<PAGE>

                      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, 1999


[_]  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.  [X]

State issuer's revenues for its most recent fiscal year: $8,135,576

As of March 15, 2000, the registrant had 615,742 shares of Common Stock issued
and outstanding.  The aggregate market value of shares held by nonaffiliates on
such date was $9,443,143 based on the closing sale price of $23.75 per share of
the Registrant's Common Stock on March 15, 2000. For purposes of this
calculation, it is assumed that the 218,136 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, 1999 (the "Annual Report").  (Parts I and II).
     2.   Portions of the Proxy Statement for the Registrant's 2000 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

                                       1
<PAGE>

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.

     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 a high level of capital
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 is currently building a full service branch office located on Route 40
in Havre de Grace, slated for opening in July of 2000.

Subsequent Financial and Accounting Developments

     Subsequent to the issuance of the consolidated financial statements for the
year ended December 31, 1998, and the filing of its 1998 Form 10-KSB, an error
in the calculation of certain compensation and benefits expenses related to
stock options was discovered.  The Company and its subsidiaries, in consultation
with their independent auditors, collectively concluded that the Company would
restate its consolidated financial statements and related disclosures for the
year ended December 31, 1998 and for the first three quarters of fiscal 1999,
and amend its 1998 Form 10-KSB and first, second, and third quarter 1999 Forms
10-QSB to reflect the correction of the error.  The purpose of the restatements
and amended filings was to reflect the changes necessary to correct the error.

     The principal effects of the changes on the accompanying financial
statements are presented in "Note 22 -- Prior Period Adjustment," to the
Consolidated Financial Statements, which are included in "Part II -- Item 7 --
Financial Statements" and are incorporated herein by reference for more
information.

                                       2
<PAGE>

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 Board of Governors of the Federal Reserve System (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 holding companies formed after May 4, 1999.

     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 will become
effective six months thereafter.

     The G-L-B Act contains significant revisions to the FHLB System.  The G-L-B
Act imposes new capital requirements on the FHLB 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 Federal
Home Loan Bank 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 Federal Home Loan Bank
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
operations 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.

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

                                       3
<PAGE>

deposits.  Elkton is the County seat and has a population of 9,800.  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
1,913 and is geographically located in the center of Cecil County.  The
population of Cecil County was 71,347 as of the 1990 census.

     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.  Construction is in process on a full service branch
office on Route 40 in Havre de Grace, with a projected open date of July 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.

                                       4
<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, 1999, the Banks had no
concentrations of loans exceeding 10% of total loans other than as disclosed
below.

<TABLE>
<CAPTION>
                                                                                        At December 31,
                                                                      ---------------------------------------------------
                                                                               1999                         1998
                                                                      ----------------------       ----------------------
                                                                       Amount           %           Amount           %
                                                                      --------       -------       --------       -------
                                                                                     (Dollars in thousands)
<S>                                                                   <C>            <C>           <C>            <C>
Type of Loan -- Cecil Federal
-----------------------------
Real estate loans:
 Construction loans (1)..........................................      $ 7,782        10.87%        $ 4,842         8.65%
 One- to four-family residential and home equity (2)(3)..........       51,450        71.85          45,377        81.02
 Multi-family residential........................................          436         0.61             869         1.55
 Land............................................................          497         0.69             357         0.64
 Commercial......................................................        3,803         5.31           2,459         4.39
Commercial business loans........................................        4,173         5.82           2,052         3.66

Consumer loans:
 Automobile loans................................................        3,656         5.10           1,481         2.64
 Education loans.................................................           47         0.07              60         0.11
 Savings account loans...........................................          739         1.03             801         1.43
 Home improvement loans..........................................           11         0.02              15         0.03
 Personal loans..................................................        3,651         5.10           2,688         4.80
                                                                       -------       ------         -------       ------
     Subtotal loans..............................................       76,245       106.47          61,001       108.92
Less:
 Loans held for sale.............................................           --           --           2,515        (4.49)
 Loans in process................................................        4,168         5.82           2,134        (3.81)
 Discounts and other.............................................          211         0.29             123        (0.22)
 Loan loss reserve...............................................          255         0.36             222        (0.40)
                                                                       -------       ------         -------       ------
    Total loans..................................................       71,611       100.00%         56,007       100.00%
                                                                       =======       ======         =======       ======

Mortgage-backed securities.......................................      $ 1,861                      $ 1,076
                                                                       =======                      =======
    Total loans and mortgage-backed  securities - Cecil Federal..      $73,472                      $57,083
                                                                       =======                      =======

<CAPTION>

                                                                                        At December 31,
                                                                      ---------------------------------------------------
                                                                               1999                         1998
                                                                      ----------------------       ----------------------
                                                                       Amount           %           Amount           %
                                                                      --------       -------       --------       -------
                                                                                     (Dollars in thousands)
<S>                                                                   <C>            <C>           <C>            <C>
Type of Loan -- Columbian
-------------------------
Real estate loans:
  Single-family residential......................................      $15,697        76.61%        $15,059        81.23%
  Construction...................................................          837         4.08             691         3.73
  Home equity and second mortgages...............................        1,143         5.58           1,311         7.07
  Commercial.....................................................        2,840        13.86           1,946        10.50
Consumer loans:
  Installment....................................................          371         1.81              11         0.06
  Savings account................................................           81         0.40             109         0.59
                                                                       -------                      -------
                                                                        20,969                       19,127
Less:
  Allowance for loan losses......................................          180         0.87             180        (0.97)
  Loans in process...............................................          167         0.82             269        (1.45)
  Deferred loan origination fees.................................          134         0.65             140        (0.75)
                                                                       -------       ------         -------       ------
     Total.......................................................      $20,488       100.00%        $18,538       100.00%
                                                                       =======       ======         =======       ======

   Mortgage-backed securities....................................        1,064                        1,834
                                                                       -------                      -------
      Total loans and mortgage-backed securities --..............
       Columbian.................................................      $21,552                      $20,372
                                                                       =======                      =======
</TABLE>

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

(1)  All construction loans were for residential properties.
(2)  Includes home equity loans.
(3)  Includes loans held for sale.

                                       5
<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, 1999, loans on one- to four-family
residential properties accounted for approximately 71.9% 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.

     Since the early 1980s, Cecil Federal has offered 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, 1999, Cecil Federal originated $12.9
million in adjustable-rate mortgage loans and $5.6 million in fixed-rate
mortgage loans (of which $114,256 of fixed-rate mortgage loans were sold in the
secondary mortgage market).  Approximately 6.0% of all loan originations during
1999 were refinancings of loans already in Cecil Federal's loan portfolio.  At
December 31, 1999, Cecil Federal's loan portfolio included $31.8 million

                                       6
<PAGE>

in adjustable rate one- to four-family residential mortgages or 44.4% of Cecil
Federal's loan portfolio, and $24.7 million in fixed rate one- to four-family
residential loans or 34.5% 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 and 15 years
and have fixed rates. As of December 31, 1999, Cecil Federal had $5.1 million
outstanding in second mortgage loans.

