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 March 31, 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 March 31, 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--
                     March 31, 1997 and December 31, 1996

                   Consolidated Statements of Income--                        4
                     Three months ended March 31, 1997 and 1996

                   Consolidated Statements of Stockholders Equity--           5
                     Three months ended March 31, 1997 and 1996

                   Consolidated Statements of Cash Flows--                    6
                     Three months ended March 31, 1997 and 1996

                   Notes to Consolidated Financial Statements             7 - 9

                   Supplemental Financial Data (Tables I - III)         10 - 12

          Item 2.  Management's Discussion and Analysis of Financial
                     Condition and Results of Operations                13 - 15

Part II.  Other Information:                                            16 - 18

          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 of Form 8-K


<PAGE>


Item 1. FINANCIAL INFORMATION

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

                                                March 31,          December 31,
ASSETS:                                            1997               1996
                                              ----------------     ------------

    Cash and due from bank                      $   4,488             $   6,015
    Securities Available for Sale                  27,771                27,297
     (Amortized Cost $28,294 in 1997
     and $27,542 in 1996)
    Federal Funds Sold                              4,423                 5,364

    Loans, Net of Unearned Income of               93,886                90,978
     $493 in 1997, $483 in 1996 and
     Allowance for Loan Losses of $1,196
     in 1997 and $1,112 in 1996
    Premises and equipment                          5,622                 4,923
    Other assets                                    2,208                 1,857
                                                ---------             ---------
          TOTAL ASSETS                          $ 138,398             $ 136,434
                                                =========             =========

LIABILITIES:
Deposits
    Demand                                      $  17,062             $  15,133
    Interest-bearing Demand                        21,377                25,968
    Savings                                        15,509                14,969
    Large Denomination Certificates
     of Deposit                                    11,099                 9,417
    Other Time                                     57,535                54,998
                                                ---------             ---------
       TOTAL DEPOSITS                             122,582               120,485
    Short-term Debt                                   329                   352
    Long-term Debt                                     40                    43
    Other Liabilities                                 783                 1,122
                                                ---------             ---------
          TOTAL LIABILITIES                       123,734               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                               3,585                 3,170
    Net Unrealized Gain (Loss) on
     Available for Sale Securities                  (344)                 (161)
                                                ---------             ---------
          TOTAL STOCKHOLDERS' EQUITY               14,664                14,432
                                                ---------             ---------
          TOTAL LIABILITIES AND
            STOCKHOLDERS' EQUITY                $ 138,398             $ 136,434
                                                =========             =========

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)

                                                         3 Months Ended
                                                             March 31
                                                         1997       1996
                                                         ----       ----

INTEREST INCOME:
Loans and Fees                                         $  2413    $  1982
Federal Funds Sold                                          36         41
Securities Held for Sale                                   510        393
                                                       -------    -------
   Total Interest Income                                  2959       2416

INTEREST EXPENSE:
Demand Deposits                                            191        138
Savings Deposits                                           105         79
Large Denomination Certificates
   of Deposit                                              134        122
Other Time Deposits                                        770        655
Short-term Debt                                              2          2
Long-term Debt                                               1          1
                                                       -------    -------
   Total Interest Expense                                 1203        997
                                                       -------    -------
   Net Interest Income                                    1756       1419

ADDITION TO ALLOWANCE FOR LOAN
AND LEASE LOSSES                                            93         77
                                                       -------    -------
   Net Interest Income After
   Addition to Allowance for Loan
   and Lease Losses                                       1663       1342

OTHER INCOME:
Service Chgs on Deposit Accts                              147        106
Other Service Charges & Fees                                45         36
Securities Gains (Losses)                                    1          6
                                                       -------    -------
   Total Other Income                                      193        148
OTHER EXPENSES:
Salaries & Employee Benefits                               665        516
Occupancy Expenses                                          40         33
Furniture & Equipment Expenses                             166        125
Other Operating Expenses                                   390        286
                                                       -------    -------
   Total Other Expenses                                   1261        960
                                                       -------    -------
Income Before Income Taxes                                 595        530
Applicable Income Taxes                                    180        185
                                                       -------    -------
   Net Income                                          $   415    $   345
                                                       =======    =======

