FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D. C. 20549

                      ------------------------------------
         (Mark One)

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

                  For the quarterly period ended March 31, 1999
                                       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 No. 0-11526
             -----------------------------------------------------

                           FIRST COLONIAL GROUP, INC.
-------------------------------------------------------------------------------
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

             PENNSYLVANIA                                   23-2228154
----------------------------------------            -------------------------
(STATE OR OTHER JURISDICTION OF                          I.R.S. EMPLOYER
 INCORPORATION OR ORGANIZATION)                       (IDENTIFICATION NO.)

     76 S. MAIN ST., NAZARETH, PA                             18064
-------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE                      (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 610-746-7300

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE  PRECEDING 12 MONTHS (OR FOR SUCH  SHORTER  PERIOD THAT THE  REGISTRANT  WAS
REQUIRED  TO FILE  SUCH  REPORTS),  AND  (2) HAS  BEEN  SUBJECT  TO SUCH  FILING
REQUIREMENTS FOR THE PAST 90 DAYS.

         YES     X            NO   _____
              -------

INDICATE THE NUMBER OF SHARES  OUTSTANDING  OF EACH OF THE  ISSUER'S  CLASSES OF
COMMON  STOCK AS OF THE  LATEST  PRACTICABLE  DATE:  1,745,725  SHARES OF COMMON
STOCK, $5 PAR VALUE, OUTSTANDING ON MARCH 31, 1999.

<PAGE>

                   FIRST COLONIAL GROUP, INC. AND SUBSIDIARIES



                                      INDEX



PART I - FINANCIAL INFORMATION                                       PAGE NO.

     ITEM 1  -  Financial Statements

      Consolidated Balance Sheet                                         2
      Consolidated Statement of Income                                   3
      Consolidated Statement of Comprehensive Income                     4
      Consolidated Statement of Cash Flows                               5
      Notes to Consolidated Financial Statements                         6

     ITEM 2  -  Management's Discussion and Analysis of
                Financial Condition and Results of Operations           12

     ITEM 3  -  Quantitative and Qualitative Discussion About           27
                Market Risk

PART II  -  OTHER INFORMATION

     ITEM 5  -  Other Information                                       31
     ITEM 6  -  Exhibits and Reports on Form 8-K                        31

SIGNATURES                                                              32

<PAGE>

                   FIRST COLONIAL GROUP, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             (Dollars in Thousands)
                                   (Unaudited)
<TABLE>
                                                    March 31      Dec. 31
ASSETS                                                  1999         1998
                                                   ---------    ---------
<S>                                               <C>          <C>

  Cash and Due From Banks                          $  12,038    $  12,259
  Federal Funds Sold                                    --          2,000
                                                   ---------    ---------
    Total Cash and Cash Equivalents                   12,038       14,259
  Interest-Bearing Deposits With Banks                 6,753        3,301
  Investment Securities Held-to-Maturity              15,050       17,723
    (Fair Value:  Mar. 31, 1999 - $15,177;
      Dec. 31, 1998 - $17,920)
  Securities Available-for-Sale at Fair Value        117,925       98,389
  Mortgage Loans Held-for-Sale                         1,070          603
  Total Loans, Net of Unearned Discount              209,717      212,437
  LESS:  Allowance for Possible Loan Losses           (2,669)      (2,691)
                                                   ---------    ---------
  Net Loans                                          207,048      209,746
  Premises and Equipment, Net                          6,663        6,885
  Accrued Interest Income                              2,460        2,542
  Other Real Estate Owned                                601          636
  Other Assets                                         4,952        4,412
                                                   ---------    ---------
      TOTAL ASSETS                                 $ 374,560    $ 358,496
                                                   =========    =========
LIABILITIES
  Deposits
    Non-Interest Bearing Deposits                  $  40,941    $  38,885
    Interest-Bearing Deposits                        269,653      255,664
                                                   ---------    ---------
      Total Deposits                                 310,594      294,549
  Securities Sold Under Agreements to Repurchase       6,075        5,094
  Long-Term Debt                                      20,000       20,000
  Accrued Interest Payable                             3,563        3,536
  Other Liabilities                                    3,680        3,600
                                                   ---------    ---------
      TOTAL LIABILITIES                              343,912      326,779
                                                   ---------    ---------
SHAREHOLDERS' EQUITY
  Preferred Stock, Par Value $5.00 a share
    Authorized - 500,000 shares, none issued            --           --
  Common Stock, Par Value $5.00 a share
    Authorized - 10,000,000 shares
    Issued   -    1,748,775 shares at Mar. 31, 1999
    and 1,745,725 shares at Dec. 31, 1998              8,744        8,729
  Additional Paid in Capital                          13,935       13,873
  Retained Earnings                                    9,487        9,023
  Employee Stock Ownership Plan Debt                  (1,435)        (435)
  Accumulated Other Comprehensive Income                 (83)         527
                                                   ---------    ---------

Total Shareholders' Equity                            30,648       31,717
                                                   ---------    ---------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY         $ 374,560    $ 358,496
                                                   =========    =========
</TABLE>

See accompanying notes to interim consolidated financial statements.

<PAGE>

                   FIRST COLONIAL GROUP, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                             (Dollars in Thousands)
                                   (Unaudited)
<TABLE>

                                                Three Months Ended
                                               Mar. 31,      Mar. 31,
                                                 1999          1998
<S>                                           <C>           <C>
INTEREST INCOME
    Interest and Fees on Loans                 $4,396        $4,913
    Interest on Investment Securities
      Taxable                                   1,341         1,170
      Tax-Exempt                                  388           259
    Interest on Deposits with Banks and
      Federal Funds Sold                           99            43
                                               ------        ------
        Total Interest Income                   6,224         6,385
                                               ------        ------
INTEREST EXPENSE
    Interest on Deposits                        2,342         2,327
    Interest on Short-Term Borrowings              46            72
    Interest on Long-Term Debt                    280           287
                                               ------        ------
        Total Interest Expense                  2,668         2,686
                                               ------        ------
NET INTEREST INCOME                             3,556         3,699
    Provision for Possible Loan Losses            125           112
                                               ------        ------
    Net Interest Income After Provision
        for Possible Loan Losses                3,431         3,587
                                               ------        ------
OTHER INCOME
    Trust Revenue                                 266           211
    Service Charges on Deposit Accounts           372           350
    Investment Securities Gains, Net              216           100
    Gain on Sale of Mortgage Loans                 78            40
    Other Operating Income                        182           159
                                               ------        ------

        Total Other Income                      1,114           860
                                               ------        ------
OTHER EXPENSES
    Salaries and Employee Benefits              1,640         1,614
    Net Occupancy and Equipment Expense           535           551
    Other Operating Expenses                    1,373         1,243
                                               ------        ------

        Total Other Expenses                    3,548         3,408
                                               ------        ------
 
Income Before Income Taxes                        997         1,039
Applicable Income Taxes                           212           271
                                               ------        ------

NET INCOME                                     $  785        $  768
                                               ======        ======
PER SHARE DATA
    Basic Net Income                           $ 0.46        $ 0.45
    Diluted Net Income                         $ 0.46        $ 0.45
    Cash Dividends                             $ 0.19        $ 0.18
</TABLE>

See accompanying notes to interim consolidated financial statements.

<PAGE>


                   FIRST COLONIAL GROUP, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                             (Dollars in Thousands)
                                   (Unaudited)

<TABLE>
                                                 ---------------------------
                                                      Three Months Ended
                                                 ---------------------------
                                                    Mar. 31,     Mar. 31,
                                                     1999          1998
                                                    ------        -----
<S>                                                <C>           <C>   

Net Income                                          $ 785         $ 768

Other Comprehensive Income, Net of Tax
   Unrealized gains (losses) on securities
      Unrealized gains (losses) arising in period    (403)          (73)
      Reclassification adjustment; gain included
         in net income                                 (8)          (78)
                                                    -----         -----

Other Comprehensive Income                           (411)         (151)
                                                    -----         -----

Comprehensive Income                                $ 374         $ 617
                                                    =====         =====
</TABLE>

Other  comprehensive  income is shown net of tax of $(187)  and $5 for March 31,
1999 and March 31, 1998, respectively.










See accompanying notes to interim consolidated financial statements.

