SUBURBAN BANCSHARES INC, DEF 14A, 1997-04-23

SUBURBAN BANCSHARES INC
DEF 14A, 1997-04-23
NATIONAL COMMERCIAL BANKS

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<PAGE> 1

SCHEDULE 14A
(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))

[X] Definitive Proxy Statement

[ ] Definitive Additional Materials

[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

Suburban Bancshares, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.

(1) Title of each class of securities to which transaction applies:

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

(2) Aggregate number of securities to which transaction applies:

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

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

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

(4) Proposed maximum aggregate value of transaction:

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

(5) Total fee paid:

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

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.

(1) Amount previously paid:

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

(2) Form, schedule or registration statement no.:

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

(3) Filing party:

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

(4) Date filed:

- --------------------------------------------------------------------------------
<PAGE> 2

SUBURBAN BANCSHARES, INC.
7505 GREENWAY CENTER DRIVE
P. O. BOX 298
GREENBELT, MARYLAND 20768

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

ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 22, 1997

To the Shareholders of
Suburban Bancshares, Inc.:

In connection with the annual meeting of shareholders of Suburban
Bancshares, Inc. (the "Company") to be held on May 22, 1997, we enclose a notice
of meeting and proxy statement containing information concerning those matters
which will be considered at the meeting.

Financial and other information concerning the Company's activities and
operations during 1996 is contained in our annual report, a copy of which is
enclosed herewith.

You are cordially invited to attend the annual meeting in person. However,
we would appreciate your completing, signing and dating the enclosed proxy card
and returning it in the enclosed postage prepaid envelope so that your shares
can be voted if you do not attend the meeting. If you do attend the meeting, you
may revoke your proxy and vote in person.

Sincerely,

/s/ WINFIELD M. KELLY, JR.
Winfield M. Kelly, Jr.
Chairman of the Board of Directors

WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE PROMPTLY COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE RETURN ENVELOPE
FURNISHED FOR THAT PURPOSE.
<PAGE> 3

SUBURBAN BANCSHARES, INC.
7505 GREENWAY CENTER DRIVE
P. O. BOX 298
GREENBELT, MARYLAND 20768

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

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 22, 1997

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

TO THE SHAREHOLDERS:

NOTICE IS HEREBY GIVEN that the annual meeting of the shareholders (the
"Meeting") of Suburban Bancshares, Inc., a Delaware corporation (the "Company"),
will be held on May 22, 1997 at 10:00 a.m., E.D.T., at The Holiday Inn at 9100
Basil Court, Landover, Maryland 20785, to consider and vote upon the following
matters:

1. The election of two directors to serve as members of the class of
directors whose term expires at the annual meeting of shareholders in
the year 2000 or until their successors are elected and qualify.

2. The approval of the 1997 Stock Option Plan for Employees and
Directors.

3. The approval of Stegman & Company as the Company's independent public
accountants for 1997.

4. The transaction of such other business as may properly come before
the Meeting or any adjournment thereof.

Shareholders of record at the close of business on March 24, 1997 are
entitled to notice of, and to vote at, the Meeting.

By Order of the Board of Directors,

/s/ SUSAN JANE HANSEN
SUSAN JANE HANSEN, Secretary

April 23, 1997

WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE PROMPTLY COMPLETE, SIGN,
DATE AND RETURN THE ENCLOSED PROXY CARD SO THAT YOUR SHARES MAY BE REPRESENTED
AT THE MEETING. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. IF YOU DO
ATTEND THE MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON.
<PAGE> 4

SUBURBAN BANCSHARES, INC.
7505 GREENWAY CENTER DRIVE
P. O. BOX 298
GREENBELT, MARYLAND 20768

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

PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 22, 1997

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

INTRODUCTION

This proxy statement is being furnished to the holders of common stock of
Suburban Bancshares, Inc., a Delaware corporation (the "Company"), in connection
with the solicitation of proxies by the Company's board of directors (the "Board
of Directors") for use at the annual meeting of shareholders to be held on May
22, 1997, at 10:00 a.m., E.D.T., at The Holiday Inn at 9100 Basil Court,
Landover, Maryland 20785, and at any adjournment thereof (the "Meeting"). The
purpose of the Meeting is to (i) elect two directors to serve as members of the
class of directors whose term expires at the annual meeting of shareholders in
the year 2000 or until their successors have been elected and qualified, (ii)
approve the 1997 Stock Option Plan for Employees and Directors, (iii) approve
Stegman & Company as the Company's independent public accountants for 1997, and
(iv) transact such other business as may properly come before the Meeting. See
"Election of Directors," "Selection of Independent Auditors," "1997 Stock Option
Plan" and "Other Matters."

Holders of a majority of the Company's outstanding common stock, par value
$.01 per share (the "Common Stock"), must be present at the Meeting, either in
person or represented by proxy, to constitute a quorum for the transaction of
business. Abstentions and broker non-votes will be counted to determine whether
a quorum is present. Shareholders of record at the close of business on March
24, 1997 are entitled to notice of, and to vote at, the Meeting. As of the close
of business on March 24, 1997, there were approximately 989 holders of record of
the Common Stock ("shareholders") and 10,951,218 shares of Common Stock
outstanding. In the election of directors, each shareholder is entitled to cast
one vote for each director to be elected; cumulative voting is not permitted.
Shareholders are entitled to one vote for each share held in respect of each
other matter presented at the Meeting. Directors are elected by a plurality of
votes by the holders of shares of Common Stock of the Company present in person
or represented by proxy at the Meeting. Abstentions and broker non-votes are
considered to be present and entitled to vote, but not as votes cast.

The mailing address of the Company's offices is P.O. Box 298, Greenbelt,
Maryland 20768. The Company's telephone number is (301) 474-6694. This proxy
statement and the accompanying notice of Meeting and proxy card are first being
provided to shareholders on or about April 23, 1997.

The cost of soliciting proxies and preparing the proxy materials will be
borne by the Company. In addition, the Company will request securities brokers,
custodians, nominees, and fiduciaries to forward solicitation material to the
beneficial owners of stock held of record and will reimburse them for their
reasonable out-of-pocket expenses in forwarding such solicitation material.
Proxies may be solicited personally or by telephone by directors, officers, and
employees of the Company or its subsidiary without additional compensation to
them.

The Board of Directors has selected Stephen A. Horvath and Marlin K.
Husted, or either one of them, to act as proxies with full powers of
substitution. Any shareholder executing a proxy has the power to revoke the
proxy at any time before it is voted, including by granting and delivering a
later dated proxy, by written notice to the Company prior to the exercise of the
proxy, or by attending the Meeting and voting in person. Attendance at the
Meeting, in and of itself, will not revoke a proxy. Any shareholder may attend
the meeting and vote in person whether or not he has previously given a proxy.
No dissenter's rights exist for shareholders who withhold approval as to any of
the matters being presented at the Meeting.

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<PAGE> 5

Unless revoked prior to its exercise, a properly executed proxy received by
the Company in time for the Meeting will be voted in accordance with the
shareholder's instructions specified on the proxy. If a signed proxy is returned
without specific instructions on it, the shareholder's Common Stock will be
voted "FOR" the election of each of the nominated directors, "FOR" the approval
of the 1997 Stock Option Plan for Employees and Directors, and "FOR" the
approval of the independent accountants. If any other business is brought before
the Meeting (which the Board of Directors does not expect to occur), Common
Stock represented by proxies will be voted in accordance with the judgment of
the proxies voting them. See "Election of Directors," "1997 Stock Option Plan,"
"Selection of Independent Auditors" and "Other Matters."

SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING

Shareholders' proposals intended to be presented at the 1998 annual meeting
and included in the Company's proxy statement and proxy relating to that meeting
must be received by the Company by December 12, 1997.

PROPOSAL 1 -- ELECTION OF DIRECTORS

The Board of Directors has established, by resolution, the number of
directors at eleven: four directors each in the classes whose terms expire in
1998 and 1999 and three directors in the class whose term expires in 2000. After
the election of directors at the Meeting, one vacancy will remain to be filled
to the class whose term expires at the annual meeting in the year 2000.

It is intended that the persons named on the accompanying proxy card will
vote for the election of the nominees described below. The Board of Directors
believes that both of the nominees will be available and able to serve as
directors, but if any of these persons should not be available or able to serve,
the proxies may exercise discretionary authority to vote for substitutes
proposed by the Board of Directors.

The following table sets forth the names of the nominees for election as
directors in the class whose term will expire at the annual meeting of
shareholders in the year 2000 and the current directors in the 1998 and 1999
classes. The age of each nominee and/or current director, the year each became a
director of the Company (if applicable), his or her position with the
subsidiary, Suburban Bank of Maryland (the "Bank"), his or her principal
occupation during the last five years, and certain other affiliations are also
disclosed. Information relating to the approximate number of shares of Common
Stock beneficially owned by each nominee and director is shown below under the
heading "Beneficial Ownership of Common Stock."

