UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                             ______________________

                                    FORM 10-Q
                             ______________________

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

             For the quarterly period ended September 30, 1997

                                     OR

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

          For the transition period from _______________  to ______________

                       Commission File Number 0-24744


                              Life Bancorp, Inc. 
              ______________________________________________________      
              (Exact name of registrant as specified in its charter)


                Virginia                                54-1711207
        _______________________________        _______________________________
        (State or other jurisdiction of        (I.R.S. Employer Identification 
         incorporation or organization)                    Number)       

        
              109 East Main Street
               Norfolk, Virginia                          23510
        _______________________________        _______________________________
             (Address of principal                       (Zip Code)
               executive office)

                                 (757) 858-1000
        ______________________________________________________________________
              (Registrant's telephone number, including area code)

     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 (par value $.01 per share)             9,847,581
     _______________________________________      _____________________________
            (Title of Class)                      (Number of Shares Outstanding
                                                      as of November 7, 1997)


<PAGE>

<TABLE>
<CAPTION>

                               LIFE BANCORP, INC.
                           FORM 10-Q QUARTERLY REPORT
                                TABLE OF CONTENTS


                                                                                                         Page
<S>                                                                                                      <C>
PART I - FINANCIAL INFORMATION                                                                            1

Item 1.  Financial Statements                                                                             1

     Unaudited Consolidated Balance Sheets                                                                1
     Unaudited Consolidated Statements of Operations - Three Months                                       2
     Unaudited Consolidated Statements of Operations - Year to Date                                       3
     Unaudited Consolidated Statement of Changes in Stockholders' Equity                                  4
     Unaudited Consolidated Statements of Cash Flows                                                      5
     Notes to Unaudited Consolidated Financial Statements                                                 6

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

     General                                                                                              7
     Financial Condition                                                                                  7
        Assets                                                                                            7
        Liabilities and Stockholders' Equity                                                              8
        Asset Quality                                                                                     8

     Results of Operations                                                                               14
        Comparison of Results of Operations for the Three Months Ended 
        September 30, 1997 and 1996                                                                      14

        Comparison of Results of Operations for the Nine Months Ended
        September 30, 1997 and 1996                                                                      16

     Impact of New Accounting Standards                                                                  18
     Liquidity and Capital Resources                                                                     18

PART II - OTHER INFORMATION                                                                              20

Item 1.           Legal Proceedings                                                                      20

Item 2.           Changes in Securities                                                                  20

Item 3.           Defaults Upon Senior Securities                                                        20

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

Item 5.           Other Information                                                                      20

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


SIGNATURES                                                                                               21
</TABLE>
                                       
<PAGE>


                         PART I - FINANCIAL INFORMATION

Item 1.           Financial Statements
<TABLE>
<CAPTION>
                               LIFE BANCORP, INC.
                      Unaudited Consolidated Balance Sheets
                        (In thousands, except stock data)

                                                                                    September 30, 1997   December 31, 1996
                              Assets                                                ------------------   -----------------
<S>                                                                                     <C>                <C>
Cash and cash equivalents...................................................            $    17,072        $    11,283
Investment securities, available-for-sale...................................                113,623             30,742
Mortgage-backed securities:                                                     
  Held-to-maturity (Market value of $120,872 and
    $141,269, respectively).................................................                119,841            140,974
  Available-for-sale........................................................                538,872            565,086
Loans receivable, net.......................................................                645,192            622,405
Accrued interest and dividends receivable...................................                 11,119             10,824
Real estate owned, net......................................................                  1,226              1,202
Federal Home Loan Bank stock, at cost.......................................                 15,044             13,086
Premises and equipment, net.................................................                 17,315             17,468
Excess of cost over net assets acquired.....................................                  4,399              4,792
Other assets................................................................                  2,654              1,900
                                                                                        -----------         ----------   
       Total assets........................................................              $1,486,357         $1,419,762
                                                                                        ===========         ==========     
                                                                                        
               Liabilities and Stockholders' Equity

Liabilities:
  Deposits..................................................................             $  740,839        $   732,322
  Notes payable and other borrowings:
    Advances from Federal Home Loan Bank of Atlanta.........................                299,385            261,711
    Securities sold under agreements to repurchase..........................                269,500            259,000
    Secured note due to Thrift Financing Corporation........................                  4,176              5,227
  Advances from borrowers for taxes and insurance...........................                  3,105              1,795
  Other liabilities.........................................................                 10,072              8,769
                                                                                          ---------          ---------
        Total liabilities...................................................              1,327,077          1,268,824
                                                                                          ---------          ---------
Stockholders' Equity:
  Preferred stock of $0.01 par value, authorized 5,000,000
    shares, none issued or outstanding......................................                      -                  -
  Common stock of $0.01 par value, authorized 30,000,000 shares,
    issued and outstanding 9,847,581 and 9,846,840 shares, respectively.....                     98                 98
  Additional paid-in capital................................................                 92,430             92,122
  Retained earnings, substantially restricted...............................                 70,711             63,871
  Unearned common stock held by ESOP and RRP trusts.........................                 (7,645)           (7,121)
  Unrealized gain on securities (net of taxes)..............................                  3,686              1,968
                                                                                         ----------         ----------
        Total stockholders' equity..........................................                159,280            150,938
                                                                                         ----------         ----------
        Total liabilities and stockholders' equity..........................             $1,486,357         $1,419,762
                                                                                         ==========         ==========
<FN>

           See Notes to Unaudited Consolidated Financial Statements
</FN>
</TABLE>
                                      

                                       1
<PAGE>

<TABLE>
<CAPTION>
                               LIFE BANCORP, INC.
         Unaudited Consolidated Statements of Operations - Three Months
                      (In thousands, except per share data)
                                                                              
                                                                        For the Three Months
                                                                        Ended September 30,
                                                                       --------------------
 
                                                                          1997        1996
                                                                        ------      ------ 
<S>                                                                     <C>         <C>   
Interest income:
  Interest on loans..................................................   $13,966     $12,523
  Interest on investment securities..................................       961         687
  Interest on mortgage-backed securities.............................    12,056      11,619
                                                                        -------     -------
        Total interest income........................................    26,983      24,829
                                                                        -------     -------

Interest expense:
  Interest on deposits...............................................     9,629       9,254
  Interest on notes payable and other borrowings.....................     8,174       7,100
                                                                         ------      ------
        Total interest expense.......................................    17,803      16,354
                                                                         ------      ------
        Net interest income..........................................     9,180       8,475
Provision for loan losses............................................      (157)       (295)
                                                                         ------      ------
        Net interest income after provision for loan losses..........     9,337       8,770
                                                                         ------      ------
Noninterest income:
  Deposit account fees and related income............................       132         162
  Servicing fees.....................................................       127         141
  Net gain on sales of mortgage loans held for sale..................        26           2
  Net gain on sales of real estate owned.............................         5         213
  Net gain on sales of assets........................................         1           -
  Net gain on sale of mortgage backed securities.....................       260          14
  Other..............................................................       515         408
                                                                         ------       -----                              
        Total noninterest income.....................................     1,066         940
                                                                         ------       -----

Noninterest expense:
  Compensation and employee benefits.................................     2,816       2,856
  Occupancy and office operations....................................       923         791
  FDIC Premium.......................................................       117       4,776
  Advertising and promotion..........................................       145          53
  Provision for losses on real estate owned..........................        11          34
  Amortization of excess of cost over net assets
    of companies acquired............................................       121         599
  Other..............................................................       407         365
                                                                         ------      ------
        Total noninterest expense....................................     4,540       9,474
                                                                         ------      ------