<PAGE>

                   FIRST COLONIAL GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in Thousands)
                                   (Unaudited)
<TABLE>

                                                            Three Months Ended
OPERATING ACTIVITIES                                        March 31,  March 31,
                                                               1999       1998
                                                           --------    --------
<S>                                                           <C>        <C>    

Net Income                                                     $785       $768
Adjustments to Reconcile Net Income to Net Cash
  Provided by Operating Activities:
    Provision for Possible Loan Losses                          125        112
    Depreciation and Amortization                               255        243
    Amortization of Security Discounts                          (36)       (20)
    Amortization of Security Premiums                            59         28
    Amortization of Deferred Fees on Loans                        1       (167)
    Mortgage Loans Originated for Sale                      (10,266)   (19,929)
    Mortgage Loan Sales                                       9,799     19,281
    Gain on Sale of Mortgage Loans                              (78)       (40)
    Investment Securities Gains, Net                           (801)      (100)
  Changes in Assets and Liabilities:
    (Increase) Decrease in Accrued Interest Income               82       (289)
    Increase (Decrease) in Accrued Interest Payable              27       (105)
    Net Increase in Other Assets                               (617)      (846)
    Net Increase in Other Liabilities                           440        586
                                                            -------   --------
Net Cash Used In Operating Activities                          (225)      (478)
                                                            -------   --------
INVESTING ACTIVITIES
Proceeds from Maturities of Securities Available-for-Sale     5,090      6,542
Proceeds from Maturities of Securities Held-to-Maturity       2,662      3,523
Proceeds from Sales of Securities Available-for-Sale          8,503      1,430
Proceeds from Sales of Securities Held-to-Maturity              ---        248
Proceeds from Sales of Securities Held-to-Maturity
Purchase of Securities Available-for-Sale                   (33,265)   (18,423)
Purchase of Securities Held-to-Maturity                         ---     (6,540)
Net Increase in Interest Bearing Deposits With Banks         (3,452)    (3,816)
Net Decrease in Loans                                         2,568     11,935
Purchase of Premises and Equipment, Net                          (1)       (63)
Proceeds from Sale of Other Real Estate Owned                   117         90
                                                            -------    -------
Net Cash Used In Investing Activities                       (17,778)    (5,074)
                                                            -------    -------
FINANCING ACTIVITIES
Net Increase in Interest and Non-Interest
     Bearing Demand Deposits and Savings Accounts             2,654      7,218
Net Increase in Certificates of Deposits                     13,391        902
Proceeds from Sale of Treasury Stock                            ---         84
Net Increase (Decrease) in Repurchase Agreements                981     (4,260)
Net Increase in ESOP Debt                                    (1,000)       ---
Proceeds from Issuance of Stock                                  77        ---
Cash Dividends Paid                                            (321)      (310)
                                                            -------     ------

Net Cash Provided by Financing Activities                    15,782      3,634
                                                            -------     ------

Decrease in Cash and Cash Equivalents                        (2,221)    (1,918)
Cash and Cash Equivalents, January 1                         14,259     14,829
                                                            -------     ------
Cash and Cash Equivalents, March 31,                        $12,038    $12,911
                                                            =======    =======
</TABLE>

See accompanying notes to interim consolidated financial statements.

<PAGE>

                   FIRST COLONIAL GROUP, INC. AND SUBSIDIARIES

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

                                   (Unaudited)


NOTE A  -  GENERAL

The accompanying  financial statements,  footnotes and discussion should be read
in conjunction with the audited financial statements,  footnotes, and discussion
contained in the Company's Annual Report for the year ended December 31, 1998.

The financial information presented herein is unaudited; however, in the opinion
of management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the unaudited financial  information have been made.
The results for the three ended March 31, 1999 are not necessarily indicative of
results to be expected for the full year or any other interim period.

NOTE B  -  SUBSIDIARIES

First Colonial Group, Inc. (the Company) is a Pennsylvania  business corporation
which is registered as a bank holding company under the Bank Holding Company Act
of 1956. The Company has two wholly-owned  subsidiaries,  Nazareth National Bank
and Trust  Company (the "Bank")  founded in 1897 and First C. G.  Company,  Inc.
founded in 1986.

NOTE C  -  INVESTMENT CONSIDERATIONS

In analyzing  whether to make,  or to continue,  an  investment  in the Company,
investors   should   consider,   among   other   factors,   certain   investment
considerations  more  particularly  described in the Company's  Annual Report on
Form 10-K for the year ended  December 31, 1998, a copy of which can be obtained
from Reid L. Heeren,  Vice  President,  First Colonial  Group,  Inc., 76 S. Main
Street, Nazareth, PA 18064.

NOTE D  -  FORWARD LOOKING STATEMENTS

The  information  contained in this Quarterly  Report  contains  forward looking
statements (as such term is defined in the  Securities  Exchange Act of 1934 and
the regulations thereunder), including, without limitation, statements as to the
allowance  and provision for possible  loan losses,  future  interest  rates and
their effect on the Company's financial condition or results of operations,  the
classification of the Company's investment portfolio,  the discussion in "Item 3
- Quantitative  and  Qualitative  Discussion  About Market Risk",  statements or
estimates  concerning  the  effect of the "Year  2000"  issues on the  Company's
systems and software and the  Company's  plans with regard to "Year 2000" issues
and  other  statements  which  are not  historical  facts or as to  management's
beliefs, expectations or opinions.  Such forward looking statements  are subject

<PAGE>

to risks and  uncertainties  and may be  affected by various  factors  which may
cause  actual  results to differ  materially  from those in the forward  looking
statements.  Certain  of  these  risks,  uncertainties  and  other  factors  are
discussed in this  Quarterly  Report or in the  Company's  Annual Report on Form
10-K for the year ended  December 31, 1998, a copy of which may be obtained from
the Company upon request and without charge (except for the exhibits thereto).

NOTE E  -  CASH DIVIDENDS

On February  26, 1999 the Company  paid its 1999 first  quarter  dividend on its
common stock of $.19 per share to shareholders of record on February 11, 1999.


NOTE F  -  STOCK DIVIDEND

On June 25, 1998 the Company paid a 5% stock dividend to  shareholders of record
on June 5, 1998.  Fractional shares were paid in cash based on the closing price
of $36.00 per share on the record date.  Net income per share and average shares
outstanding have been restated to reflect the 5% stock dividend.

NOTE G -  EARNINGS PER SHARE

During  1997,  the Company  adopted the  provisions  of  Statement  of Financial
Accounting  Standards  No.  128,  "Earnings  Per  Share  (SFAS  128)".  SFAS 128
eliminates   primary  and  fully   diluted   earnings  per  share  and  requires
presentation  of basic and diluted  earnings per share in  conjunction  with the
disclosures of the methodology used in computing such earnings per share.  Basic
earnings  per  share  excludes  dilution  and is  computed  by  dividing  income
available  to  common  shareholders  by  the   weighted-average   common  shares
outstanding during the period. Diluted earnings per share takes into account the
potential  dilution that could occur if  securities or other  contracts to issue
common stock were  exercised  and  converted  into common  stock.  Prior periods
earnings per share  calculations  have been  restated to reflect the adoption of
SFAS No. 128. Basic and diluted earnings per share are calculated as follows:


<PAGE>


For the Three Months Ended March 31, 
<TABLE>
                                                        Average
                                             Income       Shares      Per Share
                                          (numerator) (denominator)     Amount
1999
<S>                                        <C>         <C>            <C>   

Net Income                                  $  785

Basic Earnings Per Share
  Income Available to Common Shareholders   $  785      1,705,578      $  0.46

Effect of Dilutive Securities
  Stock Options                                             5,418
                                            ------      ---------      -------
Diluted Earnings Per Share
  Income Available to Common Shareholders
  plus Assumed Exercise of Options          $  785      1,710,996      $  0.46
                                            ------      ---------      -------
1998

Net Income                                  $  768

Basic Earnings Per Share
  Income Available to Common Shareholders   $  768      1,715,325      $  0.45

Effect of Dilutive Securities
  Stock Options                                             7,739
                                            ------      ---------      -------
Diluted Earnings Per Share
  Income Available to Common Shareholders
  plus Assumed Exercise of Options          $  768      1,723,064      $  0.45
                                            ------      ---------      -------
</TABLE>

Average  common  shares  outstanding  in the three month period ending March 31,
1999 and 1998 do not include 41,349 and 23,136, respectively of average weighted
unallocated  shares held by the ESOP. The exclusion of these unallocated  shares
held by the ESOP is due to the  Company's  adoption  of SOP 93-6.  Share and per
share  information  have been restated to reflect the 5% stock  dividend of June
1998.