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<PAGE> 6

<TABLE>
<CAPTION>
SERVED AS A POSITIONS WITH THE COMPANY AND
NAME AND AGE DIRECTOR SINCE ITS SUBSIDIARY AND PRINCIPAL OCCUPATIONS
- ------------------------------ -------------- --------------------------------------------------
<S> <C> <C>
1999 CLASS
1. Barbara M. DiNenna (59) 1993 Director, April 1993 -- present; Chairman of the
Audit Committee, June 1993 -- present; Director,
Suburban Bank of Maryland, September
1993 -- present; Accountant, DiNenna & Associates,
CPA, P.A. 1973 -- present; Director and Chairman
of the Board, Prince George's Hospital Foundation,
Inc., 1991 -- present
2. Marlin K. Husted (67) 1993 Director and Vice Chairman of the Board, July
1993 -- present; Director, Suburban Bank of
Maryland, August 1993 -- present; Chairman of the
Board, First American Bank of Maryland,
1984 -- June 1993
3. Raymond G. LaPlaca (60) 1990 Director, 1990 -- present; Chairman of the
Executive Committee, 1990 -- March 1993; Chairman
of the Board, Suburban Bank of Maryland,
1983 -- July 1993; Vice Chairman of the Board,
Suburban Bank of Maryland, July 1993 -- present;
Partner, Reichelt, Nussbaum, LaPlaca & Miller, a
law firm, 1995 -- present
4. Lawrence A. Shulman (54) 1997 Director, January 1997 -- present; Director,
Suburban Bank of Maryland, January
1997 -- present; President, Shulman, Rogers,
Gandal, Pordy & Ecker, P.A., a law firm,
1972 -- present
1998 CLASS
1. Samuel Y. Botts (50) 1996 Director, June 1996 -- present; Director, Suburban
Bank of Maryland, July 1995 -- present; Partner,
Jessamy, Fort & Botts, a law firm, 1986 -- present
2. Stephen A. Horvath (47) 1997 Director and President and Chief Operating
Officer, January 1997 -- present; Director and
President and Chief Executive Officer, Suburban
Bank of Maryland, January 1997 -- present; Vice
President, Crestar Bank, January 1995 -- December
1996; Senior Vice President, First Union National
Bank, June 1992 -- December 1994; President,
Metropolitan Bank, N.A., 1988 -- 1992
3. Winfield M. Kelly, Jr. 1993 Chairman of the Board and Chief Executive Officer,
(60) March 1993 -- present; Chairman of the
Compensation Committee, April 1994 -- present;
Chairman of the Board, Suburban Bank of Maryland,
July 1993 -- present; Chairman of the Board,
Dimensions Health Corporation, 1985 -- April 1993;
President and Chief Executive Officer, Dimensions
Health Corporation, health care, April
1993 -- present; Chairman of the Board, WMK, Inc.,
a consulting and management services corporation,
1984 -- present; Secretary of State, State of
Maryland, 1987 -- March 1993
</TABLE>

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<PAGE> 7

RECOMMENDATION AND VOTE: The individuals listed above as nominees will be
elected to the 2000 Class of the Company's Board of Directors upon the vote of a
plurality of the shares of Common Stock present by proxy or in person at the
Meeting.

The Board of Directors recommends a vote "FOR" each of the nominated
individuals.

DIRECTORS AND EXECUTIVE OFFICERS

EXECUTIVE OFFICERS

In addition to Winfield M. Kelly, Jr., Marlin K. Husted and Stephen A.
Horvath, included in the director listing above, Sibyl S. Malatras is an
executive officer of the Company:

Ms. Malatras, 53, was appointed Senior Vice President and Treasurer of the
Company effective April 1994, and was appointed Chief Financial Officer in May
1996. Ms. Malatras has been Senior Vice President and Treasurer of Suburban
Maryland since April 1988.

BOARD AND COMMITTEE INFORMATION

During 1996, the Board of Directors held a total of thirteen meetings,
twelve regular meetings and one organizational meeting. Two directors, Samuel Y.
Botts and Kenneth H. Michael attended fewer than 75% of the total number of
meetings of the Board of Directors and the committees on which they served
during 1996. The Board of Directors of the Company currently has a Community
Reinvestment Act ("CRA") Committee, a Compensation Committee and an Audit
Committee. During 1996, the Board of Directors of the Company did not have a
standing Nominating Committee.

The CRA Committee's functions include recommendations on policies and
procedures relating to the Company's and the Bank's community reinvestment
efforts, and monitoring the CRA activities of the Bank. The Committee includes
two current directors, Messrs. Palumbo (Chairman) and Horvath. One member from
the board of directors of the Bank and four employees of the Bank also serve on
the Committee, which held three meetings during 1996.

The Compensation Committee was formed in 1994 to review the Company's
compensation policy and programs, including executive salary administration and
incentive compensation plans and to make recommendations to the Board of
Directors concerning these programs. The Committee, currently composed of Mrs.
DiNenna and Messrs. Kelly (Chairman), Husted and LaPlaca, held three meetings in
1996.

The Audit Committee meets at least quarterly with management
representatives and the internal auditor. The Committee recommends to the Board
of Directors the appointment of independent auditors; approves the continuing
scope of both internal and external audits and of internal loan reviews; and
reviews the results of the audits and loan reviews. The independent and internal
auditors have unrestricted access to the Audit Committee and vice versa. Current
directors of the Company serving on the Audit Committee are Mrs. DiNenna
(Chairman) and Mr. Husted. Three members of the Bank's board of directors also
serve on this Committee. During 1996, the Audit Committee held eleven meetings.

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<PAGE> 8

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors, and persons who own more than ten percent of a
registered class of the Company's equity securities to file reports of ownership
and changes in ownership with the Securities and Exchange Commission (SEC) and
the Company. Specific due dates for these reports have been established, and the
Company is required to report in this Proxy Statement any known failure to file
such ownership reports by these dates during or with respect to transactions in
1996. Based solely upon the copies of reports of ownership and changes in
ownership received by the Company and written representations of the directors,
executive officers and holders of more than ten percent of the Common Stock, the
Company is not aware of any late filings or any failure to file a required
report, except that Mr. Palumbo failed to meet the required deadlines for the
timely filing of two Forms 4 in 1996, each form reflecting one transaction. Both
forms were subsequently filed.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION FOR THE YEARS ENDED 1996, 1995 AND 1994

The following table sets forth the annual and long-term compensation for
service in all capacities to the Company for the years ended December 31, 1996,
1995 and 1994 of (i) the Chief Executive Officer and (ii) each other executive
officer of the Company and its subsidiary whose salary and bonus exceeded
$100,000 (the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL
COMPENSATION (1)
--------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (3) COMPENSATION (2)
- ------------------------------------------------ ---- -------- --------- ----------------
<S> <C> <C> <C> <C>
Winfield M. Kelly, Jr. 1996 $100,000 $ 0 $ 0
Chairman & Chief Executive Officer 1995 100,000 10,000 0
1994 100,000 0 0

William R. Johnson 1996 $151,579(4) $11,369 $5,614
Former President & Chief Operating Officer; 1995 133,030 29,947 5,321
Former President & Chief Executive Officer of 1994 130,135 0 5,001
Suburban Maryland
</TABLE>

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

(1) Except as otherwise noted, salary amounts represent base salary earned and
paid in cash during the fiscal year. No Named Executive Officer received any
perquisites and other personal benefits the aggregate amount of which
exceeded the lesser of either $50,000 or 10% of the total annual salary and
bonus reported for 1996 in the Summary Compensation Table.

(2) Included in other compensation are tax deferred contributions for Mr.
Johnson to the 401(k) Plan. The amounts reflect only contributions made
during each of the calendar years that vested during the year.

(3) No bonuses were awarded in 1994. Of the bonus earned in 1995, $11,305 for
Mr. Johnson was awarded and paid in 1995, in lieu of a merit increase in
base salary, and $10,000 for Mr. Kelly and $10,642 for Mr. Johnson were paid
in 1996. The bonus earned in 1996 was paid in 1997.

(4) Includes $11,250 of compensation earned in 1996, payment of which has been
deferred in accordance with Mr. Johnson's employment and deferred
compensation agreements.

OPTION/STOCK APPRECIATION RIGHTS GRANTS

No stock options were granted pursuant to the Management Stock Option Plan
or the Incentive Stock Option Plan in 1996. The Company has never granted any
stock appreciation rights.

