SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-QSB


[ X ]    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934

For the quarterly period ended June 30, 1997


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

For the transition period from ___________________ to ___________________


                         Commission file number 0-21285


                     MID-ATLANTIC COMMUNITY BANKGROUP, INC.
        (Exact Name of Small Business Issuer as Specified in its Charter)


             VIRGINIA                                   54-1809409
------------------------------------        ------------------------------------
    (State or Other Jurisdiction            (I.R.S. Employer Identification No.)
 of Incorporation or Organization)


                        7171 George Washington Mem. Hwy.
                           Gloucester, Virginia 23061
                ------------------------------------------------
                    (Address of Principal Executive Offices)


                                 (804) 693-0628
        -----------------------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)

   -------------------------------------------------------------------------
              (Former Name, Former Address and Former Fiscal Year,
                         If Changed Since Last Report)



Check whether the issuer:  (1) filed all reports required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes _X_ . No ___.

State the number of shares outstanding of each of the issuer's classes of common
equity, as of June 30, 1997.


                       Common stock, $5 par value--944,333


<PAGE>


                                      INDEX

MID-ATLANTIC COMMUNITY BANKGROUP, INC.                                  Page No.

Part I.   Financial Information

          Item 1.  Financial Statements                                      3
                   Consolidated Balance Sheets--
                     June 30, 1997 and December 31, 1996

                   Consolidated Statements of Income--                       4
                     Six months ended June 30, 1997 and 1996
                     Three months ended June 30, 1997 and 1996

                   Consolidated Statements of Stockholders Equity--          5
                     Six months ended June 30, 1997 and 1996

                   Consolidated Statements of Cash Flows--                   6
                     Six months ended June 30, 1997 and 1996

                   Notes to Consolidated Financial Statements           7 - 10

                   Supplemental Financial Data (Tables I - III)        11 - 13

          Item 2.  Management's Discussion and Analysis of Financial
                     Condition and Results of Operations               14 - 16

Part II.  Other Information:                                           17 - 20

          Item 1.  Legal Proceedings
          Item 2.  Changes in Securities
          Item 3.  Defaults Upon Senior Securities
          Item 4.  Submission of Matters to a Vote of Security
                   Holders
          Item 5.  Other Information
          Item 6.  Exhibits and Reports on Form 8-K

                                       2
<PAGE>


Item 1. FINANCIAL INFORMATION

              MID-ATLANTIC COMMUNITY BANKGROUP, INC. AND AFFILIATE
                           CONSOLIDATED BALANCE SHEETS
                            (In Thousands of Dollars)
<TABLE>
<CAPTION>

                                                            June 30,             December 31,
ASSETS:                                                      1997                   1996
                                                       -------------------     --------------
<S>                                                        <C>                   <C>        
    Cash and due from bank                                 $     6,579           $     6,015
    Securities Available for Sale                               28,374                27,297
     (Amortized Cost $28,492 in 1997
     and $27,542 in 1996)
    Federal Funds Sold                                           8,431                 5,364

    Loans, Net of Unearned Income of                            96,733                90,978
     $520 in 1997, $483 in 1996 and
     Allowance for Loan Losses of $1,294
     in 1997 and $1,112 in 1996
    Premises and equipment                                       5,530                 4,923
    Other assets                                                 2,324                 1,857
                                                          ------------          ------------
          TOTAL ASSETS                                      $  147,971            $  136,434
                                                            ==========            ==========

LIABILITIES:
Deposits
    Demand                                                 $    17,186           $    15,133
    Interest-bearing Demand                                     26,568                25,968
    Savings                                                     13,651                14,969
    Large Denomination Certificates
     of Deposit                                                 12,595                 9,417
    Other Time                                                  61,606                54,998
                                                         -------------         -------------
       TOTAL DEPOSITS                                          131,606               120,485
    Short-term Debt                                                337                   352
    Long-term Debt                                                  37                    43
    Other Liabilities                                              712                 1,122
                                                       ---------------      ----------------
          TOTAL LIABILITIES                                    132,692               122,002
                                                          ------------        --------------

SHAREHOLDERS' EQUITY:
    Common stock, par value $5 per share,
     10,000,000 shares authorized, 944,333
     Shares Issued in 1997 and 1996                              4,722                 4,722
    Surplus                                                      6,701                 6,701
    Undivided Profits                                            3,934                 3,170
    Net Unrealized Gain (Loss) on
     Available for Sale Securities                                (78)                 (161)
                                                        --------------         -------------
          TOTAL STOCKHOLDERS' EQUITY                            15,279                14,432
                                                           -----------           -----------
          TOTAL LIABILITIES AND
            STOCKHOLDERS' EQUITY                            $  147,971            $  136,434
                                                            ==========            ==========
</TABLE>

Notes to financial statements are an integral part of these statements.

