SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549

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

                                    FORM 10-Q

                QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

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


For Quarter Ended September 30, 1999            Commission File Number 0-20378

                              CENIT BANCORP, INC.
             (Exact name of registrant as specified in its charter)

               Delaware                         54-1592546
(State or other jurisdiction of          (I.R.S. Employer Identification
 incorporation or organization)                    Number)

       225 West Olney Road
       Norfolk, Virginia                           23510
(Address of principal executive                  (Zip code)
      office)

      Registrant's telephone number, including area code:  (757) 446-6600

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
     required to be filed by Section 13 or 15(d) of the Securities  Exchange Act
     of 1934 during the preceding 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

     Indicate the number of shares  outstanding of each of the issuer's  classes
     of common stock, as of the latest practicable date.

Common Stock $.01 Par Value                         4,813,644
---------------------------                ----------------------------
       Title of Class                      Number of Shares Outstanding
                                             as of November 1, 1999

<PAGE>

                       CENIT BANCORP, INC. AND SUBSIDIARY

                                    Contents
--------------------------------------------------------------------------------


                                                                          Page
                                                                          ----
PART I - FINANCIAL INFORMATION

Item 1
   Financial Statements

Consolidated Statement of Financial Condition as of September 30, 1999
(Unaudited) and December 31, 1998............................................1

Unaudited Consolidated Statement of Operations for the Three Months and Nine
Months ended September 30, 1999 and September 30, 1998.......................2

Unaudited Consolidated Statement of Comprehensive Income for the Nine
Months Ended September 30, 1999 and September 30, 1998.......................3

Unaudited Consolidated Statement of Changes in Stockholders' Equity for the
Nine Months ended September 30, 1999.........................................4

Unaudited Consolidated Statement of Cash Flows for the Nine Months ended
September 30, 1999 and September 30, 1998....................................5

Notes to Unaudited Consolidated Financial Statements.........................6

Item 2
   Management's Discussion and Analysis of Financial Condition and Results
   of Operations.............................................................6

Item 3
   Quantitative and Qualitative Disclosures About Market Risk...............19

PART II - OTHER INFORMATION

Item 1
   Legal Proceedings........................................................20

Item 2
   Changes in Securities....................................................20

Item 3
   Defaults Upon Senior Securities..........................................20

Item 4
   Submission of Matters to a Vote of Security Holders......................20

Item 5
   Other Information........................................................20

Item 6
   Exhibits and Reports on Form 8-K.........................................20

Signatures..................................................................20

<PAGE>

PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements

                       CENIT BANCORP, INC. AND SUBSIDIARY

                  CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
                  (Dollars in thousands, except per share data)

                                     ASSETS

<TABLE>
<CAPTION>
                                                                           (Unaudited)
                                                                       September 30, 1999       December 31, 1998
                                                                       ------------------       -----------------
<S>                                                                       <C>                       <C>
Cash                                                                      $   19,377                $  14,656
Federal funds sold                                                             4,811                   42,289
Securities available for sale at fair value (adjusted
   cost of $132,215 and $64,327, respectively)                               131,814                   65,136
Loans, net:
   Held for investment                                                       466,140                  484,783
   Held for sale                                                               1,000                    3,878
Interest receivable                                                            4,010                    3,723
Real estate owned, net                                                           200                      377
Federal Home Loan Bank stock, at cost                                          5,450                    5,066
Property and equipment, net                                                   12,896                   13,002
Goodwill and other intangibles, net                                            3,380                    3,647
Other assets                                                                   3,712                    4,499
                                                                          ----------                ---------
                                                                          $  652,790                $ 641,056
                                                                          ==========                =========


                                       LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
   Deposits:
     Noninterest-bearing                                                  $   67,974                $  78,712
     Interest-bearing                                                        409,627                  418,060
                                                                          ----------                ---------
        Total deposits                                                       477,601                  496,772
   Advances from the Federal Home Loan Bank                                  105,000                   75,000
   Securities sold under agreements to repurchase                             14,926                   13,084
   Advance payments by borrowers for taxes and insurance                         865                      599
   Other liabilities                                                           3,240                    5,525
                                                                          ----------                ---------
        Total liabilities                                                    601,632                  590,980
                                                                          ----------                ---------

Stockholders' equity:
   Preferred stock, $.01 par value; authorized 3,000,000
     shares; none outstanding                                                      -                        -
   Common stock, $.01 par value; authorized 7,000,000 shares;
     issued and outstanding 4,813,644 and 4,808,806 shares,
     respectively                                                                 48                       48
   Additional paid-in capital                                                 14,051                   14,177
   Retained earnings - substantially restricted                               41,360                   39,600
   Common stock acquired by Employee Stock Ownership Plan (ESOP)              (3,910)                  (4,052)
   Common stock acquired by Management Recognition
     Plan (MRP)                                                                 (142)                    (199)
   Accumulated other comprehensive (loss) income,
     net of income taxes                                                        (249)                     502
                                                                          ----------                ---------
     Total stockholders' equity                                               51,158                   50,076
                                                                          ----------                ---------
                                                                          $  652,790                $ 641,056
                                                                          ==========                =========

<FN>
The notes to unaudited consolidated financial statements are an integral part of this statement.
</FN>
</TABLE>
                                        1
<PAGE>

                       CENIT BANCORP, INC. AND SUBSIDIARY

                 UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
                  (Dollars in thousands, except per share data)

<TABLE>
<CAPTION>

                                                                Three months                     Nine Months
                                                                    Ended                           Ended
                                                                September 30,                    September 30,
                                                           1999            1998              1999             1998
                                                           ----            ----              ----             ----
<S>                                                     <C>            <C>               <C>              <C>

Interest and fees on loans                              $  8,857       $  10,115         $  27,500        $  30,439
Interest on mortgage-backed certificates                     731             378             1,263            2,884
Interest on investment securities                            847             644             2,425            2,011
Dividends and other interest income                          255             230               796              914
                                                        --------       ---------         ---------        ---------
     Total interest income                                10,690          11,367            31,984           36,248
                                                        --------       ---------         ---------        ---------

Interest on deposits                                       4,193           4,891            12,560           14,988
Interest on borrowings                                     1,255           1,115             3,591            5,209
                                                        --------       ---------         ---------        ---------
     Total interest expense                                5,448           6,006            16,151           20,197
                                                        --------       ---------         ---------        ---------
     Net interest income                                   5,242           5,361            15,833           16,051
Provision for loan losses                                     39             100                75              440
                                                        --------       ---------         ---------        ---------
     Net interest income after provision
       for loan losses                                     5,203           5,261            15,758           15,611
                                                        --------       ---------         ---------        ---------

Other income:
     Merchant processing fees                                716             618             1,907            1,548
     Deposit fees                                            603             602             1,886            1,822
     Gains on sales of loans and securities, net             174             318               606              780
     Commercial mortgage brokerage fees                        -              30               168              393
     Other                                                   398             235               979              694
                                                        --------       ---------         ---------        ---------
                  Total other income                       1,891           1,803             5,546            5,237
                                                        --------       ---------         ---------        ---------