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<PAGE> 9

YEAR-END VALUE OF OPTIONS

Shown below is information with respect to the unexercised options to
purchase the Company's Common Stock. Neither the Chief Executive Officer nor the
other Named Executive Officer exercised any stock options during 1996.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS
DECEMBER 31, 1996 AT DECEMBER 31, 1996 (1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Winfield M. Kelly, Jr.......................... 300,000 -0- $ 682,500 -0-
William R. Johnson............................. -- -- -- --
</TABLE>

- ---------------
(1) Value is considered to be the difference between the exercise price of $0.10
and the closing bid price of $2.375 at December 31, 1996.

COMPENSATION OF DIRECTORS

During 1996, the Company paid its directors a fee of $100 for attending
meetings of the Board of Directors and/or committees of the Board of Directors.
Mr. Kelly, Chairman of the Boards of the Company and the Bank, received $100,000
for his services as Chairman; Mr. Husted, Vice Chairman of the Board of the
Company, was paid $10,800 in 1996 and, by agreement, will receive a severance
benefit of $9,000 per year served until January 1, 2000. In 1997, the Company
will pay its directors $200 for attendance at each meeting.

EMPLOYMENT AGREEMENTS

Pursuant to an agreement between the Company and Winfield M. Kelly, Jr.,
amended and revised effective as of January 1, 1997, Mr. Kelly serves as the
Chairman of the Board of Directors and Chief Executive Officer of the Company
and as Chairman of the Board of Directors of the Bank. Under the agreement Mr.
Kelly receives (i) annual director's fees of $110,000 (payable by the Bank), and
(ii) certain employee benefits, including disability insurance. The initial term
of the amended agreement will expire upon the expiration of Mr. Kelly's current
term as a director of the Company and is subject to automatic renewal upon his
reelection as Chairman of the Board by the Board of Directors. If the agreement
is terminated by the Company without cause, or if Mr. Kelly terminates the
agreement for cause (as defined), the Company will immediately pay to Mr. Kelly
the sum of $110,000 as severance compensation. In the event the agreement is
terminated or not renewed as a result of any sale or exchange of stock resulting
in a change in a controlling interest of the Company or the Bank, Mr. Kelly will
be entitled to the sum of $200,000. If Mr. Kelly's agreement is terminated by
the Company for cause (as defined), he will be entitled only to compensation
earned prior to such termination.

Pursuant to an agreement between the Bank and William R. Johnson, Mr.
Johnson was employed as the Bank's President and Chief Executive Officer on a
year-to-year basis from March 31, 1990 until December 31, 1996, at which time he
stepped down from those positions. He will serve over the next three years as an
advisor to the Chairman and the Boards of Directors. Under the terms of his
current agreement, Mr. Johnson will receive a base salary of $140,000 for one
year and certain employee benefits, including life insurance. Mr. Johnson is
also entitled to deferred compensation, in the amount of $11,250 in 1996 and
$79,291 at the end of each year of the three-year term of his agreement, which
will be paid to a trust established under a Deferred Compensation Agreement. The
trust will pay benefits to Mr. Johnson in 120 monthly installments beginning on
the retirement date (as defined). In the event of termination for cause (as
defined), Mr. Johnson would be entitled only to compensation earned prior to
termination.

Pursuant to an agreement between the Company, the Bank and Stephen A.
Horvath, Mr. Horvath has been employed as the Company's President and Chief
Operating Officer and the Bank's President and Chief Executive Officer since
January 1, 1997. Under the terms of his agreement, Mr. Horvath receives an
annual base salary of $135,000, subject to annual review and increase, and
certain employee benefits, including life

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<PAGE> 10

insurance and the use of an automobile. Mr. Horvath is also entitled to deferred
compensation equal to 10% of his annual base compensation reduced by the
Company's contribution to his 401(k) account. The initial term of this agreement
will expire on December 31, 1998 and is subject to automatic renewal for
successive one-year terms. If Mr. Horvath's agreement were terminated without
cause in the initial two-year term, he would receive his base salary for the
remainder of the term then in effect (but not less than 12 months compensation)
or after the first two-year term, he would receive his base salary for the
remainder of the term plus an additional one-year salary. If the termination
were the result of a merger or buy out or coincident with any change of control
of the Company (as defined), the severance for termination without cause would
be increased by $100,000. In the event of termination without cause, Mr. Horvath
will receive a lump sum payment of $12,000 in lieu of continuation of employee
benefits. If Mr. Horvath's agreement is terminated for cause (as defined), he
will be entitled only to compensation earned prior to such termination.

INCENTIVE STOCK OPTION PLAN

Pursuant to the Incentive Stock Option ("ISO") Plan currently in place,
there are reserved for issuance to officers and key employees of the Company and
the Bank 391,635 shares of Common Stock, which have been registered under the
Securities Act of 1933, as amended. No options to purchase shares were granted
under the ISO Plan in 1994, 1995 or 1996. In January 1997, a total of 12,600
options at an exercise price of $2.625 were granted to seven officers and key
employees of the Bank for exceptional performance in 1996. In addition to the
options granted in 1997, there are outstanding options to purchase 80,000 shares
of Common Stock at an average weighted exercise price of $5.625 per share, which
are held by a former employee of the Company. No options expired or were
canceled in 1994, 1995 or 1996. Based on the closing bid price on March 24,
1997, the market value of the securities underlying the options available for
issuance was $881,179.

The ISO Plan, which is intended to qualify as an incentive stock option
plan within the meaning of Section 422A of the Code, is currently administered
by the Company's Compensation Committee. Only officers and key employees of the
Company and its subsidiary (50% owned or greater) are eligible to receive
options under this ISO Plan. No member of the Committee is, or was at any time
within one year prior to his appointment to the Committee, eligible to
participate in the ISO Plan. The Committee has the authority to determine who
among the eligible participants will be granted options, whether or not an
option to be granted will be designated an incentive stock option within the
meaning of Section 422A of the Code ("Qualified Option"), the number of shares
to be covered by each option, the time or times at which the options may be
granted or exercised, and the terms and provisions of the options which are not
otherwise stated in the ISO Plan.

Under the ISO Plan, options may not be granted at a price that is less than
the fair market value of the Common Stock on the date the option is granted.
While the terms of the options granted pursuant to the ISO Plan may vary,
Qualified Options generally may not be exercisable until one year of continuous
service has elapsed and may not have a term of more than ten years, while
options which are not Qualified Options may not have a term of more than eleven
years.

The Board of Directors has proposed for the approval of shareholders a new
combined incentive and non-incentive stock option plan for officers and
directors. See "Proposal 2 -- 1997 Stock Option Plan."

MANAGEMENT STOCK OPTIONS

Under the terms of the Plan of Reorganization and Recapitalization (the
"Plan"), on September 27, 1993, upon the successful completion of the Company's
Stock Offering, options to purchase an aggregate of 350,000 shares of Common
Stock were granted to Winfield M. Kelly, Jr. and other persons designated by
him. These options became exercisable at a purchase price of $0.10 per share in
1995 and have a term of five years from the effective date of the Plan. Upon Mr.
Kelly's designation, Mr. Husted and Mr. Albert W. Turner, were each granted
25,000 of the Management Options; Mr. Kelly received the remaining 300,000
options.

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<PAGE> 11

QUALIFIED EMPLOYEE BENEFIT PLAN

The Company has in effect a qualified employee benefit plan pursuant to
Section 401(k) of the Code. All full-time employees of the Company and its
subsidiary who have reached the age of 21 and have completed at least six months
of service (as defined) are eligible to participate in this plan. Participants
may elect to defer a portion of their salary up to certain statutory maximums on
a pre-tax basis. The Company (and/or the subsidiary/employer of the employee, if
such is the case) contributes on a participant's behalf on an annual basis, (i)
an amount equal to 100% of the first 1% of the participant's compensation
contributed by the participant and (ii) 60% of the next 5% of the participant's
compensation that he or she contributes. A participant's right to the
contributions made on his or her behalf by the Company and/or the applicable
subsidiary/employer (with interest earnings) vests on a five-year rolling
schedule, with 100% vesting after the fifth year of service.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

In 1996, the Compensation Committee was composed of the following members:
Winfield M. Kelly, Jr., Chairman of the Committee and Chairman of the Board of
Directors and Chief Executive Officer of the Company; Marlin K. Husted, Vice
Chairman of the Board of Directors; Barbara M. DiNenna; and Raymond G. LaPlaca.
No current or former officers or employees of the Company or the Bank, with the
exception of Mr. Kelly, participated in deliberations of and/or actions taken by
the Compensation Committee concerning executive compensation; deliberations and
actions taken concerning compensation for Mr. Kelly were conducted by the
Committee in his absence.

REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION

The Compensation Committee is responsible for reviewing and making
recommendations to the Board of Directors concerning the Company's compensation
policy and programs, including executive salary administration and incentive
compensation plans. Directors of the Company appointed to this Committee are
Mrs. DiNenna and Messrs. Husted, Kelly and LaPlaca. The Chief Executive Officer
does not participate in discussions or recommendations of any program which will
directly affect his compensation.

The Company's executive compensation policies are intended to provide
competitive levels of compensation that reflect the Company's annual and
long-term performance goals, reward superior corporate performance and assist
the Company in attracting and retaining qualified executives. Total compensation
for each of the Named Executive Officers as well as other senior executives may
be comprised of three principal components: base salary or director's fees,
incentive compensation and grants of options to purchase the Company's Common
Stock.

Bonus and/or stock option awards are based on individual and company-wide
performance. The Compensation Committee has established specific criteria for
bonuses or options which may be awarded in the future, and intends that specific
bonus awards will be determined principally in relation to attainment by the
Company of its earnings targets, with other measures of financial and
non-financial performance also taken into account.

The compensation of the Chief Executive Officer was determined pursuant to
the Plan of Reorganization and Recapitalization and the service agreement
between the Company and Mr. Kelly, both of which were approved by the Board of
Directors in the first quarter of 1993. Mr. Kelly's agreement was revised and
approved by the Board of Directors in January of 1997.

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<PAGE> 12

The relative levels of the base salary for the senior officers of the
Company are designed to reflect each officer's scope of responsibility and
accountability within the Company. Base salaries are fixed at levels which the
Board believes are comparable to those executives of similar status in the
financial services industry in the Company's market area and are reflective of
the fact that each of the senior officers have broad Company-wide
responsibilities.

Winfield M. Kelly, Jr. (Chairman)
Marlin K. Husted
Barbara M. DiNenna
Raymond G. LaPlaca

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<PAGE> 13

STOCK PERFORMANCE GRAPH

The following chart compares the yearly percentage change in the cumulative
total shareholder return on the Company's Common Stock during the five years
ended December 31, 1996, with the cumulative total return on the Center for
Research in Securities Prices ("CRSP") Total Return Index for the NASDAQ Stock
Market (U.S. Companies) and the CRSP Total Return Index for NASDAQ Financial
Stocks. The comparison assumes $100 was invested on December 31, 1991 in the
Company's Common Stock and in each of the foregoing indices and the reinvestment
of dividends.

There can be no assurance as to future trends in the cumulative total
return of the Company's Common Stock or of the following indices. The Company
does not make nor does it endorse any predictions as to future stock
performance.

<TABLE>
<CAPTION>
CRSP Total Return
Index for the CRSP Total Return
NASDAQ Stock Index for NASDAQ
Measurement Period Suburban Market (U.S. Financial Stocks
(Fiscal Year Covered) Bancshares, Inc. Companies)(*) (*)
--------------------- ---------------- ------------------ ------------------
<S> <C> <C> <C>
1991 100 100 100
1992 117 116 143
1993 200 187 166
1994 171 131 167
1995 213 185 243
1996 308 227 311
</TABLE>

- ---------------
(*) The CRSP Total Return Index for the NASDAQ Stock Market (U.S. Companies) is
an index comprising all domestic common shares traded on the NASDAQ National
Market and the NASDAQ Small-Cap Market. The CRSP Total Return Index for
NASDAQ Financial Stocks is an index comprising all financial company
American Depository Receipts, domestic common shares and foreign common
shares traded on the NASDAQ National Market and the NASDAQ Small-Cap Market.
These indices were prepared for NASDAQ by the Center for Research in
Securities Prices ("CRSP") at the University of Chicago and distributed to
NASDAQ-listed companies to assist them in complying with the proxy
disclosure requirements. The Company has not independently verified the
computation of these total return indices.

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<PAGE> 14

BENEFICIAL OWNERSHIP OF COMMON STOCK

The following table sets forth certain information as of March 24, 1997
with respect to the beneficial ownership of the Company's Common Stock of each
person who is known to own beneficially more than 5% of the outstanding shares
of Common Stock, each director, each Named Executive Officer, and all directors
and executive officers as a group. All persons listed have sole voting and
investment power with respect to their shares unless otherwise indicated.

<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK
BENEFICIALLY PERCENT OF
NAME OWNED CLASS(1)
- -------------------------------------------------------------- ---------------- ----------
<S> <C> <C>
Albert W. Turner (nominee)(2)(5).............................. 906,436 8.26%
Winfield M. Kelly, Jr.(2)..................................... 570,500 5.07%
Marlin K. Husted(2)........................................... 125,000 1.14%
Stephen A. Horvath............................................ 300 *
Samuel Y. Botts............................................... 100 *
Barbara M. DiNenna............................................ 128,000 1.17%
Raymond G. LaPlaca(3)......................................... 54,883 *
Kenneth H. Michael............................................ 181,104 1.65%
Vincent D. Palumbo (nominee)(4)............................... 230,046 2.10%
Lawrence A. Shulman........................................... 5,000 *
All executive officers and directors as a group............... 2,205,419 19.51%
</TABLE>

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

(1) Based on 10,951,218 shares outstanding as of March 24, 1997, except with
respect to individuals holding options to acquire Common Stock exercisable
within sixty days of March 24, 1997, in which event represents percentage of
shares issued and outstanding as of March 24, 1997 plus the number of such
options held by such person, and all directors and officers as a group,
which represents percentage of shares outstanding as of March 24, 1997 plus
the number of such options or warrants held by all such persons as a group.

(2) Includes 25,000, 300,000 and 25,000 currently exercisable management stock
options for Messrs. Turner, Kelly and Husted, respectively.

(3) Includes 40,659 shares as to which Mr. LaPlaca shares voting and investment
power with his wife.

(4) Includes 113,058 shares as to which Dr. Palumbo shares voting and investment
power with his wife.

(5) Includes 355,725 shares as to which Mr. Turner shares voting and investment
power with his wife.

* Indicates less than one percent (1%).

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Bank has had, and expects to have in the future, banking transactions
in the ordinary course of business with some of its directors, officers and
employees, and their associates. In the past, substantially all of such
transactions have been on the same terms, including interest rates, maturities
and collateral requirements as those prevailing at the time for comparable
transactions with unaffiliated parties and did not involve more than the normal
risk of collectibility or present other unfavorable features.

At December 31, 1996, loans to officers and directors of the Company and
the Bank, including loans to their related interests, totaled approximately
$837,000. During 1996, $223,000 of new loans and principal advances on existing
loans were made and repayments totaled $165,000. In the opinion of the Company's
Board of Directors, the terms of the foregoing loans are no less favorable to
the Bank than terms of loans to unaffiliated parties.

Frank Lucente, a director of the Company until March 23, 1993, and a
current director of the Bank, is a general partner in a partnership which leases
a branch facility to the Bank. The initial five year lease term expired June 30,
1992, and the lease was renewed under the first of three renewal options at a
minimum annual rental of approximately $75,600. Kenneth H. Michael, a director
of the Company and the Bank, is the

11
<PAGE> 15

Chairman of the Board of a company that provided services to the Bank associated
with the management and disposition of certain properties obtained through
foreclosure. Fees and commissions for these services were approximately $62,000
in 1996 and $84,000 in 1995. The Company may, from time-to-time, engage this
company for similar services in the future. In the opinion of the Company's
Board of Directors, the services provided and the terms of the foregoing lease
are no more and no less favorable to the Company than those which could have
been received from unaffiliated parties.

PROPOSAL 2 -- 1997 STOCK OPTION PLAN

The Compensation Committee has recommended that the Board of Directors
approve, subject to shareholder approval, the 1997 Stock Option Plan (the "1997
Plan"). This plan would replace the Incentive Stock Option Plan currently in
place for which only officers and key employees are eligible. The purpose of the
1997 Plan is to give directors, officers and key employees an opportunity to
acquire shares of the Common Stock of the Company in order to provide an
incentive for such directors, officers and key employees to continue to promote
the success of the Company as measured by its shares and generally to increase
the commonality of interests between officers, key employees, directors and
other shareholders.

PRINCIPAL FEATURES OF THE PLAN

The 1997 Plan will be administered by a Committee, which shall consist
solely of not less than two (2) members of the Board who are non-employee
directors. Members of the Committee shall serve at the pleasure of the Board.
The Committee shall have the authority and discretion to select participants and
grant awards, to determine the form and content of awards, to interpret the
plan, to prescribe, amend, and rescind rules and regulations of the plan, and to
delegate administrative tasks to one or more members of the Committee.

In its sole discretion, the Committee may grant incentive stock options
("ISOs") or non-incentive stock options ("non-ISOs") to employees of the Company
and may grant non-ISOs to directors. In selecting the eligible participants and
in determining the number of shares to be granted, the Committee may consider
the nature of the services rendered by the participant, the participant's
current and potential contribution to the Company and other relevant factors.