                                       3
<PAGE>


              MID-ATLANTIC COMMUNITY BANKGROUP, INC. AND AFFILIATE
                        CONSOLIDATED STATEMENTS OF INCOME
                            (In Thousands of Dollars)
<TABLE>
<CAPTION>

                                                         3 Months Ended           6 Months Ended
                                                              June 30,                June 30,
                                                         1997       1996         1997          1996
                                                         ----       ----         ----          ----

INTEREST INCOME:
<S>                                                    <C>        <C>            <C>        <C>    
Loans and Fees                                         $  2548    $  2112        $  4960    $  4093
Federal Funds Sold                                          63         70            100        112
Securities Held for Sale                                   511        386           1021        779
                                                     ---------   --------        -------    -------
   Total Interest Income                                  3122       2568           6081       4984

INTEREST EXPENSE:
Demand Deposits                                            194        164            384        302
Savings Deposits                                           109         88            215        167
Large Denomination Certificates
   of Deposit                                              157        120            291        242
Other Time Deposits                                        835        679           1605       1334
Short-term Debt                                              2          1              5          4
Long-term Debt                                               1          1              1          1
                                                     ---------   --------        -------    -------
   Total Interest Expense                                 1298       1053           2501       2050
                                                     ---------   --------        -------    -------
   Net Interest Income                                    1824       1515           3580       2934

ADDITION TO ALLOWANCE FOR LOAN
AND LEASE LOSSES                                           117         81            210        158
                                                     ---------   --------        -------    -------
   Net Interest Income After
   Addition to Allowance for Loan
   and Lease Losses                                       1707       1434           3370       2776
                                                     ---------   --------        -------    -------

OTHER INCOME:
Service Chgs on Deposit Accts                              144        108            291        215
Other Service Charges & Fees                                55         30            100         66
Securities Gains (Losses)                                  -0-        (2)            (2)          3
                                                     ---------   --------        -------    -------
   Total Other Income                                      199        136            393        284
                                                     ---------   --------        -------    -------
OTHER EXPENSES:
Salaries & Employee Benefits                               700        528           1365       1044
Occupancy Expenses                                          55         33             95         66
Furniture & Equipment Expenses                             202        134            368        259
Other Operating Expenses                                   462        311            851        597
                                                     ---------   --------        -------    -------
   Total Other Expenses                                   1419       1006           2679       1966
                                                     ---------   --------        -------    -------
Income Before Income Taxes                                 487        564           1084       1094
Applicable Income Taxes                                    138        193            319        378
                                                     ---------   --------        -------    -------
   Net Income                                        $     349   $    371        $   765    $   716
                                                     =========   ========        =======    =======

   NET INCOME PER SHARE                                    .36        .38            .78        .73
                                                     =========   ========        =======  =========
</TABLE>

Notes to financial statements are an integral part of these statements.

                                       4
<PAGE>


              MID-ATLANTIC COMMUNITY BANKGROUP, INC. AND AFFILIATE
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                            (In Thousands of Dollars)

<TABLE>
<CAPTION>


                                                                        Six Months Ended
                                                                             June 30,                            
                                                                   -----------------------------
                                                                        1997                1996   
                                                                        ----                ----   
                                                                  
<S>                                                                <C>               <C>        
Balance at Beginning of Year                                       $  14,431         $    13,335
  Net Income                                                             765                 716
  Exercise of warrants                                                    --                  --
  Sale of stock                                                           --                  --
  Net change in unrealized gain (loss) on securities
  available for sale                                                      83               (346)
                                                                   ---------          ----------
Balance at End of Period                                           $  15,279          $   13,705
                                                                   =========          ==========
</TABLE>







Notes to financial statements are an integral part of these statements.

                                       5
<PAGE>


              MID-ATLANTIC COMMUNITY BANKGROUP, INC. AND AFFILIATE
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (In Thousands of Dollars)


<TABLE>
<CAPTION>

                                                           Six Months Ended
                                                                June 30,
                                                           1997         1996
                                                        --------    --------
<S>                                                     <C>         <C>     
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net Income                                           $    765    $    716
Adjustments to reconcile net income to net cash
   provided by operating activities:
     Depreciation                                            201         146
     Provision for loan losses                               210         158
     Amortization of premium on investment securities         16          16
     (Gain) on sale of investment securities                  (2)         (3)
     Changes in operating assets and liabilities:
       (Increase) in other assets                           (467)       (433)
       Increase (decrease) in accrued income taxes          (152)         40
       Increase (decrease) in other liabilities              (22)         53
                                                        --------    --------

