SUPPLEMENT NO. 1 TO PROSPECTUS DATED MAY 15, 1996

                            Maximum - 350,000 Shares
                             Minimum - 70,000 Shares
                          HARBOR BANKSHARES CORPORATION
                                  Common Stock


     Harbor  Bankshares  Corporation  (the  "Company") is offering up to 350,000
shares of its Common Stock (the "Common Stock"). The maximum number of shares of
Common Stock to be sold is 350,000 shares,  and the minimum is 70,000 shares. At
the date of this  Supplement,  the Escrow  Agent had received  subscriptions  to
purchase  91,868  shares  of  Common  Stock  in the  offering,  and was  seeking
additional subscriptions through June 30.

     One of the persons to which this  offering was made (the  "Purchaser")  has
agreed to purchase 27,000 shares of the Company's  Common Stock in this offering
but has  required  a  separate  stock  subscription  agreement.  This  agreement
contains  certain  terms not  generally  applicable  to other  investors in this
offering.  For  instance,  to enable the  Purchaser  to comply with its internal
investment  policies,  the Company has agreed not to reduce the number of shares
of its issued and outstanding Common Stock (through share repurchases, dividends
or  otherwise) if it would cause the Purchaser to be the holder of 5% or more of
the Company's  issued and  outstanding  Common  Stock,  or if it would cause the
purchase  price of the 27,000  shares to represent  10% or more of the Company's
total equity.  Based upon the total  stockholders'  equity at March 31, 1996, as
adjusted for the sale of 118,868  shares of Common Stock in this  offering,  the
27,000 shares to be sold to the Purchaser will represent  4.93% of the Company's
outstanding  Common  Stock  and  5.41% of its  total  stockholders'  equity.  In
addition,  if the Company  authorizes  the  issuance of a class of common  stock
without voting rights but otherwise  identical to the Common Stock  ("Non-Voting
Common Stock"),  commencing on the date of such authorization and continuing for
a period  of six  months  thereafter  but not  later  than  June 30,  1997,  the
Purchaser  has the right to purchase,  and the Company has agreed to sell to the
Purchaser,  shares of the Non-Voting  Common Stock at a per share purchase price
to be negotiated in good faith by the parties.  The Company has no present plans
to issue Non-Voting Common Stock.

     In addition,  in connection with a proposed  investment in 35,000 shares in
this offering,  the Company has invited a representative of a proposed purchaser
of to sit on its Board of  Directors.  Assuming  this  investment  is made,  the
Company  will expand its Board of  Directors  by one  director,  and appoint the
representative to the Board to fill the resulting vacancy. The new director will
serve until the next annual meeting of stockholders  and until his successor has
been elected and  qualified.  The person who would be appointed to the Company's
Board under this arrangement is Stanley W. Tucker. Mr. Tucker is 49 years of age
and is currently the President of MSBDFA Management Group, Inc., a private funds
management  company,  and  Managing  General  Partner of MMG  Ventures,  L.P., a
specialized small business development  company.  From 1992 until February 1995,
he served as the Executive  Director of the Maryland Small Business  Development
Financing   Authority  (a  state  agency  which  provides  financing  for  small
businesses).  He joined the agency in 1981 as its Deputy Director.

            THE SECURITIES OFFERED BY THIS PROSPECTUS ARE NOT SAVINGS
         ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR NONBANK
          SUBSIDIARY OF THE COMPANY AND ARE NOT INSURED BY THE FEDERAL
         DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.

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


               The date of this Supplement No. 1 is June 26, 1996.