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 September 30, 2000
                                       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:  1,956,677  SHARES OF COMMON
STOCK, $5 PAR VALUE, OUTSTANDING ON SEPTEMBER 30, 2000.

<PAGE>

                   FIRST COLONIAL GROUP, INC. AND SUBSIDIARIES


                                      INDEX

PART I - FINANCIAL INFORMATION                                       PAGE NO.

     ITEM 1  -  Financial Statements

       Consolidated Balance Sheet                                         2
       Consolidated Statements of Incom                                   3
       Consolidated Statement of Changes in Shareholders' Equity          4
       Consolidated Statements of Cash Flows                              5
       Notes to Consolidated Financial Statements                         6

     ITEM 2  -  Management's Discussion and Analysis of
                Financial Condition and Results of Operations            10

     ITEM 3  -  Quantitative and Qualitative Discussion About
                Market Risk                                              25

PART II  -  OTHER INFORMATION

     ITEM 1  -  Legal Proceedings                                       26
     ITEM 5  -  Other Information                                       26
     ITEM 6  -  Exhibits and Reports on Form 8-K                        26


SIGNATURES                                                              27

<PAGE>

PART I.   FINANCIAL INFORMATION
ITEM 1.   Financial Statements

             FIRST COLONIAL GROUP, INC. AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS
                       (Dollars in Thousands)
                             (Unaudited)
<TABLE>
                                                      Sept. 30      Dec. 31
                                                        2000         1999
                                                      --------      -------
<S>                                                  <C>           <C>
ASSETS
  Cash and Due From Banks                             $ 15,672      $ 14,272
  Federal Funds Sold                                     2,000         2,000
                                                      --------      --------
    Total Cash and Cash Equivalents                     17,672        16,272
  Interest-Bearing Deposits With Banks                   2,591         5,589
  Investment Securities Held-to-Maturity
    (Fair Value: Sept. 30, 2000 $18,673
     Dec. 31, 1999 - $19,123)                           19,049        19,887
  Securities Available-for-Sale                        157,819       132,356
  Mortgage Loans Held-for-Sale                             ---            -
  Total Loans, Net of Unearned Discount                222,595       202,258
  LESS:  Allowance for Possible Loan Losses             (2,430)       (2,437)
                                                      --------       -------
  Net Loans                                            220,165       199,821
  Premises and Equipment, Net                            6,955         7,116
  Accrued Interest Income                                3,140         3,045
    Other Assets                                         7,904         7,803
                                                       -------       -------
    TOTAL ASSETS                                     $ 435,295     $ 391,889
                                                     ---------     ---------
LIABILITIES
  Deposits
    Non-Interest Bearing Deposits                       46,730        41,813
    Interest-Bearing Deposits                          305,895       282,667
                                                     ---------     ---------
      Total Deposits                                   352,625       324,480
  Securities Sold Under Agreements to Repurchase         9,685         1,730
  Long-Term Debt                                        34,000        30,000
  Accrued Interest Payable                               4,746         4,208
  Other Liabilities                                      3,229         3,228
                                                     ---------     ---------
    TOTAL LIABILITIES                                  404,285       363,646

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  -  1,956,677 shares at Sept. 30, 2000
    and 1,848,437 shares at Dec. 31, 1999                9,783         9,242
  Additional Paid in Capital                            16,910        15,674
  Retained Earnings                                      8,398         8,968
  Employee Stock Ownership Plan Debt                    (1,320)       (1,320)
  Accumulated Other Comprehensive Loss                  (2,761)       (4,321)
                                                     ---------      --------
Total Shareholders' Equity                              31,010        28,243
                                                     ---------      --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY           $ 435,295     $ 391,889
                                                     ---------     ---------
</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  Nine Months Ended
                                          Sept 30,  Sept 30,  Sept 30, Sept 30,
                                            2000      1999      2000     1999
                                       ----------  --------  --------  --------
<S>                                     <C>       <C>        <C>       <C>
INTEREST INCOME:
 Interest and Fees on Loans              $ 4,696   $ 4,738    $13,332   $13,566
 Investment Securities Income
  Taxable                                  2,363     1,808      6,988     4,796
  Tax-Exempt                                 358       366      1,088     1,146
 Interest on Deposits with Banks and
  Federal Funds Sold                          54        22         88       140
                                         -------   -------    -------   -------
   Total Interest Income                   7,471     6,934     21,496    19,648
                                         -------   -------    -------   -------
INTEREST EXPENSE:
 Interest on Deposits                      2,986     2,502      8,241     7,294
 Interest on Short-Term Debt                 134       107        448       229
 Interest on Long-Term Debt                  500       345      1,413       904
                                         -------   -------    -------   -------
   Total Interest Expense                  3,620     2,954     10,102     8,427
                                         -------   -------    -------   -------
NET INTEREST INCOME:                       3,851     3,980     11,394    11,221
 Provision for Possible Loan Losses          125       ---        250       250
                                         -------   -------    -------   -------
  Net Interest Income After Provision
   For Possible Loan Losses                3,726     3,980     11,144    10,971
                                         -------   -------    -------   -------
OTHER INCOME:
 Trust Revenue                               307       271        939       874
 Service Charges on Deposit Accounts         519       432      1,461     1,229
 Investment Securities Gains (Losses), Net     9        (4)       167       557
 Gain on the Sale of Mortgage Loans           47        63         46       154
 Other Operating Income                      227       175        614       512
                                         -------   -------    -------   -------
   Total Other Income                      1,109       937      3,227     3,326
                                         -------   -------    -------   -------
OTHER EXPENSES:
 Salaries and Employee Benefits            1,864     1,726      5,477     5,019
 Net Occupancy and Equipment Expense         602       560      1,776     1,610
 Other Operating Expenses                  1,645     1,470      4,626     4,302
                                         -------    -------   -------   -------
   Total Other Expenses                    4,111     3,756     11,879    10,931
                                         -------   -------    -------   -------

Income Before Income Taxes                   724     1,161      2,492     3,366
Provision for Income Taxes                   121       276        474       771
                                         -------   -------    -------   -------

NET INCOME                               $   603   $   885    $ 2,018   $ 2,595
                                         =======   =======    =======   =======
 Per Share Data
   Basic Net Income                      $  0.32   $  0.47    $  1.06   $  1.38
                                         =======   =======    =======   =======
   Diluted Net Income                    $  0.32   $  0.47    $  1.06   $  1.37
                                         =======   =======    =======   =======
   Cash Dividends                        $  0.19   $  0.18    $  0.56   $  0.52
                                         =======   =======    =======   =======
</TABLE>

 See accompanying notes to interim financial statements.