Income before income taxes...........................................     5,863         236
Income tax provision.................................................     2,433          70
                                                                         ------      ------
Net income...........................................................    $3,430      $  166
                                                                         ======      ======                                   
Net income per common and common equivalent share:

        Primary......................................................     $0.35       $0.02
                                                                          =====       =====
        Fully diluted................................................     $0.35       $0.02
                                                                          =====       =====
Dividends paid per common share......................................     $0.12       $0.11
                                                                          =====       =====
<FN>
            See Notes to Unaudited Consolidated Financial Statements
</FN>
</TABLE>

                                       2
<PAGE>
                          
<TABLE>
<CAPTION>
                               LIFE BANCORP, INC.
         Unaudited Consolidated Statements of Operations - Year to Date
                      (In thousands, except per share data)
                                                                           
                                                                        For the Nine Months
                                                                        Ended September 30,
                                                                       --------------------

                                                                         1997         1996
                                                                       -------      -------
<S>                                                                     <C>         <C>    
Interest income:
  Interest on loans..................................................   $41,047     $35,736
  Interest on investment securities..................................     2,272       2,155
  Interest on mortgage-backed securities.............................    35,632      31,409
                                                                        -------     -------
        Total interest income........................................    78,951      69,300
                                                                        --------    -------

Interest expense:
  Interest on deposits...............................................    28,303      26,335
  Interest on notes payable and other borrowings.....................    23,070      17,738
                                                                        -------     -------
        Total interest expense.......................................    51,373      44,073
                                                                        -------     -------
        Net interest income..........................................    27,578      25,227
Provision for loan losses............................................      (122)       (299)
                                                                        -------     -------
        Net interest income after provision for loan losses..........    27,700      25,526
                                                                        -------     -------
Noninterest income:
  Deposit account fees and related income............................       393         464
  Servicing fees.....................................................       391         437
  Net gain on sales of mortgage loans held for sale..................        69           8
  Net gain (loss) on sales of real estate owned......................       (38)        290
  Net gain on sales of assets........................................        34          12
  Net gain on sale of mortgage backed securities.....................     1,246          14
  Other..............................................................     1,522       1,257
                                                                        -------     -------
        Total noninterest income.....................................     3,617       2,482
                                                                        -------     -------
Noninterest expense:
  Compensation and employee benefits.................................     8,645       8,337
  Occupancy and office operations....................................     2,641       2,306
  FDIC Premium.......................................................       263       5,549
  Advertising and promotion..........................................       487         418
  Provision for losses on real estate owned..........................        94          34
  Amortization of excess of cost over net assets
   of companies acquired.............................................       433         857
  Other..............................................................     1,344       1,428
                                                                        -------     -------
        Total noninterest expense....................................    13,907      18,929
                                                                        -------     -------
Income before income taxes...........................................    17,410       9,079
Income tax provision.................................................     7,323       3,635
                                                                        -------     -------
Net income...........................................................   $10,087     $ 5,444
                                                                        =======     =======
Net income per common and common equivalent share:

        Primary......................................................     $1.06       $0.56
                                                                          =====       =====
        Fully diluted................................................     $1.04       $0.55
                                                                          =====       =====
Dividends paid per common share......................................     $0.35       $0.33
                                                                          =====       =====
<FN>
            See Notes to Unaudited Consolidated Financial Statements
</FN>
</TABLE>

                                       3
<PAGE>
                                       
<TABLE>
<CAPTION>
                               LIFE BANCORP, INC.
       Unaudited Consolidated Statement of Changes in Stockholders' Equity
                                 (In thousands)


                                                                               Unearned
                                                                               Common        Unrealized
                                                                                Stock          Gain
                                                                                Held        on Securities 
                                                      Additional                by ESOP       Available         
                                            Common     Paid-in     Retained    and RRP       for Sale
                                            Stock      Capital     Earnings     Trusts      (Net of Tax)    Total Equity
                                           -------    ---------    --------    --------     ------------    ------------     
<S>                                          <C>      <C>          <C>         <C>            <C>           <C>
Balance at December 31, 1996............     $ 98     $92,122      $63,871     $(7,121)       $ 1,968       $150,938

Net income..............................        -           -       10,087           -              -         10,087

Cash dividends paid.....................        -           -       (3,247)          -              -         (3,247)

Common Stock released by
 ESOP trust.............................        -       1,124            -         910              -          2,034

Common Stock purchased for
 RRP trust..............................        -        (827)           -      (1,434)             -         (2,261)

Common Stock
 options Exercised......................        -          11            -           -              -             11

Unrealized gain on
 securities, net of tax.................        -           -            -           -          1,718          1,718
                                            ------    -------      -------     -------     ----------       --------     
Balance at September, 30, 1997..........     $ 98     $92,430      $70,711     $(7,645)    $    3,686       $159,280
                                            ======    =======      =======     =======     ==========       ========
<FN>
            See Notes to Unaudited Consolidated Financial Statements
</FN>
</TABLE>

                                       4
<PAGE>
                                      
<TABLE>
<CAPTION>
                               LIFE BANCORP, INC.
                 Unaudited Consolidated Statements of Cash Flows
                                 (In thousands)

                                                                                                  For the Nine Months
                                                                                                   Ended September 30,
                                                                                                  -------------------- 
 
                                                                                                     1997       1996
                                                                                                  ---------   --------
<S>                                                                                               <C>           <C>  
Cash flows from operating activities:
   Net Income................................................................................    $  10,087    $  5,444
   Adjustments to reconcile net income to net cash provided by
    (used in) operating activities:
          Provision for losses on loans and real estate owned................................          (28)       (265)
          Depreciation and amortization......................................................          465         465
          Net amortization of premiums and discounts on investments and mortgage backed    
           securities........................................................................          (15)        (23)
          Amortization of excess of cost over net assets acquired............................          433         857
          Net(gain)loss on sales of real estate owned........................................           38        (290)
          Net gain on sales of mortgage loans................................................          (69)         (8)
          Net gain on sales of assets                                                                  (34)        (12)
          Net gain on sales of mortgage backed securities                                           (1,341)          -
    Loans originated for resale..............................................................       (5,941)       (637)
    Proceeds from loans sold to others.......................................................        6,010         645
    Noncash ESOP Expenses....................................................................        1,930         827
    Changes in assets and liabilities:
     (Increase) decrease in assets:
          Accrued interest receivable........................................................         (257)     (1,774)
          Deferred loan fees.................................................................          532        (676)
          Deferred income taxes..............................................................            -        (492)
          Other assets.......................................................................          425        (192)
    Increase (decrease) in liabilities:
          Deferred income taxes..............................................................        1,014           -
          Accrued expenses and other liabilities.............................................          289       7,988
                                                                                                   -------      ------
                Net cash provided by (used in) operating activities..........................       13,538      11,857
                                                                                                   -------      ------
Cash flows from investing activities:
         Proceeds from sales and maturities of investments and mortgage-backed securities....      103,618       8,007
         Purchase of investment securities...................................................      (82,947)    (19,425)
         Principal collected on loans........................................................       98,772      54,476
         Loans originated for investment.....................................................     (121,213)   (115,714)
         Proceeds from sale of premises and equipment........................................           42           5
         Purchases of premises and equipment.................................................         (325)     (1,023)
         Purchase of Seaboard Bancorp, Inc., net of cash acquired............................            -      (8,235)
         Purchases of mortgage-backed securities.............................................     (186,688)   (271,290)
         Principal collected on mortgage-backed securities...................................      130,290     111,325
         Proceeds from sale of real estate owned.............................................          902         620
         Principal collected on ESOP loan....................................................          855         943
         (Purchases) redemption of FHLB stock................................................       (1,958)        351
                                                                                                   -------     -------   
                 Net cash provided by (used in) investing activities.........................      (58,652)   (239,960)
                                                                                                   -------     -------
Cash flows from financing activities:
         Net increase in checking deposits, savings deposits, and
           certificates of deposit...........................................................        8,518      49,977
         Net increase in advances from borrowers for taxes and insurance.....................        1,310       1,273
         Dividends paid on common stock......................................................       (3,446)     (3,421)
         Repurchase of common stock..........................................................            -     (15,162)
         Purchase of common stock held for RRP...............................................       (2,586)     (2,996)
         Proceeds from notes payable and other borrowings....................................    1,164,783     893,662 
         Repayment of notes payable and other borrowings.....................................   (1,117,676)   (693,438)
                                                                                                ----------    --------
                 Net cash provided by (used in) financing activities.........................       50,903     229,895
                                                                                                ----------    --------
Net increase (decrease) in cash and cash equivalents.........................................        5,789       1,792
Cash and cash equivalents at beginning of period.............................................       11,283       8,845
                                                                                                ----------    --------
Cash and cash equivalents at end of period...................................................   $   17,072    $ 10,637
                                                                                                ==========    ======== 