DESCRIPTION OF THE OPTIONS

Awards under the 1997 Plan shall be granted in the form of ISOs or
non-ISOs. ISOs, as defined by Section 422 of the Internal Revenue Code of 1986,
are available to employees only; non-ISOs may be granted to employees and
directors. The exercise price as to any option granted under the plan shall not
be less than market value of the optioned shares on the date of the grant (110%
of the fair market value of the Common Stock on the date of grant in the case of
an ISO granted to a holder of more than 10% of the Common Stock).

Options granted under the 1997 Plan may have a maximum term of ten years
(five years in the case of an ISO granted to a holder of more than 10% of the
Common Stock) as determined by the Committee at the time of grant, subject to
earlier termination in accordance with the terms of the 1997 Plan. If a
participant in the 1997 Plan terminates service as an employee or director for
reasons other than death or disability, such participant's options will expire
not later than three months after the date of termination of employment or
service as a director. If the termination were the result of permanent
disability or death of the employee or director, the exercise period would be
the earlier of the expiration date of the options or one year after the date of
termination. No options may be granted pursuant to the 1997 Plan more than ten
years after May 22, 1997.

A total of 500,000 shares of Common Stock are available for grant under the
1997 Plan. In the event of certain changes affecting the shares of Common Stock,
the number and kind of shares subject to outstanding awards shall be
proportionately adjusted for any increase, decrease, change or exchange of
shares which results from a merger, consolidation, recapitalization,
reorganization, reclassification, stock dividend, split-up, combination of
shares or similar event. In the event of a merger in which the Company is not
the surviving entity, the sale or disposition of all or substantially all of the
Company's assets, or liquidation of the Company, all awards will be surrendered
and the Committee shall determine whether the holder of the surrendered

12
<PAGE> 16

awards shall receive for each share subject to an option, an option for the
number and kind of shares into which each outstanding share is changed or
exchanged, together with an appropriate adjustment of the exercise price, or a
payment, in cash or shares, equal to the market value of the shares subject to
the option on the date of the merger or sale, less the exercise price of the
award.

Options granted under the 1997 Stock Option Plan may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent and distribution or pursuant to the terms of a
"qualified domestic relations order".

On March 24, 1997, the closing bid and asked prices for the common stock,
as reported by the NASDAQ stock market were $2.25 and $2.50, respectively.

FEDERAL INCOME TAX IMPLICATIONS

The Company believes that, under present law, the following federal income
tax consequences generally arise with respect to awards granted under the 1997
Stock Option Plan. The grant of an ISO or a non-ISO will create no tax
consequences for the participant or the Company. A participant will not have
taxable income upon exercising an ISO (except that the alternative minimum tax
may apply), and the Company will receive no deduction at that time. Upon
exercising a non-ISO, the participant generally must recognize ordinary income
equal to the difference between the exercise price and the fair market value of
the stock received on the date of exercise. The Company will be entitled to a
deduction equal to the amount recognized as ordinary income by the participant.

A participant's disposition of shares acquired upon the exercise of an
option generally will result in a short-term or long-term capital gain or loss
(except in the event that shares issued pursuant to the exercise of an ISO are
disposed of within two years after the date of the grant of the ISO or within
one year after the transfer of the shares to the participant) measured by the
difference between the sale price and the participant's tax basis in such shares
(or the exercise price of the option in the case of shares acquired by the
exercise of an ISO). Generally, there will be no tax consequences to the Company
in connection with a disposition of shares acquired under an option. With
respect to awards granted under the 1997 Plan that may be settled in cash, the
participant generally must recognize compensation income equal to the cash. The
Company will be entitled to a deduction of the same amount. Special rules apply
to an employee subject to liability under Section 16(b) of the Exchange Act. In
addition, under Section 162(m) of the Internal Revenue Code, certain
compensation payments in excess of $1 million are subject to a limitation on
deductibility for the Company.

The foregoing discussion, which is general in nature, is intended for the
information of shareholders considering how to vote at the Annual Meeting and
not as tax guidance to participants in the 1997 Plan. This discussion does not
address the effects of other federal taxes (including possible "golden
parachute" excise taxes) or taxes imposed under state, local or foreign tax
laws. Participants in the 1997 Plan should consult a tax advisor as to the tax
consequences of participation.

VOTE REQUIRED AND RECOMMENDATION OF THE BOARD OF DIRECTORS

The affirmative vote of a majority of the total number of votes cast at the
Meeting on the proposal to approve the 1997 Plan is required to approve the 1997
Plan.

The Board of Directors of the Company recommends that shareholders vote
"FOR" the approval of the 1997 Stock Option Plan.

PROPOSAL 3 -- SELECTION OF INDEPENDENT AUDITORS

The Board of Directors has selected Stegman & Company, independent
auditors, to examine the financial statements of the Company for the year 1997.
In 1996, Stegman & Company performed various professional services for the
Company, including completion of the examination of financial statements of the
Company for 1995, preliminary work on the examination for 1996, and preparation
of corporate tax returns.

13
<PAGE> 17

Stegman & Company has served as the Company's independent public auditor
since 1994. Representatives of Stegman & Company are expected to attend the
Meeting and will have an opportunity to make a statement if they so desire. They
will be available to respond to appropriate questions regarding the Company's
consolidated financial statements for 1996.

The Board of Directors recommends a vote "FOR" ratifying the selection of
Stegman & Company as the Company's independent public accountants for 1997.

ANNUAL REPORT ON FORM 10-K

UPON REQUEST, ANY SHAREHOLDER OF THE COMPANY CAN OBTAIN THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996, AT NO CHARGE.

OTHER MATTERS

The Meeting is called for the purposes set forth in the accompanying notice
of the Meeting. Other than the proposals set forth in the accompanying notice,
the Company's management is not aware of any matter to be brought before the
Meeting. However, should any other matter properly come before the Meeting, the
persons named in the accompanying proxy card or their duly authorized
substitutes acting at the Meeting will vote or otherwise act on such matter in
accordance with their best judgment.

By Order of the Board of Directors,

/s/ WINFIELD M. KELLY, JR.
Winfield M. Kelly, Jr.
Chairman of the Board of Directors
April 23, 1997

14
<PAGE> 18

EXHIBIT

SUBURBAN BANCSHARES, INC.
1997 STOCK OPTION PLAN

1. PURPOSE OF THE PLAN

The purpose of this Suburban Bancshares, Inc. 1997 Stock Option Plan (the
"1997 Plan") is to advance the interests of the Company through providing
selected key Employees and Directors of the Company and its Affiliates with the
opportunity to acquire Shares. By encouraging such stock ownership, the Company
seeks to attract, retain and motivate the best available personnel for positions
of substantial responsibility; to provide additional incentive to key Employees
and Directors of the Company and its Affiliates to promote the success of the
business as measured by the value of its Shares; and generally to increase the
commonality of interests between key Employees, Directors and other
shareholders.

2. DEFINITIONS

As used herein, the following definitions shall apply.

(a) "Affiliate" shall mean any Parent Corporation or Subsidiary Corporation
of the Company, and shall include the Bank.

(b) "Agreement" shall mean a written agreement entered into in accordance
with Section 5(c).

(d) "Bank" shall mean Suburban Bank of Maryland, Greenbelt, Maryland.

(e) "Board" shall mean the Board of Directors of the Company.

(f) "Cause" shall mean, in the context of the termination of an Employee's
employment by the Company or any Affiliate, or the removal of a Director
(whether by action of the appropriate Board of Directors, shareholders,
regulatory action or otherwise), as a result of the failure of the Participant
(other than for the reasons set forth in Section 9(a) or 9(b) hereof) to perform
in any material respect, the duties of such Participant's position; any
misconduct on the part of the Participant that, in the reasonable determination
of the Board is damaging or detrimental to the Company or any Affiliate;
conviction of a crime involving a felony, fraud, embezzlement, perjury or the
like; any breach of fiduciary duty involving personal profit or misappropriation
of funds or property of, or entrusted to, the Company or any Affiliate; or the
receipt of any written order, agreement, memorandum or other requirement from
any regulatory agency having jurisdiction over the Company or any Affiliate
requiring the termination, removal or resignation of such Participant.