   NET INCOME PER SHARE                                    .42        .35
                                                       =======    =======

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)



                                                         Three Months Ended
                                                               March 31,

                                                         1997            1996
                                                         ----            ----

Balance at Beginning of Year                         $  14,431        $  13,335
  Net Income                                               415              345
  Exercise of warrants                                      --               --
  Sale of stock                                             --               --
  Net change in unrealized gain (loss) on securities
  available for sale                                     (182)            (149)
                                                     ---------        ---------
Balance at End of Period                             $  14,664        $  13,531
                                                     =========        =========











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>

                                                                  Three Months Ended
                                                                        March 31,

                                                                   1997           1996
                                                                   -----          ----
<S>                                                             <C>           <C>        
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net Income                                                   $       415   $       345
Adjustments to reconcile net income to net cash
   provided by operating activities:
     Depreciation                                                        88            73
     Provision for loan losses                                           93            77
     Gain (loss) on sale of investment securities                       (1)           (6)
     Changes in operating assets and liabilities:
       (Increase) in other assets                                     (268)         (236)
       Increase (decrease) in other liabilities                       (362)           278
                                                                -----------   -----------

          Net Cash Provided By (Used In) Operating Activities   ($      35)   $       531
                                                                -----------   -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Net (increase) in loans                                      ($   3,001)   ($   5,281)
   Purchase of investment securities                                (2,343)       (4,525)
   Proceeds from sales of investment securities                       1,593         8,376
   (Increase) decrease in federal funds sold - net                      941         1,102
   Purchase of premises and equipment                                 (776)          (52)
                                                                -----------   -----------

          Net Cash (Used In) Investing Activities               ($   3,586)   ($     380)
                                                                -----------   -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Increase (decrease) in deposits - net                        $     2,097   $     (775)
   Curtailment of other borrowed funds                                  (3)           (3)
                                                                -----------   -----------

            Net Cash Provided By Financing Activities           $     2,094   $     (778)
                                                                -----------   -----------

            Net Increase (Decrease) In Cash and Due From Banks      (1,527)         (627)

CASH AND DUE FROM BANKS - BEGINNING OF PERIOD                         6,015         4,580
                                                                -----------   -----------

CASH AND DUE FROM BANKS - END OF PERIOD                         $     4,488   $     3,953
                                                                ===========   ===========
</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 March
      31, 1997 and  December 31, 1996,  and the results of  operations  and cash
      flows for the three months ended March 31, 1997 and 1996.

      The results of operations for the three months ended March 31, 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>

                                                                       March 31, 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            --             13         621
US Government Agencies and Corporations              16,878             3            389      16,492
Obligations of States and Political Subdivisions      7,308            29             99       7,238
Mortgage-backed Securities                            3,125            --             53       3,072
Federal Reserve Bank Stock                              343            --             --         343
                                                 ----------      --------       --------   ---------
                                                 $   28,288      $     32       $    554   $  27,766
                                                 ==========      ========       ========   =========
</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>


                                                    Three Months Ended
                                                         March 31,
                                                   1997            1996
                                                   ----            ----
                                                (In Thousands of Dollars)

Gross proceeds from sales of securities             1,593             8,376
                                                 ========       ===========
Gross Gains on Sale of Securities                       1                20
Gross Losses on Sale of Securities                     --              (10)
                                                 --------       -----------
 Net Securities Losses                                  1                10
                                                =========       ===========

                                       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:

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

Commercial Mortgage                                 20,267               19,622
Residential Mortgage                                26,008               25,056
Home Equity                                         10,057                9,318
Construction                                         6,453                6,915
Commercial                                          10,535               10,292
Installment                                         21,797               20,848
All Other                                              458                  522
                                                ----------          -----------
                                                    95,575               92,573
Less Unearned Income                                   493                  483
                                                ----------          -----------
                                                    95,082               92,090
Less Allowance for Loan and Lease Losses             1,196                1,112
                                                ----------          -----------
                                                $   93,886          $    90,978
                                                ==========          ===========