<PAGE>

NOTE H  -  ALLOWANCE FOR POSSIBLE LOAN LOSSES

Transactions in the allowance for possible loan losses were as follows:
<TABLE>

Three Month Period Ended March 31,                1999                1998
                                              ----------          ----------
<S>                                          <C>                 <C>    

Beginning Balance                             $2,691,000          $2,664,000

Additions
   Provision for loan losses charged to
     operating expenses                          125,000             112,000
   Recoveries of loans                            18,000              24,000
                                              ----------          ----------
      total Additions                            143,000             136,000

Deductions
   Loans charged off                             165,000             126,000
                                              ----------          ----------

Ending Balance                                $2,669,000          $2,674,000
</TABLE>

NOTE I  -   IMPAIRED LOANS

The Company measures impairment of a loan based on the present value of expected
future cash flows discounted at the loan's effective  interest rate, except that
as a  practical  expedient,  impairment  may  be  measured  based  on  a  loan's
observable  market  price,  or the fair value of the  collateral  if the loan is
collateral  dependent.  Regardless of the  measurement  method,  a creditor must
measure  impairment  based on the fair value of the collateral when the creditor
determines that  foreclosure is probable.  SFAS No. 118 allows  creditors to use
existing methods for recognizing interest income on impaired loans.

The Company has  identified a loan as impaired when it is probable that interest
and principal will not be collected  according to the  contractual  terms of the
loan  agreement.  The accrual of interest is  discontinued  on such loans and no
income is  recognized  until all recorded  amounts of interest and principal are
recovered in full.

Loan  impairment  is measured by estimating  the expected  future cash flows and
discounting  them at the  respective  effective  interest rate or by valuing the
underlying collateral.  The recorded investment in these loans and the valuation
for credit loses related to loan impairment are as follows:

<PAGE>

<TABLE>

At March 31,                                     1999                  1998
                                               --------            ----------
<S>                                           <C>                 <C>   

Principal amount of impaired loan              $501,000            $1,428,000
Deferred loan costs                                 ---                 1,000
                                               --------            ----------
                                                501,000             1,429,000
Less valuation allowance                        173,000               504,000
                                               --------            ----------
                                               $328,000              $926,000
</TABLE>


On January 1, 1995 a valuation for credit losses  related to impaired  loans was
established. The activity in this allowance account for the quarter ending March
31, 1999 is as follows:
<TABLE>

                                                 1999                1998
                                              --------            --------
<S>                                          <C>                 <C>    

Valuation allowance at January 1,             $303,000            $138,000
Provision for loan impairment                      ---             112,000
Transfer from Unallocated Allowance           (112,000)            279,000
Direct charge-offs                              18,000              25,000
                                              --------            --------
Valuation allowance at March 31,              $173,000            $504,000
</TABLE>

Total cash collected on impaired loans during the three month period ended March
31, 1999 was $45,000,  of which  $32,000 was credited to the  principal  balance
outstanding  on such  loans and  $13,000  was  recognized  as  interest  income.
Interest  that would have been accrued on impaired  loans during the first three
months of 1999 was $14,000. Interest income recognized in the first three months
of 1999 was $6,224,000.  The valuation  allowance for impaired loans of $173,000
at March 31, 1999 is included in the  "Allowance for Possible Loan Losses" which
amounts  to  $2,669,000  at March  31,  1999.  There was no  provision  for loan
impairment for the period ended March 31, 1999.

NOTE J  -  REPORTING OF COMPREHENSIVE INCOME

On January 1, 1998, the Corporation adopted the Financial  Accounting  Standards
Board issued (SFAS) No. 130, "Reporting  Comprehensive  Income",  which requires
presenting  a  complete  set of  financial  statements  to  include  details  of
comprehensive  income that arises in the reporting period.  Comprehensive income
consists  of net income or loss for the current  period and other  comprehensive
income income,  expenses,  gains and losses that bypass the income statement and
are reported  directly in a separate  component of equity.  Other  comprehensive
income includes, for example,  foreign currency items, minimum pension liability
adjustments and unrealized  gains and losses on certain  investment  securities.
The  Corporation  has  elected  to report  comprehensive  income  on a  separate
scheduled titled "Statement of Comprehensive Income".

<PAGE>

NOTE K  -  DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION

In June,  1997, the Financial  Accounting  Standards  Board issued  Statement of
Financial Accounting Standards (SFAS) No. 131, "Disclosures About Segments of an
Enterprise and Related Information".  SFAS No. 131 established standards for the
method that public business  enterprises report selected  information  regarding
operating  segments in financial reports issued to shareholders.  The disclosure
information  required consists of a measure of segment profit and loss,  certain
revenue and expense items and segment assets based upon  specified  quantitative
thresholds,  as it is reported  internally to the chief operating decision maker
on both an interim and annual basis. The statement is effective for fiscal years
beginning   after  December  15,  1997.   Management  has  determined  that  the
Corporation consists of one segment: community banking.

NOTE L  -  ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITY

In June, 1998, the Financial  Accounting Standards Board (FASB) issued Statement
of Financial  Accounting  Standards  (SFAS) No. 133,  "Accounting for Derivative
Instruments  and Hedging  Activity".  SFAS No. 133  establishes  accounting  and
reporting  standards for derivative  instruments,  including certain  derivative
instruments imbedded in other contracts, and for hedging activities. It requires
that an entity  recognize all derivatives as either assets or liabilities in the
statement of financial  position and measure those instruments at fair value. If
certain  conditions  are met, a derivative may be  specifically  designated as a
hedge.  The accounting for changes in the fair value of a derivative  (gains and
losses) depends on the intended use of the derivative and resulting designation.
SFAS No. 133 is  effective  for all fiscal  quarters of fiscal  years  beginning
after June 15, 1999.  Earlier  application is permitted only as of the beginning
of any fiscal quarter. The Company is currently reviewing the provisions of SFAS
No. 133.

NOTE M  -  COMMITMENTS AND CONTINGENCIES

The  Company has reserve  $1.5  million  against  possible  claims  which may be
asserted  against the Bank in connection  with certain  pre-need  funeral trusts
which were allegedly  directed by funeral  directors to be invested in a private
placement annuity issued by EA International  Trust. In April, 1999, two funeral
directors  whose funds were invested in this annuity  commenced suit against the
Bank; if all funeral directors whose funds were invested in this annuity were to
pursue claims,  the Bank's maximum exposure would be approximately  $5.5 million
plus  interest  and costs.  The Bank has been  advised  that it has  significant
defenses to these claims and intends to vigorously  defend  against such claims.
The Bank has  discontinued  its  involvement  in this  annuity  and is  pursuing
indemnification  for some or all of these  possible  losses  from its  insurance
carriers and from EA International Trust.

<PAGE>

ITEM 2.

                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations


The following  financial  review and analysis is of the financial  condition and
earnings  performance of the Company and its wholly owned  subsidiaries  for the
three month period ended March 31, 1999.

The  information  contained in this Quarterly  Report  contains  forward looking
statements (as such term is defined in the  Securities  Exchange Act of 1934 and
the regulations thereunder), including, without limitation, statements as to the
allowance  and provision for possible  loan losses,  future  interest  rates and
their effect on the Company's financial condition or results of operations,  the
classification of the Company's investment portfolio,  the discussion in "Item 3
- Quantitative  and  Qualitative  Discussion  About Market Risk",  statements or
estimates  concerning  the  effect of the "Year  2000"  issues on the  Company's
systems and software and the  Company's  plans with regard to "Year 2000" issues
and  other  statements  which  are not  historical  facts or as to  management's
beliefs,  expectations or opinions.  Such forward looking statements are subject
to risks and  uncertainties  and may be  affected by various  factors  which may
cause  actual  results to differ  materially  from those in the forward  looking
statements.  Certain  of  these  risks,  uncertainties  and  other  factors  are
discussed in this  Quarterly  Report or in the  Company's  Annual Report on Form
10-K for the year ended  December 31, 1998, a copy of which may be obtained from
the Company upon request and without charge (except for the exhibits thereto).

In analyzing  whether to make,  or to continue,  an  investment  in the Company,
investors   should   consider,   among   other   factors,   certain   investment
considerations  more  particularly  described in the Company's  Annual Report on
Form 10-K for the year ended  December 31, 1998, a copy of which can be obtained
from Reid L. Heeren,  Vice  President,  First Colonial  Group,  Inc., 76 S. Main
Street, Nazareth, PA 18064.

