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, 1997             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                                   1,657,081
                                                              ---------
       Title of Class                             Number of Shares Outstanding
                                                     as of October 31, 1997


<PAGE>



                      CENIT BANCORP, INC. AND SUBSIDIARIES

                                    Contents
_______________________________________________________________________________


                                                                           Page
                                                                           ----
PART I - FINANCIAL INFORMATION

Item 1
------
   Financial Statements

Consolidated   Statement  of  Financial  Condition  as  of  September  30,  1997
(Unaudited)and December 31, 1996...............................................1

Unaudited Consolidated Statement of Operations for the Three Months and
Nine Months ended September 30, 1997 and September 30, 1996....................2

Unaudited Consolidated Statement of Changes in Stockholders' Equity for the Nine
Months ended September 30, 1997................................................3

Unaudited Consolidated Statement of Cash Flows for the Nine Months ended 
September 30, 1997 and September 30, 1996......................................4

Notes to Unaudited Consolidated Financial Statements.......................... 5

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

PART II - OTHER INFORMATION

Item 1
------
   Legal Proceedings..........................................................17

Item 2
------
   Changes in Securities......................................................17

Item 3
------
   Defaults Upon Senior Securities............................................17

Item 4
------
   Submission of Matters to a Vote of Security Holders........................17

Item 5
------
   Other Information..........................................................17

Item 6
------
   Exhibits and Reports on Form 8-K...........................................17

   Signatures.................................................................18



<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements

                      CENIT BANCORP, INC. AND SUBSIDIARIES

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

                                     ASSETS
<CAPTION>

                                                                               (Unaudited)
                                                                         September 30, 1997     December 31, 1996
                                                                         ------------------     -----------------

<S>                                                                         <C>                     <C>
Cash                                                                        $   13,310              $  17,475
Federal funds sold and interest earning deposits                                 8,368                  6,003
Securities available for sale at fair value (adjusted
   cost of $154,279 and $222,367, respectively)                                156,471                224,011
Loans, net:
   Held for investment                                                         482,847                422,219
   Held for sale                                                                 3,356                  1,900
Interest receivable                                                              5,221                  5,456
Real estate owned, net                                                           1,487                  2,769
Federal Home Loan Bank and Federal Reserve Bank stock, at cost                   9,211                  7,861
Property and equipment, net                                                     13,646                 12,664
Goodwill and other intangibles                                                   4,101                  4,381
Other assets                                                                     3,690                  2,361
                                                                                 -----                  -----
                                                                            $  701,708              $ 707,100
                                                                            ==========              =========
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
   Deposits:
     Noninterest-bearing                                                    $   54,220              $  46,154
     Interest-bearing                                                          455,268                452,811
                                                                               -------                -------
        Total deposits                                                         509,488                498,965

   Advances from the Federal Home Loan Bank                                    126,000                148,000
   Other borrowings                                                              3,965                      -
   Securities sold under agreements to repurchase                                9,479                  7,138
   Advance payments by borrowers for taxes and insurance                         1,146                    631
   Other liabilities                                                             2,891                  2,758
                                                                                 -----                  -----
        Total liabilities                                                      652,969                657,492
                                                                               -------                -------
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 1,654,391 and 1,635,044 shares,
     respectively                                                                   17                     16
   Additional paid-in capital                                                   18,120                 17,670
   Retained earnings - substantially restricted                                 33,724                 31,040
   Common stock acquired by Employees Stock Ownership
     Plan (ESOP) (82,719 shares - unallocated)                                  (4,232)                     -
   Common stock acquired by Management Recognition
     Plan (MRP)                                                                   (300)                  (181)
   Net unrealized gain on securities available for sale,
     net of income taxes                                                         1,410                  1,063
                                                                                 -----                  -----
     Total stockholders' equity                                                 48,739                 49,608
                                                                                ------                 ------
                                                                            $  701,708              $ 707,100
                                                                            ==========              =========


The notes to unaudited consolidated financial statements are an integral part of
this statement.

</TABLE>                                       1
<PAGE>

                      CENIT BANCORP, INC. AND SUBSIDIARIES

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

<TABLE>

                                                                Three Months                  Nine Months
                                                                    Ended                        Ended
                                                                September 30,                 September 30,
                                                            1997            1996              1997             1996
                                                            ----            ----              ----             ----
<S>                                                     <C>             <C>              <C>              <C>

Interest and fees on loans                              $  9,882        $  7,859         $  28,260        $  21,880
Interest on mortgage-backed certificates                   2,005           3,269             7,013           10,208
Interest on investment securities                            683             850             2,108            2,916
Dividends and other interest income                          288             278               793              795
                                                             ---             ---               ---              ---
     Total interest income                                12,858          12,256            38,174           35,799
                                                          ------          ------            ------           ------
Interest on deposits                                       5,415           4,537            15,612           14,009
Interest on borrowings                                     2,046           2,598             6,455            6,999
                                                           -----           -----             -----            -----
     Total interest expense                                7,461           7,135            22,067           21,008
                                                           -----           -----            ------           ------
     Net interest income                                   5,397           5,121            16,107           14,791
Provision for loan losses                                    150             101               450              256
                                                             ---             ---               ---              ---
     Net interest income after provision
         for loan losses                                   5,247           5,020            15,657           14,535
                                                           -----           -----            ------           ------
Other income:
     Deposit fees                                            521             366             1,498              986
     Gains on sales of loans                                 174             124               398              494
     Gains on sales of securities                              -              45                90               77
     Loan servicing fees and late charges                     70              80               250              270
     Other                                                   611             438             1,470            1,103
                                                             ---             ---             -----            -----
         Total other income                                1,376           1,053             3,706            2,930
                                                           -----           -----             -----            -----
Other expenses:
     Salaries and employee benefits                        1,846           1,970             5,873            5,785
     Equipment, data processing and supplies                 653             608             2,009            1,784
     Net occupancy expense of premises                       467             437             1,385            1,264
     Expenses, gains/losses on sales and provision
       for losses on real estate owned, net                   31              24               172               30
     Professional fees                                        25             108               263              325
     Federal deposit insurance premiums                       66           2,548               208            3,015
     Expenses related to proxy contest and
       other matters                                           -               -               405                -
     Other                                                   891             655             2,385            1,811
                                                             ---             ---             -----            -----
         Total other expenses                              3,979           6,350            12,700           14,014
                                                           -----           -----            ------           ------
Income (loss) before income taxes                          2,644            (277)            6,663            3,451
Provision for (benefit from) income taxes                    935            (162)            2,353            1,142
                                                             ---            ----             -----            -----
     Net income (loss)                                  $  1,709        $   (115)        $   4,310        $   2,309
                                                        ========        ========         =========        =========
Earnings (loss) per common and common
      equivalent share                                  $   1.02        $   (.07)        $    2.54        $    1.38
                                                        ========        ========         =========        =========
Dividends per common share                              $    .25        $    .20         $     .75        $     .50
                                                        ========        ========         =========        =========