<PAGE>

FIRST COLONIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>

(Dollars in
 Thousands),
(Unaudited)                                             Accumulated
                          Additional                       Other
                   Common   Paid-In   Retained   ESOP   Comprehensive
                   Stock    Capital   Earnings   Debt      Income       Total
For the Nine
Months Ended
September 30,
2000
<S>              <C>       <C>       <C>      <C>        <C>          <C>
Balance at Dec.
31, 1999          $ 9,242   $15,674   $ 8,968  $(1,320)   $ (4,321)    $28,243

Comprehensive
Income
  Net Income                            2,018                            2,018
  Change in
  Unrealized
  Securities
  Gains, Net                                                 1,560       1,560
Total Compre-
hensive Income                                                           3,578
Sale of Common
Stock under
Dividend
Reinvestment Plan
(15,155 shares)        76       158                                        234
Sale of Common
Stock under
Directors
Stock Option
Plan (332 shs)          1                                                    1
Cash Dividends
Paid                                   (1,044)                          (1,044)
Stock Dividend
of 5%
(92,752 shs)          464     1,078    (1,542)                             ---
Cash in Lieu
of Fractional
Shares                                     (2)                              (2)
                   -------   -------   -------  -------    --------     -------
Balance at
Sept. 30, 2000    $ 9,783   $16,910   $ 8,398  $(1,320)   $ (2,761)    $31,010
</TABLE>


<PAGE>

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

                                                     Nine Months Ended
                                               Sept 30, 2000    Sept 30, 1999
OPERATING ACTIVITIES                                    (Unaudited)
<S>                                              <C>               <C>
Net Income                                        $2,018            $2,595
Adjustments to Reconcile Net Income to Net Cash
 Provided by Operating Activities:
  Provision for Possible Loan Losses                 250               250
  Depreciation and Amortization                      832               763
  Amortization of Security (Discounts) and Premiums (114)               25
  Amortization of Deferred Fees on Loans             343               (92)
  Mortgage Loans Originated for Sale              (6,629)          (36,799)
  Mortgage Loan Sales                              6,629            36,922
  Gain on Sale of Mortgage Loans                     (46)             (154)
  Investment Securities Gains, Net                  (160)             (557)
 Changes in Assets and Liabilities:
  Increase in Accrued Interest Income                (95)              (85)
  Decrease in Accrued Interest Payable               538               189
  Net Increase in Other Assets                    (1,340)           (1,367)
  Net Decrease (Increase) in Other Liabilities         2              (227)
                                                 -------           -------
Net Cash Used In Operating Activities              2,228             1,463
                                                 -------           -------
INVESTING ACTIVITIES
Proceeds from Maturities of Securities
  Available-for-Sale                               8,266            11,467
Proceeds from Maturities of Securities
  Held-to-Maturity                                   577             3,622
Proceeds from Sales of Securities
  Available-for-Sale                               4,796            16,857
Purchase of Securities Available-for-Sale        (35,627)          (66,957)
Purchase of Securities Held-to-Maturity                -            (6,211)
Net Decrease (Increase) in Interest Bearing
  Deposits With Banks                              2,998            (3,176)
Net (Decrease) Increase in Loans                 (21,008)           11,029
Purchase of Premises and Equipment, Net             (574)             (840)
Proceeds from Sale of Other Real Estate Owned        455               186
                                                 -------           -------
Net Cash Used In Investing Activities            (40,117)          (34,023)
                                                 -------           -------
FINANCING ACTIVITIES
Net Increase in Interest and Non-Interest
 Bearing Demand Deposits and Savings Accounts      8,594             4,803
Net Increase in Certificates of Deposits          19,551            18,110
Net Increase in Long-Term Debt                     4,000            10,000
Net Increase in ESOP Debt                              -            (1,000)
Net Increase in Repurchase Agreements              7,955             2,855
Proceeds from Issuance of Stock                      235               240
Cash Dividends Paid                               (1,044)             (981)
Cash in Lieu of Fractional Shares                     (2)               (4)
                                                 -------           -------
Net Cash Provided by Financing Activities         39,289            34,023
                                                 -------           -------
Increase in Cash and Cash Equivalents              1,400             1,463
Cash and Cash Equivalents, January 1              16,272            14,259
                                                 -------           -------
Cash and Cash Equivalents, Sept. 30,             $17,672           $15,722
                                                 =======           =======
</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  consolidated  financial  statements,  footnotes and discussion
should  be  read  in  conjunction  with  the  audited   consolidated   financial
statements,  footnotes,  and discussion contained in the Company's Annual Report
for the year ended December 31, 1999.

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 and nine  months  ended  September  30, 2000 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  - DIVIDENDS

On August 18,  2000,  the Company paid its third  quarter  cash  dividend on its
common stock of $.19 per share to shareholders of record on August 4, 2000.

On June 22, 2000, the Company paid a 5% stock dividend to shareholders of record
on June 2, 2000.  Fractional shares were paid in cash based on the closing price
of $14.50 per share on the record date.  Net income per share and average shares
outstanding have been restated to reflect the 5% stock dividend.

NOTE D - EARNINGS PER SHARE

The Company  calculates  earnings  per share as provided  by the  provisions  of
Statement of Financial  Accounting  Standards No. 128, "Earnings Per Share (SFAS
128)". Basic and diluted earnings per share were calculated as follows.

