil Bancorp, Inc. and subsidiaries (the "Company") as of December
31,  2000,  and the  related  consolidated  statements  of  income,  changes  in
stockholders' equity, and cash flows for the year then ended. These consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements  based  on  our  audit.  The  accompanying   consolidated   financial
statements  of the Company as of  December  31, 1999 and for the year then ended
were audited by other independent  auditors whose report dated February 23, 2000
expressed an unqualified opinion on those statements.

     We conducted our audit in  accordance  with  auditing  standards  generally
accepted in the United States.  Those standards require that we plan and perform
the  audit  to  obtain  reasonable  assurance  about  whether  the  consolidated
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  consolidated  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
audit provides a reasonable basis for our opinion.

     In our  opinion,  the  accompanying  consolidated  statement  of  financial
condition as of December  31, 2000 and the related  consolidated  statements  of
income,  changes in stockholders'  equity and cash flows for the year then ended
present fairly, in all material respects,  the financial position of the Company
as of December 31, 2000 and the results of its operations and cash flows for the
year then ended in conformity with accounting  principles  generally accepted in
the United States.


                                                            /s/Stegman & Company



Baltimore, Maryland
February 2, 2001

                                       42
<PAGE>

                     [LETTERHEAD OF SIMON MASTER & SIDLOW]



BOARD OF DIRECTORS AND STOCKHOLDERS
CECIL BANCORP, INC. AND SUBSIDIARIES
ELKTON, MARYLAND



                          Independent Auditors' Report
                          ----------------------------



     We have  audited the  accompanying  consolidated  statements  of  financial
condition of CECIL BANCORP,  INC. AND  SUBSIDIARIES  as of December 31, 1999 and
1998 and the related consolidated statements of income and comprehensive income,
stockholders'  equity and cash flows for the years then ended.  These  financial
statements  are  the  responsibility  of  the  Corporation's   management.   Our
responsibility  is to express an opinion of these financial  statements based on
our audits.

     We conducted  our audits in  accordance  with  generally  accepted  auditng
standards. Those standards require that we plan and perform the audits 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  condition of CECIL
BANCORP,  INC. AND SUBSIDIARIES as of December 31, 1999 and 1998 and the results
of its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

     As discussed in Note 22 to the financial statements,  an error resulting in
an overallotment of previously reported  compensation and benefits expense as of
December 31, 1998 was discovered during the current year. Accordingly,  the 1998
financial statements have been restated to correct the error.


                                                /s/ Simon, Master & Sidlow, P.A.



February 23, 2000


                                       43
<PAGE>

CECIL BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 2000 AND 1999

<TABLE>
<CAPTION>
  ASSETS                                                                   2000                 1999
                                                                           ----                 ----

<S>                                                                   <C>                   <C>
   Cash and due from banks                                            $   1,530,547         $  2,328,170
   Interest bearing deposits with banks                                   2,350,059            3,653,911
   Federal funds sold                                                            --               50,000
   Investment securities:
     Securities held-to-maturity (fair value of $5,295,467
     in 2000 and $6,252,081 in 1999)                                      5,335,289            6,550,880
   Securities available-for-sale at fair value                            2,612,882            3,181,992

   Loans receivable, net                                                102,581,572           92,098,839
   Property and equipment - net                                           2,501,931            2,008,791
   Real estate owned                                                        254,994              371,178
   Stock in Federal Home Loan Bank of Atlanta - at cost                     905,000              657,800
   Accrued interest receivable                                              824,683              618,702
   Goodwill, net                                                          2,463,711            2,745,278
   Other assets                                                             600,032              658,314
                                                                       ------------         ------------
       TOTAL ASSETS                                                    $121,960,700         $114,923,855
                                                                       ============         ============

  LIABILITIES AND STOCKHOLDERS' EQUITY
  LIABILITIES:
   Savings deposits                                                    $ 95,913,387         $101,217,544
   Advance payments by borrowers for property
     taxes and insurance                                                    681,853              777,509
   Employee stock ownership plan debt                                       154,032              192,540
   Other liabilities                                                        545,142              529,802
   Advances from Federal Home Loan Bank of Atlanta                       13,250,000            1,500,000
                                                                       ------------         ------------

       Total liabilities                                                110,544,414          104,217,395
                                                                       ------------         ------------

  STOCKHOLDERS' EQUITY:
   Common  stock,  $.01 par  value;  authorized  4,000,000
     shares,  issued  and outstanding 621,488 shares in
     2000 and 615,742 shares in 1999                                          6,215                6,158
   Additional paid in capital                                             5,046,082            4,898,025
   Employee stock ownership plan debt                                      (154,032)            (192,540)
   Deferred compensation - Management Recognition Plan                      (22,565)             (45,383)
   Retained earnings                                                      6,543,202            6,063,589
   Accumulated other comprehensive loss, net                                 (2,616)             (23,389)
                                                                       ------------         -------------

       Total stockholders' equity                                        11,416,286           10,706,460
                                                                       ------------         ------------

       TOTAL LIABILITIES AND STOCKHOLDERS'
         EQUITY                                                        $121,960,700         $114,923,855
                                                                       ============         ============
</TABLE>

                                       44
<PAGE>
CECIL BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
<TABLE>
<CAPTION>
                                                                           2000                 1999
                                                                           ----                 ----
<S>                                                                      <C>                  <C>
  INTEREST INCOME:
   Interest and fees on loans                                            $8,528,703           $6,769,717
   Interest on investment securities                                        515,080              532,116
   Dividends on Federal Home Loan Bank stock                                 62,526               49,604
   Other interest-earning assets                                            256,746              423,788
                                                                         ----------           ----------

         Total interest income                                            9,363,055            7,775,225
                                                                         ----------           ----------

  INTEREST EXPENSE:
   Interest expense on deposits                                           4,170,035            3,828,321
   Interest expense on FHLB advances                                        705,275              166,172
                                                                         ----------           ----------

         Total interest expense                                           4,875,310            3,994,493
                                                                         ----------           ----------

  NET INTEREST INCOME                                                     4,487,745            3,780,732

  PROVISION FOR LOAN LOSSES                                                 305,000              125,000
                                                                         ----------           ----------

  NET INTEREST INCOME AFTER PROVISION
   FOR LOAN LOSSES                                                        4,182,745            3,655,732
                                                                         ----------           ----------

  NONINTEREST INCOME:
   Checking account fees                                                    281,788              201,898
   ATM fees                                                                  84,149               57,091
   Gain on sale of loans                                                         --               23,971
   Commission income                                                        115,233               76,787
   Other                                                                     92,319               57,695
                                                                         ----------           ----------

         Total noninterest income                                           573,489              417,442
                                                                         ----------           ----------

  NONINTEREST EXPENSE:
   Salaries and employee benefits                                         1,739,472            1,504,892
   Occupancy expense                                                        202,505              143,844
   Equipment and data processing expense                                    448,349              336,794
   SAIF deposit insurance premium                                            70,633               85,338
   Branch acquisition expense                                                    --               94,560
   Goodwill amortization                                                    281,567               70,391
   Other                                                                    827,042              692,279
                                                                         ----------           ----------

         Total noninterest expense                                        3,569,568            2,928,098
                                                                         ----------           ----------

  INCOME BEFORE INCOME TAXES                                              1,186,666            1,145,076

  INCOME TAX EXPENSE                                                        467,353              474,838
                                                                         ----------           ----------

  NET INCOME                                                             $  719,313           $  670,238
                                                                         ==========           ==========

  Basic net income per common share                                           $1.20                $1.14
                                                                              =====                =====

  Diluted net income per common share                                         $1.18                $1.12
                                                                              =====                =====
</TABLE>

                                       45
<PAGE>


CECIL BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED  STATEMENTS OF CHANGES IN STOCKHOLDERS'  EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
<TABLE>
<CAPTION>
                                                                                 Deferred
                                                                     Employee   Compensation-             Accumulated
                                                       Additional      Stock     Management                 Other         Total
                                            Common      Paid-in      Ownership  Recognition   Retained  Comprehensive  Stockholders'
                                            Stock       Capital        Plan        Plan       Earnings   Income (Loss)   Equity
                                            ------     ----------    ---------  -----------   --------  -------------- ------------
<S>                                         <C>       <C>           <C>         <C>          <C>           <C>         <C>
  BALANCES AT JANUARY 1, 1999               $6,065    $4,735,470    $(231,048)  $(80,676)    $5,628,467    $ 15,924    $10,074,202

   Comprehensive income:
     Net income                               -             -            -          -           670,238        -           670,238
     Other comprehensive loss, net of
       related income tax effect              -             -            -          -              -        (39,313)       (39,313)
                                                                                                                       -----------
         Total comprehensive income           -             -            -          -              -           -           630,925
   Cash dividends paid                        -             -            -          -          (235,116)       -          (235,116)
   Repayment of ESOP debt                     -             -          38,508       -              -           -            38,508
   Release of ESOP shares                     -           38,508         -          -              -           -            38,508
   Deferred compensation amortization         -             -            -        35,293           -           -            35,293
   Stock options exercised                      93        99,099         -          -              -           -            99,192
   Release of vested MRP shares               -           24,948         -          -              -           -            24,948
                                            ------    ----------    ---------   --------     ----------    --------    -----------

  BALANCES AT DECEMBER 31, 1999              6,158     4,898,025     (192,540)   (45,383)     6,063,589     (23,389)    10,706,460

   Comprehensive income:
     Net income                               -            -             -          -           719,313        -           719,313
     Other comprehensive income, net of
       related income tax effect              -            -             -          -              -         20,773         20,773
                                                                                                                       -----------
         Total comprehensive income           -            -             -          -              -           -           740,086
   Cash dividends paid                        -            -             -          -          (239,700)       -          (239,700)
   Repayment of ESOP debt                     -            -           38,508       -              -           -            38,508
   Release of ESOP shares                     -           38,508         -          -              -           -            38,508
   Deferred compensation amortization         -            -             -        37,352           -           -            37,352
   Funding of Management Recognition Plan     -            -             -       (14,534)          -           -           (14,534)
   Stock purchased by dividend
     reinvestment plan                          37        71,133         -          -              -           -            71,170
   Stock options exercised                      20        21,980         -          -              -           -            22,000
   Release of vested MRP shares               -           16,436         -          -              -           -            16,436
                                            ------    ----------    ---------   --------     ----------    --------    -----------

  BALANCES AT DECEMBER 31, 2000             $6,215    $5,046,082    $(154,032)  $(22,565)    $6,543,202    $ (2,616)   $11,416,286
                                            ======    ==========    =========   ========     ==========    ========    ===========
</TABLE>