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

<TABLE>
<CAPTION>

                                                 Three Months        Three Months
                                                   Ending               Ending
                                                   March 31,           March 31,       December 31,
                                                    1997                  1996               1996
                                                 ----------            ---------          ---------
                                                                (In Thousands of Dollars)
<S>                                              <C>                    <C>                <C>      
Balance, Beginning                                    1,112                  865                 865
Provision Charged Against Income                         93                   77                 380
Recoveries                                                7                    8                  28
Loans Charged Off                                      (16)                 (13)               (161)
                                                    -------             --------           ---------
Balance, Ending                                  $    1,196             $    937           $   1,112
                                                 ==========             ========           =========
</TABLE>

Nonperforming assets consist of the following:

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

Nonaccrual Loans                                $    498              $   190
Restructured Loans                                    --                  ---
                                                --------              -------
Nonperforming Loans                                  498                  190
Foreclosed Properties                                 31                  ---
                                                --------              -------
Nonperforming Assets                            $    529              $   190
                                                ========              =======

Total  loans past due 90 days or more and still  accruing  were $56 on March 31,
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:
                                                      March 31,     December 31,
                                                        1997           1996
                                                        ----           ----
                                                      (In Thousands of Dollars)

       Treasury, Tax and Loan Note Option              $   329        $   352
                                                       -------        -------
       Total Short-term Debt                           $   329        $   352
                                                       =======        =======

5.  Earnings Per Share

        Earnings per share are computed on the weighted  average common shares
outstanding of 977,311 and 973,064 for the three months ended March 31, 1997 and
1996, respectively.

6.  Capital Requirements

        A  comparison  of the  Company's  capital as of March 31,  1997 with the
minimum requirements is presented below:

                                                           Minimum
                                        Actual           Requirements
                                        ------           ------------
Tier I Risk-based Capital               15.10 %              4.00  %
Total Risk-based Capital                16.30 %              8.00  %
Leverage Ratio                          11.21 %              4.00  %




                                       9
<PAGE>


                                                                         TABLE I

Consolidated Selected Financial Data
(Amounts in thousands, except per share data)

<TABLE>
<CAPTION>

                                                                         1997
                                             ----------------------------------------------------------
                                                                                                  First
                                                                                                 Quarter
<S>                                                                                         <C>        
Interest Income                                                                             $     2,959
Interest Expense                                                                                  1,203
Net Interest Income                                                                               1,756
Provision for Loan Losses                                                                            93
Net Income                                                                                          415
Per Share Data:
 Net Income                                                                                         .42
 Cash Dividends Paid                                                                                .25
Total Average Stockholders' Equity                                                           $   14,821
Total Average Assets                                                                         $  134,141

Ratios:
 Average Stockholders' Equity to
  to Total Average Assets                                                                        11.05%
 Return on Average Equity                                                                        11.20%
 Return on Average Assets                                                                         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>

                                       10

<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
March 31, 1997 and 1996. Nonaccruing loans are included in the total loans.

<TABLE>
<CAPTION>

                                              1997                                   1996
                                -----------------------------------    ----------------------------------
                                Average        Interest     Yield/      Average       Interest     Yield/
                                Balance       And Fees(1)    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                $ 93,472       $  9,651    10.33%      $ 73,416       $  7,928    10.80%
 U.S. Treasuries                      604             44     7.28%
 US Govt. Agencies & Corp.         20,129          1,504     7.47%        16,488          1,132     6.87%
 Other Securities                   7,642            494     6.46%         6,454            440     6.82%
 Federal Funds Sold                 2,662            144     5.41%         2,780            164     5.90%
                                 --------        -------  --------       -------        -------  --------
    Total Interest-
      earning Assets             $124,509       $ 11,837     9.51%      $ 99,138       $  9,664     9.75%