          Net Cash Provided By Operating Activities     $    549    $    693
                                                        --------    --------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Net (increase) in loans                              ($ 5,964)   ($10,826)
   Proceeds from sales of investment securities            1,593       9,855
   (Increase) decrease in federal funds sold              (3,067)      1,809
   Purchase of investment securities                      (2,603)     (9,852)
   Purchase of property and equipment                       (808)       (266)
                                                        --------    --------

          Net Cash (Used In) Investing Activities       ($10,849)   ($ 9,280)
                                                        --------    --------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Net increase in deposits                             $ 11,121    $ 10,877
   Dividends paid                                           (236)       (113)
   Increase (decrease) in short-term debt                    (15)        161
   Curtailment of other borrowed funds                        (6)         (6)
                                                        --------    --------

            Net Cash Provided by Financing Activities   $ 10,864    $ 10,919
                                                        --------    --------

            Net Increase in Cash and Due From Banks     $    564    $  2,332

CASH AND DUE FROM BANKS - BEGINNING OF PERIOD              6,015       4,553
                                                        --------    --------

CASH AND DUE FROM BANKS - END OF PERIOD                 $  6,579    $  6,885
                                                        ========    ========
</TABLE>

Notes to financial statements are an integral part of these statements.

                                       6
<PAGE>


              MID-ATLANTIC COMMUNITY BANKGROUP, INC. AND AFFILIATE
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    General

      The consolidated statements include the accounts of Mid-Atlantic Community
      BankGroup,  Inc. and its affiliate,  Peninsula Trust Bank. All significant
      intercompany  balances  and  transactions  have  been  eliminated.  In the
      opinion of management,  the accompanying  unaudited consolidated financial
      statements  contain all adjustments  (consisting of only normal  recurring
      accruals)  necessary to present fairly the financial  positions as of June
      30, 1997 and  December 31, 1996,  and the results of  operations  and cash
      flows for the six months ended June 30, 1997 and 1996.

      The results of  operations  for the six months ended June 30, 1997 are not
      necessarily indicative of the results to be expected for the full year.

2.    Investment Securities

      Amortized cost and carrying  amount  (estimated  fair value) of securities
      available for sale are summarized as follows:
<TABLE>
<CAPTION>

                                                                           June 30, 1997
                                                 ---------------------------------------------------
                                                                    Gross          Gross   Estimated
                                                  Amortized    Unrealized     Unrealized      Market
                                                       Cost         Gains         Losses       Value
                                                       ----         -----         ------       -----
                                                                (In Thousands of Dollars)

<S>                                              <C>             <C>            <C>        <C>      
US Treasury Securities                                  634            --              8         626
US Government Agencies and Corporations              17,124            53             99      17,078
Obligations of States and Political Subdivisions      7,303            55            112       7,246
Mortgage-backed Securities                            3,031             4             11       3,024
Federal Reserve Bank Stock                              343            --             --         343
Other Equity Securities                                  57            --             --          57
                                                 ----------      --------       --------   ---------
                                                 $   28,492      $    112       $    230   $  28,374
                                                 ==========      ========       ========   =========
</TABLE>
<TABLE>
<CAPTION>

                                                                       December 31, 1996
                                                 ---------------------------------------------------
                                                                    Gross          Gross   Estimated
                                                  Amortized    Unrealized     Unrealized      Market
                                                       Cost         Gains         Losses       Value
                                                       ----         -----         ------       -----
                                                                (In Thousands of Dollars)

<S>                                              <C>             <C>             <C>      <C>       
US Treasury Securities                                  534            --              4         530
US Government Agencies and Corporations              15,650            35            211      15,474
Obligations of States & Political Subdivisions        7,468            40             87       7,421
Mortgage-backed Securities                            3,196             2             21       3,177
Federal Reserve Bank Stock                              343            --             --         343
Marketable Equity Securities                            351             2             --         353
                                                 ----------      --------        -------  ---------- 
                                                 $   27,542      $     79        $   323  $   27,298
                                                 ==========      ========        =======  ==========
</TABLE>

                                                     Six Months Ended
                                                          June 30,
                                                          --------
                                                    1997             1996
                                                    ----             ----
                                                 (In Thousands of Dollars)

Gross proceeds from sales of securities            1,593             9,852
                                              ==========        ==========
Gross Gains on Sale of Securities                      2                22
Gross Losses on Sale of Securities                    --              (19)
                                              ----------        ----------
Net Securities Gains (Losses)                          2                 3
                                              ==========        ==========


                                       7
<PAGE>


              MID-ATLANTIC COMMUNITY BANKGROUP, INC. AND AFFILIATE
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

3.  Loans
    The  following is a summary of loans  outstanding  at the end of the periods
indicated:

                                                   June 30,        December 31,
                                                     1997               1996
                                                     ----               ----
                                                   (In Thousands of Dollars)

