FORM 10-QSB
                       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, 1996

                                       or

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

           For the transition period from ____________ to ____________

                          Commission File 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 SO. 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:  __________  SHARES OF COMMON
STOCK, $5 PAR VALUE, OUTSTANDING ON SEPTEMBER 30, 1996.

<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 Cash Flows                  4
          Notes to Consolidated Financial Statements            5

  ITEM 2  -  Management's Discussion and Analysis of
             Financial Condition and Results of
             Operations                                         8

PART II  -  OTHER INFORMATION

     ITEM 5 -  Other Information                               17
     ITEM 6 -  Exhibits and Reports on Form 8-K                17


SIGNATURES                                                     18

<PAGE>

                  FIRST COLONIAL GROUP, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET

                             (Dollars in Thousands)
                                  (Unaudited)
<TABLE>
                                                        Sept. 30     Dec. 31 
                                                          1996         1995
                                                       ---------    ---------
<S>                                                  <C>          <C>    
ASSETS
  Cash and Due From Banks                              $  14,062    $  11,949
  Federal Funds Sold                                          --        3,600
                                                       ---------    ---------
    Total Cash and Cash Equivalents                       14,062       15,549
  Interest-Bearing Deposits With Banks                       210          835
  Investment Securities                                   21,154       20,054
    (Market Value:  Sept. 30, 1996 - $21,125;
     Dec. 31, 1995 - $20,188)
  Securities Available-for-Sale at Fair Value             54,771       59,049
  Mortgage Loans Held-for-Sale                             1,450        1,006
  Total Loans, Net of Unearned Discount                  217,203      193,130
    Less:  Allowance for Possible Loan Losses             (2,494)      (2,443)
                                                       ---------    ---------
      Net Loans                                          214,709      190,687
  Premises and Equipment                                   6,873        6,763
  Other Real Estate                                          498          364
  Accrued Interest Income                                  2,265        1,878
  Other Assets                                             3,081        2,329
                                                       ---------    ---------
      TOTAL ASSETS                                     $ 319,073    $ 298,514
                                                       =========     ========

LIABILITIES
  Deposits
    Non-Interest Bearing Deposits                      $  31,582    $  26,690
    Interest-Bearing Deposits                            228,827      227,412
                                                       ---------    ---------
      Total Deposits                                     260,409      254,102
  Securities Sold Under Agreements to Repurchase           3,928        6,096
  Short-Term Borrowings                                   15,548        7,000
  Long-Term Debt                                           8,538          643
  Accrued Interest Payable                                 2,989        3,425
  Other Liabilities                                        1,999        2,481
                                                       ---------    ---------
      TOTAL LIABILITIES                                  293,411      273,747
                                                       ---------    ---------

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     -  1,555,167 shares at Sept. 30, 1996
    and 1,471,000 shares at Dec. 31, 1995                  7,776        7,355
  Additional Paid in Capital                               7,193        7,056
  Retained Earnings                                       11,364       10,479
  Employee Stock Ownership Plan Debt                        (538)        (643)
  Net Unrealized Gain (Loss) on Securities
    Available-for-Sale                                      (133)         520
                                                       ---------    ---------
Total Shareholders' Equity                                25,662       24,767
                                                       ---------    ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY             $ 319,073    $ 298,514
                                                       =========     ========
</TABLE>


See accompanying notes to interim consolidated financial statements.

<PAGE>

                  FIRST COLONIAL GROUP, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENT OF INCOME