     During the first quarter of 1995, Cecil Federal began offering home equity
lines of credit. These loans 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, 1999, Cecil Federal had $0.6 million 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, 1999, $15.7 million, or 76.6%, 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, 1999, $1.7 million, or 10.8%, of Columbian's one- to four-
family residential loans were adjustable rate mortgages ("ARMs"), and $14.0
million, or 89.2%, 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

                                       7
<PAGE>

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 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,
1999, home equity and second mortgage loans totaled $1.1 million and comprised
5.58% 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, 1999, the loan portfolio
included $7.8 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 $1.4 million
in construction loans during the year ended December 31, 1999. 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, 1999, Columbian had $670,000 in construction loans
outstanding, comprising 3.3% of Columbian's gross loan portfolio.  Columbian's
largest construction loan at December 31, 1999 was a $500,000 commitment to fund
construction of a single family residence, of which $403,161 was outstanding at
December 31, 1999.

                                       8
<PAGE>

     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.

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, 1999 Cecil Federal had $497,000 in land
loans outstanding, or .69% 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, 1999.

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, 1999, loans secured by multi-family (i.e., more than four units)
totaled $436,000, or .61%, of Cecil Federal's total loan portfolio and loans
secured by commercial properties constituted approximately $3.8 million, or
5.31%, of Cecil Federal's total loan portfolio.

                                       9
<PAGE>

     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, 1999, Columbian's largest
commercial real estate loan was a first and second mortgage on a 25,000 square
foot office building.  At December 31, 1999, multi-family and commercial loans
totaled $2.8 million and comprised 13.86% of Columbian's gross loan portfolio.

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 strength of the borrower's
firm and position.  At December 31, 1999 Cecil Federal had $4.2 million
outstanding in commercial business loans.

     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, 1999, the consumer loan portfolio
totaled $8.1 million, or 11.32%, 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,
1999, the total amount of automobile loans was $3.7 million.

                                       10
<PAGE>

     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, 1999, the total amount of other consumer loans (which
consist of personal loans) was $3.7 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 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, 1999, Columbian had approximately $452,000 in consumer loans, or
2.21%, 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

                                       11
<PAGE>

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, 1999 the total investment
in mortgage-backed securities for Cecil Federal and Columbian were $1.9 million
and $1.1 million, 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,
1999 neither of the Banks had mortgage derivative products which met the
definition of high risk mortgage securities.

Loan Maturity Schedule

     The following tables set forth certain information at December 31, 1999
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.

                                       12
<PAGE>

     The following table sets forth the estimated maturity of Cecil Federal's
loan portfolio at December 31, 1999 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 during the years ending     Due After       Due after       Due after
                                        December 31,            3 through       5 through       10 through    Due after 15
                                ----------------------------   5 years after  10 years after  15 years after   years after
                                 2000        2001       2002     12/31/99        12/31/99        12/31/99       12/31/99    Total
                                ------      ------     ------    --------        --------        --------       --------   -------
                                                                              (In thousands)
<S>                            <C>          <C>        <C>       <C>          <C>             <C>             <C>          <C>
Real estate - mortgage:
  Single-family residential...  $    3      $  535     $2,516    $    127        $  2,375        $  4,765       $40,242    $50,563
  Construction................   1,305         259        910         125              --              --         1,015      3,614
  Home equity and second
    mortgages.................     647          83        142         501           1,407           2,624           219      5,623
  Commercial..................   3,188          30        488         116             303              --            48      4,173
  Consumer....................   1,751         693        838       3,932             763             127            --      8,104
                                ------      ------     ------    --------        --------        --------       -------    -------
     Total....................  $6,894      $1,600     $4,894    $  4,801        $  4,848        $  7,516       $41,524    $72,077
                                ======      ======     ======    ========        ========        ========       =======    =======
</TABLE>

                                       13
<PAGE>

     The following table sets forth the estimated maturity of Columbian's loan
portfolio at December 31, 1999 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 during the years ending     Due After       Due after       Due after
                                       December 31,            3 through       5 through       10 through    Due after 15
                               ----------------------------   5 years after  10 years after  15 years after   years after
                                2000       2001       2002      12/31/99        12/31/99        12/31/99       12/31/99     Total
                               ------     ------     ------     --------        --------        --------       --------    -------
                                                                             (In thousands)
<S>                            <C>        <C>        <C>      <C>            <C>             <C>             <C>          <C>
Real estate - mortgage:
  Single-family residential...   $   20     $ 209    $   892    $    352      $   2,174        $  3,250        $  8,800    $ 15,697
  Construction................       --        --        257          --             --              --             413         670
  Home equity and second
    mortgages.................       17        22         35         357            390             322              --       1,143
  Commercial..................      429       133        603         455            228             856             136       2,840
  Consumer....................        2        27         20          73            330              --              --         452
                                  -----     -----    -------    --------      ---------        --------        --------    --------
     Total....................    $ 468     $ 391    $ 1,807    $  1,237      $   3,122        $  4,428        $  9,349    $ 20,802
                                  =====     =====    =======    ========      =========        ========        ========    ========
</TABLE>


                                       14
<PAGE>

     The next table sets forth at December 31, 1999, the dollar amount of all
loans due after December 31, 1999 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......................    $  24,720       $   31,796
Real estate construction (1)..............        2,448              836
Consumer and commercial business..........        8,191            4,086
                                              ---------       ----------
     Total................................    $  35,359       $   36,718
                                              =========       ==========

Columbian
---------
Real estate - mortgage:
 Single family residential................    $  13,036       $    1,698
 Construction (1).........................          511              159
 Home equity and second mortgages.........          691              452
 Commercial...............................        3,768               35
Consumer..................................          452               --
                                              ---------       ----------
     Total................................    $  18,458       $    2,344
                                              =========       ==========

     Total................................    $  53,817       $   39,062
                                              =========       ==========
</TABLE>

___________
(1)   Net of loans in process.

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
FIRREA. In addition, FIRREA authorizes the Director of OTS 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 the
fully phased in 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

                                       15
<PAGE>

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, 1999,
Cecil Federal's loans-to-one borrower cannot exceed $900,000 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 $200,000. 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 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.

