CENTURY BANCSHARES INC, S-1/A, 1997-09-09

CENTURY BANCSHARES INC
S-1/A, 1997-09-09
NATIONAL COMMERCIAL BANKS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 9, 1997

REGISTRATION NO. 333-34057

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

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------

AMENDMENT NO. 1

FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
CENTURY BANCSHARES, INC.

<TABLE>
<S> <C> <C>
DELAWARE 6712 52-1489098
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification No.)
incorporation or JOSEPH S. BRACEWELL
organization) 1275 PENNSYLVANIA AVENUE,
N.W.
1275 PENNSYLVANIA AVENUE, WASHINGTON, D.C. 20004
N.W. (202) 496-4000
WASHINGTON, D.C. 20004 (Name, address, including zip
(202) 496-4000 code, and telephone number,
Address, including zip code, including area code, of agent
and telephone number, for service)
including area code, of
Registrant's principal
executive offices)
</TABLE>

---------------------
Copy to:

<TABLE>
<S> <C>
JOHN R. BRANTLEY GEORGE P. WHITLEY
BRACEWELL & PATTERSON, L.L.P. LECLAIR RYAN, P.C.
711 LOUISIANA STREET, SUITE 2900 707 EAST MAIN STREET, 11TH FLOOR
HOUSTON, TEXAS 77002-2781 RICHMOND, VIRGINIA 23219
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

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

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

================================================================================
<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED SEPTEMBER 9, 1997

725,000 SHARES

[CENTURY BANCSHARES, INC. LOGO]

COMMON STOCK

All of the Common Stock of Century Bancshares, Inc. (the "Company") offered
hereby (the "Offering") is being sold by the Company. There is currently no
established public trading market for the Common Stock, although it is quoted on
the Non-Nasdaq Over-the-Counter ("NNOTC") Bulletin Board and is traded on a
limited basis. Application has been made for inclusion of the Common Stock in
the Nasdaq SmallCap Market under the symbol "CTRY."

It is estimated that the public offering price will be in the range of
$6.50 to $7.50 per share. See "Underwriting" for information concerning the
factors considered in determining the public offering price.

SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH ANY INVESTMENT IN THE COMMON STOCK.

THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER FEDERAL OR STATE AGENCY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
==============================================================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) THE COMPANY(2)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share................................ $ $ $
- --------------------------------------------------------------------------------------------------------------
Total(3)................................. $ $ $
==============================================================================================================
</TABLE>

(1) The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting."

(2) Before deducting expenses of this Offering payable by the Company estimated
at $ .

(3) The Company has granted the Underwriters a 30-day option to purchase up to
108,750 additional shares of Common Stock, $1.00 par value (the "Common
Stock"), on the same terms and conditions as set forth above, solely to
cover over-allotments, if any. If such option is exercised in full, the
total Price to Public, Underwriting Discount and Proceeds to the Company
will be $ , $ and $ , respectively. See
"Underwriting."

The shares of Common Stock are being offered by the Underwriter subject to
prior sale, as, when and if delivered to and accepted by it, and subject to
certain other conditions. The Underwriter reserves the right to withdraw, cancel
or modify the Offering without notice and to reject orders in whole or in part.
It is expected that delivery of the shares of Common Stock offered hereby will
be made against payment therefor on or about , 1997 at the offices
of Scott & Stringfellow, Inc., Richmond, Virginia.

SCOTT & STRINGFELLOW, INC.

The date of this Prospectus is , 1997.
<PAGE> 3

[MAP OF EXISTING AND PROPOSED LOCATIONS]

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OFFERED
HEREBY. SUCH TRANSACTIONS MAY INCLUDE STABILIZING THE MARKET PRICE OF THE COMMON
STOCK, THE PURCHASE OF COMMON STOCK TO COVER SYNDICATE SHORT POSITIONS AND THE
IMPOSITION OF PENALTY BIDS.

2
<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and consolidated financial
statements, including the notes thereto, appearing elsewhere in this Prospectus.
As used in this Prospectus, unless the context otherwise requires, the term
"Company" means Century Bancshares, Inc. and its subsidiary. Unless otherwise
indicated, the information contained in this Prospectus (i) assumes that the
Underwriter's over-allotment option is not exercised and (ii) reflects the five
percent Common Stock dividends declared during 1993, 1994, 1995 and 1997, and
the seven percent Common Stock dividend declared during 1996.

THE COMPANY

Century Bancshares, Inc. (the "Company") is a bank holding company
headquartered in Washington, D.C. that was organized to own and control all of
the capital stock of Century National Bank, a national banking association (the
"Bank"). The Bank opened in 1982 and engages in a general commercial banking
business with a particular emphasis on the needs of professionals,
entrepreneurs, small to medium-sized businesses and not-for-profit organizations
located in the Washington, D.C. metropolitan area. At June 30, 1997, the Company
had total assets of $111 million, total loans of $74 million, total deposits of
$95 million and total stockholders' equity of $7 million. Net income for the
first six months of 1997 was $288,000, or $.21 per share.

One method by which the Company plans to grow is by conducting business in
multiple locations in high growth markets in Virginia and Maryland. Although the
Company successfully expanded the scope of its operations in downtown
Washington, D.C. by acquiring a branch office from the Resolution Trust
Corporation in 1994, management believes the Company's most profitable growth
opportunities are in the contiguous markets of Fairfax County, Virginia and
Montgomery County, Maryland. Both of these markets are characterized by high
concentrations of small to medium-sized businesses and professionals. Fairfax
County is one of the more densely populated and affluent counties in Virginia.
Fairfax County's median household income is the highest in the country at
$71,610, which is nearly double the national median, and its population is
projected to increase approximately eight percent from 1996 to 2001. The
demographic characteristics of Montgomery County are also compelling. Median
household income of $61,595 ranks ninth nationwide, and the County's population
is projected to increase by approximately six percent between 1996 and 2001.

Management executed the first step of the Company's branch expansion
strategy in 1996 by establishing a loan production office in Tysons Corner,
Virginia, which is Fairfax County's largest business center. The office quickly
surpassed management's performance goals, and as a result was converted to a
full service branch in April 1997. The Company is following a similar strategy
with respect to establishing a foothold in Montgomery County, Maryland. In June
1997, the Company opened a loan production office in Bethesda, Maryland, which
is one of Montgomery County's largest business centers. The Company plans to
replace this office with a full service branch in downtown Bethesda in early
1998, for which it has already received regulatory approval.

In furtherance of its expansion strategy, the Company recently entered into
an agreement to assume the deposit liabilities and leasehold interest of a
branch of Eastern American Bank, FSB ("Eastern American") located in McLean,
Virginia approximately three miles from the Bank's office in Tysons Corner. In
conjunction with the assumption of these liabilities, the Company will acquire
approximately $9.2 million in mortgage loans from Eastern American's portfolio.
The transaction, which is subject to regulatory approval and certain other
conditions, is expected to close in October 1997. As of the date of the
agreement, there were
3
<PAGE> 5

approximately $34 million in deposits at the Eastern American branch. See "The
Eastern American Transaction" and "Use of Proceeds."

The Company competes in its markets by providing a breadth of products
comparable to a regional bank, while maintaining the quick response and personal
service of a locally headquartered bank. Management believes it can solidify the
Company's competitive advantage through establishing long-term relationships to
foster customer loyalty and by continuing to provide a broad array of commercial
account and loan products.

The Company's principal executive offices are located at 1275 Pennsylvania
Avenue, N.W., Washington, D.C. 20004, and its telephone number is (202)
496-4000.

THE OFFERING

<TABLE>
<S> <C>
Securities Offered(1)..................... 725,000 shares of Common Stock.
Common Stock Outstanding After the
Offering(1)............................. 1,942,429 shares.
Use of Proceeds........................... The Company will use the net proceeds of this Offering
to enhance and support the equity capital of the Bank in
view of the deposit transaction with Eastern American
and for general corporate purposes. See "Use of
Proceeds."
Proposed NASDAQ Symbol.................... The Company has made application to the Nasdaq Stock
Market to list the Common Stock for trading in the
SmallCap Market under the symbol "CTRY."
Risk Factors.............................. Prospective investors in the Common Stock should
consider the information discussed under the caption
"Risk Factors."
</TABLE>

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

(1) Assumes no exercise of the Underwriter's over-allotment option to purchase
up to 108,750 shares of Common Stock. See "Underwriting." Excludes
approximately 343,787 shares of Common Stock issuable upon exercise of
outstanding stock options and warrants exercisable as of June 30, 1997 at a
weighted average exercise price of $4.72 per share.
4
<PAGE> 6

SUMMARY CONSOLIDATED FINANCIAL INFORMATION

The following summary consolidated financial information of the Company
should be read in conjunction with the Consolidated Financial Statements of the
Company and the Notes thereto appearing elsewhere in this Prospectus and the
information contained in "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income..................... $ 4,131 $ 3,759 $ 7,689 $ 7,079 $ 5,712 $ 5,455 $ 6,016
Interest expense.................... 1,641 1,331 2,776 2,562 1,902 1,987 2,486
Net interest income................. 2,490 2,428 4,913 4,517 3,810 3,468 3,530
Provision for loan losses........... 72 -- 160 26 19 310 596
Noninterest income.................. 514 354 720 590 555 572 611
Noninterest expense................. 2,463 2,307 4,920 4,157 3,381 3,071 3,303
Income taxes........................ 181 182 275 311 374 240 76
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income........................ $ 288 $ 293 $ 279 $ 613 $ 591 $ 419 $ 200(1)
========== ========== ========== ========== ========== ========== ==========
BALANCE SHEET DATA:
Total assets........................ $ 110,902 $ 96,659 $ 107,186 $ 101,730 $ 90,175 $ 86,332 $ 77,280
Total loans......................... 74,346 71,455 70,676 69,204 60,663 56,644 56,331
Allowance for loan losses........... 710 830 826 740 740 730 744
Total deposits...................... 94,707 83,330 90,985 90,539 82,081 79,982 71,113
Long term debt...................... 6,400 -- 6,850 -- -- 207 540
Total stockholders' equity.......... 7,078 6,671 6,750 6,365 4,810 4,804 4,469
COMMON SHARE DATA(2):
Net income.......................... $ .21 $ .23 $ .22 $ .55 $ .55 $ .41 $ .18(1)
Book value(3)....................... 5.81 5.65 5.61 5.42 4.48 4.48 4.14
Common shares outstanding at end of
period............................ 1,217,429 1,179,869 1,203,329 1,175,234 971,146 969,023 967,428
Weighted average common and
equivalent shares outstanding
during period..................... 1,341,156 1,294,594 1,256,437 1,048,438 1,007,242 968,210 967,006
PERFORMANCE DATA:
Return on average total assets(4)... .53% .61% .27% .68% .71% .56% .29%
Return on average total equity(4)... 8.32 8.99 4.20 11.49 12.38 9.84 5.39
Net interest margin(4).............. 5.25 5.74 5.74 5.42 4.90 4.55 4.94
Loans to deposits................... 78.50 85.75 77.68 76.44 73.90 70.82 79.21
ASSET QUALITY RATIOS:
Nonperforming assets to total
assets............................ .15% 1.16% .30% .49% .70% .37% 1.11%
Net loan charge-offs to average
loans(4).......................... .53 (.25) .10 .04 .02 .59 1.40
Allowance for loan losses to total
loans............................. .95 1.16 1.17 1.07 1.22 1.29 1.32
Allowance for loan losses to
nonperforming loans............... 423 89 257 240 118 227 114
BANK CAPITAL RATIOS:
Tier 1 risk-based capital........... 9.22% 9.22% 9.15% 9.35% 10.12% 10.22% 9.65%
Total risk-based capital............ 10.17 10.40 10.29 10.47 11.37 11.48 10.91
Tier 1 leverage..................... 6.59 7.33 6.44 6.88 5.74 5.24 6.09
</TABLE>

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

(1) After giving effect to an extraordinary gain of $34,000, or $.04 per share.

(2) All common share data has been adjusted for the five percent Common Stock
dividends declared during 1993, 1994, 1995 and 1997, and the seven percent
Common Stock dividend declared during 1996.

(3) Represents total stockholders' equity (net of liquidation preference of
preferred stock of $468,000, $468,000 and $460,000 as of December 31, 1992,
1993 and 1994, respectively) divided by the number of shares of Common Stock
outstanding at the end of the period.

(4) Ratios annualized for the six-month periods ended June 30, 1997 and 1996.
5
<PAGE> 7

RISK FACTORS

An investment in the Common Stock offered hereby involves certain risks.
The following factors, in addition to those discussed elsewhere in this
Prospectus, should be considered carefully before purchasing shares of Common
Stock.

EXPOSURE TO LOCAL ECONOMIC CONDITIONS

The Company's success is dependent to a significant extent upon general
economic conditions in the Washington, D.C. metropolitan area which are, in
turn, dependent to a large extent on the Federal government, particularly its
local employment and spending levels. In addition, the banking industry in the
Washington, D.C. metropolitan area, similar to other geographic markets, is
affected by general economic conditions such as inflation, recession,
unemployment and other factors beyond the Company's control. Economic recession
over a prolonged period or other economic dislocation in the Washington, D.C.
metropolitan area, or a substantial reduction in the level of employment or
local spending by the Federal government, could cause increases in nonperforming
assets, thereby causing operating losses, impairing liquidity and eroding
capital. There can be no assurance that future adverse changes in the economy in
the Washington, D.C. metropolitan area would not have a material adverse effect
on the Company's financial condition, results of operations or cash flows. See
"Business."

INTEREST RATE RISK

The Company's earnings depend to a great extent on "rate differentials,"
which are the differences between interest income that the Company earns on
loans and investments and the interest expense paid on deposits and other
borrowings. These rates are highly sensitive to many factors which are beyond
the Company's control, including general economic conditions and the policies of
various government and regulatory authorities. From time to time, maturities of
assets and liabilities are not balanced, and a rapid increase or decrease in
interest rates could have an adverse effect on the net interest margin and
results of operations of the Company. The nature, timing and effect of any
future changes in federal monetary and fiscal policies on the Company and its
results of operations are not predictable. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Results of
Operations -- Interest Rate Sensitivity Management."

REGULATION AND SUPERVISION

Bank holding companies and banks operate in a highly regulated environment
and are subject to extensive supervision and examination by several federal and
state regulatory agencies. The Company is subject to the Bank Holding Company
Act of 1956, as amended (the "BHCA"), and to regulation and supervision by the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board").
The Bank, as a national banking association, is subject to regulation and
supervision by the Office of the Comptroller of the Currency (the "OCC") and, as
a result of the insurance of its deposits, by the Federal Deposit Insurance
Corporation (the "FDIC"). These agencies' regulations are intended primarily for
the protection of depositors, rather than for the benefit of investors. These
agencies' regulations, among other things, impose percentage limitations on the
acquisition of shares of Common Stock without prior agency approval, require the
satisfaction by the Bank (and, upon completion of the transaction with Eastern
American, the Company) of certain minimum capital standards and limit the
activities which may be conducted by the Company and the Bank. In addition,
other agencies regulate certain aspects of the Bank's lending activities. All of
these agencies can be expected to continue to propose new regulatory and
legislative actions which would affect the operations of the Company and which
may alter the competitive nature of the banking business. The effects of any
potential changes cannot be predicted but could adversely affect the business
and operations of the Company and the Bank in the future. See "Supervision and
Regulation."

RESTRICTIONS ON PAYMENT OF DIVIDENDS

The Company has not paid any cash dividends on the Common Stock to date,
and it intends during the near term to retain any earnings available for
dividends for the development and growth of its business. Although the Company's
long-term plan calls for the payment of cash dividends when circumstances
permit, no assurance may be given if or when the Company will adopt a policy of
paying cash dividends. See

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<PAGE> 8

"Dividend Policy." Federal Reserve Board policy limits the payment of cash
dividends by bank holding companies and requires that the holding company serve
as a source of strength to its banking subsidiaries. See "Supervision and
Regulation -- Regulation of the Company."

The Company's principal source of funds to pay dividends on the shares of
Common Stock will be cash dividends that the Company receives from the Bank. The
payment of dividends by the Bank to the Company is subject to certain
restrictions imposed by federal banking laws, regulations and authorities. As of
June 30, 1997, an aggregate of approximately $1.4 million was available for
payment of dividends by the Bank to the Company under applicable restrictions,
without regulatory approval. As of the date of this Prospectus, the Bank had not
paid any dividends to the Company during 1997. See "Supervision and
Regulation -- Regulation of the Bank."

CERTAIN CHARTER AND BYLAW PROVISIONS

The Company's Certificate of Incorporation, as amended, and Bylaws contain
certain provisions which may delay, discourage or prevent an attempted
acquisition or change of control of the Company. These provisions, among other
things, impose certain procedural requirements on stockholders of the Company
who wish to make nominations for elections of directors or propose other actions
at stockholder meetings, authorize the Board of Directors to fix the rights and
preferences of the shares of series of preferred stock without stockholder
approval, prohibit stockholder action by written consent and limit the ability
of stockholders to call special meetings of stockholders. In addition, certain
provisions of the Delaware General Corporation Law prohibit a Delaware
corporation from engaging in a broad range of business combinations with an
"interested stockholder" for a period of three years following the date that
such stockholder became an interested stockholder, subject to certain
exceptions. See "Description of Capital Stock -- Anti-Takeover Protections."

MANAGEMENT'S OWNERSHIP INTEREST

After the consummation of the Offering, the executive officers and
directors of the Company will own 494,376 shares of the outstanding Common
Stock, representing approximately 25.5% of such class outstanding or
approximately 24.1% of such class if the Underwriter's over-allotment option is
fully exercised. In addition, warrants and stock options to purchase an
aggregate of 193,035 shares of Common Stock are held by the Company's directors
and executive officers. If all such warrants and stock options were exercised,
the directors and executive officers would own approximately 32.2% of the Common
Stock to be outstanding after the Offering (approximately 30.6% if the
Underwriter's over-allotment option is exercised in full). Accordingly, these
executive officers and directors will be able to influence, to a significant
extent, the outcome of all matters required to be submitted to the Company's
stockholders for approval, including decisions relating to the election of
directors of the Company and other significant corporate transactions. See
"Security Ownership of Certain Beneficial Owners and Management."

LIMITED PRIOR TRADING MARKET

Prior to this Offering, there has been no established public trading market
for the Common Stock, although it is quoted on the NNOTC Bulletin Board and is
traded on a limited basis. Application has been made for inclusion of the Common
Stock for quotation on the Nasdaq SmallCap Market under the symbol "CTRY." There
can be no assurance that an active public market will develop or be sustained
after this Offering or that if such a market develops, investors in the Common
Stock will be able to resell their shares at or above the public offering price.

The public offering price of the shares of Common Stock will be determined
by negotiations between the Company and the Underwriter. Among the factors to be
considered in making such a determination will be any recent trading prices of
the Common Stock, an assessment of the Company's results of operations, an
evaluation of the Company's management, the future prospects of the Company and
its industry in general, relative price to earnings and book value ratios of
securities of companies engaged in activities similar to those of the Company
and the prevailing conditions in the securities market. See "Underwriting."

7
<PAGE> 9

COMPETITION

The Bank is subject to vigorous competition in all aspects and areas of its
business from banks and other financial institutions, including savings and loan
associations, savings banks, finance companies, credit unions and other
providers of financial services, such as money market mutual funds, brokerage
firms, consumer finance companies and insurance companies. The Bank competes in
its market area with a number of much larger financial institutions with greater
resources, lending limits, larger branch systems and a wider array of commercial
banking services. The Company believes the Bank has been able to compete
effectively with other financial institutions by emphasizing customer service,
establishing long-term customer relationships, building customer loyalty and
providing products and services designed to address the specific needs of its
customers. No assurance may be given, however, that the Bank will continue to be
able to compete effectively with other financial institutions in the future. See
"Business -- Competition."

DEPENDENCE ON KEY EMPLOYEES

To a large extent, the Company is dependent upon the experience and
abilities of certain key employees, including the services of Mr. Joseph S.
Bracewell, its President. Should the services of these employees become
unavailable for any reason, the business of the Company could be adversely
affected. The Company and Mr. Bracewell are parties to an Employment Agreement
providing for his continued employment by the Company through August 1998. See
"Management -- Employment Agreement."

FORWARD-LOOKING STATEMENTS

This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act, and Section 21E of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), that are based on the current
beliefs of, as well as assumptions made by and information currently available
to, the Company's management. All statements other than statements of historical
facts included in this Prospectus, including without limitation, statements
contained under the captions "Prospectus Summary," "Risk Factors," "The Eastern
American Transaction," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" regarding the Company's
financial position, business strategy and plans and objectives of management of
the Company for future operations, are forward-looking statements. When used in
this Prospectus the words "anticipate," "believe," "estimate," "project,"
"predict," "expect," "intend" and words or phrases of similar import, as they
relate to the Company or its subsidiaries or Company management, are intended to
identify forward-looking statements. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, it can
give no assurance that such expectations will prove to have been correct.
Important factors that could cause actual results to differ materially from the
Company's expectations ("cautionary statements") are contained under the caption
"Risk Factors" and elsewhere in this Prospectus, including, without limitation,
in conjunction with the forward-looking statements included in this Prospectus.
Based upon changing conditions, should any one or more of these risks or
uncertainties materialize, or should any underlying assumptions prove incorrect,
actual results may vary materially from those described herein as anticipated,
believed, estimated, projected, predicted, expected or intended. The Company
does not intend to update these forward-looking statements. All subsequent
written and oral forward-looking statements attributable to the Company or
persons acting on its behalf are expressly qualified in their entirety by the
applicable cautionary statements.

USE OF PROCEEDS

The net proceeds from the sale of the Common Stock offered hereby are
estimated to be approximately $ ($ if the Underwriter's
overallotment option is exercised in full), after deducting estimated
underwriting discounts and Offering expenses. The Company will use the net
proceeds of this Offering to enhance and support the equity capital of the Bank
in view of the deposit transaction with Eastern American and for general
corporate purposes. See "The Eastern American Transaction."

8
<PAGE> 10

CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Company as of June 30, 1997, and as adjusted to give effect to the sale of the
shares of Common Stock offered hereby at $ per share (after giving
effect to the payment of estimated Offering expenses). See "Use of Proceeds."

<TABLE>
<CAPTION>
JUNE 30, 1997
--------------------------
HISTORICAL AS ADJUSTED
----------- -----------
<S> <C> <C>
Long term debt.............................................. $ 6,400,000 $6,400,000
Common Stock, $1.00 par value, 5,000,000 shares authorized;
1,217,429 shares issued and outstanding; 1,942,429 shares
issued and outstanding as adjusted(1)..................... 1,217,429
Additional paid-in capital.................................. 5,300,802
Retained earnings........................................... 603,608 603,608
Unrealized loss on investment securities available-for-sale,
net of tax effect......................................... (44,335) (44,335)
----------- ----------
Total stockholders' equity........................ 7,077,504 $
----------- ----------
Total capitalization.............................. $13,477,504 $
=========== ==========
</TABLE>

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

(1) Assumes that the Underwriter's overallotment option for 108,750 shares is
not exercised and that no outstanding stock options or stock purchase
warrants are exercised. If the Underwriter's over-allotment option is
exercised in full, Common Stock, additional paid in capital, total
stockholders' equity and total capitalization would be approximately
$ , $ , $ and $ , respectively.

9
<PAGE> 11

MARKET FOR COMMON STOCK

There is currently no established public trading market in the Company's
Common Stock. The Common Stock is quoted on the NNOTC Bulletin Board, a NASD
sponsored and operated inter-dealer quotation system, and is traded on a limited
basis.

Based on information available to the Company from a limited number of
sellers and purchasers of Common Stock, the Company believes that the selling
price for the Common Stock ranged from $5.50 to $6.25 during 1995; from $5.50 to
$8.00 during 1996; and from $6.50 to $7.75 from January 1, 1997 through July 31,
1997. Such transactions may not be representative of all transactions during the
indicated periods or the actual fair market value of the Common Stock at the
time of such transactions due to the infrequency of trades and the limited
market for the Common Stock.

The Company has applied to have the Common Stock approved for listing on
The Nasdaq SmallCap Market under the symbol "CTRY." There can be no assurance,
however, that an active trading market for the Common Stock will develop and
continue after the Offering. The quotation of the Common Stock on The Nasdaq
SmallCap Market is conditioned upon the Company meeting certain asset, stock
price and public float tests, and having at least three registered and active
market makers for the Common Stock. Arrangements have been made to satisfy the
market maker requirements, and the Company believes it will satisfy the other
listing requirements upon completion of this Offering.

At June 30, 1997, there were 1,217,429 shares of Common Stock outstanding
held by approximately 264 holders of record.

DIVIDEND POLICY

The Company has not paid cash dividends on its shares of Common Stock to
date, and it intends during the near term to retain any earnings available for
dividends for the development and growth of its business. The Company's
long-term plan, however, calls for the payment of cash dividends when
circumstances permit, although no assurance can be given if or when the Company
will adopt a policy of paying cash dividends. The declaration and payment of
future cash dividends will depend on, among other things, the Company's
earnings, the general economic and regulatory climate, the Company's liquidity
and capital requirements, and other factors deemed relevant by the Company's
Board of Directors. The Company's ability to pay dividends depends, to a large
extent, upon the dividends received from the Bank. Dividends paid by the Bank
are subject to restrictions under various federal banking laws and regulations.
See "Risk Factors -- Restrictions on Payment of Dividends" and "Supervision and
Regulation."

The Company has declared stock dividends from time to time in the past, but
has not adopted a policy with respect to future stock dividends. The most recent
stock dividend declared by the Company was a five percent stock dividend payable
on May 23, 1997 on shares of Common Stock held of record as of May 7, 1997. The
declaration of future stock dividends is at the discretion of the Board of
Directors.

THE EASTERN AMERICAN TRANSACTION

The Bank has entered into a Purchase and Assumption Agreement with Eastern
American dated July 24, 1997, as amended August 15, 1997 (the "EAB Agreement"),
providing for the assumption by the Bank of the deposits and certain other
liabilities of the branch of Eastern American located at 6832 Old Dominion
Drive, McLean, Virginia (the "McLean Branch"). In connection with the assumption
of the deposit liabilities of the McLean Branch, the Bank also will assume the
obligations under the related lease and will acquire approximately $9.24 million
in mortgage loans from Eastern American's portfolio.

In consideration of the assumption of the deposits and other liabilities,
Eastern American will make a cash transfer to the Bank equal to the total amount
of the liabilities assumed, less the sum on the closing date of (i) the value of
vault cash at the McLean Branch, (ii) the net book value of the leasehold
improvements and the personal property located at the McLean Branch, (iii) the
amount of the security deposit related to the lease of the McLean Branch, (iv)
the unpaid balance of the designated mortgage loans and certain

10
<PAGE> 12

overdraft protection loans, (v) certain proration items, and (vi) a deposit
premium equal to 5.6% of the balance of the deposits assumed as of the closing
date, excluding deposits of affiliates of Eastern American and certain other
types of deposits, not to exceed $2 million. If the transactions contemplated by
the EAB Agreement had been completed as of the date of the EAB Agreement, it is
estimated that approximately $34 million in deposit liabilities would have been
assumed by the Bank and the amount of the cash transfer by Eastern American to
the Bank would have been approximately $23 million.

The obligations of the parties to complete the transactions contemplated by
the EAB Agreement are subject to the satisfaction of certain conditions,
including receipt of the unconditional approval of all required regulatory
authorities, the absence of litigation materially and adversely affecting the
operation of the branch or the transactions contemplated by the agreement, the
consent of the landlord to the assignment of the lease, the continued status of
the Bank as "well capitalized" on a pro forma basis after giving effect to the
transaction and other conditions customary in transactions of this nature.

The EAB Agreement provides that the transactions contemplated thereby will
be completed no later than October 15, 1997, subject to extension until December
1, 1997 if necessary to obtain regulatory approval. The Company anticipates that
the closing will occur substantially contemporaneously with the closing of this
Offering.

In connection with the transaction, Eastern American has agreed, for a
period of two years after the closing, that neither Eastern American nor any of
its subsidiaries, affiliates, successors or assigns will enter into any
agreement to acquire, lease, purchase, own, operate or use any building or other
facility within a two and one-half mile radius of the branch location for the
purpose of accepting deposits or cashing checks. In addition, Eastern American
has agreed that neither it nor its subsidiaries or affiliates (including the
directors, officers, employees or principal shareholders), successors or assigns
will, for a period of two years after closing, solicit deposits, loans or other
business from customers whose deposits are assumed, or whose loans are acquired,
pursuant to the EAB Agreement.

In connection with the transaction, the Bank plans to assume Eastern
American's lease for the branch location at 6832 Old Dominion Drive, McLean,
Virginia. The McLean Branch is located in Fairfax County, Virginia, in what is
referred to locally as "Old McLean." McLean, which is considered the "downtown"
of Fairfax County, encompasses approximately 26 square miles and contains
approximately 20.8 million square feet of office space. See "Business -- Primary
Market Area." The branch premises consist of 2,077 square feet which are under
lease through September 30, 2003, with one additional five-year renewal option.

The Company believes that the transaction with Eastern American will
further its strategic plan, which is directed toward the enhancement of its
franchise value and operating profitability through a significant increase in
its asset size, further expansion into nearby Virginia and Maryland markets and
the development of new commercial accounts. The Company anticipates, however,
that its net interest margin will decline immediately after the transaction,
since the proportion of non-interest bearing deposits is lower, and the average
rate paid on interest-bearing deposits is higher, at the McLean Branch than in
the Company's present deposit structure. Further, since the volume of loans to
be acquired in connection with the transaction is approximately 25% of the
deposit liabilities to be assumed, the balance of the assumed deposits initially
will be invested in securities, which generally earn lower rates of interest
than loans. The Company anticipates that, over time, most of these funds will be
re-deployed into new loans and the net interest margin should increase to
historical levels. In addition, the transaction will immediately increase the
Company's noninterest expenses as a result of personnel and occupancy expenses
of the McLean Branch, as well as amortization of the deposit premium.
Furthermore, the transaction should increase the Company's noninterest income
due to the increase in deposit accounts.

