UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    Form 10-Q
(Mark One)
[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
       SECURITIES EXCHANGE ACT OF 1934

       For the quarterly period ended December 31, 1996

                                        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 1-8952

                          INTERSTATE/JOHNSON LANE, INC.
             (Exact name of Registrant as specified in its charter)

                                    Delaware
         (State or other jurisdiction of incorporation or organization)

                                   56-1470946
                      (I.R.S. Employer Identification No.)

      Interstate Tower, P.O. Box 1012, Charlotte, North Carolina 28201-1012
               (Address of principal executive offices, zip code)

                                 (704) 379-9000
              (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 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.

              Class                          Outstanding at January 31, 1997
              -----                         --------------------------------
(Common stock, $.20 par value)                         5,938,102




                                  PAGE 1 OF 14


<PAGE>


                 INTERSTATE/JOHNSON LANE, INC. AND SUBSIDIARIES


                                      Index


                                                                     Page Number

Part I.  Financial Information

         Item 1.  Financial Statements

                  Condensed Consolidated Statements of
                  Financial Condition--December 31, 1996 and
                  September 30, 1996                                        3

                  Condensed Consolidated Statements of
                  Operations--Three Months Ended
                  December, 1996 and 1995                                   4

                  Condensed Consolidated Statements of
                  Cash Flows--Three Months Ended
                  December 31, 1996 and 1995                                5

                  Notes to Condensed Consolidated Financial
                  Statements                                                6

         Item 2.  Management's Discussion and Analysis of
                  Financial Condition and Results of Operations             9


Part II. Other Information

         Item 1.  Legal Proceedings                                        12

         Item 6.  Exhibits and Reports on Form 8-K                         12




                                     Page 2

<PAGE>

                 INTERSTATE/JOHNSON LANE, INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                  (Unaudited)


<TABLE>
<CAPTION>

                                                               (All dollars in thousands)
                                                       December 31,                  September 30,
                                                           1996                         1996
                                                       -------------                 -------------

<S>                                                     <C>                          <C>
Assets
Cash and cash equivalents                              $     15,357                  $    37,285
Cash and securities segregated for
  regulatory purposes                                       121,501                       80,501
Loans under matched securities resale agreements              3,953                        5,874
Receivables:
  Securities resale agreements                               34,233                       63,801
  Customers                                                 234,930                      234,779
  Brokers, dealers and clearing agencies                     16,941                       31,406
  Other                                                       6,108                        4,234
Trading securities owned                                    111,175                       59,796
Land, buildings, and improvements, net                        5,360                        5,574
Office facilities and equipment, net                          9,051                        9,236
Goodwill and intangible assets                               12,925                       13,076
Other assets                                                 22,813                       22,779
                                                       ------------                  -----------
                                                       $   594,347                   $  568,341
                                                       ------------                  -----------
                                                       ------------                  -----------

Liabilities and Shareholders' Equity
Short-term borrowings:
  Checks payable                                       $    22,181                   $   16,561
  Bank loans                                                 7,200                            -
  Securities repurchase agreements                          42,412                       31,078
Borrowings under matched securities repurchase
  agreements                                                 4,038                        5,983
Payables:
  Customers                                                332,041                      292,450
  Brokers and dealers                                        7,128                        7,375
  Other                                                      7,799                        7,262
Accrued compensation and benefits                          12,261                       20,939
Securities sold but not yet purchased                       35,846                       65,784
Notes payable                                                5,997                        6,208
Other liabilities and accrued expenses                      17,386                       16,875
                                                       -----------                   ----------
                                                           494,289                      470,515
                                                       ------------                  -----------
Minority interest                                              201                          200
                                                       ------------                  -----------
Long-term subordinated debt                                 20,999                       20,999
                                                       ------------                  -----------
Shareholders' equity:
    Common stock                                             1,377                        1,377
    Additional paid-in-capital                              31,082                       31,231
    Retained earnings                                       55,936                       53,670
                                                       ------------                  -----------
                                                            88,395                       86,278
    Less: treasury stock, at cost                           (9,537)                      (9,651)
                                                       ------------                  -----------
          Total shareholders' equity                        78,858                       76,627
                                                       ------------                  -----------
                                                       $   594,347                   $  568,341
                                                       ------------                  -----------
                                                       ------------                  -----------

The accompanying notes are an integral part of the condensed consolidated financial statements

</TABLE>

                                     Page 3

<PAGE>

                 INTERSTATE/JOHNSON LANE, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)


<TABLE>
<CAPTION>


                                                                 For the Three Months
                                                                  Ended December 31,
                                                              (All dollars in thousands)
                                                            1996                         1995
                                                       -------------                 -------------