Liquidity and Capital Resources

     Liquidity is a measure of the  Company's  ability to raise funds to support
asset  growth,  meet deposit  withdrawal  and other  borrowing  needs,  maintain
reserve  requirements and otherwise operate the Company on an ongoing basis. The
Company  manages its assets and  liabilities to maintain  liquidity and earnings
stability.  Among  the  sources  of  liquidity  are  money  market  investments,
securities  available-for-sale,  funds  received  from the  repayment  of loans,
short-term  borrowings and borrowings  from the Federal Home Loan Bank. At March
31, 1999, cash, due from banks, Federal funds sold and interest bearing deposits
with banks totaled $18,791,000, and securities maturing  within one year totaled

<PAGE>

$5,361,000.  At December 31, 1998, cash, due from banks,  Federal funds sold and
interest  bearing  deposits  with banks,  totaled  $17,560,000,  and  securities
maturing within one year were $4,493,000.  Securities sold under an agreement to
repurchase  totaled  $6,075,000 at March 31, 1999 and $5,094,000 at December 31,
1998. The Bank is a member of the Federal Home Loan Bank of Pittsburgh. The Bank
had interest bearing demand deposits at the Federal Home Loan Bank of Pittsburgh
in the amount of  $6,480,000  at March 31, 1999 and  $3,193,000  at December 31,
1998.  These deposits are included in due from banks on the Company's  financial
statements.  As a result of this  relationship,  the Company  places most of its
short-term  funds at the  Federal  Home Loan Bank of  Pittsburgh.  There were no
Federal  funds sold at March 31,  1999.  The Company has  $2,000,000  in Federal
funds sold at December 31, 1998.

     The Federal Home Loan Bank of  Pittsburgh  provides the Bank with a line of
credit in the  amount of  $25,000,000  at March 31,  1999,  subject  to  certain
collateral  requirements.  The Bank  had no  short-term  (overnight)  borrowings
against  this line at March  31,  1999 or at  December  31,  1998.  The Bank had
additional borrowings from the Federal Home Loan Bank at March 31, 1999 totaling
$20,000,000  of which  $8,000,000  is due in August 2000,  $5,000,000  is due in
December 2001 and $7,000,000 is due in October 2003.

     Cash flows for the three months ended March 31, 1999 consisted of cash used
in investing  activities of $17,778,000 and cash used by operating activities of
$225,000 offset in part by cash provided by financing  activities of $15,782,000
resulting in a decrease in cash and cash equivalents of $2,221,000.

     Cash  used  by  operating  activities  was the  result  of  mortgage  loans
originated for sale of $10,266,000  and an increase in other assets of $617,000,
partially  offset by mortgage loan sales of $9,799,000,  net operating income of
$785,000,  an  increase  in other  liabilities  of  $440,000,  depreciation  and
amortization  of $255,000 and a provision  for possible loan losses of $125,000.
Cash  was  used  in  investing   activities   for  the  purchase  of  securities
available-for-sale  of  $33,265,000  and  a  net  increase  in  interest-bearing
deposits with banks of  $3,452,000,  partially  offset by proceeds from sales of
securities  available-for-sale  of  $8,503,000,   proceeds  from  maturities  of
securities available-for-sale and held-to-maturity of $5,090,000 and $2,662,000,
respectively  and a net  decrease  in  loans of  $2,568,000.  Cash  provided  by
financing  activities  consisted  principally of an increase in  certificates of
deposit of $13,391,000,  increases in interest and  non-interest  bearing demand
deposits  and savings  accounts  of  $2,654,000  and an  increase in  repurchase
agreements  of  $981,000,  partially  offset  by an  increase  in  ESOP  debt of
$1,000,000 and the payment of cash dividends of $321,000.

     The Company  recognizes  the  importance of  maintaining  adequate  capital
levels to support  sound,  profitable  growth  and to  encourage  depositor  and
investor  confidence.  Shareholders' equity at March 31, 1999 was $30,648,000 as
compared to $31,717,000 at December 31, 1998,  for a  decrease of $1,069,000, or

<PAGE>

3.4%.  This  decrease  was  attributable  to an increase of  $1,000,000  in debt
related to Employee Stock Ownership Plan, a decrease of $610,000 in the value of
the securities  available for sale (see discussion on "Investment  Securities"),
and the payment of cash dividends of $321,000,  offset in part by net income for
the first three months of 1999 of $785,000 and proceeds  from the sale of common
stock pursuant to the Dividend Reinvestment Plan of $77,000.

     The Company  maintains a Dividend  Reinvestment  and Stock  Purchase  Plan.
During  the first  three  months of 1999,  3,050  shares  of common  stock  were
purchased from  authorized and unissued shares at an average price of $25.29 per
share for proceeds of approximately $77,000.

     The  Company  and the  Bank  are  subject  to  various  regulatory  capital
requirements  administered  by the  Federal  banking  agencies.  Failure to meet
minimum  capital  requirements  can  initiate  certain  mandatory  and  possibly
additional discretionary actions by regulators that, if undertaken, could have a
direct  material  effect on the Company's  financial  statements.  Under capital
adequacy  guidelines and the regulatory  framework for prompt corrective action,
the Company and the Bank must meet  specific  capital  guidelines  that  involve
quantitative measures of the Company's and the Bank's assets,  liabilities,  and
certain  off-balance-sheet  items  as  calculated  under  regulatory  accounting
practices.  The Company's and the Bank's capital amounts and  classification are
also subject to qualitative  judgments by the regulators about components,  risk
weightings, and other factors.

     Quantitative  measures established by regulation to ensure capital adequacy
require the Company and the Bank to maintain  minimum amounts and ratios of Tier
I  capital  of at  least  4% and  total  capital,  Tier I and  Tier  2, of 8% of
risk-adjusted assets and of Tier 1 capital of at least 3%to 5% of average assets
(leverage  ratio).  Tier 1 capital  includes  common  shareholders'  equity  and
qualifying  perpetual  preferred  stock  together  with  related  surpluses  and
retained  earnings.  Tier 2 capital may be comprised  of limited life  preferred
stock, qualifying debt instruments,  and the allowance for possible loan losses.
Management believes, that as of March 31, 1999, the Company and the Bank met all
capital adequacy requirements to which they were subject.

<PAGE>

Capital Ratios
<TABLE>
                                                                  To Be Well
                                                                 Capitalized
                                                 Required        Under Prompt
                                                For Capital       Corrective
                                Actual           Purposes         Provisions
(Dollars in Thousands)
 At March 31, 1999           Amount   Ratio     Amount   Ratio   Amount  Ratio
<S>                        <C>       <C>      <C>       <C>    <C>      <C>
Total Capital
(To Risk-Weighted Assets)
  Company, (Consolidated)   $33,025   16.55%   $15,964   8.00%      ---    ---
  Bank                      $29,845   15.03%   $15,886   8.00%  $19,857  10.00%

Tier 1 Capital
(To Risk-Weighted Assets)
  Company, (Consolidated)   $30,475   15.27%   $ 7,983   4.00%      ---    ---
  Bank                      $29,961   13.58%   $ 7,930   4.00%  $11,912   6.00%

Tier 1 Capital
(To Average Assets,
 Leverage)
  Company, (Consolidated)   $30,475   8.37%    $14,564   4.00%      ---    ---
  Bank                      $26,961   7.47%    $14,437   4.00%  $18,046   5.00%
</TABLE>

<TABLE>
                                                                 To Be Well
                                                                 Capitalized
                                                 Required        Under Prompt
                                                For Capital       Corrective
                                Actual           Adequacy           Action
(Dollars in Thousands)
 At December 31, 1998        Amount   Ratio     Amount   Ratio   Amount  Ratio
<S>                        <C>      <C>       <C>       <C>    <C>      <C>
Total Capital
(To Risk-Weighted Assets)
  Company, (Consolidated)   $33,555  16.97%    $15,819   8.00%      ---    ---
  Bank                      $29,450  15.02%    $15,684   8.00%  $19,605  10.00%

Tier 1 Capital
(To Risk-Weighted Assets)
  Company, (Consolidated)   $30,938  15.64%    $ 7,906   4.00%      ---    ---
  Bank                      $26,596  13.57%    $ 7,842   4.00%  $11,763   6.00%

Tier 1 Capital
(To Average Assets,
 Leverage)
  Company, (Consolidated)   $30,938   8.60%    $14,114   4.00%      ---    ---
    Bank                    $26,596   7.47%    $13,951   4.00%  $17,439   5.00%
</TABLE>

<PAGE>

     The Company is not aware of any trends,  events or uncertainties  that will
have a  material  effect  on  the  Company's  liquidity,  capital  resources  or
operations,   except  for  higher  interest  rates  which  could  cause  deposit
disintermediation  and an increase in interest  expense and the  possibility  of
inflationary trends, the results of which cannot be determined at this time. The
Company is not under any agreement  with the  regulatory  authorities  nor is it
aware of any current  recommendation  by regulatory  authorities  which, if they
were  implemented,  would have a material  adverse effect on liquidity,  capital
resources, or the operations of the Company.