(g) "Change in Control" shall mean any one of the following events
occurring after the Effective Date: (1) the acquisition of ownership, holding or
power to vote more than 51% of the Bank's or Company's voting stock, (2) the
acquisition of the power to control the election of a majority of the Bank's or
Company's Directors, (3) the exercise of a controlling influence over the
management or policies of the Bank or the Company by any person or by persons
acting as a "group" (as that term is used for purposes of Section 13(d) of the
Securities Exchange Act of 1934, as amended), or (4) the failure of Continuing
Directors to constitute at least two-thirds of the Board of Directors of the
Company or the Bank (the "Company Board") during any period of two consecutive
years. For purposes of this 1997 Plan, "Continuing Directors" shall include only
those individuals who were members of the Company Board at the Effective Date
and those other individuals whose election or nomination for election as a
member of the Company Board was approved by a vote of at least two-thirds of the
Continuing Directors then in office. For purposes of this subparagraph only, the
term "person" refers to an individual or a corporation, partnership, trust,
association, company, joint venture, pool, syndicate, sole proprietorship,
unincorporated organization or any other form of entity not specifically listed
herein. The decision of the Committee as to whether a Change in Control has
occurred shall be conclusive and binding.

(h) "Code" shall mean the Internal Revenue Code of 1986, as amended.

15
<PAGE> 19

(i) "Committee" shall mean the Stock Option Committee appointed by the
Board in accordance with Section 5(a) hereof.

(j) "Common Stock" shall mean the common stock, par value $0.01 per share,
of the Company.

(k) "Company" shall mean Suburban Bancshares, Inc.

(l) "Continuous Service" shall mean the absence of any interruption or
termination of service as an Employee of the Company or an Affiliate. Continuous
Service shall not be considered interrupted in the case of sick leave, military
leave or any other leave of absence approved by the Company or in the case of
transfers between payroll locations of the Company or between the Company, an
Affiliate or a successor.

(m) "Director" shall mean a member of the Board or of the Board of
Directors of any Affiliate.

(n) "Effective Date" shall mean the date specified in Section 15 hereof.

(o) "Employee" shall mean any person employed, as an Officer or otherwise,
by the Company or by an Affiliate, and shall include Directors of the Company or
an Affiliate who are also employed by the Company or an Affiliate.

(p) "Exercise Price" shall mean the price per Optioned Share at which an
Option or SAR may be exercised.

(q) "ISO" means an option to purchase Common Stock which meets the
requirements set forth in the 1997 Plan, and which is intended to be and is
identified as an "incentive stock option" within the meaning of Section 422 of
the Code.

(r) "Market Value" shall mean the fair market value of the Common Stock, as
determined in accordance with Section 7(b) hereof.

(s) "Non-Employee Director" shall mean a Director who, at any time of
determination: (i) is not currently an Employee; (ii) does not, directly or
indirectly, currently receive compensation from the Company or any Affiliate for
services rendered as a consultant, other than in the capacity as a director and
other than compensation in an amount which would not require disclosure pursuant
to Item 404(a) of Regulation S-K; (iii) does not have an interest in any
transaction which would require disclosure pursuant to Item 404(a) of Regulation
S-K; and (iv) is not engaged in a business relationship which would require
disclosure pursuant to Item 404(b) of Regulation S-K.

(t) "Non-ISO" means an option to purchase Common Stock which meets the
requirements set forth in the 1997 Plan but which is not intended to be, and is
not identified as, an ISO.

(u) "Option" means an ISO and/or a Non-ISO.

(v) "Optioned Shares" shall mean Shares subject to an Option granted
pursuant to this 1997 Plan.

(w) "Parent" shall mean any present or future corporation which would be a
"parent corporation" as defined in Subsection 425(e) and (g) of the Code.

(x) "Participant" shall mean any person who receives an Award pursuant to
the 1997 Plan.

(y) "1997 Plan" shall mean the Suburban Bancshares, Inc. 1997 Stock Option
Plan.

(z) "Regulation S-K" shall mean Regulation S-K of the General Rules and
Regulations promulgated under the Securities Exchange Act of 1934, as amended,
17 CFR sec.229.1 et. seq., provided, however, if the Company shall commence
reporting as a "small business issuer" within the meaning of Rule 405
promulgated under the Securities Act of 1933, as amended, references to
Regulation S-K shall refer to the comparable provisions of Regulation S-B of the
General Rules and Regulation promulgated under the Securities Exchange Act of
1934, as amended 17 CFR sec.228.1 et. seq.

(aa) "Share" shall mean one share of Common Stock.

16
<PAGE> 20

(ab) "Subsidiary" shall mean any present or future corporation which would
be a "subsidiary corporation" as defined in Subsection 425(f) and (g) of the
Code.

3. TERM OF THE 1997 PLAN AND AWARDS

(a) Term of the 1997 Plan. The 1997 Plan shall continue in effect for a
term of ten years from the Effective Date, unless sooner terminated pursuant to
Section 18 hereof. No Award shall be granted under the 1997 Plan after ten years
from the Effective Date.

(b) Term of Awards. The term of each Award granted under the 1997 Plan
shall be established by the Committee, but shall not exceed 10 years; provided,
however, that in the case of an Employee who owns Shares representing more than
10% of the outstanding Common Stock at the time an ISO is granted to such
Employee, the term of such ISO shall not exceed five years.

4. SHARES SUBJECT TO THE 1997 PLAN

Subject to adjustment in accordance with the provisions of Section 12
hereof, the aggregate number of Shares with respect to which Awards may be
granted shall not exceed 500,000. Optioned Shares may either be authorized but
unissued Shares or Shares held in treasury. If an Award expires, becomes
unexercisable or is forfeited for any reason without being exercised or becoming
vested in full, the Optioned Shares subject to such Award shall, unless the 1997
Plan shall have been terminated, be available for the grant of additional Awards
under the 1997 Plan.

5. ADMINISTRATION OF THE 1997 PLAN

(a) Composition of the Committee. The 1997 Plan shall be administered by
the Committee, which shall consist solely of not less than two (2) members of
the Board who are Non-Employee Directors. Members of the Committee shall serve
at the pleasure of the Board. In the absence at any time of a duly appointed
Committee, the 1997 Plan shall be administered by those members of the Board who
are Non-Employee Directors.

(b) Powers of the Committee. Except as limited by the express provisions
of the 1997 Plan or by resolutions adopted by the Board, the Committee shall
have sole and complete authority and discretion: (i) to select Participants and
grant Awards; (ii) to determine the form and content of Awards to be issued in
the form of Agreements under the 1997 Plan; (iii) to interpret the 1997 Plan;
(iv) to prescribe, amend and rescind rules and regulations relating to the 1997
Plan; (v) to make other determinations necessary or advisable for the
administration of the 1997 Plan; and (vi) to delegate ministerial tasks in
connection with the administration of the 1997 Plan to one or more of the
members of the Committee. The Committee shall have and may exercise such other
power and authority as may be delegated to it by the Board from time to time. A
majority of the entire Committee shall constitute a quorum and the action of a
majority of the members present at any meeting at which a quorum is present, or
acts approved in writing by a majority of the Committee without a meeting, shall
be deemed the action of the Committee.

(c) Agreement. Each Award shall be evidenced by a written agreement
containing such provisions as may be approved by the Committee. Each such
Agreement shall constitute a binding contract between the Company and the
Participant, and every Participant, upon acceptance of such Agreement, shall be
bound by the terms and restrictions of the 1997 Plan and of such Agreement. The
terms of each such Agreement shall be in accordance with the 1997 Plan, but any
Agreement may include such additional provisions and restrictions determined by
the Committee, in its discretion, provided that such additional provisions and
restrictions are not inconsistent with the terms of the 1997 Plan. In
particular, the Committee shall set forth in each Agreement: (i) the Exercise
Price of an Option; (ii) the number of Shares subject to, and the expiration
date of, the Award; (iii) the manner, time and rate (cumulative or otherwise) of
exercise or vesting of such Award; and (iv) the restrictions, if any, to be
placed upon such Award, or upon Shares which may be issued upon exercise of such
Award.

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<PAGE> 21

The Chairman of the Committee and such other officers as shall be
designated by the Committee are hereby authorized to execute Agreements on
behalf of the Company and to cause them to be delivered to the recipients of
Awards.

(d) Effect of the Committee's Decisions. All decisions, determinations and
interpretations of the Committee shall be final, conclusive and binding on all
persons affected thereby.

(e) Indemnification. In addition to such other rights of indemnification
as they may have, the members of the Committee shall be indemnified by the
Company in connection with any claim, action, suit or proceeding relating to any
action taken or failure to act under or in connection with the 1997 Plan or any
Award granted hereunder, to the full extent provided for under the Company's
Articles of Incorporation or Bylaws with respect to the indemnification of
Directors.

6. GRANT OF OPTIONS

(a) General. In its sole discretion, the Committee may grant Options to
Employees of the Company or its Affiliates and may grant Non-ISOs to Directors.
In selecting Participants and in determining the number of shares of Common
Stock to be granted to each such Participant pursuant to each Award granted
under the 1997 Plan, the Committee may consider the nature of the services
rendered by each such Participant, each such Participant's current and potential
contribution to the Company, and such other factors as the Committee may, in its
sole discretion, deem relevant. Participants who have been granted an Award may,
if otherwise eligible, be granted additional Awards.