Commercial Mortgage                                 21,223            19,622
Residential Mortgage                                27,686            25,056
Home Equity                                          9,526             9,318
Construction                                         6,188             6,915
Commercial                                          10,668            10,292
Installment                                         22,767            20,848
All Other                                              489               522
                                                ----------       -----------
                                                    98,547            92,573
Less Unearned Income                                   520               483
                                                ----------       -----------
                                                    98,027            92,090
Less Allowance for Loan and Lease Losses             1,294             1,112
                                                ----------       -----------
                                                $   96,733       $    90,978
                                                ==========       ===========

The  following  schedule  summarizes  the changes in the  allowance for loan and
lease losses:

                                                    Six Months       Six Months
                                                      Ending            Ending
                                      June 30,        June 30,      December 31,
                                        1997            1996            1996
                                        ----            ----            ----
                                              (In Thousands of Dollars)

Balance, Beginning                      1,112              865             865
Provision Charged Against Income          210              158             380
Recoveries                                 29               14              28
Loans Charged Off                        (57)             (58)           (161)
                                   ----------         --------      ----------
Balance, Ending                    $    1,294         $    979      $    1,112
                                   ==========         ========      ==========

Nonperforming assets consist of the following:

                                      June 30,         December 31,
                                         1997              1996
                                         ----              ----
                                      (In Thousands of Dollars)

Nonaccrual Loans                    $    556             $    190
Restructured Loans                        --                  ---
                                    --------             --------
Nonperforming Loans                      556                  190
Foreclosed Properties                    ---                  ---
                                    --------             --------
Nonperforming Assets                $    556             $    190
                                    ========             ========

Total  loans past due 90 days or more and still  accruing  were $164 on June 30,
1997 and $88 on December 31, 1996.

                                       8
<PAGE>


              MID-ATLANTIC COMMUNITY BANKGROUP, INC. AND AFFILIATE
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued


4.  Short-term Debt

        Short-term debt consists of the following:
                                                   June 30,       December 31,
                                                     1997             1996
                                                     ----             ----
                                                   (In Thousands of Dollars)

       Treasury, Tax and Loan Note Option         $   337            $    352
                                                  -------            --------
       Total Short-term Debt                      $   337            $    352
                                                  =======            ========

5.  Earnings Per Share

        Earnings per share are computed on the weighted  average  common  shares
outstanding  of 977,455 and 976,034 for the three months ended June 30, 1997 and
1996,  respectively,  and 977,382 and 974,566 for the six months  ended June 30,
1997 and 1996, respectively.

6.  Capital Requirements

        A  comparison  of the  Company's  capital  as of June 30,  1997 with the
minimum requirements is presented below:

                                                          Minimum

  Actual                            Requirements
Tier I Risk-based Capital            14.84 %               4.00  %
Total Risk-based Capital             16.09 %               8.00  %
Leverage Ratio                       10.94 %               4.00  %


7.       Off-Balance-Sheet Items, Commitments and Contingent Liabilities:

         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,
lines of credit,  commercial  letters of credit and  standby  letters of credit.
These instruments  involve, to varying degrees,  elements of credit and interest
rate risk in excess of the amounts  recognized  in the  statements  of financial
condition.

         The Company's exposure to credit loss in the event of nonperformance by
the other party to the financial  instruments  for commitments to extend credit,
lines of credit,  commercial  letters of credit and standby letters of credit is
represented by the contractual notional amount of those instruments. The Company
uses the same credit policies in making commitments and conditional  obligations
as it does for on-balance-sheet instruments.

         Commitments  to extend  credit are  agreements to lend to a customer as
long as there is no  violation of any  condition  established  in the  contract.
Commitments generally 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.  The  Company  evaluates  each  customer's
creditworthiness  on a  case-by-case  basis.  The amount and type of  collateral
obtained,  if deemed  necessary by the Company upon extension of credit,  varies
and is based on management's credit evaluation of the counterparty.


                                       9
<PAGE>

         Standby  letters of credit are  conditional  commitments  issued by the
Company to guarantee  the  performance  of a customer to a third party.  Standby
letter of credit  generally  have fixed  expiration  dates or other  termination
clauses and may require  payment of a fee.  The credit risk  involved in issuing
letters of credit is  essentially  the same as that  involved in extending  loan
facilities to customers. The Company's policy for obtaining collateral,  and the
nature of such  collateral,  is essentially  the same as that involved in making
commitments to extend credit.

         At June 30,  1997,  the  Company  had  outstanding  letters  of  credit
totaling  $2,163,000  and  does  not  anticipate  losses  as a  result  of these
transactions.  The Company also had, at June 30, 1997,  undisbursed  funds under
various lines of credit and loan commitments totaling $21,847,000.