11
<PAGE> 13

SELECTED CONSOLIDATED FINANCIAL INFORMATION

The following selected consolidated financial information should be read in
conjunction with the Consolidated Financial Statements of the Company and the
Notes thereto appearing elsewhere in this Prospectus and the information
contained in "Management's Discussion and Analysis of Financial Condition and
Results of Operations." The selected historical consolidated financial data as
of and for the five years ended December 31, 1996 are derived from the Company's
Consolidated Financial Statements, which have been audited by independent public
accountants. The selected historical consolidated financial data as of and for
the six months ended June 30, 1997 and June 30, 1996 have not been audited but,
in the opinion of management, contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial position and
results of operations of the Company as of such dates and for such periods in
accordance with generally accepted accounting principles. The results of
operations for the six months ended June 30, 1997 are not necessarily indicative
of the results of operations that may be expected for the year ending December
31, 1997 or for any future periods.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income..................... $ 4,131 $ 3,759 $ 7,689 $ 7,079 $ 5,712 $ 5,455 $ 6,016
Interest expense.................... 1,641 1,331 2,776 2,562 1,902 1,987 2,486
Net interest income................. 2,490 2,428 4,913 4,517 3,810 3,468 3,530
Provision for loan losses........... 72 -- 160 26 19 310 596
Noninterest income.................. 514 354 720 590 555 572 611
Noninterest expense................. 2,463 2,307 4,920 4,157 3,381 3,071 3,303
Income taxes........................ 181 182 275 311 374 240 76
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income........................ $ 288 $ 293 $ 279 $ 613 $ 591 $ 419 $ 200(1)
========== ========== ========== ========== ========== ========== ==========
BALANCE SHEET DATA:
Total assets........................ $ 110,902 $ 96,659 $ 107,186 $ 101,730 $ 90,175 $ 86,332 $ 77,280
Total loans......................... 74,346 71,455 70,676 69,204 60,663 56,644 56,331
Allowance for loan losses........... 710 830 826 740 740 730 744
Total deposits...................... 94,707 83,330 90,985 90,539 82,081 79,982 71,113
Long term debt...................... 6,400 -- 6,850 -- -- 207 540
Total stockholders' equity.......... 7,078 6,671 6,750 6,365 4,810 4,804 4,469
COMMON SHARE DATA(2):
Net income.......................... $ .21 $ .23 $ .22 $ .55 $ .55 $ .41 $ .18
Book value(3)....................... 5.81 5.65 5.61 5.42 4.48 4.48 4.14
Common shares outstanding as of end
of period......................... 1,217,429 1,179,869 1,203,329 1,175,234 971,146 969,023 967,428
Weighted average common and
equivalent shares outstanding
during period..................... 1,341,156 1,294,594 1,256,437 1,048,438 1,007,242 968,210 967,006
PERFORMANCE DATA:
Return on average total assets(4)... .53% .61% .27% .68% .71% .56% .29%
Return on average total equity(4)... 8.32 8.99 4.20 11.49 12.38 9.84 5.39
Net interest margin(4).............. 5.25 5.74 5.74 5.42 4.90 4.55 4.94
Loans to deposits................... 78.50 85.75 77.68 76.44 73.90 70.82 79.21
ASSET QUALITY RATIOS:
Nonperforming assets to total
assets............................ .15% 1.16% .30% .49% .70% .37% 1.11%
Net loan charge-offs to average
loans(4).......................... .53 (.25) .10 .04 .02 .59 1.40
Allowance for loan losses to total
loans............................. .95 1.16 1.17 1.07 1.22 1.29 1.32
Allowance for loan losses to
nonperforming loans............... 423 89 257 240 118 227 114
BANK CAPITAL RATIOS:
Tier 1 risk-based capital........... 9.22% 9.22% 9.15% 9.35% 10.12% 10.22% 9.65%
Total risk-based capital............ 10.17 10.40 10.29 10.47 11.37 11.48 10.91
Tier 1 leverage..................... 6.59 7.33 6.44 6.88 5.74 5.24 6.09
</TABLE>

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

(1) After giving effect to an extraordinary gain of $34,000, or $.04 per share.

(2) All common share data has been adjusted for the five percent Common Stock
dividends declared during 1993, 1994, 1995 and 1997, and the seven percent
Common Stock dividend declared during 1996.

(4) Ratios annualized for the six-month periods ended June 30, 1997 and 1996.

12
<PAGE> 14

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion, which analyzes the major elements of the
Company's consolidated statements of operations and financial condition, should
be read in conjunction with the detailed information and consolidated financial
statements, and the notes related thereto, included elsewhere herein. References
to the operations of the Company include the operations of the Bank, unless the
context otherwise requires.

OVERVIEW

As of June 30, 1997, the Company had total assets of $110,902,000, total
loans of $74,346,000, total deposits of $94,707,000 and total stockholders'
equity of $7,078,000. For the year ended December 31, 1996, and for the six
months ended June 30, 1997 (on an annualized basis), the Company's return on
equity was 4.20% and 8.32%, respectively. For the year ended December 31, 1996,
and for the six months ended June 30, 1997 (on an annualized basis), the
Company's return on assets was .27% and .53%, respectively.

The Company had net income of $288,000 for the six months ended June 30,
1997, and net income of $279,000, $613,000 and $591,000 during the years ended
December 31, 1996, 1995 and 1994, respectively. The decline in net income during
1996 was attributable to nonrecurring expenses associated with the installation
of a new computer system and other costs incurred to position the Company to
implement its planned expansion. See " -- Results of Operations -- Noninterest
Expense."

The Company has entered into an agreement to assume approximately $34
million in deposits and the leasehold interests of a branch of Eastern American
in McLean, Virginia. In connection with this transaction, the Company will also
acquire approximately $9.24 million in mortgage loans from Eastern American's
portfolio. Although the Company believes that the transaction with Eastern
American will be in furtherance of its business strategy to significantly
increase its asset size and to expand into nearby Virginia and Maryland markets,
the Company anticipates that a short term decline in its net income may occur as
a result of increased operating expenses and the need to redeploy the new
deposits into loans. See "The Eastern American Transaction." This and other
possible effects of the transaction with Eastern American on the Company's
financial results should be considered when reviewing the Company's reported
results of operations.

RESULTS OF OPERATIONS

NET INCOME

Net income was $288,000 ($.21 per common share) for the first six months of
1997, compared with net income of $293,000 ($.23 per common share) for the first
six months of 1996. The decrease in net income for the first six months of 1997
compared with the same period in 1996 resulted from a $156,000 increase in non-
interest expenses and a $72,000 increase in the provision for loan losses, which
were partially offset by a $160,000 increase in non-interest income and a
$62,000 increase in net interest income. In addition, earnings per common share
were affected by an increase in the number of weighted average common shares and
common stock equivalents outstanding to 1,341,156 from 1,294,594 during the
first six months of 1997 as compared to 1996.

Net income was $279,000 ($.22 per common share) for 1996, compared with net
income of $613,000 ($.55 per common share) for 1995, a decrease of $334,000 or
55%. The decrease in net income for 1996 compared with 1995 resulted principally
from a $763,000 increase in noninterest expenses, of which approximately
$416,000 was attributable to nonrecurring costs associated with new
telecommunications and computer systems, processing costs in support of new
fee-generating products and services, and expenses relating to the cost of
registering with the Securities and Exchange Commission ("SEC") the shares of
Common Stock issuable upon the exercise of certain outstanding warrants. A
$134,000 increase in the provision for loan losses also contributed to the
decrease in net income for 1996 compared with 1995. These

13
<PAGE> 15

increased expenses were partially offset by a $396,000 increase in net interest
income and a $130,000 increase in noninterest income.

Net income for 1995 was restated to reflect an adjustment to the Company's
deferred compensation liability account. The impact of this adjustment resulted
in a decrease to previously reported net income of $67,000 in 1995. See Note 2
of the Notes to Consolidated Financial Statements for additional discussion.

Net income, as restated, was $613,000 for 1995 ($0.55 per common share), a
4% increase compared with $591,000 for 1994 ($0.55 per common share). The
increase in net income from 1994 to 1995 resulted from a $707,000 increase in
net interest income, a $35,000 increase in non-interest income and a $63,000
reduction in income tax expense, which were offset by a $776,000 increase in
non-interest expenses resulting from the acquisition of the Pennsylvania Avenue
branch office and increased marketing and business development expenses.

NET INTEREST INCOME

Net interest income, which constitutes the principal source of income for
the Company, represents the difference between interest income on earning assets
and interest expense on interest-bearing liabilities. The net yield on total
earning assets, also referred to as interest rate margin or net interest margin,
represents net interest income divided by average earning assets. The Company's
principal earning assets are loans, investment securities, interest bearing
deposits in other banks, and federal funds sold.

Net interest income was $2,490,000 for the six months ended June 30, 1997,
an increase of $62,000 or 3% compared with the same period in 1996. This
increase was a result of a $10 million increase in total earning assets,
partially offset by a decline in the net interest margin from 5.74% in 1996 to
5.25% in 1997. This decline resulted from an increase in the balance of
certificates of deposit liabilities and fixed rate borrowings from the Federal
Home Loan Bank of Atlanta (the "FHLBA"), the proceeds of which were invested
primarily in short-term investments as of June 30, 1997, pending anticipated
redeployment into higher yielding loans and securities.

Net interest income was $4,913,000 for 1996, an increase of $396,000 or 9%
compared with 1995. This increase resulted from an increase in average total
earning assets of $2,186,000, and an increase in the Company's net interest
margin from 5.42% in 1995 to 5.74% in 1996, an increase of 32 basis points. The
improvement in net interest margin resulted from the Company's increased
emphasis on commercial loans, which has increased the overall yield of the loan
portfolio, together with the fact that loans constituted a higher percentage of
the Company's total earning assets in 1996 than in 1995.

Net interest income was $4,517,000 for 1995, an increase of $707,000 or 19%
compared with $3,810,000 for 1994. The Company's average total earning assets
increased from $77,825,000 for 1994 to $83,348,000 for 1995, representing a 7%
increase resulting principally from an increase in loans. The net interest
margin of 5.42% for 1995 increased 52 basis points from 4.90% for 1994.

The Company's net interest income is affected by changes in the amount and
mix of earning assets and interest-bearing liabilities, referred to as a "volume
change." It is also affected by changes in yields earned on earning assets and
rates paid on interest-bearing deposits and other borrowed funds, referred to as
a "rate change." The following tables set forth for each category of earning
assets and interest-bearing liabilities, the average amounts outstanding, the
interest earned or incurred on such amounts, and the average rate earned or
incurred for the six months ended June 30, 1997 and 1996, and for the years
ended December 31, 1996, 1995 and 1994. The tables also set forth the average
rate earned on total earning assets, the average rate paid on total
interest-bearing liabilities, and the net interest margin on average total
earning assets for the same periods.

14
<PAGE> 16

AVERAGE BALANCES AND INTEREST RATES:
INTERIM PERIODS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
------------------------------------------------------------
1997 1996
----------------------------- ----------------------------
INTEREST INTEREST
AVERAGE INCOME/ AVERAGE AVERAGE INCOME/ AVERAGE
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
-------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
EARNING ASSETS:
Loans receivable, net(1)................ $ 70,690 $3,457 9.78% $69,914 $ 3,385 9.68%
Investment securities, taxable(2)....... 9,343 271 5.80% 12,392 311 5.02%
Investment securities,
non-taxable(2)(3).................... 165 4 4.85% 250 6 4.80%
Federal funds sold...................... 2,904 84 5.72% 327 13 7.95%
Interest-earning deposits with banks.... 11,726 315 5.37% 1,661 44 5.30%
-------- ------ ------- -------
Total interest-earning
assets(3)..................... 94,828 4,131 8.71% 84,544 3,759 8.89%
NONINTEREST-EARNING ASSETS:
Cash and due from banks................. 4,887 4,159
Other assets............................ 3,134 4,047
-------- -------
Total noninterest-earning
assets........................ 8,021 8,206
-------- -------
Total assets.................... $102,849 $92,750
======== =======
INTEREST-BEARING LIABILITIES:
Deposits:
Interest-bearing demand (NOW)
deposits........................... $ 13,778 135 1.96% $13,086 128 1.96%
Savings deposits..................... 2,301 28 2.43% 2,286 30 2.62%
Money market deposits................ 21,546 385 3.57% 22,681 365 3.22%
Time deposits........................ 30,470 831 5.45% 24,546 675 5.50%
Borrowings........................... 7,882 262 6.65% 4,640 133 5.78%
-------- ------ ------- -------
Total interest-bearing
liabilities................... 75,977 1,641 4.32% 67,239 1,331 3.96%
NONINTEREST-BEARING LIABILITIES:
Noninterest-bearing deposits............ 18,979 17,486
Other liabilities....................... 838 1,463
-------- -------
Total noninterest-bearing
liabilities................... 19,817 18,949
-------- -------
Stockholders' equity...................... 7,055 6,562
-------- -------
Total liabilities and
stockholders' equity.......... $102,849 $92,750
======== =======
Net interest income....................... $2,490 $ 2,428
====== =======
Net interest margin(3).................... 5.25% 5.74%
===== ======
</TABLE>

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

(1) Non-accrual loan balances are included in the calculation of Average
Balances -- Loans Receivable, Net. Interest income on non-accrual loan
balances is included in interest income to the extent that it has been
collected.

(2) Average balance and average rate for investment securities are computed
based on book value of securities held-to-maturity and fair value of
securities available-for-sale.

(3) Average rates on a fully taxable equivalent basis are as follows:

<TABLE>
<S> <C> <C>
Investment securities, non-taxable................... 7.35% 7.74%
Total interest-earning assets........................ 8.71% 8.90%
Net interest margin.................................. 5.25% 5.75%
</TABLE>

15
<PAGE> 17

AVERAGE BALANCES AND INTEREST RATES:
ANNUAL PERIODS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------------
1996 1995 1994
---------------------------- ---------------------------- ----------------------------
INTEREST INTEREST INTEREST
AVERAGE INCOME/ AVERAGE AVERAGE INCOME/ AVERAGE AVERAGE INCOME/ AVERAGE
BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------- -------- ------- ------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EARNING ASSETS:
Loans receivable, net(1)......... $70,523 $6,887 9.77% $62,639 $6,011 9.60% $57,855 $4,802 8.30%
Investment securities,
taxable(2)..................... 10,312 545 5.29% 18,297 918 5.02% 18,251 829 4.54%
Investment securities, non-
taxable(2)(3).................. 228 10 4.39% 991 57 5.75% 127 6 4.45%
Federal funds sold............... 380 35 9.21% 428 37 8.64% 1,356 65 4.79%
Interest-earning deposits with
banks.......................... 4,091 212 5.18% 993 56 5.64% 236 10 4.09%
------- ------ ------- ------ ------- ------
Total interest-earning
assets(3)................ 85,534 7,689 8.99% 83,348 7,079 8.49% 77,825 5,712 7.34%
NONINTEREST-EARNING ASSETS:
Cash and due from banks.......... 4,361 3,854 3,851
Other assets..................... 4,189 2,907 1,378
------- ------- -------
Total noninterest-earning assets... 8,550 6,761 5,229
------- ------- -------
Total assets............... $94,084 $90,109 $83,054
======= ======= =======
INTEREST-BEARING LIABILITIES:
Deposits:
Interest-bearing demand (NOW)
deposits..................... $12,522 245 1.96% $12,230 258 2.11% $11,926 248 2.08%
Savings deposits............... 2,217 56 2.53% 2,526 67 2.65% 2,564 66 2.59%
Money market deposits.......... 23,072 784 3.40% 25,153 778 3.09% 24,784 618 2.49%
Time deposits.................. 25,596 1,400 5.47% 23,128 1,269 5.49% 20,738 922 4.44%
Borrowings....................... 4,952 291 5.88% 3,526 190 5.39% 1,102 43 3.93%
Note payable..................... -- -- N/A -- -- N/A 51 5 8.20%
------- ------ ------- ------ ------- ------
Total interest-bearing
liabilities...................... 68,359 2,776 4.06% 66,563 2,562 3.85% 61,165 1,902 3.11%
NONINTEREST-BEARING LIABILITIES:
Noninterest-bearing deposits..... 17,525 16,841 16,159
Other liabilities................ 1,642 1,236 646
------- ------- -------
Total noninterest-bearing
liabilities.............. 19,167 18,077 16,805
------- ------- -------
Stockholders' equity............... 6,558 5,469 5,084
------- ------- -------
Total liabilities and
stockholders' equity..... $94,084 $90,109 $83,054
======= ======= =======
Net interest income................ $4,913 $4,517 $3,810
====== ====== ======
Net interest margin(3)............. 5.74% 5.42% 4.90%
===== ===== =====
</TABLE>

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

(1) Non-accrual loan balances are included in the calculation or Average
Balances -- Loans Receivable, Net. Interest income on non-accrual balances
is included in interest income to the extent that it has been collected.

(2) Average balance and average rate for investment securities are computed
based on book value of securities held-to-maturity and fair value of
securities available-for-sale.

(3) Average rates on a fully taxable equivalent basis are as follows:

<TABLE>
<S> <C> <C> <C>
Investment securities, non-taxable............ 6.84% 8.76% 6.72%
Total interest-earning assets................. 9.00% 8.53% 7.34%
Net interest margin........................... 5.75% 5.45% 4.90%
</TABLE>

16
<PAGE> 18

Changes in interest income and interest expense can result from changes in
both volume and rate. The Company has an asset and liability management policy
designed to provide a proper balance between rate sensitive assets and rate
sensitive liabilities in order to provide adequate liquidity for anticipated
needs.

The following table sets forth for the periods indicated a summary of the
changes in interest earned and interest paid resulting from changes in volume
and rate. The allocation of the rate/volume variance has been made pro rata
based on the percentage that volume and rate variances produce in each category.

RATE/VOLUME ANALYSIS OF NET INTEREST INCOME
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995
COMPARED WITH COMPARED WITH COMPARED WITH
JUNE 30, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994
INCREASE (DECREASE) DUE TO INCREASE (DECREASE) DUE TO INCREASE (DECREASE) DUE TO
------------------------------ ------------------------------ ------------------------------
VOLUME RATE CHANGES VOLUME RATE CHANGES VOLUME RATE CHANGES
--------- ------ --------- --------- ------ --------- --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST EARNED ON:
Loans receivable, net........ $ 38 $ 34 $ 72 $ 768 $108 $ 876 $428 $781 $1,209
Investment securities,
taxable.................. (109) 69 (40) (425) 52 (373) 2 87 89
Investment securities,
non-taxable.............. (2) -- (2) (36) (11) (47) 45 6 51
Federal funds sold......... 73 (2) 71 (5) 3 (2) (62) 34 (28)
Interest-earning deposits
with banks............... 270 1 271 160 (4) 156 37 9 46
----- ---- ---- ----- ---- ----- ---- ---- ------
Total interest
income............... $ 270 $102 $372 $ 462 $148 $ 610 $450 $917 $1,367
----- ---- ---- ----- ---- ----- ---- ---- ------
INTEREST PAID ON:
Interest-bearing (NOW)
deposits................. $ 7 -- $ 7 $ 7 $(20) $ (13) $ 6 $ 4 $ 10
Savings deposits........... -- $ (2) (2) (8) (3) (11) (1) 2 1
Money market deposits...... (17) 37 20 (28) 34 6 10 150 160
Time deposits.............. 162 (6) 156 136 (5) 131 119 228 347
Short-term borrowings...... 105 24 129 82 19 101 113 34 147
Note payable............... -- -- -- -- -- -- (5) -- (5)
----- ---- ---- ----- ---- ----- ---- ---- ------
Total interest
expense.............. 257 53 310 189 25 214 242 418 660
----- ---- ---- ----- ---- ----- ---- ---- ------
Net interest income............ $ 13 $ 49 $ 62 $ 273 $123 $ 396 $208 $499 $ 707
===== ==== ==== ===== ==== ===== ==== ==== ======
</TABLE>

PROVISION FOR LOAN LOSSES

Provisions for loan losses are charged to income to bring the total
allowance for loan losses to a level deemed appropriate by management of the
Company based on such factors as historical experience, the volume and type of
lending conducted by the Company, the amount of nonperforming assets, regulatory
policies, generally accepted accounting principles, general economic conditions,
and other factors related to the collectibility of loans in the Company's
portfolio.

The provision for loan losses during the first six months of 1997 was
$72,000, compared to the first six months of 1996, in which no provision was
made. The increase reflects a higher level of losses in the Company's consumer
loan and credit card loan portfolios, consistent with national trends. In the
first six months of 1997, net charge offs were $188,000. In the first six months
of 1996, the Company recovered money on previously charged off loans, so no
provision expense was required.

The provision for loan losses for 1996 was $160,000 compared with $26,000
for 1995. The increase is the result of an increase in charge offs from $26,000
in 1995 to $74,000 in 1996, the establishment of reserves for certain consumer
loans which were deemed uncollectible when the borrowers declared bankruptcy,
the establishment of a $38,000 loss reserve in the fourth quarter of 1996
resulting from a borrower's use of forged collateral as security for a loan, and
a $38,000 increase in reserves during the fourth quarter of 1996 for two
non-accrual loans secured by real estate. In addition, the Company's loan
portfolio continued to grow during 1996, with the majority of growth occurring
in the commercial portfolio.

17
<PAGE> 19

The provision for loan losses was $26,000 for 1995 compared with $19,000
for 1994, representing an increase of $7,000 or 37% from 1994. The provision
expense was modest in both years compared to industry averages and the Company's
own historical experience, and was attributable to significant recoveries of
loans charged off prior to 1994, and an overall improvement in the local and
national economy during that period.

Management believes the allowance is adequate to absorb losses inherent in
the loan portfolio. In view of the Company's plans to continue its loan growth
with increased emphasis on commercial loans (which are generally considered to
be more risky than loans secured by real estate), it is likely that the Company
will continue to maintain an adequate allowance for loan losses through future
provisions charged to income. Management will continue to closely monitor the
performance of its portfolio and make additional provisions as considered
necessary. The Company does not presently anticipate that such provisions will
have a material adverse impact on the Company's results of operations in future
periods.

NONINTEREST INCOME

The Company's primary source of noninterest income is service charges on
deposit accounts. The remaining noninterest income is derived from
MasterCard/Visa, wire transfer, collection and cashier's check fees, mortgage
loan referral fees, and safe deposit box rentals. Also included in this category
are gains and losses realized on the sale of securities and certain other items
of income, whether recurring or not, which are not elsewhere classified.

Noninterest income for the first six months of 1997 was $514,000, an
increase of $160,000, or 45% compared with noninterest income of $354,000 for
the first six months of 1996. This increase results primarily from fees
generated in connection with the Company's MasterCard/Visa credit card program.

Noninterest income for 1996 was $720,000, an increase of $130,000 or 22%
compared with noninterest income of $590,000 for 1995. This increase resulted
primarily from fees generated in connection with the Company's credit card
program, which was initially established in March 1995. These fees, which are
reported along with other items as commission and fee income, increased
approximately $75,000 or 46% during 1996 as compared to 1995.

Noninterest income was $590,000 for 1995, compared with $555,000 for 1994,
an increase of $35,000 or 6% resulting primarily from fees associated with the
credit card program. The $123,000 or 164% increase in commission and fee income
from 1994 to 1995 was offset by a $127,000 or 93% decrease in other income
during the same period. This decline in other income represented a return to
more normal levels from the unusually high levels in 1994 caused by the
recognition of miscellaneous non-recurring income items.

The following table sets forth the various categories of noninterest income
for the six months ended June 30, 1997 and 1996, and for the years ended 1996,
1995 and 1994.

NONINTEREST INCOME
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
------------------------- ----------------------------------------
1997 % CHANGE 1996 1996 % CHANGE 1995 % CHANGE 1994
----- --------- ----- ---- -------- ---- -------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Service charges on deposit
accounts................... $241 13.1% $213 $416 9.8% $379 11.5% $340
Commission and fee income.... 261 100.0% 130 286 44.4% 198 164.0% 75
Safe deposit box rentals..... 10 (9.1)% 11 12 100.0% 6 (60.0)% 15
Gain (loss) on sale of
securities................. -- -- -- -- (100.0)% (3) (75.0)% (12)
Other income................. 2 N/A -- 6 (40.0)% 10 (92.7)% 137
---- ----- ---- ---- ------ ---- ----- ----
Total noninterest income..... $514 45.2% $354 $720 22.0% $590 6.3% $555
==== ===== ==== ==== ====== ==== ===== ====
</TABLE>

18
<PAGE> 20

NONINTEREST EXPENSE

The Company's noninterest expense has been consistently higher in relation
to its asset size than the average for small community banks. The Company's
strategy is to increase its asset size significantly so that its level of
noninterest expense in relation to its assets is more in line with those of
comparable institutions. To support an increased rate of asset growth, branch
expansion and increased product and service offerings, the Company invested
approximately $1 million to upgrade its telecommunications and computer systems
during 1995 and 1996. In addition to these capital expenditures, the Company
incurred consulting expenses associated with the installation, specialized
programming and security aspects of the computer system. As a result, the
Company's noninterest expenses during such periods have increased in
anticipation of a subsequent increase in total assets.

Noninterest expense was $2,463,000 for the first six months of 1997, an
increase of $156,000, or 7% compared with noninterest expense of $2,307,000 for
the first six months of 1996. This increase resulted principally from
depreciation expenses associated with the Company's new computer and
telecommunications systems and remote ATM, as well as data processing costs in
support of the credit card program.

Noninterest expense was $4,920,000 for 1996, an increase of $763,000 or 18%
compared with noninterest expense of $4,157,000 for 1995. The installation of
the new computer system resulted in the incurrence of substantial nonrecurring
expenses, including the writeoff of certain custom software development costs,
special consulting, audit and legal expenses. Additionally, during the same
period in 1996, management realigned the Company's operations and financial
reporting functions related to the utilization of the computer system. This
realignment resulted in additional nonrecurring expenses including negotiated
payments for personnel severance, accrued leave, and related expenses. In the
aggregate, these items represented approximately $304,000 in nonrecurring
expenses. In addition, a total of $112,000 in nonrecurring expenses were
incurred in connection with the registration with the SEC of the shares of
Common Stock issuable upon exercise of the Company's outstanding warrants to
purchase Common Stock. See "Description of Capital Stock -- The Warrants." The
remainder of the increase in noninterest expense resulted principally from
depreciation expenses associated with the Company's new computer and
telecommunications systems and remote ATM, as well as data processing costs in
support of the credit card program. Excluding nonrecurring expenses, noninterest
expenses increased 8% from $4,157,000 in 1995 to $4,504,000 in 1996.

Noninterest expense was $4,157,000 for 1995, compared with $3,381,000 for
1994, representing an increase of $776,000 or 23%. The increase from 1994 to
1995 was primarily attributable to increased personnel and occupancy expenses
associated with the Pennsylvania Avenue branch office, which was acquired on
September 16, 1994, together with increased expenses incurred in connection with
marketing programs.

19
<PAGE> 21

The following table sets forth the various categories of noninterest
expense for the six months ended June 30, 1997 and 1996, and for the years ended
1996, 1995 and 1994.

NONINTEREST EXPENSE
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
-------------------------- ----------------------------------------------
1997 % CHANGE 1996 1996 % CHANGE 1995 % CHANGE 1994
------ -------- ------ ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Salaries and employee
benefits...................... $1,016 6.8% $ 951 $1,988 (5.1)% $2,094 26.0% $1,662
Occupancy and equipment
expense....................... 295 21.9% 242 531 2.7% 517 18.0% 438
Depreciation and amortization... 236 24.9% 189 453 104.1% 222 63.2% 136
Professional fees............... 244 (16.2)% 291 628 130.9% 272 5.8% 257
Data processing................. 253 90.2% 133 469 41.3% 332 83.4% 181
Federal deposit insurance
premiums...................... 5 (81.5)% 27 30 (65.9)% 88 (47.9)% 169
Communications.................. 99 5.3% 94 206 28.0% 161 41.2% 114
Marketing and public
relations..................... 134 (8.8)% 147 174 15.2% 151 26.9% 119
Branch expenses paid to RTC..... -- N/A -- -- (100.0)% 21 (27.6)% 29
Office and operations
expenses...................... 100 (18.7)% 123 317 104.5% 155 (9.9)% 172
Insurance and lobby security.... 45 (8.2)% 49 104 20.9% 86 48.3% 58
Provision for losses on OREO.... -- N/A 13 7 (85.4)% 48 N/A --
Other expenses.................. 36 (25.0)% 48 13 30.0% 10 (78.3)% 46
------ ----- ------ ------ ------ ------ ----- ------
Total noninterest expense....... $2,463 6.8% $2,307 $4,920 18.4% $4,157 23.0% $3,381
====== ===== ====== ====== ====== ====== ===== ======
</TABLE>

INCOME TAX EXPENSE

Income tax expense decreased approximately $1,000 to $181,000 for the first
six months of 1997 as compared to $182,000 for the same period of 1996. The
effective rate did not change significantly for the first six months of 1997
compared to the first six months of 1996.

The Company's effective tax rate increased from 33.7% in 1995 to 49.6% in
1996 due to the nondeductible nature of the $112,000 expense incurred in
connection with the registration with the SEC of the shares of Common Stock
issuable upon exercise of the Company's outstanding warrants to purchase Common
Stock. The Company's effective tax rate declined from 38.7% in 1994 to 33.7% in
1995 as a result of adjustments made to the amounts of deferred tax assets and
deferred tax liabilities. These adjustments were recorded based upon the
Company's analysis of the carrying value of its deferred tax items.

