UNITED STATES
                       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, 1998              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                                4,847,306
      Title of Class                              Number of Shares Outstanding
                                                      as of November 6, 1998


<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, 1998
(Unaudited)and December 31, 1997.............................................. 1

Unaudited Consolidated Statement of Operations for the Three Months and Nine
Months ended September 30, 1998 and September 30, 1997........................ 2

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

Unaudited Consolidated Statement of Changes in Stockholders' Equity for the
Nine Months ended September 30, 1998.......................................... 4

Unaudited Consolidated Statement of Cash Flows for the Nine Months ended
September 30, 1998 and September 30, 1997................. ................... 5

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

Item 2
   Management's Discussion and Analysis of Financial Condition and Results of
   Operations................................................................. 7

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

PART II - OTHER INFORMATION

Item 1
   Legal Proceedings..........................................................19

Item 2
   Changes in Securities......................................................19

Item 3
   Defaults Upon Senior Securities............................................19

Item 4
   Submission of Matters to a Vote of Security Holders........................19

Item 5
   Other Information..........................................................19

Item 6
   Exhibits and Reports on Form 8-K...........................................19

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, 1998     December 31, 1997
                                                                         ------------------     -----------------
<S>                                                                         <C>                     <C>

Cash                                                                        $   12,502              $  16,993
Federal funds sold                                                              13,628                 37,118
Securities available for sale at fair value (adjusted
   cost of $62,373 and $135,861, respectively)                                  63,631                137,188
Loans, net:
   Held for investment                                                         496,857                486,487
   Held for sale                                                                 4,356                  3,167
Interest receivable                                                              3,984                  4,888
Real estate owned, net                                                             660                  1,098
Federal Home Loan Bank and Federal Reserve Bank stock, at cost                   5,066                  8,711
Property and equipment, net                                                     14,348                 14,230
Goodwill and other intangibles                                                   3,736                  4,010
Other assets                                                                     4,779                  4,193
                                                                                 -----                  -----
                                                                            $  623,547              $ 718,083
                                                                            ==========              =========
                                       LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
   Deposits:
     Noninterest-bearing                                                    $   67,679              $  54,874
     Interest-bearing                                                          421,148                452,796
                                                                               -------                -------
        Total deposits                                                         488,827                507,670

   Advances from the Federal Home Loan Bank                                     68,000                145,000
   Other borrowings                                                                  -                  2,575
   Securities sold under agreements to repurchase                               12,203                  9,664
   Advance payments by borrowers for taxes and insurance                         1,040                    720
   Other liabilities                                                             3,235                  2,517
                                                                                 -----                  -----
        Total liabilities                                                      573,305                668,146
                                                                               -------                -------
                                                                           
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 4,897,775 and 4,971,243 shares,
     respectively                                                                   49                     50
   Additional paid-in capital                                                   15,820                 18,119
   Retained earnings - substantially restricted                                 38,066                 35,416
   Common stock acquired by Employees Stock Ownership Plan (ESOP)               (4,098)                (4,232)
   Common stock acquired by Management Recognition
     Plan (MRP)                                                                   (220)                  (271)
   Accumulated other comprehensive income,
     net of income taxes                                                           625                    855
                                                                                   ---                    ---
     Total stockholders' equity                                                 50,242              $  49,937
                                                                                ------              ----------
                                                                            $  623,547              $ 718,083
                                                                            ==========              =========
<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,
                                                            1998            1997              1998             1997
                                                            ----            ----              ----             ----
<S>                                                     <C>             <C>              <C>              <C>
Interest and fees on loans                              $ 10,115        $ 9,882          $  30,439        $  28,260
Interest on mortgage-backed certificates                     378           2,005             2,884            7,013
Interest on investment securities                            638             683             1,995            2,108
Dividends and other interest income                          236             288               930              793
                                                             ---             ---               ---              ---
     Total interest income                                11,367          12,858            36,248           38,174
                                                          ------          ------            ------           ------
Interest on deposits                                       4,891           5,415            14,988           15,612
Interest on borrowings                                     1,115           2,046             5,209            6,455
                                                           -----           -----             -----            -----
     Total interest expense                                6,006           7,461            20,197           22,067
                                                           -----           -----            ------           ------
     Net interest income                                   5,361           5,397            16,051           16,107
Provision for loan losses                                    100             150               440              450
                                                             ---             ---               ---              ---
     Net interest income after provision
         for loan losses                                   5,261           5,247            15,611           15,657
                                                           -----           -----            ------           ------
Other income:
     Deposit fees                                            602             521             1,822            1,498
     Merchant processing fees                                618             462             1,548            1,016
     Commercial mortgage brokerage fees                       30               -               393              125
     Gains on sales of loans and securities                  318             174               780              488
     Other                                                   235             219               694              579
                                                             ---             ---               ---              ---
         Total other income                                1,803           1,376             5,237            3,706
                                                           -----           -----             -----            -----
Other expenses:
     Salaries and employee benefits                        2,052           1,846             6,246            5,873
     Equipment, data processing and supplies                 690             653             2,168            2,009
     Net occupancy expense of premises                       477             467             1,404            1,385
     Expenses, gains/losses on sales and provision
       for losses on real estate owned, net                   11              32                91              172
     Professional fees                                       105              25               472              263
     Merchant processing                                     515             381             1,347              844
     Expenses related to proxy contest and
     other matters                                             -               -                 -              405
     Other                                                   656             575             1,977            1,749
                                                             ---             ---             -----            -----
         Total other expenses                              4,506           3,979            13,705           12,700
                                                           -----           -----            ------           ------
Income before income taxes                                 2,558           2,644             7,143            6,663
Provision for income taxes                                   934             935             2,557            2,353
                                                             ---             ---             -----            -----
     Net income                                        $   1,624        $  1,709         $   4,586        $   4,310
                                                       =========        ========         =========        =========
Earnings per share
     Basic                                             $     .34        $    .35         $     .97        $     .88
                                                       =========        ========         =========        =========