                                       46
<PAGE>



CECIL BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED  STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
<TABLE>
<CAPTION>
                                                                           2000                 1999
                                                                           ----                 ----
<S>                                                                     <C>                  <C>
  OPERATING ACTIVITIES:
    Adjustments  to  reconcile  net  income to net cash
    provided  by  operating activities:
      Net income                                                       $    719,313         $    670,238
      Depreciation and amortization                                         472,006              231,042
      Provision for loan losses                                             305,000              125,000
      Gain on sale of loans                                                      --              (23,971)
      Deferred income taxes                                                 (43,404)            (117,711)
      Stock dividends received                                              (85,591)            (151,787)
      Distribution from management recognition plan trust                    53,788               60,241
      Origination of loans held for sale                                         --           (3,220,300)
      Proceeds from sales of loans held for sale                                 --            1,149,335
      Net change in:
        Accrued interest receivable and other assets                       (214,409)            (472,207)
        Other liabilities                                                    15,340             (142,936)
                                                                       ------------         ------------

             Net cash provided (used) by operating activities             1,308,851           (1,657,634)
                                                                       ------------         ------------

  CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of investment securities available for sale                         --           (8,086,172)
    Proceeds from maturities, calls and principal payments
      of investment securities held-to-maturity                           1,240,556            8,363,438
    Proceeds from maturities, calls and principal payments
      of investment securities available-for-sale                           675,474            1,287,175
    Proceeds from sale of stock in Federal Home Loan Bank                        --               27,700
    Purchase of stock in Federal Home Loan Bank                            (247,200)             (13,200)
    Net increase in loans                                               (10,887,450)         (12,996,150)
    Proceeds from sales of foreclosed real estate                           214,242               23,425
    Purchase of real estate owned                                                --             (206,861)
    Purchases of property and equipment - net                              (683,579)            (164,568)
                                                                       ------------         ------------

              Net cash used by investing activities                      (9,687,957)         (11,765,213)
                                                                       ------------         ------------

  CASH FLOWS FROM FINANCING ACTIVITIES:
    Net decrease in deposits                                             (5,304,157)          (8,633,350)
    Branch acquisition                                                           --           18,417,620
    Decrease in advance payments by borrowers
      for property taxes and insurance                                      (95,656)             (44,116)
    Proceeds from issuance of common stock                                   93,170               99,192
    Net increase (decrease) in advances from
      Federal Home Loan Bank                                             11,750,000             (250,000)
    Unearned ESOP compensation decrease                                      38,508               38,508
    Funding of management recognition plan                                  (14,534)                  --
    Payments of cash dividends                                             (239,700)            (235,116)
                                                                       ------------         ------------

              Net cash provided by financing activities                   6,227,631            9,392,738
                                                                       ------------         ------------
</TABLE>


                                       47
<PAGE>


CECIL BANCORP, INC. AND SUBSIDIARIES

Consolidated  Statements of Cash Flows  (Continued)
For the Years Ended December 31, 2000 and 1999
<TABLE>
<CAPTION>
                                                                           2000                 1999
                                                                           ----                 ----
<S>                                                                     <C>                  <C>
  DECREASE IN CASH AND CASH EQUIVALENTS                                 $(2,151,475)         $(4,030,109)

  CASH AND CASH EQUIVALENTS
   AT BEGINNING OF YEAR                                                   6,032,081           10,062,190
                                                                        -----------          -----------

  CASH AND CASH EQUIVALENTS
   AT END OF YEAR                                                       $ 3,880,606          $ 6,032,081
                                                                        ===========          ===========


  Supplemental disclosure of cash flows information:
   Cash paid for income taxes                                           $   594,396          $   644,929
   Cash paid for interest                                                 4,875,214            3,994,493

  Supplemental disclosure of noncash investing and financing
     activities:
   Conversion of loans receivable to real estate owned                      $99,717              $   -
                                                                            =======              =======

  Cash received in branch acquisition:
   Assumption of savings deposits liabilities                             $   -              $22,176,092
   Loans receivable obtained                                                  -                  (71,690)
   Office properties, equipment and leasehold
     improvements obtained                                                    -                 (871,113)
   Goodwill obtained                                                          -               (2,815,669)
                                                                          ---------          -----------

  Net cash received in branch acquisition                                 $   -              $18,417,620
                                                                          =========          ===========

</TABLE>

                                       48
<PAGE>

                      CECIL BANCORP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


1. NATURE OF OPERATIONS

     Cecil  Bancorp,  Inc.  (the  Corporation)  is a  savings  and loan  holding
company,  and is the parent company of Cecil Federal  Savings Bank ("Cecil") and
Columbian  Bank  ("Columbian")  (the  "Banks").  Cecil and Columbian  operate as
separate entities. The consolidated financial statements include the accounts of
the Corporation, the Banks, and Cecil's wholly owned subsidiaries, Cecil Service
Corporation and Cecil Financial Services Corporation.

     The Banks are members of the Federal  Home Loan Bank System  (FHLB) and are
subject to regulation by the Office of Thrift  Supervision  (OTS), a division of
the U.S. Government Department of Treasury. As members of this System, the Banks
maintain a required  investment in capital stock of the FHLB. The Banks maintain
insurance  on savings  deposits  within  certain  limitations  as members of the
Savings  Association  Insurance Fund (SAIF) which is administered by the Federal
Deposit Insurance Corporation (FDIC).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Consolidation and Basis of Presentation
     ---------------------------------------

          The  consolidated  financial  statements  include the  accounts of the
Corporation and its two subsidiaries.  All significant intercompany transactions
and balances have been eliminated.  Certain  reclassifications have been made to
prior  years'  consolidated   financial   statements  to  conform  to  the  2000
presentation.  The accounting and reporting policies of the Corporation  conform
to  accounting  principles  generally  accepted  in the  United  States  and the
prevailing practices within the banking industry.

     Use of Estimates
     ----------------

          The  preparation  of  the  financial  statements  in  conformity  with
accounting   principles   generally  accepted  in  the  United  States  requires
management to make estimates and assumptions that affect the reported amounts of
assets and  liabilities  and disclosure of contingent  assets and liabilities at
the date of the financial  statements  and the reported  amounts of revenues and
expenses  during the reporting  period.  Actual  results could differ from those
estimates.

     Statement of Cash Flows
     -----------------------

          The   Corporation  has  defined  cash  and  cash  equivalents  in  the
statements  of  cash  flows  as  those  amounts  included  in  the  consolidated
statements of condition  captions  "cash and due from banks",  "interest-bearing
deposits with banks" and "federal funds sold".


                                       49
<PAGE>

     Investment Securities
     ---------------------

          Securities  are classified as held to maturity when management has the
positive intent and ability to hold the securities to maturity.  Securities held
to maturity, when present, are carried at amortized cost.

          Securities   not  classified  as  held  to  maturity  or  trading  are
classified as available for sale.  Securities  available for sale are carried at
fair  value  with  unrealized  gains  and  losses  reported  separately  through
accumulated other comprehensive income, net of tax.

          Interest  and  dividends  on  securities,  including  amortization  of
premiums  and  accretion of  discounts,  are  included in interest  income.  The
adjusted cost of specific  securities sold is used to compute gains or losses on
sales.

     Loans
     -----

          Loans are generally reported at the principal amount outstanding,  net
of  unearned  income.  Loans held for sale or  securitization  are valued at the
lower of carrying cost or fair value.

          Interest  income is recognized on an accrual basis.  Loan  origination
fees, certain direct costs and unearned discounts are amortized as an adjustment
to the  yield  over the term of the loan.  Loan  commitment  fees are  generally
deferred  and  amortized  into fee  income  on a  straight-line  basis  over the
commitment  period.  Other  credit-related  fees,  including  letter and line of
credit fees and loan syndication fees, are recognized as fee income when earned.

          Commercial  loans and loans  secured by real estate are  designated as
nonperforming  when either  principal  or interest  payments are 90 days or more
past due,  terms are  renegotiated  below market  levels,  or when an individual
analysis of a  borrower's  creditworthiness  indicates  that a credit  should be
placed  on  nonperforming  status,  unless  the loan or  lease  is  sufficiently
collateralized  such that full  repayment  of both  principal  and  interest  is
assured  and  is in  the  process  of  collection.  When a  loan  is  placed  on
nonperforming  status,  uncollected  interest  accrued in prior years is charged
against the allowance for loan losses, while uncollected interest accrued in the
current year is charged against interest income. Future interest income may only
be recorded on a cash basis after  recovery of principal is reasonably  assured.
Commercial  loans and loans secured by real estate are generally  charged off to
the extent  principal  and interest due exceed the net  realizable  value of the
collateral no later than when the loan become 180 days past due.  Consumer loans
are subject to mandatory  charged-off  at a specified  delinquency  date and are
usually not classified as nonperforming prior to being charged off.

     Allowance for Loan Losses
     -------------------------

          The  allowance  for loan  losses  is  maintained  at a level  believed
adequate by management to absorb  probable losses inherent in the loan portfolio
and is based on the size and current risk characteristics of the loan portfolio,
an  assessment  of  individual  problem  loans,   actual  and  anticipated  loss
experience,  current  economic  events in specific  industries and  geographical
areas, and other pertinent  factors  including  regulatory  guidance and general
economic conditions.  Determination of the allowance is inherently subjective as
its requires significant estimates, including the amounts and timing of expected
future cash flows on impaired  loans,  estimated  losses on pools of homogeneous
loans based on historical loss experience and  consideration of economic trends,
all of which may be susceptible to significant  change.  Loan losses are charged
off against the allowance, while recoveries


                                       50
<PAGE>


of amounts previously charged off are credited to the allowance. A provision for
loan losses is charged to operations based on management's  periodic  evaluation
of the factors previously  mentioned,  as well as other pertinent factors.  When
loans are identified for sale, attributed loan loss allowance is reclassified as
a direct reduction to the carrying value of the loans.

     Property and Equipment
     ----------------------

          Properties   and  equipment  are  stated  at  cost  less   accumulated
depreciation and amortization.  Buildings and equipment, including costs related
to  developing  or obtaining  software for internal  use, are  depreciated  on a
straight-line  basis  over  their  useful  lives.   Leasehold  improvements  are
amortized over the lives of the leases.  Maintenance  and repairs are charged to
expense as  incurred,  while  improvements  which  extend  the  useful  life are
capitalized and depreciated over the remaining life.