INTEREST RATE SENSITIVITY MANAGEMENT

Net interest income, which constitutes the principal source of income for
the Company, represents the difference between interest income on earning assets
and interest expense on interest-bearing liabilities. The difference between the
Company's interest-rate sensitive assets and interest-rate sensitive liabilities
for a specified time-frame is referred to as "gap." Interest rate sensitivity
reflects the potential effect on net interest income of a movement in interest
rates. A financial institution is considered to be asset sensitive, or having a
positive gap, when the amount of its earning assets maturing or repricing within
a given period exceeds the amount of its interest-bearing liabilities also
maturing or repricing within that time period. Conversely, a financial
institution is considered to be liability sensitive, or having a negative gap,
when the amount of its interest-bearing liabilities maturing or repricing within
a given period exceeds the amount of its earning assets also maturing or
repricing within that time period. During a period of rising interest rates, a
positive gap would tend to increase net interest income, while a negative gap
would tend to have an adverse effect on net interest income. During a period of
falling interest rates, a positive gap would tend to have an adverse effect on
net interest income, while a negative gap would tend to increase net interest
income.

Management of the Company seeks to maintain a balanced interest rate risk
position to protect its net interest margin from market fluctuations. Toward
this end, the Company maintains an Asset/Liability Committee (the "ALCO
Committee") which reviews, on a regular basis, the maturity and repricing of the
assets and liabilities of the Company. The ALCO Committee has adopted the
objective of achieving and

20
<PAGE> 22

maintaining three-month and one-year cumulative gaps of less than plus or minus
10% of total assets. On a consolidated basis, the Company's three-month and one
year cumulative gaps were 3.33% and 12.09% of total assets, respectively, as of
June 30, 1997. The one-year cumulative gap exceeds the ALCO policy objective
because the Company has experienced recent deposit growth, which has been
invested primarily in short term investments pending redeployment into loans and
longer term assets. The Company anticipates that the rate sensitivity gap will
conform to the ALCO policy objective within the next 12 months.

The following table sets forth the interest-rate sensitive assets and
liabilities of the Company at June 30, 1997, which are expected to mature or are
subject to repricing in each of the time periods indicated.

INTEREST RATE SENSITIVE ASSETS AND LIABILITIES
JUNE 30, 1997
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
TERM TO REPRICING
-----------------------------------------------------
90 DAYS 91-180 181 DAYS OVER
OR LESS DAYS TO 1 YEAR 1 YEAR TOTAL
------- ------- --------- ------- --------
<S> <C> <C> <C> <C> <C>
EARNING ASSETS:
Interest-bearing deposits............... $11,213 -- -- -- $ 11,213
Investment securities, taxable.......... 10,148 $ 207 $ 1,427 $ 5,879 17,661
Investment securities, non-taxable...... -- 100 -- 65 165
Loans................................... 42,101 6,685 13,302 12,349 74,437
------- ------- ------- ------- --------
Total interest-earning assets... 63,462 6,992 14,729 18,293 103,476
------- ------- ------- ------- --------

INTEREST-BEARING LIABILITIES:
Interest-bearing demand and NOW
accounts............................. 12,499 -- -- -- 12,499
Savings deposits........................ 2,195 -- -- -- 2,195
Money market deposits................... 20,698 -- -- -- 20,698
Time deposits........................... 23,457 8,485 2,817 3,285 38,044
Borrowed funds.......................... 922 250 450 6,400 8,022
------- ------- ------- ------- --------
Total interest-bearing
liabilities................... 59,771 8,735 3,267 9,685 81,458
------- ------- ------- ------- --------
Interest sensitivity gap per period....... $ 3,691 $(1,743) $11,462 $ 8,608 $ 22,018
======= ======= ======= ======= ========
Cumulative gap............................ $ 3,691 $ 1,948 $13,410 $22,018 $ 22,018
======= ======= ======= ======= ========
Cumulative gap as percent of total
assets.................................. 3.33% 1.76% 12.09% 19.85% 19.85%
======= ======= ======= ======= ========
Cumulative interest-earning assets as
percent of cumulative interest-bearing
liabilities............................. 106% 103% 119% 127% 127%
======= ======= ======= ======= ========
</TABLE>

21
<PAGE> 23

ANALYSIS OF FINANCIAL CONDITION

LOANS AND ASSET QUALITY

The loan portfolio is the largest category of the Company's earning assets.
Most of the Company's lending is in the Washington, D.C. metropolitan area, and
a substantial portion of its loan portfolio is collateralized by first mortgages
and home equity lines of credit on residences. This concentration has been
declining, however, due to the Company's recent emphasis on the development of
new commercial loan business. As of June 30, 1997 and December 31, 1996,
approximately $43,246,000 (58%) and $44,109,000 (62%) of the Company's total
loan portfolio, respectively, consisted of loans secured by real estate, of
which one-to-four-family residential mortgage loans and home equity lines of
credit represented $26,116,000 (35%) and $27,043,000 (38%), respectively, of the
Company's total loan portfolio.

Loan concentrations are defined as aggregate credits extended to a number
of borrowers engaged in similar activities or resident in the same geographic
region, which would cause them to be similarly affected by economic or other
conditions. The Company, on a routine basis, evaluates these concentrations for
purposes of making necessary adjustments in its lending practices to reflect
current economic conditions, loan to deposit ratios and industry trends. As a
result of the Company's existing branch locations, the Company has significant
concentrations of customers and assets in the metropolitan Washington, D.C.
area. As of June 30, 1997, the industry concentrations in excess of 10% of total
loans, where the borrowers as a group might be affected similarly by economic
changes, consists of loans to members of the legal profession ($17,918,000 or
24% of total loans), business services ($12,260,000 or 16% of total loans), and
health care services ($9,524,000 or 13% of total loans). The Company offers
commercial loans, lines of credit, credit cards, home equity lines, and
residential and commercial mortgage loans to these groups. The amount of such
loans which are past due or considered by management to be potential problem
loans is not material.

The primary types of loans in the Company's portfolio are residential
mortgages and home equity loans, commercial real estate loans, commercial loans,
and consumer installment and credit card loans. Generally the Company
underwrites loans based upon the borrower's debt service capacity or cash flow,
a consideration of past performance on loans from other creditors as well as an
evaluation of the collateral securing the loan. With some exceptions, the
Company's general policy is to require a debt service coverage ratio of 120% for
commercial and commercial real estate loans, a maximum gross debt ratio of 38%
for consumer loans (including residential mortgage and home equity loans), and a
maximum loan-to-value ratio of 80% for all types of real estate loans. Most of
the Company's commercial real estate loans consist of owner-occupied properties
financed for the Company's regular commercial customers, rather than speculative
or investor-owned properties. Most of the Company's commercial and commercial
real estate loans are personally guaranteed by the owners of the business, the
primary exceptions to this requirement being loans to non-profit and membership
organizations. Given the localized nature of the Company's lending activities,
the primary risk factor affecting the portfolio as a whole is the health of the
local economy in the Washington metropolitan area and its effects on the value
of local real estate and the incomes of local professionals and business firms.
To mitigate this risk, the Company's underwriting policy provides that each loan
should be supported by an economically independent secondary source of
repayment. Any exceptions to the general loan policy must be approved by the
Executive Loan Committee.

Loans to directors, executive officers and principal stockholders of the
Company and to directors and officers of the Bank are subject to limitations
contained in the Federal Reserve Act, the principal effect of which is to
require that extensions of credit by the Bank to executive officers, directors,
and ten percent stockholders satisfy certain standards. The Bank routinely makes
loans in the ordinary course of business to certain directors and executive
officers of the Company and the Bank, their associates, and members of their
immediate families. In accordance with Federal Reserve Act guidelines, these
loans are made on substantially the same terms, including interest rates and
collateral, as those prevailing for comparable transactions with others and do
not involve more than normal risk of collectibility or present other unfavorable
features. As of June 30, 1997, loans and commitments outstanding to directors
and executive officers of the Company and the Bank, their associates and members
of their immediate families totaled $2,420,000 (net of participations sold to
other banks on a non-recourse basis), which represented approximately 3% of
total loans and commitments

22
<PAGE> 24

outstanding as of that date. As of June 30, 1997, none of these loans
outstanding from the Bank to related parties was on non-accrual, past due,
restructured or considered by management to be a potential problem loan.

The following table sets forth the composition of the Company's loan
portfolio by type of loan on the dates indicated.

LOAN PORTFOLIO ANALYSIS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ---------------------------
1997 1996 1995 1994
-------- ------- ------- -------
<S> <C> <C> <C> <C>
AGGREGATE PRINCIPAL AMOUNT
Type of loan:
1-4 family residential mortgage...................... $19,064 $20,612 $24,921 $25,610
Home equity loans.................................... 7,052 6,431 5,640 6,004
Multifamily residential.............................. 1,947 1,963 2,087 2,163
Construction......................................... 490 382 1,545 788
Commercial real estate............................... 14,693 14,721 11,910 9,358
Commercial loans..................................... 19,684 17,403 9,229 10,376
Installment and credit card loans.................... 11,125 9,226 9,023 4,989
Other loans.......................................... 382 -- 963 1,486
------- ------- ------- -------
Gross loans............................................ 74,437 70,738 69,302 60,774
Less: Unearned income................................ (91) (62) (98) (111)
------- ------- ------- -------
Total loans, net of unearned income.......... $74,346 $70,676 $69,204 $60,663
======= ======= ======= =======
PERCENTAGE OF LOAN PORTFOLIO
Type of loan:
1-4 family residential mortgage...................... 25.61% 29.14% 35.96% 42.14%
Home equity loans.................................... 9.47 9.09 8.14 9.87
Multifamily residential.............................. 2.62 2.78 3.01 3.56
Construction......................................... 0.66 0.54 2.23 1.30
Commercial real estate............................... 19.74 20.81 17.18 15.40
Commercial loans..................................... 26.44 24.60 19.07 17.07
Installment and credit card loans.................... 14.95 13.04 13.02 8.21
Other loans.......................................... 0.51 -- 1.39 2.45
------- ------- ------- -------
Gross loans............................................ 100.00% 100.00% 100.0% 100.0%
======= ======= ======= =======
</TABLE>

23
<PAGE> 25

The following table sets forth the contractual maturities of loans
outstanding as of June 30, 1997, and an analysis of sensitivities of loans due
to changes in interest rates. The Company's portfolio of adjustable rate home
mortgages consists of loans to regular customers in the local market area. Such
loans generally have balloon maturities within ten years or less, with 2% annual
and 6% lifetime "caps" on interest rate changes. Borrowers have the right to
prepay such loans without penalty.

MATURITIES AND RATE SENSITIVITY OF LOANS
JUNE 30, 1997
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
OVER 1 YEAR
THROUGH 5 YEARS OVER 5 YEARS
----------------- -----------------
ONE YEAR FIXED FLOATING FIXED FLOATING
OR LESS RATE RATE RATE RATE TOTAL
-------- ------ -------- ------ -------- -------
<S> <C> <C> <C> <C> <C> <C>
Commercial............................ $ 7,121 $3,621 $ 6,858 $ 175 $ 1,909 $19,684
Commercial real estate................ 1,362 573 1,685 3,259 7,814 14,693
Residential mortgage/home equity...... 2,079 2,200 4,766 829 18,189 28,063
Construction.......................... 225 265 -- -- -- 490
Installment/credit card............... 1,262 1,090 889 535 7,349 11,125
Other................................. 28 59 155 -- 140 382
------- ------ ------- ------ ------- -------
Total....................... $12,077 $7,808 $14,353 $4,798 $35,401 $74,437
======= ====== ======= ====== ======= =======
</TABLE>

NONPERFORMING ASSETS

Generally, interest on loans is accrued and credited to income based upon
the principal balance outstanding. It is the Company's policy to discontinue the
accrual of interest income and classify a loan as non-accrual when principal or
interest is past due 90 days or more and the loan is not well secured and in the
process of collection, or when, in the opinion of management, principal or
interest is not likely to be paid in accordance with the terms of the
obligation. The Company will generally charge-off loans after 180 days of
delinquency unless adequately collateralized and in the process of collection. A
loan is considered in the process of collection if, based on a probable specific
event, management believes that the loan will be repaid or brought current
within a reasonable period of time. Loans will not be returned to accrual status
until future payments of principal and interest appear certain. Interest accrued
and unpaid at the time a loan is placed on non-accrual status is charged against
interest income. Subsequent payments received are applied to the outstanding
principal balance.

Real estate acquired by the Company as a result of foreclosure or
in-substance foreclosure is classified as other real estate owned ("OREO"). Such
loans are reclassified to OREO and recorded at the lower of cost or fair market
value less estimated selling costs, and the estimated loss, if any, is charged
to the allowance for loan losses at that time. Further allowances for losses are
recorded as charges to other expenses at the time management believes additional
deterioration in value has occurred.

24
<PAGE> 26

The following table sets forth certain information with respect to the
Company's non-accrual loans, OREO, and accruing loans which are contractually
past due 90 days or more as to principal or interest, for the periods indicated.

NONPERFORMING ASSETS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
JUNE 30, ------------------
1997 1996 1995 1994
-------- ---- ---- ----
<S> <C> <C> <C> <C>
Non-accrual loans...................................... $168 $272 $ 8 $628
Accruing past due 90+ days............................. -- 50 300 --
---- ---- ---- ----
Total nonperforming loans.................... 168 322 308 628
Other real estate owned................................ -- -- 193 --
---- ---- ---- ----
Total nonperforming assets................... $168 $322 $501 $628
==== ==== ==== ====
Nonperforming assets to total assets................... .15% .30% .49% .70%
==== ==== ==== ====
</TABLE>

The amount of interest on non-accrual loans which would have been recorded
as income under the original terms of such loans was approximately $7,100 for
the first six months of 1997, and approximately $17,000, $1,000 and $32,000 for
the years ended December 31, 1996, 1995 and 1994, respectively. The amount of
interest income recognized on non-accrual loans that was included in net income
was zero for the six months ended June 30, 1997 and $19,600, $13,500 and $13,500
for 1996, 1995 and 1994 respectively.

Loans past due 90 days or more and still accruing as of December 31, 1996
totaled $50,000, of which $44,000 was composed of unsecured commercial loans,
installment loans and credit card debt, and the remainder was secured by real
estate. As of June 30, 1997, the real estate loan had been paid off and the
other loans had been charged off, so that there were no loans past due 90 days
or more and still accruing as of that date.

Non-accrual loans as of December 31, 1996 included three loans secured by
real estate totaling $211,000, one commercial loan in the amount of $38,000 and
several smaller credits totaling $23,000. One of the real estate loans in the
amount of $100,000 (an installment loan secured by a junior lien) and other
smaller loans were charged off during the first six months of 1997. The $38,000
commercial loan was also charged off, and an insurance claim has been filed
because the borrower used forged collateral as security for the loan. As of June
30, 1997, non-accrual loans consisted of two loans secured by real estate
totaling $109,000 and several smaller installment and credit card loans totaling
$59,000.

ALLOWANCE FOR LOAN LOSSES

In originating loans, the Company recognizes that credit losses will be
experienced and the risk of loss will vary with, among other things, general
economic conditions, the type of loan being made, the creditworthiness of the
borrower over the term of the loan and, in the case of a collateralized loan,
the quality of the collateral for such loan. The Company maintains an allowance
for loan losses based upon, among other things, such factors as historical
experience, the volume and type of lending conducted by the Company, the amount
of nonperforming assets, regulatory policies, generally accepted accounting
principles, general economic conditions, and other factors related to the
collectibility of loans in the Company's portfolios. In addition to unallocated
allowances, specific allowances are provided for individual loans when ultimate
collection is considered questionable by management after reviewing the current
status of loans which are contractually past due and after considering the net
realizable value of the collateral for the loan.

Management actively monitors the Company's asset quality in a continuing
effort to charge-off loans against the allowance for loan losses when
appropriate and to provide specific loss allowances when necessary. Although
management believes it uses the best information available to make
determinations with respect to the allowance for loan losses, future adjustments
may be necessary if economic conditions differ from the

25
<PAGE> 27

assumptions used in making the initial determinations. Based upon criteria
consistently applied during the periods, as of June 30, 1997 the allowance for
loan losses amounted to $710,000 (or .95% of total loans). The Company's
allowance for loan losses was $826,000 (1.17% of total loans) as of December 31,
1996, $740,000 (1.07% of total loans) as of December 31, 1995, and $740,000 (or
1.22% of total loans) as of December 31, 1994. The allowance for loan losses as
a percentage of nonperforming loans was 423% and 257% at June 30, 1997 and
December 31, 1996, respectively.

The following table sets forth an analysis of the Company's allowance for
loan losses for the periods indicated.

ALLOWANCE FOR LOAN LOSSES
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------
1997 1996 1995 1994
---------- ------- ------- -------
<S> <C> <C> <C> <C>
Average loans outstanding.................... $71,387 $70,523 $63,354 $58,636
======= ======= ======= =======
Loans outstanding at period end.............. 74,346 70,676 69,204 60,663
======= ======= ======= =======
Total nonperforming loans.......... 168 322 308 628
======= ======= ======= =======
Beginning balance of allowance............... $ 826 $ 740 $ 740 $ 730
Loans charged-off:
1-4 family residential mortgage loans...... -- -- 137 33
Home equity loans.......................... -- -- -- 61
Commercial loans........................... 97 126 10 1
Installment & credit card loans............ 154 129 51 11
------- ------- ------- -------
Total loans charged-off............ 251 255 198 106
------- ------- ------- -------
Recoveries of previous charge-offs:
1-4 family residential mortgage loans...... -- 37 77 7
Home equity loans.......................... -- -- -- 14
Commercial loans........................... 62 125 93 71
Installment & credit card loans............ 1 19 2 5
------- ------- ------- -------
Total recoveries................... 63 181 172 97
------- ------- ------- -------
Net loans charged-off........................ 188 74 26 9
------- ------- ------- -------
Provision for loan losses.................... 72 160 26 19
------- ------- ------- -------
Balance at period end........................ $ 710 $ 826 $ 740 $ 740
======= ======= ======= =======
Net charge-offs to average loans............. .53% .10% .04% .02%
Allowance as percent of total loans.......... .95% 1.17% 1.07% 1.22%
Nonperforming loans as % of total loans...... .23% .46% .45% 1.04%
Allowance as % of nonperforming loans........ 423% 257% 240% 118%
</TABLE>

Although the Company considers the composition of its loan portfolio, and
the loss potential associated with different types of loans, in determining the
level of the allowance, the Company does not formally allocate its allowance for
loan losses by loan category. In considering the loss potential associated with
different types of loans, the Company considers its own historical loss
experience with each type of loan, together with any internal or external
changes which might suggest that future losses will be higher or lower than the
historical loss experience. Such additional factors include changes in national
or local economic conditions which affect the repayment capacity of borrowers
and/or the market value of collateral, trends in past due payments, changes in
underwriting standards, changes in loan originating and servicing personnel,
changes in the types of credit offered, and other factors.

26
<PAGE> 28

INVESTMENT ACTIVITIES

The Company generally classifies as "available-for-sale" those securities
which are held for primary or secondary liquidity purposes, and as
"held-to-maturity" those securities which are less readily marketable and/or
held primarily for interest income and/or rate sensitivity management purposes.
Beginning in 1997, the Company has elected to invest in mortgage-backed
securities only for yield and not for liquidity, so new investments in those
securities have been classified as "held-to-maturity," which represents a change
from prior years when such investments were classified as "available-for-sale."
Additionally, as of June 30, 1997, the Company owned approximately $7 million of
short-term U.S. Treasury Bills purchased for secondary liquidity purposes, which
were classified as "held-to-maturity" because of the short term remaining until
their maturity. These two factors explain the increase in the Company's
portfolio of securities "held-to-maturity" from $958,000 as of December 31,
1996, to $9,992,000 as of June 30, 1997.

The Company's investment portfolio of $17,826,000 as of June 30, 1997
consisted primarily of U. S. Treasury and Government agency obligations and
mortgage-backed securities. This represented an increase of $10,454,000 or 142%
compared to the investment portfolio as of December 31, 1996, resulting from an
increase in deposits which exceeded the Company's loan demand during the first
six months of 1997.

The Company's investment portfolio of $7,372,000 as of December 31, 1996,
represented a decrease of $6,307,000 or 46% compared to the investment portfolio
as of December 31, 1995, as investment maturities were used to fund loan growth
and enhance liquidity. The investment portfolio declined 39% from $22,461,000 as
of December 31, 1994 to $13,679,000 as of December 31, 1995, which was
anticipated because the branch deposits acquired by the Company in 1994 from the
Resolution Trust Corporation (the "RTC") were initially invested in U.S.
Treasury and agency securities, pending redeployment into loans.

Investment securities held to maturity are stated at cost, adjusted for
amortization of premium and accretion of discount. Investment securities
available for sale are stated at fair value in accordance with SFAS No. 115,
"Accounting For Certain Investments in Debt and Equity Securities," which was
adopted by the Company in 1994. The following table sets forth the book value of
the Company's investment portfolio as of the dates indicated:

INVESTMENT PORTFOLIO COMPOSITION
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, --------------------------
1997 1996 1995 1994
-------- ------ ------- -------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE:
U.S. Treasuries and agencies.................. $ 5,160 $3,136 $ 9,968 $18,323
Mortgage-backed securities.................... 2,674 3,278 2,994 3,356
------- ------ ------- -------
Total available for sale.............. 7,834 6,414 12,962 21,679
HELD TO MATURITY:
U.S. Treasuries and agencies.................. 7,938 -- -- --
Mortgage-backed securities.................... 960 -- -- --
State, county and municipal................... 165 165 250 250
Other......................................... 929 793 467 532
------- ------ ------- -------
Total held to maturity................ 9,992 958 717 782
------- ------ ------- -------
Total investment securities..................... $17,826 $7,372 $13,679 $22,461
======= ====== ======= =======
</TABLE>

27
<PAGE> 29

The following table sets forth the maturity distribution and weighted
average yield of the investment portfolio of the Company as of June 30, 1997.
The calculation of the weighted average yields is based on yield, weighted by
the respective book value of the securities, using cost basis in the case of
securities available for sale.

INVESTMENT PORTFOLIO -- MATURITY AND YIELDS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
JUNE 30, 1997
----------------------------------------------
1 YEAR 1 YEAR TO 5 YEARS TO AFTER
OR LESS 5 YEARS 10 YEARS 10 YEARS
------- --------- ---------- --------
<S> <C> <C> <C> <C>
MATURITY DISTRIBUTION:
U.S. Treasuries and agencies........................ $8,147 $ 4,951 -- --
Mortgage-backed securities(1)....................... 485 -- -- $3,150
State, county and municipal......................... 100 65 -- --
Other............................................... -- -- -- 928
------ --------- --- ------
Total....................................... $8,732 $ 5,016 -- $4,078
====== ========= === ======
WEIGHTED AVERAGE YIELD(2):
U.S. Treasuries and agencies........................ 4.89% 6.17% N/A N/A
Mortgage-backed securities(1)....................... 5.72% N/A N/A 5.98%
State, county and municipal......................... 4.55% 4.75% N/A N/A
Fully taxable equivalent............................ 7.01% 7.32% N/A N/A
Other............................................... N/A N/A N/A 6.21%
</TABLE>

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

(1) Mortgage-backed securities consist of floating rate debt securities that
reprice quarterly or more frequently.

(2) The calculation of weighted average yields is based on yield, weighted by
the respective book value of the securities, using cost basis in the case of
securities available for sale.

DEPOSIT ACTIVITIES

The Company's average balance of total deposits was $87,074,000 for the six
months ended June 30, 1997, an increase of $6,142,000 or 8% compared with the
average balance of total deposits of $80,932,000 for the year ended December 31,
1996. The average total deposits for the year ended December 31, 1996 increased
$1,054,000 or 1% compared with average deposits of $79,878,000 for the year
ended December 31, 1995, which in turn represented an increase of $3,707,000 or
5% compared with average deposits of $76,171,000 for the year ended December 31,
1994.

The Company views deposit growth as a significant challenge in its effort
to increase its asset size, a challenge which the Company is addressing through
its branching program in Virginia and Maryland, increased emphasis on commercial
accounts, and offering more attractive interest rates to stimulate deposit
growth. See "Business -- Strategic Plan" and "The Eastern American Transaction."

Deposits are attracted through the offering of a broad variety of deposit
instruments, including checking accounts, money market accounts, NOW accounts,
savings accounts, certificates of deposit (including "jumbo" certificates in
denominations of $100,000 or more), and retirement savings plans. In 1995, the
Company introduced higher-rate deposit instruments, in the form of Investor
Certificates of Deposits and the Premier Investment Account, designed to attract
local institutional deposits in amounts of $100,000 or more. To stimulate
deposit growth in 1997, the Company introduced a One-Year No Penalty certificate
of deposit, designed to attract local commercial and consumer deposits in
amounts of $5,000 or more.

28
<PAGE> 30

The following table sets forth the average balances and weighted average
rates for the Company's categories of deposits for the periods indicated.

AVERAGE DEPOSITS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED -----------------------------------------------------------
JUNE 30, 1997 1996 1995
---------------------------- ---------------------------- ----------------------------
% OF % OF % OF
AVERAGE AVERAGE TOTAL AVERAGE AVERAGE TOTAL AVERAGE AVERAGE TOTAL
BALANCE RATE DEPOSITS BALANCE RATE DEPOSITS BALANCE RATE DEPOSITS
------- ------- -------- ------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Noninterest-bearing
deposits................ $18,979 -- 21.80% $17,525 -- 21.65% $16,841 -- 21.80%
Interest-bearing demand
(NOW) deposits.......... 13,778 1.96% 15.82 12,522 1.96% 15.47 12,230 2.11% 15.31
Savings deposits......... 2,301 2.44 2.64 2,217 2.53 2.74 2,526 2.65 3.16
Money market deposits.... 21,546 3.58 24.74 23,072 3.40 28.51 25,153 3.09 31.49
Time deposits............ 30,470 5.45 35.00 25,596 5.47 31.63 23,128 5.49 28.96
------- ---- ------ ------- ---- ------ ------- ---- ------
Total............. $87,074 100.00% $80,932 100.00% $79,878 100.00%
======= ====== ======= ====== ======= ======
Weighted average rate.... 3.17% 3.07% 2.97%
==== ==== ====

<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1994
----------------------------
% OF
AVERAGE AVERAGE TOTAL
BALANCE RATE DEPOSITS
------- ------- --------
<S> <C> <C> <C>
Noninterest-bearing
deposits................ $16,159 -- 21.21%
Interest-bearing demand
(NOW) deposits.......... 11,926 2.08% 15.66
Savings deposits......... 2,564 2.59 3.37
Money market deposits.... 24,784 2.49 32.54
Time deposits............ 20,738 4.44 27.22
------- ---- ------
Total............. 76,171 100.00%
======= ======
Weighted average rate.... 2.43%
====
</TABLE>

The Company seeks to rely primarily on core deposits from regular customers
to provide a stable and cost-effective source of funding to support asset
growth. The Company's Asset/Liability Management Policy limits total brokered
deposits (as such term is defined for regulatory purposes) to ten percent of the
Bank's total liabilities. As of June 30, 1997, brokered deposits represented
$993,000, or less than one percent, of the Company's total liabilities.

As of June 30, 1997, total time deposits over $100,000 represented 17% of
total deposits. Of this amount, $4,395,000 had a term of six months or less. The
following table sets forth the amount of the Company's certificates of deposit
of $100,000 or more by time remaining until maturity as of June 30, 1997 and
December 31, 1996. Most of the Company's certificates of deposit consist of
local, in market deposits.

TIME DEPOSITS OF $100,000 OR MORE
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
MATURITY PERIOD 1997 1996
--------------- -------- ------------
<S> <C> <C>
Three months or less........................................ $ 3,152 $ 6,179
Over three months through six months........................ 1,243 4,180
Over six months through twelve months....................... 11,033 3,905
Over twelve months.......................................... 919 905
------- -------
Totals............................................ $16,347 $15,169
======= =======
</TABLE>

BORROWINGS

Borrowings consist of advances from the Federal Home Loan Bank of Atlanta
(the "FHLBA") and deposits received in the Bank's U.S. Treasury Tax and Loan
Account. Balances outstanding and effective rates of interest are shown in the
tables below for the six months ended June 30, 1997 and 1996, and for the years
ended December 31, 1996, 1995 and 1994:

29
<PAGE> 31

SHORT TERM BORROWINGS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
---------------- ------------------------
1997 1996 1996 1995 1994
----- ------- ---- ------ ------
<S> <C> <C> <C> <C> <C>
Federal Home Loan Bank of Atlanta
Ending Balance................................... $900 $2,100 $900 $2,000 $2,200
Daily average balance for the period............. 900 598 900 2,924 707
Maximum outstanding balance at a month-end during
the period..................................... 900 2,100 900 4,000 3,500
Daily average interest rate for the period....... 6.65% 6.14% 6.65% 5.46% 4.24%
Average interest rate on period end balance...... 6.65% 6.14% 6.65% 6.10% 6.88%
Treasury Tax and Loan Account
Ending balance................................... $722 $ 581 $716 $1,808 $ 684
Daily average balance for the period............. 409 416 393 473 394
Maximum outstanding balance at a month-end during
the period..................................... 769 647 829 711 684
Daily average interest rate for the period....... 4.38% 4.59% 4.64% 4.60% 3.48%
Average interest rate on period end balance...... 3.78% 5.22% 5.16% 2.00% 2.75%
</TABLE>

The following table shows the details of the Bank's fixed rate advances
from the FHLBA, with original maturities in excess of one year, as of June 30,
1997:

LONG TERM BORROWINGS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
JUNE 30, 1997
--------------------------------------------
ADVANCE AMOUNT OUTSTANDING CURRENT LONG TERM INTEREST MATURITY REPAYMENT
DATE BORROWED BALANCE PORTION PORTION RATE DATE TERMS
- ------- -------- ----------- ------- --------- -------- -------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
10/10/96 $ 300 $ 300 -- $ 300 6.60% 10/10/99 Due at maturity
10/10/96 300 300 -- 300 6.85% 10/10/01 Due at maturity
10/10/96 2,000 1,800 $400 1,400 6.57% 10/10/01 Equal installments
quarterly commencing
1/10/97
10/10/96 2,400 2,200 400 1,800 6.66% 10/10/02 Equal installments
quarterly commencing
1/10/97
2/8/96 800 800 -- 800 6.30% 2/8/06 Due at maturity
5/16/96 1,000 1,000 -- 1,000 7.34% 5/16/06 Due at maturity
6/24/96 1,000 900 100 800 6.94% 6/24/06 Equal installments semi-
annually commencing
12/24/96
------ ------ ---- ------
$7,800 $7,300 $900 $6,400
====== ====== ==== ======
</TABLE>

RETURN ON EQUITY AND ASSETS

The following table sets forth the Company's performance ratios for the
periods indicated.