     Diluted                                           $     .33        $    .34         $     .94        $     .86
                                                       =========        ========         =========        =========
Dividends per common share                             $     .11        $    .08         $     .31        $     .25
                                                       =========        ========         =========        =========
<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,
                                                                                         1998             1997
                                                                                         ----             ----
<S>                                                                                    <C>               <C>
Net income                                                                             $  4,586          $ 4,310
                                                                                       --------          -------

Other comprehensive income (loss), before income taxes:
   Unrealized gains (losses) on securities available for sale
     Unrealized holding gains (losses) arising during the period                           (246)             639
     Less: reclassification adjustment for gains included in net income                     (72)             (90)
                                                                                            ---              --- 

Other comprehensive income (loss), before income taxes                                     (318)             549

Income tax benefit (expense) related to items of other comprehensive income (loss)           88             (202)
                                                                                             --             ---- 

Other comprehensive income (loss), net of income taxes                                     (230)             347
                                                                                           ----              ---

Comprehensive income                                                                   $  4,356          $ 4,657
                                                                                       ========          =======




























<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, 1998
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                                         Common      Accumulated
                                                                                         Stock          Other
                                                  Common      Additional                Acquired
                                     Common        Stock       Paid-In     Retained     by ESOP     Income, Net of
                                  Stock Shares    Amount       Capital     Earnings     and MRP      Income Taxes       Total
                                  ------------    ------       -------     --------     -------      ------------       -----

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

Balance, December 31, 1997,
   as originally reported          1,657,081    $  17          $18,152     $35,416      $(4,503)     $  855            $49,937

Common stock issued in
   1998 three-for-one stock split  3,314,162       33             (33)           -            -           -                  -
                                   ---------       --             ---          ---          ---         ---                ---      

Balance, December 31, 1997,
   as restated                     4,971,243    $  50          $18,119     $35,416      $(4,503)     $  855            $49,937


Comprehensive income                       -        -                -       4,586            -        (230)             4,356


Cash dividends declared                   -         -                -      (1,936)           -           -             (1,936)


Exercise of stock options
   and related tax benefits          63,532         -              548           -            -           -               548

Stock repurchase                   (137,000)       (1)          (2,963)          -            -           -            (2,964)
                                                                               

Other                                     -         -              116           -          185           -               301
                                        ---       ---              ---         ---          ---         ---               ---


Balance, September 30, 1998        4,897,775    $  49          $15,820     $38,066      $(4,318)      $  625          $50,242
                                   =========    =====          =======     =======      =======       ======          =======

























<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,
                                                                         -------------------------------
                                                                           1998                    1997
                                                                           ----                    ----
<S>                                                                        <C>                <C>
Cash flows from operating activities:
   Net income                                                              $ 4,586            $ 4,310
   Add (deduct) items not affecting cash in the period:
     Provision for loan losses                                                 440                450
     Provision for losses on real estate owned                                  14                 67
     Amortization of loan yield adjustments                                    399                115
     Depreciation, amortization and accretion, net                           1,536              1,724
     Net (gains) losses on sales/disposals of:
        Securities                                                             (72)               (90)
        Loans                                                                 (708)              (398)
        Real estate, property and equipment                                     36                 14
     Proceeds from sales of loans held for sale                             57,140             30,910
     Originations of loans held for sale                                   (57,651)           (31,997)
     Change in assets/liabilities:
        Decrease (increase) in interest receivable and other assets            538               (981)
        Increase in other liabilities                                          809                 71
                                                                               ---                 --
        Net cash provided by operating activities                            7,067              4,195
                                                                             -----              -----
Cash flows from investing activities:
   Purchases of securities available for sale                              (40,234)           (12,094)
   Principal repayments on securities available for sale                    32,566             38,328
   Proceeds from maturities and calls of securities available for sale      14,000             14,500
   Proceeds from sales of securities available for sale                     66,660             26,677
   Net increase in loans held for investment                               (11,051)           (61,012)
   Net proceeds on sales of real estate owned                                  302              1,082
   Additions to real estate owned                                              (83)               (87)
   Purchases of Federal Home Loan Bank stock                                (1,650)            (1,600)
   Redemption of Federal Home Loan Bank stock & Federal Reserve Stock        5,295                250
   Proceeds from sale of property and equipment                                 70                  5
   Purchases of property and equipment                                      (1,126)            (1,836)
                                                                            ------             ------ 
     Net cash provided by investing activities                              64,749              4,213
                                                                            ------              -----

Cash flows from financing activities:

   Proceeds from exercise of stock options and warrants                       150                 306
   Net (decrease) increase in deposits                                     (18,843)            10,523
   Proceeds from Federal Home Loan Bank advances                           556,000            987,000
   Repayment of Federal Home Loan Bank advances                           (633,000)        (1,009,000)
   Net increase in other borrowings                                              -              3,965
   Repayments of other  borrowings                                          (2,575)                 -
   Net increase in securities sold under agreement
     to repurchase                                                           2,539              2,341
   Cash dividends paid                                                      (1,424)            (1,626)
   Purchase of common stock by ESOP                                              -             (4,232)
   Common stock repurchase                                                  (2,964)                 -
   Other, net                                                                  320                515
                                                                               ---                ---
        Net cash used for financing activities                             (99,797)           (10,208)
                                                                           -------            ------- 
Decrease in cash and cash equivalents                                      (27,981)            (1,800)
Cash and cash equivalents, beginning of period                              54,111             23,478
                                                                            ------             ------
Cash and cash equivalents, end of period                                 $  26,130           $ 21,678
                                                                         =========           ========
Supplemental disclosures of cash flow  information:
     Cash paid during the period for interest                            $   7,359           $  8,928
     Cash paid during the period for income taxes                            2,085              2,095
   Schedule of noncash investing and financing activities:
     Real estate acquired in settlement of loans                         $     312           $  1,225
     Loans to facilitate sale of real estate owned                             470              1,406

<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, 1998 and 1997 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,  1997 consolidated financial statements of CENIT Bancorp, Inc. (the
"Company").
  
Note 2 - Per Share Data

     On March 24, 1998, the Company  declared a three-for-one  stock split.  All
financial  data  included  in this Form 10-Q  reflects  the  effect of the stock
split.  

     The Company adopted FAS 128,  Earnings per Share, on December 31, 1997. The
Company  changed the method used to compute  earnings per share and restated all
prior  periods. 

     Basic  earnings  per share is  calculated  using  weighted  average  shares
outstanding.  For the nine 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. For the nine and three months ended September 30, 1997,
weighted  average shares used to compute basic earnings per share were 4,897,509
and 4,843,380,  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, 1998,  weighted  average shares used to compute
diluted earnings per share were 4,873,332 and 4,872,882,  respectively.  For the
nine months and three months ended September 30, 1997,  weighted  average shares
used to  compute  diluted  earnings  per share  were  5,028,324  and  4,969,263,
respectively. 

     The  unallocated  common  shares  held  by  the  Company's  Employee  Stock
Ownership  Plan are excluded from the weighted  average shares used to calculate
basic and diluted earnings per share.  

Note 3 - Comprehensive Income 

     On January 1, 1998, the Company  adopted FAS 130,  Reporting  Comprehensive
Income. FAS 130 established standards for reporting and displaying comprehensive
income  and its  components.  The  adoption  of FAS 130 did not have a  material
impact on the Company.  All of the Company's other comprehensive  income relates
to net unrealized gains (losses) on available for sale securities.


                                        6
<PAGE>

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

General 

     The  Company's  business  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 fund 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 and other
investments permitted by applicable laws and regulations. 

Financial Condition of the Company 

Total Assets 
------------ 

     At  September  30, 1998,  the Company had total  assets of $623.5  million,
compared to $718.1  million at December 31, 1997, a decrease of $94.6 million or
13.2%. As a result of changes in the interest rate environment,  management used
the  proceeds  from the  sale,  maturity  and  principal  repayment  of  certain
securities,  primarily mortgage-backed certificates, to reduce advances from the
Federal  Home  Loan  Bank  ("FHLB")  rather  than  seek  alternative  investment
opportunities.

Securities Available for Sale
-----------------------------


     Securities  available  for sale totaled $63.6 million at September 30, 1998
and are comprised of U. S. Treasury  securities,  other U. S. Government  agency
securities, and mortgage-backed certificates.  The net decrease of $73.6 million
from the December 31, 1997 balance of $137.2  million  resulted  primarily  from
$32.6  million of  repayments,  $40.2  million of  purchases,  $14.0  million of
proceeds from the maturities of  securities,  and $66.7 million from the sale of
securities.

Loans 
----- 

     The balance of net loans held for investment  increased from $486.5 million
at December  31, 1997 to $496.9  million at September  30, 1998,  an increase of
$10.4 million or 2.1%.  Consumer loans increased during the first nine months of
1998 by $7.8 million or 13.4% while  commercial  business  loans  increased $6.2
million or 25.5%.  Real estate  loans  decreased  by $5.0 million or 1.1% during
this period,  which  includes a decrease of $28.1 million or 9.1% in residential
permanent  1-to 4-family  loans due to  amortization  or  repayments  which were
approximately  41% on an annualized  basis during the first nine months of 1998.
Amortization  or reparyments of 1-to-4 family loans increased  during  September
and October 1998 to approximately 51% on an annualized basis. 

                                       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, 1998            December 31, 1997
                                                              ------------------            -----------------
                                                                            (Dollars in Thousands)
                                                       Amount        Percent              Amount        Percent
                                                       ------        -------              ------        -------
<S>                                                   <C>               <C>             <C>               <C>
Real estate loans:
   Residential permanent 1- to 4-family:
     Adjustable rate                                  $ 203,006         37.56%          $  213,682        40.20%
     Fixed rate
       Conventional                                      73,118         13.53               89,356        16.81
       Guaranteed by VA or insured by FHA                 4,338           .80                5,487         1.03
                                                          -----           ---                -----         ----
     Total permanent 1- to 4-family                     280,462         51.89              308,525        58.04
   Residential permanent 5 or more family                 6,587          1.22                6,374         1.20
                                                          -----          ----                -----         ----
     Total permanent residential loans                  287,049         53.11              314,899        59.24
                                                        -------         -----              -------        -----
   Commercial real estate loans:
     Hotels                                               9,275          1.72               10,240         1.93
     Office and warehouse facilities                     32,568          6.02               26,710         5.02
     Retail facilities                                   19,503          3.61               18,249         3.43
     Other                                                5,542          1.02                2,714         0.51
                                                          -----          ----                -----         ----
     Total commercial real estate loans                  66,888         12.37               57,913        10.89
                                                         ------         -----               ------        -----
   Construction loans:
     Residential 1- to 4-family                          44,178          8.17               44,208         8.32
     Residential 5 or more family                        22,807          4.22               12,784         2.40
     Nonresidential                                       5,940          1.10                1,420          .27
                                                          -----          ----                -----          ---
     Total construction loans                            72,925         13.49               58,412        10.99
                                                         ------         -----               ------        -----