Noninterest-earning Assets:
 Cash & Noninterest-
 bearing Deposits              $    3,869                           $      3,264
 Other Assets                       7,387                                  4,829
 Less Allowance for
 Loan and Lease Losses            (1,142)                                  (894)
 Less Deferred Loan Fees            (482)                                  (427)
                                 --------                              ---------
   Total Assets                  $134,141                              $ 105,910
                                 ========                              =========

Liabilities and Stockholders' Equity

Interest-bearing Liabilities:
 Demand Deposits                 $ 21,923       $    764     3.48%      $ 17,776       $    552     3.11%
 Savings Deposits                  14,994            420     2.80%         9,491            316     3.33%
 Other Time Deposits               66,168          3,614     5.46%        52,920          3,108     5.87%
 Short-term Borrowings                250             10     4.00%           202              8     3.96%
 Long-term Debt                        42              2     4.76%            54              4     7.41%
                                 --------       --------    ------      --------       --------    ------
   Total Interest-bearing
   Liabilities                  $ 103,377       $  4,810     4.65%      $ 80,443       $  3,988     4.96%

Noninterest-bearing Liabilities:

 Demand Deposits                 $ 15,000                              $  11,296
 Other Liabilities                    943                                    680

Stockholders' Equity               14,821                                 13,491
                                 --------                              ---------

   Total Liabilities and
   Stockholders' Equity          $134,141                              $ 105,910
                                 ========                              =========

Net Interest Differential                                    4.86%                                  4.79%
Net Interest Earnings                           $  7,027                               $  5,676
                                                ========                               ========
Net Yield on Interest-earning
 Assets                                                      5.64%                                  5.73%

</TABLE>

(1) Interest and fees annualized.


                                       11
<PAGE>


                                                                       TABLE III

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

<TABLE>
<CAPTION>

                                                                Net Increases (Decreases)
                                                                   Three Months Ended
                                                                          March 31,
                                                                    1997    and    1996
                                                                (In Thousands of Dollars)

INTEREST INCOME:                                                Amount            Percent
                                                                ------            -------

<S>                                                           <C>                  <C>   
   Loans and Fees                                             $      431               21.75%
   Federal Funds Sold                                                (5)             (12.20%)
   Securities Held for Sale                                          117               29.77%
                                                              ----------             --------
     Total Interest Income                                    $      543               22.48%
                                                               =========             ========

INTEREST EXPENSE:
   Demand Deposits                                            $       53               38.41%
   Savings Deposits                                                   26               32.91%
   Large Denomination Certificates of Deposit                         12                9.84%
   Other Time Deposits                                               115               17.56%
   Short-term Debt                                                     0                0.00%
   Long-term Debt                                                      0                0.00%
                                                              ----------             --------
     Total Interest Expense                                   $      206               20.66%
                                                              ----------             --------
        Net Interest Income                                   $      337               23.75%
                                                              ----------             --------

ADDITION TO ALLOWANCE FOR LOAN
AND LEASE LOSSES                                              $       16               20.78%
                                                              ----------             --------
   Net Interest Income After Addition to Allowance
     for Loan and Lease Losses                                $      321               23.92%
                                                              ----------             --------

OTHER INCOME:
   Service Charges on Deposit Accounts                        $       41               38.68%
   Other Service Charges and Fees                                      9               25.00%
   Securities Gains (Losses)                                         (5)             (83.33%)
                                                              ----------             --------
     Total Other Income                                       $       45               30.41%
                                                              ----------             --------

OTHER EXPENSES:
   Salaries and Employee Benefits                             $      149               28.88%
   Occupancy                                                           7               21.21%
   Furniture and Equipment                                            41               32.80%
   Other Operating                                                   104               36.36%
                                                              ----------             --------
     Total Other Expense                                      $      301               31.35%
                                                              ----------             --------
Income Before Income Taxes                                    $       65               12.26%
Applicable Income Taxes                                              (5)              (2.70%)
                                                              ----------             --------
     Net Income                                               $       70               20.29%
                                                              ==========             ========
</TABLE>


                                       12
<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 periods  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 Operation

Peninsula  Trust Bank (the Bank)  experienced a typically  flat first quarter of
1997  relative to asset  growth,  with total assets  increasing  $2.0 million or
1.44% from year-end  1996.  The Bank  continues to  experience a year-end  trend
where certain attorney escrow balances at year-end are substantially above their
average balances due to an abnormally high number of real estate closings during
the  last  several  weeks of the  year.  These  balances  quickly  shrink  after
year-end.  Deposit  liabilities  experienced  a shift from  demand  deposits  to
savings and consumer CDs of less than $100,000.  Total deposits also experienced
a slight increase of $2.1 million or 1.74%.