<S>                                                     <C>                          <C>
Revenues:
     Commissions and sales credits                     $     35,650                  $    34,317
     Trading gains, net                                       1,976                        2,039
     Investment banking and underwriting                      1,289                        1,739
     Asset management and advisory                            2,799                        2,144
     Interest                                                 8,113                        8,462
     Other                                                    2,439                        1,833
                                                       ------------                  -----------
Total revenues                                               52,266                       50,534
     Interest expense                                         4,726                        5,558
                                                       ------------                  -----------
Net revenues                                                 47,540                       44,976
                                                       ------------                  -----------
Expenses:
     Compensation and benefits                               30,119                       28,467
     Technology and telephone                                 4,473                        4,149
     Occupancy                                                2,310                        2,092
     Execution, clearance and depository                        997                        1,057
     Promotion and development                                2,012                        1,578
     Professional services                                    1,016                          795
     Printing, postage and supplies                             961                          856
     Other operating expenses                                 1,542                        2,474
                                                       ------------                  -----------
Total expenses                                              43,430                       41,468
                                                       ------------                  -----------

Income before income taxes                                   4,110                        3,508

Income tax expense                                           1,603                        1,438
                                                       ------------                  -----------

Net Income                                             $     2,507                   $    2,070
                                                       ------------                  -----------
                                                       ------------                  -----------

Earnings per share:
     Primary                                           $      0.42                   $     0.34
                                                       ------------                  -----------
                                                       ------------                  -----------

     Fully diluted                                     $      0.37                   $     0.31
                                                       ------------                  -----------
                                                       ------------                  -----------

Weighted average shares:
     Primary                                             5,970,604                    6,110,606
                                                       ------------                  -----------
                                                       ------------                  -----------

     Fully diluted                                       7,499,899                    7,562,021
                                                       ------------                  -----------
                                                       ------------                  -----------

The accompanying notes are an integral part of the condensed consolidated financial statements


</TABLE>

                                     Page 4

<PAGE>

                 INTERSTATE/JOHNSON LANE, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                    For the three months ended December 31,
                                  (Unaudited)


<TABLE>
<CAPTION>


                                                              (All dollars in thousands)
                                                            1996                         1995
                                                       -------------                 -------------

<S>                                                     <C>                          <C>
Cash flows from operating activities:
-------------------------------------------
Net income                                             $      2,507                  $     2,070
                                                       ------------                  -----------
Adjustments  to  reconcile  net  income to cash  provided  (used)  by  operating
  activities:
  Depreciation and amortization                               1,463                        1,111
  Deferred income taxes                                         -                           (950)
  Provision for real estate charges                             -                            850
  Other non-cash items                                          230                          657
                                                       ------------                  -----------
                                                              1,693                        1,668
                                                       ------------                  -----------

Changes in operating assets and liabilities:
Cash and securities segregated for
  regulatory purposes                                       (41,000)                      (6,413)
Loans under matched securities resale and
  repurchase agreements, net                                    (23)                         710
Net payables to customers                                    39,439                       (6,816)
Net receivables from brokers, dealers and clearing
  agencies                                                   14,219                       11,357
Other receivables                                            (1,875)                      (1,792)
Trading securities owned, net                               (81,316)                      (5,023)
Other assets                                                    (64)                      (1,371)
Accrued compensation and benefits                            (8,678)                      (2,405)
Other liabilities and accrued expenses                        1,784                          357
                                                       ------------                  -----------
                                                            (77,514)                     (11,396)
                                                       ------------                  -----------
       Cash provided by financing activities                (73,314)                      (7,658)
                                                       ------------                  -----------

Cash flows from financing activities:
-------------------------------------------
Proceeds from (repayment of):
  Short-term bank borrowings                                 12,820                       11,318
  Borrowings under securities repurchase and
    resale agreements, net                                   40,902                       (8,214)
  Notes payable                                                (211)                        (862)
Purchase of stock for treasury                               (1,102)                        (692)
Dividends paid                                                 (241)                        (185)
                                                       ------------                  -----------

          Cash used by operating activities                  52,168                        1,365
                                                       ------------                  -----------


Cash flows from investing activities:
-------------------------------------------
Capital expenditures                                           (782)                        (701)
                                                       ------------                  -----------
          Cash used by investing activities:                   (782)                        (701)
                                                       ------------                  -----------


Net (decrease) in csh and cash equivalents                  (21,928)                      (6,994)
Cash and cash equivalents at beginning of period             37,285                       26,537
                                                       ------------                  -----------
Cash and cash equivalents at end of period             $     15,357                  $    19,543
                                                       ------------                  -----------
                                                       ------------                  -----------
Cash paid during the quarter for:
  Interest                                             $      8,187                  $     5,835
  Income taxes                                         $      1,569                  $     1,336