The notes to unaudited consolidated financial statements are an integral part of
this statement.

</TABLE>
                                       2
<PAGE>



                      CENIT BANCORP, INC. AND SUBSIDIARIES

       UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                      Nine Months Ended September 30, 1997
                             (Dollars in thousands)
<TABLE>





                                                                                         Common     Net Unrealized
                                                                                         Stock      Gain (Loss) on
                                                  Common      Additional                Acquired      Securities
                                     Common        Stock       Paid-In     Retained     by ESOP     Available for
                                  Stock Shares    Amount       Capital     Earnings     and MRP          Sale           Total
                                  ------------    ------       -------     --------     -------          ----           -----
<S>                                <C>             <C>         <C>          <C>          <C>           <C>             <C> 
 
 

Balance, December 31, 1996         1,635,044       $  16       $17,670      $31,040      $ (181)       $1,063          $49,608


Net income                                 -           -             -        4,310           -             -            4,310


Cash dividends declared                    -           -             -       (1,626)          -             -           (1,626)


Exercise of stock options
   and related tax benefits           19,347           1           450            -           -             -              451


Net change in unrealized gain (loss)
   on securities available for sale,
   net of income taxes                     -           -             -            -           -           347              347


Purchase of common stock by ESOP           -           -             -            -      (4,232)            -           (4,232)


Other                                      -           -             -            -        (119)            -             (119)
                                        ----         ---           ---          ---        ----           ---           ------ 


Balance, September 30, 1997        1,654,391       $  17       $18,120      $33,724     $(4,532)       $1,410          $48,739
                                   =========       =====       =======      =======     =======        ======          =======





The notes to unaudited consolidated financial statements are an integral part of
this statement.
</TABLE>
                                       3
<PAGE>
<TABLE>
<CAPTION>
                      CENIT BANCORP, INC. AND SUBSIDIARIES

                                                         
                 UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
                             (Dollars in thousands)

                                                                       Nine months ended September 30,
                                                                       -------------------------------
                                                                             1997                1996
                                                                             ----                ----
<S>                                                                      <C>                 <C>

Cash flows from operating activities:
   Net income                                                            $   4,310           $  2,309
   Add (deduct) items not affecting cash in the period:
     Provision for loan losses                                                 450                256
     Provision for losses on real estate owned                                  67                  -
     Amortization of loan yield adjustments                                    115                (30)
     Depreciation, amortization and accretion, net                           1,724              1,765
     Net (gains) losses on sales/disposals of:
        Securities                                                             (90)               (77)
        Loans                                                                 (398)              (494)
        Real estate, property and equipment                                     14                (16)
     Proceeds from sales of loans held for sale                             30,910             37,139
     Originations of loans held for sale                                   (31,997)           (35,187)
     Change in assets/liabilities:
        Decrease in interest receivable and other assets                      (981)            (1,519)
        Increase in other liabilities                                           71              1,142
                                                                                --              -----
        Net cash provided by operating activities                            4,195              5,288
                                                                             -----              -----
Cash flows from investing activities:
   Purchases of securities available for sale                              (12,094)           (63,892)
   Principal repayments on securities available for sale                    38,328             52,774
   Proceeds from maturities and calls of securities available for sale      14,500             22,160
   Proceeds from sales of securities available for sale                     26,677             14,792
   Net increase in loans held for investment                               (61,012)           (64,821)
   Net proceeds on sales of real estate owned                                1,082                360
   Additions to real estate owned                                              (87)              (132)
   Purchases of Federal Home Loan Bank stock                                (1,600)            (6,651)
   Redemption of Federal Home Loan Bank stock                                  250              3,610
   Proceeds from sale of property and equipment                                  5                  -
   Purchases of property and equipment                                      (1,836)            (1,337)
                                                                            ------             ------ 
     Net cash provided by (used for) investing activities                    4,213            (43,137)
                                                                             -----            ------- 

Cash flows from financing activities:
   Proceeds from exercise of stock options and warrants                        306                555
   Net increase in deposits                                                 10,523             39,840
   Proceeds from Federal Home Loan Bank advances                           987,000          1,535,000
   Repayment of Federal Home Loan Bank advances                         (1,009,000)        (1,537,000)
   Net increase in other borrowings                                          3,965                  -
   Net increase in securities sold under agreement
     to repurchase                                                           2,341              2,626
   Cash dividends paid                                                      (1,626)              (806)
   Purchase of common stock by ESOP                                         (4,232)                 -
   Other, net                                                                  515                129
                                                                               ---                ---
        Net cash provided by (used for) financing activities               (10,208)            40,344
                                                                           -------             ------
Increase (decrease) in cash and cash equivalents                            (1,800)             2,495
Cash and cash equivalents, beginning of period                              23,478             20,405
                                                                            ------             ------
Cash and cash equivalents, end of period                                 $  21,678           $ 22,900
                                                                         =========           ========
Supplemental disclosures of cash flow information:

     Cash paid during the period for interest                            $   8,928           $  9,195
     Cash paid during the period for income taxes                            2,095              1,595

   Schedule of noncash investing and financing activities:

     Real estate acquired in settlement of loans                         $   1,225           $  2,441
     Loans to facilitate sale of real estate owned                           1,406              1,372


The notes to unaudited consolidated financial statements are an integral part of
this statement.
</TABLE>
                                        4
<PAGE>
                      CENIT BANCORP, INC. AND SUBSIDIARIES

              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  the  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,  1997 and  1996 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, 1996 consolidated  financial  statements of
CENIT Bancorp, Inc. (the "Company").

Note 2 - Earnings and Dividends Per Share

    Earnings  per share for the three and nine months ended  September  30, 1997
are  determined by dividing  income for the periods by 1,676,989 and  1,698,565,
respectively, the weighted average number of shares of outstanding common stock,
adjusted for  unallocated  common shares held by the Company's  ESOP, and common
stock  equivalents,  where  dilutive.  Earnings per share for the three and nine
months  ended  September  30, 1996 are  determined  by  dividing  income for the
periods by 1,602,531 and 1,675,619, respectively, the weighted average number of
shares of common stock and common stock equivalents outstanding, where dilutive.
Stock  options and warrants are  regarded as common  stock  equivalents  and are
therefore  considered in earnings per share  calculations,  if dilutive.  Common
stock  equivalents  are computed  using the treasury  stock method.  There is no
material difference between primary and fully-diluted earnings per share.

Note 3 - New Accounting Standards

    In June 1996, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting Standards No. 125, "Accounting for Transfers and Servicing
of  Financial  Assets  and  Extinguishments  of  Liabilities"  (FASB 125), which
provides new accounting and reporting standards for sales, securitizations,  and
servicing of  receivables  and other  financial  assets and  extinguishments  of
liabilities.  FASB125 is effective for transactions occurring after December 31,
1996, except for the provisions  relating to repurchase  agreements,  securities
lending and other similar  transactions and pledged collateral,  which have been
delayed  until after  December 31, 1997 by FASB 127,  "Deferral of the Effective
Date of Certain  Provisions  of FASB  Statement  No. 125, an  amendment  of FASB
Statement  No.  125."  Adoption of FASB125  was not  material;  FASB127  will be
adopted as required in 1998 and is not expected to be material.

    In February  1997,  Statement of  Financial  Accounting  Standards  No. 128,
"Earnings  per Share"  (FASB  128),  was issued and is required to be adopted on
December  31,  1997.  At that time,  the Company  will be required to change the
method  currently  used to compute  earnings  per share  ("EPS") and restate all
prior periods.  The new  requirements  replace the current primary EPS and fully
diluted EPS with two new  calculations,  basic EPS and diluted  EPS.  Basic EPS,
unlike primary EPS, excludes all dilution caused by any common stock equivalents
(e.g.,  options on stock).  Diluted EPS is calculated similarly to fully diluted
EPS, except diluted EPS uses the average price of the Company's stock during the
accounting period, while fully diluted EPS uses the price of the Company's stock
at the end of the  accounting  period.  If FAS 128 had been in effect during the
first nine months of 1997,  the Company would have  reported  basic EPS of $1.06
and diluted EPS of $1.02 , for the three months ended  September  30, 1997,  and
basic EPS of $2.64 and diluted EPS of $2.54 for the nine months ended  September
30, 1997.

    In  June  1997,   Statement  of  Financial  Accounting  Standards  No.  130,
"Reporting   Comprehensive  Income"  (FASB  130),  was  issued  and  establishes
standards for reporting and displaying  comprehensive income and its components.
FASB 130 requires  comprehensive income and its components,  as recognized under
the  accounting  standards,  to be displayed in a financial  statement  with the
prominence  as other  financial  statements.  The  Company  plans  to adopt  the
standard,  as required,  beginning  in 1998;  adoption is not expected to have a
material impact on the Company.

    Statement of Financial  Accounting  Standards  No. 131,  "Disclosures  about
Segments of an Enterprise and Related  Information"  (FASB 131),  also issued in
June 1997,  establishes new standards for reporting  information about operating
segments in annual and interim financial statements.  The standard also requires
descriptive information about the way the operating segments are determined, the
products  and services  provided by the  segments and the nature of  differences
                                       5

<PAGE>

between  reportable  segment  measurements  and those used for the  consolidated
enterprise.  This standard is effective for years  beginning  after December 15,
1997.  Adoption in interim  financial  statements is not required until the year
after  initial  adoption;  however,  comparative  prior  period  information  is
required.  The Company is evaluating the standard and plans adoption as required
in 1998; adoption is not expected to have a significant  financial impact on the
Company.


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 CENIT Bank,
FSB ("CENIT Bank") and Princess Anne Bank ("Princess  Anne") (the "Banks").  The
principal  business of the Banks consists of attracting retail deposits from the
general  public in their market areas through a variety of deposit  products and
investing  these funds primarily in their market areas in commercial real estate
loans,  construction  loans,  land acquisition and development  loans,  consumer
loans,  commercial business loans, and in residential mortgage loans both inside
and  outside  their  market  areas.  The Banks  also  invest in  mortgage-backed
certificates,  securities issued by the U.S. Government and federal agencies and
other investments permitted by applicable laws and regulations.

Financial Condition of the Company

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

    At  September  30,  1997,  the Company had total  assets of $701.7  million,
compared to $707.1 million at December 31, 1996.