   Land acquisition and development loans:
     Consumer lots                                        3,762           .70                4,573         0.86
     Acquisition and development                         13,503          2.50               13,327         2.51
                                                         ------          ----               ------         ----
     Total land acquisition and development
       loans                                             17,265          3.20               17,900         3.37
                                                         ------          ----               ------         ----
     Total real estate loans                            444,127         82.17              449,124        84.49
                                                        -------         -----              -------        -----
Consumer loans:
   Boats                                                  4,645           .86                5,685         1.07
   Home equity and second mortgage                       52,127          9.64               45,194         8.50
   Mobile homes                                              57           .01                   95         0.02
   Other                                                  9,191          1.70                7,250         1.36
                                                          -----          ----                -----         ----
     Total consumer loans                                66,020         12.21               58,224        10.95
                                                         ------         -----               ------        -----
Commercial business loans                                30,393          5.62               24,222         4.56
                                                         ------          ----               ------         ----
     Total loans                                        540,540        100.00%             531,570       100.00%
                                                        -------        ------              -------       ------ 
Less:
   Allowance for loan losses                              3,977                              3,783
   Loans in process                                      41,070                             42,067
   Unearned discounts, premiums, and loan fees, net      (1,364)                              (767)
                                                         ------                               ---- 
                                                         43,683                             45,083
                                                         ------                             ------
Total loans, net                                      $ 496,857                         $  486,487
                                                      =========                         ==========


</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, 1998
                                                           ------------------
                                                          (Dollars in Thousands)
Loans originated:
   Real estate:
      Permanent:
         Residential 1- to 4-family                              $69,368
         Residential 5 or more family                                610
                     -                                               ---
            Total                                                 69,978
                                                                  ------
      Commercial real estate                                      15,182
                                                                  ------
       Construction:
         Residential 1- to 4-family                               17,040
         Residential 5 or more family                             11,350
         Nonresidential                                            5,478
                                                                   -----
            Total                                                 33,868
                                                                  ------
      Land acquisition:
         Consumer lots                                               772
         Acquisition and development                               3,530
                                                                   -----
            Total                                                  4,302
                                                                   -----
            Total real estate loans originated                   123,330
                                                                 -------
   Consumer:
      Home equity and second mortgage                             26,964
      Other                                                        6,617
                                                                   -----
            Total                                                 33,581
                                                                  ------
   Commercial business                                            33,745
                                                                  ------
            Total loans originated                               190,656
Loans purchased                                                   52,431
                                                                  ------
            Total loans originated and purchased                 243,087
                                                                 -------
Principal reductions:
   Repayments and other principal reductions                     176,618
   Real estate loans sold                                         56,327
                                                                  ------
            Total principal reductions                           232,945
                                                                 -------
Net increase in total loans                                     $ 10,142
                                                                ========
Net increase in loans held for sale                                1,172
Net increase in gross loans held for investment                    8,970
                                                                   -----
                                                                $ 10,142
                                                                ========



                                        9
<PAGE>

Deposits
--------

     The balance of deposits  decreased from $507.7 million at December 31, 1997
to $488.8 million at  September 30,  1998.  During this period,  certificates of
deposit decreased from $328.2 million at December 31, 1997, to $277.8 million at
September 30 1998, as the Company did not seek to match the highest  certificate
rates within its market.  All other interest bearing deposits increased by $18.8
million from $124.6  million at December 31, 1997 to $143.4 million at September
30, 1998.  Noninterest-bearing  deposits  increased  23.3% from $54.9 million at
December 31, 1997 to $67.7  million at September  30, 1998 due, in part,  to the
Company's emphasis on attracting small business accounts.

Capital 
--------

     The Company's and the Bank's capital ratios exceeded applicable  regulatory
requirements  at September 30, 1998.

     In June 1998,  the Board of  Directors  of the Company  gave the  Company's
management  the discretion to initiate a repurchase of up to five percent of the
Company's  shares.  During  the third  quarter of 1998 the  Company  repurchased
137,000  shares of the  Company's  stock.  Since the end of the third quarter of
1998 and through the date of this  report,  the Company has  repurchased  51,000
shares of the Company's  stock.  The Company is not obligated to conduct further
repurchases  at all, and the Company's  decision to do so, as well as the timing
of any purchases, will depend on a variety of factors.

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 Banks are
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.

                                                  September 30,     December 31,
                                                      1998              1997
                                                      ----              ----
                                                      (Dollars in Thousands)
Nonperforming loans:
   Real estate loans:
     Permanent residential 1- to 4-family
       Nonaccrual                                  $   191               $   528
       Accruing loans 90 days or more past due         474                    53
                                                       ---                    --
         Total                                         665                   581
                                                       ---                   ---
     Land acquisition and development
       Nonaccrual                                       36                   200
       Accruing loans 90 days or more past due          15                     -
                                                        --                   ---
         Total                                          51                   200
                                                        --                   ---
   Consumer loans:
     Mobile homes (nonaccrual)                          17                    48
     Credit cards (accruing loans 90 days or
       more past due)                                    -                     5
     Other (nonaccrual)                                 16                    24
                                                        --                    --
       Total                                            33                    77
                                                        --                    --
   Commercial business loans:
     Nonaccrual                                         32                   240
     Accruing loans 90 days or more past due            94                     5
                                                        --                     -
       Total                                           126                   245
                                                       ---                   ---
       Total nonperforming loans                    $  875               $   483
                                                    ======               =======
Total nonperforming loans:
   Nonaccrual                                       $  292               $ 1,040
   Accruing loans 90 or more days past due             583                    63
                                                       ---                    --
       Total                                           875                 1,103
Real estate owned, net                                 660                 1,098
Other repossessed assets, net                           11                   228
                                                        --                   ---
   Total nonperforming assets, net                  $1,546               $ 2,429
                                                    ======               =======