                                       16
<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>

                                                 Year Ended December 31,
                                                 -----------------------
                                                   1999           1998
                                                  ------         ------
                                                      (In thousands)
<S>                                              <C>            <C>
Cecil Federal
-------------
Loans originated:
  Real estate loans:
     Construction loans......................    $ 1,443        $ 2,874
     One- to four-family.....................     18,459         15,600
     Multi-family............................         --            144
     Non-residential and other...............      6,001          2,083
  Consumer loans.............................      7,634          4,142
  Commercial loans...........................      3,087          1,746
                                                 -------        -------
     Total loans originated..................    $36,624        $26,589
                                                 =======        =======

Loans sold:
  Whole loans................................    $ 1,134        $ 2,814
                                                 -------        -------
     Total loans sold........................    $ 1,134        $ 2,814
                                                 =======        =======

Columbian
---------
Loans originated:
  Real estate loans:
     Construction loans......................    $ 2,230        $   615
     One- to four-family.....................      4,081          2,775
     Multi-family............................         --             --
     Non-residential and other...............         --             30
  Consumer loans.............................        324             --
  Commercial loans...........................         --            375
                                                 -------        -------
     Total loans originated..................    $ 6,635        $ 3,795
                                                 =======        =======

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, 1999, Cecil Federal was servicing $16.3
million in loans for other financial institutions. For the years ended December

                                       17
<PAGE>

31, 1999, 1998 and 1997 Cecil Federal recognized gross servicing income of
$35,000, $41,000 and $42,000, respectively, and total fee income of $255,980,
$225,846 and $184,000, respectively.

     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.

                                       18
<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. 14.

<TABLE>
<CAPTION>
                                                             At December 31,
                                                      -------------------------
                                                        1999             1998
                                                      --------         --------
                                                            (In thousands)
<S>                                                   <C>              <C>
Cecil Federal
-------------
Loans accounted for on a non-accrual basis: (1)
  Residential real estate...........................  $    874         $    359
  Consumer..........................................        --               --
                                                      --------         --------
    Total...........................................  $    874         $    359
                                                      ========         ========

Accruing loans which are contractually past
  due 90 days or more:
  Residential real estate...........................  $     --         $    101
  Consumer..........................................       331               15
                                                      --------         --------
    Total...........................................  $    331         $    116
                                                      ========         ========
    Total of nonaccrual and 90 days past due loans..  $  1,206         $    475
                                                      ========         ========

Percentage of total loans...........................      1.68%             .85%
                                                      ========         ========
Other non-performing assets.........................  $    116         $     61
                                                      ========         ========

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

Accruing loans which are contractually
  past due 90 days or more:
  Real estate - mortgage:
      Single-family residential.....................  $     --         $     88
      Construction..................................        --               --
      Home equity and second mortgages..............        --               --
      Commercial....................................        --               --
  Consumer..........................................        --               --
                                                      --------         --------
      Total.........................................  $     --         $     88
                                                      ========         ========
      Total nonperforming loans.....................  $     80         $     88
                                                      ========         ========

Percentage of total loans...........................       .39%             .47%
                                                      ========         ========
Other nonperforming assets (2)......................  $    255         $    263
                                                      ========         ========
</TABLE>

______________
(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.
(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.

                                       19
<PAGE>

     Except as discussed below, at December 31, 1999, 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, 1999, Cecil Federal's nonaccruing loans and accruing loans
more than 90 days past due totaled $1.2 million, which consisted of 16 single-
family residential properties, 26 consumer loans, and two commercial loans.
During the year ended December 31, 1999, gross interest income of $44,886 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 $104,186, are
currently in bankruptcy.

     At December 31, 1999, Cecil Federal's other non-performing assets of
$116,184 consisted of one single family residential property acquired through
foreclosure.

     During the year ended December 31, 1999, gross interest income for
Columbian of $12,703 would have been recorded on loans accounted for on a
nonaccrual basis if the loans had been current throughout the respective
periods.

     At December 31, 1999, Columbian did not have any loans not currently
classified as nonaccrual, 90 days past due or restructured but where known
information about possible credit problems of borrowers causes management to
have serious concerns as to the ability of the borrowers to comply with present
loan repayment terms and may result in disclosure as nonaccrual, 90 days past
due or restructured.

     Columbian's other nonperforming assets of $254,994 consisted of three
properties acquired through foreclosure.  Such properties consisted of two small
multi-family dwellings, which were carried at $225,414 at December 31, 1999 and
Columbian's participation in a townhouse project, which was carried at $29,580
at December 31, 1999.

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

                                       20
<PAGE>

properties. At December 31, 1999, Cecil Federal's and Columbian's allowance for
loan losses amounted to $254,515 and $180,003, respectively.

     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,
                                             -------------------------
                                                 1999         1998
                                             ------------  -----------
                                                  (In thousands)
<S>                                          <C>           <C>
Cecil Federal
-------------
Balance at beginning of period.............        $ 222        $ 174
                                                   -----        -----

Loans charged-off:
  Residential real estate mortgage loans...           --           --
  Consumer.................................          107           77
                                                   -----        -----
Total charge-offs..........................          107           77
                                                   -----        -----

Recoveries:
  Residential real estate mortgage loans...           --           --
  Consumer.................................           14           35
                                                   -----        -----

Total recoveries...........................           14           35
                                                   -----        -----

Net loans charged-off......................           93           41
                                                   -----        -----

Provision for loan losses..................          125           90
                                                   -----        -----
Balance at end of period...................        $ 254        $ 222
                                                   =====        =====

Ratio of net charge-offs to average loans
  outstanding during the period............         1.44%         .07%
                                                   =====        =====

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

Total charge offs..........................           --           --
                                                   -----        -----

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>

                                       21
<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,
                                             -----------------------------------------------
                                                    1999                     1998
                                             --------------------    -----------------------
                                                       Percent of               Percent of
                                                     Loans in Each            Loans in Each
                                                      Category to              Category to
                                             Amount   Gross Loans    Amount    Gross Loans
                                             ------  --------------  ------  ---------------
                                                         (Dollars in thousands)
<S>                                          <C>     <C>             <C>     <C>
Cecil Federal
-------------
Real estate loans:
 Construction loans.................          $   5          10.87%    $  9             8.65%
 One- to four-family residential....            144          71.85       80            81.02
 Multi-family residential...........              1           0.61        5             1.55
 Land...............................              2           0.69       13             0.64
 Commercial.........................             15           5.31       24             4.39

Commercial loans....................             30           5.82       31             3.66

Automobiles.........................             27           5.10        5             2.64
Education loans.....................             --           0.07       --             0.11
Savings account loans...............             --           1.03       --             1.43
Home improvement loans..............             --           0.02       --             0.03
Personal loans......................             30           5.10       55             4.80
                                              -----                    ----
                                                                        222
Less:
 Loans held for sale................             --             --       --            (4.49)
 Loans in process...................             --          (5.82)      --            (3.81)
 Discounts and other................             --          (0.29)      --            (0.22)
 Loan loss reserve..................             --          (0.36)      --            (0.40)
                                              -----         ------     ----           ------
Total allowance for loan losses.....          $ 254         100.00%    $222           100.00%
                                              =====         ======     ====           ======
Columbian
---------
Real estate - mortgage:
  Single-family residential.........          $  89          76.61     $ 37            81.23%
  Construction......................             40           4.08      105             3.73
  Home equity and second mortgages..              6           5.58        8             7.07
  Commercial........................             33          13.86       25             10.5
Consumer............................             12           2.21        5             0.65
                                              -----                    ----
   Total allowance for loan losses..          $ 180                    $180
                                              =====                    ====
Less:
 Loans held for sale................             --             --       --               --
 Loans in process...................             --          (0.82)      --               --
 Deferred loan origination fees.....             --          (0.65)      --               --
 Loan loss reserve..................             --          (0.87)      --               --
                                              -----         ------     ----           ------
Total allowance for loan losses.....          $ 180         100.00%    $180           100.00%
                                              =====         ======     ====           ======
</TABLE>

                                       22
<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 to
maturity and Cecil Federal does not currently foresee any conditions that would
require any sales of its investments.