Securities Available for Sale

    Securities  available for sale totaled  $156.5 million at September 30, 1997
and are comprised of U. S. Treasury  securities,  other U. S. Government  agency
securities, and mortgage-backed certificates.  The net decrease of $67.5 million
from December 31, 1996 resulted  primarily  from the net effect of $38.3 million
of principal repayments,  $14.5 million of proceeds from the maturities or calls
of securities,  $12.1 million of U.S. Treasury and other U.S.  Government agency
securities purchases, and $26.7 million of proceeds from the sale of securities.

Loans
-----

    The balance of net loans held for  investment  increased from $422.2 million
at December 31, 1996 to $482.8  million at September 30, 1997.  Adjustable  rate
residential  permanent  one- to  four-family  loans  increased by $59.4  million
during the first nine months of 1997 due, in part,  to the bulk purchase in 1997
of $45.5  million of such loans on  properties  generally  located  outside  the
Company's  market area. Home equity and second mortgage loans increased by $12.7
million  during  the  first  nine  months  of 1997.  For the nine  months  ended
September 30, 1997, loan  originations  totaled $126.6  million,  loan purchases
totaled $73.4 million, and total principal reductions totaled $148.3 million.



                                        6

<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, 1997            December 31, 1996
                                                              ------------------            -----------------
                                                                            (Dollars in Thousands)
                                                       Amount         Percent              Amount          Percent
                                                       ------         -------              ------          -------
<S>                                                   <C>               <C>             <C>                <C>
Real estate loans:
   Residential permanent 1- to 4-family:
     Adjustable rate                                  $ 216,964         41.83%          $  157,542         33.63%
     Fixed rate
       Conventional                                      93,192         17.97               98,952         21.12
       Guaranteed by VA or insured by FHA                 5,718          1.10                7,004          1.50
                                                          -----          ----                -----          ----
     Total permanent 1- to 4-family                     315,874         60.90              263,498         56.25
   Residential permanent 5 or more family                 6,949          1.34                7,100          1.52
                                                          -----          ----                -----          ----
     Total permanent residential loans                  322,823         62.24              270,598         57.77
                                                        -------         -----              -------         -----
   Commercial real estate loans:
     Hotels                                              10,307          1.99                9,651          2.06
     Office and warehouse facilities                     26,035          5.02               27,178          5.80
     Retail facilities                                   20,051          3.87               18,181          3.88
     Other                                                2,109           .40                3,304          0.71
                                                          -----           ---                -----          ----
     Total commercial real estate loans                  58,502         11.28               58,314         12.45
                                                         ------         -----               ------         -----
   Construction loans:
     Residential 1- to 4-family                          39,826          7.68               43,807          9.35
     Residential 5 or more family                         8,174          1.58                8,855          1.89
     Nonresidential                                       1,009           .19                3,365           .72
                                                          -----           ---                -----           ---
     Total construction loans                            49,009          9.45               56,027         11.96
                                                         ------          ----               ------         -----

   Land acquisition and development loans:
     Consumer lots                                        4,696           .91                5,396          1.15
     Acquisition and development                          6,962          1.34               16,010          3.42
                                                          -----          ----               ------          ----
     Total land acquisition and development
       loans                                             11,658          2.25               21,406          4.57
                                                         ------          ----               ------          ----
     Total real estate loans                            441,992         85.22              406,345         86.75
                                                        -------         -----              -------         -----
Consumer loans:
   Boats                                                  6,368          1.23                7,814          1.67
   Home equity and second mortgage                       42,288          8.15               29,578          6.31
   Mobile homes                                             100           .02                  137          0.03
   Other                                                  6,565          1.27                6,606          1.41
                                                          -----          ----                -----          ----
     Total consumer loans                                55,321         10.67               44,135          9.42
                                                         ------         -----               ------          ----
Commercial business loans                                21,319          4.11               17,922          3.83
                                                         ------          ----               ------          ----
     Total loans                                        518,632        100.00%             468,402        100.00%
                                                        -------        ======              -------        ====== 
                                                                            
   Allowance for loan losses                              3,792                              3,806
   Loans in process                                      32,636                             42,309
   Unearned discounts, premiums, and loan fees, net        (643)                                68
                                                           ----                                 --
                                                         35,785                             46,183
                                                         ------                             ------
Total loans, net                                      $ 482,847                         $  422,219
                                                      =========                         ==========
</TABLE>



                                        7

<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, 1997
                                                           ------------------
                                                         (Dollars in Thousands)
Loans originated:
   Real estate:
      Permanent:
         Residential 1- to 4-family                              $ 52,878
         Residential 5 or more fami                                   840
                                                                      ---
            Total                                                  53,718
                                                                   ------
      Commercial real estate                                        6,124
                                                                    -----
       Construction:
         Residential 1- to 4-family                                 7,892
         Residential 5 or more family                               1,872
         Nonresidential                                               836
                                                                      ---
            Total                                                  10,600
                                                                   ------
      Land acquisition:
         Consumer lots                                                333
         Acquisition and development                                3,419
                                                                    -----
            Total                                                   3,752
                                                                    -----
            Total real estate loans originated                     74,194
                                                                   ------
   Consumer:
      Home equity and second mortgage                              23,890
      Other                                                         4,656
                                                                    -----
            Total                                                  28,546
                                                                   ------
   Commercial business                                             23,831
                                                                   ------
            Total loans originated                                126,571
                                                                  -------
Loans purchased                                                    73,395
                                                                   ------
            Total loans originated and purchased                  199,966
                                                                  -------
 Principal reductions:
   Repayments and other principal reductions                      117,041
   Real estate loans sold                                          31,261
                                                                   ------
            Total principal reductions                            148,302
                                                                  -------
Net increase in total loans                                      $ 51,664
                                                                 ========
Net increase in loans held for sale                              $  1,434
Net increase in gross loans held for investment                    50,230
                                                                   ------
                                                                 $ 51,664
                                                                 ========



                                        8

<PAGE>

Deposits
--------

    The balance of deposits  increased  from $499.0 million at December 31, 1996
to $509.5 million at September 30, 1997.  Noninterest-bearing deposits increased
from $46.2  million at December 31, 1996 to $54.2 million at September 30, 1997.
Also during this period,  certificates of deposit  increased from $329.7 million
at December 31, 1996, to $334.7  million at September 30, 1997.  The increase in
certificates  of deposit is  primarily  the  result of a deposit  promotion  run
during the second quarter of 1997.