Assets and Liabilities

     Total assets at March 31, 1999 were $374,560,000,  representing an increase
of 4.5% over  total  assets of  $358,496,000  at  December  31,  1998.  Deposits
increased  by  $16,045,000  or 5.4% from  $294,549,000  on December  31, 1998 to
$310,594,000 on March 31, 1999.  Contributing to this increase were increases in
certificates of deposit of $13,391,000,  non-interest  bearing checking deposits
of  $2,056,000  and savings and money  market  deposits of  $865,000,  partially
offset by a decline in interest  bearing  checking  deposits of $267,000.  Loans
outstanding at March 31, 1999 were  $209,717,000  as compared to $212,437,000 at
December  31, 1998.  This is a decrease of  $2,720,000  or 1.3%.  The decline in
loans  was  primarily  the  result  of a  decrease  of  $3,954,000  or  4.9%  in
residential real estate loans. During the first three months of 1999, $9,800,000
of  residential  real estate loans were sold.  Most of the loans sold were fixed
rate  with 30 or 15 year  maturities.  These  loans  were  sold  to  reduce  the
Company's  interest-rate  risk  and to  provide  liquidity  for  future  lending
opportunities.  Most of the loans sold were  originated  in the first quarter of
1999.  The Bank continues to service all of these loans.  There were  $1,070,000
and $603,000 of residential  real estate loans  identified as  held-for-sale  at
March 31,  1999 and  December  31,  1998,  respectively.  Additionally,  the net
decrease in loans during the first three  months of 1999  included a $854,000 or
1.4%  decrease in  commercial  loans  partially  offset by a $2,088,000  or 2.9%
increase in  consumer  loans.  The loan to deposit  ratio was 67.5% at March 31,
1999 and 72.1% at December 31, 1998.

     Premises and  equipment  decreased by $222,000 to  $6,663,000  at March 31,
1999 from $6,885,000 at December 31, 1998.

     The Company had long-term  debt totaling  $20,000,000 at March 31, 1999 and
December 31, 1998 from the Federal Home Loan Bank of Pittsburgh.  Of this amount
$8,000,000  matures in August 2000,  $5,000,000 matures in December 2001 and the
remaining  $7,000,000  matures on 2008. The interest rates associated with these
loans are 5.89% fixed,  5.08%  variable (at LIBOR plus 3 basis points) and 4.86%
fixed to December  2003 at which time the rate may be converted at the option of
the lender to a variable rate of LIBOR plus 15 basis points,  respectively.  The
loans are secured by the Bank's investment and residential real estate loans and
securities. These funds were borrowed to improve liquidity and to fund loans.

<PAGE>

     During the first quarter of 1999, the Company's  Employee  Stock  Ownership
Plan (ESOP)  borrowed  $1,000,000  from the  Company's  subsidiary,  First C. G.
Company,  payable over twenty years with  interest due  quarterly  and principal
annually in October.  The interest rate on this loan is at the Bank's prime rate
(7.75% at March 31,  1999).  The  proceeds  from this loan were used to purchase
35,500 shares of the Company's  common stock. In the second quarter of 1998, the
ESOP borrowed  $500,000 from First C. G. Company.  This loan is due in 2005 with
interest due quarterly and principal  annually in October.  The interest rate on
this loan is at the Bank's  prime rate (7.75% at March 31, 1999 and December 31,
1998).  The balance  outstanding on these ESOP loans was $1,435,000 at March 31,
1999 and $435,000 at December 31, 1998.

     At  March  31,  1999 and  December  31,  1998  the  Bank had no  short-term
borrowings  from the  Federal  Home  Loan Bank of  Pittsburgh  against a line of
credit of $25,000,000.

Results of Operations

     The net income for the three  months ended March 31, 1999 was  $785,000,  a
17,000 or 2.2%  increase  compared to net income of $768,000 for the same period
in 1998. The earnings  improvement is attributable to an increase in total other
income of $100,000 or 13.9%,  exclusive of investment security gains of $216,000
and gains on the sale of mortgages  of $78,000 and a decrease in Federal  income
taxes of $59,000 or 21.8% partially  offset by a decrease in net interest income
of  $143,000 or 3.9%,  an  increase in other  expenses of $140,000 or 4.1% and a
$13,000 or 11.6% increase in the provision for possible loan losses.

     Basic  earnings  per share for the three  months  ended March 31, 1999 were
$0.46 as compared to $0.45 for the corresponding  period in 1998. Average shares
outstanding  during this three month period were 1,710,996 in 1999 and 1,723,064
in 1998.  Diluted  earnings per share for the three month period ended March 31,
199 were $0.46 compared to $0.45 for the same period in 1998. Per share earnings
and  average  shares  outstanding  have been  restated  to reflect  the 5% stock
dividend paid on June 25, 1998. (see Note F)

Net Interest Income

     The "Rate/Volume  Analysis" table segregates,  in detail, the major factors
that  contributed to the changes in net interest  income,  for the quarter ended
March 31, 1999 as compared to the quarter  ended March 31,  1998,  into  amounts
attributable  to both rate and volume  variances.  In calculating the variances,
the changes were first  segregated  into (1) changes in volume (change in volume
times the old rate),  (2) changes in rate (changes in rate times the old volume)
and (3) changes in rate/volume (changes in rate times the change in volume). The
changes in  rate/volume  have been  allocated in their entirety to the change in
rates. The interest income included in the "Rate/Volume Analysis" table has been
adjusted to a fully taxable  equivalent  amount using the Federal  statutory tax
rate of 34%. Non accruing loans have been used in the daily average  balances to
determine  changes in interest  income due to volume.  Loan fees included in the
interest income calculation are not material.

<PAGE>

     Net interest income amounted to $3,556,000 for the three months ended March
31, 1999 as compared to $3,699,000  for the three months ended March 31, 1998, a
decrease of $143,000 or 4.0%.  This decrease is the result of lower loan volumes
combined with a smaller decline in interest expense.

     Total  taxable-equivalent  interest income declined  $93,000  primarily the
result of the lower volumes in the loan category. Taxable equivalent income from
loans for the first quarter  declined  $517,000 or 10.5% over the same period in
1998. This was comprised of a $1,352,000 decrease due to volume partially offset
by an  $835,000  increase as a result of an  increase  in  rate/volume.  Average
year-to-date  earning assets  increased to  $337,108,000  at March 31, 1999 from
$322,528,000 at March 31, 1998, a 4.5% increase.

     Total interest  expense  declined  $18,000 during the first three months of
1999,  compared to the same period in 1998.  This  decline was  principally  the
result of lower interest rates on deposit accounts and borrowed money.  Interest
expense  attributed to time deposits  increased  $23,000  during the first three
months of 1999, compared to the first three months of 1998. The increase in time
deposit interest expense was due to a higher level of interest-bearing deposits.
Partially  offsetting this growth in interest  expense were lower interest rates
paid on all deposit  accounts and  borrowings  as a result of  repricing  due to
market  conditions (see Item 3. - Quantitative and Qualitative  Discussion About
Market Risk).

<PAGE>

     The following table sets forth a "Rate/Volume Analysis" which segregates in
detail the major factors that  contributed to the changes in net interest income
for the three months  ended March 31, 1999  compared to the same period in 1998.
The interest  income  included in the table has been adjusted to a fully taxable
equivalent amount using the Federal statutory tax rate of 34%.

                              RATE/VOLUME ANALYSIS
                             (Dollars in Thousands)
                                   (Unaudited)

<TABLE>
                                                     Three Months Ended
                                                       March 31, 1999
                                                       Over / (Under)
                                                       March 31, 1998
                                                       CHANGE DUE TO:

                                                TOTAL      RATE      VOLUME
<S>                                         <C>         <C>       <C>    

(Fully Taxable Equivalent)
INTEREST INCOME
Interest-Bearing Balances With Banks         $    57    $  (172)   $   229
Federal Funds Sold                                (1)       (12)        11
Investment Securities                            368     (1,194)     1,562
Loans Held for Sale                               17        (25)        42
Loans                                           (534)       860     (1,394)
                                             -------    -------    -------
Total Interest Income                            (93)      (543)       450
                                             -------    -------    -------

INTEREST EXPENSE
Demand Deposits, Savings & Clubs                  (8)       (52)        44
Time Deposits                                     23       (374)       397
Federal Funds Purchased and Securities           (24)        29        (53)
   Sold Under Agreements to Repurchase
Short-Term Borrowings                             (2)        (2)       --
Long-Term Borrowings                              (7)      (108)       101
                                             -------    -------    -------
Total Interest Expense                           (18)      (507)       489
                                             -------    -------    -------

Net Increase (Decrease) in Interest Income   $   (75)   $   (36)   $   (39)
</TABLE>

<PAGE>

Other Income and Other Expenses

     Other income for the three months  ended March 31, 1999  including  service
charges, trust fees, gains on the sale of mortgage loans and other miscellaneous
income, but exclusive of securities gains or losses, was $898,000 as compared to
$760,000 for the same period in 1998. This was an increase of $138,000 or 18.2%.
The revenues from the Trust  Department  operations  were $211,000 for the three
months  ended March 31, 1998  compared to $266,000  for the three  months  ended
March 31, 1999, an increase of $55,000 or 26.1%.  There were $78,000 in gains on
the sale of mortgage  loans for the three month  period  ended March 31, 1999 as
compared  to $40,000  for the same  period in 1998,  an  increase  of $38,000 or
95.0%.