<PAGE>

For the Three Months Ended September 30,
<TABLE>
                                                         Average
                                             Income       Shares      Per Share
                                          (numerator) (denominator)     Amount
2000
<S>                                        <C>         <C>            <C>

Basic Earnings Per Share
  Income Available to Common Shareholders   $  603      1,899,594      $  0.32

Effect of Dilutive Securities
  Stock Options                                             1,664
                                            ------      ---------      -------
Diluted Earnings Per Share
  Income Available to Common Shareholders
  plus Assumed Exercise of Options          $  603      1,901,258      $  0.32
                                            ------      ---------      -------
1999

Basic Earnings Per Share
  Income Available to Common Shareholders   $  855      1,873,644      $  0.47

Effect of Dilutive Securities
  Stock Options                                             4,313
                                            ------      ---------      -------
Diluted Earnings Per Share
  Income Available to Common Shareholders
  plus Assumed Exercise of Options          $  885      1,877,957      $  0.47
                                            ------      ---------      -------
</TABLE>

<PAGE>

For the Nine Months Ended June 30,
<TABLE>
                                                         Average
                                             Income       Shares      Per Share
                                          (numerator) (denominator)     Amount
2000
<S>                                        <C>         <C>            <C>

Basic Earnings Per Share
  Income Available to Common Shareholders   $2,018      1,899,608      $  1.06

Effect of Dilutive Securities
  Stock Options                                             2,413
                                            ------      ---------      -------
Diluted Earnings Per Share
  Income Available to Common Shareholders
  plus Assumed Exercise of Options          $2,018      1,902,021      $  1.06
                                            ------      ---------      -------
1999

Basic Earnings Per Share
  Income Available to Common Shareholders   $2,595      1,874,109      $  1.38

Effect of Dilutive Securities
  Stock Options                                             4,216
                                            ------      ---------      -------
Diluted Earnings Per Share
  Income Available to Common Shareholders
  plus Assumed Exercise of Options          $2,595      1,878,325      $  1.37
                                            ------      ---------      -------
</TABLE>

<PAGE>

NOTE E  -  COMMITMENTS AND CONTINGENCIES

The Company has reserved  $994,000  against asserted claims and claims which may
be asserted against the Bank in connection with certain pre-need funeral trusts.
Most of the claims arise from trusts in which the Company was allegedly directed
by  funeral  directors  to invest in a private  placement  annuity  issued by EA
International  Trust.  Nine funeral  directors whose funds were invested in this
annuity have  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 $4.4 million principal loss plus interest, costs
and attorney fees. 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  carrier and from EA
International Trust.

NOTE F  -  RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1998,  SFAS No. 133,  Accounting for Derivative  Instruments and Hedging
Activities was issued.  Subsequent to this statement,  SFAS No. 137 and 138 were
issued,  which  amended  the  effective  date of SFAS No.  133 to be all  fiscal
quarters  of all  fiscal  years  beginning  after  June 15,  2000.  Based on the
Company's  minimal use of derivatives at the current time,  management  does not
anticipate  the  adoption  of SFAS No.  133 will  have a  significant  impact on
earnings or financial position of the Company. However, the impact from adopting
SFAS No. 133 will depend on the nature and purpose of the derivative instruments
in use by the Company at that time.


<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 and nine month period ended September 30, 2000.

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 as to
litigation  and the  amount  of  reserves,  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,  including without limitation, the
effect of economic conditions and related uncertainties,  the effect of interest
rates on the Company  and the Bank,  Federal  and state  government  regulation,
competition,  and results of litigation.  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, 1999 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, 1999 a copy of which can be obtained
from Reid L. Heeren,  Vice  President,  First Colonial  Group,  Inc., 76 S. Main
Street, Nazareth, PA 18064.

Results of Operations

Basic and diluted  earnings per share for the three months ended  September  30,
2000  were  $0.32 as  compared  to $0.47 for the  corresponding  period in 1999.
Average basic shares  outstanding  during this three month period were 1,899,594
in 2000 and  1,873,644  in 1999.  Basic  earnings  per share for the nine months
ended  September 30, 2000 were $1.06 as compared to $1.38 for the  corresponding
period in 1999.  Average basic shares  outstanding during this nine month period
were 1,899,608 in 2000 and 1,874,109 in 1999. Diluted earnings per share for the
nine  month  period  ended  September  30 were $1.06 and $1.37 in 2000 and 1999,
respectively.  Per share  earnings  and  average  shares  outstanding  have been
restated to reflect the 5% stock dividend paid on June 22, 2000. (see Note D)

<PAGE>

The net income for the three months ended  September  30, 2000 was  $603,000,  a
$282,000  or 31.9%  decrease  compared  to net income of  $885,000  for the same
period in 1999. The earnings decrease was attributable in part to an increase in
total other  expenses of  $355,000.  Contributing  to the higher  expenses  were
increases  in salaries  and  benefits of $138,000  and a loss as the result of a
robbery at one of the Bank's branches (see discussion on "Other Income and Other
Expenses").  Also affecting  earnings for the quarter was a decrease of $129,000
in net interest income (see discussion on "Net Interest Income"), an increase of
$125,000 in the provision for possible loan losses and a $16,000 decrease in the
gains on the sale of  mortgage  loans.  These were  offset in part by a $175,000
increase in other income  exclusive  of gains on the sale of mortgage  loans and
gains on the sale of  securities  available-for-sale,  a decrease of $155,000 in
Federal  income  taxes  and an  $13,000  increase  in the  gains  on the sale of
securities available-for-sale.

Net income for the nine months ended September 30, 2000 was $2,018,000  compared
to $2,595,000 for the same period in 1999, a decrease of $577,000 or 22.2%.  The
earnings decline was primarily attributable to increases in total other expenses
of $948,000. The higher expenses were due in part to the increases in salary and
benefit  expenses  of  $458,000  and the  one-time  write-down  of a  commercial
property  held in  Other  Real  Estate  Owned in the  amount  of  $184,000  (see
discussion on "Other Income and Other  Expenses").  The other factors  affecting
the  reduction  in income  were  lower  gains on the sale of  available-for-sale
securities  of $390,000,  and a decrease of $108,000 in the gains on the sale of
mortgage  loans.  These  were  partially  offset by a $173,000  increase  in net
interest income,  a $399,000  increase in other income exclusive of gains on the
sale of mortgage  loans and gains on the sale of securities  available-for-sale,
and a decrease of $297,000 in Federal income taxes.