Other expenses:
     Salaries and employee benefits                        1,951           2,052             6,522            6,246
     Equipment, data processing and supplies                 730             690             2,221            2,168
     Merchant processing                                     550             515             1,533            1,347
     Net occupancy expense of premises                       528             477             1,576            1,404
     Professional fees                                        88             105               479              472
     Expenses, gains/losses on sales and provision
       for losses on real estate owned, net                   11              11                46               91
     Other                                                   691             656             1,888            1,977
                                                        --------       ---------         ---------        ---------
                  Total other expenses                     4,549           4,506            14,265           13,705
                                                        --------       ---------         ---------        ---------

Income before income taxes                                 2,545           2,558             7,039            7,143
Provision for income taxes                                   916             934             2,534            2,557
                                                        --------       ---------         ---------        ---------

     Net income                                         $  1,629       $   1,624         $   4,505        $   4,586
                                                        ========       =========         =========        =========

Earnings per share:
     Basic                                              $    .35       $     .34         $     .98        $     .97
                                                        ========       =========         =========        =========
     Diluted                                            $    .35       $     .33         $     .97        $     .94
                                                        ========       =========         =========        =========

Dividends per common share paid                         $    .15       $     .10         $     .45        $     .30
                                                        ========       =========         =========        =========

<FN>
The notes to unaudited consolidated financial statements are an integral part of this statement.
</FN>
</TABLE>
                                        2
<PAGE>

                       CENIT BANCORP, INC. AND SUBSIDIARY

            UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                             (Dollars in thousands)
<TABLE>
<CAPTION>

                                                                                                Nine Months
                                                                                                   Ended
                                                                                               September 30,
                                                                                         1999             1998
                                                                                         ----             ----
<S>                                                                                    <C>               <C>

Net income                                                                             $  4,505          $ 4,586

Other comprehensive loss, before income taxes:
   Unrealized losses on securities available for sale:
     Unrealized holding losses arising during the period                                 (1,211)            (246)
     Less: reclassification adjustment for gains included in net income                       -              (72)
                                                                                       --------          -------

Other comprehensive loss, before income taxes                                            (1,211)            (318)

Income tax benefit related to items of other comprehensive loss                             460               88
                                                                                       --------          -------

Other comprehensive loss, net of income taxes                                              (751)            (230)
                                                                                       --------          -------

Comprehensive income                                                                   $  3,754          $ 4,356
                                                                                       ========          =======

<FN>
The notes to unaudited consolidated financial statements are an integral part of this statement.
</FN>
</TABLE>
                                        3
<PAGE>

                       CENIT BANCORP, INC. AND SUBSIDIARY

       UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                      Nine Months Ended September 30, 1999
                             (Dollars in thousands)




<TABLE>
<CAPTION>

                                                                                                      Accumulated
                                                                                        Common          Other
                                                                                         Stock      Comprehensive
                                                  Common      Additional                Acquired    Income (Loss),
                                     Common        Stock       Paid-In     Retained     by ESOP      Net of Income
                                  Stock Shares    Amount       Capital     Earnings     and MRP          Taxes          Total
                                  ------------    ------      ----------   --------     -------      ------------       -----

<S>                               <C>              <C>        <C>          <C>          <C>           <C>             <C>

Balance, December 31, 1998        4,808,806        $ 48       $14,177      $39,600      $(4,251)      $  502          $ 50,076


Comprehensive income                      -           -             -        4,505            -         (751)            3,754


Cash dividends declared                   -           -             -       (2,745)           -            -            (2,745)


Exercise of stock options and
 related tax benefits                23,168           -           198            -            -            -               198


Stock repurchases                   (18,330)          -          (373)           -            -            -              (373)


Other                                     -           -            49            -          199            -               248
                                  ---------        ----       -------      -------      -------       ------          --------

Balance, September 30, 1999       4,813,644        $ 48       $14,051      $41,360      $(4,052)      $ (249)         $ 51,158
                                  =========        ====       =======      =======      =======       ======          ========




<FN>
The notes to unaudited consolidated financial statements are an integral part of this statement.
</FN>
</TABLE>

                                        4
<PAGE>

                       CENIT BANCORP, INC. AND SUBSIDIARY

                 UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
                             (Dollars in thousands)
<TABLE>
<CAPTION>

                                                                          Nine months ended September  30,
                                                                          --------------------------------
                                                                             1999                1998
                                                                             ----                ----
<S>                                                                      <C>                 <C>

Cash flows from operating activities:
   Net income                                                            $   4,505           $  4,586
   Add (deduct) items not affecting cash in the period:
     Provision for loan losses                                                  75                440
     Provision for losses on real estate owned                                  22                 14
     Amortization of loan yield adjustments                                    569                399
     Depreciation, amortization and accretion, net                           1,279              1,536
     Net (gains) losses on sales/disposals of:
        Securities                                                               -                (72)
        Loans                                                                 (606)              (708)
        Real estate, property and equipment                                   (298)                36
     Proceeds from sales of loans held for sale                             46,171             57,140
     Originations of loans held for sale                                   (42,710)           (57,651)
     Change in assets/liabilities:
        Decrease in interest receivable and other assets                       577                538
        (Decrease) increase in other liabilities                            (2,239)               809
                                                                         ---------           --------
        Net cash provided by operating activities                            7,345              7,067
                                                                         ---------           --------

Cash flows from investing activities:
   Purchases of securities available for sale                              (86,762)           (40,234)
   Principal repayments on securities available for sale                     6,494             32,566
   Proceeds from maturities of securities available for sale                12,350             14,000
   Proceeds from sales of securities available for sale                          -             66,660
   Net decrease (increase) in loans held for investment                     17,978            (11,051)
   Net proceeds on sales of real estate owned                                  284                302
   Additions to real estate owned                                              (24)               (83)
   Purchases of Federal Home Loan Bank stock                                (2,500)            (1,650)
   Redemption of Federal Home Loan Bank stock                                2,116              5,295
   Proceeds from sale of property and equipment                                326                 70
   Purchases of property and equipment                                      (1,010)            (1,126)
                                                                         ---------           --------
     Net cash (used for) provided by investing activities                  (50,748)            64,749
                                                                         ---------           --------

Cash flows from financing activities:
   Proceeds from exercise of stock options and warrants                        138                150
   Net decrease in deposits                                                (19,171)           (18,843)
   Proceeds from Federal Home Loan Bank advances                            83,000            556,000
   Repayment of Federal Home Loan Bank advances                            (53,000)          (633,000)
   Repayments of other borrowings                                                -             (2,575)
   Net increase in securities sold under agreement
     to repurchase and federal funds purchased                               1,842              2,539
   Cash dividends paid                                                      (2,056)            (1,424)
   Common stock repurchase                                                    (373)            (2,964)
   Other, net                                                                  266                320
                                                                         ---------           --------
        Net cash provided by (used for) financing activities                10,646            (99,797)
                                                                         ---------           --------