     Real Estate Owned
     -----------------

          Real  estate owned  represents  assets that have been acquired through
foreclosure. These assets are recorded on the books of the Banks at the lower of
cost or fair value less  estimated  costs to dispose  and are  included in other
assets.

     Goodwill
     --------

          Goodwill  represents  the premium  paid in excess of the fair value of
assets and liabilities acquired in a branch purchase transaction. These premiums
are being amortized on a straight line basis over 10 years. On a periodic basis,
management  reviews goodwill and other intangible  assets to determine if events
or changes in  circumstances  indicate the carrying  value of such assets is not
recoverable, in which case an impairment charge would be recorded.  Amortization
expense  related to this  goodwill was $281,567 and $70,391 for the years ending
December 31, 2000 and 1999, respectively.

     Income Taxes
     ------------

          The  Corporation  and its  subsidiaries  file a  consolidated  federal
income tax  return.  The  provision  for income  taxes is based upon  income for
financial statement purposes,  rather than amounts reported on the Corporation's
income tax return.

          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.  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.  The effect on deferred tax
assets  and  liabilities  of a change  in tax rates is  recognized  as income or
expense in the period that includes the enactment date.


                                       51
<PAGE>


     Loan Servicing
     --------------

          The cost of mortgage  servicing  rights is amortized in proportion to,
and over the period of, estimated net servicing revenue.  Impairment of mortgage
servicing  rights is  assessed  based on the fair  value of those  rights.  Fair
values are  estimated  using  discounted  cash flows  based on a current  market
interest  rate.  The amount of impairment  recognized is the amount by which the
capitalized mortgage servicing rights exceed their fair value.

          When participating interests in loans sold have an average contractual
interest rate,  adjusted for normal servicing fees, that differs from the agreed
yield to the  purchaser,  gains or losses are  recognized  equal to the  present
value of such differential over the estimated  remaining life of such loans. The
resulting  "excess  servicing  receivable"  or "deferred  servicing  revenue" is
amortized  over the  estimated  life using a method  approximating  the interest
method.

          Quoted  market  prices  are not  available  for the  excess  servicing
receivables. Thus, the excess servicing receivables and the amortization thereon
are periodically  evaluated in relation to estimated  future servicing  revenue,
taking into  consideration  changes in interest rates,  current repayment rates,
and expected future cash flows. The Corporation  evaluates the carrying value of
the excess  servicing  receivables by estimating the future  servicing income of
the  excess  servicing  receivables  based  on  management's  best  estimate  of
remaining loan lives and discounted at the original discount rate.

     Stock-Based Compensation
     ------------------------

          The  Corporation's  stock-based  compensation  plans are accounted for
based on the  intrinsic  value method set forth in Accounting  Principles  Board
Opinion  No.  25,  Accounting  for  Stock  Issued  to  Employees,   and  related
interpretations.  Compensation  expense  for  stock  options  is  generally  not
recognized if the exercise price of the option equals or exceeds the fair market
value of the stock on the date of grant.

     Advertising
     -----------

          Advertising  costs are expensed as incurred.  Advertising  expense was
$27,661  and  $50,843  for  the  years  ended   December   31,  2000  and  1999,
respectively.

     Segment Information
     -------------------

          The  Corporation  is in one  business  segment,  the  savings and loan
banking business,  and offers banking products to customers in Cecil and Harford
Counties,   Maryland.   Accordingly,   management  evaluates  the  Corporation's
performance as a whole and does not allocate  resources based on the performance
of different lending or transaction activities.

     Earnings Per Share
     ------------------

          Basic  earnings per share (EPS) is  calculated  by dividing net income
available to common stockholders by the weighted average number of common shares
outstanding during the period less unallocated ESOP shares. Diluted earnings per
share is calculated by dividing such net income by the weighted  average  number
of  common  shares  used to  compute  basic EPS plus the  incremental  amount of
potential common stock determined by the Treasury stock method.


                                       52
<PAGE>


     Comprehensive Income
     --------------------

          The  Corporation  reports  comprehensive  income  which  includes  net
income,  as well as other  changes in  stockholders'  equity  that  result  from
transactions  and  economic  events  other  than those  with  stockholders.  The
Corporation's  only significant  element of  comprehensive  income is unrealized
gains and losses on available-for-sale securities.

3. RECENT ACCOUNTING PRONOUNCEMENTS

     Accounting for Derivative Instruments and Hedging Activities
     ------------------------------------------------------------

          Statement of Financial  Accounting  Standard ("SFAS"),  Accounting for
Derivative  Instruments  and  Hedging  Activities,  as amended by SFAS No.  137,
Accounting for Derivative  Instruments and Hedging  Activities - Deferral of the
Effective  Date of FAS Statement No. 133,  requires  derivative  instruments  be
carried at fair value on the balance  sheet.  The  statement  continues to allow
derivative instruments to be used to hedge various risks and sets forth specific
criteria  to be used  to  determine  when  hedge  accounting  can be  used.  The
statement  also provides for  offsetting  changes in fair value or cash flows of
both the  derivative  and the hedged  asset or  liability  to be  recognized  in
earnings  in the same  period;  however,  any changes in fair value or cash flow
that represent the ineffective  portion of a hedge are required to be recognized
in earnings and cannot be deferred. For derivative instruments not accounted for
as hedges, changes in fair value are required to be recognized in earnings.

          The  Corporation  plans to adopt the provisions of this statement,  as
amended,  for its quarterly and annual reporting  beginning January 1, 2001, the
statement's  effective date. These statements  should not have a material impact
on the Corporation's results of operations.

     Accounting for Transfers and Servicing of Financial
     ---------------------------------------------------
        Assets and Extinguishments of Liabilities
        -----------------------------------------

          SFAS  No. 140,  Accounting  for  Transfers  and Servicing of Financial
Assets and  Extinguishments  of  Liabilities,  was issued in September  2000 and
replaces SFAS No. 125. The guidance in SFAS No. 140,  while not changing most of
the  guidance  originally  issued in SFAS No.  125,  revises the  standards  for
accounting  for  securitizations  and other  transfers of  financial  assets and
collateral and requires certain  additional  disclosures  related to transferred
assets.

          Certain  provisions  of the  statement  related  to  the  recognition,
reclassification  and  disclosure of  collateral,  as well as the  disclosure of
securitization  transactions,  became  effective  for the  Corporation  for 2000
year-end  reporting.  Other provisions  related to the transfer and servicing of
financial   assets  and   extinguishments   of  liabilities  are  effective  for
transactions occurring after March 31, 2001.

          Based  on current  circumstances  and after  consideration  of planned
revisions  to  existing  securitization   agreements  to  conform  them  to  the
requirements  of SFAS No. 140,  management  believes the  application of the new
rules  will  not  have  a  material  impact  on  the  Corporation's  results  of
operations, financial position or liquidity.


                                       53
<PAGE>


4. INVESTMENT SECURITIES

          Investment   securities  have  been  classified  in  the  consolidated
statements of financial position according to management's intent.

         Investment  securities at December 31, 2000 and 1999 are  summarized as
follows:
<TABLE>
<CAPTION>
                                                                                                 2000
                                                            -------------------------------------------------------------
                                                                                Gross            Gross         Estimated
                                                            Amortized         Unrealized        Unrealized       Fair
                                                                Cost            Gains            Losses          Value
                                                            -----------       ----------       -----------    -----------
<S>                                                         <C>                 <C>               <C>         <C>
Available for Sale:
   U. S. Treasury Securities and obligations
     of U. S. Government and Federal agencies                $  500,000            $ -             $  780      $  499,220
   Mutual funds                                                 918,052              -              3,482         914,570
   Mortgage-backed securities                                 1,201,496             713             3,117       1,199,092
                                                             ----------            ----            ------      ----------

                                                             $2,619,548            $713            $7,379      $2,612,882
                                                             ==========            ====            ======      ==========
<CAPTION>
                                                                                                 1999
                                                            -------------------------------------------------------------
                                                                                Gross            Gross         Estimated
                                                            Amortized         Unrealized        Unrealized       Fair
                                                                Cost            Gains            Losses          Value
                                                            -----------       ----------       -----------    -----------
<S>                                                         <C>                 <C>               <C>         <C>
Available for Sale:
   U. S. Treasury securities and obligations
     of U. S. Government and Federal agencies                $  500,000       $   -               $17,810      $  482,190
   Mutual funds                                                 860,248           -                14,239         846,009
   Mortgage-backed securities                                 1,859,850           -                 6,057       1,853,793
                                                             ----------       ---------           -------      ----------

                                                             $3,220,098       $   -               $38,106      $3,181,992
                                                             ==========       =========           =======      ==========

<CAPTION>
                                                                                                 2000
                                                            -------------------------------------------------------------
                                                                                Gross            Gross         Estimated
                                                            Amortized         Unrealized        Unrealized       Fair
                                                                Cost            Gains            Losses          Value
                                                            -----------       ----------       -----------    -----------
<S>                                                         <C>                 <C>               <C>         <C>
Held to Maturity:
   U. S. Treasury securities and obligations
     of U. S. Government and Federal agencies                $4,504,722         $26,773           $53,681      $4,477,814
   Mortgage-backed securities                                   830,567           6,849            19,763         817,653
                                                             ----------         -------           -------      ----------

                                                             $5,335,289         $33,622           $73,444      $5,295,467
                                                             ==========         =======           =======      ==========
</TABLE>

                                       54
<PAGE>
<TABLE>
<CAPTION>
                                                                                                 1999
                                                            -------------------------------------------------------------
                                                                                Gross            Gross         Estimated
                                                            Amortized         Unrealized        Unrealized       Fair
                                                                Cost            Gains            Losses          Value
                                                            -----------       ----------       -----------    -----------
<S>                                                         <C>                 <C>               <C>         <C>
Held to Maturity:
   U. S. Treasury securities and obligations
     of U. S. Government and Federal agencies                $5,479,757       $   -              $276,906      $5,202,851
   Mortgage-backed securities                                 1,071,123           -                21,893       1,049,230
                                                             ----------       --------           --------      ----------

                                                             $6,550,880       $   -              $298,799      $6,252,081
                                                             ==========       ========           ========      ==========
</TABLE>

     The amortized costs and estimated fair values U. S. Treasury securities and
obligations of the U.S.  Government and Federal agencies at December 31, 2000 by
contractual  maturities are shown below.  Expected  maturities  will differ from
contractual  maturities  because  borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties:
<TABLE>
<CAPTION>
                                                                                                           Estimated
                                                                                     Amortized                Fair
                                                                                       Cost                   Value
                                                                                    -----------            ----------

         <S>                                                                        <C>                    <C>
         Due in one year or less                                                    $   998,386            $1,002,813
         Due in one year through five years                                             300,000               298,394
         Due after five years through ten years                                       1,225,000             1,218,859
         Due after ten years                                                          2,481,336             2,456,968
                                                                                     ----------            ----------

                                                                                     $5,004,722            $4,977,034
                                                                                     ==========            ==========
</TABLE>

          There  were no sales of investment  securities  during the years ended
December 31, 2000 and 1999.