Net Interest Income

Net interest  income amounted to $3,851,000 for the three months ended September
30, 2000 as compared to  $3,980,000  for the three  months ended  September  30,
1999, a decrease of $129,000 or 3.2%.  This decrease was primarily the result of
increases in interest paid on deposits exceeding the increase on interest earned
on loans and  investments.  For the nine months ended  September  30, 2000,  net
interest income was  $11,394,000  compared to $11,221,000 for the same period in
1999, an increase of $173,000 or 1.5%.

The fully  taxable-equivalent  net interest income was $11,997,000 for the first
nine months of 2000, compared to $11,842,000 for the same period in 1999, a 1.3%
or $155,000 increase.  This increase in  taxable-equivalent  net interest income
was  primarily  due to a  $52,000  increase  related  to volume  and a  $103,000
increase related to interest rates.

<PAGE>

The "Rate/Volume  Analysis" table segregates,  in detail, the major factors that
contributed  to the changes in net  interest  income,  for the nine months ended
September  30,  2000 as  compared  to the  same  period  in 1999,  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.  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.

The  following  table sets forth a  "Rate/Volume  Analysis"  for the nine months
ended  September 30, 2000.  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>
                                                      Nine Months Ended
                                                     September 30, 2000
                                                       Over / (Under)
                                                     September 30, 1999
                                                       CHANGE DUE TO:

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

(Fully Taxable Equivalent)
INTEREST INCOME
Interest-Bearing Balances With Banks         $   (45)   $    13    $   (58)
Federal Funds Sold                                (7)         6        (13)
Investment Securities                          2,104        529      1,575
Loans                                           (222)        85       (307)
                                             -------    -------    -------
Total Interest Income                          1,830        633      1,197
                                             -------    -------    -------

INTEREST EXPENSE
Demand Deposits, Savings & Clubs             $   (43)   $   (29)   $   (14)
Time Deposits                                    990        327        663
Federal Funds Purchased and Securities
   Sold Under Agreements to Repurchase            68         64          4
Short-Term Debt                                  151         46        105
Long-Term Debt                                   509        122        387
                                             -------    -------    -------
Total Interest Expense                       $ 1,675    $   530    $ 1,145
                                             -------    -------    -------

Net Increase in Interest Income              $   155    $   103    $    52
</TABLE>

<PAGE>

Total taxable-equivalent interest income for the nine months ended September 30,
2000 grew $1,830,000  compared to the same period in 1999,  primarily the result
of the higher volumes in the investment security earning asset category.  Income
from  investment  securities  for the  nine  months  ended  September  30,  2000
increased  $2,104,000 or 32.2% over the same period in 1999.  This was comprised
of a $1,575,000 increase due to volume and a $529,000 increase due to rates as a
result of rising interest rates.  Average  year-to-date earning assets increased
to $376,789,000 at September 30, 2000 from $351,179,000 at September 30, 1999, a
7.3% increase.

Total  interest  expense grew  $1,675,000  during the first nine months of 2000,
over the same period in 1999.  This growth was  principally the result of higher
volumes,  primarily  due to an increase in time  deposits  and  long-term  debt.
Interest expense attributed to time deposits increased $990,000 during the first
nine months of 2000, over the first nine months of 1999. This was comprised of a
$663,000  increase  due to volume  and a  $327,000  increase  due to rates.  The
increase in time deposits was used to finance the earning asset growth.

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>

Nine Months Ended, June 30,                 2000                   1999
                                             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  $  1,650  $   72   5.82% $ 3,250  $ 117  4.80%
Federal Funds Sold                    299      16   7.13      659     23  4.65
Investment Securities
      Taxable                     136,112   6,988   6.85  101,426  4,796  6.30
      Non-Taxable (1)              29,733   1,649   7.40   32,206  1,737  7.19
Loans (1) (2)                     211,468  13,374   8.43  216,353 13,596  8.38
Reserve for Loan Losses            (2,473)     --     --   (2,715)    --    --
                                ---------   -----        --------  -----
Net Loans                         208,995  13,374   8.53  213,638 13,596  8.49
                                ---------   -----        --------  -----
  Total Interest-Earning Assets   376,789  22,099   7.82  351,179 20,269  7.70
Non-Interest Earning Assets        31,810      --     --   28,392     --    --
                                ---------   -----        --------  -----
  TOTAL ASSETS, INT INCOME      $ 408,599  22,099   7.21 $379,571 20,269  7.12
                                ---------   -----        --------  -----

LIABILITIES
INTEREST-BEARING LIABILITIES
Interest-Bearing Deposits
  Demand Deposits               $  52,637     397   1.01 $ 52,092    412  1.05
  Money Market Deposits            12,938     265   2.73   13,894    287  2.75
  Savings & Club Deposits          62,927   1,042   2.21   63,519  1,048  2.20
  CD's over $100,000                4,788     171   4.76    4,937    149  4.02
  All Other Time Deposits         154,304   6,366   5.50  137,175  5,398  5.25
                                ---------   -----        --------  -----
   Total Int-Bearing Deposits     287,594   8,241   3.82  271,617  7,294  3.58
Federal Funds Purchased
 and Securities Sold Under
 Agreements to Repurchase           6,144     208   4.51    5,973    140  3.13
Short-Term Debt                     5,025     240   6.37    2,301     89  5.16
Long-Term Debt                     30,496   1,413   6.18   21,355    904  5.64
                                ---------   -----        --------  -----
  Total Int-Bearing Liabilities   329,259  10,102   4.09  301,246  8,427  3.73