Capital
-------

    The Company's and the Banks' capital ratios exceeded  applicable  regulatory
requirements at September 30, 1997.

    In July 1997, the ESOP acquired 82,719 shares of the Company's stock. These
shares are unallocated as of September 30, 1997.

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.


                                        9

<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,
                                                                            1997                       1996
                                                                            ----                       ----
                                                                                   (Dollars in Thousands)
<S>                                                                      <C>                        <C>

Nonperforming loans:
   Real estate loans:
     Permanent residential 1- to 4-family
       Nonaccrual                                                        $  872                     $ 1,172
       Accruing loans 90 days or more past due                              328                         246
                                                                            ---                         ---
         Total                                                            1,200                       1,418
                                                                          -----                       -----
     Permanent residential 5 or more family
       Accruing loans 90 days or more past due                              167                           -
                                                                            ---                         ---
     Commercial real estate
       Nonaccrual                                                             -                         457
                                                                            ---                         ---
     Construction:
       Accruing loans 90 days or more past due                                -                         170
                                                                            ---                         ---
     Land acquisition and development
       Nonaccrual                                                           200                         200
                                                                            ---                         ---

   Consumer loans:
     Mobile homes (nonaccrual)                                               62                          83
     Credit cards (accruing loans 90 days or
       more past due)                                                         2                           9
     Other (nonaccrual)                                                      27                          17
                                                                             --                          --
       Total                                                                 91                         109
                                                                             --                         ---
   Commercial business loans:
     Nonaccrual                                                             225                         483
     Accruing loans 90 days or more past due                                  6                           -
                                                                            ---                         --- 
                                                                            231                         483
                                                                            ---                         ---

Total nonperforming loans:
   Nonaccrual                                                             1,386                       2,412
   Accruing loans 90 or more days past due                                  503                         425
                                                                            ---                         ---
       Total                                                              1,889                       2,837
Real estate owned, net                                                    1,487                       2,769
Other repossessed assets, net                                               292                          55
                                                                            ---                          --
   Total nonperforming assets, net                                       $3,668                     $ 5,661
                                                                         ======                     =======
   Total nonperforming assets, net, to total assets                         .52%                        .80%
                                                                            ===                         === 
</TABLE>

   The decrease in nonperforming  assets from December 31, 1996 to September 30,
1997 of $2.0 million related  primarily to a net decrease in nonaccrual loans of
$1.0  million and a net  decrease in real estate  owned of $1.3  million,  which
offset an  increase  in  accruing  loans 90 or more days past due of $78,000 and
other repossessed assets of $237,000.



                                       10

<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,
                                            -------------------------------
                                           1997                        1996
                                           ----                        ----
                                               (Dollars in Thousands)

Balance at beginning of period          $ 3,806                     $ 3,696
Provision for loan losses                   450                         256
Losses charged to allowance               (571)                       (399)
Recovery of prior losses                    107                         446
                                            ---                         ---
Balance at end of period                $ 3,792                     $ 3,999
                                        =======                     =======

    The Company's  provision for loan losses  increased to $450,000 for the nine
months  ended  September  30, 1997 as compared to $256,000 in the same period in
1996. At September 30, 1997, the Company's  coverage ratio was 200.0% based on a
total allowance for loan losses of $3.8 million and total nonperforming loans of
$1.9 million. This compares to a coverage ratio of 132.9% at September 30, 1996.

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.


                                       11

<PAGE>
<TABLE>
<CAPTION>



                                                    For the Three Months                 For the Three Months
                                                            Ended                                Ended
                                                     September 30, 1997                   September 30, 1996
                                                     ------------------                   ------------------

                                                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)                               $  487,000    $ 9,882      8.12%      $  363,986   $  7,859      8.64%
     Mortgage-backed certificates               112,393      2,005      7.13          194,063      3,269      6.74
     U.S. Treasury and other U.S.
        Government agency securities             43,936        683      6.22           53,285        850      6.38
     Federal funds sold                           8,560        119      5.56            7,259         97      5.35
     Federal Home Loan Bank and
        Federal Reserve Bank stock                9,253        169      7.31           10,014        181      7.23
                                                  -----        ---                     ------        ---      
        Total interest-earning assets           661,142     12,858      7.78          628,607     12,256      7.80
                                                -------     ------                    -------     ------     

Noninterest-earning assets:
     REO                                          1,586                                 2,402
     Other                                       38,219                                37,149
                                                 ------                                ------
        Total noninterest-earning assets         39,805                                39,551
                                                 ------                                ------
             Total assets                    $  700,947                            $  668,158
                                             ==========                            ==========

Interest-bearing liabilities:
     Passbook and statement savings          $   44,116        377      3.42%      $   45,536        391      3.43%
     Checking accounts                           28,939        149      2.06           27,035        165      2.44
     Money market deposit accounts               47,981        402      3.35           42,031        336      3.20
     Certificates of deposit                    336,156      4,487      5.34          274,148      3,645      5.32
                                                -------      -----                    -------      -----      
        Total interest-bearing deposits         457,192      5,415      4.74          388,750      4,537      4.67
                                                -------      -----                    -------      -----      
     Advances from the Federal Home
        Loan Bank                               131,978      1,894      5.74          181,087      2,518      5.56
     Securities sold under agreements
        to repurchase                             9,734        116      4.77            6,960         75      4.31
     Other borrowings                             1,893         36      7.61              237          5      8.44
                                                  -----         --                        ---          -      
        Total borrowings                        143,605      2,046      5.70          188,284      2,598      5.52
                                                -------      -----                    -------      -----     
        Total interest-bearing liabilities      600,797      7,461      4.97          577,034      7,135      4.95
                                                -------      -----                    -------      -----     