RETURN ON EQUITY AND ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, --------------------------
1997 1996 1995 1994
-------- ---- ----- -----
<S> <C> <C> <C> <C>
Return on average assets(1).................. .53% .27% .68% .71%
Return on average equity(1).................. 8.32 4.20 11.49 12.38
Average equity to average assets............. 6.86 6.97 6.07 6.12
</TABLE>

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

(1) Annualized for the six month period ended June 30, 1997.

30
<PAGE> 32

LIQUIDITY

The Company's Asset/Liability Management Policy is intended to maintain
adequate liquidity for the Bank and thereby enhance its ability to raise funds
to support asset growth and meet deposit withdrawals, maintain reserve
requirements and otherwise sustain operations. The Company accomplishes this
primarily through management of the maturities of its earning assets and
interest-bearing liabilities. The Company believes that the Bank's present
liquidity position is adequate to meet its current and future needs.

Asset liquidity is provided by cash and assets which are readily
marketable, or which can be pledged, or which will mature in the near future.
Asset liquidity is maintained in the form of vault cash, demand deposits with
commercial banks, federal funds sold, interest bearing deposits with other
financial institutions, short-term investment securities, other investment
securities available-for-sale, and short-term loans. The Company has defined
"cash and cash equivalents" as those amounts included in cash and due from banks
and federal funds sold. As of June 30, 1997, cash and cash equivalents amounted
to $4,841,000, a decrease of $14,959,000 compared to December 31, 1996, which
decrease was primarily attributable to the purchase of investment securities.

As of June 30, 1997, $19,945,000 or 69% of the Company's total portfolio of
investments and interest bearing deposits held with other financial institutions
was scheduled to mature within one year. The remainder of this portfolio
consists of $5,016,000 (17% of total portfolio) in U.S. Government, agency, and
municipal securities that will mature within three years, and $3,150,000 (11% of
total portfolio) in federal agency mortgage pass-through securities and
collateralized mortgage obligations with an estimated weighted average duration
of approximately three years, and the Bank's required stock investment in the
FHLBA and the Federal Reserve Bank of Richmond totaling $928,000. The unrealized
gain contained in the held-to-maturity portion of the investment portfolio as of
June 30, 1997 was $6,000.

Liability liquidity is provided by access to core funding sources,
principally various customers' deposit accounts in the Company's market area. As
a member of the FHLBA, the Bank is authorized to borrow up to $13,300,000
secured by a blanket pledge of its portfolio of 1-to-4-family residential
mortgage loans. The Bank also has approved lines of credit from larger
correspondent banks to borrow excess reserves on an overnight basis (known as
"federal funds purchased") in the amount of $1,000,000 and to borrow on a
secured basis ("repurchase agreements") in the amount of $5,000,000. As of June
30, 1997, the Bank had no federal funds purchased or repurchase agreements, and
was utilizing $7,300,000 of its available FHLBA borrowings in the form of
fixed-rate term credit advances with an average cost of 6.73%. The Company
utilizes fixed rate term credit advances from the FHLBA to fund fixed rate real
estate loans of comparable terms and maturities.

The Company's cash flows are composed of three classifications: cash flows
from operating activities, cash flows from investing activities, and cash flows
from financing activities. Net cash flow provided by operating activities was
$641,000 and $271,000 for the six months ended June 30, 1997 and 1996,
respectively, and $903,000, $448,000, and $303,000 for the years ended December
31, 1996, 1995 and 1994, respectively.

Net cash used in investing activities was $18.9 million for the six months
ended June 30, 1997. Net cash provided by investing activities was $1.0 million
for the six months ended June 30, 1996. Net cash provided by investing
activities was $3.7 million for the year ended December 31, 1996. Net cash used
in investing activities was $6.8 million and $5.5 million for the years ended
December 31, 1995 and 1994, respectively.

Net cash provided by financing activities was $3.3 million for the six
months ended June 30, 1997. Net cash used in financing activities was $5.6
million for the six months ended June 30, 1996. Net cash provided by financing
activities was $5.2 million, $10.4 million and $3.8 million for the years ended
December 31, 1996, 1995 and 1994, respectively.

In the ordinary course of business, the Bank enters into commitments to
make loans and fund letters of credit, and the Company is also a party to two
operating leases with respect to its banking quarters. Details of these
commitments may be found in the accompanying Notes to Consolidated Financial
Statements.

The Company had cash on hand in the amount of $78,000 as of June 30, 1997
at the holding company level. The Company anticipates using these funds,
together with dividends received from the Bank, as working

31
<PAGE> 33

capital to pay normal operating expenses. As of June 30, 1997, the Company had
no indebtedness outstanding at the holding company level.

CAPITAL RESOURCES

Total stockholders' equity as of June 30, 1997 was $7,078,000, an increase
of $328,000 or approximately 5% compared with stockholders' equity of $6,750,000
as of December 31, 1996. This increase was attributable to net income for the
six months ended June 30, 1997 of $288,000, a $2,000 increase in the market
value of investment securities available-for-sale, net of tax effect and $38,000
in net proceeds from issuances of Common Stock pursuant to the exercise of
outstanding stock options and warrants.

Total stockholders' equity was $6,750,000 as of December 31, 1996, an
increase of $385,000 or 6% compared with stockholders' equity of $6,365,000 as
of December 31, 1995. The increase in total stockholders' equity as of December
31, 1996 was attributable to $279,000 of net income for 1996, a $22,000 increase
in the market value of investment securities available for sale, net of tax
effect, and $84,000 received from issuances of Common Stock pursuant to the
exercise of outstanding stock options.

Total stockholders' equity was $6,365,000 as of December 31, 1995, an
increase of $1,555,000 or 32% compared with stockholders' equity of $4,810,000
as of December 31, 1994. The increase in total stockholders' equity as of
December 31, 1995 was attributable to $613,000 of net income for 1995, $480,000
in net proceeds from the issuance of Common Stock, and a $502,000 increase in
the market value of investment securities available-for-sale, net of tax effect,
all partially offset by a $40,000 preferred stock dividend.

There currently are no regulatory capital requirements applicable to the
Company, because it has total consolidated assets of less than $150 million. The
Bank, however, is required to comply with capital standards promulgated by the
OCC. The OCC has established certain minimum capital standards that apply to
national banks. The following table sets forth the capital standards required by
the OCC, as well as the capital ratios of the Bank as of the dates indicated:

BANK CAPITAL RATIOS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
REGULATORY CAPITAL RATIOS
DECEMBER 31, -------------------------
JUNE 30, ---------------------------- ADEQUATELY WELL
1997 1996 1995 1994 CAPITALIZED CAPITALIZED
-------- -------- ------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Tier 1 capital................. $ 6,939 $ 6,628 $ 6,177 $ 5,085
Tier 2 capital................. 710 826 740 629
-------- -------- ------- -------
Total capital.................. $ 7,649 $ 7,454 $ 6,917 $ 5,714
======== ======== ======= =======
Risk-weighted assets........... $ 75,229 $ 72,411 $66,050 $50,259
======== ======== ======= =======
Adjusted total assets.......... $105,355 $102,852 $89,789 $88,594
======== ======== ======= =======
Capital Ratios
Tier 1 risk-based capital.... 9.22% 9.15% 9.35% 10.12% 4.00% 6.00%
Total risk-based capital..... 10.17% 10.29% 10.47% 11.37% 8.00% 10.00%
Leverage ratio (Tier 1
capital to adjusted total
assets)................... 6.59% 6.44% 6.88% 5.74% 4.00% 5.00%
</TABLE>

The Company anticipates that, after consummation of the transaction with
Eastern American, it will have total consolidated assets of more than $150
million, and that as a result the regulatory capital standards will apply to the
Company on a consolidated basis. Because the Company has minimal assets and
liabilities at the parent company level, its consolidated capital ratios are
approximately the same as the Bank's capital ratios. See "The Eastern American
Transaction" and Note 16 of Notes to Consolidated Financial Statements.

32
<PAGE> 34

ACCOUNTING MATTERS

In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS
128") which is effective for financial statements issued for periods ending
after December 15, 1997, including interim periods. SFAS 128 establishes
standards for computing and presenting earnings per share and applies to
entities with publicly held common stock or potential common stock. Management
does not expect that the adoption of SFAS 128 will have a material impact on the
Company's financial condition or reported earnings per share.

In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 129, Disclosure of Information about Capital Structure ("SFAS
129") which is effective for financial statements issued for periods ending
after December 15, 1997. SFAS 129 establishes standards for disclosing
information about an entity's capital structure and applies to all entities.
Management does not expect that the adoption of SFAS 129 will have a material
impact on the Company's financial condition or reported capital structure.

During June of 1997, the FASB issued Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income ("SFAS 130"). SFAS 130
establishes standards for reporting and display of comprehensive income and its
components (revenue, expenses, gains and losses) in a full set of general
purpose financial statements. SFAS 130 is effective for financial statements for
periods beginning after December 15, 1997.

During June of 1997, the FASB issued Statement of Financial Accounting
Standards No. 131 Disclosures about Segments of an Enterprise and Related
Information ("SFAS 131"). SFAS 131 establishes standards for the way that public
business enterprises report information about operating segments in annual
financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. SFAS 131 is
effective for financial statements for periods beginning after December 15,
1997.

IMPACT OF INFLATION, CHANGING PRICES AND MONETARY POLICIES

The financial statements and related financial data concerning the Company
presented herein have been prepared in accordance with generally accepted
accounting principles, which require the measurement of financial position and
operating results in terms of historical dollars without considering changes in
the relative purchasing power of money over time due to inflation. The primary
effect of inflation on the operations of the Company is reflected in increased
operating costs. Unlike industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
changes in interest rates have a more significant effect on the performance of a
financial institution than do the effects of changes in the general rate of
inflation and changes in prices. Interest rates do not necessarily move in the
same direction or in the same magnitude as the prices of goods and services.
Interest rates are highly sensitive to many factors which are beyond the control
of the Company, including the influence of domestic and foreign economic
conditions and the monetary and fiscal policies of the United States government
and federal agencies, particularly the Federal Reserve Board. The Federal
Reserve Board implements national monetary policy such as seeking to curb
inflation and combat recession by its open market operations in United States
government securities, control of the discount rate applicable to borrowing by
banks, and establishment of reserve requirements against bank deposits. The
actions of the Federal Reserve Board in these areas influence the growth of bank
loans, investments and deposits, and affect the interest rates charged on loans
and paid on deposits. The nature, timing and impact of any future changes in
federal monetary and fiscal policies on the Bank and its results of operations
are not predictable.

33
<PAGE> 35

BUSINESS

GENERAL

The Company is a registered bank holding company under the Bank Holding
Company Act of 1956 ("BHCA"), and conducts its operations through the Bank,
which it acquired in 1986. The Company was incorporated and organized in 1985
for the purpose of acquiring the Bank. The Bank opened in 1982 and is engaged in
a general commercial banking business with a particular emphasis on the needs of
professionals, entrepreneurs, small to medium-sized businesses and
not-for-profit membership organizations located in the Washington, D. C.
metropolitan area.

The Company's primary source of revenue is the interest income and fees
which its earns by lending and investing the funds which are held on deposit.
Because loans generally earn higher rates of interest than investments, the
Company seeks to employ as much of its deposit funds as possible in the form of
loans to individuals, businesses and other organizations. In the interest of
liquidity, however, a portion of the Company's deposits are maintained in cash,
government securities, deposits with other financial institutions, and overnight
loans of excess reserves (known as "federal funds sold") to large correspondent
banks. The revenue which the Company earns (prior to deducting its overhead
expenses) is essentially a function of the amount of the Company's loans and
deposits, as well as the profit margin ("interest spread") and fee income which
can be generated thereon.

The Company's strategic plan is directed toward the enhancement of its
franchise value and operating profitability through a significant increase in
its asset size, further expansion into nearby Virginia and Maryland markets, and
the development of new commercial accounts. After opening its first branch in
the District in 1994, the Bank opened a loan production office in Tysons Corner,
Virginia in 1996, which it replaced with a full service branch in April 1997. In
June 1997 the Bank opened a loan production office in Bethesda, Maryland, which
it plans to replace with a full service branch in early 1998 for which it has
already received regulatory approval. On July 24, 1997, the Company entered into
an agreement to assume the deposit and certain other liabilities of the McLean
Branch of Eastern American. See "The Eastern American Transaction."

PRIMARY MARKET AREA

The Company's market area includes the District of Columbia, Fairfax and
Arlington Counties, Virginia, the Cities of Alexandria, Falls Church and
Fairfax, Virginia, Montgomery and Prince Georges Counties, Maryland. With the
nation's capital as its center, the Washington, D.C. metropolitan area is the
eighth largest in the nation. The area population is currently 4.2 million and
has been growing at approximately 2% per year. Recent population growth has been
particularly strong in Fairfax County, Virginia and Montgomery County, Maryland,
where the Company's expansion efforts have been concentrated. Employment is
diversified among high technology firms, trade and professional organizations ,
small business and financial services firms and the Federal and local
governments.

The Washington metropolitan area has over 260 million square feet of office
space, of which 37% is in the District, 40% is in northern Virginia, and 23% is
in suburban Maryland. The largest markets in the District are the central
business district (the location of the Company's main office) and the "East end"
(the location of the Company's Pennsylvania Avenue branch), where more than
180,000 people are employed. The businesses employing the highest number of
people are professional firms and not-for-profit membership organizations. The
largest office market in northern Virginia is Tysons Corner (where the Bank has
an existing branch), and the largest office market in suburban Maryland is
Bethesda (where the Bank has an existing loan production office and plans to
open its next branch). Both of these suburban office markets are densely
populated by small- to medium-size businesses, professional firms and
not-for-profit organizations, the main types of customers served by the Bank.

34
<PAGE> 36

BANKING SERVICES

The Company provides a broad range of banking-related services through its
main office located at 1875 Eye Street, N.W., Washington, D.C. and its branch
offices located at 1275 Pennsylvania Avenue, N.W., Washington, D.C., and 8251
Greensboro Drive, McLean (Tysons Corner), Virginia. In March 1997 the OCC
approved the Company's application for a full service branch in Bethesda,
Maryland, and in June 1997 the Company established a loan production office
there.

The Company strives to provide its customers with the breadth of products
comparable to a regional bank, while maintaining the quick response and personal
service of a locally headquartered bank. The Company holds deposits for
individuals, businesses, and other organizations, and provides services related
thereto for the convenience of its depositors, including credit card programs
and electronic banking. In most cases, the Company pays interest on funds which
it holds on deposit for customers, and it also charges fees for certain services
which it provides. The interest expense paid on deposits, and the noninterest
income earned from service charges, are primarily related to the volume of
deposits handled by the Company. Lending services are concentrated in
professional, service, and commercial business sectors located in the
metropolitan Washington, D.C. area, with the Company emphasizing the development
of its commercial loan business.

STRATEGIC PLAN

As the economy of the Washington, D.C. area has improved since the early
1990s, the Company has maintained the conservative approach to loan underwriting
that it developed in response to the earlier challenging economic conditions,
and has devoted increasing effort and resources toward the stimulation of
business growth and the expansion of its customer base. The Company's current
strategic plan is directed toward the enhancement of its franchise value and
operating profitability through a significant increase in its asset size, the
development of new commercial accounts and loans, and expansion into the nearby
Maryland and Virginia markets. The following are the key action plans being
pursued by the Company in the implementation of its growth and expansion
strategy:

Expanding the branch network. One of the methods by which the Company plans
to grow is to conduct business in multiple locations, including expansion into
the nearby Maryland and Virginia markets. The proposed transaction with Eastern
American is an example of the type of transaction the Company may consider. For
the foreseeable future, the Company expects to acquire or establish branch
offices in high-density commercial districts, to further its objective of
increasing the volume of commercial accounts and loans. The Company established
its first branch office in September 1994 by acquiring from the RTC a branch of
a failed savings and loan association. The branch is located at 1275
Pennsylvania Avenue, N.W., in an area of downtown Washington which is
experiencing significant development. Effective January 1, 1996, the Company
established a loan production office in Tysons Corner, Virginia, which was
replaced by a full service branch at 8251 Greensboro Drive in Tysons Corner in
April 1997. In March 1997 the OCC approved the Company's application to
establish a full service branch in Bethesda, Maryland, and in June 1997 the
Company established a loan production office there. The Company expects to open
a full service branch in downtown Bethesda in early 1998.

Expanding products and services. The Company recently commenced, and
expects to continue, a program to expand its products and services. The
objectives of this program are to provide "value-added" services to existing
clients, to compete more effectively for the development of new commercial
business, to stimulate deposit growth and to increase fee income. In furtherance
of this strategy, the Company established a MasterCard/Visa credit card program
for its customers, introduced two new types of accounts (Basic Checking,
designed for customers with low and moderate incomes, and Century Pro, designed
for higher-income professionals), introduced two new electronic banking services
(TeleBank for personal accounts and ExecuBank for business accounts),
established overdraft lines of credit for small businesses (Century Reserve),
developed a comprehensive no-charge banking package for related accounts
(Century Link), installed a remote ATM in the International Square food court,
developed a high-interest money market account to compete with brokerage funds
(Premier Investment Account), and introduced check-image statements for all
accounts in June of 1996. In 1997, the Bank introduced a One-Year No Penalty
certificate

35
<PAGE> 37

of deposit. To serve commercial firms and not-for-profit organizations, the
Company has also introduced a variety of cash management services, including
lock box services, merchant credit card processing, courier reimbursement and
depositary transfer services, repurchase agreements, sweep accounts and
commercial account analysis. The Company's current plan contemplates a continued
emphasis on the development of commercial loan and deposit business, including
expansion of its commercial product line as well as increased business
development in the Maryland and Virginia markets.

Exploring acquisition and merger opportunities. The Company believes that
its franchise value and operating profitability would be enhanced by a
significant increase in its asset size. For this reason, the Company in the past
has explored, and expects to continue to explore in the future, merger and
acquisition opportunities which would accelerate the Company's progress toward
the achievement of its strategic plan. The proposed transaction with Eastern
American is an example of the type of transaction that the Company may consider.
See "The Eastern American Transaction."

There can be no assurance that the Company will be successful in
implementing any of the future plans described above or that, even if
implemented, such actions will produce the desired financial results. The
foregoing matters should be taken into account when considering the more
specific discussion of the Company's financial performance set forth elsewhere
in this Prospectus.

COMPETITION

The Company is subject to vigorous competition in all aspects and areas of
its business from banks and other financial institutions, including savings and
loan associations, savings banks, finance companies, credit unions and other
providers of financial services, such as money market mutual funds, brokerage
firms, consumer finance companies and insurance companies. The Company also
competes with non-financial institutions that maintain their own credit programs
and governmental agencies that make available low cost or guaranteed loans to
certain borrowers. The principal methods of competition include interest rates
paid on deposits and charged on loans and the availability of other banking
products and services. The Company competes in its market area with a number of
much larger financial institutions that have substantially greater resources,
including larger lending limits, larger branch systems and a wider array of
commercial banking services. The Company has been able to compete effectively
with other financial institutions by emphasizing customer services, establishing
long-term customer relationships and building customer loyalty, and by providing
products and services designed to address the specific needs of its customers.

PERSONNEL

At June 30, 1997, the Company had 43 employees, including 29 employees at
the Eye Street location, seven employees at the Pennsylvania Avenue location,
one employee at the Bethesda, Maryland location and six employees at the Tysons
Corner, Virginia location.

PROPERTIES

The Company's principal executive offices and all of its banking offices
are leased under agreements expiring at various dates, including renewal
options, through 2012. The Company's principal executive offices, which are
located in the District at 1275 Pennsylvania Avenue, N.W., also serve as a
branch location of the Bank. The premises at 1275 Pennsylvania Avenue consist of
2,750 square feet which are under lease through 2004, with one additional
five-year renewal option. The lease for the Company's main office, located in
the District at 1875 Eye Street, N.W., extends through 2002, with two additional
five-year renewal options. The lease for the main office includes 3,895 square
feet of lobby space, 5,286 square feet of Metro-level basement space and space
for an ATM in the adjacent International Square food court. The Company's branch
office in Tysons Corner is located at 8251 Greensboro Drive, McLean, Virginia
and consists of 1,801 square feet of space held under lease through March 31,
1999. The Company is currently negotiating with the landlord to extend the lease
term for an additional seven years on the terms and conditions similar to the
existing lease arrangement. See Note 14 of Notes to Consolidated Financial
Statements for additional information concerning the Company's commitments under
its lease agreements.

36
<PAGE> 38

In connection with the transaction with Eastern American, the Bank plans to
assume Eastern American's lease for the branch location at 6832 Old Dominion
Drive, McLean, Virginia. The branch premises consist of 2,077 square feet which
are under lease through September 30, 2003, with one additional five-year
renewal option.

The Bethesda office is located in a shared office facility at Three
Bethesda Metro Center. On August 6, 1997, the Bank executed a non-binding letter
of intent to establish a branch location at 7625 Wisconsin Avenue, Bethesda,
Maryland. The location is in the vicinity of Wisconsin Avenue and Old Georgetown
Road, where the Bank has authority to establish a branch pursuant to regulatory
approval received from the OCC on March 12, 1997. The proposed branch premises
consist of 2,022 square feet to be leased through October 31, 2007, with one
additional five-year renewal option. The letter of intent is subject to a number
of conditions, including the execution of a mutually acceptable final lease
document. Assuming successful conclusion of lease negotiations, management
anticipates that the Bethesda branch will open for business in early 1998.

LEGAL PROCEEDINGS

The nature of the business of the Company causes it (and the Bank) to be
involved in routine legal proceedings from time to time. Management of the
Company believes that there are no pending or threatened legal proceedings that
upon resolution would have a material adverse impact on the Company.

37
<PAGE> 39

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

The directors and executive officers of the Company, all of whom are
elected annually, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH THE COMPANY
---- --- ----------------------------
<S> <C> <C>
Mr. Joseph S. Bracewell............. 50 Chairman of the Board, President
Mr. John R. Cope.................... 55 Director, Vice President and General Counsel
Mr. Bernard J. Cravath.............. 65 Director and Assistant Secretary
Mr. Neal R. Gross................... 54 Director
Mr. Joseph H. Koonz, Jr............. 62 Director
Mr. William McKee................... 53 Director
Mr. William C. Oldaker.............. 56 Director and Secretary
</TABLE>

Mr. Joseph S. Bracewell has been Chairman of the Board, President and Chief
Executive Officer of the Company and Chairman of the Board of the Bank since
1985. Mr. Bracewell has also served as Chief Executive Officer of the Bank since
1982 and as President of the Bank from 1982-1988 and since August 15, 1996. Mr.
Bracewell serves on the Executive Loan Committee, the Asset/Liability Committee,
the Personnel Committee and the Marketing Committee. Mr. Bracewell also serves
on the Boards of Directors of the Federal Home Loan Bank of Atlanta and the
Independent Bankers Association of America.

Dr. George Contis was elected as a director of the Company in November
1995. Dr. Contis has served as a member of the Board of Directors of the Bank
since 1988 and is currently Chairman of the Bank's Executive Loan Committee and
a member of its Legal Matters Review Committee. Dr. Contis is a physician and
the President of Medical Services Corporation International, an international
contract provider of medical services.

Mr. John R. Cope has served as a director and Vice President of the Company
since 1985. Since 1982, Mr. Cope has served on the Board of Directors of the
Bank, and he has served as Vice Chairman of the Board of the Bank since 1985. In
addition, Mr. Cope serves as General Counsel to the Company and the Bank. Mr.
Cope is a partner with the law firm of Bracewell & Patterson, L.L.P., which from
time to time provides legal services to the Company and the Bank. Mr. Cope is
Chairman of the Marketing Committee and a member of the Executive Compensation,
Stock Option and Personnel Committees.

Mr. Bernard J. Cravath has served as a director of the Company since 1987
and as Assistant Secretary since 1991. In addition, Mr. Cravath is Chairman of
the Audit Committee and serves as a member of the Executive Compensation and
Asset/Liability Committees. Mr. Cravath is President of Reality Properties,
Inc., a real estate investment firm.

Mr. Neal R. Gross was elected as a Director of the Company in October 1995.
Mr. Gross has served as a member of the Board of Directors of the Bank since
1992 and is a member of the Audit Committee. Mr. Gross serves as Chairman of the
Board and Chief Executive Officer of Neal R. Gross and Co., Inc., a corporation
providing court reporting services to attorneys, law firms, the federal
government, and other private organizations and individuals.

Mr. Joseph H. Koonz, Jr. has served as a director of the Company since
1985. Mr. Koonz, a senior partner of the law firm of Koonz, McKenney, Johnson,
DePaolis & Lightfoot, serves as a member of the Stock Option Committee.

Mr. William McKee has served as a director of the Company since 1992. Mr.
McKee is a partner with the law firm of King & Spalding in Washington, D.C. Mr.
McKee is Chairman of the Asset/Liability Committee and a member of the Marketing
Committee.

Mr. William C. Oldaker has served the Company as a director since 1986. In
1992, Mr. Oldaker was elected as Secretary. Since 1984, Mr. Oldaker has served
on the Board of Directors of the Bank. Mr. Oldaker

38
<PAGE> 40

also serves as Chairman of the Personnel, Executive Compensation and Stock
Option Committees. Mr. Oldaker is a partner with the Washington, D.C. law firm
of Oldaker, Ryan, Phillips & Utrecht.

EXECUTIVE COMPENSATION

Executive Officer Compensation

The following table sets forth information regarding the compensation for
the Company's Chief Executive Officer, the only executive officer who received
compensation in excess of $100,000 for the year ended December 31, 1996:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- ------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) OPTIONS COMPENSATION(3)
--------------------------- ---- -------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Joseph S. Bracewell...... 1996 $182,300 -- $10,750 2,735 $1,592
President and Chief
Executive 1995 182,300 $ 7,000 9,420 1,500 1,800
Officer of the Company; 1994 182,300 11,841 9,420 14,048 1,705
Chief Executive Officer of
the Bank
</TABLE>

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

(1) These payments are listed in the year accrued and earned, but each was paid
in the following year.

(2) Amounts in this column represent (a) contributions to the executive's 401(k)
plan account and (b) director fees deferred by the executive pursuant to the
deferred compensation program for directors. Contributions to the 401(k)
plan on behalf of Mr. Bracewell were $4,750, $4,620, and $4,620 during 1996,
1995 and 1994, respectively. During 1996, 1995 and 1994, Mr. Bracewell
deferred $6,000, $4,800 and $4,800, respectively, pursuant to the deferred
compensation program for directors.

(3) Includes the dollar value of insurance premiums paid by the Company with
respect to the term life insurance portion of split dollar policies in which
the Company has the full interest in the cash surrender value. During 1996,
1995 and 1994, the Company held three split dollar policies covering Mr.
Bracewell.

Except as set forth herein, the named executive officer did not receive any
other annual compensation, stock options, restricted stock awards, stock
appreciation rights, long term incentive plan payouts or any perquisites or
other personal benefits, securities or property that exceeded the lesser of
$50,000 or 10% of the total annual salary and bonus for such named executive
officer during the fiscal year ended December 31, 1996. See "-- Employment
Agreement."

Director Compensation

Each member of the Board of Directors of the Company and/or the Bank
receives a retainer of $4,200 annually ($6,000 for those directors serving on
the Boards of both the Company and the Bank) provided the director attends at
least two-thirds of the meetings of the Board of Directors. In addition,
directors serving on the Executive Loan Committee receive cash fees of $50 per
meeting attended. No additional compensation is paid for service on other
standing committees. Directors are permitted to defer annual retainers in lieu
of a deferred compensation plan to provide retirement income, as described
below.

The Company has entered into Director Compensation Agreements (the
"Compensation Agreements") with all of the directors of the Company and with all
but one of the directors of the Bank. Each director of the Company and the Bank
may elect to enter into a Compensation Agreement in lieu of receiving director's
fees in cash. The Compensation Agreements generally provide for the purchase of
life insurance for each director with the deferred director's fees and the
payment of a retirement benefit for up to 180 months following retirement, or in
the case of an individual's death prior to retirement, the payment of an amount
for a period of up to 180 months following a director's death. The retirement
benefit granted under the Compensation

39
<PAGE> 41

Agreement vests pursuant to a schedule, with 20% of the retirement benefit
vesting each year over a five year period.