   Total nonperforming assets, net, to total assets   .25%                  .34%
                                                      ====                  ====
                                                     




                                       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,
                                                 -------------------------------
                                                 1998                       1997
                                                 ----                       ----
                                                      (Dollars in Thousands)

Balance at beginning of period                 $ 3,783                  $ 3,806
Provision for loan losses                          440                      450
Losses charged to allowance                       (340)                    (571)
Recovery of prior losses                            94                      107
                                                    --                      ---
Balance at end of period                       $ 3,977                  $ 3,792
                                               =======                  =======

     The  Company's  provision  for loan losses was $440,000 for the nine months
ended  September  30, 1998  compared to $450,000 in the same period in 1997.  At
September  30,  1998,  the  Company's  coverage  ratio was 455% based on a total
allowance  for loan  losses  of  $3,977,000  and  total  nonperforming  loans of
$875,000. This compares to a coverage ratio of 200% at September 30, 1997.

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, 1998                   September 30, 1997
                                                     ------------------                   ------------------

                                                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)                               $  509,055    $10,116      7.95%      $  487,000  $   9,882      8.12%
     Mortgage-backed certificates                19,546        378      7.74          112,393      2,005      7.13
     U.S. Treasury and other U.S.
        Government agency securities             42,967        638      5.94           43,936        683      6.22
     Federal funds sold                           9,517        134      5.63            8,560        119      5.56
     Federal Home Loan Bank and
        Federal Reserve Bank stock                5,083        101      7.95            9,253        169      7.31
                                                  -----        ---                      -----        ---      
        Total interest-earning assets        $  586,168     11,367      7.76       $  661,142     12,858      7.78
                                             ----------     ------                 ----------     ------      

Noninterest-earning assets:
     REO                                            595                                 1,586
     Other                                       39,565                                38,219
                                                 ------                                ------
        Total noninterest-earning assets         40,160                                39,805
                                                 ------                                ------
             Total assets                    $  626,328                            $  700,947
                                             ==========                            ==========

Interest-bearing liabilities:
     Passbook and statement savings          $   38,059        314      3.30%      $   44,116        377      3.42%
     Checking accounts                           35,363        158      1.79           28,939        149      2.06
     Money market deposit accounts               66,312        649      3.91           47,981        402      3.35
     Certificates of deposit                    285,327      3,770      5.28          336,156      4,487      5.34
                                                -------      -----                    -------      -----      
        Total interest-bearing deposits         425,061      4,891      4.60          457,192      5,415      4.74
                                                -------      -----                    -------      -----      
     Advances from the Federal Home
        Loan Bank                                71,402        959      5.37          131,978      1,894      5.74
     Securities sold under agreements
        to repurchase                            12,895        150      4.65            9,734        116      4.77
     Other borrowings                               332          6      7.23            1,893         36      7.61
                                                    ---          -                      -----         --      
        Total borrowings                         84,629      1,115      5.27          143,605      2,046      5.70
                                                 ------      -----                    -------      -----     
        Total interest-bearing liabilities      509,690      6,006      4.71          600,797      7,461      4.97
                                                -------      -----                    -------      -----      

Noninterest-bearing liabilities:
     Deposits                                    58,131                                45,883
     Other liabilities                            6,782                                 4,185
                                                  -----                                 -----
        Total noninterest-bearing liabilities    64,913                                50,068
                                                 ------                                ------
             Total liabilities                  574,603                               650,865

Stockholders' equity                             51,725                                50,082
                                                 ------                                ------
Total liabilities and stockholders' equity   $  626,328                            $  700,947
                                             ==========                            ==========

Net interest income/interest rate spread                   $ 5,361      3.05%                  $   5,397      2.81%
                                                           =======                             =========      

Net interest position/net interest margin    $   76,478                 3.66%      $   60,345                 3.27%
                                             ==========                            ==========                  

Ratio of average interest-earning assets to
     average interest-bearing liabilities        115.00%                               110.04%
                                                 ======                                ====== 
<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, 1998                   September 30, 1997
                                                     ------------------                   ------------------

                                                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)                               $  511,506   $ 30,439      7.93%      $  464,181  $  28,260      8.12%
     Mortgage-backed certificates                57,035      2,884      6.74          134,392      7,013      6.96
     U.S. Treasury and other U.S.
        Government agency securities             44,463      1,995      5.98           44,791      2,108      6.28
     Federal funds sold                          11,714        486      5.53            7,386        305      5.51
     Federal Home Loan Bank and
        Federal Reserve Bank stock                7,756        444      7.63            9,029        488      7.21
                                                  -----        ---                      -----        ---      
        Total interest-earning assets           632,474     36,248      7.64          659,779     38,174      7.71
                                                -------     ------                    -------     ------      

Noninterest-earning assets:
     REO                                            738                                 1,927
     Other                                       42,112                                38,781
                                                 ------                                ------
        Total noninterest-earning assets         42,850                                40,708
                                                 ------                                ------
             Total assets                    $  675,324                            $  700,487
                                             ==========                            ==========

