<PAGE>  1

               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, 1995          
                               ---------------------------------

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

Commission file number   0-14417                             
                       ------------------------------------------

                FIRST LIBERTY FINANCIAL CORP.                
-----------------------------------------------------------------
    (Exact name of registrant as specified in its charter)

         Georgia                         58-1680650     
-----------------------------------------------------------------
(State of incorporation)    (I.R.S. Employer Identification No.)

 201 Second Street, Macon, Georgia               31297       
-----------------------------------------------------------------
(Address of principal executive offices)       (Zip Code)

                        (912) 743-0911                           
------------------------------------------------------------------
      (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   
                                       ---   ---

Exhibit index appears on page 22.

There were 3,979,742 shares of Common Stock outstanding as of 
February 13, 1996.

                                            
                                 Page 1 of 25


<PAGE>  2

                         FIRST LIBERTY FINANCIAL CORP.
                         -----------------------------
                         QUARTERLY REPORT ON FORM 10-Q
                         -----------------------------
                    FOR THE QUARTER ENDED DECEMBER 31, 1995
                    ---------------------------------------

                               Table of Contents


PART I - FINANCIAL INFORMATION
------------------------------

Item                                                                Page
----                                                                ----


1.  Financial Statements:

      Consolidated Statements of Financial Condition                  3

      Consolidated Statements of Income                               4

      Consolidated Statements of Cash Flows                           6

      Notes to Consolidated Financial Statements                      8

      Independent Accountants' Report                                12

2.  Management's Discussion and Analysis of Financial          
      Condition and Results of Operations                            13  


PART II - OTHER INFORMATION
---------------------------

4.  Submission of Matters to a Vote of Securities Holders            20

6.  Exhibits and Reports on Form 8-K                                 20

    Signatures                                                       21
  
    Index of Exhibits                                                22





                                      2

<PAGE>  3

First Liberty Financial Corp. and Subsidiaries  
----------------------------------------------
Consolidated Statements of Financial Condition
----------------------------------------------
(Unaudited)
-----------
                                                 December 31,     September 30, 
                                               ---------------  ---------------
                                                      1995             1995   
-------------------------------------------------------------------------------
                                                      (dollars in thousands)
Assets
------
Cash and due from banks                           $ 33,066           $ 24,610 
Federal funds sold and repurchase agreements         1,825             22,652 
Securities available-for-sale, at
  market value                                     171,934            167,613 
Loans available-for-sale, net at market value       35,868             22,282
Loans, net                                         624,455            625,641 
Accrued interest receivable                          6,701              6,406 
Premises and equipment, net                         21,909             22,194 
Real estate, net                                     4,136              4,053 
Intangible assets                                   11,046             11,315 
Advances to attorneys for loans originated           8,309              3,220 
Other assets                                         7,859              9,288 
                                                  --------           --------
   Total assets                                   $927,108           $919,274 
                                                  ========           ========

Liabilities and Stockholders' Equity
------------------------------------
Deposits                                          $716,655           $719,226 
Notes payable and other borrowed money              92,500             88,500 
Subordinated debentures                             12,556             12,501 
Securities sold under agreements to repurchase      10,348              4,315 
Checks payable on loans originated                   8,618              7,119 
Other liabilities                                   13,362             16,944 
                                                  --------           --------
  Total liabilities                                854,039            848,605 
                                                  --------           --------

Commitments and contingencies                            -                  - 

Stockholders' equity:
 Series B, 6.00% Cumulative Convertible
   Preferred stock ($25.00 stated value,
   302,580 shares authorized, issued
   and outstanding)                                  7,564              7,564 
 Common stock ($1.00 par value, 25,000,000
   shares authorized, 3,994,682 and 3,982,616
   shares issued, respectively, and 3,972,342 and
   3,960,276 shares outstanding, respectively)       3,995              3,983 
 Additional paid-in capital                         25,432             25,376 
 Retained earnings                                  35,329             33,584 
 Net unrealized gain on securities 
   available-for-sale, net of taxes                  1,018                431
 Treasury stock at cost (22,340 shares)               (269)              (269)
                                                  --------           --------
  Total stockholders' equity                        73,069             70,669
                                                  --------           --------
   Total liabilities and stockholders' equity     $927,108           $919,274 
                                                  ========           ========

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

                                      3

<PAGE>  4

First Liberty Financial Corp. and Subsidiaries
----------------------------------------------
Consolidated Statements of Income 
---------------------------------
(Unaudited)
-----------
                                                Three Months Ended  
                                                    December 31,         
                                            ---------------------------------
                                               1995             1994   
-----------------------------------------------------------------------------
                                 (dollars in thousands, except per share data) 
Interest Income:
----------------
Loans                                       $14,928            $11,009 
Securities                                    3,013              2,403 
Federal funds sold                              302                 86 
Other interest income                            16                  - 
                                            -------            -------
  Total interest income                      18,259             13,498 
                                            -------            -------