     Total  other  expenses  for the three  month  period  ended  March 31, 1999
increased by $140,000 or 4.1% to  $3,548,000  over total other  expenses for the
same period in 1998 of  $3,408,000.  Included  in this  increase is a $26,000 or
1.6% increase in salary and benefit  expenses which were  $1,640,000 as compared
to $1,614,000  in 1998.  These  increases  are  primarily due to general  salary
increases of approximately  4% and additional staff  necessitated by current and
planned  future growth.  Occupancy and equipment  expenses were $535,000 for the
three  months ended March 31, 1999 and $551,000 for the three months ended March
31, 1998, a decrease of $16,000 or 2.9%. Other operating  expenses for the three
month  period ended March 31, 1999 were  $1,373,000,  an increase of $130,000 or
10.5% over the $1,243,000 in other expenses for the same period in 1998.

Investment Securities

     The  Company  classifies  its debt and  marketable  securities  into  three
categories: trading, available-for-sale, and held-to-maturity as provided by the
Financial  Accounting  Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities".  The Company had no trading securities at March 31,
1999 and December 31, 1998.

     Available-for-sale  securities  are  carried  at fair  value  with  the net
unrealized  gains or losses reported in equity.  The Company had $117,925,000 in
available-for-sale  securities at March 31, 1999 with a net  unrealized  loss of
$83,000.  At  December  31,  1998  available-for-sale   securities  amounted  to
$98,389,000 with a net unrealized gain of $527,000.

     Held-to-maturity  securities  totaling  $15,050,000  at March 31,  1999 are
carried at cost. At December 31, 1998, the  held-to-maturity  securities totaled
$17,723,000. The Company has the intent and ability to hold the held-to-maturity
securities  until  maturity.  The Company,  at March 31, 1999,  did not hold any
securities identified as derivatives.

Allowance and Provision for Possible Loan Losses

     The  provision  is based on  management's  analysis of the  adequacy of the
allowance for loan losses.  In its  evaluation,  management  considers past loan
experience,  overall  characteristics  of the loan portfolio,  current  economic
conditions and other relevant factors.  Management  currently  believes that the
allowance is adequate to absorb known and inherent losses in the loan portfolio.
Ultimately,  however,  the adequacy of the allowance is largely  dependent  upon
economic conditions which are beyond the scope of management's control.

<PAGE>

     For the first  three  months of 1999,  the  provision  for loan  losses was
$125,000  compared to $112,000 for the same period in 1998. Net charge offs were
$147,000 for the three months ended March 31, 1999  compared  with  $102,000 for
the three  months  ended March 31,  1998.  The ratio of the  allowance  for loan
losses to total loans at March 31, 1999 was 1.27%  compared to 1.27% at December
31,  1998.  This was  primarily  the  result  of a  decline  in  total  loans to
$209,717,000  at March 31, 1999 from  $212,437,000  at December 31,  1998.  This
decline was the result of the sale of  $9,800,000  of mortgage  loans during the
first three months of 1999.  The allowance for possible loan losses at March 31,
1999  totaled  $2,669,000,  a decrease of $22,000 or 0.8% over the  December 31,
1998 amount of $2,691,000.

     As provided  by SFAS No.  114, as amended by SFAS No. 118,  $173,000 of the
Allowance for Possible  Loan Losses is allocated to impaired  loans at March 31,
1999 (See Note I "Impaired Loans").

     Transactions in the allowance for loan losses are as follows:

     ALLOWANCE FOR LOAN LOSSES
<TABLE>

                                                 1999                1998
                                             ----------           ----------
<S>                                         <C>                  <C>  

Balance, January 1,                          $2,691,000           $2,664,000
Provision charged to Operating Expenses         125,000              112,000
Loans Charged Off                              (165,000)            (126,000)
Recoveries                                       18,000               24,000
                                             ----------           ----------

Balance March 31,                            $2,669,000           $2,674,000
</TABLE>

         The following table sets forth an allocation of the allowance for loan
losses by loan category:
<TABLE>

At March 31, 1999
-----------------
<S>                                         <C>    
Commercial                                   $903,000
Residential Real Estate                       140,000
Consumer                                      749,000
Unallocated                                   877,000
                                           ----------

Total                                      $2,669,000
</TABLE>

<PAGE>

Non-Performing Loans

     The following  discussion relates to the Bank's  non-performing loans which
consist of those on a  non-accrual  basis and accruing  loans which are past due
ninety days or more.

     Accrual of interest is  discontinued  on a loan when  management  believes,
after considering  economic and business  conditions and collection effort, that
the  borrower's  financial  condition is such that the collection of interest is
doubtful.  The Company  views  these loans as  non-accrual,  but  considers  the
principal to be  substantially  collectible  because the loans are  protected by
adequate  collateral or other  resources.  Interest on these loans is recognized
only when  received.  The  following  table shows the balance of  non-performing
loans for each of the periods indicated.

     Non performing  assets (non accruing loans and loans past due over 90 days)
were 1.08% of total loans at March 31, 1999 compared to 1.13% at March 31, 1998.
The  decrease in this ratio is the result of a $203,000 or 8.3%  increase in non
performing  loans to $2,254,000  over the one year period ending March 31, 1999.
The ratio of the allowance for loan losses to non  performing  assets was 118.4%
at March 31, 1999 compared to 108.8% at March 31, 1998.

     Non accruing loans at March 31, 1999 of $1,096,000 decreased from March 31,
1998 level of $1,926,000.  This $830,000  decrease was primarily the result of a
commercial loan payoff of $225,000 and a commercial  real estate  foreclosure in
the amount of $579,000.  These loans are secured by commercial  real estate.  At
the  present  time,  management  is of the opinion  that these  loans  present a
minimal amount of exposure to the bank.

     Loans past due 90 days or more and still  accruing  interest are loans that
are  generally  well secured and expected to be restored to a current  status in
the near future.  As of March 31, 1999, loans past due 90 days or more and still
accruing  interest were  $1,158,000  compared to $531,000 at March 31, 1998. The
$627,000  increase  in loans past due 90 days from  March 31,  1998 to March 31,
1999 was the result of increases in mortgage and consumer loans past due 90 days
or more of $492,000  and  $191,000,  respectively.  This was offset in part by a
decrease in commercial loans of $56,000.

<PAGE>

<TABLE>

NON-PERFORMING LOANS
                                            March 31,  December 31,   March 31,
                                              1999        1998          1998
<S>                                      <C>          <C>           <C>    

Non-accrual loans on a cash basis         $1,096,000   $1,245,000     $1,926,000
Non-accrual loans as a percentage
  of total loans                               0.52%        0.59%          0.88%
Accruing loans past due 90 days
  or more                                 $1,158,000   $1,021,000    $  531,000
Accruing loans past due 90 days
  or more as a percentage of total
  loans                                        0.55%        0.48%         0.24%
Other Real Estate Owned from
  Foreclosed Property                     $  601,000   $ 636,000     $  194,000
Allowance for loan losses to
  nonperforming loans                        118.40%     118.80%        108.83%
Nonperforming assets to total loans            1.07%       1.07%          1.13%
Allowance for loan losses to total loans       1.27%       1.27%          1.23%

</TABLE>


     There are no significant loans classified for regulatory purposes that have
not been included in the above table of non-performing loans. The Company has no
significant  loans that qualify as "Troubled Debt  Restructuring"  as defined by
the Financial  Accounting  Standards Board's  Statement of Financial  Accounting
Standards  No. 15  "Accounting  for  Debtors and  Creditors  for  Troubled  Debt
Restructuring" at March 31, 1999.

YEAR 2000

     The Company has adopted a Year 2000 policy to address the "Year 2000" Issue
concerning the inability of certain  information systems and automated equipment
to properly  recognize and process dates containing the Year 2000 and beyond. If
not  corrected,   these  systems  and  equipment  could  produce  inaccurate  or
unpredictable  results  commencing on January 1, 2000.  The Company,  similar to
most financial services providers,  is particularly  vulnerable to the potential
impact  of the Year  2000  Issue due to the  nature  of  financial  information.
Potential impacts to the Company may arise from software, computer hardware, and
other  equipment  both within the  Company's  direct  control and outside of the
Company's ownership,  yet with which the Company electronically or operationally
interfaces.