Noninterest-bearing liabilities:
     Deposits                                    45,883                                39,336
     Other liabilities                            4,185                                 3,672
                                                  -----                                 -----
        Total noninterest-bearing liabilities    50,068                                43,008
                                                 ------                                ------
             Total liabilities                  650,865                               620,042

Stockholders' equity                             50,082                                48,116
                                                 ------                                ------
Total liabilities and stockholders' equity   $  700,947                            $  668,158
                                             ==========                            ==========

Net interest income/interest rate spread                   $ 5,397      2.81%                   $  5,121      2.85%
                                                           =======      ====                    ========      ==== 

Net interest position/net interest margin    $   60,345                 3.27%      $   51,573                 3.26%
                                             ==========                 ====       ==========                 ==== 

Ratio of average interest-earning assets to
     average interest-bearing liabilities        110.04%                               108.94%
                                                 ======                                ====== 



(1) Includes nonaccrual loans and loans held for sale.
</TABLE>
                                       12

<PAGE>
<TABLE>
<CAPTION>



                                                     For the Nine Months                  For the Nine Months
                                                            Ended                                Ended
                                                     September 30, 1997                   September 30, 1996
                                                     ------------------                   ------------------

                                                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)                               $  464,181   $ 28,260      8.12%      $  335,603  $  21,880      8.69%
     Mortgage-backed certificates               134,392      7,013      6.96          204,506     10,208      6.66
     U.S. Treasury and other U.S.
        Government agency securities             44,791      2,108      6.28           60,102      2,916      6.47
     Federal funds sold                           7,386        305      5.51            7,267        289      5.30
     Federal Home Loan Bank and
        Federal Reserve Bank stock                9,029        488      7.21            9,385        506      7.19
                                                  -----        ---                      -----        ---      
        Total interest-earning assets           659,779     38,174      7.71          616,863     35,799      7.74
                                                -------     ------                    -------     ------      

Noninterest-earning assets:
     REO                                          1,927                                 1,908
     Other                                       38,781                                37,648
                                                 ------                                ------
        Total noninterest-earning assets         40,708                                39,556
                                                 ------                                ------
             Total assets                    $  700,487                            $  656,419
                                             ==========                            ==========

Interest-bearing liabilities:
     Passbook and statement savings          $   45,560      1,154      3.38%      $   45,033      1,148      3.40%
     Checking accounts                           29,014        451      2.07           26,590        508      2.55
     Money market deposit accounts               46,341      1,147      3.30           41,974      1,010      3.21
     Certificates of deposit                    328,889     12,860      5.21          281,166     11,343      5.38
                                                -------     ------                    -------     ------     
        Total interest-bearing deposits         449,804     15,612      4.63          394,763     14,009      4.73
                                                -------     ------                    -------     ------      
     Advances from the Federal Home
        Loan Bank                               145,882      6,117      5.59          162,943      6,651      5.44
     Securities sold under agreements
        to repurchase                             8,761        301      4.58            9,230        327      4.72
     Other borrowings                               638         37      7.73              372         21      7.53
                                                    ---         --                        ---         --      
        Total borrowings                        155,281      6,455      5.54          172,545      6,999      5.41
                                                -------      -----                    -------      -----     
        Total interest-bearing liabilities      605,085     22,067      4.86          567,308     21,008      4.94
                                                -------     ------                    -------     ------     

Noninterest-bearing liabilities:
     Deposits                                    41,515                                37,532
     Other liabilities                            3,789                                 4,203
                                                  -----                                 -----
        Total noninterest-bearing liabilities    45,304                                41,735
                                                 ------                                ------
             Total liabilities                  650,389                               609,043

Stockholders' equity                             50,098                                47,376
                                                 ------                                ------
Total liabilities and stockholders' equity   $  700,487                            $  656,419
                                             ==========                            ==========

Net interest income/interest rate spread                  $ 16,107      2.85%                  $  14,791      2.80%
                                                          ========      ====                   =========      ==== 

Net interest position/net interest margin    $   54,694                 3.26%      $   49,555                 3.20%
                                             ==========                 ====       ==========                 ==== 

Ratio of average interest-earning assets to
     average interest-bearing liabilities        109.04%                           108.74%
                                                 ======                            ====== 


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

                                       13

<PAGE>



Comparison  of  Operating  Results  for  the Three  Months  Ended 
September 30, 1997 and September 30, 1996.
------------------------------------------

General
-------

     The Company's  pre-tax income for the three months ended September 30, 1997
was $2.6 million  compared to a pre-tax loss of $277,000  during the same period
in the prior year.  This  increase in income is largely  attributable  to a $2.4
million  decrease  in other  expenses  resulting  primarily  from the 1996  $2.3
million special assessment charged to the Company in connection with the federal
legislation to recapitalize the Savings  Association  Insurance Fund ("SAIF") of
the Federal Deposit Insurance  Corporation.  The Company also had an increase in
net interest  income of $276,000,  an increase in other income of $323,000 and a
$49,000 increase in provision for loan losses.

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

     The  Company's  net  interest  income  before  provision  for  loan  losses
increased by $276,000,  or 5.4%,  for the quarter  ended  September  30, 1997 as
compared to that of the previous year. This increase  resulted  primarily from a
$602,000  increase  in interest  income  which  exceeded a $326,000  increase in
interest expense. The increase in interest income was primarily  attributable to
an increase in the average  balance of loans.  The increase in interest  expense
was  primarily  due to an  increase in the average  balance of  certificates  of
deposits.