The accompanying notes are an integral part of the condensed consolidated financial statements

</TABLE>

                                     Page 5


<PAGE>


                 INTERSTATE/JOHNSON LANE, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


1.   Basis of Presentation:

     The interim financial statements are unaudited;  however,  such information
     reflects  all  normal  recurring  adjustments  which,  in  the  opinion  of
     management,  are necessary for a fair  presentation  of the results for the
     period.  The nature of the  Company's  business is such that the results of
     any interim  period are not  necessarily  indicative  of results for a full
     fiscal year.


2.   Net Capital Requirements:

     As a registered  broker-dealer  and member of the New York Stock  Exchange,
     Interstate/Johnson   Lane  Corporation  ("IJL"),  the  principal  operating
     subsidiary  of the  Company,  is subject  to the  Securities  and  Exchange
     Commission's uniform net capital rule. IJL has elected to operate under the
     alternative  method of the  rule,  which  prohibits  a  broker-dealer  from
     engaging in any transactions  when its "net capital" is less than 2% of its
     "aggregate  debit balances"  arising from customer  transactions,  as these
     terms are  defined  in the rule.  The  Exchange  may also  impose  business
     restrictions  on a member  firm if its net  capital  falls  below 5% of its
     aggregate  debit  balances.  IJL is also subject to the  Commodity  Futures
     Trading Commission minimum net capital requirement.

     At December  31,  1996,  IJL's net capital was 17% of its  aggregate  debit
     balances  and  approximately   $35.1  million  in  excess  of  its  minimum
     regulatory requirements.


3.   Commitments and Contingencies:

     Leases  for office  space and  equipment  are  accounted  for as  operating
     leases.  Approximate minimum rental commitments under noncancelable leases,
     some of which  contain  escalation  clauses  and  renewal  options,  are as
     follows:

                                                                       Millions

         For the nine months ended September 30, 1997                     $6.9

         For the fiscal year ended September 30,
                           1998                                             6.2
                           1999                                             3.7
                           2000                                             1.6
                           2001                                             0.7
                           Thereafter                                       4.4
                                                                       --------
                                                                         $ 23.5
                                                                       --------
                                                                       --------

                                     Page 6

<PAGE>

     
                 INTERSTATE/JOHNSON LANE, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


3.   Commitments and Contingencies, continued:

     In connection with its  involvement as a general  partner and/or  placement
     agent  of  various  real  estate  limited  partnerships,  the  Company  has
     guaranteed  certain  obligations of limited partners and, with others,  has
     jointly or severally  guaranteed  mortgage loan  obligations of some of the
     partnerships.  At December 31,  1996,  contingent  liabilities  under these
     obligations amounted to approximately $2.1 million in the aggregate.

     Of a $20  million  irrevocable  letter  of  credit  available,  the  amount
     outstanding at December 31, 1996 under this facility was $3.6 million.


4.   Legal Proceedings:

     The  Company is  involved  in certain  litigation  arising in the  ordinary
     course of business. While some actions seek substantial damages, management
     believes,  based upon  discussion  with  counsel,  that the outcome of this
     litigation  will not have a  material  effect  on the  Company's  financial
     position.  The  materiality of these legal matters to the Company's  future
     operating  results  depends on the level of future results of operations as
     well as the timing and ultimate resolution of such legal matters.


5.   Financial Instruments with Off-Balance-Sheet Risk:

     IJL's business  activities involve the execution,  settlement and financing
     of securities  transactions  generating accounts  receivable,  and thus may
     expose IJL to financial risk in the event a customer or other  counterparty
     is unable to fulfill its  contractual  obligations.  IJL  controls the risk
     associated  with  collateralized  loans by revaluing  collateral at current
     prices,  monitoring  compliance with applicable  credit limits and industry
     regulations,  and  requiring  the  posting of  additional  collateral  when
     appropriate.

     Obligations  arising from  financial  instruments  sold short in connection
     with its normal trading  activities  expose IJL to risk in the event market
     prices increase, since it may be obligated to repurchase those positions at
     a greater price.  IJL's short selling  primarily  involves debt securities,
     which are typically less  volatile,  in periods of stable  interest  rates,
     than equities or options.