     In order to address the Year 2000 Issue,  the  Company  has  developed  and
implemented  a five phase  compliance  plan  divided  into the  following  major
components:  (1) Awareness; (2) Assessment;  (3) Renovation;  (4) Validation and
Testing;  and (5)  Implementation.  The  Company has  completed  the first three
phases  of the plan for all of its  mission-critical  systems  and is  currently
working on the final two phases.

<PAGE>

     The  Company  has  identified  its  mission-critical  systems as those that
affect the Company's  ability to process  banking  transactions  and its general
accounting  systems.  Such systems include deposit,  loan and trust  accounting,
check and deposit processing and branch teller equipment.

     The Company  purchases  most of its computer  software  from major  outside
providers of bank software. A significant  component of the Year 2000 plan is to
install the Year 2000 compliant  software  provided by these vendors and also to
test these  supplied  systems.  The  Company's  major  software  providers  have
informed the Company  that,  based on tests they have  conducted and continue to
conduct,  they believe their  respective  systems to be Year 2000 compliant.  In
addition,  the Company is conducting its own tests on these systems  provided by
vendors.  The Company also has some internally  generated  programmed  software.
This  software has been  corrected  for Year 2000 and is in final  testing.  The
Company  anticipates  that all  mission-critical  systems will be tested by June
1999.

     The Company has  reviewed  the impact of Year 2000 on other  equipment  and
systems such as heating, air conditioning, telecommunications, electric service,
vaults,  photocopiers,  personal  computers,  printers and other equipment where
necessary.  Some of  this  equipment,  such  as  personal  computers,  has  been
replaced.  Other items such as vaults,  heating, air conditioning,  photocopiers
and  printers  have been tested and found "not date  sensitive".  The  Company's
providers of telecommunications and electric service have been contacted.  These
providers have indicated they do not expect any  interruption  of service in the
Year 2000.

     Other  important  segments  of the Year  2000  plan are to  identify  those
suppliers and customers  whose  possible  lack of Year 2000  preparedness  might
expose  the  Company  to   financial   loss.   Included  in  this   process  was
communications  to all the Company's  customers and  identification  of loan and
deposit  customers  whose  failure to address the Year 2000 Issue  might  impact
their banking relationship.  As a result of this communication,  the Company has
identified  those  customers who may be affected by the Year 2000.  Risk factors
have been  assigned to these  customers.  The Company  does not  anticipate  any
significant  loss  as a  result  of  these  risks.  The  Company  has  initiated
communications with all of its significant  suppliers to determine the extent to
which the Company is  vulnerable  to those third  parties'  failure to remediate
their own Year 2000 issues.

     The Company has developed  contingency  plans to address any or all systems
that, despite all testing,  still do not operate correctly in the Year 2000. The
contingency  plans  provide for manual and personal  computer  based  systems to
process checks,  deposits and loan  transactions.  The Company will increase its
inventories  of the  various  required  supplies,  such as new  account and loan
forms,  deposit withdrawal forms and other pre-printed  forms,  available at the
Company's Main Office and branch  offices.  Alternative  communications  systems
have been  established  and  alternative  power sources are being  investigated.
These plans will be finalized  and tested during the first half of 1999. At this
time,  the Company  cannot  estimate the cost, if any, that might be required to
implement such contingency plans.

<PAGE>

     During the first  quarter of 1999,  the Company  spent $30,000 on Year 2000
compliance  matters.  As of March  31,  1999,  $881,000  has been  spent on this
project.  These  expenses are comprised of the  replacement of branch teller and
new  account  systems  for  $645,000,  replacement  of  personal  computers  for
$205,000,  replacement of mortgage lending software for $19,000 and enhancements
to banking and trust systems of $12,000.  Additional  expenses  expected in 1999
include $80,000 for an alternative electric power system,  $40,000 for replacing
an automated teller machine, $25,000 for branch new account systems, $15,000 for
check processing  software and $50,000 for other banking  systems.  The expenses
related to Year 2000 are financed by the general revenues of the Company and are
included in the Company's  other operating  expenses in the Company's  financial
statement.

     The  Company  anticipates  that its total Year 2000  project  cost will not
exceed $1,100,000. This estimated project cost is based upon currently available
information.  The aforementioned Year 2000 project cost estimate also may change
as the  Company  progresses  in its Year 2000  program  and  obtains  additional
information and conducts further testing. At this time, no significant  projects
have been delayed as a result of the Company's Year 2000 effort.

     Financial  institution  regulators have intensively  focused upon Year 2000
exposures, issuing guidance concerning the responsibilities of senior management
and directors.  Year 2000 testing and  certification is being addressed as a key
safety and soundness  issue in conjunction  with regulatory  exams.  The Federal
banking agencies have highly  prioritized Year 2000 compliance in order to avoid
major disruptions to the operations of financial  institutions and the country's
financial systems when the new century begins.

     The Federal  banking  agencies have been  conducting  Year 2000  compliance
examinations.  The failure to  implement  an adequate  Year 2000  program can be
identified as an unsafe and unsound banking  practice.  The Company and the Bank
are subject to regulation and  supervision  by the Federal  Reserve Bank and the
Comptroller of the Currency which regularly  conducts  reviews of the safety and
soundness of the  Company's  operations,  including  the  Company's  progress in
becoming  Year  2000  compliant.   The  regulatory   agencies  have  established
examination    procedures   which   contain   three   categories   of   ratings:
"Satisfactory",  "Needs  Improvement" and  "Unsatisfactory".  Institutions  that
receive  a  Year  2000  rating  of  Unsatisfactory  may  be  subject  to  formal
enforcement action, supervisory agreements, cease and desist orders, civil money
penalties,  or the  appointment of a conservator.  In addition,  Federal banking
agencies  will  be  taking  into  account  Year  2000  compliance  programs when

<PAGE>

reviewing  applications  and may deny an application  based on Year 2000 related
issues.  Failure by the Company to adequately prepare for Year 2000 issues could
negatively impact the Company's banking operations,  including the imposition of
restrictions upon its operations by the Comptroller of the Currency.

     Despite the Company's  activities in regards to the Year 2000 Issue,  there
can be no assurance  that partial or total  systems  interruptions  or the costs
necessary  to update  hardware and  software  would not have a material  adverse
effect upon the Company's business,  financial condition, results of operations,
and business prospects.  There is also no guarantee that the hardware,  software
and systems of third parties such as utility  companies,  other banks,  computer
services and supply companies,  the Federal Reserve Bank, other Federal agencies
and other vendors who provide  services and supplies to the Company will be free
of unfavorable Year 2000 issues.  The failure of such third parties could have a
material adverse impact upon the Company.

<PAGE>

ITEM 3.  Quantitative and Qualitative Discussion About Market Risk

     As a financial institution,  the Company's primary component of market risk
is interest rate  volatility.  Fluctuations in interest will  ultimately  impact
both the  level  of  income  and  expense  recorded  on a large  portion  of the
Company's assets and liabilities,  and the market value of all  interest-earning
assets,  other than those which possess a short term to maturity.  Since most of
the Company's  interest-bearing  assets and liabilities are located at the Bank,
the  majority of the  Company's  interest  rate risk is at the Bank level.  As a
result, most interest rate risk management  procedures are performed at the Bank
level (see discussion on "Interest Rate Sensitivity").

     The  Company  and the  Bank  operate  as a  community  banking  institution
primarily in the counties of Northampton,  Lehigh and Monroe, Pennsylvania. As a
result of its location and nature of  operations,  the Company is not subject to
foreign  currency  exchange or commodity  price risk. The Bank makes real estate
loans  primarily in the counties  adjacent to its operations and thus is subject
to risks associated with those local  economies.  The Bank holds a concentration
of  residential  real estate loans (36.3% of total loans) and  commercial  loans
supported  by real estate  (24.3% of total loans) in its loan  portfolio.  These
loans are subject to  interest  and  economic  risks.  The Bank also  originates
residential real estate loans for sale in the secondary  market.  Such loans are
identified as "Mortgage Loans  Held-for-Sale" on the Company's Balance Sheet and
are subject to interest rate risk (see discussion on "Assets and  Liabilities").
The  Company  does not own any  trading  assets  and  does not have any  hedging
transactions in place such as interest rate swaps.

Interest Rate Sensitivity

     The following  table  "Consolidated  Comparative  Statement  Analysis" sets
forth a  comparison  of average  daily  balances,  interest  income and interest
expense on a fully taxable  equivalent  basis and interest rates  calculated for
each major category of interest-earning assets and interest-bearing liabilities.
For the  purposes  of  this  analysis,  the  computations  in the  "Consolidated
Comparative  Statement  Analysis" were prepared using the Federal statutory rate
of 34%; there were no state or local taxes on income applicable to the Company.