Interest-bearing liabilities:
     Passbook and statement savings          $   40,697      1,008      3.30%      $   45,560      1,154      3.38%
     Checking accounts                           34,268        468      1.82           29,014        451      2.07
     Money market deposit accounts               61,294      1,735      3.77           46,341      1,147      3.30
     Certificates of deposit                    299,194     11,777      5.25          328,889     12,860      5.21
                                                -------     ------                    -------     ------      
        Total interest-bearing deposits         435,453     14,988      4.59          449,804     15,612      4.63
                                                -------     ------                    -------     ------      
     Advances from the Federal Home
        Loan Bank                               115,938      4,739      5.45          145,882      6,117      5.59
     Securities sold under agreements
        to repurchase                            11,355        393      4.61            8,761        301      4.58
     Other borrowings                             1,348         77      7.62              638         37      7.73
        Total borrowings                        128,641      5,209      5.40          155,281      6,455      5.54
                                                -------      -----                    -------      -----      
        Total interest-bearing liabilities      564,094     20,197      4.77          605,085     22,067      4.86
                                                -------     ------                    -------     ------      

Noninterest-bearing liabilities:
     Deposits                                    53,786                                41,515
     Other liabilities                            6,386                                 3,789
        Total noninterest-bearing liabilities    60,172                                45,304
                                                 ------                                ------
             Total liabilities                  624,266                               650,389

Stockholders' equity                             51,058                                50,098
                                                 ------                                ------
Total liabilities and stockholders' equity   $  675,324                            $  700,487
                                             ==========                            ==========

Net interest income/interest rate spread                  $ 16,051      2.87%                  $  16,107      2.85%
                                                          ========                             =========     

Net interest position/net interest margin    $   68,380                 3.38%      $   54,694                 3.26%
                                             ==========                            ==========            
Ratio of average interest-earning assets to
     average interest-bearing liabilities        112.12%                           109.04%
                                                 ======                            ====== 
<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, 1998
and  September  30, 1997.

General
-------

     The Company's  pre-tax income for the three months ended September 30, 1998
was $2.56 million  compared to $2.64 million during the same period in the prior
year. This decrease is primarily  attributable  to a $527,000  increase in other
expenses,  the effect of which was  partially  offset by a $427,000  increase in
other income and a $14,000  increase in net interest  income after provision for
loan losses.

Net Interest Income 
------------------- 

     The  Company's  net  interest  income  before  provision  for  loan  losses
decreased by $36,000,  or less than 1.0%,  for the quarter  ended  September 30,
1998 as compared to that of the previous year. This decrease resulted  primarily
from a $1.49 million  decrease in interest income which exceeded a $1.46 million
decrease in interest  expense.  The  decrease in interest  income was  primarily
attributable  to  an  decrease  in  the  average   balance  of   mortgage-backed
certificates.  The decrease in interest  expense was primarily due to a decrease
in the average balance of certificates of deposits.

     Interest  on  the  Company's  portfolio  of  mortgage-backed   certificated
decreased by approximately  $1.6 million from $2.0 million for the quarter ended
September 30, 1997, to $378,000 for the  comparable  1998 period.  This decrease
resulted from a $92.8 million  decrease in the average  balance of the portfolio
during the third quarter of 1998  compared to 1997.  The decrease in the average
balance of  mortgage-backed  certificates was due to sales and prepayments which
have increased due to declines in interest rates.

     Interest on loans  increased by $233,000 in the quarter ended September 30,
1998,  compared to the  comparable  1997 period.  This  increase  was  primarily
attributable to a $22.1 million  increase in the average  balance of loans.  The
yield on the Company's loan portfolio  decreased from 8.12% in the quarter ended
September 30, 1997 to 7.95% in the comparable 1998 period  primarily as a result
of purchased  loans with lower yields being added to the loan  portfolio  during
1998 and lower rates on originations.

     Interest on investment securities for the quarter ended September 30, 1998,
decreased  by $45,000  compared  to the same  period in 1997.  The yield on this
portfolio  decreased from 6.22% in the quarter ended September 30, 1997 to 5.94%
for the quarter ended September 30, 1998.

     Interest on deposits  decreased by $524,000 in the quarter ended  September
30, 1998,  compared to the comparable  1997 period.  This decrease was primarily
attributable to a $50.8 million  decrease in the average balance of certificates
of deposit in the quarter ended  September 30, 1998,  compared to the comparable
1997 period.

     Interest on  borrowings  decreased by $931,000 in the third quarter of 1998
compared  to the same  period in 1997.  The  decrease  was the  result of both a
decrease in the average balance outstanding during the quarters of $59.0 million
and a decrease  in the cost of these  borrowings  from 5.70%  during the quarter
ended September 30, 1997 to 5.27% in the comparable 1998 quarter.

     Total  interest-earning  assets decreased from an average of $661.1 million
during the third quarter of 1997 to $586.2  million  during the third quarter of
1998. Net interest  income during the two quarters  remained  approximately  the
same,  however,  as decreases in lower yielding  investments offset decreases in
interest-bearing  deposits and  borrowings.  This resulted in an increase in the
Company's net interest margin to 3.66% during the third quarter of 1998 compared
to a net interest margin of 3.27% during the third quarter of 1997.