NON-INTEREST-BEARING LIABILITIES
Non-Interest-Bearing Deposits      43,015      --     --   41,132     --    --
Other Liabilities                   7,614      --     --    6,834     --    --
                                ---------   -----        --------  -----
   TOTAL LIABILITIES              379,888  10,102   3.55  349,212  8,427  3.22
   SHAREHOLDERS' EQUITY            28,711      --     --   30,359     --    --
                                ---------   -----        --------  -----
   TOTAL LIABILITIES AND EQUITY $ 408,599  10,102   3.30 $379,571  8,427  2.96

NET INTEREST INCOME                       $11,997                $11,842
                                            -----                  -----

    Net Interest Spread (3)                         3.73                  3.97
    Effect of Interest-Free Sources
      Used to Fund Earnings Assets                  0.52                  0.52
    Net Interest Margin (4)                         4.25%                 4.50%
                                                    ----                  ----
</TABLE>

(1)  The indicated interest income and average yields are presented on a taxable
     equivalent basis. The tax equivalent adjustment included above are $603,000
     and $621,000 for the six months ended  September 30, 2000 and September 30,
     1999, respectively.  The effective tax rate used for the taxable equivalent
     adjustments was 34%.

(2)  Loan fees of $(201,000) and $253,000 for the six months ended September 30,
     2000 and September 30, 1999, respectively, are included in interest income.
     Average  loan  balances  include   non-accruing  loans  and  average  loans
     held-for-sale  of  $1,269,000  and  $3,007,000  for the nine  months  ended
     September 30, 2000 and September 30, 1999, respectively.

(3)  Net  interest  spread  is  the  arithmetic   difference  between  yield  on
     interest-earning assets and the rate paid on interest-bearing liabilitites.

(4)  Net interest marginis computed by dividing net interest income by averaging
     interest-earning assets.

<PAGE>

The net interest  margin of 4.25% for the nine month period ended  September 30,
2000,  decreased from the 4.50% net interest margin for the first nine months of
1999.  The yield on  interest  earning  assets  was 7.82%  during the first nine
months of 2000 as compared to 7.70% in 1999.  The average  interest rate paid on
interest  bearing  deposits  and other  borrowings  was 4.09% for the first nine
months of 2000 as compared to 3.73% in 1999.

Other Income and Other Expenses

Other income for the three months ended  September 30, 2000,  including  service
charges,  trust  revenues,  gains  on the  sale  of  mortgage  loans  and  other
miscellaneous   income,  but  exclusive  of  securities  gains  or  losses,  was
$1,100,000  as  compared to  $941,000  for the same period in 1999.  This was an
increase of  $159,000  or 16.9% This  increase  was the result of  increases  in
service charges,  miscellaneous  fees, and trust revenues,  reduced in part by a
decline in gains from the sale of  mortgage  loans.  In the three  month  period
ended  September 30, 2000,  service  charges were  $519,000,  a $87,000 or 20.1%
increase over the 1999 amount of $432,000.  The increase in service  charges was
due to growth in checking accounts.  The revenues from the Investment Management
and Trust Division operations increased as a result of growth in Trust accounts.
The Trust  revenues were $307,000 for the three months ended  September 30, 2000
as compared to $271,000  for the three  months  ended  September  30,  1999,  an
increase of $36,000 or 13.3%.  Other  miscellaneous  income for the three months
ended September 30, 2000 was $227,000,  an increase of $52,000 or 29.7% compared
to $175,000  for the same period in 1999.  The higher  miscellaneous  income was
primarily  the result of  increases  in mortgage  servicing  fees and other fees
related to loan activities.  There were $47,000 in gains on the sale of mortgage
loans for the three month period ended September 30, 2000 as compared to $63,000
for the same period in 1999.

Other income for the nine months ended  September  30, 2000,  including  service
charges,  trust  revenues,  gains  on the  sale  of  mortgage  loans  and  other
miscellaneous   income,  but  exclusive  of  securities  gains  or  losses,  was
$3,060,000  as compared to $2,769,000  for the same period in 1999.  This was an
increase of $291,000 or 10.5%.  In the nine month  period  ended  September  30,
2000,  service  charges were  $1,461,000,  a $232,000 or 18.9% increase over the
1999 amount of $1,229,000.  The increase in service charge income was the result
of a  higher  number  of  checking  account  customers.  The  revenues  from the
Investment  Management and Trust Division  operations were $939,000 for the nine
months  ended  September  30, 2000 as  compared to $874,000  for the nine months
ended  September 30, 1999, an increase of $65,000 or 7.4%. This increase was due
to growth in new Trust accounts and estate fees. Other miscellaneous  income for
the nine months  ended  September  30, 2000 was $614,000 as compared to $512,000
for the same period in 1999,  a increase  of $102,000 or 19.9%.  During the nine
months ended  September 30, 2000,  sales of mortgage loans resulted in a gain of
$46,000 as  compared  to  $154,000  for the same  period in 1999,  a decrease of
$108,000  or  70.1%.  The  gain  was  the  result of  the sale of $6,629,000 and

<PAGE>

$36,922,000  of  residential  real estate loans in the first nine months of 2000
and 1999, respectively,  a decline of 82%. The decline in the volume of mortgage
loan sales was due to rising interest rates.

Total  other  expenses  for the three  month  period  ended  September  30, 2000
increased by $355,000 or 9.4% to  $4,111,000  over total other  expenses for the
same period in 1999 of  $3,756,000.  Included in this increase was a $138,000 or
8% increase in salary and benefit  expenses which were $1,864,000 as compared to
$1,726,000  in 1999.  These  increases  were  primarily  due to  general  salary
increases of  approximately  4% and the  additional  staff  necessitated  by the
opening of four new branches located in Stroudsburg, Mount Pocono, Whitehall and
Trexlertown. Occupancy and equipment expenses were $602,000 for the three months
ended  September 30, 2000 and $560,000 for the three months ended  September 30,
1999,  an increase of $42,000 or 7.5%.  The increase in occupancy  expenses were
related to the new branches. Other operating expenses for the three month period
ended September 30, 2000 were $1,645,000,  an increase of $175,000 or 11.9% over
the $1,470,000 in other expenses for the same period in 1998.  This increase was
primarily  the result of expenses  related to the  purchase  of the  branches in
Whitehall  and  Trexlertown  and a loss due to a  robbery  at one of the  Bank's
branches. Management expects the Bank will be reimbursed for part of the robbery
loss by its insurance carrier.