     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 Chief Financial Officer in accordance with
investment strategies approved by the Investment Committee of the Board of
Directors of Columbian.

     For additional information, see Notes 3 and 4 of Notes to Consolidated
Financial Statements.

                                       23
<PAGE>

     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,
                                                     ---------------------    ------------------
                                                      1999       1998         1999       1998
                                                      ----       ----         ----       ----
                                                                      (In thousands)
<S>                                                  <C>         <C>          <C>        <C>

Investment securities:
  U.S. government and agency securities.....         $1,973         $3,004     $3,988       $3,244
  Other.....................................            697            559        150        1,513
                                                     ------         ------     ------       ------
    Total investment securities.............          2,670          3,563      4,138        4,757
Federal funds sold..........................             --             --         50        1,125
Interest-earning deposits and certificates
  of deposit................................          3,465          3,642         50        2,570
FHLB stock..................................            471            458        187          215
                                                     ------         ------     ------       ------
     Total investments......................         $6,606         $7,663     $4,425       $8,667
                                                     ======         ======     ======       ======
 </TABLE>

                                       24
<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, 1999.

<TABLE>
<CAPTION>
                                          One Year or Less      One to Five Years       Five to  Ten Years       More than Ten Years
                                         -----------------      -----------------       ------------------       ------------------
                                         Carrying  Average      Carrying  Average        Carrying   Average       Carrying  Average
                                          Value     Yield        Value     Yield          Value      Yield         Value     Yield
                                         --------  -------      --------  -------       ----------  -------      --------  --------
                                                                                               (Dollars in thousands)
<S>                                      <C>       <C>          <C>       <C>           <C>         <C>          <C>       <C>
Cecil Federal
-------------
Securities available for sale:
  U.S. government and
   agency securities..................   $     --       --%     $     --      --%       $       --     --%       $     --     --%
  Other...............................        697     6.03            --      --                --     --              --     --
  Interest-earning deposits and
   certificates of deposits...........         --       --            --      --                --     --              --     --
  FHLB stock..........................         --       --            --      --                --     --              --     --
                                         --------               --------                ----------              ---------
    Total.............................   $    697     6.03      $     --      --        $       --     --       $      --     --
                                         ========               ========                ==========              =========

Securities held to maturity:
  U.S. government and
   agency securities..................   $  1,973     4.99%     $     --      --        $       --     --       $      --     --
  Other...............................         --       --            --      --                --     --              --     --
  Interest-earning deposits and
    certificates of deposits..........      3,465     4.55            --      --                --     --              --     --
  FHLB stock..........................        471     7.40            --      --                --     --              --     --
                                         --------               --------                ----------              ---------
    Total.............................   $  5,909               $     --      --        $       --     --       $      --     --
                                         ========               ========                ==========              =========

<CAPTION>
                                            Total Investment Portfolio
                                         -------------------------------
                                          Carrying    Market    Average
                                           Value      Value      Yield
                                          -------    -------    -------
<S>                                      <C>         <C>        <C>
Cecil Federal
-------------
Securities available for sale:
  U.S. government and
   agency securities..................   $     --     $   --        --%
  Other...............................        697        697      6.03
  Interest-earning deposits and
    certificates of deposits..........         --         --        --
  FHLB stock..........................         --         --        --
                                         --------     ------
    Total.............................   $    697     $  697      6.03
                                         ========     ======

Securities held to maturity:
  U.S. government and
   agency securities..................   $  1,973     $1,971      4.99
  Other...............................         --         --        --
  Interest-earning deposits and
   certificates of deposits...........      3,465      3,465      4.55
  FHLB stock..........................        471        471      7.40
                                         --------     ------
    Total.............................   $  5,909     $5,907      4.92
                                         ========     ======
</TABLE>

                                       25
<PAGE>

     The following table sets forth the scheduled maturities, carrying values,
market values and average yields for Columbian's investment portfolio at
December 31, 1999.

<TABLE>
<CAPTION>
                                          One Year or Less      One to Five Years       Five to  Ten Years       More than Ten Years
                                         -----------------      -----------------       ------------------       ------------------
                                         Carrying  Average      Carrying  Average        Carrying   Average       Carrying  Average
                                          Value     Yield        Value     Yield          Value      Yield         Value     Yield
                                         --------  -------      --------  -------       ----------  -------      --------  --------
                                                                                             (Dollars in thousands)
<S>                                      <C>       <C>          <C>       <C>           <C>         <C>          <C>       <C>
Columbian
---------
Securities available for sale:
  U.S. government and
   agency securities..................    $  --         %       $    --       --%        $  482      6.13%        $   --      --%
  Other...............................      150                      --       --             --        --             --      --
  Interest-earning deposits and
   certificates of deposits...........       --                      --       --             --        --             --      --
  FHLB stock..........................       --                      --       --             --        --             --      --
                                          -----                 -------                  ------                   ------
    Total.............................    $ 150                 $    --       --         $  482                   $   --
                                          =====                 =======                  ======                   ======

Securities held to maturity:
  U.S. government and
   agency securities..................    $  --       --        $   300     6.02         $1,206      6.97         $2,000    6.84
  Federal funds sold..................       --     5.43             --       --             --        --             --      --
  Other...............................       50       --             --       --             --        --             --      --
  Interest-earning deposits and
    certificates of deposits..........       50                      --       --             --        --             --      --
  FHLB stock..........................      187     7.89             --       --             --        --             --      --
                                          -----                 -------                  ------                   ------
    Total.............................    $ 287                 $   300                  $1,206                   $2,000
                                          =====                 =======                  ======                   ======
<CAPTION>
                                            Total Investment Portfolio
                                         -------------------------------
                                          Carrying    Market    Average
                                           Value      Value      Yield
                                           ------    -------    -------
<S>                                      <C>         <C>        <C>
Columbian
---------
Securities available for sale:
  U.S. government and
   agency securities..................     $  482    $  482      6.13%
  Other...............................        150       150      5.12
  Interest-earning deposits and
   certificates of deposits...........         --        --        --
  FHLB stock..........................         --        --        --
                                           ------    ------
    Total.............................     $  632    $  632      5.89
                                           ======    ======