Prior Stock Option Plans

In 1986, the Board of Directors of the Company approved an Incentive Stock
Option Plan for Key Employees, a Nonqualified Stock Option Plan for Key
Employees and a Nonqualified Stock Option Plan for Directors (collectively
referred to herein as the "1986 Plans"). The purpose of each of the 1986 Plans
was to encourage ownership of the Company's Common Stock by key employees and
directors of the Company and its subsidiaries. A total of 130,000 shares of
Common Stock initially was reserved for issuance under the 1986 Plans. Under the
1986 Plans, the exercise price of any option granted could not be less than the
fair market value of the Common Stock on the date the option was granted. All of
the 1986 Plans were administered by various committees of the Board of Directors
of the Company. The 1986 Plans expired during 1992 and 1993; however, options
with respect to an aggregate of 33,374 shares granted under the 1986 Plans were
outstanding and exercisable by the optionees at June 30, 1997, at exercise
prices ranging from $1.54 to $5.12 per share, of which 23,530 were exercisable
by directors of the Company. In April 1994, the 1986 Plans were replaced by the
Company's 1994 Stock Option Plan described below.

1994 Stock Option Plan

The Board of Directors approved the 1994 Stock Option Plan (the "1994
Plan") in April 1994 and it was approved by the Company's stockholders in May
1994. The Company initially reserved 150,000 shares of its Common Stock, subject
to antidilutive adjustments, for the issuance of incentive stock options and
nonqualified stock options to directors and key employees under the 1994 Plan.
As a result of stock dividends declared by the Company in 1995, 1996 and 1997,
the number of shares reserved for issuances under the 1994 Plan has been
increased to 176,362. The 1994 Plan is administered by the Company's Stock
Option Committee and provides that the options granted under the 1994 Plan may
be either incentive stock options pursuant to Section 422A of the Internal
Revenue Code of 1986, as amended, or nonqualified options. Directors and certain
key employees are entitled to participate under the 1994 Plan.

Options granted under the 1994 Plan will terminate (i) ten years after the
date the option was granted, unless the option was granted for a shorter period,
(ii) five years from the date of grant in the case of an incentive stock option
granted to a 10% or more stockholder of the Company, (iii) three months after
the date on which employment with the Company was terminated, or (iv) one year
after the death or disability of an optionee. Options granted under the 1994
Plan are not transferable by the optionee, other than by will or the laws of
descent and distribution.

As of June 30, 1997, options to purchase 150,426 shares of Common Stock at
exercise prices ranging from $1.92 to $6.88 were outstanding (of which 70,787
were held by directors of the Company) and 16,433 shares of Common Stock
remained available for future grants under the 1994 Plan.

Options Granted to Certain Executives in Last Fiscal Year

During the fiscal year ended December 31, 1996, the Company granted the
following options to purchase the Company's Common Stock to the executive
officer of the Company listed in the Summary Compensation Table.

OPTION/SAR GRANTS IN FISCAL YEAR 1996

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
PERCENT OF AT ASSUMED ANNUAL RATES
NUMBER OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO PER SHARE TERM
OPTIONS/SARS EMPLOYEES EXERCISE EXPIRATION --------------------------
NAME GRANTED IN 1996 PRICE DATE 5% 10%
---- ------------ ------------ --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Joseph S. Bracewell........... 2,735 18.88% $ 6.00 5/21/06 $10,320 $26,153
</TABLE>

40
<PAGE> 42

Options Exercised During Last Fiscal Year

During the fiscal year ended December 31, 1996, the following options were
exercised by the executive officer of the Company listed in the Summary
Compensation Table:

OPTIONS EXERCISED IN FISCAL YEAR 1996
AND YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED OPTIONS AT YEAR END YEAR END
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph S. Bracewell............... 3,092 $5,159 26,456 3,275 $108,399 $5,829
</TABLE>

EMPLOYMENT AGREEMENT

The Company and Mr. Bracewell are parties to an Employment Agreement which
became effective on September 1, 1996 (the "Employment Agreement") and will
terminate on August 31, 1998 unless renewed by the parties on written notice.
Under the Employment Agreement, Mr. Bracewell receives an annual salary of
$182,300, the use of a Company car, the payment by the Company of life insurance
premiums, and certain country club dues. Upon termination of Mr. Bracewell's
employment during the term of the Employment Agreement (except by reason of his
death or upon termination by the Company for cause), Mr. Bracewell would be
entitled to receive a payment in an amount equal to twice his annual salary, and
all of his stock options will automatically vest. If Mr. Bracewell elects not to
renew the Employment Agreement upon its expiration, the Employment Agreement
provides for a severance payment in the amount of his annual salary.

In the event of a change of control, the Employment Agreement provides that
all of Mr. Bracewell's stock options automatically vest. Under the Employment
Agreement, a "change of control" means (i) the acquisition by any person or
group of persons of beneficial ownership of securities representing more than
fifty percent (50%) of the combined voting power of the then outstanding voting
securities of the Company or the Bank, (ii) a reorganization with respect to
which those persons who had been beneficial owners of the voting securities of
either the Bank or the Company immediately prior to such reorganization do not,
following such reorganization, beneficially own shares representing more than
50% of the combined voting power of the voting securities of the resulting
corporation, (iii) a sale of substantially all the assets of the Bank or
Company, (iv) the cessation for any reason of the individuals who constituted
the Board of Directors of the Company on the date of the agreement (the
"Incumbent Board") to constitute at least a majority of the Incumbent Board,
provided that any person becoming a director subsequent to the date of the
agreement whose election or whose nominations for election by the Company's
stockholders was approved by a majority vote of the directors comprising the
Incumbent Board are, for purposes of the agreement, considered as though he or
she were a member of the Incumbent Board, or (v) a change in the Company's
status requiring prior notice to the Board of Governors of the Federal Reserve
System and/or the OCC pursuant to the Change in Bank Control Act of 1978 and
regulations, 12 C.F.R. Sections 5.50 and 225.41, promulgated thereunder. Mr.
Bracewell has agreed not to compete with the Company for the term of the
Employment Agreement and for 12 months thereafter.

CERTAIN TRANSACTIONS

The Bank has and expects to have various loan transactions with directors,
officers and employees of the Company and the Bank. All loans that have been
made and any loans in the future will be made in the ordinary course of business
and on the same terms and conditions, including interest rates and collateral,
as those of comparable transactions prevailing at the time with non-affiliated
parties and, in the opinion of management do not and will not involve more than
the normal risk of collectability or otherwise present other terms less
favorable to the Bank than would otherwise be obtained with unrelated persons.

41
<PAGE> 43

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT

The following table sets forth, as of June 30, 1997, the shares of Common
Stock beneficially owned by (i) any person who, to the knowledge of the Company,
beneficially owns more than five percent of such stock, (ii) each director and
each executive officer of the Company named in the executive compensation table
and (iii) all directors and executive officers of the Company as a group. Unless
otherwise indicated, the Company believes that all persons named in the
following table have sole investment and voting power over the shares of the
Common Stock.

<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES CLASS
------------------- --------- ----------
<S> <C> <C>
Joseph S. Bracewell......................................... 150,346(1) 11.87%
1875 Eye Street, N.W.
Washington, D.C. 20006
George Contis............................................... 96,013(2) 7.61%
1716 Wilson Boulevard
Arlington, Virginia 22209
John R. Cope................................................ 32,180(3) 2.62%
2000 K Street, N.W., Suite 500
Washington, D.C. 20006
Bernard J. Cravath.......................................... 67,376(4) 5.45%
9812 Falls Road, Suite 201
Potomac, Maryland 20854
Neal R. Gross............................................... 130,271(5) 10.48%
1323 Rhode Island Ave., N.W.
Washington, D.C. 20005
Joseph H. Koonz, Jr......................................... 72,647(6) 5.92%
2020 K. Street, N.W.
Washington, D.C. 20006
William S. McKee............................................ 65,162(7) 5.29%
1730 Pennsylvania Ave., N.W.
Washington, D.C. 20006
William C. Oldaker.......................................... 73,416(8) 5.91%
818 Connecticut Ave., N.W.
Suite 1100
Washington, D.C. 20006
All directors and executive officers of the Company
and as a group (8 persons)................................ 687,411 48.74%
</TABLE>

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

(1) Includes 3,450 shares held by minor children, 22,504 shares held as Trustee,
36,095 shares held for the benefit of Mr. Bracewell in the 401(k) plan
maintained by the Bank and 6,760 shares of Common Stock held by Mr.
Bracewell in individual retirement accounts. Also includes 24,503 shares of
Common Stock issuable upon exercise of options which are exercisable within
the next sixty days, 2,358 shares of Common Stock issuable upon the exercise
of currently exercisable Warrants held by minor children and 22,004 shares
issuable on the exercise of currently exercisable Warrants held by Mr.
Bracewell as Trustee.

(2) Includes 37,569 shares held by Medical Sciences Corporation International
Profit Sharing Plan and Trust of which Dr. Contis is Trustee, 8,553 shares
of Common Stock issuable upon exercise of currently exercisable options, and
35,960 shares issuable on the exercise of currently exercisable Warrants.

(3) Includes 13,979 shares held by the John R. Cope Rollover IRA, 9,054 shares
of Common Stock issuable upon exercise of currently exercisable options and
292 shares issuable on the exercise of currently

(Footnotes Continued on Following Page)

42
<PAGE> 44

exercisable Warrants. Also includes 879 shares of Common Stock held by Mr.
Cope's spouse; 4,219 shares of Common Stock held by a family trust of which
Mr. Cope is Trustee, and 2,600 shares held in trust for a minor child.

(4) Includes 1,298 shares of Common Stock held by Mr. Cravath's spouse. Also
includes 9,054 shares of Common Stock issuable upon exercise of currently
exercisable options and 9,128 shares issuable on the exercise of currently
exercisable Warrants.

(5) Includes 8,553 shares of Common Stock issuable upon exercise of currently
exercisable options and 16,839 shares issuable on the exercise of currently
exercisable Warrants.

(6) Includes 9,054 shares of Common Stock issuable upon exercise of currently
exercisable options and 63,593 shares of Common Stock held jointly with Mr.
Koonz's spouse.

(7) Includes 9,054 shares of Common Stock issuable upon exercise of currently
exercisable options and 4,403 shares issuable on the exercise of currently
exercisable Warrants.

(8) Includes 9,054 shares of Common Stock issuable upon exercise of currently
exercisable options and 15,192 shares issuable on the exercise of currently
exercisable Warrants. Also includes 11,114 shares of Common Stock held in
individual retirement accounts and 1,799 shares held in the retirement
account of Mr. Oldaker's spouse.

SUPERVISION AND REGULATION

The supervision and regulation of bank holding companies and their
subsidiaries is intended primarily for the protection of depositors, the deposit
insurance funds of the FDIC and the banking system as a whole, and not for the
protection of bank holding company shareholders or creditors. The banking
agencies have broad enforcement power over bank holding companies and banks
including the power to impose substantial fines and other penalties for
violations of laws and regulations.

The following discussion sets forth the material statutory and regulatory
provisions governing the Company and the Bank. To the extent such discussion
describes statutory or regulatory provisions, it is qualified in its entirety by
reference to the particular statute or regulation.

REGULATION OF THE COMPANY

The Company is a bank holding company within the meaning of the BHCA, and
therefore is subject to regulation, supervision and examination by the Federal
Reserve Board. As such, the Company is required to file reports with and to
furnish such other information as the Federal Reserve Board may require pursuant
to the BHCA. The Federal Reserve Board has the authority to issue orders to bank
holding companies to cease and desist from unsound banking practices and
violations of conditions imposed by, or violations of agreements with, the
Federal Reserve Board. The Federal Reserve Board is also empowered to assess
civil money penalties against companies or individuals who violate the BHCA or
orders or regulations thereunder, to order termination of non-banking activities
of non-banking subsidiaries of bank holding companies, and to order termination
of ownership and control of a non-banking subsidiary by a bank holding company.
Certain violations may also result in criminal penalties. The OCC is authorized
to exercise comparable authority with respect to the Bank.

The Federal Reserve Board takes the position that a bank holding company is
required to serve as a source of financial and managerial strength to its
subsidiary banks and may not conduct its operations in an unsafe or unsound
manner. In addition, it is the Federal Reserve Board's position that, in serving
as a source of strength to its subsidiary banks, a bank holding company should
stand ready to use available resources to provide adequate capital funds to its
subsidiary banks during periods of financial stress or adversity and should
maintain the financial flexibility and capital-raising capacity to obtain
additional resources for assisting its subsidiary banks. A bank holding
company's failure to meet its obligations to serve as a source of strength to
its subsidiary banks will generally be considered by the Federal Reserve Board
to be an unsafe and unsound

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banking practice or a violation of the Federal Reserve Board regulations or
both. This doctrine has become known as the "source of strength" doctrine. In
addition, statutory changes in the Federal Deposit Insurance Act (the "FDIA")
made by the Federal Deposit Insurance Corporation Improvement Act of 1991 (the
"FDICIA") now require the holding company parent of an undercapitalized bank to
guarantee, up to certain limits, the bank's compliance with a capital
restoration plan approved by the bank's primary federal supervisory agency.

The BHCA and the Change in Bank Control Act, together with regulations
promulgated by the Federal Reserve Board, require that, depending on the
particular circumstances, either Federal Reserve Board approval must be obtained
or notice must be furnished to the Federal Reserve Board and not disapproved
prior to any person or company acquiring "control" of a bank holding company,
such as the Company, subject to certain exemptions for certain transactions.
Control is conclusively presumed to exist if an individual or company acquires
25% or more of any class of voting securities of the bank holding company.
Control is rebuttably presumed to exist if a person acquires 10% or more but
less than 25% of any class of voting securities and either the company has
securities registered pursuant to Section 12 of the Securities Exchange Act of
1934, as amended, or no other person will own a greater percentage of that class
of voting securities immediately after the transaction. The regulations provide
a procedure for challenge of the rebuttable control presumption.

As a bank holding company, the Company is required to obtain prior approval
to merge or consolidate with any other bank holding company, acquire all or
substantially all of the assets of any bank or acquire ownership or control of
shares of a bank or bank holding company if, after the acquisition, the Company
would directly or indirectly own or control five percent or more of the voting
shares of such bank or bank holding company.

The Company is also prohibited from acquiring a direct or indirect interest
in or control of more than five percent of the voting shares of any company that
is not a bank or bank holding company and from engaging directly or indirectly
in activities other than those of banking, managing or controlling banks or
furnishing services to its subsidiary banks, except that it may engage in and
may own shares of companies engaged in certain activities found by the Federal
Reserve Board to be so closely related to banking or managing and controlling
banks as to be a proper incident thereto. These activities include, among
others, operating a mortgage, finance, credit card, or factoring company;
performing certain data processing operations; providing investment and
financial advice; acting as an insurance agent for certain types of
credit-related insurance; leasing personal or real property on a full-payout,
non-operating basis; and providing certain stock brokerage and investment
advisory services. In approving acquisitions or the addition of activities, the
Federal Reserve Board considers whether the acquisition or the additional
activities can reasonably be expected to produce benefits to the public, such as
greater convenience, increased competition, or gains in efficiency, that
outweigh such possible adverse effects as undue concentration of resources,
decreased or unfair competition, conflicts of interest or unsound banking
practices. In considering any application for approval of an acquisition or
merger, the Federal Reserve Board is also required to consider the financial and
managerial resources of the companies and the banks concerned, as well as the
applicant's record of compliance with the Community Reinvestment Act (the
"CRA").

The BHCA generally imposes certain limitations on transactions by and
between banks and non-bank companies in the same holding company structure,
including limitations on extensions of credit (including guarantees of loans) by
the Bank to affiliates, investments in the stock or other securities of the
Company by the Bank, and the nature and amount of Company securities that the
Bank may accept from any affiliate to secure loans extended to the affiliate.
The Company, as an affiliate of the Bank, is also subject to these restrictions.
Under the BHCA and the Federal Reserve Board's regulations, a bank holding
company and its subsidiaries are prohibited from engaging in certain tie-in
arrangements in connection with any extension of credit, lease or sale of
property or furnishing of services.

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REGULATION OF THE BANK

The Bank is a national banking association and is therefore subject to
regulation, supervision, and examination by the OCC. The Bank is also a member
of the Federal Reserve System and the FDIC. Requirements and restrictions under
the laws of the United States include the requirement that reserves be
maintained against deposits, restrictions on the nature and the amount of loans
which can be made, restrictions on the business activities in which a bank may
engage, restrictions on the payment of dividends to stockholders, and minimum
capital requirements. See "Risk Factors -- Restrictions on Payment of Dividends"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations." The OCC has enforcement authority over the Bank that is similar to
that of the Federal Reserve Board with respect to the Company. In addition, upon
making certain determinations with respect to the condition of any insured
national bank, such as the Bank, the FDIC may begin to terminate a bank's
federal deposit insurance.

There are certain statutory limitations on the payment of dividends by
national banks. Without approval of the OCC, dividends may not be paid in excess
of a bank's total net profits for that year, plus its retained profits for the
preceding two years, less any required transfers to capital surplus. However, a
national bank may not pay dividends in excess of total retained profits,
including current year's income. In some cases, the OCC may find a dividend
payment that meets these statutory requirements to be an unsafe or unsound
practice.

Banks are affected by the credit policies of other monetary authorities,
including the Federal Reserve Board, which affect the national supply of bank
credit. Such policies influence overall growth of bank loans, investments, and
deposits and may also affect interest rates charged on loans and paid on
deposits. The monetary policies of the Federal Reserve Board have had a
significant effect on the operating results of commercial banks in the past and
are expected to continue to do so in the future.

FDICIA requires the OCC to take "prompt corrective action" with respect to
any national bank which does not meet specified minimum capital requirements.
The applicable regulations establish five capital levels, ranging from "well
capitalized" to "critically undercapitalized," and require or permit the OCC to
take supervisory action in certain circumstances. Under these regulations, a
national bank is considered well capitalized if it has a total risk-based
capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or
greater, and a leverage ratio of 5.0% or greater, and it is not subject to an
order, written agreement, capital directive, or prompt corrective action
directive to meet and maintain a specific capital level for any capital measure.
A national bank is considered adequately capitalized if it has a total
risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio
and leverage capital ratio of 4.0% or greater (or a leverage ratio of 3.0% or
greater if the institution is rated composite 1 in its most recent report of
examination, subject to appropriate federal banking agency guidelines), and the
institution does not meet the definition of an undercapitalized institution. A
national bank is considered undercapitalized if it has a total risk-based
capital ratio that is less than 8.0%, a Tier 1 risk-based capital ratio that is
less than 4.0%, or a leverage ratio that is less than 4.0%. A significantly
undercapitalized institution is one which has a total risk-based capital ratio
that is less than 6.0%, a Tier 1 risk-based capital ratio that is less than
3.0%, or a leverage ratio that is less than 3.0%. A critically undercapitalized
institution is one which has a ratio of tangible equity to total assets that is
equal to or less than 2.0%. As of June 30, 1997, the Bank was classified as
"well-capitalized."

The OCC is authorized by the legislation and regulations to take various
enforcement actions against any undercapitalized national bank and any national
bank that fails to submit an acceptable capital restoration plan or fails to
implement a plan accepted by the OCC. These powers include, among other things,
requiring the institution to be recapitalized, prohibiting asset growth,
restricting interest rates paid, requiring prior approval of capital
distributions by any bank holding company which controls the institution,
requiring divestiture by the institution of its subsidiaries or by the holding
company of the institution itself, requiring new election of directors, and
requiring the dismissal of directors and officers.

With certain exceptions, national banks will be prohibited from making
capital distributions or paying management fees if the payment of such
distributions or fees will cause them to become undercapitalized. Furthermore,
undercapitalized national banks will be required to file capital restoration
plans with the OCC. Undercapitalized national banks also will be subject to
restrictions on growth, acquisitions, branching and engaging in new lines of
business unless they have an approved capital plan that permits otherwise. The
OCC

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<PAGE> 47

also may, among other things, require an undercapitalized national bank to issue
shares or obligations, which could be voting stock, to recapitalize the
institution or, under certain circumstances, to divest itself of any subsidiary.

Significantly and critically undercapitalized national banks may be subject
to more extensive control and supervision. The OCC may prohibit any such
institutions from, among other things, entering into any material transaction
not in the ordinary course of business, amending their charter or bylaws, or
engaging in certain transactions with affiliates. In addition, critically
undercapitalized institutions generally will be prohibited from making payments
of principal or interest on outstanding subordinated debt. Within 90 days of a
national bank becoming critically undercapitalized, the OCC must appoint a
receiver or conservator unless certain findings are made with respect to the
prospect for the institution's continued viability.

CURRENT REGULATORY ISSUES

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the "Interstate Banking Act") authorizes the Federal Reserve Board to permit
adequately capitalized and adequately managed bank holding companies to acquire
all or substantially all of the assets of an out-of-state bank after September
29, 1995, subject to deposit concentration limits, state law limits on the time
period a target bank must be in existence and consideration of the acquiring
bank's compliance with Federal and state community reinvestment laws. Thus,
nationwide interstate banking became effective on September 29, 1995. The
Interstate Banking Act also authorizes banking subsidiaries of bank holding
companies to act as agent for depository institution affiliates in other states
when receiving deposits, renewing time deposits, closing loans, servicing loans,
or receiving payments on loans and other obligations; and the Interstate Banking
Act expressly states that banks acting in an agency capacity are not branches.
With respect to interstate branching by multi-state bank holding companies,
states have two options -- for the period from September 29, 1994 through June
1, 1997, states may enact legislation that either prohibits interstate merger
transactions involving out-of-state banks ("opt-out") or permits interstate
merger transactions prior to June 1, 1997 ("opt-in"), so long as the law applies
equally to all out-of-state banks. The Interstate Banking Act also contained
provisions addressing branch retention in interstate merger transactions and de
novo branching by out-of-state banks. Maryland, Virginia, and the District of
Columbia have each adopted "opt-in" provisions permitting de novo branching
prior to June 1, 1997.

In addition, there are several pieces of legislation relevant to the
banking industry that were recently enacted into law. On August 20, 1996,
President Clinton signed the Small Business Job Protection Act (the "Jobs Act").
The Jobs Act contained several provisions that affect the banking industry.
First, the most significant part of the Jobs Act removed the prohibition against
banks, savings and loan associations and bank holding companies electing to be
treated as "S" corporations. This change is effective for tax years beginning
after December 31, 1996. Second, the Jobs Act gave qualifying savings
associations a tax break when they change their method of accounting for bad
debt reserves. This change will save the thrift industry approximately
$3,000,000,000 in tax liability and will facilitate the conversion of savings
associations into banks. Finally, the Jobs Act increased the IRA deduction from
$250 to $2,000 per year for a spouse that does not work outside the home,
subject to income eligibility limits.

On September 30, 1996, President Clinton signed the Economic Growth and
Regulatory Paperwork Reduction Act of 1996 (the "Growth Act"), which contained a
comprehensive approach to recapitalize the FDIC's Savings Association Insurance
Fund (the "SAIF") and to assure payment of the Financing Corporation (the
"FICO") obligations. Most of the Bank's deposits are insured by the FDIC's Bank
Insurance Fund (the "BIF"). In 1994, the Bank acquired the deposits of a savings
and loan branch, which are insured under the SAIF. Under the Growth Act, banks
with deposits that are insured under the BIF are required to pay a portion of
the interest due on bonds that were issued by FICO to help shore up the ailing
Federal Savings and Loan Insurance Corporation in 1987. The Growth Act
stipulates that the BIF assessment rate to contribute toward the FICO
obligations must be equal to one-fifth the SAIF assessment rate through year-end
1999, or until the insurance funds are merged, whichever occurs first. The
amount of FICO debt service to be paid by all BIF-insured institutions is
approximately $0.0126 per $100 of BIF-insured deposits for each year from 1997
through 1999 when the obligation of BIF-insured institutions increases to
approximately

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$0.0240 per $100 of BIF-insured deposits per year through the year 2019, subject
in all cases to adjustments by the FDIC on a quarterly basis. The Growth Act
also contained provisions protecting banks from liability for environmental
clean-up costs; prohibiting credit unions sponsored by Farm Credit System banks;
easing application requirements for most bank holding companies when they
acquire a thrift or a permissible nonbank operation; easing Fair Credit
Reporting Act restrictions between bank holding company affiliates; and reducing
regulatory burden under the Real Estate Settlement Procedures Act, the
Truth-in-Savings Act, the Truth-in-Lending Act, and the Home Mortgage Disclosure
Act.

Because the SAIF was recapitalized through a special assessment imposed
under the Growth Act in 1996, BIF-insured and SAIF-insured deposits will be
subject to risk-based FDIC deposit insurance assessment rates anywhere from zero
for the most safe and sound institutions to $0.27 per $100 of deposits for the
least safe and sound institutions. See Condensed Notes to Consolidated Financial
Statements.

Various bills, including financial modernization legislation, which would
affect the operations of bank holding companies, commercial banks, and other
financial institutions, have been introduced in Congress. However, the
likelihood of passage of such legislation, its final form, manner of
implementation or impact on the Company and the Bank is unknown.

EFFECT OF ECONOMIC ENVIRONMENT

The policies of regulatory authorities, including the monetary policy of
the Federal Reserve Board, have a significant effect on the operating results of
bank holding companies and their subsidiaries. Among the means available to the
Federal Reserve Board to affect the money supply are open market operations in
U.S. Government securities, changes in the discount rate on member bank
borrowings, and changes in reserve requirements against member bank deposits.
These means are used in varying combinations to influence overall growth and
distribution of bank loans, investment and deposits, and their use may affect
interest rates charged on loans or paid for deposits.

Federal Reserve Board monetary policies have materially affected the
operating results of commercial banks in the past and are expected to continue
to do so in the future. The nature of future monetary policies and the effect of
such policies on the business and income of the Company and the Bank cannot be
predicted.

OTHER MATTERS

In addition to the generally applicable state and federal laws governing
business and employers, the Company and Bank are further regulated by special
federal and state laws and regulations applicable only to financial institutions
and their parent companies. Virtually all aspects of the operations of the
Company and the Bank are subject to specific requirements or restrictions and
general regulatory oversight, from laws regulating consumer finance
transactions, such as the Truth in Lending Act, the Home Mortgage Disclosure Act
and the Equal Credit Opportunity Act, to laws regulating collections and
confidentiality, such as the Fair Debt Collections Practices Act, the Fair
Credit Reporting Act and the Right to Financial Privacy Act.

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DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 5,000,000 shares of
Common Stock, par value $1.00 per share, and 1,000,000 shares of preferred
stock, par value $1.00 per share, issuable in series. The terms of each series
of preferred stock may be fixed by the Board of Directors of the Company, within
certain limits set by the Company's Certificate of Incorporation, as amended. As
of June 30, 1997, there were 1,217,429 shares of Common Stock outstanding,
warrants to purchase 194,106 shares of Common Stock outstanding, and no shares
of preferred stock outstanding.

COMMON STOCK

Each holder of Common Stock is entitled to one vote for each share held on
all matters with respect to which the holders of Common Stock are entitled to
vote. The Common Stock has no preemptive or conversion rights and is not subject
to redemption. Holders of Common Stock are not entitled to cumulative voting in
the election of directors. In the event of dissolution or liquidation, after
payment of all creditors the holders of the Common Stock (subject to the prior
rights of the holders of any outstanding preferred stock) will be entitled to
receive pro rata any assets distributable to stockholders in respect of the
number of shares held by them.

The holders of shares of Common Stock are entitled to such dividends as the
Board of Directors, in its discretion, may declare out of funds legally
available therefor. Under the Delaware General Corporation Law, dividends may
not be paid if, after the payment, the Company's total assets would be less than
the sum of its total liabilities and stated capital, or if the Company would be
unable to pay its debts as they become due in the usual course of its business.
The Company has not paid dividends on shares of its Common Stock to date. The
Company does not anticipate paying dividends on the Common Stock in the near
future, although the Company's long-term plan calls for the payment of cash
dividends when circumstances permit. The payment of dividends on Common Stock
would be subject to the prior rights of the holders of any preferred stock.
Payment of future dividends on both the Common Stock and any preferred stock,
will be dependent upon, among other things, the earnings and financial condition
of the Company and the Bank, the Company's other cash flow requirements and the
general economic and regulatory climate. See "Dividend Policy," "Risk
Factors -- Restrictions on Payment of Dividends" and "Supervision and
Regulation."

The Transfer Agent and Registrar for the Common Stock is Chase Mellon
Shareholder Services, Inc.

THE WARRANTS

On November 14, 1995, the Company issued 173,912 units in an offering to
its existing stockholders. Each unit consisted of one share of Common Stock and
one warrant to purchase one share of Common Stock (the "Warrants"). The
following discussion of the principal terms of the Warrants is qualified in its
entirety by reference to the form of Warrant which has been filed as an exhibit
to the Registration Statement of which this Prospectus is a part.

The Warrants were issued in registered form, with each such Warrant
initially entitling the registered owner thereof to purchase one share of Common
Stock at an exercise price of $5.75 per share, subject to antidilutive
adjustments. The Warrants will automatically expire at 5:00 p.m., Washington
D.C. time, on November 16, 1998 (the "Expiration Date"). The Warrants are
exercisable after November 14, 1996 at any time by surrendering the Warrants,
with the subscription form properly completed and duly executed, to the Company
together with the payment of the applicable exercise price in lawful money of
the United States of America, in cash or by certified check or bank draft
payable to the order of the Company.

Provision is made in the Warrants for adjustment of the price and number of
shares of Common Stock purchasable upon exercise of the Warrant in the event of
a stock dividend, stock split, or reclassification of shares, and certain
reorganizations, consolidations and mergers. As a result of the stock dividends
declared by the Company since the issuance of the Warrants, each Warrant now
entitles the holder to purchase 1.1235 shares of Common Stock at $5.118 per
share.