Provision for Loan Losses 
------------------------- 

     The Company's  provision  for loan losses  decreased by $50,000 to $100,000
for the three months ended  September 30,  1998,  compared to the same period in
1997 as asset  quality  continues to improve.  Net loans  charged off during the
quarter  ended  September  30,  1998,  were  $30,000  compared to $68,000 in the
comparable  1997 period.  
                                    
Other Income  
------------  
    
     Total  other  income  increased  from $1.4  million  in the  quarter  ended
September 30, 1997 to $1.8 million in the comparable 1998 period, an increase of
$427,000 or 31.0%.
                                      
                                       15
<PAGE>

     Deposit fees increased by $81,000,  primarily as the result of increases in
usage fees from the Company's automated teller network and increases in checking
account fees. Merchant processing fees increased by $156,000,  gains on sales of
loans and securities  increased by $144,000,  and commercial  mortgage brokerage
fees  increased by $30,000,  all of which were primarily the result of increases
in the volume of transactions.

Other Expenses 
-------------- 

     Total other expenses  increased by $527,000 for the quarter ended September
30, 1998 compared to the comparable 1997 period.
     
     Salaries and employee benefits increased by $206,000.  Merchant  processing
expenses  increased by $134,000 due to  increases in volume.  Professional  fees
increased by $80,000  primarily as a result of a nonrecurring  recovery of legal
costs in the third quarter of 1997. Marketing expenses increased by $41,000 due,
in part, to expenses  during the third quarter,  1998 related to a new marketing
campaign  designed to promote the  identity,  products and services of the Bank,
the area's  largest  remaining  community  bank.  Primarily  as a result of this
marketing campaign,  which is scheduled to end during the fourth quarter,  1998,
marketing expenses are expected to increase  approximately $80,000 over those of
the third quarter, 1998.

Comparison of Operating Results for the Nine Months Ended 
September 30, 1998 and September 30, 1997.

General 
------- 

     The Company's  pre-tax income for the nine months ended  September 30, 1998
was $7.1 million  compared to $6.7  million  during the same period in the prior
year. This increase is attributable to a $1.5 million  increase in other income,
the effects of which more than offset a $1.0 million increase in other expenses.

Net Interest Income 
------------------- 

     The  Company's  net  interest  income  before  provision  for  loan  losses
decreased by $56,000 during the nine months ended  September 30, 1998,  compared
to the same period in 1997.  Interest  income  decreased by $1.9  million  while
interest  expense  decreased by  approximately  the same amount  during the nine
month period of 1998 compared to 1997.

     Interest  on  the  Company's  portfolio  of  mortgage-backed   certificates
decreased  by  approximately  $4.1 million from $7.0 million for the nine months
ended September 30, 1997, to $2.9 million for the comparable  1998 period.  This
decrease  resulted from a $77.4 million  decrease in the average  balance of the
portfolio and decrease in the average  yield on the portfolio  from 6.96% in the
nine months ended  September 30, 1997, to 6.74% in the  comparable  1998 period.
The decrease in the average balance of  mortgage-backed  certificates was due to
sales and repayments.

     Interest  on loans  increased  by $2.2  million  in the nine  months  ended
September 30, 1998  compared to the  comparable  1997 period.  This increase was
attributable to a $47.3 million  increase in the average  balance of loans.  The
yield on the Company's  loan  portfolio  decreased from 8.12% in the nine months
ended September 30, 1997, to 7.93% in the comparable 1998 period  primarily as a
result of purchased loans with lower yields being added to the loan portfolio.

     Interest on investment  securities for the nine months ended  September 30,
1998 decreased by $113,000  compared to the same period in 1997 primarily due to
a decrease in the portfolio's yield from 6.28% in 1997 to 5.98% in 1998.

     Interest  on  deposits  decreased  by  $624,000  in the nine  months  ended
September 30, 1998,  compared to the comparable  1997 period.  This decrease was
primarily  attributable  to a $29.7 million  decrease in the average  balance of
certificates of deposit in the nine months ended September 30, 1998.

     The Company's net interest margin  increased from 3.26% for the nine months
ended September 30, 1997, to 3.38% for the nine months ended September 30, 1998.
The Company's interest rate spread increased from 2.85% in the nine months ended
September  30,  1997,  to 2.87% in the  comparable  1998 period.  The  Company's
calculations  of interest  rate  spread and net  interest  rate margin  included
nonaccrual loans as interest-earning assets.
                                       
                                       16

<PAGE>

Provision for Loan Losses 
------------------------- 

     The Company's  provision  for loan losses  decreased by $10,000 to $440,000
for the nine months ended  September  30,  1998,  compared to the same period in
1997.  Net loans  charged off during the nine months ended  September  30, 1998,
were $247,000 compared to $464,000 in the comparable 1997 period. 

Other Income 
------------ 

     Total other  income  increased  from $3.7  million in the nine months ended
September 30, 1997 to $5.2 million in the comparable 1998 period, an increase of
$1.5 million or 41.3%.

     Deposit fees increased by $324,000, primarily as the result of increases in
usage fees from the Company's automated teller network and increases in checking
account fees.  Merchant  processing  fees increased by $532,000,  and commercial
mortgage  brokerage fees  increased by $268,000,  the result of increases in the
volume of  transactions.  Gains on sales of loans and  securities  increased  by
$292,000.

Other Expenses
--------------
         
     Total other  expenses  increased  by $1.0 million for the nine months ended
September 30, 1998 compared to the comparable 1997 period. 