Interest Expense:
-----------------
Deposits                                      8,032              5,435 
Short-term borrowings                         1,375                860 
Long-term borrowings                            627                735 
                                            -------            -------
  Total interest expense                     10,034              7,030 
                                            -------            -------
Net interest income                           8,225              6,468 
Provision for estimated losses on loans         300                300 
                                            -------            -------
Net interest income after provision for
    estimated losses on loans                 7,925              6,168 
                                            -------            -------

Non-Interest Income:
--------------------
Loan servicing fees                             613                626 
Gain on sale of investment securities            11                  -
Gain on sale of loans and
  mortgage-backed securities                    382                  4 
Gain on sale of servicing                       264                448 
Deposit account service charges               1,093                831 
Other income (loss)                              (5)                35 
                                            -------            -------
Total non-interest income                     2,358              1,944 
                                            -------            -------
  Total net and non-interest income          10,283              8,112 
                                            -------            -------

Non-Interest Expense:
---------------------
Compensation, payroll taxes and fringe
  benefits                                    3,631              2,854
Occupancy and equipment                         846                667
Advertising                                     226                218
Professional fees                               147                142
Data processing                                 221                148
Federal deposit insurance premiums              371                389
Amortization of intangible assets               278                113
Net cost of operation of other real estate        8                196
Other expenses                                  942                694
                                            -------            -------
  Total non-interest expense                  6,670              5,421
                                            -------            -------
Income before income tax expense              3,613              2,691
Income tax expense                            1,238                926
                                            -------            -------
Net income                                    2,375              1,765
Dividends on preferred stock                    113                240
                                            -------            -------
Net income applicable to common stockholders$ 2,262            $ 1,525
                                            =======            =======



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

                                     4

<PAGE>  5

First Liberty Financial Corp. and Subsidiaries
----------------------------------------------
Consolidated Statements of Income, continued 
--------------------------------------------
(Unaudited)
-----------
                                                        Three Months Ended 
                                                           December 31,         
                                               -------------------------------
                                                      1995             1994    
------------------------------------------------------------------------------
                                               
Earnings Per Common Share:
--------------------------
  Primary                                          $   .56          $   .50
  Fully diluted                                    $   .54          $   .43

Dividends Per Common Share:                        $   .13          $   .10
---------------------------

Average Number of Shares Outstanding:
-------------------------------------
  Primary                                        4,038,045        3,080,051
  Fully diluted                                  4,438,831        4,094,625







































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

                                    5

<PAGE>  6

First Liberty Financial Corp. and Subsidiaries 
----------------------------------------------
Consolidated Statements of Cash Flows 
-------------------------------------
(Unaudited)
-----------
                                                       Three Months Ended   
                                                           December 31,         
                                               -------------------------------
                                                      1995             1994    
------------------------------------------------------------------------------
                                                      (dollars in thousands)
Operating Activities:
---------------------
Cash flows from operating activities: 
  Net income                                      $  2,375        $   1,765
    Adjustments to reconcile net income
    to cash provided by (used in) operations:
    Depreciation                                       474              423
    Amortization of loan fees                          (65)            (187) 
    Provision for estimated losses
      on loans and real estate                         305              438
    Amortization of intangibles                        278              113
    Dividends received on stock                        (69)             (56)
    Gain on sales of loans, mortgage-
      backed and investment securities                (393)              (4)
  Loans available-for-sale: 
    Disbursements                                  (29,323)            (649)
    Purchases                                      (42,800)         (14,141)
    Sales                                           58,910           18,574
    Repayments                                          23               80
  Increase in accrued interest receivable             (295)            (478) 
  Increase in accrued interest payable                 482              688 
  Other, net                                        (3,001)           1,282
                                                  --------         --------
    Total adjustments                              (15,474)           6,083
                                                  --------         --------
      Net cash provided by (used in)
        operating activities                       (13,099)           7,848 
                                                  --------         --------
 
Investing Activities:                                          
---------------------
Cash flows from investing activities:  
  Net decrease in federal funds sold
    and repurchase agreements                       20,827            4,479    
  Investment securities available-for-sale:
    Purchases                                            -           (7,876)
    Sales                                              819            2,980
    Maturities                                       3,200            2,000
  Mortgage-backed securities available-for-sale:
    Purchases                                      (15,370)         (31,481)
    Repayments                                       8,001            6,574
  Loan disbursements                               (87,214)         (74,668)
  Loan purchases                                    (1,419)          (4,759)
  Loan repayments                                   88,104           59,315
  Purchases of premises and equipment                 (191)            (170)
  Proceeds from sales of real estate                 1,482               33
  Net increase in advances to 
    attorneys for loans originated                  (5,089)            (157)
  Net cash received in acquisitions                      -           (1,192)
                                                  --------         --------
      Net cash provided by (used in)
       investing activities                         13,150          (44,922) 
                                                  --------         --------


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

                                     6

<PAGE>  7

First Liberty Financial Corp. and Subsidiaries 
----------------------------------------------
Consolidated Statements of Cash Flows, continued
------------------------------------------------
(Unaudited) 
-----------
 