The Company has the option, on and after November 14, 1997 and prior to
5:00 p.m. Washington, D.C. time on the Expiration Date, to repurchase the
Warrants at a price equal to $.26 per Warrant.

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Holders of the Warrants as such do not have voting, dividend or other
rights as stockholders of the Company unless and until their Warrants have been
duly exercised.

PREFERRED STOCK

The preferred stock is available for issuance from time to time for various
purposes as determined by the Company's Board of Directors, including without
limitation, making future acquisitions and raising additional equity capital.
Subject to certain limitations set forth in the Company's Certificate of
Incorporation, as amended, the preferred stock may be issued on such terms and
conditions, and at such times and in such situations, as the Board of Directors
in its sole discretion determines to be appropriate, without any further
approval or action by the stockholders, unless otherwise required by laws,
rules, regulations or agreements applicable to the Company.

Because the Certificate of Incorporation of the Company does not prescribe
rights and preferences, the Board of Directors of the Company has virtually
unlimited authority to set rights and preferences of any series established,
including voting rights. The effects of the issuance of preferred stock on the
stockholders could include, among other things, (i) reduction of the amount
otherwise available for payments of dividends on Common Stock if dividends are
payable on a series of preferred stock; (ii) restrictions on dividends on Common
Stock if dividends on the series of preferred stock are in arrears, (iii)
dilution of the equity interest of holders of Common Stock if the series of
preferred stock is convertible, and is converted, into Common Stock; and (iv)
restrictions on the rights of holders of Common Stock to share in the Company's
assets upon liquidation until satisfaction of any liquidation preference granted
to the holders of the series of preferred stock.

ANTI-TAKEOVER PROTECTIONS

As described above, the Company's Certificate of Incorporation permits the
issuance of preferred stock in series by action of the Board of Directors.
Although the Company has no plans to utilize the issuance of shares of preferred
stock as a deterrent to possible takeover attempts, the power to issue shares of
preferred stock in series and to determine certain rights and preferences with
respect to each such series may have dilutive effect on the value of shares of
Common Stock and other ownership rights of the holders of Common Stock, and may
have the effect of discouraging attempts to acquire control of the Company.

The Company's Certificate of Incorporation and Bylaws contain certain
provisions, in addition to the authority to issue preferred stock in series,
which may have the effect of delaying or preventing a change in control of the
Company. The Company's Certificate of Incorporation contains provisions which
prohibit stockholder action by written consent and which require certain
extraordinary corporate transactions, including amendment to the Certificate of
Incorporation, to be approved by the vote of the holders of two-thirds of the
outstanding shares of capital stock entitled to vote thereon, rather than a
majority. The effect of these provisions, when coupled with existing statutory
restrictions on the purchase of voting securities of a registered bank holding
company, may be to delay or prevent a change in control of the Company.

The Company is subject to Section 203 of the Delaware General Corporation
Act which, with certain exceptions, prohibits a Delaware corporation from
engaging in any of a broad range of business combinations with any "interested
stockholder" for a period of three years following the date that such
stockholder became an interested stockholder, unless: (a) prior to such date,
the Board of Directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder, (b) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned (i) by persons
who are directors and officers and (ii) by employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer,
or (c) on and after such date, the business combination is approved by the Board
of Directors and authorized at an annual or special meeting of stockholders by
the affirmative vote of at least 66 2/3% of the outstanding voting stock which
is not owned by

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the interested stockholder. An "interested stockholder" is defined as any person
that is (a) the owner of 15% or more of the outstanding voting stock of the
corporation or (b) an affiliate or associate of the corporation and was the
owner of 15% or more of the outstanding voting stock of the corporation at any
time within the three-year period immediately prior to the date on which it is
sought to be determined whether such person is an interested stockholder.

The Bylaws of the Company also impose certain procedural requirements on
stockholders who wish (a) to make nominations in the election of directors and
(b) to present any other proposal to the stockholders for action, including any
repeal or change in the Bylaws of the Company. The requirements include, among
other things, the timely delivery to the Company's Secretary of notice of the
nomination or proposal and evidence of (i) the stockholder's status as such,
(ii) the number of shares the stockholder beneficially owns, (iii) a list of the
persons with whom the stockholder is acting in concert and (iv) the number of
shares such persons beneficially own. The Bylaws further provide that when
nominating directors, the stockholder must also submit such information with
respect to the nominee as would be required by a proxy statement and certain
other information. The Bylaws provide that failure to follow the required
procedures renders the nominee or proposal ineligible to be voted upon by the
stockholders.

The Company believes that the provisions noted above are prudent and will
reduce the Company's vulnerability to takeover attempts and certain other
transactions that are not negotiated with or approved by the Board of Directors.
In the judgment of the Company, its Board of Directors will be in the best
position to determine the true value of the Company and negotiate effectively
for what might be in the best interests of its stockholders. Accordingly, the
Company believes that it is in the best interests of the Company and its
stockholders to encourage potential acquirors to negotiate directly with the
Board of Directors, and that these provisions will both encourage this
negotiation and discourage hostile takeover attempts. It is also the Company's
view that these provisions should not discourage persons from proposing mergers
or other transactions at prices that reflect the true value of the Company and
are in the best interest of all of the stockholders.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this Offering, the Company will have outstanding
1,942,429 shares of Common Stock (assuming 725,000 shares are issued and no
exercise of existing employee stock options to purchase Common Stock, and
further assuming that none of the outstanding Warrants are converted into Common
Stock). Of these shares, the Company estimates that 1,448,053 shares (75% of the
shares to be issued and outstanding) will be freely tradeable without
restriction or registration under the Securities Act. The Company estimates that
the remaining 494,376 shares (25% of the shares to be issued and outstanding)
will be held by "affiliates" of the Company, as defined in Rule 144 under the
Securities Act, and may be sold only pursuant to Rule 144 or another exemption
from registration under the Securities Act.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned shares for at least one
year, including persons who may be deemed "affiliates" of the Company, would be
entitled to sell within any three-month period a number of shares that does not
exceed the greater of the average weekly trading volume during the four calendar
weeks preceding such sale or 1% of the then outstanding shares of Common Stock.
A person who is deemed not to have been an affiliate of the Company at any time
during the 90 days preceding a sale, and who has beneficially owned such shares
for at least two years, would be entitled to sell such shares under Rule 144
without regard to the volume limitations described above. Sales pursuant to Rule
144 are also subject to certain requirements relating to the manner of sale,
notice and availability of public information about the Company.

In addition, at June 30, 1997, the Company had 183,800 stock options
outstanding, of which options with respect to 149,681 shares of Common Stock
were currently exercisable. Shares of Common Stock issued upon exercise of these
options would be "restricted securities," as defined in Rule 144, and may be
sold in accordance with the provisions of such rule. Also, at June 30, 1997,
194,106 shares of Common Stock were issuable upon the exercise of the Company's
outstanding Warrants. The shares issuable upon exercise of the outstanding
Warrants will be freely tradeable under the Securities Act, unless held by an
affiliate.

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No prediction can be made regarding the effect, if any, that eventual
market sales of restricted securities or shares held by affiliates will have on
the market price of the Common Stock prevailing from time to time. There is a
possibility that substantial amounts of restricted securities may be resold in
the public market and that such shares may adversely affect the prevailing
market price of the Common Stock.

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement between
the Company and Scott & Stringfellow, Inc. (the "Underwriter"), the Underwriter
has agreed to purchase from the Company, and the Company has agreed to sell to
the Underwriter, 725,000 shares of Common Stock.

The Underwriting Agreement provides that the obligations of the Underwriter
thereunder are subject to the approval of certain legal matters by counsel and
to various other conditions. The Underwriter is committed to purchase and pay
for all 725,000 shares of Common Stock if any are purchased. The Company has
been advised that the Underwriter proposes to offer the shares of Common Stock
directly to the public at the public offering price set forth on the cover page
of this Prospectus, and to certain securities dealers at such price less a
concession not in excess of $ per share. The Underwriter may allow, and
such selected dealers may reallow, a concession not in excess of $ per
share. After the shares of Common Stock are released for sale to the public, the
offering price and such concessions may be changed by the Underwriter.

The Underwriter has informed the Company that it does not intend to confirm
sales to any account over which it exercises discretionary authority.

The Company has granted a 30-day option to the Underwriter to purchase up
to 108,750 additional shares of Common Stock at the public offering price, less
the underwriting discount, as set forth on the cover page of the Prospectus. The
Underwriter may exercise such option solely for the purpose of covering
over-allotments. To the extent the Underwriter exercises this option, the
Underwriter will be committed, subject to certain conditions, to purchase such
additional shares of Common Stock.

The Company and its executive officers and directors have agreed not to
offer, sell, contract or otherwise dispose of any Common Stock for at least 120
days after this Offering, without the written consent of the Underwriter.

The Company has agreed to indemnify the Underwriter against, and to
contribute to certain losses arising out of, certain civil liabilities,
including certain civil liabilities under the Securities Act.

Prior to this Offering, there has been no established public trading market
for the Common Stock. The Common Stock is quoted on the NNOTC Bulletin Board, a
NASD sponsored and operated inter-dealer quotation system for equity securities
not listed on the NASDAQ Stock Market, under the symbol "CTRY" and is traded on
a limited basis. See "Market for Common Stock." The public offering price was
determined by negotiations between the Company and the Underwriter. Among the
factors considered in determining the price were the trading history of the
Common Stock on the NNOTC Bulletin Board, the history of and prospects for the
Company and the industry in which it competes, an assessment of the Company's
management, the past earnings of the Company and the trend and future prospects
for future earnings, the general condition of the securities markets at the time
of the Offering, and the market prices of public-traded common stock of
comparable companies in recent periods.

The foregoing is a summary of the principal terms of the Underwriting
Agreement and does not propose to be complete. Reference is made to a copy of
the Underwriting Agreement which has been filed as an exhibit to the
Registration Statement.

51
<PAGE> 53

EXPERTS

The consolidated statements of financial condition as of December 31, 1996
and 1995, and the consolidated statements of operations, stockholders' equity
and cash flows for each of the years in the three year period ended December 31,
1996, have been included herein and in the Registration Statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Bracewell & Patterson, L.L.P., Houston, Texas. Mr. John R. Cope, a
director and officer of the Company as well as the Bank, is a partner in the law
firm of Bracewell & Patterson, L.L.P. Mr. Cope and other partners of Bracewell &
Patterson, L.L.P. own in the aggregate approximately four percent of the shares
of Common Stock outstanding. Certain legal matters relating to the offering made
hereby will be passed upon for the Underwriter by LeClair Ryan, a Professional
Corporation, Richmond, Virginia.

AVAILABLE INFORMATION

This Prospectus, which constitutes a part of a Registration Statement filed
by the Company with the Securities and Exchange Commission (the "Commission")
under the Securities Act, omits certain of the information set forth in the
Registration Statement in accordance with the rules and regulations of the
Commission. Reference is hereby made to the Registration Statement and to the
exhibits thereto for further information with respect to the Company and the
securities offered hereby. Copies of the Registration Statement and the exhibits
thereto are on file at the offices of the Commission and may be obtained upon
payment of the prescribed fee or may be examined without charge at the public
reference facilities of the Commission described below. The Commission also
maintains a Web site (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants such as the
Company which file electronically with the Commission.

The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by the Company with the Commission may be inspected and copied
at the public reference facility maintained by the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and the
following regional offices of the Commission: New York Regional Office, Seven
World Trade Center, 13th Floor, New York, New York 10048; and Chicago Regional
Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material also may be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates.

52
<PAGE> 54

CENTURY BANCSHARES, INC. AND SUBSIDIARY

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTERIM PERIODS (UNAUDITED)
Consolidated Statement of Financial Condition as of June F-2
30, 1997...............................................
Consolidated Statements of Operations for the six months F-3
ended June 30, 1997 and 1996...........................
Consolidated Statement of Stockholders' Equity for the six F-4
months ended June 30, 1997.............................
Consolidated Statements of Cash Flows for the six months F-5
ended June 30, 1997 and 1996...........................
Condensed Notes to Consolidated Financial Statements...... F-6
FULL FISCAL YEARS (AUDITED)
Independent Auditors' Report.............................. F-8
Consolidated Statements of Financial Condition as of F-9
December 31, 1996 and 1995.............................
Consolidated Statements of Operations for the years ended F-10
December 31, 1996, 1995 and 1994.......................
Consolidated Statements of Stockholders' Equity for the F-11
years ended December 31, 1996, 1995 and 1994...........
Consolidated Statements of Cash Flows for the years ended F-12
December 31, 1996, 1995 and 1994.......................
Notes to Consolidated Financial Statements................ F-13
</TABLE>

F-1
<PAGE> 55

CENTURY BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
JUNE 30, 1997
(UNAUDITED)

ASSETS

<TABLE>
<S> <C>
Cash and due from banks..................................... $ 4,841,217
Interest-bearing deposits in other banks.................... 11,213,428
Investment securities available-for-sale, at fair value
(Note 1).................................................. 7,834,041
Investment securities held to maturity, at cost; fair value
of $9,997,957 (Note 1).................................... 9,991,911
Loans, net of unearned income............................... 74,346,296
Less -- allowance for loan losses......................... (709,595)
------------
Loans, net........................................ 73,636,701
------------
Leasehold improvements, furniture, and equipment, net....... 1,555,320
Accrued interest receivable................................. 612,863
Deposit premium............................................. 256,763
Prepaid expenses............................................ 135,256
Other assets................................................ 824,243
------------
Total assets...................................... $110,901,743
============

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing.................................... $ 21,270,994
Interest-bearing....................................... 73,436,455
------------
Total deposits.................................... 94,707,449
------------
Other borrowings.......................................... 8,022,460
Other liabilities......................................... 1,094,330
------------
Total liabilities................................. 103,824,239
------------
Stockholders' equity (Note 2):
Common Stock, $1 par value; 5,000,000 shares authorized;
1,217,429 shares issued and outstanding................ 1,217,429
Additional paid-in capital............................. 5,300,802
Retained earnings......................................... 603,608
Unrealized loss on investment securities
available-for-sale, net of tax effect.................. (44,335)
------------
Total stockholders' equity........................ 7,077,504
------------
Commitments and contingencies
Total liabilities and stockholders' equity........ $110,901,743
============
</TABLE>

See accompanying Condensed Notes to Consolidated Financial Statements.

F-2
<PAGE> 56

CENTURY BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)

<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Interest income:
Interest and fees on loans................................ $3,456,912 $3,385,113
Interest on federal funds sold............................ 83,488 13,057
Interest on deposits in other banks....................... 315,225 44,227
Interest on investment securities......................... 274,928 316,858
---------- ----------
Total interest income............................. 4,130,553 3,759,255
---------- ----------
Interest expense:
Interest on deposits:
Certificates $100,000 and over......................... 353,136 355,381
Certificates under $100,000............................ 478,202 320,240
NOW accounts........................................... 134,589 128,107
Savings accounts....................................... 28,396 29,585
Money market accounts.................................. 384,646 365,346
Interest on other borrowings.............................. 261,958 132,731
---------- ----------
Total interest expense............................ 1,640,927 1,331,390
---------- ----------
Net interest income......................................... 2,489,626 2,427,865
Provision for loan losses................................... 72,400 --
---------- ----------
Net interest income after provision for loan losses....... 2,417,226 2,427,865
---------- ----------
Noninterest income:
Service charges on deposits accounts...................... 240,820 213,157
Other operating income.................................... 273,065 140,662
---------- ----------
Total noninterest income.......................... 513,885 353,819
---------- ----------
Noninterest expenses:
Salaries and employee benefits............................ 1,016,229 950,814
Occupancy and equipment expense........................... 294,958 242,083
Depreciation and amortization............................. 236,190 188,667
Professional fees......................................... 243,989 291,313
Data processing........................................... 253,119 132,901
Federal deposit insurance premiums........................ 4,753 27,039
Communications............................................ 99,151 93,992
Other operating expenses.................................. 314,218 379,756
---------- ----------
Total noninterest expenses........................ 2,462,607 2,306,565
---------- ----------
Income before income tax expense.......................... 468,504 475,119
Income tax expense.......................................... 180,384 181,971
---------- ----------
Net income................................................ $ 288,120 $ 293,148
========== ==========
Income per common share (Note 3)............................ $ .21 $ .23
========== ==========
Weighted average common and common equivalent shares
outstanding (Note 3)...................................... 1,341,156 1,294,594
========== ==========
</TABLE>

See accompanying Condensed Notes to Consolidated Financial Statements

F-3
<PAGE> 57

CENTURY BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)

<TABLE>
<CAPTION>
UNREALIZED LOSS
COMMON STOCK ON INVESTMENT
---------------------- ADDITIONAL RETAINED SECURITIES
SHARES AMOUNT PAID-IN-CAPITAL EARNINGS AVAILABLE-FOR-SALE TOTAL
--------- ---------- --------------- --------- ------------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996.............. 1,146,028 $1,146,028 $4,870,856 $ 779,057 $(45,900) $6,750,041
Stock Dividend (5% of Shares
Outstanding)........................ 57,793 57,793 404,551 (463,569) -- (1,225)
Issuance of Common Stock on Exercise
of Stock Options.................... 12,385 12,385 20,043 -- -- 32,428
Issuance of Common Stock on Exercise
of Stock Warrants................... 1,223 1,223 5,352 -- -- 6,575
Net Income............................ -- -- -- 288,120 -- 288,120
Unrealized Gain on Investment
Securities Available for Sale, Net
of Tax Effect....................... -- -- -- -- 1,565 1,565
--------- ---------- ---------- --------- -------- ----------
Balance, June 30, 1997.................. 1,217,429 $1,217,429 $5,300,802 $ 603,608 $(44,335) $7,077,504
========= ========== ========== ========= ======== ==========
</TABLE>

See accompanying Condensed Notes to Consolidated Financial Statements.

F-4
<PAGE> 58

CENTURY BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)

<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income................................................ $ 288,120 $ 293,148
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 236,190 188,667
Provision for loan losses.............................. 72,400 --
(INCREASE) DECREASE IN:
Accrued interest receivable............................... (103,296) (22,204)
Other assets.............................................. 37,900 (539,290)
INCREASE IN:
Other liabilities......................................... 109,449 351,157
------------ -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 640,763 271,478
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loan repayments (originations) and recoveries, net........ (3,858,621) (2,161,652)
(Increase) decrease in interest bearing deposits in other
banks.................................................. (4,390,351) 280,207
Purchases of securities available for sale................ (2,059,125) --
Purchases of securities held to maturity.................. (9,021,377) --
Maturities of securities available for sale............... 628,371 2,714,804
Maturities of securities held to maturity................. -- 466,879
Purchase of leasehold improvements, furniture and
equipment.............................................. (214,954) (280,456)
Proceeds from sale of other real estate................... -- 8,001
------------ -----------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES...................................... (18,916,057) 1,027,783
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in certificates of deposit........ 11,293,984 (633,194)
Net (decrease) in demand, savings and money market
deposits............................................... (7,571,745) (6,575,909)
Proceeds from issuance of common stock.................... 37,778 15,567
Increase (decrease) in short-term borrowings.............. 6,583 (1,127,104)
(Decrease) increase in long-term borrowings............... (450,000) 2,700,000
------------ -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES....... 3,316,600 (5,620,640)
------------ -----------
NET (DECREASE) IN CASH AND EQUIVALENTS.................... (14,958,694) (4,321,379)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR................ 19,799,911 10,025,561
------------ -----------
CASH AND CASH EQUIVALENTS, JUNE 30TH........................ $ 4,841,217 $ 5,704,182
============ ===========
SUPPLEMENTAL DISCLOSURES:
INTEREST PAID ON DEPOSITS AND BORROWINGS.................... $ 1,573,122 $ 1,349,389
------------ -----------
INCOME TAXES PAID........................................... $ 39,000 $ 408,000
------------ -----------
TRANSFER OF LOANS TO OTHER REAL ESTATE OWNED................ -- --
------------ -----------
</TABLE>

See accompanying Condensed Notes to Consolidated Financial Statements.

F-5
<PAGE> 59

CENTURY BANCSHARES, INC. AND SUBSIDIARY

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1997 AND 1996

The unaudited consolidated financial statements as of and for the six
months ended June 30, 1997 and June 30, 1996 have not been audited but, in the
opinion of management, contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial position and
results of operations of the Company as of such date and for such periods. The
unaudited consolidated financial statements should be read in conjunction with
the Consolidated Financial Statements of the Company and the Notes thereto
appearing elsewhere herein. The results of operations for the six months ended
June 30, 1997 are not necessarily indicative of the results of operations that
may be expected for the year ending December 31, 1997 or for any future periods.

(1) INVESTMENT SECURITIES

Investment securities available-for-sale, and their contractual maturities,
at June 30, 1997, are summarized as follows:

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Obligations of U.S. Treasury, government agencies
and corporations:
Within one year................................ $1,635,632 -- $ 1,442 $1,634,190
After one, but within five years............... 4,007,676 -- 666 4,007,010
After ten years................................ 848,366 -- 19,101 829,265
---------- --- ------- ----------
Total.................................. 6,491,674 -- 21,209 6,470,465
Collateralized mortgage obligations:
After ten years................................ 1,410,391 -- 46,815 1,363,576
---------- --- ------- ----------
Total investment securities
available-for-sale................... $7,902,065 -- $68,024 $7,834,041
========== === ======= ==========
</TABLE>

Investment securities held-to-maturity at June 30, 1997, are summarized as
follows:

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Obligations of the U.S. Treasury, government
agencies and corporations
Within one year............................... $6,995,701 -- $701 $6,995,000
After one, but within five years.............. 943,480 -- 164 943,316
After ten years............................... 960,051 $6,333 -- 966,384
---------- ------ ---- ----------
Total................................. 8,899,232 6,333 865 8,904,700
Municipal securities:
Within one year............................... 99,975 170 -- 100,145
After one, but within five years.............. 64,954 408 -- 65,362
---------- ------ ---- ----------
Total................................. 164,929 578 -- 165,507
Federal Reserve Bank stock...................... 119,350 -- -- 119,350
Federal Home Loan Bank stock.................... 808,400 -- -- 808,400
---------- ------ ---- ----------
Total investment securities
held-to-maturity.................... $9,991,911 $6,911 $865 $9,997,957
========== ====== ==== ==========
</TABLE>

F-6
<PAGE> 60

CENTURY BANCSHARES, INC. AND SUBSIDIARY

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) -- (CONTINUED)

(2) STOCK OPTION PLANS

Stock option transactions for the six months ended June 30, 1997 and 1996,
are summarized as follows:

<TABLE>
<CAPTION>
1997 1996
-------------------------- --------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
------- ---------------- ------- ----------------
<S> <C> <C> <C> <C>
Outstanding, at beginning of year.......... 155,733 $3.81 159,863 $3.32
Granted.................................. 43,712 $6.88 34,109 $5.71
Forfeited................................ (2,676) $5.40 -- --
Exercised................................ (12,969) $2.50 (3,981) $3.69
------- -------
Outstanding, June 30....................... 183,800 $4.60 189,981 $3.72
======= =======
Exercisable, June 30....................... 149,681 $4.21 154,638 $3.49
======= =======
</TABLE>

In connection with the five percent stock dividend payable to stockholders
of record as of May 7, 1997, the number of shares subject to any outstanding
options, as well as the exercise price per share, have been appropriately and
equitably adjusted, pursuant to the stock option plans, so as to maintain the
proportionate number of shares without changing the aggregate option price. In
the table above, the shares and prices per share have been adjusted to reflect
the stock dividend.

(3) INCOME PER COMMON SHARE

On April 15, 1997, the Company declared a five percent stock dividend
payable on May 23, 1997 to Common Stockholders of record as of May 7, 1997 which
resulted in the issuance of 57,793 shares of Common Stock. Weighted average
shares outstanding and income per common share have been restated for the effect
of the stock dividend.

F-7
<PAGE> 61

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Century Bancshares, Inc.:

We have audited the accompanying consolidated statements of financial
condition of Century Bancshares, Inc. and subsidiary as of December 31, 1996 and
1995, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Century
Bancshares, Inc. and subsidiary as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally accepted
accounting principles.

KPMG PEAT MARWICK LLP

Washington, D.C.
February 21, 1997

F-8
<PAGE> 62

CENTURY BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1996 AND 1995

ASSETS

<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Cash and due from banks..................................... $ 8,363,911 8,045,561
Federal funds sold.......................................... 11,436,000 1,980,000
Interest bearing deposits in other banks.................... 6,823,077 6,031,700
Investment securities available-for-sale, at fair value..... 6,414,011 12,961,735
Investment securities, at cost, fair value of $959,389 and
$718,851 in 1996 and 1995, respectively................... 958,245 716,879
Loans, net of unearned income............................... 70,676,356 69,203,965
Less -- allowance for loan losses........................... (825,876) (740,000)
------------ -----------
Loans, net.................................................. 69,850,480 68,463,965
------------ -----------
Leasehold improvements, furniture, and equipment, net....... 1,558,247 1,454,056
Accrued interest receivable................................. 509,567 589,130
Other real estate owned..................................... -- 192,658
Deposit premium............................................. 275,072 320,847
Prepaid expenses............................................ 157,228 141,844
Other assets................................................ 840,171 831,681
------------ -----------
$107,186,009 101,730,056
============ ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing.................................... $ 24,064,454 24,712,204
Interest-bearing....................................... 66,920,756 65,827,158
------------ -----------
Total deposits............................................ 90,985,210 90,539,362
Other borrowings.......................................... 8,465,877 3,807,910
Other liabilities......................................... 984,881 1,017,764
------------ -----------
Total liabilities................................. 100,435,968 95,365,036
------------ -----------
Stockholders' equity:
Common stock, $1 par value; 2,000,000 shares authorized;
1,146,028 and 1,046,047 shares issued and outstanding
at December 31, 1996 and 1995, respectively............ 1,146,028 1,046,047
Additional paid in capital................................ 4,870,856 4,410,876
Retained earnings......................................... 779,057 976,161
Unrealized loss on investment securities
available-for-sale, net of tax effect.................. (45,900) (68,064)
------------ -----------
Total stockholders' equity........................ 6,750,041 6,365,020
------------ -----------
Commitments and contingencies
$107,186,009 101,730,056
============ ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-9
<PAGE> 63

CENTURY BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994

<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans............................ $6,887,424 6,010,907 4,801,905
Interest on federal funds sold........................ 34,732 37,145 64,967
Interest on deposits in other banks................... 211,563 56,258 9,622
Interest on securities available-for-sale............. 545,481 917,605 790,967
Interest on securities held to maturity............... 10,296 57,272 43,665
---------- ---------- ----------
Total interest income......................... 7,689,496 7,079,187 5,711,126
---------- ---------- ----------
Interest expense:
Interest on deposits:
Certificates $100,000 and over..................... 768,603 636,236 441,693
Certificates under $100,000........................ 630,875 631,662 480,060
NOW accounts....................................... 245,473 258,428 248,148
Savings accounts................................... 56,075 67,189 66,341
Money market accounts.............................. 783,466 777,954 617,731
Interest on loan payable.............................. -- -- 4,246
Interest on other borrowings.......................... 291,494 190,295 43,323
---------- ---------- ----------
Total interest expense........................ 2,775,986 2,561,764 1,901,542
---------- ---------- ----------
Net interest income..................................... 4,913,510 4,517,423 3,809,584
Provision for loan losses............................... 160,000 26,347 19,431
---------- ---------- ----------
Net interest income after provision for loan losses..... 4,753,510 4,491,076 3,790,153
---------- ---------- ----------
Noninterest income:
Service charges on deposit accounts................... 416,357 378,739 340,291
Other operating income................................ 303,902 214,797 226,505
Loss on sale of securities............................ -- (3,197) (11,748)
---------- ---------- ----------
Total noninterest income...................... 720,259 590,339 555,048
---------- ---------- ----------
Noninterest expenses:
Salaries and employee benefits........................ $1,987,989 2,093,816 1,661,821
Occupancy and equipment expense....................... 531,336 516,617 438,355
Depreciation and amortization......................... 452,949 221,557 136,180
Professional fees..................................... 628,244 272,960 257,235
Data processing....................................... 468,743 332,363 180,900
Federal deposit insurance premiums.................... 30,238 88,146 169,185
Communications........................................ 206,404 161,090 113,802
Other real estate owned............................... 6,775 48,445 --
Other operating expenses.............................. 607,813 422,322 423,273
---------- ---------- ----------
Total noninterest expenses.................... 4,920,491 4,157,316 3,380,751
---------- ---------- ----------
Income before income tax expense........................ 553,278 924,099 964,450
Income tax expense...................................... 274,699 311,445 373,546
---------- ---------- ----------
Net income.............................................. $ 278,579 612,654 590,904
========== ========== ==========
Income per common share................................. $ .23 .57 .58
========== ========== ==========
Weighted average common and common equivalent shares
outstanding........................................... 1,196,607 998,512 959,278
========== ========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-10
<PAGE> 64

CENTURY BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL UNREALIZED LOSS ON
------------------ ---------------------- PAID-IN RETAINED INVESTMENT SECURITIES
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS AVAILABLE-FOR-SALE
------- -------- --------- ---------- ---------- -------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993, as
previously reported................. 62,335 $ 62,335 782,316 $ 782,316 3,898,006 152,728 (24,844)
Adjustment related to deferred
compensation........................ -- -- -- -- -- (66,981) --
------- -------- --------- ---------- --------- -------- --------
Balance, December 31, 1993, as
restated............................ 62,335 62,335 782,316 782,316 3,898,006 85,747 (24,844)
Stock dividend (5% of shares
outstanding)........................ -- -- 39,061 39,061 (39,061) -- --
Repurchase of preferred stock......... (1,008) (1,008) -- -- (6,552) -- --
Exercise of stock options............. -- -- 1,855 1,855 3,258 -- --
Preferred stock dividend.............. -- -- -- -- -- (36,796) --
Net income............................ -- -- -- -- -- 590,904 --
Unrealized loss on investment
securities available-for-sale, net
of tax effect....................... -- -- -- -- -- -- (545,301)
------- -------- --------- ---------- --------- -------- --------
Balance, December 31, 1994............ 61,327 61,327 823,232 823,232 3,855,651 639,855 (570,145)
Exercise of stock options............. -- -- 7,831 7,831 15,616 -- --
Stock dividend (5% of shares
outstanding)........................ -- -- 41,072 41,072 195,092 (236,164) --
Redemption of preferred stock......... (33,878) (33,878) -- -- (220,207) -- --
Exchange of preferred stock........... (27,449) (27,449) 35,814 35,814 (8,365) -- --
Issuance of common stock.............. -- -- 138,098 138,098 573,089 -- --
Preferred stock dividend.............. -- -- -- -- -- (40,184) --
Net income............................ -- -- -- -- -- 612,654 --
Unrealized gain on investment
securities available-for-sale, net
of tax effect....................... -- -- -- -- -- -- 502,081
------- -------- --------- ---------- --------- -------- --------
Balance, December 31, 1995............ -- -- 1,046,047 1,046,047 4,410,876 976,161 (68,064)
Stock dividend (7% of shares
outstanding)........................ -- -- 73,047 73,047 401,758 (475,683) --
Exercise of stock options............. -- -- 26,934 26,934 58,222 -- --
Net income............................ -- -- -- -- -- 278,579 --
Unrealized loss on investment
securities available-for-sale, net
of tax effect....................... -- -- -- -- -- -- 22,164
------- -------- --------- ---------- --------- -------- --------
Balance, December 31, 1996............ -- $ -- 1,146,028 $1,146,028 4,870,856 779,057 (45,900)
======= ======== ========= ========== ========= ======== ========

TOTAL
---------
<S> <C>
Balance, December 31, 1993, as
previously reported................. 4,870,541
Adjustment related to deferred
compensation........................ (66,981)
---------
Balance, December 31, 1993, as
restated............................ 4,803,560
Stock dividend (5% of shares
outstanding)........................ --
Repurchase of preferred stock......... (7,560)
Exercise of stock options............. 5,113
Preferred stock dividend.............. (36,796)
Net income............................ 590,904
Unrealized loss on investment
securities available-for-sale, net
of tax effect....................... (545,301)
---------
Balance, December 31, 1994............ 4,809,920
Exercise of stock options............. 23,447
Stock dividend (5% of shares
outstanding)........................ --
Redemption of preferred stock......... (254,085)
Exchange of preferred stock........... --
Issuance of common stock.............. 711,187
Preferred stock dividend.............. (40,184)
Net income............................ 612,654
Unrealized gain on investment
securities available-for-sale, net
of tax effect....................... 502,081
---------
Balance, December 31, 1995............ 6,365,020
Stock dividend (7% of shares
outstanding)........................ (878)
Exercise of stock options............. 85,156
Net income............................ 278,579
Unrealized loss on investment
securities available-for-sale, net
of tax effect....................... 22,164
---------
Balance, December 31, 1996............ 6,750,041
=========
</TABLE>

See accompanying notes to consolidated financial statements.