Decrease in cash and cash equivalents                                      (32,757)           (27,981)
Cash and cash equivalents, beginning of period                              56,945             54,111
                                                                         ---------           --------
Cash and cash equivalents, end of period                                 $  24,188           $ 26,130
                                                                         =========           ========

Supplemental disclosures of cash flow  information:
   Cash paid during the period for interest                              $   4,868           $  7,359
   Cash paid during the period for income taxes                              2,347              2,085
Schedule of noncash investing and financing activities:
   Real estate acquired in settlement of loans                           $     302           $    312
   Loans to facilitate sale of real estate owned                               281                470

<FN>
The notes to unaudited consolidated financial statements are an integral part of this statement.
</FN>
</TABLE>


                                        5
<PAGE>

                       CENIT BANCORP, INC. AND SUBSIDIARY

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------


Note 1 - Basis of Presentation

     The  accompanying  unaudited  consolidated  financial  statements have been
prepared in accordance with the instructions to Form 10-Q and, therefore, do not
include  all of  the  disclosures  and  notes  required  by  generally  accepted
accounting principles. In the opinion of management, all adjustments (consisting
of normal recurring accruals)  considered necessary for a fair presentation have
been  included.  The results of operations  for the three and nine month periods
ended September 30, 1999 and 1998 are not necessarily indicative of results that
may be expected for the entire year or any interim periods.  Certain  previously
reported amounts have been reclassified to agree with the current  presentation.
The  interim  financial  statements  should  be read  in  conjunction  with  the
December 31,  1998 consolidated financial statements of CENIT Bancorp, Inc. (the
"Company").

Note 2 - Per Share Data

     Basic  earnings  per share is  calculated  using  weighted  average  shares
outstanding.  For the nine month period and three month  period ended  September
30, 1999,  weighted average shares used to compute basic earnings per share were
4,578,034  and  4,592,926,  respectively.  For the nine months and three  months
ended September 30, 1998, weighted average shares used to compute basic earnings
per share were 4,749,457 and 4,769,039, respectively.

     Diluted earnings per share is calculated by adding common stock equivalents
to the weighted average shares outstanding.  For the nine month period and three
month period ended September 30, 1999,  weighted  average shares used to compute
diluted earnings per share were 4,658,141 and 4,663,600,  respectively.  For the
nine months and three months ended September 30, 1998,  weighted  average shares
used to  compute  diluted  earnings  per share  were  4,873,332  and  4,872,882,
respectively.

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

General

     The  Company's  business  currently  consists  of the  business of its sole
subsidiary, CENIT Bank (the "Bank"). The principal business of the Bank consists
of  attracting  retail  deposits  from the  general  public in its market  areas
through a variety of deposit  products and investing  these funds in commercial,
real  estate  and  consumer  loans.  The Bank also  invests  in  mortgage-backed
certificates,  securities  issued  by the  U.S.  Treasury  and  U.S.  Government
agencies,   federal  funds  sold,  Federal  Home  Loan  Bank  stock,  and  other
investments permitted by applicable laws and regulations.

Financial Condition Of The Company

Total Assets

     At  September  30, 1999,  the Company had total  assets of $652.8  million,
compared to $641.1 million at December 31, 1998.

Securities Available for Sale

     Securities  available for sale totaled $131.8 million at September 30, 1999
and are comprised of mortgage-backed  certificates,  U. S. Treasury and other U.
S. Government agency securities,  and other debt securities. The net increase of
$66.7  million,  or 102.5% from the December  31, 1998 balance of $65.1  million
resulted  primarily  from  $86.8  million in  purchases  of  available  for sale
securities,  partially offset by $12.4 million in proceeds from maturities,  and
$6.5 million in principal repayments.



                                        6
<PAGE>

     In the third  quarter  of 1999,  the  Company  purchased  $51.8  million in
mortgage-backed securities. These securities consisted of $29.0 million of fixed
rate mortgage-backed securities with a weighted average maturity of eight years,
and $22.8 million of adjustable rate mortgage-backed  securities with an average
interest   rate  reset  of  28  months.   The  Company  did  not   purchase  any
mortgage-backed securities in the third quarter of 1998.

Loans

     The balance of net loans held for investment  decreased from $484.8 million
at December  31, 1998 to $466.1  million at  September  30,  1999, a decrease of
$18.7  million  or  3.9%.  This  decrease  is  primarily  due to a  decrease  in
adjustable  rate  single-family  mortgages  of $29.8  million,  offset by a $5.2
million  increase in fixed rate  single-family  mortgages.  The  Company's  core
banking  loans  (multi-family,   commercial  real  estate,  construction,   land
acquisition and  development,  consumer lots,  commercial  business and consumer
loans) increased $5.8 million, or 2.4%, from December 31,  1998 to September 30,
1999. For the nine months ended  September 30, 1999, loan  originations  totaled
$174.4  million  and loan  purchases  totaled  $24.2  million.  Total  principal
reductions totaled $222.8 million.




                                        7
<PAGE>

     The following  table sets forth the  composition of the Company's  loans in
dollar  amounts and as a percentage of the Company's  total gross loans held for
investment at the dates indicated.

<TABLE>
<CAPTION>

                                                        September 30, 1999                  December 31, 1998
                                                        ------------------                  -----------------
                                                                       (Dollars in Thousands)
                                                       Amount        Percent               Amount       Percent
                                                       ------        -------               ------       -------
<S>                                                  <C>              <C>               <C>              <C>
Real estate loans:
   Residential permanent 1- to 4-family:
     Adjustable rate                                 $  151,271       30.16%            $  181,104       34.63%
     Fixed rate
       Conventional                                      72,262       14.42                 66,041       12.63
       Guaranteed by VA or insured by FHA                 2,973         .59                 3,972          .76
                                                     ----------       -----             ----------       -----
     Total permanent 1- to 4-family                     226,506       45.17                251,117       48.02
   Residential permanent 5 or more family                 8,737        1.74                  7,874        1.51
                                                     ----------       -----             ----------       -----
     Total permanent residential loans                  235,243       46.91                258,991       49.53
                                                     ----------       -----             ----------       -----

   Commercial real estate loans:
     Hotels                                              10,483        2.09                  9,208        1.76
     Office and warehouse facilities                     38,020        7.58                 36,659        7.01
     Retail facilities                                   23,118        4.61                 22,823        4.37
     Other                                               10,453        2.08                  7,921        1.51
                                                     ----------       -----             ----------       -----
     Total commercial real estate loans                  82,074       16.36                 76,611       14.65
                                                     ----------       -----             ----------       -----