5. LOANS RECEIVABLE

          The Company's lending activities are predominantly  conducted in Cecil
and Harford  Counties in the State of Maryland.  The ability and  willingness of
loan borrowers to honor their  repayment  commitments is generally  dependent on
the health of the real estate economic  sector in the borrowers  geographic area
and the general economy.

          A summary of loans receivable follows:
<TABLE>
<CAPTION>
                                                                                         2000                     1999
                                                                                     ------------            ------------
         <S>                                                                          <C>                     <C>
         First mortgage loans:
           1 - 4 dwelling units                                                      $ 65,758,249             $61,353,811
           5 or more                                                                      962,694                 747,635
           Nonresidential                                                               6,299,554               5,138,128
           Land                                                                         3,924,769               1,690,448
           Construction                                                                 6,359,503               8,618,861
                                                                                     ------------             -----------
                                                                                       83,304,769              77,548,883
                                                                                     ------------             -----------

                                       55
<PAGE>

         Other loans:
           Home equity loans                                                         $  8,137,929             $ 6,936,416
           Commercial loans                                                             5,335,371               4,172,750
           Home improvement loans                                                           2,488                  11,152
           Consumer loans                                                               7,307,995               7,677,779
           Loans on savings deposits                                                      883,068                 819,751
           Education                                                                       41,167                  47,419
                                                                                     ------------             -----------
                                                                                       21,708,018              19,665,267
                                                                                     ------------             -----------

                  Total loans                                                         105,012,787              97,214,150

         Less:
           Undisbursed proceeds on loans in process                                    (1,612,667)             (4,335,592)
           Deferred loan fees                                                            (399,823)               (345,204)
           Allowance for loan losses                                                     (418,725)               (434,515)
                                                                                     ------------             -----------

                                                                                     $102,581,572             $92,098,839
                                                                                     ============             ===========
</TABLE>

          The  Banks  serviced  loans for  others in the  approximate  amount of
$13,100,000 and $13,776,000 in 2000 and 1999, respectively.

          An  analysis  of the  allowance  for loan  losses for the years  ended
December 31, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
                                                                                       2000                        1999
                                                                                     ---------                  ---------

         <S>                                                                          <C>                        <C>
         Balance at beginning of period                                               $434,515                   $402,309
         Provision charged to operations                                               305,000                    125,000
         Charge-offs, net                                                             (320,790)                   (92,794)
                                                                                      --------                  ---------

         Balance at end of period                                                     $418,725                   $434,515
                                                                                      ========                   ========
</TABLE>
          Commercial  and commercial  real estate loans are considered  impaired
when it is  probable  that the  Corporation  will not collect all amounts due in
accordance  with  the  contractual   terms  of  the  loan.  Except  for  certain
restructured  loans,  impaired  loans are loans that are on  nonaccrual  status.
Loans  that are  returned  to  accrual  status  are no longer  considered  to be
impaired.

          The allowance for loan losses includes  impairment reserves related to
loans that are identified as impaired,  which are based on discounted cash flows
using the loan's  effective  interest  rate, or the fair value of the collateral
for  collateral-dependent  loans, or the observable market price of the impaired
loan.  When  foreclosure  is probable,  impairment is measured based on the fair
value of the  collateral.  Loans that  experience  insignificant  payment delays
(less than 60 days) and  insignificant  shortfalls in payment amounts (less than
10%) generally are not classified as impaired.  Restructured  loans are reported
as impaired in the year of restructuring.  Thereafter, such loans may be removed
from the  impaired  loan  disclosure  if the loans were  paying a market rate of
interest at the time of  restructuring  and are  performing in  accordance  with
their  renegotiated  terms.  A loan is  classified as real estate owned when the
Corporation has taken possession of the collateral, regardless of whether formal
foreclosure proceedings take place.


                                       56
<PAGE>

          The following table sets forth  nonperforming loans as of December 31,
2000 and 1999.  Nonperforming loans are defined as loans which are on nonaccrual
status and loans  which have been  restructured.  Interest  income  foregone  on
nonperforming loans totaled $30,195 and $57,588 for the years ended December 31,
2000 and 1999,  respectively.  Interest income  recognized on the  nonperforming
loans approximated $28,905 and $47,001 for the years ended December 31, 2000 and
1999, respectively.
<TABLE>
<CAPTION>
                                                                                    2000                  1999
                                                                                  --------              --------

              <S>                                                                 <C>                   <C>
              Nonaccrual loans                                                    $397,000              $874,000
              Restructured loans                                                    -                     -
                                                                                  --------              --------


                  Total nonperforming loans                                       $397,000              $874,000
                                                                                  ========              ========

              Accruing loans past due 90 days or more                             $242,000              $331,000
                                                                                  ========              ========
</TABLE>

          At  December  31,  2000,  the Banks  had  outstanding  commitments  to
originate loans as follows:
<TABLE>
<CAPTION>
                                                              Fixed Rate          Variable Rate
                                                                (9.25% -             (8-1/8% -
                                                                  10%)                10.25%)                Total
                                                              ------------        ---------------         ------------

         <S>                                                      <C>                 <C>                   <C>
         First mortgages                                          $173,000            $1,054,700            $1,227,700
</TABLE>

6.  OFFICE PROPERTIES, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

          Office properties, equipment and leasehold improvements are summarized
by major classifications as follows:
<TABLE>
<CAPTION>
                                                                                       2000                     1999
                                                                                    ----------              -----------

           <S>                                                                      <C>                     <C>
           Land                                                                     $  298,500              $    65,161
           Buildings and improvements                                                1,784,532                1,246,997
           Construction in progress                                                     -                       261,046
           Furniture, fixtures and equipment                                         1,153,744                1,001,018
           Leasehold improvements                                                      241,323                  234,071
                                                                                    ----------             ------------
                                                                                     3,478,099                2,808,293
           Accumulated depreciation                                                    976,168                  799,502
                                                                                    ----------             ------------

                                                                                    $2,501,931               $2,008,791
                                                                                    ==========               ==========
</TABLE>

          Depreciation  expense for the years ended  December  31, 2000 and 1999
was $190,439 and $139,397, respectively.

          During the year ended December 31, 2000 interest costs of $18,618 were
capitalized as a cost of construction.

                                       57
<PAGE>

          Cecil  leases  two of its  branch  facilities  under  operating  lease
agreements  which  provide for the payment of utilities and taxes by the lessee.
Future  minimum   payments  for  each  of  the  five   succeeding   years  under
noncancelable leases consisted of the following at December 31, 2000:

                  Year ending December 31:
                         2001                                 $ 73,950
                         2002                                   64,151
                         2003                                   44,310
                         2004                                   44,310
                         2005                                   35,005
                         Thereafter                             27,612
                                                              --------

                                                              $289,338
                                                              ========
7. FEDERAL HOME LOAN BANK STOCK

          Investment in stock of the FHLB is required of every federally-insured
savings bank. The Banks must own capital stock in an amount equal to the greater
of 1% of their residential mortgages and mortgage-backed  securities,  or 3/10th
of 1% of total assets.  No ready market exists for the bank stock, and it has no
quoted market value.

8. ACCRUED INTEREST RECEIVABLE

          Accrued interest receivable at December 31, 2000 and 1999, consists of
the following:
<TABLE>
<CAPTION>
                                                         2000             1999
                                                       --------         --------

          <S>                                          <C>              <C>
          Loans receivable                             $679,805         $511,758
          Mortgage-backed securities                     12,796           20,016
          Investment securities                         132,082           86,928
                                                       --------         --------

                                                       $824,683         $618,702
                                                       ========         ========
</TABLE>

9. SAVINGS DEPOSITS

          The following is a summary of savings deposits as of December 31:
<TABLE>
<CAPTION>
                                                                        2000                            1999
                                                               ------------------------        --------------------------
                                                                              Weighted                          Weighted
                                                                               Average                           Average
                                                                 Amount          Rate            Amount            Rate
                                                               -----------    ---------        ------------     ---------
     <S>                                                       <C>                <C>          <C>                 <C>
     N.O.W. and Money Market accounts                          $11,469,018        1.84         $ 12,473,084        1.84
     Savings accounts                                           15,915,699        2.33           17,480,165        2.37
     Term certificates                                          63,224,294        5.05           66,645,697        5.32
     Checking accounts                                           5,304,376                        4,618,598
                                                               -----------                     ------------

                                                               $95,913,387                     $101,217,544
                                                               ===========                     ============
</TABLE>


                                       58
<PAGE>


          A summary of certificate  accounts by maturity as of December 31, 2000
follows:

                 Under 12 months                              $45,388,026
                 12 months to 24 months                        10,526,681
                 24 months to 36 months                         4,156,071
                 Over 36 months                                 3,153,516
                                                              -----------

                                                              $63,224,294
                                                              ===========

          Eligible  savings  accounts  are insured up to $100,000 by the Savings
Association Insurance Fund.

          Savings deposits  include  certificates of deposit in denominations of
$100,000 or more aggregating $20,037,808 and $18,441,625 as of December 31, 2000
and 1999, respectively.

          The Banks  held  deposits  of  approximately  $1,017,441  for  related
parties at December 31, 2000.

10.   ADVANCES FROM FEDERAL HOME LOAN BANK OF ATLANTA

          At December 31, 2000, short-term advances consist of the following:
<TABLE>
<CAPTION>
                        Maturity                  Interest
                          Date                      Rate                     2000
                        ---------                 --------                -----------

                 <S>                                <C>                   <C>
                 September 4, 2001                  6.35%                 $ 7,750,000
                 November 20, 2001                  6.35%                   5,500,000
                                                                          -----------

                 Total advances from Federal Home Loan Bank of Atlanta    $13,250,000
                                                                          ===========
</TABLE>

          The  Banks have  lines of credit  with the  Federal  Home Loan Bank of
Atlanta ("FHLB") with a total maximum  available  balance of $16,790,000.  As of
December 31, 2000,  $3,540,000  was  available to be drawn  against the lines of
credit.

           Wholly owned first mortgage loans on 1 - 4 dwelling units with unpaid
principal  balances of  approximately  $61,200,000  were  pledged to the FHLB as
collateral on advances.