<FN>
            See Notes to Unaudited Consolidated Financial Statements
</FN>
</TABLE>

                                       5
<PAGE>


                               LIFE BANCORP, INC.
              Notes to Unaudited Consolidated Financial Statements

1.   Summary of Significant Accounting Policies

     Basis of Financial Statement Presentation

The accompanying  unaudited  consolidated  financial statements were prepared in
accordance with instructions to Form 10-Q, and, therefore, do not include all of
the disclosures or footnotes necessary for a complete  presentation of financial
position,  results of  operations  and cash flows in conformity  with  generally
accepted accounting  principles.  However,  all normal,  recurring  adjustments,
which,  in the opinion of management,  are necessary for a fair  presentation of
the financial statements,  have been included. The results of operations for the
three and nine months ended September 30, 1997, are not  necessarily  indicative
of the  results  that may be  expected  for the entire  year or for any  interim
period.

     Principles of Consolidation

The consolidated financial statements include the accounts of Life Bancorp, Inc.
(the  "Company") and its  wholly-owned  subsidiary,  Life Savings Bank, FSB (the
"Bank").  All  significant  intercompany  transactions  have been  eliminated in
consolidation.  Additionally,  certain  reclassifications  may have been made in
order to conform with the current  presentation.  The accompanying  consolidated
financial statements have been prepared on the accrual basis.

2.   Net Income Per Share

For the purpose of calculating net income per common and common equivalent share
for each of the quarterly  periods  presented,  the Company used the  respective
numbers of weighted-average outstanding shares shown below (in thousands):

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

  For primary net income per share........... 9,683                  9,288
  For fully diluted net income per share..... 9,707                  9,359

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

  For primary net income per share........... 9,561                  9,749
  For fully diluted net income per share..... 9,691                  9,855

The dilutive  securities  included in the calculations above consist entirely of
common  equivalent  shares in the form of common  shares  contingently  issuable
under the Company's Stock Option Plan and Recognition and Retention Plan.


                                       6
<PAGE>
                                    

3.   Subsequent Events

     On October 14, 1997, the Board of Directors  approved a quarterly  dividend
of $0.12 per share.  The dividend  will be payable on November 28, 1997, to Life
Bancorp's stockholders of record at the close of business on November 14, 1997.

     On October 29, 1997, the Company and BB&T Corporation (BB&T) announced that
they  had  executed  a   definitive   Agreement   and  Plan  of   Reorganization
("Agreement")  pursuant  to which the  Company  will be  acquired  by BB&T.  The
transaction  will  be  accounted  for  as a  pooling  of  interests.  Under  the
Agreement,  BB&T will acquire all of the issued and outstanding  common stock of
the Company in exchange for .58 shares of BB&T's common stock,  if BB&T stock is
trading at $57 or higher. The exchange ratio may be increased, in increments, to
a maximum of .60 shares if BB&T's common stock price is between $57 and $55, and
below $55 will be fixed at .60 shares.  Pricing  will be based on the average of
BB&T's closing prices for a specific period prior to closing the transaction.
       
     Under  terms of the  agreement,  the  Company  granted  BB&T an  option  to
purchase  common  shares  of the  Company  up to 19.9% of the  shares  currently
outstanding.   The  option   agreement  is  only   exercisable   under   certain
circumstances.

     Consummation  of the  transaction  is subject to,  among other  conditions,
approval by regulatory authorities as well as the Company's shareholders.

     Based  on  BB&T's  closing  price  of  $54.88  on  October  28,  1997,  the
transaction is valued at $32.93 per share or a total consideration to be paid to
the Company's shareholders of $359.2 million.

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

     The  Company's  principal  business is conducted  through the Bank from its
headquarters  located in Norfolk,  Virginia and 20  full-service  retail banking
offices located in the cities of Norfolk, Chesapeake,  Portsmouth,  Suffolk, and
Virginia  Beach,  Virginia.  The Bank's  deposits  are  insured  by the  Savings
Association  Insurance Fund ("SAIF") to the maximum extent permitted by law. The
Bank is subject to  examination  and  comprehensive  regulation by the Office of
Thrift Supervision ("OTS"), which is the Bank's chartering authority and primary
regulator.  The  Bank is also  subject  to  regulation  by the  Federal  Deposit
Insurance Corporation ("FDIC"), as the administrator of the SAIF, and to certain
reserve requirements  established by the Federal Reserve Board ("FRB"). The Bank
is a member of the Federal Home Loan Bank ("FHLB") of Atlanta.

                               Financial Condition
Assets

     Total assets of the Company remained  relatively  unchanged during the nine
months,  totaling  $1.4 billion  at  December  31,  1996  and $ 1.5  billion  at
September 30, 1997.

     The general  interest rate  environment  existing  during the third quarter
caused  the  Bank,  as part of its  continuing  asset/liability  management,  to
evaluate its investment  strategies.  As a result, for the short-term,  the Bank
more heavily weighted its investment in fixed rate,  callable  government agency
investment   securities   and  reduced  its   investment  in  adjustable   rate,
mortgage-backed securities. Additionally, the

                                       7
<PAGE>

generally  flat interest  rate curve  existing  during the third quarter  caused
certain of the Bank's adjustable-rate,  mortgage-backed securities to experience
a relatively high prepay rate which was anticipated to continue, and potentially
increase,  over the succeeding  several months.  The positive valuation of these
securities  presented the Bank with an  opportunity  it to sell $29.3 million of
mortgage-backed  securities at a premium, instead of being prepaid at par, while
recognizing a profit on the sale of such securities of  approximately  $260,000.
The  proceeds of the sale were  reinvested  in fixed rate,  callable  government
agency  securities.  As a result of this  transaction  and the  decision to more
heavily  invest  in  fixed  rate,   government  agency  securities,   investment
securities,  available-for-sale  increased  $82.9  million from $30.7 million at
December 31, 1996, to $113.6 million at September 30, 1997.