                                                          Three Months Ended  
                                                             December 31,     
                                                  ----------------------------
                                                        1995             1994 
------------------------------------------------------------------------------
                                                        (dollars in thousands)

Financing Activities: 
---------------------
Cash flows from financing activities:  
  Net decrease in deposits                            (2,613)          (7,166)
  Notes payable and other borrowed money:
    Proceeds                                         115,000           84,500
    Repayments                                      (111,000)         (33,880)
  Net increase (decrease) in securities sold   
    under agreements to repurchase                     6,033             (993) 
  Net increase (decrease) in checks payable
    on loans originated                                1,499             (199)
  Issuance of common stock                                63                -  
  Dividends paid on stock                               (577)               -
                                                    --------         --------
    Net cash provided by financing activities          8,405           42,262
                                                    --------         --------

Net increase in cash and due from banks                8,456            5,188
Cash and due from banks beginning of period           24,610           16,293
                                                    --------         --------
Cash and due from banks end of period               $ 33,066         $ 21,481
                                                    ========         ========
 
Supplemental Disclosures of  
---------------------------
  Cash Flow Information: 
  ----------------------
Cash paid during the year for: 
  Interest                                          $  9,552         $  6,420  
  Income taxes                                           177                -
Noncash investing and financing activities:
  Real estate foreclosed                            $  1,473         $    211
  Financing of sales of foreclosed
    real estate                                          174              305
  Dividends declared but not paid
    on preferred stock                                   113              240
  Dividends declared but not paid
    on common stock                                      516              301

Acquisitions: 
  Fair value of assets acquired                            -         $(56,221)
  Fair value of liabilities assumed                        -           55,029
                                                                     --------
  Net cash received                                        -         $ (1,192)
                                                                     ========

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

                                  7

<PAGE>  8

                FIRST LIBERTY FINANCIAL CORP. AND SUBSIDIARIES
                ----------------------------------------------
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  ------------------------------------------
                                  (Unaudited)
                                  -----------



1.  Summary of Significant Accounting Policies
    ------------------------------------------

The accounting and reporting policies of First Liberty Financial Corp. and
Subsidiaries ("the Company") conform to generally accepted accounting 
principles and to general practice within the savings and loan industry.  The
interim consolidated financial statements included herein are unaudited but 
reflect all adjustments which, in the opinion of management, are necessary to
a fair presentation of the consolidated financial position, results of 
operations and cash flows for the interim periods presented.  All adjustments 
reflected in the interim financial statements are of a normal recurring 
nature.  Such financial statements should be read in conjunction with the 
financial statements and notes thereto and the report of independent 
accountants included in the Company's Form 10-K Annual Report for the fiscal 
year ended September 30, 1995.  The year end balance sheet data was derived 
from audited financial statements, but does not include all disclosures 
required by generally accepted accounting principles.  The results of 
operations for the three months ended December 31, 1995 are not necessarily 
indicative of the results to be expected for the full year.

Certain reclassifications have been made to the prior year consolidated 
financial statements to conform to the current year consolidated financial
statements presentation.


2.  Earnings Per Share
    ------------------

Earnings per share are computed on the weighted average number of shares
outstanding including common stock equivalents, if dilutive.  For computing
primary earnings per share, stock options exercisable at a price less than
average market price during the period are considered common stock equivalents.
Fully diluted earnings per share assumes (i) the conversion, if dilutive, of 
all convertible debt as of the beginning of the year (or date of issue), with 
the elimination of the related interest expense net of applicable income 
taxes, (ii) the exercise of all stock options below the market price at 
December 31 or the average market price for the quarter, and (iii) the 
conversion, if dilutive, of all convertible preferred stock as of the beginning
of the year (or date of issue), with the elimination of dividends declared.















                                   8

<PAGE>  9

                FIRST LIBERTY FINANCIAL CORP. AND SUBSIDIARIES
                ----------------------------------------------
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
             ----------------------------------------------------- 
                                  (Unaudited)
                                  -----------


3.  Sale of Servicing
    -----------------

During the three months ended December 31, 1995, Liberty Mortgage Corporation
("Liberty Mortgage"), the Company's mortgage banking subsidiary, sold bulk loan
servicing rights with aggregate principal balances of $43 million, compared to
$40 million, a year earlier.  This resulted in recognizing a gain on the sale
of servicing of $264,000 for the three months ended December 31, 1995 compared
to $448,000 for the same period a year ago.  The servicing rights sold 
generally related to loans originated for sale and sold within the last six 
months.  The servicing sale during the quarter ended December 31, 1995 
included principal balances of $21 million in which Liberty Mortgage granted 
recourse to the buyer.  Accordingly, the gain related to such rights of 
$250,000 was deferred and will be recognized in the period that the recourse
expires.


4.  Mortgage Servicing Rights
    -------------------------

Liberty Mortgage invests in mortgage servicing rights ("MSRs") resulting from
loans originated or purchased through correspondent relationships.  The
investment in MSRs has the effect of reducing the basis in the loans purchased
or originated, and increasing the gain (or reducing the loss) on sales of 
loans.  The following table outlines the activity in MSRs for the three month
periods ended December 31, 1995 and 1994 (dollars in thousands).
 