12. INCOME TAXES

           Income tax expense for the years ended December 31 consists of:
<TABLE>
<CAPTION>
                                                                  2000             1999
                                                               ----------       ---------
           <S>                                                 <C>              <C>
           Current income taxes:
            Federal ...................................       $ 412,034        $ 477,787
             State .....................................          98,723          114,761
                                                               ---------        ---------
                                                                 510,757          592,548
                                                               ---------        ---------
           Deferred income taxes:
             Federal ...................................         (35,537)         (96,375)
             State .....................................          (7,867)         (21,335)
                                                               ---------        ---------
                                                                 (43,404)        (117,710)
                                                               ---------        ---------

           Total income tax expense ....................       $ 467,353        $ 474,838
                                                               =========        =========
</TABLE>

                                       59
<PAGE>

          The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
are presented below:
<TABLE>
<CAPTION>
                                                                                          2000                 1999
                                                                                        --------             ---------
           <S>                                                                          <C>                  <C>
           Deferred tax assets:
              Deferred loan origination fees                                            $103,013              $ 80,676
              Loan loss allowance                                                        158,753               167,811
              Reserve for uncollected interest                                            11,662                22,241
              Tax basis of foreclosed real estate in excess of book                       16,655                16,655
              Deferred compensation                                                      101,936               110,937
              Interest collected in advance                                                8,177                 8,287
              Net unrealized loss on available for sale securities                         1,646                14,717
              Tax basis of goodwill in excess of book                                     64,924                30,104
              Other                                                                        2,337                 3,332
                                                                                        --------              --------

                  Total gross deferred tax assets                                        469,103               454,760
                                                                                        --------              --------

           Deferred tax liabilities:
              FHLB stock dividends                                                        27,691                27,691
              Tax reserves for bad debts                                                  66,495                91,001
              Mortgage servicing rights                                                   61,877                41,402
              Tax accumulated depreciation in excess of book                              25,992                37,329
                                                                                        --------              --------

                  Total gross deferred tax liabilities                                   182,055               197,423
                                                                                        --------              --------

           Net deferred tax assets                                                      $287,048              $257,337
                                                                                        ========              ========
</TABLE>

          A two year  reconcilement  of the  difference  between  the  statutory
federal  income tax rate and the  effective tax rate for the  Corporation  is as
follows:
<TABLE>
<CAPTION>
                                                                                         2000               1999
                                                                                        ------             -------
           <S>                                                                          <C>                <C>
           Federal income tax rate                                                      34.00%             34.00%
              Increase resulting from:
                State income taxes, net of federal
                  income tax benefit                                                     5.00               5.39
                Other                                                                     .38               2.08
                                                                                        -----              -----

           Effective tax rate                                                           39.38%             41.47%
                                                                                        =====              =====
</TABLE>

          At  December  31,  2000  and  1999,  there is no  valuation  allowance
maintained  against the deferred tax assets.  The  Corporation  expects to fully
realize the benefit of the deferred tax assets.

12. RETAINED EARNINGS

          Retained  earnings  are  restricted  by  regulatory  requirements  and
federal income tax requirements.

                                       60
<PAGE>
          In  connection  with the  insurance of savings  accounts by SAIF,  the
Banks are required to meet certain  capital  requirements  based on computations
prescribed by the Office of Thrift Supervision ("OTS").

          Payment  of dividends on the common stock of the  Corporation  will be
subject to the  availability of funds from dividend  distributions of the Banks,
which are subject to various  restrictions.  Under  regulations for the OTS, the
Banks  are not  permitted  to pay  dividends  on  their  common  stock  if their
regulatory  capital is reduced  below the amount  required for the  "liquidation
account" or the capital  requirements  imposed by FIRREA and the OTS.  Since the
banks meet the fully phased-in capital requirements under FIRREA, they may pay a
cash dividend on their  capital stock as long as the proposed  dividend does not
exceed the  Bank's  aggregate  net  income,  less  dividends  paid,  for the two
preceding years and the current year-to-date.

          Cecil  Bancorp has a dividend  reinvestment  and stock  purchase  plan
which  provides  stockholders  with the  opportunity  to increase  their  equity
ownership  in the  Company  by  electing  to have cash  dividends  automatically
reinvested in additional shares of common stock without payment of any brokerage
commission  or  service  charge.  Pursuant  to the plan,  stockholders  are also
permitted to make optional quarterly cash purchases of stock, subject to minimum
and maximum dollar  amounts.  The Board has reserved  60,000 shares for issuance
under the plan.

13. REGULATORY CAPITAL MATTERS

          The  Banks are  subject to  various  regulatory  capital  requirements
administered by their primary federal  regulator,  the OTS.  Failure to meet the
minimum  regulatory  capital  requirements can initiate certain  mandatory,  and
possible  additional  discretionary  actions by regulators,  that if undertaken,
could have direct  material effect on the Banks and the  consolidated  financial
statements.  Under the regulatory capital adequacy guidelines and the regulatory
framework for prompt  corrective  action,  the Banks must meet specific  capital
guidelines involving  quantitative  measures of the Banks' assets,  liabilities,
and certain  off-balance-sheet  items as calculated under regulatory  accounting
practices.  The  Banks'  capital  amounts  and  classification  under the prompt
corrective  action  guidelines are also subject to qualitative  judgments by the
regulators about components, risk weightings, and other factors.

          Quantitative  measures  established  by regulation  to ensure  capital
adequacy  require the Banks to  maintain  minimum  amounts and ratios of:  total
risk-based  capital to  risk-weighted  assets,  Tier I capital to  risk-weighted
assets (as defined in the regulations),  Tier I capital to adjusted total assets
(as  defined),  and  tangible  capital to adjusted  total  assets (as  defined).
Management  believes,  as of  December  31,  2000,  that the Banks  meet all the
capital adequacy requirements to which they are subject.

          As of December 31, 2000,  the most recent  notification  from the OTS,
the Banks were  categorized as well capitalized  under the regulatory  framework
for prompt  corrective  action. To remain  categorized as well capitalized,  the
Banks will have to maintain  minimum total  risk-based,  Tier I risk-based,  and
Tier I leverage ratios as disclosed in the following table.  There are no events
or conditions since the most recent  notification that management  believes have
changed the Banks' prompt corrective action category.


                                       61
<PAGE>

          The  following  tables  illustrate the actual and required amounts and
ratios for the Corporation and the Banks as set forth by the FDIC and the OTS at
the dates indicated:
<TABLE>
<CAPTION>
                                                                                                 To be Well Capitalized
                                                                                                Under Prompt Corrective
                                                                      Actual                        Action Provisions
                                                             ----------------------            ------------------------
                                                             Amount          Ratio             Amount            Ratio
                                                             ------         -------            ------            -----
                                                                (in thousands)                     (in thousands)
      <S>                                                    <C>            <C>                <C>               <C>
      CECIL
      -----
      As of December 31, 2000:
         Total risk-based capital
           (to risk-weighted assets)                         $6,959         10.32%             $6,741            10.00%
         Tier I capital
           (to risk-weighted assets)                          6,724          9.97               4,045             6.00
         Tier I capital
           (to adjusted total assets)                         6,724          7.45               4,514             5.00
         Tangible capital
           (to adjusted total assets)                         6,724          7.45               1,354             1.50

      As of December 31, 1999:
         Total risk-based capital
           (to risk-weighted assets)                         $5,999         10.06%             $5,964             10.00%
         Tier I capital
           (to risk-weighted assets)                          5,744          9.63               3,578              6.00
         Tier I capital
           (to adjusted total assets)                         5,744          6.79               4,228              5.00
         Tangible capital
           (to adjusted total assets)                         5,744          6.79               1,283              1.50

      COLUMBIAN
      ---------
      As of December 31, 2000:
         Total risk-based capital
           (to risk-weighted assets)                         $2,187         13.35%             $1,638            10.00%
         Tier I capital
           (to risk-weighted assets)                          2,051         12.52                 983             6.00
         Tier I capital
           (to adjusted total assets)                         2,051          7.00               1,466             5.00
         Tangible capital
           (to adjusted total assets)                         2,051          7.00                 440             1.50

      As of December 31, 1999:
         Total risk-based capital
           (To risk-weighted assets)                         $2,240         15.05%             $1,489             10.00%
         Tier I capital
           (to risk-weighted assets)                          2,104         14.14                 893              6.00
         Tier I capital
           (to adjusted total assets)                         2,104          7.58               1,389              5.00
         Tangible capital
           (to adjusted total assets)                         2,104          7.58                 417              1.50

</TABLE>

                                       62
<PAGE>


14. OFFICER, DIRECTOR, AND EMPLOYEE BENEFIT PLANS

          Employee Stock Ownership Plan
          -----------------------------

          The  Board  of  Directors  approved  a  contributory   Employee  Stock
Ownership  Plan (ESOP) for  employees who have attained age 21 and completed one
year of service with the Corporation or its  subsidiaries,  effective January 1,
1994.  The ESOP  acquired  38,508  shares of common  stock in November  1994 for
$385,080 financed by a loan from the Corporation. Shares acquired with such loan
proceeds  are  to be  held  in a  suspense  account  for  allocation  among  the
participants as the loan is repaid. The loan agreement is secured by a pledge of
the common stock owned by the ESOP and purchased  with the proceeds of the loan.
The  outstanding  loan  balance is included as a liability  in the  accompanying
consolidated statements of financial condition, and the Corporation's obligation
related to the ESOP debt is reflected as a reduction  in  stockholders'  equity.
The loan is to be paid in annual  installments of $38,508 plus interest at prime
plus 1% (10.50% at December 31, 2000) over a ten year period.  Payments began on
December 31, 1995.  The Banks  contribute  sufficient  cash funds to the ESOP to
repay the loan, plus such other amounts as the Corporation's  Board of Directors
may determine in its discretion.

          Contributions  to the  ESOP and  shares  released  from  the  suspense
account are to be  allocated  among  participants  on the basis of their  annual
wages subject to federal income tax withholding, plus any amounts withheld under
a plan  qualified  under Sections 125 or 401(k) of the Code and sponsored by the
Corporation.  Participants  must be  employed at least 1,000 hours in a calendar
year in order to receive  an  allocation.  Forfeitures  will be  reallocated  to
participants  on the  same  basis  as  other  contributions.  Dividends  paid on
allocated shares are expected to be credited to participant  accounts within the
ESOP, or paid to participants;  dividends on unallocated  shares are expected to
be used to repay the ESOP loan. The Corporation is to administer the ESOP.