     Mortgage-backed  securities  decreased $47.3 million,  or 6.7%, from $706.1
million  at  December 31, 1996,   to  $658.7  million  at  September  30,  1997,
reflecting for the most part, the aforementioned switch in emphasis,  during the
third quarter, from mortgage-backed  securities to fixed rate, government agency
securities.

     Loans receivable  increased by $22.8 million,  or 3.7%, from $622.4 million
at  December 31, 1996,  to $645.2 million at September 30, 1997. The Bank had no
mortgage loans held-for-sale at either December 31, 1996 or September 30, 1997.

     The  increases  in assets  were mostly  funded by  increases  in  deposits,
advances from the Federal Home Loan Bank of Atlanta and repurchase agreements.

Liabilities and Stockholders' Equity

     Deposits  increased  from  $732.3  million at  December  31, 1996 to $740.8
million  at  September 30, 1997.  Advances  from the  Federal  Home Loan Bank of
Atlanta  increased by $37.7 million,  or 14.4%,  from $261.7 million at December
31,  1996 to $299.4  million  at  September  30,  1997.  Securities  sold under
agreements  to  repurchase  increased  by $10.5  million,  or 4.1%,  from $259.0
million at December 31, 1996 to $269.5 million at September 30, 1997.

     Stockholders'  equity increased from $150.9 million at December 31, 1996 to
$159.3  million at September  30, 1997.  This  increase was primarily due to the
results of the Company's net income of $10.1 million for the nine months coupled
with a $1.7 million  increase in unrealized  gains, net of taxes, as a result of
the Statement of Financial Accounting Standards ("SFAS") No. 115 required market
valuation of the Company's securities  portfolio;  which was partially offset by
quarterly  cash dividends  totaling  $3.2 million,  or $0.11 per share,  paid on
February 28, 1997, to  stockholders  of record on  February 14, 1997;  $0.12 per
share,  paid on May 31, 1997,  to  shareholders  of record on May 16, 1997;  and
$0.12 per share,  paid on August 29, 1997, to  shareholders  of record on August
15, 1997.

Asset Quality

     General.  When a borrower  fails to make a required  payment on a loan, the
Bank  attempts to cure the  deficiency  by  contacting  the borrower and seeking
payment.  Contacts  are  generally  made 15 days after a payment is due. In most
cases, deficiencies are cured promptly. If a delinquency continues, late charges
are assessed and additional efforts are made to collect the loan. While the Bank
prefers  to work with  borrowers  to resolve  such  problems,  when the  account
becomes 90 days  delinquent,  the Bank  generally  pursues  foreclosure or other
proceedings, as necessary, to minimize any potential loss.

                                       8
<PAGE>

     Impaired  Loans.  The Company has adopted  SFAS No. 114, as amended by SFAS
118. SFAS No. 114, as amended,  provides that a loan is impaired when,  based on
current  information and events, it is probable that the creditor will be unable
to collect all principal and interest  amounts due according to the  contractual
terms of the loan  agreement.  SFAS No. 114, as amended,  requires that impaired
loans be measured based on the present value of the expected  future cash flows,
discounted at the loan's effective interest rate. The effective interest rate of
a loan is defined as the contractual interest rate adjusted for any net deferred
loan  fees  or  costs,  premiums  or  discounts  existing  at the  inception  or
acquisition  of the loan.  If the loan is collateral  dependent,  as a practical
expedient,  impairment can be based on a loan's  observable  market price or the
fair  value of the  collateral.  The  value of the loan is  adjusted  through  a
valuation  allowance  created  through  a  charge  against  income.  Residential
mortgages,  consumer  installment  obligations and credit cards may be excluded.
Loans that were treated as in-substance  foreclosures under previous  accounting
pronouncements  are  considered to be impaired loans and under SFAS No. 114 will
remain in the loan portfolio.

     A loan  may be  placed  on  non-accrual  status  and not  classified  as an
impaired loan when, in the opinion of management,  based on current  information
and events,  it is probable that the Bank will eventually  collect all principal
and  interest  amounts  due  according  to the  contractual  terms  of the  loan
agreement.  Interest  income for impaired  loans is generally  recognized  on an
accrual  basis  unless it is deemed  inappropriate  to do so. In those  cases in
which the receipt of interest payments is deemed more uncertain,  the cash basis
of income  recognition  is utilized.  Loans are placed on a  non-accrual  status
when, in the judgment of management,  the  probability  of timely  collection of
interest is deemed to be insufficient to warrant further accrual. As a matter of
policy,  the Bank does not  accrue  interest  on loans  past due 90 days or more
except when the estimated  value of the collateral  and  collection  efforts are
deemed  sufficient  to  ensure  full  recovery.  When  a  loan  is  placed  on a
non-accrual  status,  previously  accrued but unpaid  interest is deducted  from
interest income.

                                       9
<PAGE>

     The following table sets forth information  relating to the Bank's recorded
investment  in  impaired  loans at or during  the  periods  indicated.  Specific
reserves have not been netted against loan balances.
<TABLE>
<CAPTION>

                                                                 Three Months Ended                Year Ended
                                                             -----------------------------------
                                                             September 30,  June 30,   March 31,   December 31,
                                                                  1997        1997        1997       1996
                                                             -------------  --------   ---------   ------------
                                                                             
                                                                                (In thousands)

                                                                                   
<S>                                                           <C>            <C>       <C>         <C>
Impaired loans for which there is a related 
allowance for credit losses                                   $7,113         $8,141    $8,996      $9,022

Impaired loans for which there is no related 
allowance for credit losses                                        -              -         -           -  
                                                              ------         ------    ------      ------
Total impaired loans                                          $7,113         $8,141    $8,996      $9,022
                                                              ======         ======    ======      ======
Allowance for credit losses on impaired loans                 $3,034         $3,745    $3,907      $3,500
                                                              ======         ======    ======      ======
Average impaired loans during the period                      $7,458         $8,507    $9,006      $9,659
                                                              ======         ======    ======      ======
Interest income recognized on impaired loans  
during the time within the period that the loans
were impaired                                                 $  121         $  114    $   87      $  506
                                                              ======         ======    ======      ======   
Interest income recognized on impaired loans 
using a cash-basis method of accounting during
the time within the period that the loans were impaired       $  121         $  114    $   87      $  506
                                                              ======         ======    ======      ====== 
</TABLE>

     Troubled  Debt   Restructurings.   Under  Generally   Accepted   Accounting
Principles,  the Bank is required to account for certain loan  modifications  or
restructurings as "troubled debt  restructurings." In general,  the modification
or  restructuring  of a debt  constitutes a troubled debt  restructuring  if the
Bank,  for  economic  or  legal  reasons  related  to the  borrower's  financial
difficulties,  grants a  concession  to the  borrower  that the Bank  would  not
otherwise consider under current market conditions.  Debt restructurings or loan
modifications for a borrower do not necessarily always constitute  troubled debt
restructurings  however,  and troubled debt  restructurings  do not  necessarily
result  in  non-accrual  loans.  The Bank  had $1.5  million  of  troubled  debt
restructurings, net of specific reserves, at September 30, 1997. Included in the
Bank's  troubled  debt  restructurings  at  September  30,  1997,  is an  office
warehouse  complex  with a  carrying  value  of  $1.0  million  net of  specific
reserves.  At September 30,  1997, this loan was classified  substandard and was
current.  The remaining $500,000 of troubled debt restructuring at September 30,
1997,  consisted of loans  secured by  multi-family  and  commercial  properties
located in Virginia Beach and Norfolk.