                                               Three Months Ended     
                                                    December 31,       
                                         -----------------------------
                                              1995             1994   
                                         -----------------------------
      Capitalized                           $  742           $   39
      Sold                                      32               62
      Amortized                                 94              127
      Net investment at December 31          2,692            2,765


Prior to October 1, 1995 Liberty Mortgage recorded mortgage servicing rights
relating only to loans purchased.  Effective October 1, 1995 the Company 
adopted Statement of Financial Accounting Standards ("SFAS") No. 122 
"Accounting for Mortgage Servicing Rights".  This statement amends SFAS No.
65 "Accounting for Certain Mortgage Banking Activities" and requires a mortgage
banking enterprise to recognize as seperate assets MSRs regardless of whether 
the MSRs are purchased or originated.  SFAS No. 122 also requires the 
allocation of the total cost of the mortgage loans to the mortgage servicing 
rights and the loan (without the mortgage servicing rights), based on their 
relative fair values if it is practicable to estimate those fair values.  
Mortgage servicing rights are then amortized in proportion to and over the 
period of estimated net servicing income and should be evaluated for impairment
based on their fair value.  The estimated combined fair value of these assets
exceeded the book value at December 31, 1995.  When determining fair value the
Company considers the date of origination, the average note rate and the 

                                      9

<PAGE>  10

average remaining term and estimated prepayment speeds.  The fair value is 
calculated by estimating the present value of future net servicing income.  As
a result of the adoption of SFAS No. 122, the Company capitalized and 
amortized MSRs for the three months ended December 31, 1995 of $437,000 and 
$6,000, respectively, associated with loans originated.

 
5.  Acquisitions
    ------------

On January 19, 1996 the Company announced an agreement to acquire Middle 
Georgia Bank in Byron, Georgia.  Middle Georgia Bank has two offices, 
approximately $110 million in assets, $100 million in deposits, and $63 million
in loans.  This transaction is expected to close in the fourth quarter of 
fiscal 1996, subject to regulatory approval.  The transaction, if approved, is
expected to be accounted for as a pooling-of-interests.

On September 15, 1995 the Company acquired by merger Tifton Banks, Inc. of 
Tifton Georgia, and its subsidiary, Tifton Bank & Trust Company ("Tifton 
Bank").  Tifton Bank, on the date of acquisition, held the following 
approximate balances:  loans of $42 million, cash and investments of $21 
million, premises and equipment of $1 million and deposits of $45 million.  
Intangible assets resulting from the acquisition amounted to approximately $2
million.

On March 24, 1995, the Company acquired three banking offices located in
Sylvania, Vidalia and Waycross, Georgia from a commercial bank.  Total assets
acquired were approximately $3 million and total cash received and deposits
assumed were approximately $95 million.  Intangible assets resulting from the
acquisition were approximately $4 million.

On December 2, 1994, the Company acquired Central Banking Company of 
Swainsboro, Georgia and its subsidiary The Central Bank ("Central Bank").  
Central Bank on the date of acquisition, held the following approximate 
balances:  loans of $21 million, cash and investments of $34 million, premises
and equipment of $1 million and deposits of $52 million.  Intangible assets 
resulting from the acquisition amounted to approximately $2 million.

The financial institutions acquired during fiscal 1995 were accounted for as
purchases and accordingly, income and expenses of such institutions are 
included in the consolidated statements of the Company from the date of 
acquisition.


6.   Adoption of SFAS No. 114 and 118
     --------------------------------

On October 1, 1995, the Company adopted SFAS No. 114 "Accounting by Creditors 
for Impairment of a Loan" and SFAS No. 118 "Accounting by Creditors for 
Impairment of a Loan-Income Recognition and Disclosures," which amended SFAS 
No. 114.  Under the new standards, a loan is considered impaired, based upon 
current information and events, if it is probable that the Company will be 
unable to collect the scheduled payments of principal and interest when due 
according to the contractual terms of the loan agreement.  Uncollateralized 
loans are measured for impairment based on the present value of expected 
future cash flows discounted at the historical effective interest rate, while 
all collateral-dependent loans

                                  10

<PAGE>  11

are measured for impairment based on the fair value of the collateral.  The
adoption of SFAS No. 114 resulted in no additional provision for credit losses
at October 1, 1995 or during the three months ended December 31, 1995.

At December 31, 1995, the recorded investment in loans for which impairment has
been recognized in accordance with SFAS No. 114 totaled $3.2 million, with a
corresponding valuation allowance of $1.2 million.  For the period ended 
December 31, 1995, the average recorded investment in impaired loans was 
approximately $3.1 million.  Interest income recognized by the Company on 
impaired loans (during the portion of the year that they were impaired) was 
not significant.