Total other  expenses for the nine months ended  September 30, 2000 increased by
$948,000 or 8.7%, to $11,879,000  from  $10,931,000 for the same period in 1999.
Salaries  and  employee  benefits  were  $5,477,000  for the nine  months  ended
September 30, 2000 as compared to $5,019,000 for the nine months ended September
30, 1999  representing  an increase of  $458,000 or 9.1%.  These  increases  are
primarily due to general  salary  increases of  approximately  4% and additional
staff  added  for  the new  branches.  Occupancy  and  equipment  expenses  were
$1,776,000  for the nine months ended  September 30, 2000 and $1,610,000 for the
nine months ended  September  30, 1999,  an increase of $166,000 or 10.3%.  This
increase is related to the new  branches,  rent  increases  and other  equipment
expenses.  Other operating expenses for the nine months ended September 30, 2000
were  $4,626,000 in relation to $4,302,000  for the nine months ended  September
30,  1999,  an increase of $324,000 or 7.5%.  Included in the  increase of other
operating expenses was a $184,000  write-down of a commercial loan property held
in Other Real Estate Owned.

FINANCIAL CONDITION
Assets and Liabilities

Total assets at September 30, 2000 were  $435,295,000,  representing an increase
of $43,406,000 or 11.1% over total assets of  $391,889,000 at December 31, 1999.
Deposits increased by $28,145,000 or 8.7% from $324,480,000 on December 31, 1999
to  $352,625,000  on September  30, 2000.  Contributing  to this  increase  were
increases  in  certificates  of deposit  of  $19,551,000,  non-interest  bearing
checking   deposits  of  $4,917,000,   interest  bearing  checking  deposits  of
$3,827,000, partially offset by a  decline in savings and money  market deposits

<PAGE>

of $150,000.  Included in the  increase in deposits  are the  deposits  acquired
through the purchase of two bank branches from another bank totaling $9,141,000.
These  branches  are  located  in  Whitehall  and  Trexlertown,  Lehigh  County,
Pennsylvania.  The  acquisition  of these branches  occurred in September  2000.
Loans  outstanding  at  September  30,  2000 were  $222,595,000  as  compared to
$202,258,000 at December 31, 1999. This was an increase of $20,337,000 or 10.1%.
The increase in loans was primarily the result of an increase of  $12,259,000 or
14% in consumer loans. This includes  $4,404,000 of consumer loans acquired with
the purchase of the Whitehall and  Trexlertown  branches in September 2000. Also
contributing to the increase in loans during the first nine months of 2000 was a
$8,307,000 or 14.4% increase in residential  real estate loans.  These increases
were offset in part by a decrease in  commercial  loans of $229,000.  During the
first nine months of 2000,  $6,629,000  of  residential  real estate  loans were
sold.  The  Bank  continues  to  service  all of  these  loans.  There  were  no
residential real estate loans identified as held-for-sale at September 30, 2000.
The loan to deposit  ratio was 63.1% at September 30, 2000 and 62.3% at December
31, 1999.

The Company had  long-term  debt totaling  $34,000,000  at September 30, 2000 as
compared to  $30,000,000  at December  31,  1999.  Of the loans  outstanding  at
September 30, 2000, $5,000,000 matures in December 2001,  $10,000,000 matures in
August  2004,  $7,000,000  matures in October  2008 and  $12,000,000  matures in
August 2010. The interest rates  associated  with these loans are 6.86% variable
(at LIBOR plus 3 basis  points),  4.86% fixed to October  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,  6.06% fixed to August 2001 at which time the rate may be
converted to 3 month LIBOR plus 15 basis points, if LIBOR is 7.5% or higher, and
6.23%  fixed to August 2001 at which time the rate may be  converted  to 3 month
LIBOR plus 15 basis points if LIBOR is 8% or higher, respectively. The loans are
secured by the Bank's  residential real estate loans and investment  securities.
These  funds  were  borrowed  to  improve  liquidity  and  to  fund  loans.  The
$12,000,000  loan  maturing in August 2010 was  originated  in August 2000.  The
proceeds  from this new loan were used to pay off a previous  loan in the amount
of $8,000,000 that matured in August 2000 and to provide funds for future loans.

The Company's  Employee Stock  Ownership  Plan (ESOP) has two loans  outstanding
totaling  $1,320,000 at September 30 ,2000 and December 31, 1999. The first loan
with an  outstanding  principal  balance of $370,000 is due in 2005.  The second
loan with an outstanding balance of $950,000 is due in 2018. The interest is due
quarterly on these loans.  Principal payments are made annually in October.  The
interest  rate on these loans is at the Bank's prime rate (9.5% at September 30,
2000 and 8.5% December 31, 1999).

At  September  30,  2000 and  December  31,  1999,  the  Bank had no  short-term
borrowings  from the  Federal  Home  Loan Bank of  Pittsburgh  against a line of
credit of $25,000,000.

<PAGE>

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.

For the first nine months of 2000 and 1999,  the  provision  for loan losses was
$250,000.  Net charge offs were $257,000 for the nine months ended September 30,
2000 compared with  $445,000 for the nine months ended  September 30, 1999.  The
ratio of the  allowance for loan losses to total loans at September 30, 2000 was
1.09%  compared to 1.20% at December 31, 1999 and 1.24% at  September  30, 1999.
This was primarily the result of an increase in total loans to  $222,335,000  at
September  30, 2000 from  $202,258,000  at December 31, 1999.  The allowance for
possible  loan losses at September  30, 2000 totaled  $2,430,000,  a decrease of
$7,000 or 0.3% over the December 31, 1999 amount of $2,437,000 and a decrease of
$66,000 or 2.6% over the September 30, 1999 balance of $2,496,000.