                                       10
<PAGE>

     Non-Performing  Assets. The following table sets forth information relating
to the Bank's  non-performing  assets and troubled  debt  restructurings  at the
dates indicated.
<TABLE>
<CAPTION>

                                                 September 30, 1997   December 31, 1996                                             
                                                 ------------------   -----------------
                                                     
                                                      (Dollars in Thousands)

<S>                                                 <C>              <C>   
 Non-performing assets:
  Non-accruing loans:
    Mortgage loans:
      Single-family:
        Conventional..............................    $1,866           $ 1,498
        FHA/VA....................................       799               698
      Multi-family................................         -                 -
      Commercial..................................       366                46
    Consumer loans................................       318               308
                                                      ------            ------
  Total non-accruing loans........................     3,349             2,550
  Real estate owned, net (1)......................     1,226             1,202
                                                      ------            ------
Total non-performing assets.......................     4,575             3,752

Troubled debt restructurings, net (2).............     1,532             2,464
                                                      ------            ------
Total non-performing assets and troubled 
debt restructurings...............................    $6,107            $6,216
                                                      ======            ======
Non-accruing loans to total loans held for 
investment........................................     0.52%             0.41%
                                                       ====              ====
Total non-performing assets to total assets.......     0.31%             0.26%
                                                       ====              ====
Total non-performing assets and troubled 
debt restructurings to total assets...............     0.41%             0.44%
                                                       ====              ====
</TABLE>
____________________________

(1) Amounts are net of the  allowance  for real estate  owned which  amounted to
    $28,000 at September 30, 1997 and $30,000 December 31, 1996.
(2) Amounts are net of specific  valuation  allowance which totaled $3.0 million
    at September 30, 1997 and $3.7 million December 31, 1996.
    
    The  Bank's  real  estate  owned at  September  30,  1997  consisted  of 19
properties.  During  the first  nine  months of 1997,  the Bank sold ten  single
family  residences,   one  residential  lot  and  two  multi-family   residences
previously acquired in foreclosure for a combined sale price of $940,301.  After
satisfying  deductions for valuation  allowances,  repairs,  holding costs, real
estate brokerage  commissions and settlement expenses,  the Bank realized a loss
on the sale of approximately $38,000.

     Potential Problem Loans. In addition to the loans included in the preceding
impaired  loans and  non-performing  assets  and  troubled  debt  restructurings
tables,  at September 30, 1997,  the Bank had loans totaling $4.5 million which,
even though they were not impaired or  categorized as  non-performing  assets or
troubled debt restructurings, were designated as substandard or special mention.

                                       11
<PAGE>

     At September 30, 1997, there were seven performing loans to four borrowers,
totaling  $2.2 million,  which the Bank had  designated  as  substandard.  These
performing loans are broken down as follows:  two loans,  totaling $1.5 million,
are secured by commercial properties located in Norfolk,  Virginia; three loans,
totaling  $546,000,  are secured by  commercial  properties  in Virginia  Beach,
Virginia;  and two loans, totaling $200,000, are secured by various multi-family
properties and developed lots in Norfolk,  Virginia. At this time, the Bank does
not  anticipate  losses  on any of these  loans.  Previsously  included  in this
category  was one  loan,  designated  as  substandard,  which  was a  performing
construction  loan  secured  by a  retirement  facility  under  construction  in
Virginia  Beach.  In  August  1996,  the  partially   constructed  building  was
substantially  destroyed by fire and, at the time of the fire, construction loan
disbursements  totaled $3.3 million. At September 30, 1997, the loan was paid in
full.

     Additionally,  at September 30, 1997,  there were four performing  loans to
one borrower,  totaling  $2.3 million,  which the Bank had designated as special
mention. These loans are secured by a multi-family dwelling unit and duplexes in
Virginia Beach, Virginia.

     Allowance for Loan Losses.  The Bank's policy is to establish  reserves for
estimated losses on loans when it determines that losses may be incurred on such
loans.  The  allowance  for losses on loans is  maintained  at a level  believed
adequate by management to absorb potential losses in the portfolio. Management's
determination  of the adequacy of the allowance is based on an evaluation of the
portfolio; past loss experience; current economic conditions; volume, growth and
composition  of the  portfolio;  and other  relevant  factors.  The allowance is
increased by provisions for loan losses, which are charged against income.


                                       12
<PAGE>

     The  following  table sets forth the activity in the Bank's  allowance  for
loan losses during the periods indicated.
<TABLE>
<CAPTION>
                                             Three Months Ended    Nine Months Ended
                                               September 30,         September 30,
                                             ------------------    -----------------

                                              1997       1996      1997        1996
                                             ------     ------     ------      -----
                                                       (Dollars in thousands)

<S>                                          <C>        <C>        <C>         <C>
Allowance at beginning of period             $9,746     $9,505     $9,656      $4,438
Addition to allowance from acquisition                                                                     
  of Seaboard Savings                             -          -          -       5,192
Provision for loan losses                      (157)      (295)      (122)       (299)
Charge-offs:
  Mortgage loans:
    Single-family                               (28)       (33)      (115)       (150)
    Multi-family                               (139)       (38)      (299)        (38)
    Construction                                  -          -          -           -
    Commercial                                 (478)       (40)      (478)        (40)
    Residential lots                              -          -          -           -
  Consumer loans                               (382)       (57)      (737)       (249)
                                             -------      -----    -------       -----
      Total charge-offs                      (1,027)      (168)    (1,629)       (477)
      Other charge offs                           -          -          -           -
Recoveries:
  Mortgage loans:
    Single-family                                12         62         42          64
    Multi-family                                  -         10          -          10
    Construction                                  -          -          -           -
    Commercial                                   16      1,468         32       1,623
  Consumer loans                                 49         12         98          43
                                             ------    -------     ------     -------
      Total recoveries                           77      1,552        172       1,740
      Other recoveries                            -          -        562           -
                                             ------    -------     ------     -------
Allowance at end of period                   $8,639    $10,594     $8,639     $10,594
                                             ======    =======     ======     =======
Allowance for loan losses to total non-
  accruing loans at end of period            257.96%    644.80%    257.96%     644.80%
                                             ======     ======     ======      ======
Allowance for loan losses to total
  impaired loans at end of period            121.45%    127.59%    121.45%     127.59%
                                             ======     ======     ======      ======
Allowance for loan losses to total loans
  held for investment at end of period         1.34%      1.79%      1.34%       1.79%
                                             ======     ======     ======      ======
</TABLE>

     Based on facts and circumstances  currently  available,  the Bank presently
believes  that the allowance for loan losses was adequate at September 30, 1997.
However, there can be no assurances that additions to such allowance will not be
necessary in future periods,  in which case the Company's  results of operations
would be adversely affected.