   Construction loans:
     Residential 1- to 4-family                          48,875        9.74                 47,232        9.03
     Residential 5 or more family                         9,912        1.98                 19,621        3.75
     Nonresidential                                       1,720         .34                  4,101         .79
                                                     ----------       -----             ----------       -----
     Total construction loans                            60,507       12.06                 70,954       13.57
                                                     ----------       -----             ----------       -----


   Land acquisition and development loans:
     Consumer lots                                        3,598         .72                  3,703        0.71
     Acquisition and development                         17,038        3.40                 11,444        2.19
                                                     ----------       -----             ----------       -----
     Total land acquisition and development
       loans                                             20,636        4.12                 15,147        2.90
                                                     ----------       -----             ----------       -----

     Total real estate loans                            398,460       79.45                421,703       80.65
                                                     ----------       -----             ----------       -----

Consumer loans:
   Boats                                                  3,072         .61                  4,275         .82
   Home equity and second mortgage                       56,082       11.18                 52,845       10.11
   Other                                                 12,036        2.40                 10,589        2.02
                                                     ----------       -----             ----------       -----
     Total consumer loans                                71,190       14.19                 67,709       12.95
                                                     ----------       -----             ----------       -----
Commercial business loans                                31,910        6.36                 33,485        6.40
                                                     ----------       -----             ----------       -----

     Total loans                                        501,560      100.00%               522,897      100.00%
                                                     ----------      ======             ----------      ======
Less:
   Allowance for loan losses                              3,882                              4,024
   Loans in process                                      32,957                             35,463
   Unearned discounts, premiums, and loan fees, net      (1,419)                            (1,373)
                                                     ----------                         ----------
                                                         35,420                             38,114
                                                     ----------                         ----------

Total loans, net                                     $  466,140                         $  484,783
                                                     ==========                         ==========

</TABLE>


                                        8
<PAGE>

     The following table sets forth information about  originations,  purchases,
sales,  and  principal  reductions  for  the  Company's  loans  for  the  period
indicated.

                                                            Nine Months Ended
                                                            September 30, 1999
                                                           --------------------
                                                          (Dollars in Thousands)
Loans originated:
   Real estate:
      Permanent:
         Residential 1- to 4-family                            $   58,642
         Residential 5 or more family                               1,500
                                                               ----------
            Total                                                  60,142
                                                               ----------
      Commercial real estate                                       15,827
                                                               ----------
      Construction:
         Residential 1- to 4-family                                15,054
         Residential 5 or more family                               1,218
         Nonresidential                                             1,633
                                                               ----------
            Total                                                  17,905
                                                               ----------
      Land acquisition:
         Consumer lots                                                958
         Acquisition and development                               10,852
                                                               ----------
            Total                                                  11,810
                                                               ----------
            Total real estate loans originated                    105,684
                                                               ----------
   Consumer:
      Home equity and second mortgage                              28,015
      Other                                                         7,628
                                                               ----------
            Total                                                  35,643
                                                               ----------
   Commercial business                                             33,065
                                                               ----------
            Total loans originated                                174,392
   Loans purchased                                                 24,171
                                                               ----------
            Total loans originated and purchased                  198,563
                                                               ----------
Principal reductions:
   Repayments and other principal reductions                      178,672
   Real estate loans sold                                          44,082
                                                               ----------
            Total principal reductions                            222,754
                                                               ----------
Net decrease in total loans                                    $  (24,191)
                                                               ==========


Net decrease in loans held for sale                            $   (2,855)
Net decrease in gross loans held for investment                   (21,336)
                                                               ----------
                                                               $  (24,191)
                                                               ==========



                                        9
<PAGE>

Deposits

     Total deposits decreased $19.2 million, or 3.9%, between September 30, 1999
and  December  31,  1998.   Noninterest-bearing  and  interest-bearing  deposits
decreased $10.7 million and $8.5 million, respectively.

     While the Company's overall noninterest-bearing  deposits balance decreased
from $78.7  million at December 31, 1998 to $68.0 million at September 30, 1999,
its average  balance  increased  for the three  months and the nine months ended
September 30, 1999. The average  noninterest-bearing  deposits balance increased
$8.7 million to $66.8  million for the three months ended  September 30, 1999 as
compared to the same period last year. The average noninterest- bearing deposits
balance  for the first  nine  months of 1999  increased  $11.7  million to $65.5
million as compared to the first nine months of 1998.

     The  $8.5  million  decrease  in  interest-bearing  deposits  is  primarily
attributed to customers  seeking other  investment  alternatives  offered in the
market as a result of current economic conditions.

Capital

     The Company's and the Bank's capital ratios exceeded applicable  regulatory
requirements at September 30, 1999.

     In July 1999,  the Board of  Directors  of the Company  gave the  Company's
management  the  discretion  to  initiate a  repurchase  of up to 150,000 of the
Company's  shares.  The Company is not obligated to conduct such a repurchase at
all,  and  the  Company's  decision  to do so,  as  well  as the  timing  of any
repurchase,  will depend on a variety of factors.  As of September  30, 1999, no
shares had been repurchased under this discretionary authority.

Asset Quality

     Nonperforming Assets.  Nonperforming assets consist of nonperforming loans,
real estate  acquired in  settlement  of loans  ("REO"),  and other  repossessed
assets. Generally the Company does not accrue interest on loans that are 90 days
or more past due,  with the  exception of certain  VA-guaranteed  or FHA insured
one- to four-family  permanent  mortgage loans,  certain credit card loans,  and
matured loans for which the borrowers are still making required monthly payments
of interest,  or principal and  interest,  and with respect to which the Bank is
negotiating extensions or refinancings with the borrowers.


                                       10
<PAGE>

     The   following   table  sets  forth   information   about  the   Company's
nonperforming loans, REO, and other repossessed assets at the dates indicated.

<TABLE>
<CAPTION>

                                                             September 30,              December 31,
                                                                1999                       1998
                                                             -------------              ------------
                                                                       (Dollars in Thousands)
<S>                                                          <C>                         <C>
Nonperforming loans:
   Real estate loans:
     Permanent residential 1- to 4-family
       Nonaccrual                                            $  205                      $   359
       Accruing loans 90 days or more past due                   36                          511
                                                             ------                      -------
       Total                                                    241                          870
                                                             ------                      -------


   Construction:
       Accruing loans 90 days or more past due                  369                            -
                                                             ------                      -------


   Land acquisition and development loans:
       Accruing loans 90 days or more past due                   48                            -
                                                             ------                      -------


   Consumer loans:
       Nonaccrual:
         Boats                                                   12                           37
         Home equity and second mortgage                         95                           57
         Other                                                   52                           46
       Accruing 90 days or more past due                          -                            2
                                                             ------                      -------
       Total                                                    159                          142
                                                             ------                      -------


   Commercial business loans:
       Nonaccrual                                                31                           64
                                                             ------                      -------


Total nonperforming loans:
       Nonaccrual                                               395                          563
       Accruing loans 90 or more days past due                  453                          513
                                                             ------                      -------
       Total                                                    848                        1,076

Real estate owned, net                                          200                          377
Other repossessed assets, net                                     -                           21
                                                             ------                      -------


   Total nonperforming assets, net                           $1,048                      $ 1,474
                                                             ======                      =======


   Total nonperforming assets, net, to total assets             .16%                         .23%
                                                             ======                      =======


</TABLE>

                                       11
<PAGE>

     Allowance for Loan Losses.  The following  table sets forth activity of the
allowance for loan losses for the periods indicated.