     Interest  on  the  Company's  portfolio  of  mortgage-backed   certificates
decreased by approximately  $1.3 million from $3.3 million for the quarter ended
September 30, 1996 to $2.0 million for the comparable 1997 period. This decrease
resulted from an $81.7 million  decrease in the average balance of the portfolio
offset by an increase in the average  yield of the  portfolio  from 6.74% in the
quarter ended  September 30, 1996, to 7.13% in the comparable  1997 period.  The
decrease in the average balance of mortgage-backed certificates was due to sales
and repayments.

     Interest and fees on loans  increased by $2.0 million in the quarter  ended
September 30, 1997,  compared to the comparable  1996 period.  This increase was
primarily  attributable  to a $123.0 million  increase in the average balance of
loans.  The yield on the Company's  loan  portfolio  decreased from 8.64% in the
quarter  ended  September  30,  1996,  to 8.12% in the  comparable  1997  period
primarily  as a result of  purchased  loans  outside  the market area with lower
yields being added to the loan portfolio.

     Interest on investment securities for the quarter ended September 30, 1997,
decreased  by $167,000  compared to the same period in 1996  primarily  due to a
$9.3 million decrease in the average balance of investment securities.

     Interest on deposits  increased by $878,000 in the quarter ended  September
30, 1997  compared to the  comparable  1996 period.  This increase was primarily
attributable to a $62.0 million  increase in the average balance of certificates
of deposit in the quarter ended  September 30, 1997,  compared to the comparable
1996  period.  During  September  1996,  the Company  assumed  $62.8  million of
deposits  from  Essex  Savings  Bank,  FSB  ("Essex").  Interest  on  borrowings
decreased by $552,000  primarily due to a $49.1 million  decrease in the average
balance of advances from the Federal Home Loan Bank.

     The Company's net interest margin was 3.27% for the quarter ended September
30, 1997 and 3.26% for the quarter  ended  September  30,  1996.  The  Company's
calculations  of interest  rate  spread and net  interest  rate  margin  include
nonaccrual loans as interest-earning assets.

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

     The Company's  provision  for loan losses  increased by $49,000 to $150,000
for the three months ended  September  30, 1997,  compared to the same period in
1996.  Net loan  losses  charged  to the  allowance  during  the  quarter  ended
September 30, 1997 were $68,000  compared to $128,000 of net recoveries of prior
losses in the comparable 1996 period.

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

     Total  other  income  increased  from $1.1  million  in the  quarter  ended
September 30, 1996 to $1.4 million in the comparable 1997 period.

     Deposit fees  increased by $155,000,  or 42.3%,  primarily as the result of
increases  in usage  fees from the  Company's  automated  teller  network  which
increased by  $115,000.  Merchant  processing  fees  increased by $214,000,  and
discounts

                                       14
<PAGE>

related to the  purchase of accounts  receivable  through the  Business  Manager
program at Princess Anne increased by $81,000. Gains on sales of loans increased
by $50,000.  These  increases were offset by a $123,000  reduction in commercial
mortgage  brokerage  fees.  These fees often  fluctuate  from quarter to quarter
depending on the level of loans placed with others.

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

     Total other  expenses  decreased  by $2.4  million  for the  quarter  ended
September  30, 1997  compared to the  comparable  1996 period.  During the third
quarter of 1996,  the Company  incurred a special  one-time  assessment  of $2.3
million  charged to the Company in connection  with the federal  legislation  to
recapitalize the SAIF.

     Salaries and employee benefits decreased by $124,000,  or 6.3%, compared to
the same period in 1996,  due, in part, to lower  commissions as a result of the
decrease in commercial mortgage brokerage activity in the third quarter of 1997.
Merchant  processing  expenses increased by $189,000 due to increases in volume,
and  intangible  amortization  increased  by $60,000  associated  with the Essex
branch  purchase  and  deposit  assumption  which  occurred in  September  1996.
Professional fees decreased by $83,000 during the third quarter of 1997 compared
to the third quarter of 1996  primarily as a result of a recovery of legal costs
relating to previous problem assets.

Comparison of Operating Results for the Nine Months Ended September 30, 1997 and
September 30, 1996.
-------------------

General
-------

     The Company's  pre-tax income for the nine months ended  September 30, 1997
was $6.7 million  compared to $3.5  million  during the same period in the prior
year. This increase is attributable to a $1.3 million decrease in other expenses
which includes  $405,000 of expenses  related to the Company's proxy contest and
other  matters in 1997 and $2.3 million of expense  associated  with the special
one-time  SAIF  assessment in 1996, a $776,000  increase in other income,  and a
$1.3  million  increase in net interest  income,  the effects of which more than
offset a $194,000 increase in provision for loan losses.

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

     The  Company's  net  interest  income  before  provision  for  loan  losses
increased by $1.3  million,  or 8.9%,  for the nine months ended  September  30,
1997, as compared to that of the previous year. This increase resulted primarily
from a $2.4 million increase in interest  income,  which exceeded a $1.1 million
increase in interest  expense.  The  increase in interest  income was  primarily
attributable  to an increase in the average  balance on loans.  The  increase in
interest  expense was  primarily  due to an  increase in the average  balance of
certificates of deposit.

     Interest  on  the  Company's  portfolio  of  mortgage-backed   certificates
decreased by  approximately  $3.2 million from $10.2 million for the nine months
ended September 30, 1996, to $7.0 million for the comparable  1997 period.  This
decrease  resulted from a $70.1 million  decrease in the average  balance of the
portfolio,  offset by an  increase in the average  yield of the  portfolio  from
6.66% in the nine months ended  September 30, 1996,  to 6.96% in the  comparable
1997 period. The decrease in the average balance of mortgage-backed certificates
was due to sales and repayments.