                                     Page 7

<PAGE>





                 INTERSTATE/JOHNSON LANE, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


5.   Financial Instruments with Off-Balance-Sheet Risk, continued:


     Forward  and  futures  contracts  provide  for the seller  agreeing to make
     delivery of securities or other  instruments at a specified future date and
     price. Risk arises from the potential  inability of counterparties to honor
     contract terms,  and from changes in values of the underlying  instruments.
     At December 31, 1996, IJL's commitments  included forward purchase and sale
     contracts involving  mortgage-backed  securities with long market values of
     approximately  $23.6 million and short market values of approximately $23.0
     million  and  futures  sale  contracts  with short  market  values of $14.2
     million used primarily to hedge municipal bonds. While the Company may from
     time to time  participate in the trading of some derivative  securities for
     its clients,  this trading is not a  significant  portion of the  Company's
     business.

     IJL enters into  resale  agreements,  whereby it lends money by  purchasing
     U.S.  government/agency  or  mortgage-backed  securities  from customers or
     dealers with an  agreement to resell them to the same  customers or dealers
     at  a  later  date.  Such  loans  are   collateralized  by  the  underlying
     securities, which are held in custody by IJL and may be converted into cash
     at  IJL's  option.  In  addition,  IJL  monitors  the  market  value of the
     collateral,   and  issues  margin  calls  as  necessary  according  to  the
     creditworthiness  of the  borrower.  Approximately  89% of all loans  under
     securities  resale  agreements  at  December  31,  1996  were  made  to two
     counterparties.

     IJL incurs risk in underwriting  public securities  offerings to the extent
     that  prospective  buyers  fail to  purchase  the  securities.  The Company
     attempts to mitigate this risk through due  diligence  carried out prior to
     undertaking the contractual obligation.



                                     Page 8

<PAGE>

                 INTERSTATE/JOHNSON LANE, INC. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


General Business Environment

The  Company's  principal  activities --  securities  brokerage  for  individual
(retail) and institutional  investors,  market-making in equity and fixed-income
securities,  investment banking and underwriting,  and investment management and
advisory  services  --  are  highly  competitive.  Strategic  alliances  between
investment firms and commercial banks, insurance companies,  and other financial
services  entities  have  intensified  this  competition.  Many of the Company's
revenue  sources are sensitive to  marketplace  trading  volumes and to interest
rate  conditions  both of which  can be  cyclical  and  volatile.  As a  result,
revenues and earnings may vary significantly from quarter to quarter.


At December  31,  1996,  approximately  22% of the  Company's  retail  financial
consultants had fewer than three years' industry experience. Notwithstanding the
energized securities markets of recent years, a prolonged slowdown in individual
investor  activity could more severely  reduce the revenue  production of a less
seasoned sales force. In addition,  the continuing trend of increased regulation
of the  securities  industry  could  create  significant  incremental  costs and
indirectly stifle certain revenue streams.


Liquidity and Capital Resources

The  Company's net cash  position  decreased  $21.9 million for the three months
ended December 31, 1996.  Operating  activities  consumed $77.5 million of cash,
partly funded by $4.2 million of net income adjusted for  depreciation and other
non-cash  charges.  Financing  activities  provided  $52.2 million of cash while
capital expenditures totaled $780,000.

The Company's asset base consists primarily of cash, cash equivalents, and other
assets  which can be  converted  to cash within one year;  at December 31, 1996,
these  assets  comprised  approximately  92% of the  balance  sheet.  Day-to-day
financing  requirements  generally  are  influenced  by the level of  securities
inventories,  net  receivables  from  customers  and  broker-dealers,   and  net
receivables under resale agreements.  Significant  incremental cash requirements
also may occur from time to time in  connection  with  payments  under  deferred
compensation plans,  repurchase of the Company's common stock and/or convertible
debentures,  initial  funding  of  new  business  unit  activities,  payment  of
dividends,  and litigation  settlements arising from normal business operations.
In addition,  $600,000 of capital  spending in the first  quarter of fiscal 1997
reflects  implementation of the second phase of a planned $10 million program of
technology improvements over a multi-year period.


                                     Page 9

<PAGE>

                 INTERSTATE/JOHNSON LANE, INC. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS, continued


Liquidity and Capital Resources, continued

At December 31, 1996, the Company had $148 million of unused call loan financing
available.  In addition,  the Company  maintains credit lines of several hundred
million dollars for collateralizing  repurchase  agreements with other financial
institutions,  and has financed its customer  receivables with customer payables
for many years.  Management  believes that these  resources,  funds  provided by
operations,   and  permanent  capital  of  shareholders'  equity  and  long-term
subordinated  debt,  will satisfy  normal  financing  needs for the  foreseeable
future.