F-11
<PAGE> 65

CENTURY BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994

<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.......................................... $ 278,579 612,654 590,904
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................... 452,959 221,557 136,180
Provision for loan losses........................ 160,000 26,347 19,431
Provision for losses on other real estate
owned.......................................... 10,000 48,445 --
Loss on sale of
securities -- available-for-sale............... -- 3,197 11,748
Loss (gain) on sale of other real estate owned... (21,328) 11,883 --
(Increase) decrease in accrued interest
receivable..................................... 79,563 (7,509) (82,396)
Decrease in prepaid expenses and other assets.... (23,874) (402,960) (117,490)
Increase in other liabilities.................... (32,883) (65,943) (255,459)
----------- ----------- -----------
Net cash provided by operating activities............. 903,016 447,671 302,918
----------- ----------- -----------
Cash flows from investing activities:
Loan repayments and recoveries (originations),
net.............................................. (1,547,403) (8,951,855) (4,077,823)
Net increase in interest bearing deposits in other
banks............................................ (791,377) (5,838,933) (169,388)
Purchases of securities available-for-sale.......... (3,092,717) (1,010,160) (10,454,516)
Purchases of securities held to maturity............ (326,366) -- (254,852)
Payments and maturities of securities
available-for-sale............................... 9,662,605 6,553,254 7,404,794
Repayments and maturities of securities held to
maturity......................................... 85,000 -- --
Proceeds from sale of investment securities
available-for-sale............................... -- 3,738,431 2,164,757
Purchase of leasehold improvements, furniture and
equipment, net of disposals...................... (511,366) (1,366,073) (95,203)
Proceeds from sale of other real estate owned....... 203,986 96,890 --
----------- ----------- -----------
Net cash provided (used) by investing activities...... 3,682,362 (6,778,446) (5,482,231)
----------- ----------- -----------
Cash flows from financing activities:
Net issuances of certificates of deposit............ $ 262,533 3,868,183 2,072,464
Net increase in demand, savings, and money market
deposits......................................... 183,315 4,589,920 26,296
Deposit premium..................................... -- (62,845) (303,000)
Repayments of loan payable.......................... -- -- (207,000)
Repurchase of preferred stock....................... -- (254,085) (7,560)
Issuance of common stock............................ 85,156 734,634 5,113
Dividend paid on preferred stock.................... -- (40,184) (36,796)
Increase in other borrowings........................ 4,657,968 1,607,910 2,200,000
----------- ----------- -----------
Net cash provided by financing activities............. 5,188,972 10,443,533 3,749,517
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents......................................... 9,774,350 4,112,758 (1,429,796)
Cash and cash equivalents, beginning of year.......... 10,025,561 5,912,803 7,342,599
----------- ----------- -----------
Cash and cash equivalents, end of year................ $19,799,911 10,025,561 5,912,803
=========== =========== ===========
Supplemental disclosures of cash flow information:
Interest paid on deposits and borrowings............ $ 2,743,631 2,483,398 1,902,707
=========== =========== ===========
Income taxes paid (refunded)........................ $ 626,079 19,222 (88,190)
=========== =========== ===========
Transfer of loans to other real estate owned.......... $ -- 946,366 --
=========== =========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-12
<PAGE> 66

CENTURY BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

The primary business of Century Bancshares, Inc. (the Company) and its
subsidiary, Century National Bank (Century Bank) is to attract deposits from
individual and corporate customers and to originate loans secured by residential
and commercial real estate, business assets, and other personal property. The
Company operates primarily in the District of Columbia and targets individuals
and businesses in professional services as its clientele. The Company is subject
to competition from other financial institutions in attracting and retaining
deposits and in making loans. The Company and Century Bank are subject to the
regulations of certain agencies of the federal government and undergo periodic
examinations by those agencies.

BASIS OF FINANCIAL STATEMENT PRESENTATION

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

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

INVESTMENT SECURITIES

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

Available-for-sale and trading securities are recorded at fair value.
Held-to-maturity securities are recorded at amortized cost, adjusted for the
amortization or accretion of premiums or discounts. Unrealized holding gains and
losses, net of the related tax effect, on available-for-sale securities are
excluded from earnings and are reported as a separate component of stockholders'
equity until realized.

A decline in the market value of any available-for-sale or held-to-maturity
security below cost that is deemed other than temporary is charged to earnings,
resulting in the establishment of a new cost basis for the security.

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

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

F-13
<PAGE> 67

CENTURY BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

INCOME RECOGNITION ON LOANS

Interest on loans is credited to income as earned on the principal amount
outstanding. When, in management's judgment, the full collectibility of
principal or interest on a loan becomes uncertain, that loan is placed on a cash
basis (nonaccrual) for purposes of income recognition. Accrued but uncollected
interest on nonaccrual loans is charged against current income.

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

ALLOWANCE FOR LOAN LOSSES

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

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

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

Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 114, Accounting by Creditors for Impairment of a Loan,
as amended by Statement 118, Accounting by Creditors for Impairment of a Loan E
Income Recognition and Disclosures (collectively referred to as SFAS No. 114).
SFAS No. 114 addresses the accounting by creditors for the impairment of all
loans except for large groups of smaller-balance homogeneous loans that are
collectively evaluated for impairment, and certain other types of loans
specifically excluded by the Standard.

SFAS No. 114 requires that impaired loans be measured at the present value
of expected future cash flows discounted at the loan's effective interest rate,
or at the loan's observable market price or the fair value of the collateral if
the loan is collateral dependent. A loan is considered impaired when, based on
current information and events, it is probable that a creditor will be unable to
collect all amounts due according to the contractual terms of the original loan
agreement. The adoption of SFAS No. 114 did not have a significant effect on the
Company's financial statements. All loans receivable have been evaluated for
collectibility under the provisions of these standards, except for the consumer
and home equity loan portfolios, which are evaluated collectively as large
groups of smaller balance homogeneous loans.

Impaired loans are specifically reviewed loans for which it is probable
that the Company will be unable to collect all amounts due according to the
terms of the loan agreement. The specific factors that influence management's
judgment in determining when a loan is impaired include evaluation of financial
strength of the borrower and the fair value of the collateral. The Company's
impaired loans are generally nonaccrual loans

F-14
<PAGE> 68

CENTURY BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

and restructured loans. Restructured loans are impaired loans in the year of
restructuring and thereafter, such loans are subject to management's evaluation
of impairment based on the restructured terms. The Company's charge-off policy
for impaired loans is consistent with its policy for all loan charge-offs.
Impaired loans are charged-off when all or a portion thereof is considered
uncollectible or transferred to foreclosed properties. Consistent with the
Company's method for nonaccrual loans, interest receipts on impaired loans are
applied to principal.

LOAN FEES

Loan origination fees and direct loan origination costs are deferred and
recognized either upon the sale of a loan or amortized as an adjustment to yield
over the life of the loan.

LEASEHOLD IMPROVEMENTS, FURNITURE, AND EQUIPMENT

Leasehold improvements, furniture, and equipment are stated at cost, less
accumulated depreciation and amortization. Amortization of leasehold
improvements is computed using the straight-line method over the estimated
useful lives of the improvements or the lease term, whichever is shorter.
Depreciation of furniture and equipment is computed using the straight-line
method over their estimated useful lives.

OTHER REAL ESTATE OWNED

Real estate acquired through foreclosure is recorded at the lower of cost
or fair value less estimated selling costs. Management periodically evaluates
the recoverability of the carrying value of other real estate owned. Costs
relating to property improvements are capitalized, and costs relating to holding
properties are charged to expense. Gains or losses on the sale of other real
estate owned are recognized upon disposition of the property.

INCOME TAXES

The Company accounts for income taxes based upon the asset and liability
method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

INCOME PER COMMON SHARE

Income per common share is computed by dividing net income less preferred
stock dividends by the weighted average number of common and common equivalent
shares (when dilutive and significant) outstanding during the year. Common
equivalent shares result from stock options and warrants outstanding and are
computed using the treasury stock method.

On March 14, 1995, the Company declared a 5 percent stock dividend to
common stock shareholders of record as of March 31, 1995, resulting in the
issuance of 41,072 shares. On March 19, 1996, the Company declared a 7 percent
stock dividend to common stock shareholders of record as of March 31, 1996,
resulting in the issuance of 73,047 shares.

Weighted average shares outstanding and income per common share have been
restated for the effect of the stock dividends.

F-15
<PAGE> 69

CENTURY BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CASH AND CASH EQUIVALENTS

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

NEW ACCOUNTING STANDARDS NOT YET IMPLEMENTED

During February of 1997, the FASB issued Statement of Financial Accounting
Standards No. 128, Earnings Per Share (SFAS 128). SFAS 128 establishes standards
for computing and presenting earnings per share (EPS) and applies to entities
with publicly held common stock or potential common stock. SFAS 128 is effective
for financial statements issued for periods ending after December 15, 1997,
including interim periods. Management does not expect that the adoption of SFAS
128 will have a material impact on the Company's financial condition or reported
earnings per share.

During February 1997, the FASB issued Statement of Financial Accounting
Standards No. 129, Disclosure of Information about Capital Structure (SFAS 129).
SFAS 129 establishes standards for disclosing information about an entity's
capital structure and applies to all entities. SFAS 129 is effective for
financial statements issued for periods ending after December 15, 1997.

STOCK OPTIONS

On January 1, 1996, the Company adopted SFAS No. 123, Accounting for
Stock-Based Compensation, which permits entities to recognize as expense over
the vesting period the fair value of all stock-based awards on the date of
grant. Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants made in 1995 and
future years as if the fair value-based method defined in SFAS No. 123 had been
applied. The Company has elected to continue to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123.

RECLASSIFICATIONS

Certain amounts for 1995 and 1994 have been reclassified to conform to the
presentation for 1996.

(2) DEFERRED COMPENSATION

The deferred compensation liability for the deferred compensation contracts
was understated at December 31, 1996 by approximately $225,000. The after tax
effect of this understatement has been reflected in the appropriate periods
through restatement of previously reported results. The impact on prior periods
resulted in a decrease to previously reported net income of approximately
$67,000 in 1995 and a cumulative impact on retained earnings at December 31,
1993 of approximately $67,000. There was no impact on 1994 net income.

(3) RESTRICTED CASH

Under Federal Reserve Board regulations, banks are required to maintain
cash reserves against certain categories of deposit liabilities. Cash balances
qualified to meet these reserve requirements consist of vault cash and balances
on deposit with the Federal Reserve Bank. Such restricted cash balances are
included in "Cash and due from banks" in the consolidated statements of
financial condition and amount to approximately $226,000 and $235,000 as of
December 31, 1996 and 1995, respectively.

F-16
<PAGE> 70

CENTURY BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(4) INVESTMENT SECURITIES

Investment securities available-for-sale, and their contractual maturities,
at December 31, 1996 and 1995 are summarized as follows:

<TABLE>
<CAPTION>
1996
-----------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Obligations of U.S. Treasury,
government agencies and
corporations:
Within one year................... $ 542,476 5,377 188 547,665
After one, but within five
years.......................... 3,448,135 1,099 13,543 3,435,691
After ten years................... 931,138 2,040 17,189 915,989
----------- ----- ------- ----------
Total..................... 4,921,749 8,516 30,920 4,899,345
Collateralized mortgage obligations:
After ten years................... 1,562,872 -- 48,206 1,514,666
----------- ----- ------- ----------
Total investment
securities
available-for-sale...... $ 6,484,621 8,516 79,126 6,414,011
=========== ===== ======= ==========
</TABLE>

<TABLE>
<CAPTION>
1995
-----------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Obligations of U.S. Treasury,
government agencies and
corporations:
Within one year................... $ 9,001,131 -- 26,133 8,974,998
After one, but within five
years.......................... 1,000,000 -- 7,400 992,600
After ten years................... 1,116,701 -- 15,669 1,101,032
----------- ----- ------- ----------
Total..................... 11,117,832 -- 49,202 11,068,630
Collateralized mortgage obligations:
After ten years................... 1,948,619 -- 55,514 1,893,105
----------- ----- ------- ----------
Total investment securities
available-for-sale................ $13,066,451 -- 104,716 12,961,735
=========== ===== ======= ==========
</TABLE>

Expected maturities may differ from contractual maturities of mortgage
backed securities and collateralized mortgage obligations because borrowers have
the right to prepay their obligations at any time.

Investment securities held-to-maturity at December 31, 1996 and 1995 are
summarized as follows:

<TABLE>
<CAPTION>
1996
-----------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Municipal securities -- maturing
Within one year................... $ 99,956 527 -- 100,483
After one, but within five
years.......................... 64,939 617 -- 65,556
----------- ----- ------- ----------
Total..................... 164,895 1,144 -- 166,039
Federal Reserve Bank stock.......... 119,350 -- -- 119,350
Federal Home Loan Bank stock........ 674,000 -- -- 674,000
----------- ----- ------- ----------
$ 958,245 1,144 -- 959,389
=========== ===== ======= ==========
</TABLE>

F-17
<PAGE> 71

CENTURY BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
1995
-----------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Municipal securities -- maturing
Within one year.................... $ 85,000 170 -- 85,170
After one, but within five years... 164,829 1,802 -- 166,631
----------- ------ -------- --------
Total...................... 249,829 1,972 -- 251,801
Federal Reserve Bank stock........... 119,350 -- -- 119,350
Federal Home Loan Bank stock......... 347,700 -- -- 347,700
----------- ------ -------- --------
$ 716,879 1,972 -- 718,851
=========== ====== ======== ========
</TABLE>

Investment securities available for sale carried at $2,144,283 and
$2,000,866 at December 31, 1996 and 1995, respectively, were pledged to secure
public deposits and for other purposes as required.

No investment securities were sold during 1996. Realized losses on sales of
securities available for sale during 1995 and 1994 were $3,197 and $11,748,
respectively.

As a member of the Federal Reserve and Federal Home Loan Bank Systems,
Century Bank is required to hold stock in the Federal Reserve Bank of Richmond
and the Federal Home Loan Bank of Atlanta. These stocks, which have no stated
maturity, are carried at cost since no active trading markets exist.

(5) LOANS RECEIVABLE

The loan portfolio consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
Commercial................................................ $17,400,323 13,212,532
Real estate -- residential................................ 20,932,776 27,007,742
Real estate -- commercial................................. 14,001,133 11,910,244
Real estate -- construction............................... 462,685 1,545,143
Consumer.................................................. 11,509,900 9,985,863
Home equity............................................... 6,431,425 5,640,012
----------- -----------
70,738,242 69,301,536
Unearned income........................................... (61,886) (97,571)
----------- -----------
70,676,356 69,203,965
Allowance for loan losses................................. (825,876) (740,000)
----------- -----------
Loans, net................................................ $69,850,480 68,463,965
=========== ===========
</TABLE>

Loans on which the accrual of interest has been discontinued amounted to
approximately $249,000, $8,000, and $628,000 at December 31, 1996, 1995, and
1994, respectively. Interest lost on these nonaccrual loans was approximately
$17,000, $1,000, and $32,000 for 1996, 1995, and 1994, respectively. Interest
paid on these nonaccrual loans was approximately $19,851, $3,500, and $13,500
for 1996, 1995, and 1994, respectively. At December 31, 1996, the Bank has one
investment in impaired loans of $24,136 for which there was no specific reserve
for impairment. Average impaired loans for 1996 were approximately $12,000.

F-18
<PAGE> 72

CENTURY BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
Balance, beginning of year........................ $ 740,000 740,000 730,000
Provision for loan losses....................... 160,000 26,347 19,431
Loans charged off............................... (256,245) (198,126) (106,105)
Recoveries...................................... 182,121 171,779 96,674
--------- -------- --------
Balance, end of year.............................. $ 825,876 740,000 740,000
========= ======== ========
</TABLE>

An analysis of the activity of loans to directors, officers, and their
affiliates during the years ended December 31, 1996 and 1995, is as follows:

<TABLE>
<CAPTION>
1996 1995
----------- ---------
<S> <C> <C>
Balance, beginning of year.................................. $ 3,320,113 2,566,970
Additions................................................. 29,961 1,550,080
Payments.................................................. (1,073,366) (796,937)
----------- ---------
Balance, end of year........................................ $ 2,276,708 3,320,113
=========== =========
</TABLE>

In the opinion of management, all transactions entered into between the
Company and such related parties have been and are in the ordinary course of
business and made on the same terms and conditions as similar transactions with
unaffiliated persons.

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

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

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

<TABLE>
<CAPTION>
CONTRACTUAL OR NOTIONAL
AMOUNT FOR THE
YEARS DECEMBER
-------------------------
1996 1995
----------- ----------
<S> <C> <C>
Financial instruments whose contract amounts represent
potential credit risk:
Commitments to extend credit............................. $19,361,000 13,910,000
Standby letters of credit................................ 658,000 882,000
</TABLE>

At December 31, 1996, the Company did not have any financial instruments
whose notional or contractual amounts exceed the amount of credit risk.

F-19
<PAGE> 73

CENTURY BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

Most of the Company's business activity is with customers located in the
District of Columbia, Maryland, and northern Virginia. Accordingly, the ultimate
collectibility of a substantial portion of the Company's loan portfolio is
susceptible to changes in conditions in these markets.

Industry concentrations in excess of 10 percent of total loans where the
borrowers as a group might be affected similarly by economic changes consist of
loans to members of the legal profession, service companies, and the health care
profession. Century offers lines of credit, home equity lines, and mortgage
loans to these groups. The aggregate total of loans to such groups was
approximately $17.7 million, $10.8 million, and $9.4 million respectively, as of
December 31, 1996. The aggregate total of loans to such groups was approximately
$13.9 million, $9.0 million, and $9.1 million respectively, as of December 31,
1995. The amount of such loans which are past due or considered by management to
be potential problem loans is not material.

(6) LEASEHOLD IMPROVEMENTS, FURNITURE, AND EQUIPMENT

Leasehold improvements, furniture, and equipment consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
----------- ----------
<S> <C> <C>
Leasehold improvements...................................... $ 1,248,990 1,233,384
Furniture and equipment..................................... 2,398,978 1,904,090
----------- ----------
3,647,968 3,137,474
Less accumulated depreciation and amortization.............. (2,089,721) (1,683,418)
----------- ----------
Balance, end of year........................................ $ 1,558,247 1,454,056
=========== ==========
</TABLE>

Depreciation and amortization expense was $407,175, $151,471, and $77,377
for 1996, 1995, and 1994, respectively.

(7) DEPOSITS

Major classifications of deposits consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
----------- ----------
<S> <C> <C>
Noninterest-bearing -- demand deposits...................... $24,064,454 24,712,204
----------- ----------
Interest-bearing:
NOW accounts.............................................. 13,852,112 15,132,526
Savings accounts.......................................... 3,594,587 3,703,943
Money market accounts..................................... 24,231,842 22,144,836
Certificates of deposit:
Less than $100,000..................................... 10,072,924 10,930,074
$100,000 and over...................................... 15,169,291 13,915,779
----------- ----------
66,920,756 65,827,158
----------- ----------
Total deposits.................................... $90,985,210 90,539,362
=========== ==========
</TABLE>

F-20
<PAGE> 74

CENTURY BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Certificates of deposit of $22,204,859 have remaining maturities of one
year or less. Certificates of deposit with a remaining term of more than one
year are as follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1998................................................. $ 672,238
1999................................................. 1,335,025
2000................................................. 792,887
2001................................................. 232,820
2002................................................. --
Thereafter........................................... 4,386
----------
$3,037,356
==========
</TABLE>

On September 16, 1994, Century Bank acquired deposit accounts of
approximately $9.1 million, for which it paid a premium of $366,000. The premium
is amortized over the estimated remaining lives of the deposit account
relationships on a straight-line basis. The amount of accumulated amortization
is $90,928 at December 31, 1996.

(8) OTHER BORROWINGS

Other borrowings consists of advances from the Federal Home Loan Bank of
Atlanta and deposits received in the Bank's U.S. Treasury Tax and Loan Account.
Balances outstanding are shown below:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- --------- ---------
<S> <C> <C> <C>
Federal Home Loan Bank
Ending balance................................... $7,750,000 2,000,000 2,200,000
Daily average balance for the period............. 4,559,202 2,924,163 706,739
Maximum outstanding balance at a month-end during
the period.................................... 7,800,000 4,000,000 3,500,000
Daily average interest rate for the period....... 5.99% 5.46% 4.24%
Average interest rate on period end balance...... 6.73% 6.10% 6.88%
Treasury Tax and Loan Account
Ending balance................................... 715,877 1,807,909 683,836
Daily average balance for the period............. 392,740 473,062 394,396
Maximum outstanding balance at a month-end during
the period.................................... 829,352 710,501 683,836
Daily average interest rate for the period....... 4.64% 4.60% 3.48%
Average interest rate on period and balance...... 5.16% 2.00% 2.75%
</TABLE>

FHLB advances with original maturities in excess of one year are summarized
as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
---------- ------
<S> <C> <C>
6.60% fixed rate, due 1999.................................. $ 300,000 --
6.85% fixed rate, due 2001.................................. 300,000 --
6.57% fixed rate, due 2001.................................. 1,600,000 --
6.66% fixed rate, due 2002.................................. 2,000,000 --
6.30% fixed rate, due 2006.................................. 800,000 --
7.34% fixed rate, due 2006.................................. 1,000,000 --
6.94% fixed rate, due 2006.................................. 850,000 --
---------- ------
$6,850,000 --
========== ======
</TABLE>

F-21
<PAGE> 75

CENTURY BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Bank has been advised by the FHLB that it has a total credit
availability of $13.3 million. The FHLB credit availability does not represent a
firm commitment by the FHLB. Rather, it is the FHLB's assessment of what the
Bank could borrow given the Bank's current financial condition. The credit
availability is subject to change at any time based upon the Bank's financial
condition and that of the FHLB, as well as changes in FHLB policies or
Congressional mandates. At December 31, 1996, the Bank's available credit from
the FHLB was $5.55 million.

In connection with its borrowings from the FHLB, the Bank is required to
own FHLB stock. At December 31, 1996, the Bank's investment in FHLB stock had a
par and carrying value of $674,000 and was automatically pledged against FHLB
advances. Advances from the FHLB are secured by a blanket floating lien on the
Bank's residential, one-to-four family first mortgage loans.

(9) STOCKHOLDERS' EQUITY

On November 14, 1995, the Company issued 173,912 Units pursuant to an
Offering made on September 15, 1995, to existing holders of the Company's Common
and Preferred Stock. Each Unit consisted of one share of Common Stock and one
Warrant. The offering price was $5.75 per Unit.

Each Warrant entitles the holder thereof to purchase one share of Common
Stock at a price of $5.75 per share, subject to adjustment. The Warrants may be
exercised at any time from November 15, 1996 through November 16, 1998. The
Warrants may be repurchased by the Company at any time on and after November 14,
1997 at a price of $.26 per Warrant.

Holders of the Company's Series A Cumulative Convertible Preferred Stock
were given the opportunity to exchange their Preferred Stock for Units at an
exchange ratio of 1.305 Units per share of Preferred Stock. At the time of the
Offering, there were 61,327 shares of Preferred Stock outstanding. A total of
27,449 shares of Preferred Stock were exchanged, resulting in the issuance of
35,814 Units and the payment of $40 to redeem fractional shares.

The remaining 138,098 Units were sold for cash, yielding net proceeds to
the Company of $711,187 after payment of costs associated with the Offering. The
Company used a portion of such proceeds to redeem the remaining 33,878 shares of
Preferred Stock, which was callable at $7.50 per share.

(10) STOCK OPTION PLANS

Pursuant to the Century Bancshares, Inc. 1994 Stock Option Plan ("1994
Plan") the Company in 1994 reserved 150,000 shares of its common stock for the
issuance of incentive stock options and nonqualified stock options to directors
and key employees. As of December 31, 1996, after adjusting for stock dividends
and stock option activity, there are 159,685 shares of stock reserved for
issuance pursuant to the 1994 Plan, of which 104,954 shares are reserved for
outstanding options and 54,731 shares are reserved for future option grants.
These options are granted for a term of 7 years to directors with immediate
vesting, and 10 years to employees with 25 percent of the original grant vesting
after each six, eighteen, thirty and forty-two months of continued service. Both
the price per option and number of options available are adjusted for dividends.

In addition, there remain outstanding certain options granted to directors
and key employees under two prior option plans ("Prior Plans") which expired in
1992 and 1993. As of December 31, 1996, after adjusting for stock dividends and
stock option activity, there are 43,363 shares of stock reserved for issuance
pursuant to options granted under the Prior Plans, which options are still valid
and were not affected by the Plans' expiration. As of December 31, 1996, all
options granted under the Prior Plans are fully exercisable.

In connection with the 5 percent stock dividend effective July 31, 1993,
March 31, 1994, and March 31, 1995, and the 7 percent stock dividend effective
March 31, 1996, the number of shares subject to any outstanding options, the
exercise price per share, and the number of shares reserved for the issuance of
future

F-22
<PAGE> 76

CENTURY BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

options have been appropriately and equitably adjusted, pursuant to the stock
option plans, so as to maintain the proportionate number of shares without
changing the aggregate option price. In the tables below, the shares and prices
per share have been adjusted to reflect the stock dividends.

Stock option transactions for the years ended December 31, 1996, 1995, and
1994, are summarized as follows:

<TABLE>
<CAPTION>
1996 1995 1994
------------------- ------------------- -------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
FIXED OPTIONS SHARES PRICE SHARES PRICE SHARES PRICE
------------- ------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year....................... 152,250 $ 3.49 139,926 $3.26 91,209 $3.31
Granted...................... 33,985 6.00 34,955 5.75 66,687 3.65
Exercised.................... (26,934) 3.16 (14,252) 2.80 (15,572) 2.13
Forfeited.................... (10,984) 5.18 (8,379) 7.18 (2,398) 5.40
------- ------- -------
Outstanding at end of year... 148,317 4.00 152,250 3.49 139,926 3.26
======= ======= =======
Options exercisable at
year-end................... 134,840 3.85 131,285 3.37 115,719 3.18
======= ======= =======
Weighted-average fair value
of options granted......... $ 2.191 $ 1.909 N/A
======= ======= =======
</TABLE>

The following table summarizes information about stock options outstanding
at December 31, 1996:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------ OPTIONS EXERCISABLE
WEIGHTED- -----------------------
AVERAGE WEIGHTED- WEIGHTED-
NUMBER REMAINING AVERAGE AVERAGE
OF OPTIONS CONTRACTUAL EXERCISE NUMBER EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE PRICE
------------------------ ----------- ------------ --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$1.61 to $2.22................ 33,804 1.2 $1.92 33,804 $1.92
$2.82 to $3.83................ 31,453 3.3 2.98 30,753 2.97
$4.23 to $5.37................ 53,981 4.9 4.80 48,380 4.78
$6.00......................... 29,079 9.5 6.00 21,903 6.00
------- -------
$1.61 to $6.00................ 148,317 4.6 4.00 134,840 3.85
======= =======
</TABLE>

The fair value of each option grant is estimated on the date of grant using
the Black Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1996 and 1995, respectively: no dividends for
either year, expected volatility of 20 percent for both years, risk free
interest rates of 6.3 percent and 5.8 percent, and expected lives of 7 and 5
years.