               (Dollars in Thousands, except for Per Share Data)
                                  (Unaudited)
<TABLE>
                                  Three Months Ended      Nine Months Ended
                                 Sept. 30,   Sept. 30,   Sept. 30,  Sept. 30, 
                                   1996        1995        1996       1995
                                ---------   ---------   ---------  ---------
INTEREST INCOME:
<S>                             <C>         <C>        <C>        <C>  
Interest and Fees on Loans        $ 4,634     $ 4,316    $ 13,265   $ 12,577
 Investment Securities Income
  Taxable                           1,092       1,174       3,379      3,324
  Tax-Exempt                          171          95         434        290
 Interest on Other Investments
  Deposits With Banks                   7          34          55        101
  Federal Funds Sold                   --           1           2          2
                                ---------   ---------   ---------  ---------
                                    5,904       5,620      17,135     16,294
                                ---------   ---------   ---------  ---------
INTEREST EXPENSE:
 Interest on Deposits               2,068       2,182       6,453      6,114
 Interest on Repurchase Agreements     37          93         113        284
 Interest on Short-Term Borrowing     251         114         407        317
 Interest on Long-Term Debt            70          31         127         95
                                ---------   ---------   ---------  ---------
  Total Interest Expense            2,426       2,420       7,100      6,810
                                ---------   ---------   ---------  ---------
NET INTEREST INCOME:                3,478       3,200      10,035      9,484
 Provision for Possible Loan Losses   105         100         515      1,698
                                ---------   ---------   ---------  ---------
  Net Interest Income After Provision
   For Possible Loan Losses         3,373       3,100       9,520      7,786
                                ---------   ---------   ---------  ---------
OTHER INCOME:
 Trust Income                         177         161         525        481
 Service Charges on Deposit Accounts  276         260         787        776
 Investment Securities Gains, Net      36          29         308         15
 Gain (Loss) on the Sale of
  Mortgage Loans                      (18)         (4)        (13)         9
 Other Operating Income               131         161         431        414
                                ---------   ---------   ---------  ---------
  Total Other Income                  602         607       2,038      1,695
                                ---------   ---------   ---------  ---------
OTHER EXPENSES:
 Salaries and Employee Benefits     1,385       1,273       4,186      3,867
 Net Occupancy and Equipment Expense  582         476       1,658      1,391
 Other Operating Expenses           1,028       1,009       2,907      3,215
                                ---------   ---------   ---------  ---------
  Total Other Expenses              2,995       2,758       8,751      8,473
                                ---------   ---------   ---------  ---------
Income  Before Income Taxes           980         949       2,807      1,008
Provision for Income Taxes            278         290         800        241
                                ---------   ---------   ---------  ---------
NET INCOME                         $  702      $  659      $2,007     $  767
                                =========   =========   =========  =========
  Net Income Per Share             $ 0.46      $ 0.44      $ 1.32     $ 0.51
                                =========   =========   =========  =========
  Average Shares Outstanding    1,527,717   1,508,401   1,522,862  1,502,870
</TABLE>


See accompanying notes to interim consolidated financial statements.