          The  Corporation accounts for its ESOP in accordance with Statement of
Position 93-6. Accordingly,  the debt of the ESOP is recorded as debt and shares
pledged as  collateral  are  reported as unearned  ESOP  shares,  a reduction of
stockholders'  equity. As shares are released from collateral,  the Banks record
compensation expense in an amount equal to the fair value of the shares, and the
shares  become  outstanding  for earnings per share  computations.  Compensation
expense is also recognized for Corporation  dividends on unallocated shares paid
or added to participant accounts.  Compensation expense is reduced by the amount
of the annual  interest  paid by the ESOP to service  the loan issued to acquire
the shares of stock. ESOP  compensation  expense was $21,346 and $44,833 in 2000
and 1999, respectively. The ESOP shares as of December 31, 2000 were as follows:

              Shares released for allocation                           23,106
              Shares distributed                                       (2,662)
              Unreleased shares                                        15,402
                                                                       ------

                      Total ESOP shares                                35,846
                                                                       ======

              Fair value of unreleased shares at December 31, 2000   $302,264
                                                                     ========


                                       63
<PAGE>


     Stock-based Compensation Plans
     ------------------------------

          In 1995, the Corporation formed a Management Recognition Plan ("MRP"),
which was  authorized  to acquire 4% of the shares of common stock issued on the
date of  conversion  to a stock  corporation  to provide them with a proprietary
interest in the  Corporation in a manner designed to encourage such employees to
remain with the Corporation.

          The Corporation contributed funds in the amount of $263,351 to the MRP
to enable it to acquire  the shares of stock that will be  required  to fund the
MRP (18,174  shares).  The number of shares  awarded for the year ended December
31, 1995 was 17,807.  Subsequently,  in 1999,  an  additional  1,540 shares were
awarded  and  necessitated  the  purchase  of 678 shares in 2000,  for which the
Corporation contributed funds in the amount of $14,534. All awards under the MRP
are earned and nonforfeitable by a participant at the rate of one-fifth per year
of service.

          The  amounts  contributed  by the  Corporation  to the MRP  are  being
amortized to  compensation  expense as the plan  participants  become  vested in
those shares.  Compensation  expense in connection  with the MRP was $23,335 and
$59,116  in  2000  and  1999,  respectively.  The  unamortized  cost,  which  is
comparable   to  deferred   compensation,   is   reflected  as  a  reduction  of
stockholders' equity.

          The  following  table  summarizes  information  about  the  management
recognition plan at December 31:
<TABLE>
<CAPTION>
                                                            2000           1999
                                                           ------        -------

              <S>                                          <C>          <C>
              Outstanding shares at beginning of year        3,130        5,564
              Vested and paid shares                        (2,576)      (2,434)
              Purchased shares                                 678          -
                                                            ------       ------

              Outstanding shares at end of year              1,232        3,130
                                                            ======       ======
</TABLE>

          The  Corporation  adopted  stock option plans in 1992 and 1995 for the
benefit of Directors,  selected  officers,  and other key  employees.  The Plans
provide for the granting of options for the common shares of the  Corporation at
the fair  market  value at the time the options  are  granted.  The term of each
option awarded is to be determined by a committee of the Board of Directors, but
shall not exceed ten years.  The term of an option  shall not exceed  five years
for employees  owning more than 10% of the outstanding  common stock at the time
the option is granted. Discretionary stock appreciation rights may be granted in
conjunction with, or independently of, any options granted under the Plans. Upon
exercise of a stock appreciation  right, the related option, or portion thereof,
is cancelled.

          In accordance with the stock option plans, a total of 57,838 shares of
unissued  common stock are reserved  for  issuance  pursuant to incentive  stock
options.  The number of shares  reserved  for the option plans did not change in
2000.

          The  Company's  1995 Stock  Option  Plan has  authorized  the grant of
options to management  personnel  for up to 44,519  shares of the  Corporation's
common stock. All options granted have 10 year terms and vest over a period of 5
years.


                                       64
<PAGE>


          A  summary of the  Corporation's  stock option  activity,  and related
information for the year ended December 31 is as follows:
<TABLE>
<CAPTION>
                                                                 2000                                1999
                                                       --------------------------          ----------------------------
                                                                      Weighted-                             Weighted-
                                                                       Average                               Average
                                                       Shares      Exercise Price          Shares        Exercise Price
                                                       ------      --------------          ------        --------------

         <S>                                           <C>              <C>                 <C>                <C>
         Outstanding at beginning of year              27,366           $12.34              32,785             $11.07
         Granted                                          -                -                 3,852              25.00
         Exercised                                     (2,000)          (11.00)             (9,271)            (10.70)
                                                       ------                               ------

         Outstanding at end of year                    25,366           $12.45              27,366             $12.34
                                                       ======                               ======

         Options exercisable at year end               22,547                               18,106
                                                       ======                               ======
</TABLE>

          The  following  table  summarizes   information  about  stock  options
outstanding at December 31, 2000:
<TABLE>
<CAPTION>
                                                 Options Outstanding                       Options Exercisable
                                    ------------------------------------------------    -----------------------------
                                                       Average        Weighted                            Weighted
                                                     Remaining         Average                             Average
               Exercise               Number            Life          Exercise           Number           Exercise
            Price Range             Outstanding        (Years)          Price           Exercisable         Price
            -----------             -----------      ----------       ---------         -----------       --------

         <S>                           <C>               <C>           <C>                  <C>             <C>
         $5.53 - $25.00                25,366            5.09          $12.45               22,547          $10.71
</TABLE>

          The per share  weighted  average fair value of stock  options  granted
during  1999 was  $13.85,  on the date of the  grants  using the  Black  Scholes
option-pricing  model  as a  valuation  technique  with  the  following  average
assumptions:  3% expected dividend yield, 5.9% risk-free interest rate, expected
life, 7.25 years and; expected volatility, 21%. These options vest over a period
of 5 years.  There were no options  granted  during the year ended  December 31,
2000.

          For  financial  statement  purposes,   the  Corporation  measures  the
compensation  costs of its stock option plans under Accounting  Principles Board
(APB) Opinion No. 25 whereby,  no compensation cost is recorded if, at the grant
date, the exercise price of the options is equal to the fair market value of the
Corporation's  common stock.  Had the  Corporation  determined cost based on the
fair value at the grant date for its stock options under SFAS Statement No. 123,
Accounting for Stock-Based  Compensation,  the Company's net income and earnings
per share for the years ended December 31, 2000 and 1999 would have been reduced
to the pro forma amounts indicated on the following page:


                                       65
<PAGE>
<TABLE>
<CAPTION>
                                                                                          Earnings per Share
                                                                                        ------------------------
                                                                  Net Income            Basic            Diluted
                                                                  ----------            -----            -------
              <S>                                                  <C>                  <C>               <C>
              December 31, 2000
                As reported                                        $719,313             $1.20             $1.18
                Pro forma                                           703,973              1.18              1.16

              December 31, 1999
                As reported                                         670,238              1.14              1.12
                Pro forma                                           665,518              1.13              1.12
</TABLE>

     Retirement Plan for Non-Employee Directors
     ------------------------------------------

          Effective  January 1, 1995 the  Corporation  adopted a Retirement Plan
for Non-Employee  Directors.  Under this plan, each participating Director would
receive  monthly  benefits for the year-year  period  following  termination  of
service on the Board,  in an amount  equal to the product of his or her "Benefit
Percentage",  his or her "Vested  Percentage",  and $500. A Director's  "Benefit
Percentage"  is based on his or her  overall  years of  service  on the Board of
Directors of the  Corporation,  and  increases in  increments of 20% from 0% for
less than five years of service,  to 20% for five to nine years of  service,  to
40% for 10 to 14 years of service,  to 60% for 15 to 19 years of service, to 80%
for 20 to 24 years of service, and to 100% for 25 or more years of service.

          A Director's "Vested  Percentage" is based on his or her full years of
service  as a  non-employee  Director  after  January 1, 1995 and  increases  in
increments of 10% per year,  from 10% for one full year of service after January
1, 1995, up to 100% for ten or more full years of service after January 1, 1995.
In the event that a Director dies before  collecting  benefits  under this plan,
the Director's  surviving spouse will be eligible to receive 50% of the benefits
the Director would have received.

          The  Directors'  Plan is unfunded.  All benefits will be paid from the
Corporation's  general assets.  The Corporation  recognizes annual  compensation
expense  as the  benefits  become  vested.  The amount of  compensation  expense
incurred by the  Corporation in connection the plan for the years ended December
31, 2000 and 1999 were $15,165 and $37,000, respectively.

15. PENSION PLANS

          The  Corporation has established a defined  contribution 401(k) profit
sharing  plan for the benefit of its  employees  and the  employees of Cecil and
Columbian,  effective January 15, 1999. The plan covers all full-time  employees
who meet  certain  eligibility  requirements  as to age and  length of  service.
Contributions  to the  401(k)  section  of the  plan are  based  on the  amounts
contributed  by employees.  The  employees may  contribute a percentage of their
annual  compensation  with  contributions  limited to $10,500  for the 2000 plan
year. The Corporation  makes a discretionary  matching  contribution  equal to a
uniform percentage of the amount of the employees' contribution. In applying the
matching  contribution,  only  employee  salary  reductions  up  to 2%  will  be
considered.  The Corporation  may also make a discretionary  contribution to the
plan as determined by the Board of Directors.  For the years ended  December 31,
2000 and 1999, there were no employer contributions to the plan.



                                       66
<PAGE>

          The  Corporation had a defined  contribution pension plan covering all
full-time  employees  who met  certain  eligibility  requirements  as to age and
length  of  service.  The plan  was  funded  by  annual  employer  contributions
determined at the rate of 10% of  compensation  of eligible  employees.  Pension
costs  charged to  operations  in 2000 and 1999 amounted to $63,342 and $56,051,
respectively. This plan was merged into the 401(k) profit sharing plan effective
January 15, 2000.

          Columbian had in effect a profit sharing plan for full-time  employees
who have  completed  one  full  year of  service.  The Plan  allows  for  annual
contributions  of up to 15% of its  payroll.  The  Plan  does  not  provide  for
employee contributions.  Each participant in the plan becomes fully vested after
five  consecutive  years of service under the Plan and upon retirement  receives
the  contributions  on  behalf  of the  participant  and the  earnings  thereon.
Contributions  charged to  operations in 2000 and 1999 were $26,766 and $23,000,
respectively. Columbian's plan was terminated effective December 31, 2000.

16. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK


          The Banks are party to financial  instruments  with  off-balance-sheet
risk.