                                                Nine months ended September 30,
                                                -------------------------------
                                                1999                      1998
                                                ----                      ----
                                                    (Dollars in Thousands)

Balance at beginning of period                 $ 4,024                  $ 3,783
Provision for loan losses                           75                      440
Losses charged to allowance                       (286)                    (340)
Recovery of prior losses                            69                       94
                                               -------                  -------
Balance at end of period                       $ 3,882                  $ 3,977
                                               =======                  =======

     The Company's  provision for loan losses  decreased to $75,000 for the nine
months ended  September 30,  1999, as compared to $440,000 in the same period in
1998.  The  difference  between  the  provision  for loan  losses  and net loans
charged-off during the first nine months of 1999 relates primarily to loan types
in which the Bank is no longer active and for which  provisions  for loan losses
have previously been made.  Management  believes that these previous  provisions
are adequate.  At  September 30,  1999, the Company's  coverage ratio was 457.8%
based on a total allowance for loan losses of $3,882,000 and total nonperforming
loans of $848,000.  This compares to a coverage ratio of 374.0% at  December 31,
1998 and a coverage ratio of 454.5% at September 30, 1998.

Average Balance Sheets

     The  following  tables set forth,  for the periods  indicated,  information
regarding: (i) the total dollar amounts of interest income from interest-earning
assets  and the  resulting  average  yields;  (ii) the total  dollar  amounts of
interest  expense from  interest-bearing  liabilities and the resulting  average
costs;  (iii) net interest income;  (iv) interest rate spread;  (v) net interest
position;  (vi) the net yield earned on  interest-earning  assets; and (vii) the
ratio of total interest-earning  assets to total  interest-bearing  liabilities.
Average  balances shown in the following tables have been calculated using daily
average balances.


                                       12
<PAGE>

<TABLE>
<CAPTION>

                                                    For the Three Months                 For the Three Months
                                                            Ended                                Ended
                                                     September 30, 1999                   September 30, 1998
                                                ----------------------------         ----------------------------

                                                Average               Yield/         Average               Yield/
                                                Balance   Interest     Cost          Balance   Interest     Cost
                                                -------   --------    -----          -------   --------    -----
                                                                     (Dollars in thousands)
<S>                                          <C>           <C>          <C>        <C>          <C>           <C>
Interest-earning assets:
     Loans (1)                               $  468,494    $ 8,857      7.56%      $  509,055   $ 10,115      7.95%
     Mortgage-backed certificates                42,397        731      6.90           19,546        378      7.74
     U.S. Treasury and other U.S.
        Government agency securities             59,480        847      5.70           42,967        644      6.00
     Federal funds sold                          13,884        176      5.07            9,517        134      5.63
     Federal Home Loan Bank and
        Federal Reserve Bank stock                4,186         79      7.55            5,083         96      7.55
                                               --------     ------                  ---------     ------
        Total interest-earning assets           588,441     10,690      7.27          586,168     11,367      7.76
                                               --------     ------                  ---------     ------

Noninterest-earning assets:
     REO                                            298                                   595
     Other                                       38,910                                39,565
                                             ----------                             ---------
        Total noninterest-earning assets         39,208                                40,160
                                             ----------                             ---------
             Total assets                    $  627,649                            $  626,328
                                             ==========                             =========


Interest-bearing liabilities:
     Passbook and statement savings          $   34,077        209      2.45%      $   38,059        314      3.30%
     Checking accounts                           41,938        147      1.40           35,363        158      1.79
     Money market deposit accounts               75,718        660      3.49           66,312        649      3.91
     Certificates of deposit                    255,146      3,177      4.98          285,327      3,770      5.28
                                               --------     ------                  ---------     ------
        Total interest-bearing deposits         406,879      4,193      4.12          425,061      4,891      4.60
                                               --------     ------                  ---------     ------
     Advances from the Federal Home
        Loan Bank                                83,489      1,097      5.25           71,402        959      5.37
     Securities sold under agreements
        to repurchase                            15,010        158      4.21           12,895        150      4.65
     Other borrowings                                 -          -         -              332          6      7.23
                                               --------     ------                  ---------     ------
        Total borrowings                         98,499      1,255      5.10           84,629      1,115      5.27
                                               --------     ------                  ---------     ------
        Total interest-bearing liabilities      505,378      5,448      4.31          509,690      6,006      4.71
                                               --------     ------                  ---------     ------

Noninterest-bearing liabilities:
     Deposits                                    66,790                                58,131
     Other liabilities                            4,671                                 6,782
                                             ----------                             ---------
        Total noninterest-bearing liabilities    71,461                                64,913
                                             ----------                             ---------

             Total liabilities                  576,839                               574,603
                                             ----------                             ---------

Stockholders' equity                             50,810                                51,725
                                             ----------                             ---------


Total liabilities and stockholders' equity   $  627,649                            $  626,328
                                             ==========                             =========


Net interest income/interest rate spread                   $ 5,242      2.96%                   $  5,361      3.05%
                                                           =======      ====                    ========      ====

Net interest position/net interest margin    $   83,063                 3.56%      $   76,478                 3.66%
                                             ==========                 ====       ==========                 ====

Ratio of average interest-earning assets to
     average interest-bearing liabilities        116.44%                               115.00%
                                             ==========                             =========

<FN>
(1) Includes nonaccrual loans and loans held for sale.
</FN>
</TABLE>

                                       13
<PAGE>
<TABLE>
<CAPTION>

                                                     For the Nine Months                  For the Nine Months
                                                            Ended                                Ended
                                                     September 30, 1999                   September 30, 1998
                                                -----------------------------        ----------------------------

                                                Average               Yield/         Average               Yield/
                                                Balance   Interest     Cost          Balance   Interest     Cost
                                                -------   --------    ------         -------   --------    ------
                                                                     (Dollars in thousands)
<S>                                          <C>          <C>           <C>        <C>         <C>          <C>
Interest-earning assets:
     Loans (1)                               $  485,138   $ 27,500      7.56%      $  511,506  $  30,439    7.93%
     Mortgage-backed certificates                23,726      1,263      7.10           57,035      2,884    6.74
     U.S. Treasury and other U.S.
        Government agency securities             56,350      2,425      5.74           44,463      2,011    6.03
     Federal funds sold                          15,274        552      4.82           11,714        486    5.53
     Federal Home Loan Bank and
        Federal Reserve Bank stock                4,357        244      7.47            7,756        428    7.36
                                               --------     ------                   --------     ------
        Total interest-earning assets           584,845     31,984      7.29          632,474     36,248    7.64
                                               --------     ------                   --------     ------