<PAGE>

                           FIRST COLONIAL GROUP, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS

                             (Dollars in Thousands)
                                  (Unaudited)
<TABLE>

                                                        Nine Months Ended
OPERATING ACTIVITIES                              Sept 30, 1996   Sept 30, 1995
<S>                                                <C>            <C>   
Net Income                                           $  2,007       $   767
Adjustments to Reconcile Net Income to Net Cash
  Provided by (Used In) Operating Activities:
    Provision for Possible Loan Losses                    515         1,698
    Depreciation and Amortization                         545           463
    Amortization of Security Discounts                   (105)         (115)
    Amortization of Security Premiums                     125           145
    Amortization of Deferred Fees on Loans                 65            49
    Investment Securities Gains, Net                     (308)          (15)
    (Gain) Loss on Sale of Mortgage Loans                  13            (9)
    Mortgage Loans Originated for Sale                (10,128)       (4,105)
    Mortgage Loan Sales                                 4,218         3,442
  Changes in Assets and Liabilities:
    Net Increase in Accrued Interest Income              (387)         (277)
    Increase (Decrease) in Accrued Interest Payable      (435)          367
        Net Increase in Other Assets                     (765)         (519)
        (Increase) Decrease in Other Liabilities         (147)          669
                                                     --------      --------
Net Cash Provided by (Used In) Operating Activities    (4,787)        2,560
                                                     --------      --------
INVESTING ACTIVITIES
Proceeds from Maturities of Securities 
  Available-for-Sale                                   11,024         6,175
Proceeds from Maturities of Securities 
 Held-to-Maturity                                       4,582         2,036
Proceeds from Sales of Securities 
 Available-for-Sale                                    19,795         6,156
Purchase of Securities Available-for-Sale             (27,010)      (12,272)
Purchase of Securities Held-to-Maturity                (5,914)       (2,836)
Net (Increase) Decrease in Interest Bearing 
 Deposits With Banks                                      625           (46)
Net Increase in Loans                                 (19,586)       (9,055)
Purchase of Premises and Equipment, Net                  (642)         (903)
Proceeds from Sale of Other Real Estate Owned             303            89
                                                     --------      --------
Net Cash Used In Investing Activities                 (16,823)      (10,656)
                                                     --------      --------
FINANCING ACTIVITIES
Net Increase (Decrease) in Interest and 
 Non-Interest Bearing Demand Deposits and  
 Savings Accounts                                       4,034       (14,550)
Net Increase (Decrease) in Certificates of Deposits     2,273        14,399
Net Increase (Decrease) in Long-Term Debt               8,000          (219)
Increase in Short-Term Borrowings                       8,548         9,675
Net Decrease in Repurchase Agreements                  (2,168)         (258)
Proceeds from Issuance of Stock                           189           190
Cash Dividends                                           (750)         (728)
Cash in Lieu of Fractional Shares                          (3)           --
                                                     --------      --------
Net Cash Provided by Financing Activities              20,123         8,509
                                                     --------      --------
Increase (Decrease) in Cash and Cash Equivalents       (1,487)          413
Cash and Cash Equivalents, January 1                   15,549        10,669
                                                     --------      --------
Cash and Cash Equivalents, End of Period             $ 14,062      $ 11,082
                                                     ========      ========
</TABLE>


See accompanying notes to interim consolidated financial statements.

<PAGE>

                           FIRST COLONIAL GROUP, INC.

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

                                  (Unaudited)

NOTE A  -  GENERAL

1.  Interim Financial Statements

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, 1995.

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, 1996 are not
necessarily  indicative of results to be expected for the full year or any other
interim period.

2.  Mortgage Servicing Rights

Effective  January 1, 1996, the Company  adopted SFAS No. 122,  "Accounting  for
Mortgage  Servicing  Rights".  The  adoption  of this  statement  did not have a
material  effect on the financial  positions at September 30, 1996 or results of
operations of the Company for the three and nine month periods then ended.

NOTE B  -  CASH DIVIDENDS

On August 22,  1996 the  Company  paid its 1996 third  quarter  dividend  on its
common stock of $.17 per share to shareholders of record on August 8, 1996.

NOTE C  -  STOCK DIVIDEND

On June 19, 1996 the Company paid a 5% stock dividend to  shareholders of record
of May 31, 1996.  Fractional shares were paid in cash based on the closing price
of $18.50 per share on the record date.  Earnings  per share and average  shares
outstanding have been restated to reflect the 5% stock dividend.

NOTE D - IMPAIRED LOANS

On  January  1, 1995 the  Company  adopted  Statement  of  Financial  Accounting
Standards (SFAS) No. 114, "Accounting by Creditors for Impairment of a Loan", as
amended by SFAS No. 118,  "Accounting  by Creditors  for  Impairment of a Loan -
Income  Recognition  and  Disclosures".  SFAS No. 114  requires  that a creditor

<PAGE>

measure  impairment  based on the present  value of  expected  future cash flows
discounted at the loan's  effective  interest  rate,  except that as a practical
expedient, a creditor may measure impairment based on a loans' 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  in 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:
<TABLE>

                                                  At September 30,
                                               1996            1995
                                           ----------       ----------
<S>                                      <C>              <C>   
     Principal amount of impaired loans    $1,241,000       $1,638,000
     Accrued interest                          ---               ---
     Deferred loan costs                        3,000            4,000
                                           ----------       ----------
                                            1,244,000        1,642,000
     Less valuation allowance                 123,000          205,000
                                           ----------       ----------
                                           $1,121,000       $1,437,000
                                           ==========       ==========
</TABLE>

On January 1, 1995 a valuation for credit losses  related to impaired  loans was
established.  The activity in this allowance  account for the nine months ending
September 30, is as follows:
<TABLE>