         The following commitments are outstanding as of December 31:
<TABLE>
<CAPTION>
                                                                       2000                        1999
                                                                    ----------                  ----------

              <S>                                                   <C>                         <C>
              Unfunded lines of credit                              $3,725,000                  $3,300,000
              Loan commitments                                       4,786,000                   3,966,000
                                                                    ----------                  ----------

                                                                    $8,511,000                  $7,266,000
                                                                    ==========                  ==========
</TABLE>

          The Banks' exposure to credit loss in the event of  non-performance by
the other party to these instruments is represented by the contractual amount of
the  instrument.  The Banks use the same credit  policies in granting  such loan
commitments as it does for  on-balance-sheet  instruments.  The Banks  generally
requires  collateral  to support such  financial  instruments  with credit risk,
which generally consists of the right to receive a first mortgage on improved or
unimproved real estate when performance under the contract occurs.

          The  Corporation  invests funds in the form of certificates of deposit
at the Federal  Home Loan Bank.  In addition,  the  Corporation  maintains  cash
accounts at the Federal Home Loan Bank and three local banks. Balances reflected
on the local bank's  statements  exceed the $100,000  insurance limit by varying
amounts  throughout the year. The  Corporation  controls this risk by monitoring
the  financial  condition of the local  banks.  The Federal Home Loan Bank is an
instrumentality of the U.S. Government.

17. EARNINGS PER SHARE

          During  2000 and 1999,  options to acquire  22,547 and 18,106  shares,
respectively,  of the  Corporation's  stock  were  vested and  exercisable.  The
options expire through May 2006.


                                       67
<PAGE>


         Basic earnings per common share were computed by dividing net income by
the weighted  average  number of shares of common stock  outstanding  during the
year.  The weighted  average  number of shares of common stock  outstanding  was
598,678 and 586,696 in 2000 and 1999, respectively.

         Diluted  earnings per common share were  determined  on the  assumption
that the options were  exercised on the date they became  vested.  The number of
common  shares was  increased  by the number of shares  issuable on the exercise
options when the market price of the common stock exceeds the exercise  price of
the  options.  This  increase in the number of common  shares was reduced by the
number  of common  shares  that are  assumed  to have  been  purchased  with the
proceeds from the exercise of the options;  those purchases were assumed to have
been made at the  average  price of $20.53 and $24.50 at  December  31, 2000 and
1999,  respectively.  The  weighted  average  number of  shares of common  stock
outstanding for computation of diluted earnings per common share was 608,873 and
596,312 in 2000 and 1999, respectively.

         The  following  table  is  a  reconciliation   of  the  numerators  and
denominators of basic and diluted earnings per share  computations for the years
ended December 31:
<TABLE>
<CAPTION>
                                                                                       2000
                                                                --------------------------------------------------
                                                                   Income                Shares          Per Share
                                                                (Numerator)         (Denominator)          Amount
                                                                -----------         -------------        ---------
         <S>                                                      <C>                   <C>                   <C>
         Basic EPS
              Net income                                          $719,313              598,678               $1.20

         Effect of dilutive securities
              Stock options                                         -                    10,195                (.02)
                                                                  --------              -------               -----
         Diluted EPS
              Net income                                          $719,313              608,873               $1.18
                                                                  ========              =======               =====

<CAPTION>
                                                                                       2000
                                                                --------------------------------------------------
                                                                   Income                Shares          Per Share
                                                                (Numerator)         (Denominator)          Amount
                                                                -----------         -------------        ---------
         <S>                                                      <C>                   <C>              <C>
         Basic EPS
              Net income                                          $670,238              586,696           $1.14

         Effect of dilutive securities
              Stock options                                         -                     9,616            (.02)
                                                                  --------              -------           -----

         Diluted EPS
              Net income                                          $670,238              596,312           $1.12
                                                                  ========              =======           =====
</TABLE>

18.  FAIR VALUE OF FINANCIAL INSTRUMENTS

          SFAS  No. 107  Disclosure  About Fair Value of  Financial  Instruments
requires that the Corporation disclose estimated fair values for both its on and
off-balance-sheet  financial instruments.  The following methods and assumptions
were used to estimate the fair value of the Corporation's financial instruments.
Changes in estimates and  assumptions  could have a significant  impact on these
fair values.

                                       68
<PAGE>

     Cash and Cash Equivalents
     -------------------------

          The  fair  values  of cash and  cash  equivalents  approximates  their
carrying values.

     Investment Securities
     ---------------------

          The  fair values of investment  securities  are based on quoted market
prices, where available.  If a quoted market price is not available,  fair value
is estimated using quoted market prices of comparable instruments.

     Loans Receivable
     ----------------

          The  fair  value of the loan  portfolio  is  estimated  by  evaluating
homogeneous   categories  of  loans  with  similar  financial  and  credit  risk
characteristics.  Loans are segregated by types,  such as residential  mortgage,
commercial  real estate and consumer.  Each loan  category is further  segmented
into fixed and adjustable-rate interest terms.

          The  fair values of each loan  category are  estimated by  discounting
contractual cash flows adjusted for estimated prepayments. Assumptions regarding
prepayment  estimates and discount  rates are  judgmentally  determined by using
available market information.

     Investment in Stock of FHLB
     ---------------------------

          The  fair value of the  Corporation's  investment in stock of the FHLB
approximates its carrying value.

     Savings Deposits and Advance Payments by Borrowers
     --------------------------------------------------

          The fair values of passbook  accounts,  NOW accounts,  demand  deposit
accounts and variable rate money market  accounts  approximates  their  carrying
values.  The fair values of fixed rate  certificates  of deposit  are  estimated
using a discounted cash flow  calculation  that applies interest rates currently
offered for deposits of similar remaining maturities.

     Employee Stock Ownership Plan Debt
     ----------------------------------

          The fair value of the Corporation's employee stock ownership plan debt
is estimated using a discounted cash flow analysis based on current market rates
for debt with similar terms and remaining maturity.

     Advances from the Federal Home Loan Bank of Atlanta
     ---------------------------------------------------

          The  fair value of Federal Home Loan Bank  advances  was  estimated by
computing  the  discounted  value of  contractual  cash flows payable at current
interest rates for obligations with similar remaining terms.


                                       69
<PAGE>


          The  estimated  fair values of financial  instruments  at December 31,
2000 are as follows:
<TABLE>
<CAPTION>
                                                                                                        Estimated
                                                                               Carrying                   Fair
                                                                                 Value                    Value
                                                                              ------------             ------------
         <S>                                                                   <C>                     <C>
         Financial assets:
           Cash and cash equivalents                                          $  3,880,606             $  3,880,606
           Investment securities:
              Held to maturity                                                   5,335,289                5,295,467
              Available for sale                                                 2,612,882                2,612,882
           Loans receivable                                                    102,581,572              102,083,750
           Investment in stock of FHLB                                             905,000                  905,000
           Financial liabilities:
           Savings deposits and advance payments by borrowers                   96,595,240               95,867,168
           Employee stock ownership plan debt                                      154,032                  154,032
           Advances from Federal Home Loan Bank of Atlanta                      13,250,000               13,250,000
</TABLE>

         The estimated fair values of financial instruments at December 31, 1999
are as follows:
<TABLE>
<CAPTION>
                                                                                                        Estimated
                                                                               Carrying                   Fair
                                                                                 Value                    Value
                                                                              ------------             ------------
         <S>                                                                   <C>                     <C>
         Financial assets:
           Cash and cash equivalents                                            $6,032,081               $6,032,081
           Investment securities:
              Held to maturity                                                   6,550,880                6,252,081
              Available for sale                                                 3,181,992                3,181,992
           Loans receivable                                                     92,098,839               91,565,753
           Investment in stock of FHLB                                             657,800                  657,800
         Financial liabilities:
           Savings deposits and advance payments by borrowers                  101,995,053              101,552,492
           Employee stock ownership plan debt                                      192,540                  192,540
           Advances from the Federal Home Loan Bank of Atlanta                   1,500,000                1,500,000
</TABLE>

19. BRANCH ACQUISITION

         On September 6, 1999, Cecil acquired two branches of Susquehanna  Bank.
The  acquisition  was accounted for as a purchase.  The results of operations of
the  two  branches  are  included  in the  accompanying  consolidated  financial
statements since the date of acquisition.  The total liabilities  assumed in the
purchase amounted to $22,176,092 and exceeded the assets received by $2,815,669.
The excess is being amortized on the  straight-line  method over ten years.  The
costs associated with the branch acquisition totaled $80,204 in 1999.

20. CECIL BANCORP, INC. - HOLDING COMPANY
       ONLY FINANCIAL INFORMATION

         The following  condensed statement of financial position as of December
31,  2000 and 1999 and  condensed  statements  of income  and cash flows for the
years then ended for Cecil Bancorp,  Inc. should be read in conjunction with the
consolidated financial statements and notes thereto.



                                       70
<PAGE>


                        Statements of Financial Condition
<TABLE>
<CAPTION>
                                     Assets

                                                                                         December 31,
                                                                                 2000                       1999
                                                                              -----------               -----------

      <S>                                                                     <C>                       <C>
      Cash                                                                    $    92,003               $   194,002
      Investment in subsidiary banks                                           11,245,604                10,573,454
      Deferred taxes                                                                -                        12,905
      Prepaid expenses                                                            228,781                   143,709
      Other assets                                                                  7,792                    12,887
                                                                              -----------               -----------

           Total assets                                                       $11,574,180               $10,936,957
                                                                              ===========               ===========

                      Liabilities and Stockholders' Equity

      Other liabilities                                                       $     3,862               $    37,957
      Employee stock ownership plan debt                                          154,032                   192,540
                                                                              -----------               -----------
                                                                                  157,894                   230,497
                                                                              -----------               -----------

      Stockholders' equity:
         Common stock, $.01 par value,  authorized
           4,000,000 shares,  issued and outstanding
           621,486 shares in 2000 and
           615,742 shares in 1999                                                   6,215                     6,158
         Additional paid-in capital                                             5,046,082                 4,898,025
      Employee stock ownership plan debt                                         (154,032)                 (192,540)
      Deferred Compensation Management
         Recognition Plan                                                         (22,565)                  (45,383)
      Retained earnings                                                         6,543,202                 6,063,589
      Accumulated other comprehensive loss                                         (2,616)                  (23,389)
                                                                              -----------               -----------

                                                                               11,416,286                10,706,460
                                                                              -----------               -----------

           Total liabilities and stockholders' equity                         $11,574,180               $10,936,957
                                                                              ===========               ===========