The Company uses several factors in determining if a loan is impaired under 
SFAS No. 114.  The internal asset classification procedures include a thorough
review of significant loans and lending relationships and include the 
accumulation of related data.  This data includes loan payment status, 
borrowers' financial data, and borrowers' operating factors such as cash 
flows, operating income or loss, and other factors.  Loans continue to be 
classified as impaired unless they are brought fully current and the 
collection of scheduled interest and principal is considered probable.


                                   11

<PAGE>  12

Coopers & Lybrand



  
Report of Independent Accountants
---------------------------------



To the Board of Directors
First Liberty Fianncial Corp.


We have reviewed the accompanying consolidated financial statements of First
Liberty Financial Corp. and Subsidiaries as of December 31, 1995 and 1994 and 
for the three-month periods then ended.  These financial statements are the 
responsibility of the Company's management.

We conducted our review in accordance with standards established by the 
American Institute of Certified Public Accountants.  A review of interim 
financial information consists principally of applying analytical procedures 
to financial data and making inquiries of persons responsible for financial 
and accounting matters.  It is substantially less in scope than an audit 
conducted in accordance with generally accepted auditing standards, the 
objective of which is the expression of an opinion regarding the financial 
statements taken as a whole.  Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that 
should be made to the accompanying financial statements for them to be in 
conformity with generally accepted accounting principles.


                                                    Coopers & Lybrand L.L.P.


Atlanta, Georgia
February 13, 1996

















                                  12

<PAGE>  13

                FIRST LIBERTY FINANCIAL CORP. AND SUBSIDIARIES
                ----------------------------------------------
         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
         -----------------------------------------------------------
                           AND RESULTS OF OPERATIONS
                           -------------------------

Overview
--------

First Liberty Financial Corp. is a unitary savings and loan holding company for
First Liberty Bank ("Liberty Bank").  The consolidated financial statements
include the accounts of First Liberty Financial Corp., Liberty Bank, a wholly-
owned subsidiary of First Liberty Financial Corp., and Liberty Mortgage
Corporation ("Liberty Mortgage"), a wholly-owned subsidiary of Liberty Bank
(collectively known as "the Company"). 

Liquidity 
---------

The Company's primary sources of funds are deposits, loan repayments, sales and
maturities of securities, loan sales, repurchase agreements, advances from the
Federal Home Loan Bank of Atlanta and various other borrowings.  Deposits 
provide a source of funds that are highly dependent on market and other 
conditions, while loan repayments are a relatively stable source of funds.

The liquidity of Liberty Bank's operation is measured by the ratio of cash and
short-term investments (as defined by federal regulations) to the sum of
withdrawable deposits and borrowings maturing within one year.  Federal
regulations currently require institutions to maintain a liquidity ratio of at
least 5%.  Liberty Bank was in compliance with its requirements at December 31,
1995. 

Capital Resources
-----------------

The Office of Thrift Supervision ("OTS") capital regulations include a core
capital requirement, a tangible capital requirement and a risk-based capital
requirement.  Subject to certain exceptions, each of these capital standards 
must be no less stringent than the capital standards applicable to national 
banks, although the risk-based capital requirement for savings institutions 
may deviate from the risk-based capital standards applicable to national banks
to reflect interest rate risk or other risks if the deviations in the 
aggregate do not result in materially lower levels of capital being required 
of savings institutions than would be required of national banks.







                                  13

<PAGE>  14

The following table reflects Liberty Bank's compliance with its regulatory
capital requirements at December 31, 1995 (dollars in thousands):

       Actual for Liberty Bank          Regulatory    Requirement
-----------------------------------------------------------------
                            % of                          % of
  Capital                 Adjusted                      Adjusted     Excess
Requirement   Amount       Assets         Amount         Amount      Amount
----------------------------------------------------------------------------

Tangible      $54,232       5.92%         $13,736         1.50%      $40,496
----------------------------------------------------------------------------
Core          $56,146       6.12%         $27,529         3.00%      $28,617
----------------------------------------------------------------------------
Risk-based    $75,100      11.58%         $51,877         8.00%      $23,223
----------------------------------------------------------------------------


The Federal Deposit Insurance Corporation Improvement Act of 1991  establishes
five classifications for institutions based upon the capital requirements.  
Each appropriate banking agency, such as the OTS for Liberty Bank, must 
establish by regulation the parameters of each such classification.  Based on 
final regulations promulgated by the OTS, Liberty Bank is considered well-
capitalized.  Failure to maintain that status could result in greater 
regulatory oversight or restrictions on Liberty Bank's activities.


Commitments
-----------

Commitments to originate loans are generally made at the market rate prevailing
at the time of issuance.  The Company had open commitments to originate
residential mortgage loans of approximately $73 million, including $652,000 to
be held in portfolio and $26 million on which the interest rate had not been
locked-in at December 31, 1995.  Commitments to buy and sell residential 
mortgage loans and mortgage-backed securities for mandatory delivery were 
approximately $500,000 and $55 million, respectively, at December 31, 1995.  
Also at December 31, 1995, the Company bought $6 million of optional 
commitments to sell residential mortgage loans.  Loans in process (which 
represent undisbursed loan commitments related to construction loans) and 
unused lines of credit amounted to $72 million at December 31, 1995.  