At September 30, 2000,  $69,000 of the  allowance for possible  loans losses was
allocated to impaired loans.

Transactions in the allowance for loan lossses were as follows:
<TABLE>
                                                      2000            1999
                                                   ----------      ----------
<S>                                               <C>             <C>
Balance, January 1,                                $2,437,000      $2,691,000
Provision charged to Operating Expenses               250,000         250,000
Loans Charged Off                                    (388,000)       (513,000)
Recoveries                                            131,000          68,000
                                                   ----------      ----------
Balance, September 30,                             $2,430,000      $2,496,000
</TABLE>


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

          At September 30, 2000
     Commercial                       $   798,000
     Residential Real Estate              237,000
     Consumer                             781,000
     Unallocated                          614,000
                                      -----------
        Total                         $ 2,430,000

<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.

Total  non-performing loans (non-accruing loans and loans past due over 90 days)
amounted to  $2,251,000  at  September  30, 2000 as  compared to  $2,802,000  at
December   31,1999  and   $2,489,000  at  September  30,  1999.   The  ratio  of
non-performing  loans to total loans was 1.01% and 1.24% at  September  30, 2000
and 1999, respectively.  The decrease in this ratio is primarily the result of a
decrease in total non-performing loans due to collection efforts.

Non-accruing  loans at  September  30,  2000 of  $1,134,000  increased  from the
September 30, 1999 level of $1,111,000.  This $23,000 increase was primarily the
result of the addition of some  commercial  loans to non-accrual  status.  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 September 30, 2000, loans past due 90 days or more and still
accruing interest were $1,117,000  compared to $1,378,000 at September 30, 1999.
The  $261,000  decrease  in loans past due 90 days from  September  30,  1999 to
September  30, 2000 was the result of  decreases  in  commercial,  mortgage  and
consumer loans past due 90 days or more.

<PAGE>

Non-Performing Loans
<TABLE>
                                            Sept 30,    Sept 30,    December 31,
                                              2000        1999          1999
<S>                                      <C>          <C>           <C>

Non-accrual loans on a cash basis         $1,134,000   $1,111,000    $1,311,000
Non-accrual loans as a percentage
  of total loans                               0.51%        0.55%         0.65%
Accruing loans past due 90 days
  or more                                 $1,117,000   $1,378,000    $1,491,000
Accruing loans past due 90 days
  or more as a percentage of total
  loans                                        0.50%        0.69%         0.74%
Allowance for loan losses to
  nonperforming loans                        107.95%      100.32%        86.97%
Nonperforming loans to total loans             1.01%        1.24%         1.39%
Allowance for loan losses to total loans       1.09%        1.24%         1.20%

</TABLE>

There are no significant loans classified for regulatory  purposes that have not
been included in the above table of non-performing loans.

Other Real Estate Owned

Other Real Estate Owned at  September  30, 2000 of $102,000  decreased  from the
September 30, 1999 level of $678,000.  This $576,000  decrease was primarily the
sale of some real estate properties and the result of a $184,000  writedown of a
commercial property.

Investment Securities

The Company had $157,819,000 in  available-for-sale  securities at September 30,
2000  with  a  net  unrealized   loss  of  $2,761,000.   At  December  31,  1999
available-for-sale  securities  amounted to  $132,356,000  with a net unrealized
loss of $4,321,000.

During the nine month period ended September 30, 2000,  $4,629,000 of securities
available-for-sale  were  sold  for  a net  gain  of  $167,000  as  compared  to
$16,300,000  of  securities  available-for-sale  were  sold  for a net  gain  of
$557,000 for the same time period in 1999.

Held-to-maturity  securities  totaling  $19,049,000  at  September  30, 2000 are
carried at cost. At December 31, 1999, the  held-to-maturity  securities totaled
$19,887,000. The Company has the intent and ability to hold the held-to-maturity
securities until maturity.  The Company, at September 30, 2000, did not hold any
securities identified as derivatives.

<PAGE>

Capital Resources and Liquidity

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 4% 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 September 30, 2000, 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 Setpember 30, 2000       Amount   Ratio     Amount   Ratio   Amount  Ratio
<S>                        <C>       <C>      <C>       <C>    <C>      <C>
Total Capital
(To Risk-Weighted Assets)
  Company, (Consolidated)   $35,783   15.71%   $18,222   8.00%      ---    ---
  Bank                      $31,427   13.87%   $18,120   8.00%  $22,651  10.00%

Tier 1 Capital
(To Risk-Weighted Assets)
  Company, (Consolidated)   $33,353   14.64%   $ 9,111   4.00%      ---    ---
  Bank                      $28,997   12.80%   $ 9,060   4.00%  $13,590   6.00%

Tier 1 Capital
(To Average Assets,
 Leverage)
  Company, (Consolidated)   $33,353   7.93%    $16,820   4.00%      ---    ---
  Bank                      $28,997   6.97%    $16,648   4.00%  $20,810   5.00%
</TABLE>

<TABLE>
                                                                 To Be Well
                                                                 Capitalized
                                                 Required        Under Prompt
                                                For Capital       Corrective
                                Actual           Adequacy           Action
(Dollars in Thousands)
 At December 31, 1999        Amount   Ratio     Amount   Ratio   Amount  Ratio
<S>                        <C>      <C>       <C>       <C>    <C>      <C>
Total Capital
(To Risk-Weighted Assets)
  Company, (Consolidated)   $34,329  16.67%    $16,477   8.00%      ---    ---
  Bank                      $30,831  15.00%    $16,446   8.00%  $20,557  10.00%

Tier 1 Capital
(To Risk-Weighted Assets)
  Company, (Consolidated)   $31,892  15.48%    $ 8,239   4.00%      ---    ---
  Bank                      $28,194  13.71%    $ 8,223   4.00%  $12,334   6.00%

Tier 1 Capital
(To Average Assets,
 Leverage)
  Company, (Consolidated)   $31,892   8.11%    $15,726   4.00%      ---    ---
    Bank                    $28,194   7.20%    $15,655   4.00%  $19,568   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.