                                       13
<PAGE>

                              Results of Operations

     Comparison  of Results of Operations  for the Three Months Ended  September
30, 1997 and 1996

     General.  The Company reported net income of approximately $3.4 million and
$166,000 for the three months ended  September 30, 1997 and 1996,  respectively.
Before a one-time  statutorily  mandated SAIF  assessment  and a related  charge
during the third quarter of 1996,  the  Company's  net income was  approximately
$3.1 million for the  three-month  period ended September 30, 1996. The $300,000
increase in net income for the three months ended  September 30, 1997,  compared
to the  pre-SAIF net income  during the  corresponding  period in 1996,  was due
primarily to a $705,000,  or 8.3%,  increase in net interest income; a $126,000,
or 13.4% increase in noninterest  income and a decrease in noninterest  expenses
of $104,000.  These were partially offset by an increase in provision for income
taxes.

     Net Interest Income. Net interest income increased by $705,000, or 8.3%, in
the three months ended  September 30, 1997,  to $9.2  million,  compared to $8.5
million  during the same period in 1996. The reason for such increase was a $2.2
million  improvement  in interest  income,  mainly due to an increase in average
interest-earning assets of $97.1 million, or 7.3%, to $1.4 billion for the three
months  ended  September  30,  1997.  The  additional   interest-earning  assets
primarily resulted from increases in investment and  mortgage-backed  securities
and internal  growth in the Bank's loan  portfolio.  Interest on loans increased
$1.4 million,  or 11.5%, as a result of a $66.2 million,  or 11.2%,  increase in
the average  balance of the loan  portfolio  together  with a 3 basis point (100
basis points being equal to 1%)  increase in the average  yield earned  thereon.
Interest income on mortgage-backed  securities increased $437,000 as a result of
a $17.6  million,  or 2.5%,  increase  in the average  balance of the  mortgage-
backed  securities  portfolio  together  with an 8 basis  point  increase in the
average yield earned  thereon.  The improvement in interest income was partially
offset by a $1.4 million  increase in interest  expense mainly as a result of an
increase of $113.5 million in average interest-bearing liabilities.  Interest on
deposits increased $375,000,  or 4.1%, as a result of an increase in the average
balance of deposits of $26.8 million,  or 3.7%, together with an increase in the
cost of deposits from 5.18% to 5.19%.  Interest expense on borrowings  increased
by $1.1 million,  or 15.1%, as a result of an increase in the average balance of
$86.7 million, or 18.1%, partially offset by a decrease in the average rate paid
on borrowings from 5.92% to 5.77%.  The Bank's average  interest rate spread and
net interest margin amounted to 2.15% and 2.58%, respectively,  during the three
months ended September 30, 1997,  compared to 2.02% and 2.56% for the comparable
period in 1996.

     Provision for Loan Losses.  The negative provision for loan losses amounted
to  $157,000  for the three  months  ended  September  30,  1997,  compared to a
negative provision of $295,000 during the three months ended September 30, 1996.
For  additional  discussion  of the  Bank's  loan loss  policy,  see  "Financial
Condition - Asset Quality - Allowance for Loan Losses."

                                       14
<PAGE>

     Yields  Earned and Rates Paid.  The  following  table sets  forth,  for the
periods indicated, information regarding (i) the total dollar amount of interest
income of the Company from  interest-earning  assets and the  resultant  average
yields;  (ii) the total dollar  amount of interest  expense on  interest-bearing
liabilities  and the resultant  average rate;  (iii) net interest  income;  (iv)
interest-rate  spread;  and  (v)  net  interest  margin.  Average  balances  are
determined on an average daily balance basis.
<TABLE>
<CAPTION>
                                                                    Three Months Ended September 30,
                                                  ------------------------------------------------------------------
                                                            1997                                1996
                                                  ----------------------------       -------------------------------
    
                                     Yield/Cost                        Average                               Average 
                                at September 30, Average               Yield/       Average                 Yield/
                                      1997       Balance  Interest    Cost (1)      Balance    Interest      Cost (1)
                                ---------------  -------  --------    --------      -------    --------     --------

                                                                 (Dollars in Thousands)
<S>                                  <C>      <C>         <C>          <C>        <C>          <C>            <C>
Interest-earning assets:
Loans receivable:
  Mortgage loans...........          8.13%    $  576,000  $11,924      8.28%      $  520,280   $ 10,871       8.36%
  Consumer loans...........         10.59%        82,168    2,042      9.94%          71,714      1,652       9.21%
                                              ----------  -------                 ----------   --------
Total loans................          8.43%       658,168   13,966      8.49%         591,994     12,523       8.46%
Mortgage-backed securities.          7.12%       706,925   12,056      6.82%         689,370     11,619       6.74%
Investment securities......          7.04%        49,479      872      7.05%          36,406        623       6.85%
Other earning assets.......          6.30%         7,188       89      4.95%           6,886         64       3.72%
                                              ----------  -------                 ----------   --------
Total interest-earning assets        7.72%     1,421,760   26,983      7.59%       1,324,656     24,829       7.50%
                                                          -------                              --------
Noninterest-earning assets.                       59,496                              38,757
                                              ----------                          ----------
    Total assets...........                   $1,481,256                          $1,363,413
                                              ==========                          ==========
Interest-bearing liabilities:
Deposits:
  Demand deposits..........          3.53%    $  111,165      967      3.48%      $   63,680        531       3.34%
  Passbook savings.........          3.31%        52,434      433      3.30%          53,452        430       3.22%
  Certificates.............          5.65%       577,943    8,229      5.70%         597,620      8,293       5.55%
                                              ----------  -------                 ----------   --------
Total deposits.............          5.17%       741,542    9,629      5.19%         714,752      9,254       5.18%
Borrowings.................          5.72%       566,623    8,174      5.77%         479,909      7,100       5.92%
                                              ----------  -------                 ----------   --------
  Total interest-bearing
    liabilities............          5.41%     1,308,165   17,803      5.44%       1,194,661     16,354       5.48%
                                                          -------                              --------
Noninterest-bearing liabilities                   15,641                              21,440
                                              ----------                          ----------
    Total liabilities......                    1,323,806                           1,216,101
Stockholders' equity.......                      157,450                             147,312
                                              ----------                          ----------
  Total liabilities and
    stockholders' equity...                   $1,481,256                          $1,363,413
                                              ==========                          ==========
Net interest-earning assets                   $  113,595                          $  129,995
                                              ==========                          ==========
Net interest income and
  interest-rate spread.....          2.31%                $9,180      2.15%                    $  8,475       2.02%
                                                          ======                               ========
Net interest margin........                                           2.58%                                   2.56%
Ratio of average interest-                                                                      
  earning assets to average
  interest-bearing liabilities                                        1.09x                                   1.11x
<FN>
_______________________________
    (1)  Annualized
</FN>
</TABLE>

     Noninterest Income.  Noninterest income for the quarter ended September 30,
1997, was  $1.1 million  compared to $940,000 in the comparable  three months of
1996. This increase  resulted mostly from  approximately  $260,000 profit on the
previously discussed sale of mortgage-backed securities.

     Noninterest Expense.  Noninterest expenses decreased by $4.9 million during
the three months ended  September 30, 1997,  to $4.5  million,  compared to $9.5
million  during the nine months ended  September 30, 1996.  Consistent  with the
SAIF  recapitalization  legislation,  during the third quarter of 1996, the Bank
was assessed $4.4 million by the FDIC as its pro rata share to recapitalize  the
SAIF. As a result of the special  assessment,  relative to deposits  obtained in
the Seaboard Savings Bank, FSB

                                       15
<PAGE>

acquisition,  the acquired  goodwill relating to Seaboard was adjusted through a
charge to noninterest  expense of $451,000.  Before the one time  assessment and
related charge,  noninterest  expenses were relatively unchanged at $4.5 million
for the three months ended  September  30, 1997 compared to $4.6 million for the
three months ended September 30,1996.