                                               1996            1995
                                           ----------     ----------
<S>                                      <C>            <C>  
     Valuation allowance at January 1,     $  238,000     $  160,000
     Provision for loan impairment            149,000         89,000
     Direct charge-offs                      (273,000)       (44,000)
     Recoveries                                 9,000           ---
                                           ----------     ----------
     Valuation allowance at September 30,  $  123,000     $  205,000
</TABLE>

Total cash  collected  on  impaired  loans  during the nine month  period  ended
September  30,  1996 was  $1,018,000,  of which  $983,000  was  credited  to the
principal  balance  outstanding  on such loans and  $35,000  was  recognized  as
interest income.  Interest that would have been accrued on impaired loans during
the first nine months of 1996 was $171,000.  Interest income on loans recognized
for the first nine months of 1996 was $13,265,000.  The valuation  allowance for
impaired  loans of $123,000 at September  30, 1996 and $205,000 at September 30,
1995 is included in the  "Allowance  for Possible  Loan Losses" which amounts to


<PAGE>

$2,494,000 at September 30, 1996. The provision for loan impairment for the nine
month  period  ended  September  30, 1996 and 1995 is a part of  "Provision  for
Possible Loan Losses" included in the "Consolidated Statement of Income" for the
same period.

NOTE E  -  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 F  -  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-KSB  for the year  ended  December  31,  1995,  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 G  -  FORWARD LOOKING STATEMENTS

The  information  contained  in this  Quarterly  Report on Form  10-QSB  for the
quarterly  period ended September 30, 1996 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 and other statements 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 on Form 10-QSB,  or in the Company's  Annual
Report on Form 10-KSB for the year ended  December 31, 1995, a copy of which may
be obtained  from the Company  upon request and without  charge  (except for the
exhibits thereto).

<PAGE>

                  FIRST COLONIAL GROUP, INC. AND SUBSIDIARIES

                    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 periods ended September 30, 1996.

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 asset  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,   1996,   cash,   due  from  banks,   Federal   Funds  Sold  and
interest-bearing  deposits  with  banks  totaled  $14,272,000,   and  securities
maturing  within one year totaled  $2,492,000.  At December 31, 1995,  cash, due
from banks Federal Funds Sold and interest  bearing  deposits with banks totaled
$16,384,000, and securities maturing within one year were $4,955,000. Securities
sold under an agreement to repurchase  totaled  $3,928,000 at September 30, 1996
and  $6,096,000  at December 31, 1995.  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 $12,000 at September 30,
1996 and $538,000 at December 31, 1995.  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 September 30, 1996. At December
31, 1995, Federal Funds Sold totaled $3,600,000.

     The Federal Home Loan Bank of  Pittsburgh  provides the Bank with a line of
credit in the amount of $12,148,000, all of which was available at September 30,
1996,  subject  to  certain  collateral  requirements.  The Bank had  short-term
(overnight)  borrowings  against this line of  $1,548,000 at September 30, 1996.
The Bank had no short-term (overnight) borrowings at December 31, 1995. The Bank
had additional short-term borrowings from the Federal Home Bank at September 30,
1996 totaling $14,000,000 of which $10,000,000 and $4,000,000 are due on October
15, 1996 and October 30, 1996, respectively.

     Cash flows for the nine months ended  September 30, 1996  consisted of cash
used in operating activities of $4,787,000 and cash used in investing activities
of  $16,823,000,  offset in part by cash  provided by  financing  activities  of
$20,123,000 resulting in a decrease in cash and cash equivalents of $1,487,000.