     Salaries  and employee  benefits  increased  by  $373,000,  or 6.4%,  which
includes a $209,000  increase in  commercial  mortgage  brokerage  compensation.
Equipment,  data processing and supply expense  increased by $159,000.  Merchant
processing   expenses   increased  by  $503,000  due  to  increases  in  volume.
Professional  fees  increased  by  $209,000  due,  in part,  to $37,000 of legal
expenses  during  the first  nine  months of 1998  related  to the merger of the
Company's  two  subsidiary  banks,  and a recovery  of legal  costs in the third
quarter of 1997. REO expense  decreased by $81,000,  as a result of the decrease
in REO outstanding  during 1998 compared to 1997. In 1997, the Company  incurred
$405,000 of expenses related to the 1997 proxy contest and other matters.  Other
expense  increased by $228,000 which includes  $63,000  related to the merger of
the Company's banks.

Liquidity 
--------- 

     The  principal  sources of funds for the Company for the nine months  ended
September 30, 1998 included $556.0 million in proceeds from FHLB advances, $32.6
million in principal  repayments of securities available for sale, $66.7 million
in proceeds  from sales of securities  available for sale,  and $57.1 million in
proceeds  from the sale of  loans.  Funds  were  used  primarily  to repay  FHLB
advances  totaling $633.0  million,  to fund $11.1 million net increase in loans
held for investment,  to fund purchases of investment  securities  available for
sale  totaling  $40.2  million,  and to  originate  loans held for sale of $57.7
million.
     
     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 CENIT 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  requirements  may vary from time to
time (between 4% and 10%) depending  upon economic  conditions and savings flows
of all savings  institutions.  At the present  time,  the required  liquid asset
ratio in 4%. CENIT Bank's  liquid asset ratio was 6.8% and 8.8% at September 30,
1998 and December 31, 1997, respectively. 

                                       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 may 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 process of software inventory, analysis,
modification  and  testing  to  address  the Year 2000  Issue.  The scope of the
project includes: ensuring 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.

     Management  believes  that  significant  progress  has  been  made  towards
accomplishing these objectives.  Significant  software and hardware systems have
been identified,  including third party and customer related issues; remediation
is well  underway  and  committees  have been  formed  to  address  testing  and
contingency planning. A summary of significant milestones is presented below:
              
 .    The Company has completed  modifications of its mainframe  applications for
     Year 2000  compliance  and is currently  establishing  a plan to test these
     applications.  This testing will begin in the fourth quarter of 1998 and is
     expected to be completed by the end of the second  quarter of 1999.  For PC
     and LAN  systems,  the  Company  has  completed  its review and  expects to
     complete all  modifications and testing by the end of the second quarter of
     1999.

 .    The majority of the  Company's  non-IT  related  systems and  equipment are
     currently  Year 2000  compliant,  based  primarily on  communications  with
     vendors.  Compilation  of written  documentation  regarding  compliance  is
     underway and is scheduled to be completed by the end of the second  quarter
     of 1999, as is any testing of critical systems that the Company  determines
     needs to be conducted.

 .    The  potential  impact of Year 2000 will depend not only on the  corrective
     measures the Company undertakes but also on other entities who 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 is currently communicating with significant third parties to ensure
     their  awareness  of the Year  2000  Issue.  In  addition,  management  has
     reviewed  significant  lending   relationships  and  consulted  with  these
     customers as to their plans to address Year 2000 issues.  The plans of such
     parties are currently being  monitored,  and any fundamental  impact on the
     Company will be evaluated.

 .    The  Company  has not had an  independent  review of its Year 2000 risks or
     estimates.  However, the Company expects to engage experts during the first
     quarter  of 1999 to  assist  with a review  of  compliance  testing  by the
     Company.

 .    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 will be approximately  $1,000,000.  The Company estimates
     that  approximately  88% of these costs will be related to the redeployment
     of existing personnel to address Year 2000 Issues,  while approximately 12%
     of these costs will  represent  incremental  expenses to the Company  since
     inception  of the Year 2000  project.  Since  inception,  the  Company  has
     incurred  approximately $400,000 of costs related to its Year 2000 project,
     of which $20,000 represents incremental expenses. Management believes there
     has not been an adverse impact on the Company's  financial condition or day
     to day  operations as a result of computer  projects  being deferred due to
     reallocation of resources to the Year 2000 project.                        

     Although the Company  expects its critical  systems to be compliant  before
December 31, 1999,  there is no guarantee that these results will be achieved as
a  result  of  risks  inherent  in this  process,  including  loss of  technical
resources  to  perform  the work,  failure  to  identify  critical  systems  and
noncompliance by third parties whose systems and operations impact the Company .
The Company is working to establish a  contingency  plan to address the possible
failure of critical  systems.  The Company  expects to complete its  contingency
plan by the end of the second  quarter of 1999. For non-IT systems and equipment
and third party  providers,  the Company is assessing their  compliance and will
consider alternative providers, where necessary.
                                       
                                       18
                                      
                                      
<PAGE>

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

     The above  discussion  contains  certain  forward  looking  statements that
involve  potential risk and  uncertainties.  The Company's  future results could
differ  materially from those discussed  herein.  Readers should not place undue
reliance on these forward  looking  statements,  which are applicable only as of
the date hereof.

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  1997
annual report, during the first nine months of 1998.

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 - Inapplicable
------------------------------------------------------------



Item 5 - Other Information - None
--------------------------


Item 6 - Exhibits and Reports on Form 8-K - None
-----------------------------------------







                                       19
                                                    
<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.


                                                             CENIT BANCORP, INC.




DATE: November 12, 1998                                      /S/ Michael S. Ives
                                                             -------------------
                                           Michael S. Ives
                                           President and Chief Executive Officer



DATE: November 12, 1998                                      /S/ John O. Guthrie
                                                             -------------------
                                           John O. Guthrie
                                           Senior Vice President and
                                           Chief Financial Officer

                                       20