</TABLE>

                                       71
<PAGE>
<TABLE>
<CAPTION>
                              Statements of Income

                                                                                      Years Ended December 31,
                                                                                 2000                        1999
                                                                                -------                    --------
<S>                                                                             <C>                        <C>
      Income:
         Cash dividends from subsidiary                                         $125,000                   $175,000
         Equity in earnings of subsidiary banks                                  651,378                    580,788
                                                                                --------                   --------


              Total income                                                       776,378                    755,788
                                                                                --------                   --------

      Operating expenses:
         Compensation and benefits                                                47,338                     79,349
         Other                                                                    39,125                     44,656
                                                                                --------                   --------
                                                                                  86,463                    124,005
                                                                                --------                   --------

      Net income before income taxes                                             689,915                    631,783

      Income tax benefit                                                         (29,398)                   (38,455)
                                                                                --------                   --------

      Net income                                                                $719,313                   $670,238
                                                                                ========                   ========
</TABLE>
<TABLE>
<CAPTION>
                            Statements of Cash Flows


                                                                                      Years Ended December 31,
                                                                                 2000                        1999
                                                                                -------                    --------
<S>                                                                             <C>                        <C>

      Cash flows from operating activities:
         Cash paid to suppliers and employees                                   $(118,978)                $(129,875)
         Dividends received from subsidiary banks                                 125,000                   175,000
                                                                                ---------                 ---------

      Net cash provided by operating activities                                     6,022                    45,125
                                                                                ---------                 ---------

      Cash flows from financing activities:
         Proceeds from sale of common stock                                        93,171                    99,192
         Unearned ESOP compensation decrease                                       38,508                    38,508
         Dividends paid                                                          (239,700)                 (235,116)
                                                                                ---------                 ---------

      Net cash used by financing activities                                      (108,021)                  (97,416)
                                                                                ---------                 ---------

      Net decrease in cash                                                       (101,999)                  (52,291)

      Cash at beginning of year                                                   194,002                   246,293
                                                                                ---------                 ---------

      Cash at end of year                                                       $  92,003                 $ 194,002
                                                                                =========                 =========
</TABLE>



                                       72
<PAGE>



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

     On October 31,  2000,  the Company  changed  its  independent  accountants.
Information  concerning this change is  incorporated  herein by reference to the
Current Report on Form 8-K filed by the Company on November 7, 2000.

                                       73


                                    PART III

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

     Information  concerning the directors and executive officers of the Company
is  incorporated  herein by  reference to the section  captioned  "Proposal I --
Election of Directors" in the Proxy Statement.

     Based solely on a review of reports of beneficial  ownership filed on Forms
3, 4 and 5, there were no delinquent  filers of such reports except for one late
filing which was an amendment to a Form 3 filed in February  2001  reporting one
transaction by Director Robert L. Johnson for the fiscal year ended December 31,
2000.

ITEM 10.  EXECUTIVE COMPENSATION
--------------------------------

     The information  required by this item is incorporated  herein by reference
to the section  captioned  "Proposal I -- Election  of  Directors  --  Executive
Compensation" in the Proxy Statement.


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------------

         (a)      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                  -----------------------------------------------

                  Information  required by this item is  incorporated  herein by
                  reference  to the section  captioned  "Voting  Securities  and
                  Principal Holders Thereof" in the Proxy Statement.

         (b)      SECURITY OWNERSHIP OF MANAGEMENT
                  --------------------------------

                  Information  required by this item is  incorporated  herein by
                  reference to the sections  captioned  "Voting  Securities  and
                  Principal  Holders  Thereof"  and  "Proposal  I -- Election of
                  Directors."

         (c)      CHANGES IN CONTROL
                  ------------------

                  Management of the Company knows of no arrangements,  including
                  any pledge by any person of  securities  of the  Company,  the
                  operation of which may at a subsequent date result in a change
                  in control of the registrant.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------

     The information  required by this item is incorporated  herein by reference
to the section  captioned  "Proposal I -- Election of Directors --  Transactions
with Management" in the Proxy Statement.

                                       73
<PAGE>

ITEM 13.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
-------------------------------------------------------------------------

         (a)      DOCUMENTS FILED AS PART OF THIS REPORT
                  --------------------------------------

         (1)      FINANCIAL  STATEMENTS.  The following financial  statements
                  ---------------------
contained in the Annual Report, Exhibit 13 hereto, are incorporated herein by
reference.

                  Independent Auditors' Report
                  Consolidated  Statements of Financial Condition as of December
                  31, 2000 and 1999
                  Consolidated  Statements of Operations  for the  Years  Ended
                  December  31,  2000 and  1999
                  Consolidated Statements  of  Stockholders'   Equity  for  the
                  Years  Ended December  31, 2000 and 1999
                  Consolidated  Statements  of Cash Flows for the Years Ended
                  December 31, 2000 and 1999
                  Notes to Consolidated Financial Statements.

     (2) Financial  Statement  Schedules.  All schedules for which  provision is
         -------------------------------
made in the applicable accounting  regulations of the SEC are omitted because of
the absence of conditions  under which they are required or because the required
information  is included in the  consolidated  financial  statements and related
notes thereto.

     (3)  Exhibits.  The  following is a list of exhibits  filed as part of this
          --------
Annual Report on Form 10-KSB with an index to their location in the sequentially
numbered copy of this Annual Report on Form 10-KSB.



      No.         Description
      ---         -----------

      3.1         Articles of Incorporation of Cecil Bancorp, Inc. *

      3.2         Amended Bylaws of Cecil Bancorp, Inc.

      3.3         Federal Stock Charter **

      3.4         Federal Stock Bylaws **

      4           Form of Common Stock Certificate *

      10.2        Employment Agreement between Cecil Bancorp, Inc., Cecil
                  Federal Savings Bank and Mary Halsey * +

      10.3        Cecil Bancorp, Inc. Stock Option and Incentive Plan *** +

      10.4        Cecil Bancorp, Inc. Management Recognition Plan *** +

      10.5        Cecil Federal Savings Bank Retirement Plan for Non-Employee
                  Directors **** +

      10.6        Columbian Bank, a Federal Savings Bank 1994 Stock Option and
                  Incentive Plan** +

      13          Annual Report to Stockholders for the year ended December
                  31, 2000

      21          Subsidiaries

      23.1        Consent of Simon Master & Sidlow, P.A.

      23.2        Consent of Stegman & Company

                                       74
<PAGE>

[FN]
_____________
+    Management contract or compensation plan or arrangement.
*    Incorporated by reference to the Company's  Registration  Statement on Form
     S-1 (File No. 33-81374).
**   Incorporated   by  reference  to  Columbian's   Registrant's   Registration
     Statement on Form 10-SB.
***  Incorporated  by reference to the Company's  Proxy Statement for its Annual
     Meeting of May 25, 1995 (File No. 0-24926).
**** Incorporated by reference to the Company's Annual Report on Form 10-KSB for
     the fiscal year ended December 31, 1994 (File No. 0-24926).
</FN>



         (b) Reports on Form 8-K. On November 7, 2000,  the  Registrant  filed a
             -------------------
Current  Report on Form 8-K reporting a change in their  independent  certifying
accountants.


                                       75
<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.


                                      CECIL BANCORP, INC.

Date:    March 30, 2001               By: /s/ Mary B. Halsey
                                          --------------------------------------
                                          Mary B. Halsey
                                          President and Chief Executive Officer
                                          (Duly Authorized Representative)



     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.


By: /s/ Mary B. Halsey                                     Date:  March 30, 2001
    -------------------------------------------------
       Mary B. Halsey
       President and Chief Executive Officer
       (Principal Executive Officer)

By: /s/ Mary B. Halsey                                     Date:  March 30, 2001
    -------------------------------------------------
       Mary B. Halsey
       President and Chief Executive Officer
       (Principal Financial and Accounting Officer)

By: /s/ Charles F. Sposato                                 Date:  March 30, 2001
    -------------------------------------------------
       Charles F. Sposato
       Chairman of the Board

By: /s/ Thomas L. Foard                                    Date:  March 30, 2001
    -------------------------------------------------
       Thomas L. Foard
       Secretary and Director

By: /s/ Howard J. Neff                                     Date:  March 30, 2001
    -------------------------------------------------
       Howard J. Neff
       Director

By: /s/ Doris P. Scott                                     Date:  March 30, 2001
    -------------------------------------------------
       Doris P. Scott
       Director

By: /s/ Howard B. Tome                                     Date:  March 30, 2001
    -------------------------------------------------
       Howard B. Tome
       Director

By: /s/ Donald F. Angert                                   Date:  March 30, 2001
    -------------------------------------------------
       Donald F. Angert
       Director


<PAGE>

By: /s/ Robert L. Johnson                                  Date:  March 30, 2001
    -------------------------------------------------
       Robert L. Johnson
       Director

By: /s/Matthew G. Bathon                                   Date:  March 30, 2001
    -------------------------------------------------
       Matthew G. Bathon
       Director



<PAGE>



                                INDEX TO EXHIBITS




Exhibit           DESCRIPTION
-------           -----------



   3.1            Articles of Incorporation of Cecil Bancorp, Inc. *

   3.2            Amended Bylaws of Cecil Bancorp, Inc.

   3.3            Federal Stock Charter **

   3.4            Federal Stock Bylaws **

   4              Form of Common Stock Certificate * +

   10.2           Employment Agreement between Cecil Bancorp, Inc., Cecil
                  Federal Savings Bank and Mary Halsey *

   10.3           Cecil Bancorp, Inc. Stock Option and Incentive Plan *** +

   10.4           Cecil Bancorp, Inc. Management Recognition Plan *** +

   10.5           Cecil Federal Savings Bank Retirement Plan for Non-Employee
                  Directors **** +

   10.6           Columbian Bank, a Federal Savings Bank 1994 Stock Option and
                  Incentive Plan** +

   13             Annual Report to Stockholders for the year ended December
                  31, 2000

   21             Subsidiaries

   23.1           Consent of Simon Master & Sidlow, P.A.

   23.2           Consent of Stegman & Company
[FN]
___________
+    Management plan or compensation plan or arrangement.
*    Incorporated by reference to the Company's  Registration  Statement on Form
     S-1 (File No. 33-81374).
**   Incorporated   by  reference  to  Columbian's   Registrant's   Registration
     Statement on Form 10-SB.
***  Incorporated  by reference to the Company's  Proxy Statement for its Annual
     Meeting of May 25, 1995 (File No. 0-24926).
**** Incorporated by reference to the Company's Annual Report on Form 10-KSB for
     the fiscal year ended December 31, 1994 (File No. 0-24926).
</FN>