<PAGE>

     Cash  used  in  operating  activities  was the  result  of  mortgage  loans
originated for sale of $10,128,000,  an increase in other assets of $765,000,  a
decrease  in  accrued  interest  payable of  $435,000,  an  increase  in accrued
interest  income of $387,000  and a decrease in other  liabilities  of $147,000,
partially reduced by net operating income of $2,007,000,  mortgage loan sales of
$4,218,000,  a provision for possible  loan losses of $515,000 and  depreciation
and  amortization  of $545,000.  Cash was used in investing  activities  for the
purchase of securities  available-for-sale  and  held-to-maturity of $27,010,000
and $5,914,000 respectively,  net increases in loans to customers of $19,586,000
and the net purchase of premises and equipment of $642,000,  partially offset by
the proceeds from the sales of  available-for-sale  securities  of  $19,795,000,
from the maturities of available-for-sale securities of $11,024,000 and proceeds
from maturities of held-to-maturity  securities of $4,582,000.  Cash provided by
financing activities consisted principally of increases in short-term borrowings
of  $8,548,000,  increases  in  long-term  borrowings  $8,000,000,  increases in
interest  and  non-interest  bearing  demand  deposits  and savings  accounts of
$4,034,000 and increases in  certificates  of deposit of  $2,273,000,  offset in
part by a decrease in repurchase  agreements  of  $2,168,000  and the payment of
cash  dividends  of  $750,000  . Also  affecting  financing  activities  was the
issuance  of  10,193  new  shares  of  common  stock  pursuant  to the  Dividend
Reinvestment  Plan and 262 shares  purchased  through  the  exercising  of stock
options by a former Director for total proceeds of $189,000.

     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, 1996 was $25,662,000
as compared to  $24,767,000 at December 31, 1995, for an increase of $895,000 or
3.61%. This increase was attributable to net income for the first nine months of
1996 of  $2,007,000,  proceeds  of the  sale of  common  stock  pursuant  to the
Dividend  Reinvestment Plan and the Non-Employee  Directors Stock Option Plan of
$189,000 and a reduction of $105,000 of debt related to the  Company's  Employee
Stock Ownership Plan less the payment of cash dividends of $750,000, the payment
of cash in lieu of fractional  shares from the stock  dividend of $3,000 and the
reduction  of $653,000 in the value of the  securities  available-for-sale  (see
discussion on "Investment Securities").

     On July 1, 1996 a  $1,600,000  subordinated  note,  dated June 30, 1989 and
issued from the Company to the Bank,  matured and was repaid to the Company.  On
July 1, 1996 the  Company  issued a  $1,000,000  subordinated  note to the Bank,
floating at prime plus 50 basis points, maturing July 1, 2001. Additionally,  on
that date, the Company  contributed  $600,000 to the Bank's Capital structure in
the form of "Paid-in-Surplus".

     The Company  maintains a Dividend  Reinvestment  and Stock  Purchase  Plan.
During  the first  nine  months of 1996,  10,193  shares  of common  stock  were
purchased from  authorized and unissued shares at an average price of $18.10 per
share.

<PAGE>

     Banking  regulators  require bank holding  companies  and banks to maintain
certain capital levels,  through  risk-based capital standards by which all bank
holding  companies and banks are evaluated in terms of capital  adequacy.  These
guidelines relate a banking company's capital to the risk profile of its assets.
The risk-based capital standards now require all banks to have Tier 1 capital of
at least 4% and total capital, Tier 1 and Tier 2, of 8% of risk-adjusted assets.
Tier 1  capital  includes  common  shareholders'  equity,  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.

     Banking  regulators  also  require  bank  holding  companies  and  banks to
maintain a certain Tier 1 leverage  ratio.  The leverage  ratio  requirement  is
measured as the ratio of Tier 1 capital to adjusted  average assets.  The tables
below provide a comparison of the Company's and Bank's risk-based capital ratios
and  leverage  ratio,  to the  minimum  regulatory  guidelines  for the  periods
indicated.

CAPITAL RATIOS OF THE COMPANY

<TABLE>

                                        Company
                                Sept. 30,  December 31,        Minimum 
                                   1996        1995      Regulatory Requirement
<S>                             <C>         <C>            <C>  

     Tier 1 Leverage Ratio         8.02%       8.20%         3.00% - 5.00%

     Risk-Based Capital Ratios
     Tier I Capital               13.97%      14.62%             4.00%
     Total Capital                15.23%      15.86%             8.00%
</TABLE>


CAPITAL RATIOS OF THE BANK

<TABLE>
                                         Bank
                               Sept. 30,   December 31,        Minimum 
                                  1996         1995      Regulatory Requirement
<S>                            <C>          <C>            <C>    