     Income Tax  Provision.  The  provision  for income taxes  increased by $2.4
million due to both an increase in the  provision  rate and the level of pre-tax
income.  The income tax  provision  rate  increased  from 29.7% of income before
taxes,  for the third quarter of 1996, to 41.5%,  for the third quarter of 1997,
due to additional  taxable  income in higher income tax brackets and the effects
of non-tax deductible expenses for 1997.

     Comparison of Results of Operations for the Nine Months Ended September 30,
1997 and 1996

     General. The Company reported net income of approximately $10.1 million and
$5.4  million  for  the  nine  months  ended   September   30,  1997  and  1996,
respectively.  The  Company's  reported  net  income for the nine  months  ended
September 30, 1996, before a one-time statutorily mandated SAIF assessment and a
related charge, was approximately $8.4 million. The $1.7 million increase in net
income for the nine months ended  September  30, 1997,  compared to the pre-SAIF
assessment net income during the corresponding period in 1996, was due primarily
to a $2.4 million increase in net interest income and a $1.1 million,  or 45.7%,
increase in noninterest  income which was partially offset by an increase in the
provision for income taxes.

     Net Interest  Income.  Net interest  income  increased by $2.4 million,  or
9.3%, in the nine months ended September 30, 1997, to $27.6 million, compared to
$25.2 million during the comparable period in 1996. The reason for such increase
was a $9.7 million improvement in interest income,  mainly due to an increase in
average interest-earning assets of $180.5 million, or 14.9%, to $1.4 billion for
the nine months ended September 30, 1997. The additional interest-earning assets
primarily  resulted from  increases in  mortgage-backed  securities and internal
growth in the Bank's loan  portfolio.  Interest on loans increased $5.3 million,
or 14.9%,  as a result of a $90.6  million,  or 16.2%,  increase  in the average
balance of the loan portfolio  partially  offset by a 10 basis point decrease in
the average yield earned thereon. Interest income on mortgage-backed  securities
increased $4.2 million as a result of a $89.0 million, or 14.6%, increase in the
average balance of the mortgage-backed  securities portfolio partially offset by
a 7 basis point decrease in the average yield earned thereon. The improvement in
interest  income was  partially  offset by a $7.3  million  increase in interest
expense  mainly  as a  result  of an  increase  of  $202.5  million  in  average
interest-bearing  liabilities.  Interest on deposits increased $2.0 million,  or
7.5%,  as a result of an increase  in the  average  balance of deposits of $56.5
million,  or 8.3%,  partially  offset by a decrease in the cost of deposits from
5.15% to 5.11%.  Interest  expense on borrowings  increased by $5.3 million,  or
30.1%, as a result of an increase in the average  balance of $146.0 million,  or
37.0%,  partially  offset by a decrease in the average  rate paid on  borrowings
from 5.99% to 5.69%.  The Bank's  average  interest rate spread and net interest
margin amounted to 2.20% and 2.64%,  respectively,  during the nine months ended
September  30, 1997,  compared to 2.16% and 2.79% for the  comparable  period in
1996.

     Provision for Loan Losses.  The negative provision for loan losses amounted
to $122,000 for the nine months ended September 30, 1997, compared to a negative
provision of $299,000  during the nine months  ended  September  30,  1996.  For
additional discussion of the Bank's loan loss policy, see "Financial Condition -
Asset Quality - Allowance for Loan Losses."

                                       16
<PAGE>
     Yields  Earned and Rates Paid.  The  following  table sets  forth,  for the
periods indicated, information regarding (i) the total dollar amount of interest
income of the Company from  interest-earning  assets and the  resultant  average
yields;  (ii) the total dollar  amount of interest  expense on  interest-bearing
liabilities  and the resultant  average rate;  (iii) net interest  income;  (iv)
interest-rate  spread;  and  (v)  net  interest  margin.  Average  balances  are
determined on an average daily balance basis.
<TABLE>
<CAPTION>

                                                                        Nine Months Ended September 30,
                                                   ---------------------------------------------------------------------
                                                                1997                                  1996
                                                   -----------------------------         -------------------------------
                                   Yield/Cost                            Average                                Average 
                                at September 30,   Average               Yield/        Average                   Yield/
                                      1997         Balance  Interest    Cost (1)       Balance    Interest      Cost (1)            
                                ---------------    -------  --------    --------       -------   ---------     ---------
                                                        (Dollars in Thousands)
<S>                                  <C>        <C>         <C>          <C>        <C>          <C>            <C>
                                    
Interest-earning assets:
Loans receivable:
  Mortgage loans...........          8.13%      $  568,629  $35,209      8.26%      $  491,892   $ 31,101       8.43%
  Consumer loans...........         10.59%          80,857    5,838      9.63%          66,964      4,635       9.23%
                                                ----------  -------                 ----------   --------
Total loans................          8.43%         649,486   41,047      8.43%         558,856     35,736       8.53%
Mortgage-backed securities.          7.12%         697,786   35,632      6.81%         608,757     31,409       6.88%
Investment securities......          7.04%          36,654    1,951      7.10%          36,800      1,887       6.84%
Other earning assets.......          6.30%           8,582      321      4.99%           7,597        268       4.70%
                                                ----------  -------                 ----------   --------
Total interest-earning assets        7.72%       1,392,508   78,951      7.56%       1,212,010     69,300       7.62%
                                                            -------                              --------
Noninterest-earning assets.                         56,937                              40,361
                                                ----------                          ----------
    Total assets...........                     $1,449,445                          $1,252,371
                                                ==========                          ========== 
Interest-bearing liabilities:
Deposits:
  Demand deposits..........          3.53%      $  106,919    2,669      3.33%      $   49,255      1,188       3.22%
  Passbook savings.........          3.31%          52,565    1,281      3.25%          54,886      1,350       3.28%
  Certificates.............          5.65%         578,339   24,353      5.61%         577,198     23,797       5.50%
                                                ----------  -------                 ----------   --------
Total assets...............          5.17%         737,823   28,303      5.11%         681,339     26,335       5.15%
Borrowings.................          5.72%         540,918   23,070      5.69%         394,950     17,738       5.99%
                                                ----------  -------                 ----------   --------
  Total interest-bearing
    liabilities............          5.41%       1,278,741   51,373      5.36%       1,076,289     44,073       5.46%
                                                            -------                              --------
Noninterest-bearing liabilities                     16,403                              22,683
                                                ----------                          ----------
    Total liabilities......                      1,295,144                           1,098,972
Stockholders' equity.......                        154,301                             153,399
                                                ----------                          ----------
  Total liabilities and
    stockholders' equity...                     $1,449,445                          $1,252,371
                                                ==========                          ========== 
Net interest-earning assets                     $  113,767                          $  135,721
                                                ==========                          ==========
Net interest income and
  interest-rate spread.....          2.31%                 $ 27,578      2.20%                   $ 25,227       2.16%
                                                           ========                              ========
Net interest margin........                                              2.64%                                  2.79%
Ratio of average interest-
  earning assets to average
  interest-bearing liabilities                                           1.09x                                  1.13x
<FN>
        (1)  Annualized
</FN>
</TABLE>

     Noninterest Income.  Noninterest income for the nine months ended September
30,  1997,  was  $3.6 million  compared to $2.5 million in the  comparable  nine
months of 1996. This increase  resulted mostly from a $1.2 million profit on the
sale of mortgage-backed  securities during the first and third quarters of 1997.