Results of Operations
---------------------

The Company's consolidated net income for the quarter ended December 31, 1995 
was $2.4 million compared to $1.8 million for the quarter ended December 31, 
1994.  The Company's net income is affected by the level of its non-interest 
income, non-interest expense and the level of earnings of its mortgage banking
operations.  However, the Company's net income is most significantly affected 
by the difference between interest income on its loan and investment portfolios
and the interest expense of its deposits and borrowings ("net interest 
income").  Net interest income is affected by several factors, but is most 
affected by the volume of and interest rates on interest-earning assets and 
interest-bearing 



                                   14

<PAGE>  15

liabilities.  The following tables reflect the effective yields and costs of
funds for the three month periods ended December 31, 1995 and 1994 (dollars in
thousands):

                                   Average Balance              Rate/Yield
                                 Three Months Ended         Three Months Ended
                                    December 31,                December 31,
                                    1995     1994            1995        1994  
                                 ------------------        -------------------

Interest-Earning Assets:
------------------------
  Loans                          $650,973  $507,186         9.17%       8.68%
  Securities                      168,740   150,739         7.14%       6.38%
  Federal funds sold and
    repurchase agreements          16,014     5,831         7.54%       5.92%
                                 --------  --------        -----       -----
All interest-earning assets      $835,727  $663,756         8.73%       8.14%
                                 ========  ========        -----       -----

Interest-Bearing Liabilities:
-----------------------------
  Deposits                       $718,274  $569,130         4.47%       3.82%
  Borrowings                      110,461    88,246         7.25%       7.23%
                                 --------  --------        -----       -----
All interest-bearing liabilities $828,735  $657,376         4.84%       4.28%
                                 ========  ========        -----       -----

Interest rate spread             $  6,992  $  6,380         3.89%       3.86% 
--------------------             ========  ========        -----       ----- 

Interest income as a percentage 
-------------------------------
  of average earning assets                                 3.93%       3.90%
  -------------------------                                =====       =====

The following table describes the extent to which changes in interest rates and
changes in volume of interest-earning assets and interest-bearing liabilities
have affected the Company's interest income and expense from the three month
period ended December 31, 1994 to the three month period ended December 31, 
1995 (dollars in thousands):

                                   December 31, 1995 vs December 31, 1994 
                                 -----------------------------------------
                                                    Due to                
                                 -----------------------------------------
                                                         Rate/
                                   Rate      Volume     Volume      Total 
                                 --------   --------   --------   --------

Changes in Interest Income:
---------------------------
  Loans                          $    622   $  3,121   $    176   $  3,919
  Securities                          289        287         34        610
  Federal funds sold and  
    repurchase agreements              24        151         41        216
                                ---------   --------   --------   --------
Total interest income                 935      3,559        251      4,745
                                ---------   --------   --------   --------

Changes in Interest Expense:
----------------------------
  Deposits                            930      1,424        243      2,597
  Borrowings                            5        401          1        407
                                ---------   --------   --------   --------
Total interest expense                935      1,825        244      3,004
                                ---------   --------   --------   --------

Net interest income             $       -   $  1,734   $      7   $  1,741 
                                =========   ========   ========   ========



                                   15

<PAGE>  16

The Company's provision for estimated loan losses was $300,000 for both 
quarters ended December 31, 1995 and 1994.  Charge-offs, net of recoveries, to
the allowance for estimated loan losses were $145,000 during the three months
ended December 31, 1995 compared to $22,000 for the same period a year 
earlier.  The allowance for estimated loan losses at December 31, 1995 was 
$8.0 million or 331% of nonperforming loans compared to $6.4 million or 142% 
of nonperforming loans at December 31, 1994.

The table below summarizes nonperforming assets at December 31, 1995 and 1994. 
Nonperforming assets consist of nonaccrual loans, real estate owned, other
repossessed assets, and loans with interest or principal past due 90 days or 
more which are still accruing (dollars in thousands).


                                                    December 31,       
                                           ----------------------------
                                               1995             1994   
                                           ----------------------------
      Nonaccrual loans                       $ 2,410          $ 4,529
      Foreclosed real estate                   4,126           10,107
      Other repossessed assets                   238              118
                                             -------          -------
      Total nonperforming assets             $ 6,774          $14,754
                                             =======          =======
      Total nonperforming assets as 
       a percentage of total assets              .74%            1.87%
                                             =======          ========


Real estate owned remained relatively unchanged at $4.1 million at December 31,
1995 as compared to September 30, 1995. During the quarter ended December 31,
1995 there were foreclosures of $1.5 million, sales of foreclosed properties 
of $1.8 million and capital expenditures of approximately $250,000.  

Liberty Mortgage originated loans during the three months ended December 31, 
1995 totaling $77 million compared to $37 million during the same period a 
year earlier.