The Company's  broker-dealer  subsidiary,  Interstate/Johnson  Lane  Corporation
("IJL"), is subject to liquidity and capital  requirements of the Securities and
Exchange  Commission,  Commodity  Futures Trading  Commission,  and The New York
Stock  Exchange,  and  consistently  has operated  well in excess of the minimum
requirements.  At  December  31,  1996,  IJL had net  capital of $39.9  million,
"excess net capital" of approximately $35.1 million,  and a net capital ratio of
17%.


Results of Operations

For the three months  ended  December 31,  1996,  net  revenues  increased  $2.6
million,  or 6%, from the previous year,  while  expenses,  other than interest,
increased  $2.0 million,  or 5%. Net income of $2.5 million was up $437,000 from
the results of the period of a year ago.

Overall,  commissions and sales credits  increased by about $1.3 million,  or 4%
from the same  three-month  period of a year  ago.  Increases  in listed  equity
transactions,  coupled  with  increased  sales of mutual fund shares and annuity
products,  contributed  to the  majority of the  increase in the retail  sector.
However,   a  lower  level  of  originations   had  a  negative  impact  on  the
institutional sector.

Investment banking fees and underwriting profits decreased $450,000, or 26%, for
the same three month period due to a lower level of managed underwritings in the
quarter.  Asset  management and advisory fees were up $655,000,  or 31%, for the
comparable  three month period due to the continued  growth of asset-based  fees
charged retail clients in lieu of  transaction-based  commissions.  Other income
increased  $600,000,  or 33%, for the same three month period due to an increase
in money fund service fees and an increase in income  recognized on  investments
held by the Company.


                                    Page 10

<PAGE>


                 INTERSTATE/JOHNSON LANE, INC. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS, continued


Results of Operations, continued

Interest revenues were down about $350,000,  while expenses decreased  $832,000,
for the three  months  ended  December  31, 1996  compared to the  corresponding
period a year ago. The resultant  increase of $482,000 in net interest income is
due to an increase in net  interest  earned on higher  levels of customer  debit
balances,  offset by a decrease in interest earned on segregated customer funds.
The majority of the decrease in both gross revenues and expenses is attributable
to significantly lower levels of matched resale and repurchase agreements.

Compensation  and  benefits  costs  increased  $1.7  million,  or  6%,  for  the
three-months  period ended  December 31, 1996,  due  primarily to an increase in
transaction  based  commission  expense  and  other  profit-driven   incentives.
Occupancy costs increased  $218,000,  or 10%, due primarily to increases in rent
on leased office space and leasehold improvements made to existing office space.
Promotion and development costs increased $434,000, or 28%, due to the Company's
continuing effort to build revenue and professional services increased $221,000,
or 28%,  due to an increase in  consulting  services  for  technology  projects,
various  reengineering efforts and services related to the formation of CapTrust
Financial  Advisors,  LLC.  Printing,   postage  and  supplies  costs  increased
$105,000,   or  12%,  due   primarily   to   increases  in  postage   costs  and
non-capitalized  office equipment.  Other operating expenses decreased $932,000,
or 38%, for the quarter  largely as a result of decreases in the  adjustments to
the carrying value of certain assets.

                                    Page 11

<PAGE>

                          PART II. OTHER INFORMATION



Item 1. Legal Proceedings

     The  Company is  involved  in certain  litigation  arising in the  ordinary
     course of business. While some actions seek substantial damages, management
     believes,  based upon  discussion  with  counsel,  that the outcome of this
     litigation  will not have a  material  effect  on the  Company's  financial
     position.  The  materiality of these legal matters on the Company's  future
     operating  results  depends on the level of future results of operations as
     well as the timing and ultimate resolution of such legal matters.


Item 6. Exhibits and Reports on Form 8-K

         (a)      Exhibits

                  Designation of Exhibit                             Sequential
                       in this Report           Description          Page Number
                              11            Statement Regarding
                                            Computation of Per
                                            Share Earnings               14

                              27            Financial Data Schedule      15

         (b)      Reports on Form 8-K

                  There were no  reports on Form 8-K filed for the three  months
                  ended December 31, 1996.


<PAGE>





                          INTERSTATE/JOHNSON LANE, INC.
                          AND CONSOLIDATED SUBSIDIARIES


                                   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.



                                                   INTERSTATE/JOHNSON LANE, INC.
                                                         Registrant


         Signature                       Title                          Date



_________________________           President and Chief
     James H. Morgan                Executive Officer         February 14, 1997





_________________________           Vice President - Finance
     Edward C. Ruff                 and Treasurer (Principal
                                    Financial Officer)        February 14, 1997



_________________________           Assistant Vice President
  C. Fred Wagstaff, III             (Principal Accounting
                                    Officer)                  February 14, 1997





                                    Page 13
<PAGE>