Noninterest-earning assets:
     REO                                            353                                   738
     Other                                       38,064                                42,112
                                               --------                              --------
        Total noninterest-earning assets         38,417                                42,850
                                               --------                              --------
             Total assets                    $  623,262                            $  675,324
                                               ========                              ========


Interest-bearing liabilities:
     Passbook and statement savings              35,041        640      2.44%      $   40,697     1,008     3.30%
     Checking accounts                           40,089        429      1.43           34,268       468     1.82
     Money market deposit accounts               74,444      1,909      3.42           61,294     1,735     3.77
     Certificates of deposit                    256,543      9,582      4.98          299,194     11,777    5.25
                                               --------     ------                   --------     ------
        Total interest-bearing deposits         406,117     12,560      4.12          435,453     14,988    4.59
                                               --------     ------                   --------     ------
     Advances from the Federal Home
        Loan Bank                                80,110      3,107      5.17          115,938      4,739    5.45
     Securities sold under agreements
        to repurchase                            16,177        484      3.99           11,355        393    4.61
     Other borrowings                                 -          -         -            1,348         77    7.62
                                               --------     ------                   --------     ------
        Total borrowings                         96,287      3,591      4.97          128,641      5,209    5.40
                                               --------     ------                   --------     ------
        Total interest-bearing liabilities      502,404     16,151      4.29          564,094     20,197    4.77
                                               --------     ------                   --------     ------

Noninterest-bearing liabilities:
     Deposits                                    65,530                                53,786
     Other liabilities                            5,041                                 6,386
                                               --------                              --------
        Total noninterest-bearing liabilities    70,571                                60,172
                                               --------                              --------

             Total liabilities                  572,975                               624,266
                                               --------                              --------

Stockholders' equity                             50,287                                51,058
                                               --------                              --------


Total liabilities and stockholders' equity  $   623,262                             $ 675,324
                                               ========                              ========

Net interest income/interest rate spread                  $ 15,833      3.00%                     $16,051        2.87%
                                                           =======      ====                     ========        ====

Net interest position/net interest margin   $   82,441                  3.61%      $   68,380                    3.38%
                                              ========                  ====         ========                    ====

Ratio of average interest-earning assets to
     average interest-bearing liabilities       116.41%                                112.12%
                                              ========                               ========
<FN>
(1) Includes nonaccrual loans and loans held for sale.
</FN>
</TABLE>

                                       14
<PAGE>

Comparison  of Operating  Results for the Three Months Ended  September 30, 1999
and September 30, 1998.

General

     The Company's pre-tax income remained substantially unchanged for the three
months ended  September 30, 1999 as compared to the same period in 1998. A $119,
000  decrease in net interest  income was offset by a $88,000  increase in other
income and a $61,000 decrease in the provision for loan losses.

Net Interest Income

     The  Company's  net interest  income  before the  provision for loan losses
decreased $119,000, or 2.2%, to $5.2 million for the quarter ended September 30,
1999 as compared to $5.4  million for the quarter  ended  September  30, 1998. A
$0.7 million  decrease in interest income was partially offset by a $0.6 million
decrease  in interest  expense for the third  quarter of 1999 as compared to the
same period in 1998.

     Interest on loans decreased $1.2 million, or 11.9%, to $8.9 million for the
third quarter 1999  compared to $10.1  million for the same period in 1998.  The
average loan balance for the third quarter of 1999 decreased  $40.6 million,  or
8.0%,  to $468.5  million at September  30, 1999  compared to $509.1  million at
September 30, 1999.  The yield on the loan  portfolio for September 30, 1999 was
7.56% compared to 7.95%.  Increased loan  prepayments,  caused  primarily by the
declining market rates, primarily contributed to the lower average loan balances
and loan yields.

     Interest  on  the  Company's  portfolio  of  mortgage-backed   certificates
increased  $353,000,  or 93.4%,  to $731,000 for the quarter ended September 30,
1999 from $378,000 for the comparable  1998 period.  This increase was primarily
attributable to the purchase of $51.8 million in  mortgage-backed  securities in
the third quarter of 1999. The average  balance of the portfolio  increased from
$19.5 million in the third quarter of 1998 to $42.4 million in the third quarter
of 1999, an increase of 117.4%.

     Interest  on  U.S.  Treasury  & other  U.S.  Government  agency  securities
(collectively, "investments") increased $203,000, or 31.5%, in the third quarter
of 1999 compared to the same quarter in 1998. This increase was primarily due to
a $16.5 million,  or 38.4%,  increase in the average balance of investments from
$43.0 million at September 30, 1998 to $59.5 million at September 30, 1999.

     Interest on deposits  decreased  $698,000,  or 14.3%, for the quarter ended
September 30, 1999 compared to the quarter ended September 30,1998. The decrease
was  attributable to both a decrease in the average balance of  interest-bearing
deposits,  as well as a decrease  in the  average  cost of these  deposits.  The
average  balance of  interest-bearing  deposits  and the  average  cost of these
deposits were $406.9 million and 4.12%,  respectively,  for the third quarter of
1999 as  compared  to $425.1  million  and  4.60%,  respectively,  for the third
quarter of 1998.

Provision for Loan Losses

     The Company's  provision for loan losses  decreased  $61,000 to $39,000 for
the three months ended  September  30, 1999 as compared to $100,000 for the same
period in 1998.  Net loans  charged off during the three months ended  September
30, 1999 were $46,000  compared to $30,000 for the comparable  1998 period.  The
difference  between  the  provision  for loan  losses and net loans  charged off
during the third  quarter of 1999  relates  primarily to loan types in which the
Bank  is no  longer  active  and for  which  provisions  for  loan  losses  have
previously  been made.  Management  believes that these previous  provisions are
adequate.

Other Income

     Total  other  income  increased  by $88,000  for the third  quarter of 1999
compared to the same period in 1998.  The increase is primarily  the result of a
$163,000 increase in other income and a $98,000 increase in merchant  processing
fees,  partially  offset by a $144,000  decrease  in gains on sales of loans and
securities.  The increase in other income resulted  primarily from the sale of a
land parcel held by the Company.  The increase in merchant  processing  fees and
the  decrease in gains on sales of loans and  securities  were volume  generated
changes.


                                       15
<PAGE>

Other Expenses

     Total other expense remained  substantially  the same for the third quarter
of 1999  compared  to the third  quarter  of 1998.  Increases  in net  occupancy
expense and equipment and data  processing  expense were offset by a decrease in
salaries and employee benefits.


Comparison of Operating Results for the Nine Months Ended September 30, 1999 and
September 30, 1998.