                                       10
<PAGE>

                                                                         TABLE I
Consolidated Selected Financial Data
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>

                                                                        1997
                                             ----------------------------------------------------------
                                                                               Second            First
                                                                               Quarter          Quarter
                                                                               -------          -------

<S>                                                                           <C>              <C>     
Interest Income                                                               $  3,122         $  2,959
Interest Expense                                                                 1,298            1,203
Net Interest Income                                                              1,824            1,756
Provision for Loan Losses                                                          117               93
Net Income                                                                         349              415
Per Share Data:
 Net Income                                                                        .36              .42
 Cash Dividends Paid                                                                --              .25
Total Average Stockholders' Equity                                              14,841        $  14,797
Total Average Assets                                                           140,413         $134,056

Ratios:
 Average Stockholders' Equity
 to Total Average Assets                                                        10.57%           11.04%
 Return on Average Equity                                                        9.41%           11.22%
 Return on Average Assets                                                         .99%            1.24%
</TABLE>


<TABLE>
<CAPTION>

                                                                        1996
                                             ----------------------------------------------------------
                                                   Fourth         Third      Second           First
                                                   Quarter      Quarter      Quarter          Quarter
                                                   -------      -------      -------          -------

<S>                                          <C>               <C>           <C>              <C>      
Interest Income                              $    2,891        $   2,778     $   2,568        $   2,416
Interest Expense                                  1,186            1,123         1,053              997
Net Interest Income                               1,705            1,655         1,515            1,419
Provision for Loan Losses                           141               81            81               77
Net Income                                          413              404           371              346
Per Share Data:
 Net Income                                        0.43             0.41          0.38             0.35
 Cash Dividends Paid                                 --               --            --             0.12
Total Average Stockholders' Equity            $  14,644        $  14,242     $  13,846        $  13,491
Total Average Assets                           $128,458         $122,642      $114,384         $105,910

Ratios:
 Average Stockholders' Equity
 to Total Average Assets                         11.40%           11.61%        12.10%           12.74%
 Return on Average Equity                        11.28%           11.35%        10.72%           10.26%
 Return on Average Assets                         1.29%            1.32%         1.30%            1.31%
</TABLE>

                                       11
<PAGE>


DISTRIBUTION OF ASSETS, LIABILITIES, STOCKHOLDERS' EQUITY,              TABLE II
INTEREST RATES AND INTEREST DIFFERENTIAL

The following schedule presents the condensed  consolidated average rates earned
and paid by Mid-Atlantic Community BankGroup,  Inc. and its affiliate on a fully
taxable equivalent basis assuming a 34% tax rate for the three months ended June
30, 1997 and 1996. Nonaccruing loans are included in the total loans.
<TABLE>
<CAPTION>

                                              1997                                   1996
                                -----------------------------------    ----------------------------------
                                 Average      Interest     Yield/       Average       Interest     Yield/
                                 Balance      And Fees      Rate        Balance       And Fees      Rate
                                 -------      --------      ----        -------       --------      ----
                                    (In Thousands of Dollars)             (In Thousands of Dollars)
<S>                             <C>             <C>         <C>         <C>            <C>         <C>   
Assets
Interest-earning Assets:
 Loans and Leases               $  95,503       $  4,960    10.39%      $ 76,355       $  4,093    10.72%
 US Treasuries                        619             22     7.11%            --             --        --
 US Govt. Agencies & Corp.         20,133            749     7.44%        16,255            557     6.85%
Other Securities                    7,761            250     6.44%         6,547            222     6.78%
Federal Funds Sold                  3,702            100     5.40%         3,907            112     5.73%
                             ------------     ----------  --------   -----------     ----------  --------
    Total Interest-
      earning Assets             $127,718       $  6,081     9.52%      $103,064       $  4,984     9.67%

Noninterest-earning Assets:
 Cash & Noninterest-
 bearing Deposits                $  4,032                             $    3,581
 Gross Unrealized Gain (Loss)
  - Available for Sale Securities   (313)                                  4,949
 Other Assets                       7,504
 Less Allowance for
 Loan and Lease Losses            (1,194)                                  (929)
 Less Deferred Loan Fees            (495)                                  (425)
                             ------------                           ------------
   Total Assets                  $137,252                              $ 110,240
                                 ========                              =========

Liabilities and Stockholders' Equity

Interest-bearing Liabilities:
 Demand Deposits               $   21,976      $     384     3.49%      $ 16,834      $     302     3.59%
 Savings Deposits                  15,264            215     2.82%        12,372            167     2.70%
 Other Time Deposits               68,686          1,896     5.52%        54,189          1,576     5.82%
 Short-term Borrowings                246              5     4.07%           203              4     3.94%
 Long-term Debt                        40              1     5.00%            52              1     3.85%
                           --------------    -----------    ------  ------------    -----------    ------
   Total Interest-bearing
   Liabilities                  $ 106,212       $  2,501     4.71%      $ 83,650       $  2,050     4.90%