Securities held to maturity:
  U.S. government and
   agency securities..................     $3,506    $3,232      6.81
  Federal funds sold..................         50        50      5.43
  Other...............................         --        --        --
  Interest-earning deposits and
    certificates of deposits..........         50        50      4.78
  FHLB stock..........................        187       187      7.89
                                           ------    ------
    Total.............................     $3,793    $3,519      6.82
                                           ======    ======
</TABLE>

                                       26
<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,        %
                                                              1999         Deposits           1998           1998        Deposits
                                                          ------------     ---------      ------------   ------------    --------
                                                                                (Dollars in thousands)
<S>                                                       <C>              <C>            <C>            <C>             <C>
Regular checking..................................        $      4,382       5.66%        $      1,870   $      2,512       4.17%
NOW accounts......................................               7,526       9.73                1,113          6,413      10.65
Passbook..........................................               9,253      11.97                  567          8,686      14.42
Statement savings.................................               2,426       3.14                  425          2,001       3.33
Commercial checking...............................                 139        .18                   46             93        .15
Money market......................................               3,825       4.95                1,466          2,359       3.92
Christmas club....................................                  61        .08                  (10)            71        .12
91 day CD.........................................               4,917       6.36               (2,556)         7,473      12.41
6 month CD........................................               6,506       8.41                  589          5,917       9.83
1 year CD.........................................               9,030      11.67                1,860          7,170      11.91
18 month CD.......................................               3,555       4.60                  764          2,791       4.64
30 month CD.......................................               5,767       7.46                2,730          3,037       5.04
42 month CD.......................................                 213        .28                  213             --         --
60 month CD.......................................               4,810       6.22                1,202          3,608       5.99
18 month IRA CD...................................               7,392       9.56                   22          7,370      12.24
14 month variable CD..............................                 464        .60                 (244)           708       1.18
12 month access CD................................               3,454       4.47                3,454             --         --
Over 60 month CD..................................                 247        .32                  247             --         --
Susque IRAs.......................................               3,183       4.11                3,183             --         --
Susque Access IRA.................................                 121        .16                  121             --         --
Susq MMFA IRA.....................................                  60        .07                   60             --         --
                                                          ------------     ------         ------------   ------------     ------
                                                          $     77,331     100.00%        $     17,122   $     60,209     100.00%
                                                          ============     ======         ============   ============     ======
</TABLE>

                                       27
<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,
                                                                    -------------------
                                                                     1999        1998
                                                                    -------     -------
                                                                      (In thousands)
     <S>                                                            <C>         <C>
     2 -  3.99% (1).................................                $   310     $   490
     4 -  5.99%.....................................                 43,040      30,225
     6 -  7.99%.....................................                  6,220       7,429
     8 -  9.99%.....................................                     63          --
                                                                    -------     -------
                                                                    $49,633     $38,144
                                                                    =======     =======
</TABLE>
     ________________
     (1)  Includes Club Accounts.

Time Deposit Maturity Schedule

     The following table sets forth the amount and maturities of time deposits
at December 31, 1999 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)..............................           $    310    $      --      $      --      $    --      $   310
4 -  5.99%..................................             32,340        6,401          1,804        2,566       43,111
6 -  7.99%..................................              4,367          543            436          874        6,220
8 -  9.99%..................................                 63           --             --           --           63
                                                       --------    ---------      ---------      -------      -------
                                                       $ 37,080    $   6,944      $   2,240      $ 3,440      $49,704
                                                       ========    =========      =========      =======      =======
</TABLE>
______________
(1)  Includes Club Accounts.

     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,
1999.

<TABLE>
<CAPTION>
                                                 Certificates
               Maturity Period                   of Deposits
               ---------------                   -----------
               <S>                               <C>
                                                (In thousands)

               Three months or less............    $ 1,521
               Over three through six months...      6,543
               Over six through twelve months..      1,725
               Over twelve months..............      2,099
                                                   -------
                Total..........................    $11,888
                                                   =======
</TABLE>

                                       28
<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,
                                       1999        % Deposits        1998           1998      % Deposits
                                   -------------  -------------  -------------    -------     -----------
<S>                                <C>            <C>            <C>            <C>           <C>
                                                             (Dollars in thousands)

Christmas Club...................       $     7            .03%       $     7   $    --          --%
Commercial Checking..............            97            .41             97        --          --
Passbook Accounts................         1,712           7.17           (418)    2,130        7.76
Six Month Certificates...........           225            .94            215        10        0.03
Twelve Month Certificates........           164            .68           (180)      344        1.25
Thirteen Month Certificates......         5,758          24.10          2,298     3,460       12.60
Eighteen Month Certificates......         1,767           7.40         (1,931)    3,698       13.46
Nineteen Month Certificates......         1,700           7.12            850       850        3.09
Twenty Five Month Certificates...         1,716           7.18           (442)    2,158        7.86
Thirty Month Certificates........            60            .25            (66)      126        0.46
Thirty Seven Month Certificates..           673           2.82           (260)      933        3.40
Forty Two Month Certificates.....           187            .78            (37)      224        0.82
Forty Nine Month Certificates....           602           2.52           (129)      731        2.66
Sixty Month Certificates.........         2,068           8.66         (2,687)    4,755       17.31
Sixty One Month Certificates.....         1,864           7.80            187     1,677        6.11
Chesapeake Accounts..............         2,090           8.75          1,005     1,085        3.95
Statement Savings................         1,918           8.03         (2,158)    4,076       14.84
NOW Checking.....................         1,122           4.70            (48)    1,170        4.26
IRA's............................           157            .66            118        39        0.14
                                        -------         ------        -------   -------      ------
                                        $23,887         100.00%       $(3,579)  $27,466      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,
                                   ---------------------------------
     Rate                            1999                    1998
     ----                          --------                ---------
                                             (In thousands)
     <S>                           <C>                     <C>
     2.00 -  3.99%..............   $   300                 $    --
     4.00 -  5.99%..............    13,735                  13,318
     6.00 -  7.99%..............     2,906                   5,692
                                   -------                 -------
                                   $16,941                 $19,010
                                   =======                 =======
</TABLE>


      The following table sets forth the amount and maturities of term
certificates at December 31, 1999 for Columbian.