Loan growth  experienced a modest increase during the first quarter,  increasing
$2.9 million  (3.20%).  The Bank has been  successful  in  attracting  some high
quality  loans of a larger than  average  size ($.75  million to $1.6  million).
Historically,  a $.5 million loan was  considered a large loan.  This has caused
management  to alter its  liquidity  and  funding  philosophy  and  become  more
aggressive in deposit development. Competition among all banks for deposit funds
continues to intensify due to the proliferation of mutual funds.

Loan  quality  remains  strong.  Total  loans  past due 30 days or more  equaled
$1,693,000  (1.78%  of total  outstandings).  Included  in the 30 day  total are
$56,000 which are 90 days or more past due and still  accruing.  Twenty-six (26)
loans totaling  $498,000 are carried in a nonaccrual  status,  which represented
0.52% of total  outstanding  loans  and 41.6% of the loan  loss  reserve.  Gross
charge-offs for the quarter were $16,000;  total  recoveries were $7,000.  These
amounts  compare  to  first  quarter  1996,  with  charge-offs  of  $13,000  and
recoveries of $8,000.

The Bank  maintained  its practice  during the first quarter of selling  Federal
funds,  having  sold  continuously  on a daily basis in amounts  averaging  $2.7
million,  1.98% of average total assets.  These figures  compare to $4.9 million
and 3.8%, respectively,  for the fourth quarter 1996. The quarter-end balance of
$4.4 million represented a $.9 million decrease from the previous year-end.  The
decline in both average and period end levels is not a major  liquidity  concern
due to the cyclical deposit decline discussed above. Additionally,  the increase
in loans combined with a small increase in investment account contributed to the
declining Federal funds level.

The investment  account increased  $474,000 in the first quarter.  New purchases
totaled $2.7 million, while maturities, sales and calls totaled $1.9 million and
prepayments  on  mortgage-backed  securities  approximated  $66,000.  The  gross
unrealized loss on available for sale securities increased during the quarter by
$278,000.  Management  closely  monitors  the  gain  or  loss  position  in  the
portfolio. The gradual rise in interest rates has adversely affected bond prices
resulting in declines in market values.  However,  the yield of the portfolio in
total interest earnings  continues to rank the bank in the upper quartile of its
peer group as noted in the FFIEC Uniform Bank Performance  Report.  Management's
future  investment  decisions may move more toward


                                       13
<PAGE>


bonds with less market  values  volatility,  provided  this can be done  without
harmful compromise of interest earnings.

The total portfolio  remained  constant at 20.0% of total assets at December 31,
1996 and March 31, 1997. The portfolio was comprised of 74% U.S.  Treasuries and
U.S. Government Agencies,  25% State, County and Municipal  governments,  and 1%
other  bank-qualified  Private  label CMOs and Federal  Reserve Bank stock.  The
portfolio target level will approximate 20% of total assets throughout 1997.

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  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.
Therefore, the negative $278,000 swing during the first quarter is not cause for
alarm at this time.

Deposits   represent  99.1%  of  total   liabilities  of  the  Bank,   including
non-interest  bearing checking accounts which represent 13.9% of total deposits.
There continues to be no brokered deposits.

Earnings

The Company recorded a net after tax profit of $415,000 during the first quarter
1997, a $70,000, or 20.3% increase over March 31, 1996.