Noninterest-bearing Liabilities:

 Demand Deposits                $  15,349                             $   12,243
 Other Liabilities                    872                                    679

Stockholders' Equity               14,819                                 13,668
                               ----------                            -----------

   Total Liabilities and
   Stockholders' Equity          $137,252                              $ 110,240
                                 ========                              =========

Net Interest Differential                                    4.81%                                  4.77%
Net Interest Earnings                           $  3,580                               $  2,934
                                                ========                               ========
Net Yield on Interest-earning
 Assets                                                      5.61%                                  5.69%

</TABLE>

                                       12
<PAGE>


                                                                       TABLE III

A  summary  of  the  increases  and  decreases  of  the  items  included  in the
Consolidated Statements of Income are shown below:

                                                  Net Increases (Decreases)
                                                      Six Months Ended
                                                           June 30,
                                                     1997    and    1996
                                                  (In Thousands of Dollars)

INTEREST INCOME:
                                                     Amount      Percent

   Loans and Fees                                    $   867       21.18%
   Federal Funds Sold                                    (12)     (10.71%)
   Securities Held for Sale                              242       31.07%
                                                     -------    ---------
     Total Interest Income                           $ 1,097       22.01%
                                                     =======    =========

INTEREST EXPENSE:
   Demand Deposits                                   $    82       27.15%
   Savings Deposits                                       48       28.74%
   Large Denomination Certificates of Deposit             49       20.25%
   Other Time Deposits                                   271       20.31%
   Short-term Debt                                         1       25.00%
   Long-term Debt                                        -0-         -0-
                                                     -------    ---------
     Total Interest Expense                          $   451       22.00%
                                                     -------    ---------
        Net Interest Income                          $   646       22.02%
                                                     -------    ---------

ADDITION TO ALLOWANCE FOR LOAN
AND LEASE LOSSES                                     $    52       32.91%
                                                     -------    ---------
   Net Interest Income After Addition to Allowance
     for Loan and Lease Losses                       $   594       21.40%
                                                     -------    ---------

OTHER INCOME:
   Service Charges on Deposit Accounts               $    76       35.35%
   Other Service Charges and Fees                         34       51.52%
   Securities Gains (Losses)                              (1)     (33.33%)
                                                     -------    ---------
     Total Other Income                              $   109       38.38%
                                                     -------    ---------

OTHER EXPENSES:
   Salaries and Employee Benefits                    $   321       30.75%
   Occupancy                                              29       43.94%
   Furniture and Equipment                               109       42.08%
   Other Operating Expenses                              254       42.55%
                                                     -------    ---------
     Total Other Expenses                            $   713       36.27%
                                                     -------    ---------
Income Before Income Taxes                           $   (10)     (00.91%)
Applicable Income Taxes                                  (59)     (15.61%)
                                                     -------    ---------
     Net Income                                      $    49        6.84%
                                                     =======    =========


                                       13
<PAGE>


Item 2.  Management's Discussion and Analysis

The following presents management's  discussion and analysis of the consolidated
financial  condition  and  results  of  operations  of  Mid-Atlantic   Community
BankGroup,  Inc. (the  "Company") as of the dates and for the period  indicated.
This discussion should be read in conjunction with the Selected  Financial Data,
the Company's Consolidated Financial Statements and the Notes thereto, and other
financial data appearing elsewhere in this report.

The consolidated  financial  statements  include the accounts of the Company and
its wholly-owned  subsidiary,  Peninsula Trust Bank (the "Bank").  The Company's
existence  originated  during  the  third  quarter  of 1996;  however,  the Bank
represents  more than 99% of the Company's  activities.  Therefore,  comparative
discussions of consolidated versus  non-consolidated  financials should still be
considered appropriate.

PENINSULA TRUST BANK

Results of Operations

After experiencing typically flat asset growth during the first quarter of 1997,
Peninsula  Trust Bank (the Bank) enjoyed strong balance sheet  expansion  during
the second quarter of 1997, with total assets  increasing $9.6 million,  or 6.9%
over March 31, 1997 and $11.6  million,  or 8.5% over December 31, 1996.  Growth
was funded almost  entirely from new deposits,  which reflected $9.0 million and
$11.1  million  increases  for the three  months and six months  ending June 30,
1997, respectively.  The majority of the increase was in consumer time deposits,
which experienced an increase of $6.6 million over December 31, 1996.

Loan demand  resumed strong growth during the second  quarter,  evidenced by net
loans increasing $2.8 million (3.0%) and $5.7 million (6.3%), respectively, over
March 31, 1997 and December 31, 1996.