<TABLE>
<CAPTION>
                                                              Amount Due
                                          -----------------------------------------------------
                                          Less Than                          After
Rate                                      One Year    1-2 Years  2-3 Years  3 Years    Total
----                                      ---------   ---------  ---------  -------  ---------
<S>                                       <C>         <C>        <C>        <C>      <C>
                                                             (In thousands)
2.00 -  3.99%.................            $    177    $     78    $     --  $    45     $   300
4.00 -  5.99%.................              10,120       1,841         764    1,010      13,735
6.00 -  7.99%.................               1,604          58         357      887       2,906
                                          --------    --------    --------  -------   ---------
                                          $ 11,901    $  1,977    $  1,121  $ 1,942   $  16,941
                                          ========    ========    ========  =======   =========
</TABLE>

                                       29
<PAGE>

     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, 1999.

<TABLE>
<CAPTION>
                                                                        Term
         Maturity Period                                             Certificates
         ---------------                                             ------------
                                                                    (In thousands)
         <S>                                                        <C>
         Three months or less.................................      $        103
         Over three through six months........................               204
         Over six through 12 months...........................             1,100
         Over 12 months.......................................               718
                                                                    ------------
           Total..............................................      $      2,125
                                                                    ============

Savings Deposit Activity

     The following table sets forth the savings activities of the Banks for the
 periods indicated.

                                                                  Year Ended December 31,
                                                               -----------------------------
                                                                  1999              1998
                                                                  ----              ----
<S>                                                            <C>               <C>
Deposits..................................................     $201,113,000      $72,420,748
Withdrawals...............................................      191,398,018       69,344,611
                                                               ------------      -----------
 Net increase (decrease) before interest credited.........        9,714,982        3,076,137
Interest credited.........................................        3,828,321        4,002,772
                                                               ------------      -----------
 Net increase (decrease) in savings deposits..............     $ 13,543,303      $ 7,078,909
                                                               ============      ===========
</TABLE>

     Management attributes the increase in deposits (prior to interest credited)
for the year ended December 31, 1999 to increased marketing of existing products
to current customers, and the addition of several new savings products and
purchase of Susquehanna branches.

     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.

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, 1999, Cecil Federal was
authorized to invest up to approximately $1.7 million in the stock of or in the
loans to subsidiaries.  In addition, institutions meeting regulatory

                                       30
<PAGE>

capital requirements and certain other tests may invest up to 50% of their
regulatory capital in conforming first mortgage loans to subsidiaries. At
December 31, 1999, Cecil Federal had $95,717 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
$34,598 for 1999. 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
$61,119 for 1999.

     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 8 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.

                                       31
<PAGE>

Regulation of the Banks

     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.

     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 3% of adjusted total assets and "total" capital
(a combination of core and "supplementary" capital) equal to 8% of risk-weighted
assets. Regulatory tangible, core and total capital are not calculated in
accordance with generally accepted accounting principles. 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 $2,745,278 as of September 30, 1999 as a result of the purchase of
two branches from Susquehana Bank. Cecil will amortize the goodwill over a 10
year period. 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, 1999, 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 and a portion of the savings association's general
loss allowances. 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, 1999, 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.

                                       32
<PAGE>

     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.

     The table below presents Cecil Federal's capital position relative to its
various regulatory capital requirements at December 31, 1999.

<TABLE>
<CAPTION>
                                                                            Percent of
                                                                Amount      Assets (1)
                                                               --------     ----------
                                                               (Dollars in thousands)
     <S>                                                       <C>         <C>
     Tangible capital......................................      $5,744          6.79%
     Tangible capital requirement..........................       1,268          1.50
                                                                 ------         -----
       Excess..............................................      $4,476          5.29%
                                                                 ======         =====

     Core capital..........................................      $5,744          6.79%
     Core capital requirement..............................       3,382          4.00
                                                                 ------         -----
       Excess..............................................      $2,362          2.79%
                                                                 ======         =====

     Total capital (i.e., core and supplementary capital)..      $5,999         10.06%
     Risk-based capital requirement........................       4,771          8.00
                                                                 ------         -----
       Excess..............................................      $1,228          2.06%
                                                                 ======         =====
</TABLE>


     -------------------------
     (1)  Based upon adjusted total assets for purposes of the tangible core
          capital requirements, and risk-weighted assets for purposes of the
          risk-based capital requirements.

                                       33
<PAGE>

     The table below provides information with respect to Columbian's compliance
with its regulatory capital requirements at December 31, 1999.

<TABLE>
<CAPTION>
                                                                  Percent of
                                                     Amount       Assets (1)
                                                    --------      ----------
                                                    (Dollars in thousands)
     <S>                                            <C>           <C>

     Tangible capital................               $  2,104          7.58%
     Tangible capital requirement....                    417          1.50
                                                    --------      --------
        Excess.......................               $  1,687          6.08%
                                                    ========      ========

     Core capital....................               $  2,104          7.58%
     Core capital requirement........                  1,111          4.00
                                                    --------      --------
        Excess.......................               $    993          3.58%
                                                    ========      ========

     Risk-based capital..............               $  2,240         15.05%
     Risk-based capital requirement..                  1,191          8.00
                                                    --------      --------
        Excess.......................               $  1,049          7.05%
                                                    ========      ========
</TABLE>

     -------------------------
     (1)  Based on adjusted total assets for purposes of the tangible capital
          and core capital requirements and risk-weighted assets for purpose of
          the risk-based capital requirement.

     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, 1999, 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

                                       34
<PAGE>

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 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.

     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).  Under the regulations, a savings institution that is not subject to an
order or written directive to meet or maintain a specific capital level is
deemed "well capitalized" if it also has: (i) a total risk-based capital ratio
of 10% or greater; (ii) a Tier 1 risk-based capital ratio of 6.0% or greater;
and (iii) a leverage ratio of 5.0% or greater.  An "adequately capitalized"
savings institution is an institution that does not meet the definition of well
capitalized and has: (i) a total risk-based capital ratio of 8.0% or greater;
(ii) a Tier 1 capital risk-based ratio of 4.0% or greater; and (iii) a leverage
ratio of 4.0% or greater (or 3.0% or greater if the institution has a composite
1 CAMEL rating).  An "undercapitalized" savings institution is an institution
that has (i) a total risk-based capital ratio less than 8.0%; or (ii) a Tier 1
risk-based capital ratio of less than 4.0%; or (iii) a leverage ratio of less
than 4.0% (or 3.0% if the institution has a composite 1 CAMEL rating).  A
"significantly undercapitalized" savings institution is defined as an
institution that has: (i) a total risk-based capital ratio of less than 6.0%; or
(ii) a Tier 1 risk-based capital ratio of less than 3.0%; or (iii) a leverage
ratio of less than 3.0%.  A "critically undercapitalized" savings institution is
defined as an institution that has a ratio of "tangible equity" to total assets
of less than 2.0%.  Tangible equity is defined as core capital plus cumulative
perpetual preferred stock (and related surplus) less all intangibles other than
qualifying supervisory goodwill and certain purchased mortgage servicing rights.
The OTS may

                                       35
<PAGE>

reclassify a well capitalized savings institution as adequately capitalized and
may require an adequately capitalized or undercapitalized institution to comply
with the supervisory actions applicable to institutions in the next lower
capital category if the OTS determines, after notice and an opportunity for a
hearing, that the institution is in an unsafe or unsound condition or that the
institution has received and not corrected a less-than-satisfactory rating for
any CAMEL rating category. The Banks are classified as well capitalized under
the prompt corrective action regulations.