     Interest  and fees on loans  increased  by $6.4  million in the nine months
ended September 30, 1997 compared to the comparable  1996 period.  This increase
was  attributable to a $128.6 million  increase in the average balance of loans.
The yield on the  Company's  loan  portfolio  decreased  from  8.69% in the nine
months  ended  September  30,  1996,  to 8.12%  in the  comparable  1997  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,
1997 decreased by $808,000  compared to the same period in 1996 primarily due to
a $15.3 million decrease in the average balance of investment securities.

     Interest on deposits  increased  by $1.6  million in the nine months  ended
September 30, 1997,  compared to the comparable  1996 period.  This increase was
primarily  attributable  to a $47.7 million  increase in the average  balance of
certificates of deposit in the nine months ended September 30, 1997, compared to
the  comparable  1996  period,  offset  by a  decrease  in the  average  cost of
certificates  of deposit from 5.38% in the nine months ended September 30, 1996,
to 5.21% in the comparable  1997 period.  In September 1996, the Company assumed
$62.8  million of deposits  from

                                       15

<PAGE>
Essex.  Interest on  borrowings  decreased by $544,000  primarily due to a $17.1
million  decrease in the average  balance of advances from the Federal Home Loan
Bank.
                                                        
     The Company's net interest margin  increased from 3.20% for the nine months
ended September 30, 1996, to 3.26% for the nine months ended September 30, 1997.
This  increase  was the result of an increase  in the  Company's  interest  rate
spread from 2.80% in the nine months ended  September  30, 1996, to 2.85% in the
comparable 1997 period.  The Company's  calculations of interest rate spread and
net interest rate margin include nonaccrual loans as interest-earning assets.

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

     The Company's  provision for loan losses  increased by $194,000 to $450,000
for the nine months ended  September  30,  1997,  compared to the same period in
1996.  Net loan losses  charged to the  allowance  during the nine months  ended
September 30, 1997, were $464,000 compared to $47,000 of net recoveries of prior
losses in the comparable 1996 period.

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

     Total other  income  increased  from $2.9  million in the nine months ended
September 30, 1996 to $3.7 million in the comparable 1997 period.

     Deposit fees increased by $512,000, primarily as the result of increases in
usage fees from the Company's automated teller network of $319,000 and increases
in checking  account fees of $155,000.  Merchant  processing  fees  increased by
$452,000,  and discounts related to the purchase of accounts  receivable through
the Business  Manager  program at Princess  Anne  increased  by $162,000.  These
increases  were offset by a reduction  of $96,000 in the gains on sales of loans
and a $249,000  reduction in commercial  mortgage  brokerage  fees.  Income from
these two areas of the Company's  operations often  fluctuates  depending on the
level of loans sold to or placed with others.

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

     Total other  expenses  decreased  by $1.3 million for the nine months ended
September 30, 1997 compared to the comparable 1996 period. The nine months ended
September 30, 1997 includes $405,000 of expenses relating to the Company's proxy
contest and other  matters.  These  expenses  resulted  from proxy  solicitation
expenses and from legal and other expenses related to investigations of possible
violations of banking and securities laws by entities  outside the Company.  The
nine months ended September 30, 1996 includes a special  one-time  assessment of
$2.3 million charged to the Company in connection  with the federal  legislation
to recapitalize the SAIF.

     Salaries and employee benefits  increased by $88,000,  or 1.52%,  partially
related to the  expansion of the retail  banking  network.  The expansion of the
retail  banking  network  was  also  partially   responsible  for  increases  of
equipment,  data  processing  and supply  expense by $225,000 and net  occupancy
expense of premises by  $121,000.  Merchant  processing  expenses  increased  by
$406,000  due to increases in volume and  intangible  amortization  increased by
$180,000  associated with the Essex branch purchase and deposit assumption which
occurred in September 1996. Expenses associated with real estate owned increased
by $142,000.  Professional  fees decreased by $62,000 primarily as a result of a
recovery of legal costs relating to previous problem assets.

Liquidity
---------

     The  principal  sources of funds for the Company for the nine months  ended
September 30, 1997 included $987.0 million in proceeds from FHLB advances, $38.3
million in principal  repayments of securities available for sale, $26.7 million
in  proceeds  from sales of  securities  available  for sale,  $30.9  million in
proceeds from the sale of loans, and $14.5 million from proceeds from maturities
and calls of securities  available for sale.  Funds were used primarily to repay
FHLB advances  totaling  $1.0  billion,  to fund a $61.0 million net increase in
loans held for  investment,  to fund purchases of securities  available for sale
totaling $12.1 million, and to originate loans held for sale of $32.0 million.



                                       16

<PAGE>



     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.

     CENIT Bank is required to maintain  specific levels of liquid  investments.
Current regulations require CENIT Bank to maintain liquid assets,  which include
short-term assets such as cash, certain time deposits and bankers'  acceptances,
short-term U.S.  Treasury  obligations,  and  mortgage-backed  certificates with
final  maturities  of five years or less, as well as certain  long-term  assets,
equal to not less than 5.0% of its net  withdrawable  accounts  plus  short-term
borrowings.  CENIT Bank has generally maintained  regulatory liquidity in excess
of its  required  levels.  CENIT  Bank's  liquidity  ratio  was 8.9% and 9.5% at
September 30, 1997 and December 31, 1996, respectively.


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

     Exhibits - 3.4 
     Bylaws of CENIT Bancorp, Inc.


                                      17

<PAGE>


                                   SIGNATURES
                                   ----------

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





                                          CENIT BANCORP, INC.




DATE: November  3, 1997                   /S/ Michael S. Ives
                                          Michael S. Ives
                                          President and Chief Executive Officer



DATE: November  3, 1997                   /S/ John O. Guthrie
                                          John O. Guthrie
                                          Senior Vice President and
                                          Chief Financial Officer


                                                        18