Asset  quality  continues  to be  strong.  Total  loans past due 30 days or more
equaled $1.8 million (1.87% of total outstandings). Included in the 30 day total
are  $164,000  which are 90 days or more past due and still  accruing  interest.
Non-accrual  loans totaled $556,000 at June 30, 1997, which represented 0.56% of
total  outstanding  loans and 42.9% of the loan loss  reserve.  Included  in the
non-accrual loan total are two loans totalling $314,000, secured by real estate,
one of which is engaged in bankruptcy proceedings. The provision for loan losses
was  $117,000  in the second  quarter of 1997 and  $210,000 in the first half of
1997.  Gross  charge-offs for the quarter were $41,000,  while total  recoveries
were  $22,000.  These amounts  compare  favorably to second  quarter 1996,  with
charge-offs of $47,000 and recoveries of $8,000.

The Bank  maintained its practice  during the second quarter of selling  Federal
funds,  having  sold  continuously  on a daily basis in amounts  averaging  $4.7
million,  3.37% of average total assets.  These figures  compare to $2.7 million
and 1.99%, respectively,  for the first quarter 1997. The quarter-end balance of
$8.4 million represented a $4.0 million increase from the first quarter 1997.

The level of the investment  account  remained  virtually  unchanged  during the
second  quarter of 1997,  ending  the period at $28.4  million or 19.2% of total
assets.  The  portfolio  is  comprised of 2% US  Treasuries,  71% US  Government
Agencies,  26% State,  County and  Municipal  governments,  and 1% other  equity
securities and Federal Reserve Bank Stock.

The Financial Accounting Standards Board (FASB) Statement 115 stipulated the way
in which  banks  must  classify  and  account  for their  securities  portfolio,
beginning  with  the  first  quarter  of  1994.  Securities  are  classified  as
Investment Securities when management has both the intent and the ability at the
time of purchase to hold the securities  until maturity.  Investment  Securities
are carried at cost  adjusted  for  amortization  of premiums  and  accretion of
discounts.  Securities  

                                       14
<PAGE>

which are held for an  indefinite  period of time are  classified  as Securities
Available for Sale and are marked to market at each financial reporting date, or
at each month-end.  Securities Available for Sale include securities that may be
sold in  response  to  changes in  interest  rates,  changes  in the  security's
prepayment  risk,  increases in loan demand,  general  liquidity needs and other
similar factors.

The Bank  elected,  as of year-end  1995,  to classify  the entire  portfolio as
"available  for sale".  It is expected  that this may cause the "net  unrealized
gains/losses"  to fluctuate in a more  volatile  manner.  Long-term,  fixed-rate
bonds will demonstrate more price  instability  during their lives.  These price
fluctuations  would not be as apparent if the bonds were  designated as "held to
maturity" and thus, not reported in the net unrealized gains and losses.

Deposits   represent  99.2%  of  total   liabilities  of  the  Bank,   including
non-interest bearing checking accounts which represent 13.1% of total deposits.

Earnings

Net income for the second  quarter of 1997  declined  to  $349,000,  compared to
$415,000 for the first  quarter of 1997 and  $371,000 for the second  quarter of
1996. The decline in earnings resulted from an increase in non-interest expense,
which was partially  offset by increases in net interest income and non-interest
income.

Net interest  income for the second quarter of 1997 totaled  $1,824,000 (a 20.4%
increase over a similar  period in 1996).  The net interest  margin  experienced
modest  contraction as renewing  deposits among consumer CDs reflected an upward
trend in renewal  rates.  This trend  occurred  during a period when the average
yield on the loan portfolio  declined by 33 basic points. As a result, the 21.6%
increase  in  interest  income for the second  quarter  1997  compared to second
quarter  1996 was offset by a 23.3%  increase in  interest  expense for the same
period.

Non-interest  expense for the second quarter  totaled $1.4 million,  compared to
$1.3  million  for the first  quarter  of 1997 and $1.0  million  for the second
quarter of 1996.  The  increase  in  non-interest  expense  resulted  from costs
incurred in connection  with opening the Company's  fifth banking office and new
operations  center in Glenns,  during the first quarter of 1997, the full impact
of which was not  realized  until the  second  quarter.  In  addition,  the Bank
completed minor renovations and improvements at the Main Office.  Capitalization
of these  improvements  and  increases  in  furniture,  fixtures  and  equipment
relating to the new branch, operations center and renovations at the Main Office
resulted in increased  depreciation expense of approximately  $12,000 per month.
The  Bank's  rapid  growth  during the past three  years  necessitated  improved
facilities for the operations support functions, such as Accounting, Bookkeeping
and Data  Processing.  In May, the loan loss  provision was increased by $12,000
per month due to increased loan volume,  resulting in a $24,000  increase in the
second quarter of 1997.