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 September  30, 2000,  cash,  due from banks,  Federal funds sold and interest
bearing deposits with banks totaled $20,263,000,  and securities maturing within
one year totaled $3,498,000. At December 31, 1999, cash, due from banks, Federal
funds sold and interest bearing deposits with banks,  totaled  $21,861,000,  and
securities  maturing within one year were  $2,249,000.  Securities sold under an
agreement to repurchase  totaled $9,685,000 at September 30, 2000 and $1,730,000
at December  31,  1999.  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  $2,424,000 at September 30, 2000 and
$5,548,000 at December 31, 1999.  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. At September 30, 2000 and December 31, 1999 there were Federal funds
sold totaling $2,000,000.

The Federal Home Loan Bank of Pittsburgh provides the Bank with a line of credit
in the  amount  of  $25,000,000  at  September  30,  2000,  subject  to  certain
collateral  requirements.  The Bank  had no  short-term  (overnight)  borrowings
against  this line at September  30, 2000 or at December 31, 1999.  The Bank had
long-term  borrowings  from the  Federal  Home Loan Bank at  September  30, 2000
totaling $34,000,000.

Cash flows for the nine  months  ended  September  30,  2000  consisted  of cash
provided by operating  activities of  $2,228,000  and cash provided by financing
activities of $39,289,000,  offset in part by cash used in investing  activities
of  $40,117,000  resulting  in an  increase  in cash  and  cash  equivalents  of
$1,400,000.

Cash provided by operating  activities  was the result of mortgage loan sales of
$6,629,000, net operating income of $2,018,000, depreciation and amortization of
$832,000, an increase in accrued interest income of $538,000 and a provision for
possible loan losses of $250,000, partially reduced by mortgage loans originated

<PAGE>

for sale of  $6,629,000,  an  increase  in other  assets of  $1,340,000,  and an
increase  in accrued  interest  income of  $95,000.  Cash was used in  investing
activities for the purchase of securities  available-for-sale of $35,627,000,  a
net  increase  in  loans of  $21,008,000,  and the  purchase  of  furniture  and
equipment  of  $574,000,   partially  offset  by  proceeds  from  maturities  of
securities  available-for-sale  and held-to-maturity of $8,266,000 and $577,000,
respectively, proceeds from sales of securities available-for-sale of $4,796,000
and a net decrease in interest bearing  deposits with banks of $2,998,000.  Cash
provided  by  financing  activities   consisted   principally  of  increases  in
certificates of deposit of $19,551,000, interest and non-interest bearing demand
deposits  and  savings  accounts  of  $8,594,000,   an  increase  in  repurchase
agreements of  $7,955,000,  an increase in long-term  debt with the Federal Home
Loan Bank of  $4,000,000,  and the  proceeds  from the sale of  common  stock of
$235,000, offset in part by the payment of cash dividends of $1,044,000 and cash
paid in lieu of fractional shares of $2,000.

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  September  30,  2000 was  $31,010,000  as
compared to $28,243,000 at December 31, 1999, for an increase of $2,767,000.

On August 18, 2000 the Company paid its 2000 third  quarter cash dividend on its
common stock of $0.19 per share to  shareholders of record on August 4, 2000. On
June 22, 2000, the Company paid a 5% stock dividend to shareholders of record on
June 2, 2000.  Fractional shares were paid in cash based on the closing price of
$14.50 per share on the record date.

The Company  maintains a Dividend  Reinvestment and Stock Purchase Plan.  During
the first nine months of 2000, 15,624 shares of common stock were purchased from
authorized  and  unissued  shares at an  average  price of $15.04  per share for
proceeds of approximately $234,000.

The Company has a Non-Employee  Director Stock Option Plan that provides for the
awarding of stock options to the Company's  non-employee  directors.  During the
first nine months of 2000  options to  purchase  2,550  shares of the  Company's
common  stock at an average  price of $16.43  per share were  granted to certain
non-employee  directors.  A non-employee  director  exercised  options for 1,340
shares of the  Company's  common stock at a price of $12.69 per share during the
first nine months of 2000.

The Company  also has a Stock  Option  Plan,  which  provide for the granting of
options to acquire the Company's common stock for officers and key employees. No
options were issued or exercised under this plan during the first nine months of
2000.

<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.  Because  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.

There have been no material changes in the Bank's  assessment of its sensitivity
to market risk since its  presentation in the 1999 annual report to shareholders
and its 1999 Form 10-K filed with the Securities and Exchange Commission.

<PAGE>

PART II  -  OTHER INFORMATION

ITEM 1.     Legal Proceedings

The Company has reserved  $994,000  against asserted claims and claims which may
be asserted against the Bank in connection with certain pre-need funeral trusts.
Most of the claim  arises  from  trusts in which the  Company  was  directed  by
funeral  directors  to  invest  in a  private  placement  annuity  issued  by EA
International  Trust.  Nine funeral  directors whose funds were invested in this
annuity have  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 $4.4 million principal loss plus interest, costs
and attorney fees. 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  carrier and from EA
International Trust.

ITEM 5.     Other Information

In September,  2000,  the Bank  completed  its  acquisition  of two  supermarket
branches from  Commonwealth Bank of Valley Forge,  Pennsylvania.  These branches
are located in Giant  Supermarkets in Whitehall and Trexlertown,  Lehigh County,
Pennsylvania.

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:       November 13, 2000                 BY:  /S/  S. ERIC BEATTIE
       ----------------------------                --------------------
                                              S. ERIC BEATTIE
                                              PRESIDENT
                                              (PRINCIPAL EXECUTIVE OFFICER)


DATE:       November 13, 2000                 BY:  /S/  REID L. HEEREN
       ---------------------------                 -------------------
                                              REID L. HEEREN
                                              VICE PRESIDENT