As the Company continues to apply APB Opinion No. 25 in accounting for its
stock options, no compensation cost has been recognized for its stock options in
the financial statements. Had the Company determined compensation cost based on
the fair value at the grant date for its stock options under SFAS No. 123, the
Company's net income would have been reduced to the pro forma amounts indicated
below:

<TABLE>
<CAPTION>
1996 1995
-------- -------
<S> <C> <C>
Net income, as reported..................................... $278,579 612,654
Net income, pro forma....................................... 244,585 586,074
Primary earnings per share, as reported..................... .23 .57
Primary earnings per share, pro forma....................... .20 .55
</TABLE>

F-23
<PAGE> 77

CENTURY BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Pro forma net income reflects only options granted in 1996 and 1995.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected in the pro forma net income amounts
presented above because compensation cost is reflected over the options vesting
period and compensation cost for options granted prior to January 1, 1995 is not
considered.

(11) INCOME TAXES

The provision for taxes on income for the years ended December 31, 1996,
1995, and 1994, consisted of the following:

<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
Current:
Federal income tax................................ $289,329 627,042 29,600
State income tax.................................. 73,503 127,114 (39,416)
-------- -------- -------
362,832 754,156 (9,816)
Deferred:
Federal income tax (benefit)...................... (68,715) (370,563) 289,682
State income tax (benefit)........................ (19,418) (72,148) 93,680
-------- -------- -------
(88,133) (442,711) 383,362
-------- -------- -------
Total income tax.................................... $274,699 311,445 373,546
======== ======== =======
</TABLE>

The difference between the statutory federal income tax rates and the
effective income tax rates for 1996, 1995, and 1994, are as follows:

<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate.......................... 34.0% 34.0 34.0
State income taxes, net of federal benefit................. 6.4 3.5 4.0
Nondeductible expenses..................................... 8.1 -- 0.7
Other...................................................... 1.1 (3.8) --
---- ---- ----
Effective income tax rate.................................. 49.6 33.7 38.7
==== ==== ====
</TABLE>

F-24
<PAGE> 78

CENTURY BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following is a summary of the tax effects of temporary differences that
give rise to significant portions of the deferred tax assets and deferred tax
liabilities at December 31, 1996 and 1995:

<TABLE>
<CAPTION>
1996 1995
--------- --------
<S> <C> <C>
Assets:
Fixed assets.............................................. $ 107,629 109,032
Book loan loss reserve.................................... 428,698 432,395
Deferred rent expense..................................... 57,869 71,343
Deferred loan fees........................................ 25,113 39,936
Vacation pay accrual...................................... 21,996 29,631
Directors' deferred compensation.......................... 188,412 145,433
Goodwill.................................................. 7,389 --
--------- --------
Deferred tax assets......................................... 837,106 827,770
--------- --------
Liabilities:
Federal Home Loan Bank stock dividends.................... (11,484) (11,583)
Tax bad debt reserve...................................... (207,305) (269,393)
Unrealized losses on investments designated as
available-for-sale recognized for tax purposes......... (5,897) (37,043)
Other..................................................... (86,327) (71,791)
--------- --------
Deferred tax liabilities.................................... (311,013) (389,810)
--------- --------
Net deferred tax asset (liability) attributable to
operations................................................ 526,093 437,960
Unrealized losses on investments available-for-sale charged
directly to stockholders' equity.......................... 5,897 36,650
--------- --------
Net deferred tax asset...................................... $ 531,990 474,610
========= ========
</TABLE>

Net deferred tax assets of $531,990 and $474,610 at December 31, 1996 and
1995, respectively, are included in other assets.

The Company has not established a valuation allowance for deferred tax
assets. In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not some portion or all of the deferred
tax assets will not be realized. Based on the level of historical taxable income
during the carryback period and the reversal of certain deferred tax
liabilities, management believes it is more likely than not the Company will
realize the benefits of these deductible differences.

(12) PROFESSIONAL FEES TO RELATED PARTIES

Included in professional fees are legal fees paid to law firms whose
partners are directors of the Company or the Bank, totaling approximately
$139,611, $102,000, and $81,000 for the years ended December 31, 1996, 1995, and
1994, respectively.

(13) EMPLOYEE BENEFIT PLAN

The Company maintains a 401(k) plan which covers substantially all
employees. Participants may contribute up to 6 percent of their compensation.
The Company matches 50 percent of participant contributions to the Plan. This
matching contribution totaled approximately $21,000 for each of the years ended
December 31, 1996, 1995, and 1994.

F-25
<PAGE> 79

CENTURY BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(14) COMMITMENTS

The Company leases its banking facilities under operating leases providing
for payment of fixed rentals and providing for pass-through of certain landlord
expenses, with options to renew. Rental expense was approximately $327,400,
$323,600, and $301,000 for the years ended December 31, 1996, 1995, and 1994,
respectively. Total future minimum rental payments at December 31, 1996, are as
follows:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1997..................................................... $ 387,000
1998..................................................... 401,000
1999..................................................... 370,000
2000..................................................... 367,000
Thereafter............................................... 680,000
----------
$2,205,000
==========
</TABLE>

(15) DIVIDENDS FROM SUBSIDIARY

Dividends paid to the Company by Century Bank are subject to restrictions
by regulatory agencies. As of December 31, 1996, approximately $1,544,000 was
available to be paid to the Company in dividends from Century Bank, pursuant to
such regulatory restrictions. As described in note 15, regulatory agencies have
established laws and guidelines with respect to the maintenance of appropriate
levels of bank capital that could further limit the amount available for payment
of dividends by Century Bank under regulatory restrictions if applied in the
future.

(16) CAPITAL AND LIQUIDITY

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

The Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) of
1989 requires depository institutions to maintain minimum capital levels. In
addition to its capital requirements, FIRREA includes provisions for changes in
the federal regulatory structure for institutions, including a new deposit
insurance system, increased deposit insurance premiums, and restricted
investment activities with respect to noninvestment grade corporate debt and
certain other investments.

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

Quantitative measures established by regulation to ensure capital adequacy
require The Company and Century Bank to maintain minimum amounts and ratios (set
forth in the table below) of total and Tier 1 capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as
defined)

F-26
<PAGE> 80

CENTURY BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

to average assets (as defined). Management believes, as of December 31, 1996,
that the Bank meets all capital adequacy requirements to which it is subject.

As of December 31, 1996, the most recent notification from the OCC
categorized Century Bank as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as well capitalized Century Bank
must maintain minimum total risk-based, Tier 1 risk-based, Tier 1 leverage
ratios as set forth in the table. There are no conditions or events since that
notification that management believes have changed the institution's category.

The following table presents the actual and required capital information
for the Company and Century Bank:

<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS:
------------------ ----------------- ------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
---------- ------ ---------- ----- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1996
Total Capital (to Risk Weighted
Assets):
Century Bancshares................. $7,346,745 10.13% $5,803,841 8.00% $ N/A N/A
Century National Bank.............. 7,453,630 10.29% 5,792,880 8.00% 7,241,200 10.00%
Tier 1 Capital (to Risk Weighted
Assets):
Century Bancshares................. 6,520,869 8.99% 2,901,920 4.00% N/A N/A
Century National Bank.............. 6,627,754 9.15% 2,896,440 4.00% 4,344,720 6.00%
Tier 1 Capital (to Average Assets):
Century Bancshares................. 6,520,869 6.35% 4,110,634 4.00% N/A N/A
Century National Bank.............. 6,627,754 6.44% 4,114,080 4.00% 5,232,267 5.00%
AS OF DECEMBER 31, 1995
Total Capital (to Risk Weighted
Assets):
Century Bancshares................. 6,852,237 10.34% $5,303,124 8.00% $ N/A N/A
Century National Bank.............. 6,917,391 10.47% 5,287,440 8.00% 6,609,300 10.00%
Tier 1 Capital (to Risk Weighted
Assets):
Century Bancshares................. 6,112,237 9.22% 2,651,562 4.00% N/A N/A
Century National Bank.............. 6,177,391 9.35% 2,643,720 4.00% 3,965,580 6.00%
Tier 1 Capital (to Average Assets):
Century Bancshares................. 6,112,237 6.80% 3,596,085 4.00% N/A N/A
Century National Bank.............. 6,177,391 6.88% 3,591,560 4.00% 4,489,450 5.00%
</TABLE>

F-27
<PAGE> 81

CENTURY BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(17) PARENT COMPANY-ONLY FINANCIAL STATEMENTS

The Century Bancshares, Inc. (parent company-only) condensed financial
statements are as follows:

STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1996 AND 1995

ASSETS

<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 29,121 56,769
Investment in Century Bank.................................. 6,856,926 6,430,174
Other assets................................................ 112,668 112,668
---------- ----------
$6,998,715 $6,599,611
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
Notes payable............................................. $ -- --
Other liabilities......................................... 248,674 234,591
---------- ----------
248,674 234,591
---------- ----------
Stockholders' equity:
Preferred stock........................................... -- --
Common stock.............................................. 1,146,028 1,046,047
Additional paid-in capital................................ 4,870,856 4,410,876
Retained earnings......................................... 779,057 976,161
Unrealized loss on investment securities
available-for-sale, net of
tax effect............................................. (45,900) (68,064)
---------- ----------
6,750,041 6,365,020
---------- ----------
$6,998,715 6,599,611
========== ==========
</TABLE>

F-28
<PAGE> 82

CENTURY BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994

<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- --------
<S> <C> <C> <C>
Income:
Dividends from Century Bank.............................. $ -- -- 140,000
Other income............................................. 1,659 929 1,336
--------- --------- --------
1,659 929 141,336
--------- --------- --------
Expenses:
Professional fees........................................ 111,754 112,663 --
Interest expense......................................... -- -- 4,246
Other expenses........................................... 15,914 50,915 17,291
--------- --------- --------
127,668 163,578 21,537
--------- --------- --------
Net income (loss) before income tax benefit and equity in
undistributed earnings of bank subsidiary................ (126,009) (162,649) 119,799
Income tax benefit......................................... -- (55,702) (8,203)
--------- --------- --------
Net income before equity in undistributed earnings of bank
subsidiary............................................... (126,009) (106,947) 128,002
Equity in undistributed earnings of Century Bank........... 404,588 719,601 462,902
--------- --------- --------
Net income................................................. $ 278,579 612,654 590,904
========= ========= ========
</TABLE>

STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994

<TABLE>
<CAPTION>
1996 1995 1994
---------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.............................................. $ 278,579 612,654 590,904
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Undistributed earnings of Century Bank............... (404,588) (719,601) (462,902)
Decrease in other assets............................. -- 134,416 174,434
Increase (decrease) in other liabilities............. 14,083 (178,584) 52,847
---------- --------- ---------
Net cash provided by (used in) operating activities....... (111,926) (151,115) 355,283
---------- --------- ---------
Cash flows from investing activities:
Capital contributions to Century Bank................... -- (400,000) --
---------- --------- ---------
Net cash used in investing activities..................... -- (400,000) --
---------- --------- ---------
Cash flows from financing activities:
Repayments under notes payable.......................... -- -- (207,000)
Repurchase of preferred stock........................... -- (254,085) (7,560)
Issuance of common stock................................ 85,156 734,634 5,113
Preferred stock dividends paid.......................... (878) (40,184) (36,796)
---------- --------- ---------
Net cash provided (used) by financing activities.......... 84,278 440,365 (246,243)
---------- --------- ---------
Net (decrease) increase in cash and cash equivalents...... (27,648) (110,750) 109,040
Cash and cash equivalents, beginning of year.............. 56,769 167,519 58,479
---------- --------- ---------
Cash and cash equivalents, end of year.................... $ 29,121 56,769 167,519
========== ========= =========
Supplemental disclosures of cash flow information:
Interest paid........................................... $ -- -- 4,246
Income taxes paid (refunded)............................ -- 11,222 (88,190)
========== ========= =========
</TABLE>

F-29
<PAGE> 83

CENTURY BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(18) FAIR VALUES OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, Disclosure About Fair
Value of Financial Instruments (SFAS No. 107), requires the disclosure of
estimated fair values for financial instruments. Quoted market prices, if
available, are utilized as an estimate of the fair value of financial
instruments. Because no quoted market prices exist for a portion of the
Company's financial instruments, the fair value of such instruments has been
derived based on management's assumptions with respect to future economic
conditions, the amount and timing of future cash flows and estimated discount
rates. Different assumptions could significantly affect these estimates.
Accordingly, the net realizable value could be materially different from the
estimates presented below. In addition, the estimates are only indicative of
individual financial instruments' values and should not be considered an
indication of the fair value of the Company taken as a whole.

CASH, INTEREST BEARING DEPOSITS WITH OTHER BANKS, AND FEDERAL FUNDS SOLD

For cash and due from banks and interest-bearing deposits with other banks,
and federal funds sold the carrying amount approximates fair value.

INVESTMENT SECURITIES AND MORTGAGE-BACKED SECURITIES

For these instruments, fair values are based on published market or dealer
quotes.

LOANS, NET

The fair value of loans is estimated by discounting the future cash flows,
including estimated prepayments of principal, using the current rates at which
similar loans would be made to borrowers with similar credit ratings and for the
same remaining maturities.

ACCRUED INTEREST RECEIVABLE

The carrying amount approximates fair value.

NONINTEREST-BEARING DEPOSITS

The fair value of these deposits is the amount payable on demand at the
reporting date.

INTEREST-BEARING DEPOSITS

The fair value of demand deposits, savings accounts, and money market
deposits with no defined maturity is the amount payable on demand at the
reporting date. The fair value of certificates of deposit is estimated by
discounting the future cash flows using the current rates at which similar
deposits would be accepted.

OTHER BORROWINGS

The carrying amount for variable rate borrowings approximate the fair
values at the reporting date. The fair values of the fixed rate borrowings are
estimated by discounting the future cash flows using interest rates currently
available for borrowings with similar terms and remaining maturities.

ACCRUED INTEREST PAYABLE

The carrying amount approximates fair value.

F-30
<PAGE> 84

CENTURY BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

OFF-BALANCE SHEET ITEMS

Century Bank has reviewed the unfunded portion of commitments to extend
credit, as well as standby and other letters of credit, and has determined that
the fair value of such instruments is not material.

The estimated fair values of The Company's financial instruments at
December 31, 1996 follows:

<TABLE>
<CAPTION>
CARRYING FAIR
VALUE VALUE
----------- -----------
<S> <C> <C>
ASSETS
Cash and interest-bearing deposits with other banks....... $ 8,363,911 8,363,911
Federal funds sold........................................ 11,436,000 11,436,000
Interest-bearing deposits with other banks................ 6,823,077 6,823,077
Investment securities..................................... 7,372,256 7,373,400
Loans, net................................................ 69,850,480 69,867,616
Accrued interest receivable............................... 509,567 509,567

LIABILITIES
Noninterest-bearing deposits.............................. $24,064,454 24,064,454
Interest-bearing deposits................................. 66,920,756 67,053,793
Other borrowings.......................................... 8,465,877 8,465,877
Accrued interest payable.................................. 185,615 185,615
</TABLE>

(19) SUBSEQUENT EVENT

On February 1, 1997, the Company signed a lease to open a third branch of
its subsidiary, Century National Bank, in McLean, Virginia. This new branch was
approved by the regulatory authority and will allow Century to establish its
presence in the suburbs and expand its opportunities to provide loans and gather
deposits.

F-31
<PAGE> 85

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

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SHARES OF COMMON STOCK OFFERED
HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
SOLICITATION OR OFFER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Summary Consolidated Financial
Information......................... 5
Risk Factors.......................... 6
Forward-Looking Statements............ 8
Use of Proceeds....................... 8
Capitalization........................ 9
Market for Common Stock............... 10
Dividend Policy....................... 10
The Eastern American Transaction...... 10
Selected Consolidated Financial
Information......................... 12
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 13
Business.............................. 34
Management............................ 38
Security Ownership of Certain
Beneficial Holders and Management... 42
Supervision and Regulation............ 43
Description of Capital Stock.......... 48
Shares Eligible for Future Sale....... 50
Underwriting.......................... 51
Experts............................... 52
Legal Matters......................... 52
Available Information................. 52
Index to Consolidated Financial
Statements.......................... F-1
============================================
</TABLE>

======================================================
725,000 SHARES

[CENTURY BANCSHARES, INC. LOGO]

COMMON STOCK
----------------------

PROSPECTUS

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

SCOTT & STRINGFELLOW, INC.

SEPTEMBER , 1997

======================================================
<PAGE> 86

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth all expenses in connection with the shares
of Common Stock being registered. All amounts shown below are estimates, except
the registration fee:

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $1,895
National Association of Securities Dealers, Inc. filing
fee....................................................... $1,125
Blue sky filing fees and expenses........................... $5,479
Accountants' fees and expenses.............................. $ *
Legal fees and expenses..................................... $ *
Printing fees............................................... $ *
Miscellaneous............................................... $ *
------
Total............................................. $ *
======
</TABLE>

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

* To be supplied by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

DELAWARE GENERAL CORPORATION LAW

Section 145 of the Delaware General Corporation Law provides generally that
a person sued as a director, officer, employee or agent of a corporation may be
indemnified by the corporation for reasonable expenses, including attorneys'
fees, if in the case of other than derivative suits, such person has acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation (and, in the case of a criminal
proceeding, had no reasonable cause to believe that such person's conduct was
unlawful). In the case of a derivative suit, an officer, employee or agent of
the corporation may be indemnified by the corporation for reasonable expenses,
including attorneys' fees, if such person has acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made in
the case of a derivative suit in respect of any claim as to which an officer,
employee or agent has been adjudged to be liable to the corporation unless that
person is fairly and reasonably entitled to indemnity for proper expenses.
Indemnification is mandatory in the case of a director, officer, employee, or
agent who is successful on the merits in defense of a suit against such person.

CERTIFICATE OF INCORPORATION

Consistent with applicable law, the Company's Certificate of Incorporation
limits a director's monetary liability to the Company or its stockholders for
breach of fiduciary duty, except for breaches of the duty of loyalty, acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, unlawful dividend payments or acts from which the director
derived an improper personal benefit. The Company's Certificate of Incorporation
does not limit the availability of equitable remedies based on breach of
fiduciary duty and does not limit a director's liability for violations of the
federal securities laws. The Company believes that the foregoing provisions of
its Certificate of Incorporation may assist it in attracting and retaining
qualified individuals to serve on its Board of Directors.

INDEMNIFICATION AGREEMENTS

The Company has entered into indemnification agreements with its officers
and directors. The indemnification agreements require the Company to indemnify
each of such persons to the full extent permitted by Delaware law and provide
for the advancement of expenses to them on receipt of an undertaking to repay
any advances to which such persons are later determined not to be entitled.

II-1
<PAGE> 87

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

On November 14, 1995, the Company issued and sold an aggregate of 173,912
Units, each Unit consisting of one share of Common Stock and one warrant to
purchase Common Stock (the"Units"), in reliance upon the exemption provided by
Section 3(b) of the Securities Act of 1933, as amended and Rule 504 of
Regulation D promulgated thereunder. The Units were offered and sold exclusively
to holders of record as of September 15, 1995 of shares of the Company's Common
Stock and shares of the Company's Preferred Stock. No other person was permitted
to subscribe for Units in the offering.

The Units were offered and sold for cash, at a price of $5.75 per Unit, of
which $5.49 represented the purchase price of the Common Stock, and $.26 was
attributable to the Warrant. In addition to cash subscriptions, holders of the
Company's Preferred Stock were given the opportunity to subscribe for the Units
by voluntarily exchanging shares of Preferred Stock for Units.

During the past three fiscal years and the six months ended June 30, 1997,
the Company has issued an aggregate of 69,727 shares of its Common Stock upon
the exercise of outstanding stock options granted to employees or directors at
weighted average exercise prices ranging from $2.13 to $3.16 per share. All such
sales were made in reliance upon the exemption from registration provided by
Section 4(2) of the Securities Act of 1933, as amended.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits. The following exhibits are filed as part of this Registration
Statement. Except as otherwise indicated, each exhibit is incorporated herein by
reference to the exhibit of the same number in the Registrant's Registration
Statement on Form S-1 filed under Registration No. 333-14417.

<TABLE>
<S> <C>
1+ -- Form of Underwriting Agreement by and between the Company
and the Underwriter.
3.1 -- Certificate of Incorporation, as amended, of the Company.
3.2 -- Bylaws of the Company.
3.3 -- Articles of Association of the Bank.
3.4+ -- Amendment dated July 24, 1997 to the Certificate of
Incorporation, as amended, of the Company, filed August
4, 1997.
4.1 -- Form of Warrant.
4.2 -- Form of Common Stock certificate.
5* -- Opinion and Consent of Bracewell & Patterson, L.L.P., as
to the validity of the Common Stock registered hereunder.
10.1 -- Century Bancshares, Inc. 1994 Stock Option Plan.
10.2 -- Incentive Stock Option Plan for Key Employees, as
amended.
10.3 -- Nonqualified Stock Option Plan for Key Employees, as
amended.
10.4 -- Nonqualified Stock Option Plan for Directors, as amended.
10.5 -- Form of Director Compensation Agreement between the
Company and its directors.
10.6 -- Form of Indemnity Agreement between Company and the
persons named therein.
10.7 -- Employment Agreement dated September 1, 1996, between the
Company and Mr. Joseph S. Bracewell.
10.8 -- Lease Agreement dated January 3, 1995, between the Bank
and Pennsylvania Building Associates.
10.9+ -- Executive Service Agreement dated May 20, 1997 between
InterOffice/ Bethesda, Inc. and the Bank.
</TABLE>

II-2
<PAGE> 88

<TABLE>
<S> <C>
10.10 -- Retail Lease dated January 14, 1982, between the Square
106 Associates and the Bank, as amended on March 14,
1984, December 18, 1991, February 12, 1992, October 27,
1995, and June 1, 1996.
10.11 -- Sublease Agreement, dated May 1, 1992, between the
Company and the Bank.
10.12+ -- Purchase and Assumption Agreement dated July 24, 1997 by
and between the Company and Eastern American Bank, FSB
("Eastern American").
10.13+ -- Amendment No. 1 dated August 14, 1997 to Purchase and
Assumption Agreement dated July 24, 1997 by and between
the Company and Eastern American.
11 -- Computation of earnings per share.
21 -- Subsidiaries of the Registrant.
23.1* -- Consent of KPMG Peat Marwick LLP, independent auditors of
the Company.
23.2* -- Consent of Bracewell & Patterson, L.L.P. (included in the
opinion filed as Exhibit 5 hereto).
24+ -- Powers of Attorney (included on the signature page of
this Registration Statement).
</TABLE>

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

+ Previously filed.

* Filed herewith.
** To be filed by Amendment.

ITEM 17. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

The undersigned registrant hereby undertakes:

(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-3
<PAGE> 89

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has caused this Registration Statement or amendment to be signed on
its behalf by the undersigned, thereunto duly authorized, in the District of
Columbia on the 9th day of September, 1997.

CENTURY BANCSHARES INC.
(Registrant)

By: /s/ JOSEPH S. BRACEWELL
----------------------------------
Joseph S. Bracewell
Chairman of the Board, President
and
Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed this 9th day of September 1997 by
the following persons in the capacities indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>

/s/ JOSEPH S. BRACEWELL Chairman of the Board, President and Chief
- ----------------------------------------------------- Executive Officer (Principal Financial and
Joseph S. Bracewell Accounting Officer)

* Director
- -----------------------------------------------------
George Contis

* Director and Vice President
- -----------------------------------------------------
John R. Cope

* Director and Assistant Secretary
- -----------------------------------------------------
Bernard J. Cravath

* Director
- -----------------------------------------------------
Neal R. Gross

* Director
- -----------------------------------------------------
Joseph H. Koonz, Jr.

* Director
- -----------------------------------------------------
William McKee

* Director and Secretary
- -----------------------------------------------------
William C. Oldaker

*By: /s/ JOSEPH S. BRACEWELL
------------------------------------------------
Attorney-in-fact

</TABLE>

II-4
<PAGE> 90

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>

1+ -- Form of Underwriting Agreement by and between the Company
and the Underwriter.
3.1 -- Certificate of Incorporation, as amended, of the Company.
3.2 -- Bylaws of the Company.
3.3 -- Articles of Association of the Bank.
3.4+ -- Amendment dated July 24, 1997 to the Certificate of
Incorporation, as amended, of the Company, filed August
4, 1997.
4.1 -- Form of Warrant.
4.2 -- Form of Common Stock certificate.
5* -- Opinion and Consent of Bracewell & Patterson, L.L.P., as
to the validity of the Common Stock registered hereunder.
10.1 -- Century Bancshares, Inc. 1994 Stock Option Plan.
10.2 -- Incentive Stock Option Plan for Key Employees, as
amended.
10.3 -- Nonqualified Stock Option Plan for Key Employees, as
amended.
10.4 -- Nonqualified Stock Option Plan for Directors, as amended.
10.5 -- Form of Director Compensation Agreement between the
Company and its directors.
10.6 -- Form of Indemnity Agreement between Company and the
persons named therein.
10.7 -- Employment Agreement dated September 1, 1996, between the
Company and Mr. Joseph S. Bracewell.
10.8 -- Lease Agreement dated January 3, 1995, between the Bank
and Pennsylvania Building Associates.
10.9+ -- Executive Service Agreement dated May 20, 1997 between
InterOffice/Bethesda, Inc. and the Bank.
10.10 -- Retail Lease dated January 14, 1982, between the Square
106 Associates and the Bank, as amended on March 14,
1984, December 18, 1991, February 12, 1992, October 27,
1995, and June 1, 1996.
10.11 -- Sublease Agreement, dated May 1, 1992, between the
Company and the Bank.
10.12+ -- Purchase and Assumption Agreement dated July 24, 1997 by
and between the Company and Eastern American Bank, FSB
("Eastern American").
10.13+ -- Amendment No. 1 dated August 14, 1997 to Purchase and
Assumption Agreement dated July 24, 1997 by and between
the Company and Eastern American.
11 -- Computation of earnings per share.
21 -- Subsidiaries of the Registrant.
23.1* -- Consent of KPMG Peat Marwick LLP, independent auditors of
the Company.
23.2* -- Consent of Bracewell & Patterson, L.L.P. (included in the
opinion filed as Exhibit 5 hereto).
24+ -- Powers of Attorney (included on the signature page of
this Registration Statement).
</TABLE>

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

+ Previously filed.

* Filed herewith.
** To be filed by Amendment.

<PAGE> 1
Exhibit 5

September 9, 1997

Century Bancshares, Inc.
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004

Ladies and Gentlemen:

We have acted as counsel to Century Bancshares, Inc., a Delaware corporation
("Century"), in connection with the preparation of its Registration Statement
on Form S-1 (Registration No. 333-34057), as amended (the "Registration
Statement"), filed by Century under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the issuance by Century of up to 833,750
shares of its common stock, $1.00 par value per share (the "Common Stock").

We have examined originals or copies of (i) the Registration Statement; (ii)
the Certificate of Incorporation of Century, as amended; (iii) the Bylaws of
Century; (iv) certain resolutions of the Board of Directors of Century; and (v)
such other documents and records as we have deemed necessary and relevant for
purposes hereof. In addition, we have relied upon certificates of officers of
Century and telegrams of public officials as to certain matters of fact
relating to this opinion and have made such investigations of law as we have
deemed necessary and relevant as a basis hereof.

We have assumed the genuineness of all signatures, the authenticity of all
documents, certificates and records submitted to us as copies, and the
conformity to original documents, certificates and records of all documents,
certificates and records submitted to us as copies. Moreover, we have assumed
the due authorization, execution and delivery of all instruments and documents
by all parties thereto other than Century, and the legality, validity, binding
effect on and enforceability against all such parties of such instruments and
documents.

Based upon the foregoing, and subject to the limitations and assumptions set
forth herein, and having due regard for such legal considerations as we deem
relevant, we are of the opinion that the issuance of the shares of Common Stock
has been duly authorized and (subject to the Registration Statement becoming
effective and any applicable state securities or Blue Sky laws being complied
with) when certificates representing shares of the Common
<PAGE> 2
Century Bancshares, Inc.
September 9, 1997
Page 2

Stock are issued and delivered against payment therefor, the Common Stock will
be validly issued, fully paid and nonassessable.

We advise you that members of this firm own approximately four percent of the
outstanding Common Stock of Century.

The foregoing opinion is based on and is limited in all respects to the laws of
the State of Texas, the general corporation laws of the State of Delaware and
the relevant law of the United States of America, and we render no opinion with
respect to the law of any other jurisdiction.

We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the Prospectus included in the Registration Statement. By giving
such consent, we do not admit that we are experts with respect to any part of
the Registration Statement, including this Exhibit, within the meaning of the
term "expert" as used in the Securities Act or the rules and regulations issued
thereunder.

Very truly yours,

Bracewell & Patterson, L.L.P.

<PAGE> 1
Exhibit 23.1

Consent of Independent Auditors

The Board of Directors
Century Bancshares, Inc.:

We consent to the use of our report dated February 21, 1997, included
herein, and to the reference to our firm under the heading "Experts" in the
Prospectus.

KPMG Peat Marwick LLP

Washington, D.C.
September 9, 1997