     The table below presents the Cecil Federal's capital position at December
31, 1999 relative to its various minimum regulatory capital requirements under
the prompt corrective regulations.

<TABLE>
<CAPTION>
                                                             Percent of
                                                   Amount    Assets  (1)
                                                  --------  -------------
                                                  (Dollars in thousands)
        <S>                                       <C>       <C>
        Tangible equity.........................  $  5,744          6.79%
        Tangible equity requirement.............     1,268          1.50
                                                  --------         -----
          Excess................................  $  4,476          5.29%
                                                  ========         =====

        Tier 1 or leverage capital..............  $  5,744          6.79%
        Tier 1 or leverage capital requirement..     2,536          3.00
                                                  --------         -----
          Excess................................  $  3,208          3.79%
                                                  ========         =====

        Tier 1 risk-based capital...............  $  5,744          6.79%
        Tier 1 risk-based capital requirement...     3,382          4.00
                                                  --------         -----
          Excess................................  $  2,362          2.79%
                                                  ========         =====

        Risk-based capital......................  $  5,999         10.06%
        Risk-based capital requirement..........     4,771          8.00
                                                  --------         -----
          Excess................................  $  1,228          2.06%
                                                  ========         =====
</TABLE>

-------------------------
(1)  Based upon adjusted total assets for purposes of the tangible equity and
     Tier 1 or leverage capital requirements, and risk-weighted assets for
     purposes of the Tier 1 risk-based and risk-based capital requirements.

                                       36
<PAGE>

     The table below presents the Columbian's capital position at December 31,
1999 relative to its various minimum regulatory capital requirements under the
prompt corrective regulations.

<TABLE>
<CAPTION>
                                                             Percent of
                                                   Amount    Assets  (1)
                                                  --------  -------------
                                                  (Dollars in thousands)
<S>                                               <C>       <C>

        Tangible equity.........................  $  2,104          7.58%
        Tangible equity requirement.............       417          1.50
                                                  --------         -----
          Excess................................  $  1,687          6.08%
                                                  ========         =====

        Tier 1 or leverage capital..............  $  2,104          7.58%
        Tier 1 or leverage capital requirement..       833          3.00
                                                  --------         -----
          Excess................................  $  1,271          4.58%
                                                  ========         =====

        Tier 1 risk-based capital...............  $  2,104          7.58%
        Tier 1 risk-based capital requirement...     1,111          4.00
                                                  --------         -----
          Excess................................  $    993          3.58%
                                                  ========         =====

        Risk-based capital......................  $  2,240         15.05%
        Risk-based capital requirement..........     1,191          8.00
                                                  --------         -----
          Excess................................  $  1,049          7.05%
                                                  ========         =====
</TABLE>

-------------------------
(1)  Based upon adjusted total assets for purposes of the tangible equity and
     Tier 1 or leverage capital requirements, and risk-weighted assets for
     purposes of the Tier 1 risk-based and risk-based capital requirements.

     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

                                       37
<PAGE>

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.

     Liquidity Requirements.  The Banks are required to maintain average daily
balances of liquid assets (cash, certain time deposits, bankers' acceptances,
highly rated corporate debt and commercial paper, securities of certain mutual
funds, and specified United States government, state or federal agency
obligations) equal to a monthly average of not less than a specified percentage
(currently 4%) of its net withdrawable savings deposits plus short-term
borrowings. Monetary penalties may be imposed for failure to meet liquidity
requirements. The short-term liquidity ratios of the Banks at December 31, 1999
were 17.14% for Cecil Federal and 68.6% for Columbian, substantially all of
which qualified as short-term liquidity. A substantial sustained decline in
savings deposits could adversely affect the Banks' liquidity which could result
in restricted operations and additional borrowings from the FHLB.

     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 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 adopted a new assessment schedule for SAIF deposit insurance
pursuant to which the assessment rate for well-capitalized institutions with the
highest supervisory ratings have been reduced to zero and institutions in the
lowest risk assessment classification are assessed at the rate of 0.27% of
insured deposits. Until December 31, 19989, however, SAIF-insured institutions,
will be 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 will be assessed
for these obligations at the rate of 1.3 basis points. After December 31, 1999,
both BIF and SAIF members will be assessed at the same rate for FICO payments.

     Each depository institution participating in a SAIF-to-BIF conversion
transaction is required to pay an exit fee to SAIF equal to 0.90% of the
deposits transferred and an entrance fee to BIF based on the current reserve
ratio of the BIF. A savings institution is not prohibited from adopting a
commercial bank or savings bank charter if the resulting bank remains a SAIF
member.

     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

                                       38
<PAGE>

is permissible for a national bank; (ii) the branching powers of the institution
shall be restricted to those of a national bank; (iii) the institution shall not
be eligible to obtain any advances from its FHLB; and (iv) 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 immediately repay any
outstanding FHLB advances (subject to safety and soundness considerations).

     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, 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, 1999, approximately 84.71% of Cecil Federal's and 100.90%
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 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 fully phased-in 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, 1999, Cecil Federal's regulatory loans-to-
one-borrower limit was $900,000, 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

                                       39
<PAGE>

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.

     Federal regulations impose additional limitations on the payment of
dividends and other capital distributions (including stock repurchases and cash
mergers) by the Banks. Under these regulations, a savings institution that,
immediately prior to, and on a pro forma basis after giving effect to, a
proposed capital distribution, has total capital (as defined by OTS regulation)
that is equal to or greater than the amount of its fully phased-in capital
requirements (a "Tier 1 Institution") is generally permitted without OTS
approval, after notice, to make capital distributions during a calendar year in
the amount of up to the greater of (i) 100% of its net income to date during the
calendar year plus an amount that would reduce by one-half the amount by which
its capital-to-assets ratio exceeded its fully phased-in capital requirement to
assets ratio at the beginning of the calendar year, or (ii) 75% of its net
income for the previous four quarters. A savings institution with total capital
in excess of current minimum capital requirements but not in excess of the fully
phased-in requirements (a "Tier 2 Institution") is permitted to make capital
distributions without OTS approval of between up to 75% of its net income for
the previous four quarters, less dividends already paid for such period. A
savings institution that fails to meet current minimum capital requirements (a
"Tier 3 Institution") is prohibited from making any capital distributions
without the prior approval of the OTS. Tier 1 Institutions that have been
notified by the OTS that they are in need of more than normal supervision will
be treated as either a Tier 2 or Tier 3 Institution. Unless the OTS determines
that the Banks are institutions requiring more than normal supervision, the
Banks expect to be authorized to pay dividends in accordance with the provisions
of the OTS regulations discussed above as a Tier 1 Institution.