<PAGE>


                   FIRST COLONIAL GROUP, INC. AND SUBSIDIARIES
                   CONSOLIDATED COMPARATIVE STATEMENT ANALYSIS
                             (Dollars in Thousands)
                                   (Unaudited)
<TABLE>

Three Months Ended, March 31,                1999                   1998
                                             Int    Avg             Int   Avg
                                     Avg     Inc/  Yield/     Avg   Inc/ Yield/
                                     Bal     Exp    Rate      Bal   Exp   Rate
<S>                                <C>        <C>  <C>     <C>       <C> <C>

ASSETS:
INTEREST-EARNING ASSETS
Int-Bearing Deposits with Banks  $  7,278  $   85   4.68% $ 2,393  $  28  4.68%
Federal Funds Sold                  1,267      14   4.40    1,067     15  5.64
Investment Securities
      Taxable                      87,181   1,341   6.16   74,798  1,169  6.24
      Non-Taxable (1)              32,134     588   7.32   20,615    392  7.60
Net Loans Held for Sale             2,963      26   3.52    1,360      9  2.64
Loans (1) (2)                     209,018   4,377   8.36  225,002  4,911  8.72
Reserve for Loan Losses            (2,733)     --     --   (2,707)    --    --
                                ---------   -----        --------  -----     
Net Loans                         206,285   4,377   8.48  222,295  4,911  8.84
                                ---------   -----        --------  -----     
  Total Interest-Earning Assets   337,108   6,431   7.64  322,528  6,524  8.08
Non-Interest Earning Assets        27,124      --     --   24,162     --    --
                                ---------   -----        --------  -----     
  TOTAL ASSETS, INT INCOME      $ 364,232   6,431   7.08 $346,690  6,524  7.52
                                ---------   -----        --------  -----     

LIABILITIES
INTEREST-BEARING LIABILITIES
Interest-Bearing Deposits
  Demand Deposits               $  49,448     132   1.08 $ 47,463    136  1.16
  Money Market Deposits            13,620      92   2.72   14,423    101  2.80
  Savings & Club Deposits          61,998     336   2.16   60,801    331  2.16
  CD's over $100,000                4,295      41   3.80    4,780     46  3.84
  All Other Time Deposits         131,073   1,741   5.32  123,367  1,713  5.56
                                ---------   -----        --------  -----     
   Total Int-Bearing Deposits     260,434   2,342   3.60  250,834  2,327  3.72
Federal Funds Purchased 
 and Securities Sold Under 
 Agreements to Repurchase           5,695      42   2.96    7,141     66  3.68
Short-Term Borrowings                 321       4   5.00      321      6  7.48
Long-Term Borrowings               20,000     280   5.60   18,374    287  6.24
                                ---------   -----        --------  -----     
  Total Int-Bearing Liabilities   286,450   2,668   3.72  276,670  2,686  3.88

NON-INTEREST-BEARING LIABILITIES
Non-Interest-Bearing Deposits      38,990      --     --   32,315     --    --
Other Liabilities                   7,660      --     --    7,365     --    --
                                ---------   -----        --------  -----     
   TOTAL LIABILITIES              333,100   2,668   3.20  316,350  2,686  3.40
   SHAREHOLDERS' EQUITY            31,132      --     --   30,340     --    --
                                ---------   -----        --------  -----     
   TOTAL LIABILITIES AND EQUITY $ 364,232   2,668   2.92 $346,690  2,686  3.80

NET INTEREST INCOME                       $ 3,763                $ 3,838 
                                            -----                  -----     

    Net Interest Spread                             3.92                  4.20
    Effect of Interest-Free Sources
      Used to Fund Earnings Assets                  0.56                  0.56
    Net Interest Margin                             4.48%                 4.76%
                                                    ----                  ----
</TABLE>

<PAGE>

     The net interest margin of 4.48% for the three month period ended March 31,
1999, decreased from the 4.76% net interest margin for the first three months of
1998.  The yield on  interest  earning  assets was 7.64%  during the first three
months of 1998 as compared to 8.08% in 1998.  The average  interest rate paid on
interest  bearing  deposits and other  borrowings  was 3.72% for the first three
months of 1999 as compared to 3.88% in 1998.

     Interest rate  sensitivity is a measure of the extent to which net interest
income would change due to changes in the level of interest rates. The objective
of interest rate sensitivity  management is to reduce a company's  vulnerability
to future interest rate  fluctuations  and to enhance  consistent  growth of net
interest income

     Rate sensitivity  arises from the difference  between the volumes of assets
which are  rate-sensitive  as compared to the volumes of  liabilities  which are
rate-sensitive.  The mismatch of assets and liabilities in a specific time frame
is referred to as interest  sensitivity  gap.  Generally,  in an  environment of
rising interest rates, a negative gap will decrease net interest income,  and in
an  environment  of falling  interest  rates,  a negative gap will  increase net
interest income.

     Assets and  liabilities  are  allocated to a specific  time period based on
their  scheduled  repricing date or on an historical  basis.  At March 31, 1999,
assets of  $151,163,000  (40.4% of total  assets) were subject to interest  rate
changes within one year. Liabilities subject to rate change within one year were
$178,089,000.  A negative  one-year  gap position of  $26,926,000  existed as of
March 31, 1999. The ratio of rate-sensitive assets to rate-sensitive liabilities
for the one-year time frame was 84.9%.  The "Interest  Sensitivity  Analysis" in
the following table presents a sensitivity gap analysis of the Company's  assets
and liabilities at March 31, 1999.

<PAGE>

<TABLE>
-------------------------------------------------------------------------------
INTEREST SENSITIVITY ANALYSIS
(Dollars in Thousands) as of March 31, 1999
-------------------------------------------------------------------------------

                      0-90   91-180   181-365       1-5        Over
                      Days    Days      Days        Years     5 years    Total
<S>                <C>      <C>     <C>         <C>        <C>         <C>
Interest-Bearing 
Deposits with Banks $ 6,753  $   ---  $    ---   $    ---   $    ---    $ 6,753
Inv Securities       29,247   11,154    20,680     52,141     19,753    132,975
Loans Held-for-Sale   1,070      ---       ---        ---        ---      1,070
Loans                31,760   13,833    24,628     74,103     62,724    207,048
Other Assets         12,038      ---       ---        ---     14,676     26,714
                    ------- --------  --------    -------   --------   --------
  TOTAL ASSETS      $80,868  $24,987  $ 45,308   $126,244   $ 97,153   $374,560
                    ------- --------  --------    -------   --------   --------
Non-Interest-Bearing
  Deposits (1)      $   ---  $   ---  $    ---    $   ---   $ 40,941   $ 40,941
Int-Bearing 
 Deposits            96,143   21,468    49,403     40,089     62,550    269,653
Securities Sold 
 Under Agreements 
 to Repurchase        6,075      ---       ---        ---        ---      6,075
Long-Term Debt        5,000      ---       ---     15,000        ---     20,000
Other                   ---      ---       ---        ---      7,243      7,243
Capital                 ---      ---       ---        ---     30,648     30,648
                    ------- --------  --------    -------   --------   --------
TOTAL LIABILITIES
  AND CAPITAL      $107,218  $21,468  $ 49,403    $55,089   $141,382   $374,560
                    ------- --------  --------    -------   --------   --------
Net Interest  
  Sensitivity Gap  $(26,350) $ 3,519 $  (4,095)   $71,155   $(44,229)  $    ---

Cumulative Int
  Sensitivity Gap  $(26,350)$(22,831)$ (26,926)   $44,229   $    ---   $    ---

Cumulative Gap
  RSA/RSL             75.42%   82.26%    84.88%    118.97%    100.0%
</TABLE>

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

(1) Historically, non-interest-bearing deposits reflect insignificant changes in
deposit trends and, therefore, the Company classifies these deposits over five
years.

<PAGE>

PART II  -  OTHER INFORMATION

ITEM 5.  Other Information
                  None

ITEM 6.  Exhibits and Reports on Form 8-K
         (a)      Exhibits
                  27.1 Financial Data Schedule

         (b)      Reports on Form 8K
                       No reports on Form 8K were filed for the quarter during
which this report is filed.

<PAGE>

                                   SIGNATURES


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


                           FIRST COLONIAL GROUP, INC.


DATE:    May 15, 1999                       BY: /S/  S. ERIC BEATTIE
       --------------------                     ----------------------
                                                 S. ERIC BEATTIE
                                                 PRESIDENT
                                                (PRINCIPAL EXECUTIVE OFFICER)


DATE:     May 15, 1999                      BY: /S/  REID L. HEEREN
       --------------------                     -------------------
                                                 REID L. HEEREN
                                                 VICE PRESIDENT
                                                (PRINCIPAL FINANCIAL OFFICER)