(b) Special Rules for ISOs. The aggregate Market Value, as of the date the
Option is granted, of the Shares with respect to which ISOs are exercisable for
the first time by an Employee during any calendar year (under all incentive
stock option plans, as defined in Section 422 of the Code, of the Company or any
present or future Parent or Subsidiary of the Company) shall not exceed
$100,000. Notwithstanding the prior provisions of this paragraph, the Committee
may grant to Employees Options in excess of the foregoing limitations, in which
case such Options granted in excess of such limitation shall be Options which
are Non-ISOs.

7. EXERCISE PRICE FOR OPTIONS

(a) Limitations. The Exercise Price as to any particular Option granted
under the 1997 Plan shall not be less than the Market Value of the Optioned
Shares on the date of grant. In the case of an Employee who is granted an ISO
and at that time owns Shares representing more than 10% of the Company's
outstanding Shares of Common Stock, the Exercise Price of such ISO shall not be
less than 110% of the Market Value of the Optioned Shares subject to such ISO at
the time the ISO is granted.

(b) Determination of Exercise Price. If the Common Stock is listed on a
national securities exchange (including the NASDAQ National Market) on the date
in question, then the Market Value per Share shall be not less than the average
of the highest and lowest selling price on such exchange on such date, or if
there were no sales on such date, then the Exercise Price shall be not less than
the mean between the bid and asked price on such date. If the Common Stock is
traded otherwise than on a national securities exchange on the date in question,
then the Market Value per Share shall be not less than the mean between the bid
and asked price on such date, or, if there is no bid and asked price on such
date, then on the next prior business day on which there was a bid and asked
price. If no such bid and asked price is available, then the Market Value per
Share shall be its fair market value as determined by the Committee, in its sole
and absolute discretion.

(c) Reissuance of Options. Not withstanding anything herein to the
contrary, the Committee shall have the authority to cancel outstanding Options
with the consent of the Participant and to reissue new Options at a lower
Exercise Price equal to the then Market Value per share of Common Stock in the
event that the Market Value per share of Common Stock at any time prior to the
date of exercise of outstanding Options falls below the Exercise Price.

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<PAGE> 22

8. EXERCISE OF OPTIONS

(a) General. Any Option granted hereunder shall be exercisable at such
times and under such conditions as shall be permissible under the terms of the
1997 Plan and of the Agreement granted to a Participant. An Option may not be
exercised for a fractional Share.

(b) Procedure for Exercise. A Participant may exercise Options, subject to
provisions relative to its termination and limitations on its exercise, only by
delivering to the Company both (i) written notice of intent to exercise the
Option with respect to a specified number of Shares, and (ii) payment in full of
the aggregate Exercise Price of the Shares with respect to which the Option is
being exercised, which payment may be in cash, in Common Stock, or a combination
of cash and Common Stock. Each such notice and payment shall be delivered, or
mailed by prepaid registered or certified mail, addressed to the Treasurer of
the Company at the Company's executive offices. Common Stock utilized in full or
partial payment of the Exercise Price for Options shall be valued at its Market
Value at the date of exercise.

(c) Exercisability and Termination. (i) Except as otherwise provided
herein or in the Agreement relating to any Option, no Employee may exercise any
Option unless the Employee shall have been in the Continuous Employment of the
Company or any Affiliate at all times during the period beginning with the date
of grant of any such Option and ending on the date three (3) months prior to the
date of exercise of any such Option. Notwithstanding anything to the contrary
contained herein, if an Employee's employment with the Company is terminated for
Cause, all of such Employee's Options shall terminate effective immediately upon
termination of Employee's employment. Except as otherwise provided herein or in
the Agreement relating to an Option, no Non-Employee Director may exercise any
Option more than one year after the termination of such Non-Employee Directors
service as a Director. In the event of the removal of a Non-Employee Director
for Cause, all of such Non-Employee Director's Options shall terminate effective
upon removal of such Non-Employee Director.

(ii) In the event that any Employee's employment by the Company or any
Affiliate shall terminate for any reason, other than Permanent and Total
Disability (as such term is defined in Section 22(e)(3) of the Code), death or
Cause, all of any such Employee's Options and all of any such Employee's rights
to purchase or receive shares of Common Stock pursuant thereto, shall
automatically terminate on the earlier of (A) the respective expiration dates of
such Options; or (B) the expiration of three (3) months after the date of such
termination of employment, but only if, and to the extent that, the Employee was
entitled to exercise such Option at the date of such termination of employment.
In the event that a Subsidiary ceases to be a Subsidiary of the Company, the
employment of all of its employees who are not immediately thereafter employees
of the Company shall be deemed to terminate upon the date such Subsidiary so
ceases to be a Subsidiary of the Company.

(iii) In the event that the employment of any Employee by the Company or
any Affiliate (including any service by an Employee as a Director) shall
terminate as the result of the Permanent and Total Disability of such Employee,
or if the service of any Non-Employee Director shall terminate as a result of
Permanent and Total Disability, such Employee or Non-Employee Director, as the
case may be, may exercise any Option granted to him pursuant to the 1997 Plan at
any time prior to the earlier of (A) the respective expiration dates of such
Options or (B) the date which is one (1) year after the date of such
termination, but only if, and to the extent that, the such Participant was
entitled to exercise such Option at the date of such termination. For purposes
of this Section 8(iii), any Option held by an Employee or Non-Employee Director
shall be considered exercisable at the date of his Permanent and Total
disability if the only unsatisfied condition precedent to the exercisability of
such Option at such date is the passage of a specified period of time.

(iv) In the event of the death of any Participant all of the Options
granted to any such Employee may be exercised by the person or persons to whom
the Participant's rights under any such Options pass by will or the laws of
descent and distribution (including the Participant's estate during the period
of administration) at any time prior to (A) the respective expiration dates of
such Options; or (B) the date which is one (1) year after the date of death of
such Participant but only if, and to the extent that, the Participant was
entitled to exercise any of such Options at the date of death. For purposes of
this Section 8(iv), any Option held by a Participant

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<PAGE> 23

shall be considered exercisable at the date of his death if the only unsatisfied
condition precedent to the exercisability of such Option at the date of death is
the passage of a specified period of time.

9. CHANGE IN CONTROL

(a) General. Notwithstanding the provisions of any Award which provides
for its exercise or vesting in installments, all Options shall be immediately
exercisable and fully vested upon the occurrence of a change in control. At the
time of a Change in Control, the Participant shall, at the discretion of the
Committee, be entitled to receive cash in an amount equal to the excess of the
Market Value of the Common Stock subject to such Option over the Exercise Price
of such Shares, in exchange for the cancellation of such Options by the
Participant.

(b) Exception. Notwithstanding subparagraph (a) of this Section, in no
event may an Option be canceled in exchange for cash, within the six-month
period following the date of its grant.

10. EFFECT OF CHANGES IN COMMON STOCK SUBJECT TO THE 1997 PLAN

(a) Recapitalization; Stock Splits, Etc. The number and kind of shares
reserved for issuance under the 1997 Plan, and the number and kind of shares
subject to outstanding Awards (and the Exercise Price thereof), shall be
proportionately adjusted for any increase, decrease, change or exchange of
Shares for a different number or kind of shares or other securities of the
Company which results from a merger, consolidation, recapitalization,
reorganization, reclassification, stock dividend, split-up, combination of
shares, or similar event in which the number or kind of shares is changed
without the receipt or payment of consideration by the Company.

(b) Transactions in which the Company is Not the Surviving Entity. Subject
to Section 9 hereof, in the event of (i) the liquidation or dissolution of the
Company, (ii) a merger or consolidation in which the Company is not the
surviving entity, or (iii) the sale or disposition of all or substantially all
of the Company's assets (any of the foregoing to be referred to herein as a
"Transaction"), all outstanding Awards shall be surrendered. With respect to
each Award so surrendered, the Committee shall in its sole and absolute
discretion determine whether the holder of the surrendered Award shall
receive --

(1) for each Share then subject to an outstanding Award an option for
the number and kind of shares into which each outstanding Share (other than
Shares held by dissenting stockholders) is changed or exchanged, together
with an appropriate adjustment to the Exercise Price; or

(2) a payment in cash or shares (from the Company or the successor
corporation), in an amount equal to the Market Value of the Shares subject
to the Award on the date of the Transaction, less the Exercise Price of the
Award.

(c) Special Rule for ISOS. Any adjustment made pursuant to subparagraphs
(a) or (b)(1) hereof shall be made in such a manner as not to constitute a
modification, within the meaning of Section 424(h) of the Code, of outstanding
ISOS.