Net  interest  income of  $1,756,000  for the three  months ended March 31, 1997
represented a $337,000  increase (23.7%) over the same period in 1996.  However,
as a percentage of average earning assets,  the 1997 figure of 5.64% reflected a
modest  decrease of 1.57% from the 5.73% for the first  quarter of 1996.  Public
opinion  anticipated  the Federal  Reserve's  increase in interest rates well in
advance  of the  actual  increase.  As a result,  the Bank  began to see  upward
pressure from competition on deposit product interest rates. Therefore,  cost of
funds  demonstrated  an increase  throughout  the quarter,  while the  effective
increase  in loan rates was not  realized  until March 26, 1997 when the "prime"
rate increased 25 basis points.

Total  non-interest  income for the first quarter of 1997 was $193,000  compared
with  $148,000  for  the  corresponding  period  in  1996  (a  30.4%  increase).
Non-interest expense of $1,261,000 increased $960,000 (31.3%) over first quarter
1996.  $149,000  of the  increase  was in  personnel  expense,  most of which is
associated with the hiring of additional employees to support the Bank's growth,
both in number of  offices  and  customer  accounts.  The Bank  opened its fifth
branch  office in January  1997.  The  building  which  houses  this branch also
includes a new  Operations  Center.  Total  capitalized  costs of this  combined
branch  and  Operations  Center  exceeded  $1.5  million.  The impact of such an
expansion in plant and  equipment  was reflected in an increase in total monthly
depreciation  expense of  approximately  $10,000.  Although the improved  office
conditions  had been  necessary for some time, it will take the Company  several
months throughout 1997 to effectively absorb these increased overhead costs.


                                       14
<PAGE>

Loan Loss Reserve

The March 31, 1997 "Allowance for Loan Losses" represented 1.25% of total loans,
compared to 1.23% at March 31, 1996. The current  expense  accrual was increased
from  $27,000 to $39,000 per month in March 1997.  The  increase was prompted as
growth in total loans had outpaced  the growth of the reserve in recent  months,
causing a gradual  decline in the  ratio.  The  Company  plans to  maintain  the
reserve in a range from 1.25% to 1.30% of total loans. This level is expected to
be adequate for growth in the second quarter 1997.  Both the "Allowance" and the
accrual will be reviewed for possible adjustment in June 1997.

Capital and Liquidity

Equity capital at  quarter-end  totaled $14.7  million,  representing  10.60% of
total  assets.  This level of capital  would be  adequate  to support  growth in
operations  to an asset level  approximating  $150  million  without  additional
external  injections.  However, the current quarters for the Newport News office
are under a lease that expires in October of 1998.  Plans are being developed to
construct a new  permanent  facility on a nearby site which was acquired in 1996
at a cost in excess of $600,000.  Total cost of  construction  and site work may
approach  $1  million.  Thus,  the need for  additional  capital  to assist  the
building  program may be warranted before such an asset level described above is
reached.

Short term  liquidity is provided by access to the Federal funds market  through
correspondent bank relationships which include commitments of $5.4 million.  Fed
funds sold equaled  11.5% of total demand  deposits.  This  compares to 13.3% at
March 31,  1996.  This is  considered  an adequate  level of  liquidity  to meet
anticipated withdrawals and expected loan demand.

Future Plans

The  Company is  considering  further  expansion  of its  branch  network in the
Peninsula  region of  Tidewater,  Virginia.  Exploration  of the City of Hampton
market is currently underway.  It is anticipated that a site for a sixth banking
office  will be located  before the end of 1997 with an  anticipated  opening in
1998. The Company is also in the process of negotiating a possible joint venture
arrangement  with a  mortgage  company to expand its  product  offerings  in the
mortgage loan area. It is expected that this process will be consummated  before
the end of the third quarter of 1997.


                                       15
<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 - None

Item 5. Other Information - None

Item 6. Exhibits and reports on Form 8-K

        a)  Exhibits

               11         Statement re: computation of per share earnings

               19         Report to Shareholders

        b)  Form 8-K - None


                                       16

<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:  May 14, 1997                    BY        /s/ W. J. Farinholt
                                         ----------------------------------
                                         W. J. Farinholt, President & CEO



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

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




                                       17