     Noninterest Expense.  Noninterest expenses decreased by $5.0 million during
the nine months ended  September 30, 1997, to $13.9  million,  compared to $18.9
million  during the nine months ended  September 30, 1996.  Consistent  with the
SAIF recapitalization legislation, during the third quarter of 1996 the Bank was
assessed  $4.4  million  by the FDIC as its pro rata share to  recapitalize  the
SAIF. As a result of the special  assessment,  relative to deposits  obtained in
the Seaboard Savings Bank, FSB

                                       17
<PAGE>

acquisition,  the acquired  goodwill relating to Seaboard was adjusted through a
charge to noninterest  expense of $451,000.  Before the one-time  assessment and
related  charge,  noninterest  expenses  were $14.1  million for the nine months
ended September 30, 1996.

     Income Tax  Provision.  The  provision  for income taxes  increased by $3.7
million due to both an increase in the  provision  rate and the level of pre-tax
income.  The income tax  provision  rate  increased  from 40.0% of income before
taxes, for the nine-month period of 1996, to 42.1%, for the nine-month period of
1997,  due to  additional  taxable  income in higher income tax brackets and the
effects of non-tax deductible expenses for 1997.

                       Impact of New Accounting Standards

     In February 1997, the Financial  Accounting Standards Board ("FASB") issued
SFAS 128, "Earnings per Share",  which 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 SFAS 128 had been in effect during the first nine months
of 1997,  the Company would have reported  basic EPS of $0.37 and diluted EPS of
$0.35 for the three months ended September 30, 1997, and basic EPS of $1.10 and
diluted EPS of $1.06, for the nine months ended September 30, 1997.

     In June 1997, FASB issued SFAS 130, "Reporting Comprehensive Income", which
is required to be adopted for fiscal years beginning after December 15, 1997. In
1998,  the Company will be required to report items of  comprehensive  income in
the  complete  set of financial  statements.  Additionally,  the Company will be
required  to  display  the  accumulated  balance of other  comprehensive  income
separately in the equity section of a statement of financial position.  The only
anticipated item of comprehensive  income  reportable by the Company will be the
unrealized gains or losses on available-for-sale  securities, in accordance with
SFAS 115.

     In June 1997,  FASB  issued  SFAS 131,  "Disclosures  about  Segments of an
Enterprise and Related Information",  which is required to be adopted for fiscal
years beginning after December 15, 1997.  The statement requires public business
enterprises,  like the Company, to report financial and descriptive  information
about its reportable  operating  segments and report a measure of segment profit
or loss,  certain specific revenue and expense items,  segment assets, and other
disclosures about products and services,  geographic areas, and major customers.
Since  the  Company  does  not  have  reportable  segments,  as  defined  in the
statement,  the Company  believes that the statement  will have no impact on the
Company's financial statements.

                         Liquidity and Capital Resources

     The  Bank's  liquidity,  represented  by cash  and cash  equivalents,  is a
product of its operating, investing and financing activities. The Bank's primary
sources  of  funds  are  deposits;  borrowings;  amortization,  prepayments  and
maturities of outstanding loans and mortgage-backed securities;  sales of loans;
maturities of investment securities and other short-term investments;  and funds
provided from  operations.  While  scheduled  payments from the  amortization of
loans and  mortgage-backed  securities  and maturing  investment  securities and
short-term  investments  are relatively  predictable  sources of funds,  deposit
flows and loan  prepayments  are greatly  influenced by general  interest rates,
economic conditions

                                       18
<PAGE>

and  competition.  In  addition,  the Bank  invests  excess  funds in  overnight
deposits and other short-term interest-earning assets, which provide operational
liquidity.  The Bank has been  able to  generate  sufficient  cash  through  its
deposits  as well as  borrowings  (primarily  consisting  of FHLB  advances  and
repurchase  agreements).  At September 30, 1997,  the Bank had $299.4 million of
outstanding FHLB advances and $273.7 million in repurchase  agreements and other
borrowings.

     Excess  liquidity is generally  invested in short-term  investments such as
overnight  deposits.  On a longer-term  basis,  the Bank maintains a strategy of
investing  in  various  lending  products.  The Bank uses its  sources  of funds
primarily to meet its ongoing operations,  to fund maturing savings certificates
and  savings  withdrawals  and to fund loan  commitments  and its  portfolio  of
mortgage-backed  and  investment  securities.  At September 30, 1997,  the total
approved loan commitments  outstanding  amounted to  $29.1 million.  At the same
date,  commitments  under  unused  lines of  credit  amounted  to $9.5  million.
Certificates  of deposits  scheduled  to mature in one year or less at September
30,  1997,  totaled   $388.0 million;   however,   management  believes  that  a
significant  portion of maturing  deposits  will remain with the Bank.  The Bank
anticipates  that  even  with  interest  rates at lower  levels  than  have been
experienced in recent years, it will continue to have  sufficient  funds to meet
its operational  needs. At September 30, 1997, the Bank had a liquidity ratio of
7.86%, which exceeded the required minimum liquid asset ratio of 5.0%.

     At September 30, 1997, the Bank's regulatory  capital was well in excess of
applicable  minimums required by federal  regulations.  The Bank, as a member of
the  thrift  industry,  is  required  to  maintain  tangible  capital of 1.5% of
adjusted  total  assets,  core  capital  of 3.0% of  adjusted  total  assets and
risk-based  capital of 8.0% of adjusted  risk-weighted  assets. At September 30,
1997, the Bank's  tangible  capital was $132.7  million,  or 8.98%,  of adjusted
total  assets,  core capital was $132.7  million,  or 8.98%,  of adjusted  total
assets and  risk-based  capital  was $138.2  million,  or  22.45%,  of  adjusted
risk-weighted  assets,  exceeding  the  requirements  by $110.5  million,  $88.3
million and $89.0 million, respectively.

                                       19
<PAGE>

                           PART II - OTHER INFORMATION

Item 1.           Legal Proceedings
                       Not applicable.

Item 2.           Changes in Securities
                       Not applicable.

Item 3.           Defaults Upon Senior Securities
                       Not applicable.

Item 4.           Submission of Matters to a Vote of Security Holders
                       Not applicable.

Item 5.           Other Information
                       Not applicable.

Item 6.           Exhibits and Reports on Form 8-K

        a)     Exhibits required by Item 601 of Regulation S-K.
                       None

        b)     Reports on Form 8-K filed during the quarter.
                       None



                                       20
<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.


                                                    LIFE BANCORP, INC.



Date:  November 14, 1997    By: /s/ Tollie W. Rich, Jr.
                               _____________________________________________
                                  Tollie W. Rich, Jr., Executive Vice President,
                                       Chief Operating Officer


Date:  November 14, 1997    By: /s/ Emory J. Dunning, Jr.
                               ______________________________________________
                                   Emory J. Dunning, Jr., Senior Vice President,
                                       Treasurer and Chief Financial Officer


                                       21