General

     The Company's  pre-tax  income  decreased  $0.1  million,  or 1.4%, to $7.0
million for the nine months ended September 30, 1999 as compared to $7.1 million
for the nine months  ended  September  30,  1998.  A $560,000  increase in other
expense was partially offset by a $147,000 increase in net interest income after
the provision for loan losses and a $309,000 increase in other income.

Net Interest Income

     The  Company's  net  interest  income  before  provision  for  loan  losses
decreased  $0.2  million,  or 1.4%,  to $15.8  million for the nine months ended
September  30, 1999. A $4.3 million  decrease in interest  income was  partially
offset by a $4.1 million  decrease in interest expense for the first nine months
of 1999 as  compared  to the same period in 1998.  Increased  loan  prepayments,
caused  primarily by declining market rates,  contributed to decreased  interest
income on loans and loan yields. In addition,  management used the proceeds from
the sale,  maturity and  principal  repayment of certain  securities,  primarily
lower-yielding mortgage-backed certificates, to reduce advances from the Federal
Home Loan Bank ("FHLB") rather than seek alternative  investment  opportunities.
This  strategy  reduced  both  interest  earning  assets  and  interest  bearing
liabilities  during the first  nine  months of 1999  compared  to the first nine
months of 1998. Total interest-earning assets decreased to an average balance of
$584.8  million at September 30, 1999 from $632.5 million at September 30, 1998,
while  total  interest-bearing   liabilities  decreased  to  $502.4  million  at
September  30,  1999  from  $564.1  million  at  September  30,  1998.   Average
noninterest-bearing  deposits increased $11.7 million from September 30, 1998 to
September 30, 1999 which also had a favorable impact on net interest margin. The
Company's  net  interest  margin  increased  to 3.61% for the nine months  ended
September 30, 1999 from 3.38% for the nine months ended September 30, 1998.

     Interest on loans decreased $2.9 million, or 9.5%, to $27.5 million for the
nine months ended  September  30, 1999 compared to $30.4 million the same period
in 1998. This decrease was  attributable to both decreases in average  balances,
as well as a decrease in the loan portfolio yield  associated with the declining
market rates in 1998. The average loan balance for the first nine months of 1999
decreased $26.4 million,  or 5.2%, to $485.1 million  compared to $511.5 million
for the first nine months of 1998. The yield on the loan portfolio was 7.56% for
the nine months ended  September  30, 1999 compared to 7.93% for the same period
in 1998, a decrease of 4.7%.

     Interest  on  the  Company's  portfolio  of  mortgage-backed   certificates
decreased  $1.6  million , or 55.2%,  to $1.3  million for the nine months ended
September  30,  1999 from $2.9  million  for the  comparable  1999  period.  The
decrease was  attributable to a $33.3 million decrease in the average balance of
the  portfolio  during the first nine months of 1999  compared to the first nine
months of 1998. The decrease in the portfolio  average balance was  attributable
to the sales and  prepayments of  mortgage-backed  securities as a result of the
interest rate declines in 1998,  partially  offset by a substantial  purchase of
mortgage-backed securities in the third quarter of 1999.

     Interest on deposits  decreased by $2.4 million,  or 16.0%,  for first nine
months of 1999  compared  to the first nine  months of 1998.  The  decrease  was
attributable  to both a decrease  in the  average  balance  of  interest-bearing
deposits  as well as a  decrease  in the  average  cost of these  deposits.  The
average  balance of  interest-bearing  deposits  and the  average  cost of these
deposits were $406.1 million and 4.12%  respectively,  for the first nine months
of 1999 as compared to $435.5 and 4.59%, respectively, for the first nine months
of 1998.

     Interest on  borrowings  decreased  $1.6  million,  or 30.8%,  for the nine
months  ended  September  30, 1999  compared  to the same  period in 1998.  This
decrease  was  substantially  due to a $35.8  million  decrease  in the  average
balance of FHLB  advances for the first nine of 1999  compared to the first nine
months of 1998. The decline in the average balance

                                       16
<PAGE>

was   primarily   associated   with  the  use  of  proceeds  from  the  sale  of
mortgage-backed  certificates  to  significantly  reduce  the  balance  of  FHLB
advances in 1998.

Provision for Loan Losses

     The Company's  provision for loan losses decreased  $365,000 to $75,000 for
the nine months  ended  September  30, 1999 as compared to $440,000 for the same
period in 1998. Net loans charged off during the nine months ended September 30,
1999 were  $217,000  compared to $246,000 for the  comparable  1998 period.  The
difference  between  the  provision  for loan  losses and net loans  charged off
during the first nine months of 1999  relates  primarily  to loan types in which
the Bank is no longer  active  and for which  provisions  for loan  losses  have
previously  been made.  Management  believes that these previous  provisions are
adequate.

Other Income

     Total other income increased  $309,000,  or 5.9%, for the nine months ended
September  30,1999 as  compared  to the same period in 1998.  The  increase  was
primarily  attributable  to a $285,000  increase in other income.  This increase
resulted  primarily from a $152,000  recognition of gain from the sale of a land
parcel held by the Company and a $135,000  recognition of the deferred gain from
the sale of the Company's  headquarters  building.  Volume related  increases in
merchant  processing  fees and  deposit  fees  were  offset  by  volume  related
decreases in commercial  mortgage brokerage fees and gains on sales of loans and
securities.

Other Expenses

     Total  other  expenses  increased  $560,000,  or 4.1%,  from the first nine
months of 1999  compared  to the first nine  months of the  previous  year.  The
increase is primarily the result of a $276,000 increase in salaries and employee
benefits,  a $186,000  increase  in merchant  processing  expense and a $172,000
increase  in net  occupancy  expense.  The  increase in  salaries  and  employee
benefits is partially  attributed to the  implementation  of the Company's  core
banking  initiatives,  which required  additional lenders and retail bankers, as
well as salary  increases.  The increase in net  occupancy  expense is primarily
attributable  to increased rent expense  subsequent to the sale of the Company's
headquarters  building.  The  increase  in the  merchant  processing  expense is
primarily volume generated.

Liquidity

     The  principal  sources of funds for the Company for the nine months  ended
September  30, 1999  included  $46.2 million in proceeds from the sale of loans,
$18.8 million in proceeds from principal repayments and maturities of securities
available for sale, a $18.0 million decrease in loans held for investment, and a
$2.1  million  redemption  of  Federal  Home Loan Bank  stock.  Funds  were used
primarily to fund  purchases of securities  available for sale of $86.8 million,
to originate loans held for sale of $42.7 million,  as well as to compensate for
a $19.2 million decrease in deposits.

     The Company's  liquidity could be impacted by a decrease in the renewals of
deposits  or general  deposit  runoff.  However,  the Company has the ability to
raise  deposits  by  conducting  deposit  promotions.  In the event the  Company
requires funds beyond its ability to generate them internally, the Company could
obtain  additional  advances from the FHLB.  The Company could also obtain funds
through the sale of investment securities from its available for sale portfolio.