Liberty Mortgage invests in mortgage servicing rights ("MSRs") resulting from
loans originated or purchased through correspondent relationships.  The
investment in MSRs has the effect of reducing the basis in the loans purchased
or originated, and increasing the gain (or reducing the loss) on sales of 
loans.  The following table outlines the activity in MSRs for the three month
periods ended December 31, 1995 and 1994 (dollars in thousands).
 
                                               Three Months Ended     
                                                    December 31,       
                                           ---------------------------
                                               1995             1994   
                                           ---------------------------
      Capitalized                            $  742           $   39
      Sold                                       32               62
      Amortized                                  94              127 
      Net investment at December 31           2,692            2,765


Prior to October 1, 1995 Liberty Mortgage recorded mortgage servicing rights
relating only to loans purchased.  Effective October 1, 1995 the Company 
adopted Statement of Financial Accounting Standards ("SFAS") No. 122 
"Accounting for 


                                  16

<PAGE>  17

Mortgage Servicing Rights".  This statement amends SFAS No. 65 "Accounting 
for Certain Mortgage Banking Activities" and requires a mortgage banking 
enterprise to recognize as seperate assets MSRs regardless of whether the 
MSRs are purchased or originated.  SFAS No. 122 also requires the allocation 
of the total cost of the mortgage loans to the mortgage servicing rights and
the loan (without the mortgage servicing rights), based on their relative 
fair values if it is practicable to estimate those fair values.  Mortgage 
servicing rights are then amortized in proportion to and over the period of 
estimated net servicing income and should be evaluated for impairment based 
on their fair value.  The estimated combined fair value of these assets 
exceeded the book value at December 31, 1995.  When determining fair value 
the Company considers the date of origination, the average note rate and the 
average remaining term and estimated prepayment speeds.  The fair value is 
calculated by estimating the present value of future net servicing income.  As
a result of the adoption of SFAS No. 122, the Company capitalized and 
amortized MSRs for the three months ended December 31, 1995 of $437,000 and 
$6,000, respectively, associated with loans originated.

During the three months ended December 31, 1995, Liberty Mortgage sold bulk 
loan servicing rights with aggregate principal balances of $43 million, 
compared to $40 million, a year earlier.  This resulted in recognizing a gain 
on the sale of servicing of $264,000 for the three months ended December 31, 
1995 compared to $448,000 for the same period a year ago.  The servicing rights
sold generally related to loans originated for sale and sold within the last 
six months.  The servicing sale during the quarter ended December 31, 1995 
included principal balances of $21 million in which Liberty Mortgage granted 
recourse to the buyer.  Accordingly, the gain related to such rights of 
$250,000 was deferred and will be recognized in the period that the recourse 
expires.

Non-interest income (net of gains on the sale of assets) increased $200,000 or
14% for the quarter ended December 31, 1995 as compared to the same quarter a
year earlier.  This change was principally the result of deposit account 
service charges increasing $262,000 or 32%, due to average transaction account
balances increasing 38% from December 1994 to December 1995.  
 
Non-interest expense (net of other real estate operations) for the three months
ended December 31, 1995 increased $1.4 million or 28% over the same period a 
year ago.  The acquisitions during fiscal 1995 were mainly responsible for the
increase.  Approximated expenses directly relating to the acquisitions for the
current period are as follows (dollars in thousands). 

      Compensation, taxes and benefits                       $  563
      Occupancy and equipment                                   145
      Advertising                                                12
      Professional fees                                          21
      Data processing                                            35
      Federal deposit insurance premiums                         85
      Amortization of intangibles                               177
      Other                                                     162
                                                             ------
                                                             $1,200
                                                             ======

                                  17

<PAGE>  18

Federal deposit insurance premiums declined in total $18,000 for the quarter
ended December 31, 1995 as compared to the quarter ended December 31, 1994. 
This reflects a savings of approximately $103,000 (after consideration of the
acquisitions) due to lower assessment rates.

The net cost of operations of other real estate declined by $188,000 for the
quarter ended December 31, 1995 as compared to the same period a year ago. 
Contributing to this variance was the following (dollars in thousands).

                                                Three Months Ended     
                                                    December 31,       
                                           ---------------------------
                                               1995             1994   
                                           ---------------------------
      Provisions for estimated losses        $    5           $  138
      Net losses (gains) on sales               (20)               7
      Net expense (income) from operations       23               51


Accounting for Income Taxes
---------------------------

The Company's effective income tax rate, as well as the marginal income tax 
rate, for both quarters ended December 31, 1995 and 1994 was 34%.  The 
Company's management has determined that it is more likely than not that its 
deferred tax assets will be realized.  This is based on the existence of 
taxable income in the form of future reversals of existing taxable temporary 
differences and taxable income in prior carryback years that is sufficient to 
allow realization of the tax benefit of the Company's existing deductible 
temporary differences.  The Company is not aware of any material uncertainties
existing at December 31, 1995 that may affect the realization of the Company's
deferred tax assets.  The Company evaluates the realizability of deferred tax 
assets quarterly by assessing the need for a valuation allowance.