(d) Conditions and Restrictions on New, Additional, or Different Shares or
Securities. If, by reason of any adjustment made pursuant to this Section, a
Participant becomes entitled to new, additional, or different shares of stock or
securities, such new, additional, or different shares of stock or securities
shall thereupon be subject to all of the conditions and restrictions which were
applicable to the Shares pursuant to the Award before the adjustment was made.

(e) Other Issuances. Except as expressly provided in this Section, the
issuance by the Company or an Affiliate of shares of stock of any class, or of
securities convertible into Shares or stock of another class, for cash or
property or for labor or services either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, shall not affect, and no adjustment
shall be made with respect to, the number, class, or Exercise Price of Shares
then subject to Awards or reserved for issuance under the 1997 Plan.

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<PAGE> 24

11. NON-TRANSFERABILITY OF AWARDS

Awards may not be sold, pledged, assigned, hypothecated, transferred or
disposed of in any manner other than by will or by the laws of descent and
distribution, or pursuant to the terms of a "qualified domestic relations order"
(within the meaning of Section 414(p) of the Code and the regulations and
rulings thereunder).

12. TIME OF GRANTING AWARDS

The date of grant of an Award shall, for all purposes, be the later of the
date on which the Committee makes the determination of granting such Award, and
the Effective Date. Notice of the determination shall be given to each
Participant to whom an Award is so granted within a reasonable time after the
date of such grant.

13. EFFECTIVE DATE

The 1997 Plan shall be effective as of May 22, 1997. Awards may be made
prior to approval of the 1997 Plan by the shareholders of the Company if the
exercise of Awards in the form of Options, are conditioned upon shareholder
approval of the 1997 Plan.

14. APPROVAL BY SHAREHOLDERS

The 1997 Plan shall be approved by shareholders of the Company within
twelve (12) months before or after the Effective Date.

15. MODIFICATION OF AWARDS

At any time, and from time to time, the Board may authorize the Committee
to direct execution of an instrument providing for the modification of any
outstanding Award, provided no such modification shall confer on the holder of
said Award any right or benefit which could not be conferred on him by the grant
of a new Award at such time, or impair the Award without the consent of the
holder of the Award.

16. AMENDMENT AND TERMINATION OF THE 1997 PLAN

The Board may from time to time amend the terms of the 1997 Plan and, with
respect to any Shares at the time not subject to Awards, suspend or terminate
the 1997 Plan; provided that the provisions of Section 9 may not be amended more
than once every six months (other than to comport with changes in the Code, the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder), and provided further that any material amendment shall be subject
to stockholder approval.

No amendment, suspension or termination of the 1997 Plan shall, without the
consent of any affected holders of an Award, alter or impair any rights or
obligations under any Award theretofore granted.

17. CONDITIONS UPON ISSUANCE OF SHARES

(a) Compliance with Securities Laws. Shares of Common Stock shall not be
issued with respect to any Award unless the issuance and delivery of such Shares
shall comply with all relevant provisions of law, including, without limitation,
the Securities Act of 1933, as amended, the rules and regulations promulgated
thereunder, any applicable state securities law, and the requirements of any
stock exchange upon which the Shares may then be listed. The 1997 Plan is
intended to comply with Rule 16b-3 promulgated under the Securities Exchange Act
of 1934, as amended, and any provision of the 1997 Plan which the Committee
determines in its sole and absolute discretion to be inconsistent with said Rule
shall, to the extent of such inconsistency, be inoperative and null and void,
and shall not affect the validity of the remaining provisions of the 1997 Plan.

(b) Special Circumstances. The inability of the Company to obtain approval
from any regulatory body or authority deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares

21
<PAGE> 25

hereunder shall relieve the Company of any liability in respect of the
non-issuance or sale of such Shares. As a condition to the exercise of an
Option, the Company may require the person exercising the Option to make such
representations and warranties as may be necessary to assure the availability of
an exemption from the registration requirements of federal or state securities
law.

(c) Committee Discretion. The Committee shall have the discretionary
authority to impose in Agreements such restrictions on Shares as it may deem
appropriate or desirable, including but not limited to the authority to impose a
right of first refusal or to establish repurchase rights or both of these
restrictions.

18. RESERVATION OF SHARES

The Company, during the term of the 1997 Plan, will reserve and keep
available a number of Shares sufficient to satisfy the requirements of the 1997
Plan.

19. WITHHOLDING TAX

The Company's obligation to deliver Shares upon exercise of Options shall
be subject to the Participant's satisfaction of all applicable federal, state
and local income and employment tax withholding obligations. The Committee, in
its discretion, may permit the Participant to satisfy the obligation, in whole
or in part, by irrevocably electing to have the Company withhold Shares, or to
deliver to the Company Shares that he already owns, having a value equal to the
amount required to be withheld. The value of Shares to be withheld, or delivered
to the Company, shall be based on the Market Value of the Shares on the date the
amount of tax to be withheld is to be determined. As an alternative, the Company
may retain, or sell without notice, a number of such Shares sufficient to cover
the amount required to be withheld.

20. NO EMPLOYMENT OR OTHER RIGHTS

In no event shall a Participant's eligibility to participate or
participation in the 1997 Plan create or be deemed to create any legal or
equitable right of such Participant or any other party to continue service with
the Company, the Bank, or any Affiliate thereof. No Participant shall have a
right to be granted an Award or, having received an Award, the right to again be
granted an Award. However, a Participant who has been granted an Award may, if
otherwise eligible, be granted an additional Award or Awards.

21. GOVERNING LAW

The 1997 Plan shall be governed by and construed in accordance with the
laws of the State of Maryland, without reference to the choice of law or
conflicts of law provisions thereof, except to the extent that federal law shall
be deemed to apply.

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<PAGE> 26

SUBURBAN BANCSHARES, INC.

PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AS TO ALL MATTERS

THE UNDERSIGNED SHAREHOLDER of Suburban Bancshares, Inc.
hereby appoints Stephen A. Horvath and Marlin K. Husted the lawful proxies of
the undersigned with full power of substitution to vote, as designated on the
reverse side of this proxy card, all shares of Common Stock of the Suburban
Bancshares, Inc. which the undersigned is entitled to vote at the Annual
Meeting of Shareholders to be held on Thursday, May 22, 1997 at 10:00 a.m. at
the Holiday Inn at 9100 Basil Court in Landover, Maryland 20785, and at any and
all adjournments thereof, with respect to the matters set forth on the reverse
and described in the Notice of Annual Meeting and Proxy Statement dated April
23, 1997, receipt of which is hereby acknowledged.

Shares represented by all properly executed proxies will be
voted (or the vote on such matters will be withheld on specific matters) in
accordance with instructions appearing on the proxy. IN THE ABSENCE OF
SPECIFIC INSTRUCTIONS, PROXIES WILL BE VOTED FOR EACH OF THE MATTERS IDENTIFIED
HEREIN TO BE PRESENTED AT THE ANNUAL MEETING. IF ANY OTHER BUSINESS ARISES AT
THE MEETING, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE DIRECTORS'
RECOMMENDATIONS.

(Continued and to be dated and signed on the reverse side.)
<PAGE> 27
1. ELECTION OF DIRECTORS:
FOR all nominees WITHHOLD AUTHORITY to
listed below vote for all nominees listed below

Two Directors to the class of Directors whose term expires in 2000:
Vincent D. Palumbo and Albert W. Turner

INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL
NOMINEE, WRITE THAT NOMINEE'S NAME IN THE SPACE
PROVIDED BELOW.

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

2. APPROVAL OF THE 1997 STOCK OPTION PLAN FOR EMPLOYEES AND DIRECTORS.

FOR AGAINST ABSTAIN

3. APPROVAL OF STEGMAN & COMPANY AS THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTANTS FOR 1997.

FOR AGAINST ABSTAIN

4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.

Change of address and/or comments, Mark Here

Please complete, sign, date and return this
Proxy Card promptly, using the enclosed envelope.
Votes must be indicated (X) in black or blue ink.

, 1997
- -------------------------- -------------------------------- ----------
Signature Signature if held jointly Date

NOTE: PLEASE DATE AND SIGN EXACTLY AS YOUR NAME APPEARS ABOVE. ALL JOINT
OWNERS SHOULD SIGN. WHEN SIGNING AS A FIDUCIARY, REPRESENTATIVE OR
CORPORATE OFFICER, GIVE FULL TITLE AS SUCH. IF YOU RECEIVE MORE THAN
ONE PROXY CARD DISTRIBUTED ON BEHALF OF THE BOARD OF DIRECTORS, PLEASE
SIGN AND RETURN ALL CARDS RECEIVED.