     All savings  institutions,  including the Bank, are required to maintain an
average daily balance of liquid assets equal to a certain  percentage of the sum
of its average daily balance of net withdrawable deposit accounts and borrowings
payable in one year or less.  The  liquidity  requirement  may vary from time to
time (between 4% and 10%) depending  upon economic  conditions and savings flows
of all savings  institutions.  At September 30, 1999 and December 31, 1998,  the
required  liquid asset ratio was 4.0%.  The Bank's  liquid asset ratio  exceeded
regulatory requirements at September 30, 1999 and December 31, 1998.





                                       17
<PAGE>

Impact of the Year 2000 Issue

     The Year 2000 Issue is the result of computer  programs being written using
two digits rather than four to define the  applicable  year.  As a result,  such
computer  programs will not recognize the correct date after  December 31, 1999.
Also,  systems and  equipment  that are not  typically  thought of as  "computer
related"  (referred to as "non-IT")  contain imbedded  hardware or software that
may have a time element.

     In 1997,  the  Company  implemented  a four  phase  project  of  inventory,
assessment,  renovation  and  testing/implementation  to  address  the Year 2000
Issue.  The scope of the project  included:  determining  the  compliance of all
applications,  operating  systems  and  hardware  on the  mainframe,  PC and LAN
systems;  addressing  issues related to non-IT embedded  software and equipment;
and addressing the compliance of the Company's  significant  borrowers and third
party providers.

     All four phases of the Company's Year 2000 project have been  substantially
completed  within  the  guidelines  and  timeframes  set  forth  by the  Federal
Financial  Institution  Examination Council. The Company will conduct additional
testing  throughout  the remainder of the year.  The Company also  completed its
Year 2000  Contingency  Plan,  designed to address  situations  including  power
shortages,  telephone  communications  failure and our customers' potential Year
2000  problems.  This plan also  contains two  stand-alone  plans to address the
Company's  expected  year-end  cash  requirements  and an event  plan to monitor
specific  operations prior to and during the century  rollover date.  Successful
contingency  planning is an ongoing process,  and the plans will be revised from
time to time during the remainder of 1999 as events warrant.

     The Company has determined, based primarily on communications with vendors,
that substantially all of the Company's non-IT related systems and equipment are
Year 2000  compliant.  Testing of critical  systems that the Company  determined
needed to be  conducted  and  compilation  of  written  documentation  regarding
compliance were substantially completed at the end of the first quarter of 1999.

     The  potential  impact of Year 2000 will depend not only on the  corrective
measures the Company  undertook but also on other  entities that provide data to
or receive data from the Company and on those whose  operational  capability  or
financial  conditions  are  important to the  Company.  The Company has received
assurances  from all major third party vendors that they are in  compliance.  In
addition,  management has reviewed significant lending and deposit relationships
and consulted with these customers as to their Year 2000 readiness. The plans of
such  parties are being  monitored  and the Company is prepared to deal with any
fundamental impact on the Company.

     The Company has established an internal review process to evaluate its Year
2000 testing results.  Monthly progress reports are made to the Company's senior
management and Board of Directors.  The Company's  Customer  Awareness  Program,
established  earlier  this  year,  informs  customers  of Year 2000  issues  and
provides status reports as to the Bank's Year 2000 efforts.

     The Company  estimates,  based on current  projections  of  allocations  of
existing  resources and known direct costs, that total costs related to the Year
2000 project  from 1997 to 2000 will be  approximately  $1,100,000.  The Company
estimates  that  approximately  81%  of  these  costs  will  be  related  to the
redeployment  of  existing   personnel  to  address  Year  2000  Issues,   while
approximately  19% of these  costs will  represent  incremental  expenses to the
Company since inception of the Year 2000 project.  Since inception,  the Company
has incurred  approximately  $885,000 of costs related to its Year 2000 project,
of which approximately  $104,000 represents  incremental  expenses primarily for
software  upgrades  and outside  consultant  fees.  Of the $885,000 of Year 2000
project costs incurred since  inception,  approximately  $160,000,  $340,000 and
$385,000  were  incurred  in  1997,  1998 and the  first  nine  months  of 1999,
respectively.  The  remaining  estimated  costs to complete the project  include
additional testing,  monitoring and contingency  activities during the remainder
of 1999 and into the year  2000.  Some  computer-related  initiatives  have been
delayed due to the allocation of resources towards Year 2000 issues.  Management
believes these delays have not had an adverse impact on the Company's  financial
condition or day to day operations.



                                       18
<PAGE>

     Based on the results of the Company's testing program,  it is the Company's
opinion that its critical systems are Year 2000 compliant. In the unlikely event
that  a  critical   system   does  not  perform  as  expected  or  if  there  is
non-compliance by a major third party provider,  the above mentioned contingency
plan would be invoked.  This plan is intended to guide the Company in responding
to possible failure of critical systems.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

     Information  contained  in  the  above  discussion  titled,   "Management's
Discussion and Analysis of Financial Condition and Results of Operations," other
than historical information, may contain forward-looking statements that involve
risks and  uncertainties  including,  but not limited to, the  Company's and its
major  vendors' and  customers'  Year 2000  readiness,  and the estimated  costs
related to Year 2000  issues.  These  statements  are made  pursuant to the safe
harbor provisions of the Private Litigation Reform Act of 1995, and are provided
to  assist  the  reader  in  understanding   anticipated  future  financial  and
operational  results.   Although  the  Company  believes  that  the  assumptions
underlying the forward- looking statements contained herein are reasonable,  any
of these  assumptions  could  ultimately  prove to be inaccurate.  The Company's
actual results may differ  materially  from those  projected in  forward-looking
statements,  particularly  if market  conditions  or other  factors  prevent the
Company from  achieving or sustaining  the  increases in loan  production of fee
income that are the basis of many of the Company's assumptions.

Item 3 - Quantitative and Qualitative Disclosure About Market Risk

Market Risk Management

     The  Company's   primary  market  risk  exposure  is  interest  rate  risk.
Fluctuations in interest rates will impact both the level of interest income and
interest expense and the market value of the Company's  interest-earning  assets
and  interest-bearing  liabilities.  There  were  no  material  changes  in  the
Company's  market risk  management  strategy,  as stated in the  Company's  1998
annual report, during the first nine months of 1999.



                                       19
<PAGE>

PART II - OTHER INFORMATION

Item 1 - Legal Proceedings - Inapplicable

Item 2 - Changes in Securities - Inapplicable

Item 3 - Defaults Upon Senior Securities - Inapplicable

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 - None

                                                     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.


                                           CENIT BANCORP, INC.


DATE: November 9, 1999                     /S/Michael S. Ives
                                           Michael S. Ives
                                           President and Chief Executive Officer



DATE: November 9, 1999                     /S/ John O. Guthrie
                                           John O. Guthrie
                                           Senior Vice President and
                                           Chief Financial Officer


                                       20