Acquisitions  
------------

On January 19, 1996 the Company announced an agreement to acquire Middle 
Georgia Bank in Byron, Georgia.  Middle Georgia Bank has two offices, 
approximately $110 million in assets, $100 million in deposits, and $63 million
in loans.  This transaction is expected to close in the fourth quarter of 
fiscal 1996, subject to regulatory approval.  The transaction, if approved, is
expected to be accounted for as a pooling-of-interests.

On September 15, 1995 the Company acquired by merger Tifton Banks, Inc. of 
Tifton Georgia, and its subsidiary, Tifton Bank & Trust Company ("Tifton 
Bank").  Tifton Bank, on the date of acquisition, held the following 
approximate balances:  loans of $42 million, cash and investments of $21 
million, premises and equipment of $1 million and deposits of $45 million.  
Intangible assets resulting from the acquisition amounted to approximately 
$2 million.

On March 24, 1995, the Company acquired three banking offices located in
Sylvania, Vidalia and Waycross, Georgia from a commercial bank.  Total assets
acquired were approximately $3 million and total cash received and deposits 




                                   18

<PAGE>  19

assumed were approximately $95 million.  Intangible assets resulting from the
acquisition were approximately $4 million.

On December 2, 1994, the Company acquired Central Banking Company of 
Swainsboro, Georgia and its subsidiary The Central Bank ("Central Bank").  
Central Bank on the date of acquisition, held the following approximate 
balances:  loans of $21 million, cash and investments of $34 million, premises 
and equipment of $1 million and deposits of $52 million.  Intangible assets 
resulting from the acquisition amounted to approximately $2 million.

The financial institutions acquired during fiscal 1995 were accounted for as
purchases and accordingly, income and expenses of such institutions are 
included in the consolidated statements of the Company from the date of 
acquisition.


Adoption of SFAS No. 114 and 118
--------------------------------

On October 1, 1995, the Company adopted SFAS No. 114 "Accounting by Creditors 
for Impairment of a Loan" and SFAS No. 118 "Accounting by Creditors for 
Impairment of a Loan-Income Recognition and Disclosures," which amended SFAS 
No. 114.  Under the new standards, a loan is considered impaired, based upon 
current information and events, if it is probable that the Company will be 
unable to collect the scheduled payments of principal and interest when due 
according to the contractual terms of the loan agreement.  Uncollateralized 
loans are measured for impairment based on the present value of expected 
future cash flows discounted at the historical effective interest rate, while 
all collateral-dependent loans are measured for impairment based on the fair 
value of the collateral.  The adoption of SFAS No. 114 resulted in no 
additional provision for credit losses at October 1, 1995 or during the three 
months ended December 31, 1995.

At December 31, 1995, the recorded investment in loans for which impairment has
been recognized in accordance with SFAS No. 114 totaled $3.2 million, with a
corresponding valuation allowance of $1.2 million.  For the period ended 
December 31, 1995, the average recorded investment in impaired loans was 
approximately $3.1 million.  Interest income recognized by the Company on 
impaired loans (during the portion of the year that they were impaired) was not
significant.

The Company uses several factors in determining if a loan is impaired under 
SFAS No. 114.  The internal asset classification procedures include a 
thorough review of significant loans and lending relationships and include the
accumulation of related data.  This data includes loan payment status, 
borrowers' financial data, and borrowers' operating factors such as cash flows,
operating income or loss, and other factors.  Loans continue to be classified 
as impaired unless they are brought fully current and the collection of 
scheduled interest and principal is considered probable.







                                  19

<PAGE>  20

PART II - OTHER INFORMATION
---------------------------


Item 4.   Submission of Matters to a Vote of Securities Holders
-------   -----------------------------------------------------

      There were no matters submitted to a vote of securities holders during 
      the quarter ended December 31, 1995.

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

      (a)   Exhibits  
      ---   --------

      Exhibit 11 - Statements of Computation of Earnings Per Share
      Exhibit 15 - Awareness Letter of Coopers & Lybrand L.L.P.
      Exhibit 27 - Financial Data Schedule

      (b)   Reports Filed on Form 8-K
      ---   -------------------------

      On January 23, 1996, the Registrant filed a Current Report on Form 8-K 
      which included a press release dated January 19, 1996 concerning its 
      letter of intent to acquire Middle Georgia Bank.





























                                   20

<PAGE>  21

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.



                                   FIRST LIBERTY FINANCIAL CORP.
                                   -----------------------------



DATE:      February 13, 1996                      /s/  David L. Hall          
       -------------------------                  ----------------------------
                                                  David L. Hall
                                                  Executive Vice President and 
                                                  Chief Financial Officer
                                                  (Duly authorized, principal
                                                   financial and accounting
                                                   officer)






















                                   21

<PAGE>  22

                        FIRST LIBERTY FINANCIAL CORP.
                        -----------------------------

                              Index of Exhibits



The following exhibits are filed as part of the Report.  


Exhibit Number                          Description                       Page
--------------                          -----------                       ----


      11                Statements of Computation of Earnings Per Share     23
      15                Awareness Letter of Coopers & Lybrand L.L.P.        25
      27                Financial Data Schedule






















                                   22