     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, 1999, of $470,900 and $186,900 for
Cecil Federal and Columbian, respectively. The FHLB of Atlanta serves as a
reserve or central 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 $47.8 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

                                       40
<PAGE>

Reserve Bank, the effect of the reserve requirement is to reduce the amount of
the institution's interest-earning assets. At December 31, 1999, 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 the FSLIC 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 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

                                       41
<PAGE>

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 (S)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 of 1977 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, if the savings association engages only in deposit-
taking activities and lending and other activities that are permissible for bank
holding companies.

                                       42
<PAGE>

     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 11
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 11 of the Notes to
Consolidated Financial Statements in the Annual Report.

Employees

     Cecil Federal had 28 full-time employees and four part-time employees as of
December 31, 1999, none of whom was represented by a collective bargaining
agreement.  Cecil Federal believes that it enjoys excellent relations with its
personnel.

                                       43
<PAGE>

     As of December 31, 1999, Columbian had nine full-time employees and one
part-time employee, 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, 1999.  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    $ 55,488          $    272

Loan Center
135 North Street
Elkton, MD 21922                 1995 (2)    3,000          --                72

Branch Offices:
108 North East Plaza
North East, Maryland 21901       1975 (1)    2,000      13,791                43

Big Elk Office
108 Big Elk Mall
Elkton, MD 21922                 1977 (3)    1,200       8,261                 2

Susquehanna Building
200 North Street
Elkton, Maryland 21922           1999 (4)    2,282          --               600
                                                      --------          --------
                                                      $ 77,540          $    989
                                                      ========          ========
</TABLE>

_____________
(1)  Original lease signed 11/74 for 20 years with five year renewals.
     Currently paying $1,365 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 $1,700 per month.
(3)  Lease assumed as a result of branch purchase on September 30, 1999.
     Currently paying $1,568 per month until April 2002.
(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.

     The net book value of Cecil's office furniture, fixtures, and equipment was
$555,023 as of December 31, 1999.

                                       44
<PAGE>

     Columbian.  The following table sets forth certain additional information
regarding Columbian's office facilities as of December 31, 1999.

                                   Year Opened  Square Footage  Net Book Value
                                   -----------  --------------  --------------
                                                                (In thousands)
Main Office:
303-307 St. John Street
Havre de Grace, Maryland 21078         1970         3,355           $ 116


         Columbian also owns a parcel of land on Route 40 near Havre de Grace
which it acquired in fiscal year 1995 and which had a book value of $261,046 as
of December 31, 1999. Columbian is currently in the process of improving this
property to serve as a branch office which it plans to open in July 2000.

         The net book value of Columbian's office furniture, fixtures and
equipment was $92,961 as of December 31, 1999.

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 is incorporated herein by reference.

Item 7.  Financial Statements
-----------------------------

         The Independent Auditor's Report and Related Consolidated Financial
Statements and Notes thereto contained in the Annual Report are incorporated
herein by reference.

Item 8.  Changes in and Disagreements with Accountants on Accounting and
------------------------------------------------------------------------
         Financial Disclosure
         --------------------

         Not applicable.

                                       45
<PAGE>

                                    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 for the fiscal year
ended December 31, 1999.

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.

Item 13.  Exhibits, Financial Statement Schedules and Reports on Form 8-K
-------------------------------------------------------------------------

     Subsequent to the issuance of the 1998 consolidated financial statements
and the filing of its 1998 Form 10-KSB, an error in the calculation of certain
compensation and benefits expenses related to stock options was discovered. The
Company and its subsidiaries, in consultation with their independent auditors,
collectively concluded that the Company would restate its consolidated financial
statements and related disclosures for the year ended December 31, 1998 and for
the first three quarters of fiscal 1999, and amend its 1998 Form 10-KSB and
first, second, and third quarter 1999 Forms 10-QSB to reflect the correction of
the error.  The purpose of the restatements and amended filings was to reflect
the changes necessary to correct the error.

                                       46
<PAGE>

     The principal effects of the changes on the accompanying financial
statements are presented in Note 22 to the Consolidated Financial Statements,
which are contained in the Annual Report filed as Exhibit 13 hereto, and
incorporated herein by reference for more information.

     (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, 1999
          and 1998
          Consolidated Statements of Operations for the Years Ended December 31,
          1999 and 1998
          Consolidated Statements of Shareholders' Equity for the Years Ended
          December 31, 1999 and 1998
          Consolidated Statements of Cash Flows for the Years Ended December 31,
          1999 and 1998
          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            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, 1999

     21             Subsidiaries

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

     27             Financial Data Schedule

                                       47
<PAGE>

-----------------------
*    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).


     (b)  Reports on Form 8-K.  The Registrant did not file any Current Reports
          -------------------
on Form 8-K during the last quarter of the fiscal year ending December 31, 1999.

                                       48
<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 24, 2000          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 24, 2000
    --------------------------------------------
    Mary B. Halsey
    President and Chief Executive Officer
    (Principal Executive Officer)

By: /s/ Mary B. Halsey                                     Date: March 24, 2000
    --------------------------------------------
    Mary B. Halsey
    President and Chief Executive Officer
    (Principal Financial and Accounting Officer)

By: /s/ Bernard L. Siegel                                  Date: March 24, 2000
    --------------------------------------------
    Bernard L. Siegel
    Chairman of the Board

By: /s/ Thomas L. Foard                                    Date: March 24, 2000
    --------------------------------------------
    Thomas L. Foard
    Secretary and Director

By: /s/ Howard J. Neff                                     Date: March 24, 2000
    --------------------------------------------
    Howard J. Neff
    Director

By: /s/ Doris P. Scott                                     Date: March 24, 2000
    --------------------------------------------
    Doris P. Scott
    Director

By: /s/ Howard B. Tome                                     Date: March 24, 2000
    --------------------------------------------
    Howard B. Tome
    Director

By: /s/ Donald F. Angert                                   Date: March 24, 2000
    --------------------------------------------
    Donald F. Angert
    Director

                                       49
<PAGE>

By: /s/ Robert L. Johnson                              Date: March 24, 2000
    -----------------------------
    Robert L. Johnson
    Director

By: /s/ Charles Sposato                                Date: March 24, 2000
    -----------------------------
    Charles Sposato
    Director

By: /s/ Matthew G. Bathon                              Date: March 24, 2000
    -----------------------------
    Matthew G. Bathon
    Director

                                       50
<PAGE>

                               INDEX TO EXHIBITS


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

   3.1         Articles of Incorporation of Cecil Bancorp, Inc. *

   3.2         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,
               1999

   21          Subsidiaries

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

   27          Financial Data Schedule

-----------------------
*    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).

                                       51