Capital and Liquidity

Equity  capital at June 30, 1997 totaled $15.3 million,  representing  10.33% of
total assets. The Company completed a $3.2 million stock offering in July, 1997.
This level of capital will  position the Company for growth well into the future
and could support asset growth to more than $200 million.

Short term  liquidity is provided by access to the Federal funds market  through
correspondent  bank  relationships  . The  Bank  maintains  lines of  credit  to
purchase Fed funds totalling $5.4 million. Fed funds sold equaled 19.3% of total
demand  deposits at June 30, 1997.  This compares to 8.1% at June 30, 1996. This
is considered an adequate level of liquidity to meet anticipated withdrawals and
expected loan demand.

                                       15
<PAGE>


Future Plans

Construction of the permanent  facility for the Newport News office began during
the first  half of 1997.  The  branch  will be  located at the corner of Thimble
Shoals  Boulevard and J. Clyde Morris  Boulevard near the entrance to the Oyster
Point Industrial  Park. The Company acquired the land for its permanent  Newport
News branch site in 1996 at a cost of approximately $620,000. Construction costs
for the branch building are expected to be approximately  $850,000, and combined
with site work should  result in total  capitalized  improvements  approximating
$1,000,000.  The current operations for the Newport News branch are conducted in
rented office space, with a lease that expires in October, 1998.

The  Company  plans to  establish  a  branch  office  in  Hampton,  Virginia  to
complement its Newport News office and is currently  evaluating available sites.
Although plans are incomplete and subject to change,  it is the Company's desire
to open a branch office in Hampton, Virginia in the second half of 1998.

The  Company  expects to enter into an  agreement,  subject to state and federal
regulatory  approval,  to acquire a 50% membership  interest in Johnson Mortgage
Company,  L.L.C.,  which  will be the  successor  to  Johnson  Mortgage  Company
("Johnson Mortgage"),  for a total of $500,000.  Half the purchase price will be
paid in cash and the other half will be paid in shares of the  Company's  common
stock with a market value of $250,000 at the time of closing.  Johnson  Mortgage
originates and sells long-term, fixed-rate mortgage loans, a product the Company
has not previously offered.

                                       16
<PAGE>


                           PART II. OTHER INFORMATION


Item 1. Legal Proceedings - None

Item 2. Changes in Securities - None

Item 3. Defaults Upon Senior Securities - None

Item 4. Submission of Matters to a Vote of Security Holders

        On April 22, 1997,  the Annual  Meeting of  Shareholders  was held to
vote on the following  matters to elect 14 directors for a term of one year each
and to ratify the  appointment  by the Board of Directors of the firm of Smith &
Eggleston,  P.C.  as the  Company's  independent  auditors  for the year  ending
December 31, 1997. The results of the votes on these matters are as follows:

           (1)    Election of Directors

                                                 For    Against     Withheld   
                                                 ---    -------     --------   

                    Charles F. Bristow          782,806     0           1,425
                    John R. Curtis              782,806     0           1,425
                    Charles F. Dawson           782,806     0           1,425
                    William J. Farinholt        782,806     0           1,425
                    William D. Fary             782,806     0           1,425
                    Robert D. Foster            782,256     550         1,425
                    Harry M. Healy              782,806     0           1,425
                    Jeanne P. Hockaday          782,806     0           1,425
                    Joseph A. Lombard, Jr.      782,806     0           1,425
                    George A. Marston, Jr.      782,806     0           1,425
                    Hersey M. Mason, Jr.        782,806     0           1,425
                    Henry C. Rowe               782,806     0           1,425
                    Kenneth E. Smith            782,806     0           1,425
                    Thomas Z. Wilke             782,806     0           1,425


           (2)    Ratification of Accountants
<TABLE>
<CAPTION>

                       For       Against     Withheld      Abstentions      Broker Non-votes
                       ---       -------     --------      -----------      ----------------

<S>                  <C>          <C>          <C>            <C>                 <C>  
                     780,481      1,700         --            2,050               2,300

</TABLE>

Item 5. Other Information - None

Item 6. Exhibits and reports on Form 8-K

        a)  Exhibits

               11     Statement re: computation of per share earnings
               27     Financial Data Schedule (filed electronically only)

        b)  Form 8-K - None

                                       17
<PAGE>

                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                                 MID-ATLANTIC COMMUNITY BANKGROUP, INC.


Date:  August 14, 1997        BY        /s/ W. J. Farinholt
                                -----------------------------------------------
                                        W. J. Farinholt, President & CEO



Date:  August 14, 1997        BY        /s/ Kenneth E. Smith
                                -----------------------------------------------
                                        Kenneth E. Smith, Exec. Vice President
                                        & Chief Financial Officer


Date:  August 14, 1997        BY        /s/ Kathleen C. Healy
                                -----------------------------------------------
                                        Kathleen C. Healy, Vice President &
                                        Chief  Accounting Officer




                                       18