     Tier 1 Leverage Ratio        6.92%        6.80%         3.00% - 5.00%

     Risk-Based Capital Ratios
          Tier I Capital         11.93%       12.41%             4.00%
          Total Capital          13.62%       13.66%             8.00%
</TABLE>

<PAGE>

     The Company is not aware of any known trends,  events or uncertainties that
will have a material  effect on the Company's  liquidity,  capital  resources or
operations,   except  for  lower   interest  rates  which  could  cause  deposit
disintermediation  and uncertain economic 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  September  30, 1996 were  $319,073,000,  representing  an
increase  of 6.9% over  total  assets of  $298,514,000  at  December  31,  1995.
Deposits  increased by $6,307,000 or 2.5% from $254,102,000 on December 31, 1995
to $260,409,000 on September 30, 1996. This increase was the result of growth of
$4,864,000 in  non-interest  checking  deposits,  $2,273,000 in  certificates of
deposit and $304,000 in interest-bearing checking accounts,  partially offset by
a $1,004,000  decrease in savings and club  accounts and a $130,000  decrease in
money market deposits.  The increase in deposits was partially the result of the
introduction  on August 1, 1996 of two new  transaction  type  deposit  accounts
entitled "Quality Checking"  (non-interest  bearing) and "Quality Checking Gold"
(interest bearing). Loans outstanding at September 30, 1996 were $217,203,000 as
compared  to  $193,130,000  at  December  31,  1995.  This  is  an  increase  of
$24,073,000 or 12.5%. The growth in loans was comprised primarily of an increase
of $17,352,000  or 23.5% in residential  real estate loans, a $4,653,000 or 8.9%
increase in consumer  loans,  and a $2,068,000  or 3.1%  increase in  commercial
loans.  During the first nine months of 1996,  $4,218,000  of  residential  real
estate loans were sold.  The amount of these sold loans  originated in the first
nine  months  of  1996  was  $2,685,000  with  the  remaining  $1,533,000  being
originated  in 1995.  The Bank  continues to service all of these  loans.  As of
September  30,  1996 there were  $1,450,000  of  mortgage  loans  identified  as
held-for-sale.  The loan to deposit  ratio was 83.4% at  September  30, 1996 and
76.0% at December 31, 1995.

     On  September  23,  1996 the Bank  committed  to the sale of  approximately
$9,400,000 of  residential  real estate loans to the Federal  National  Mortgage
Association with settlement scheduled for October 16, 1996. The Bank will retain
the servicing of these loans.

     Premises and equipment increased by $110,000 to $6,873,000 at September 30,
1996 from  $6,763,000  at December 31, 1995.  This  increase was  primarily  the
result of the purchase of furniture and equipment.

     The Company had long-term debt totaling $8,538,000 at September 30, 1996 as
compared to  $643,000 at December  31,  1995.  The  borrowed  funds were used to
improve  liquidity  and to fund  loans.  On August  28,  1996 the Bank  borrowed
$8,000,000,  maturing  August  28,  2000,  from the  Federal  Home  Loan Bank of
Pittsburgh.  The  interest  rate,  fixed at 5.89% until  August 28,  1998,  then
putable at the Bank's option,  thereafter  floats on a quarterly  basis at LIBOR
plus 6 basis points. The loan is secured by the Bank's investment securities and
residential real estate loans.

<PAGE>

     At September  30, 1996 the Bank had total  short-term  borrowings  from the
Federal Home Loan Bank of Pittsburgh of $15,548,000 as compared to $7,000,000 at
December 31, 1995.  Included in this amount was overnight  borrowings  against a
line of credit of $12,148,000 of $1,548,000 at September 31, 1996. There were no
overnight borrowings outstanding at December 31, 1995. In addition, the Bank had
outstanding  borrowings  of  $14,000,000  from the  Federal  Home  Loan  Bank of
Pittsburgh at September 30, 1996 as compared to $7,000,000 at December 31, 1995.
Of this amount $10,000,000 matures on October 15, 1996 and $4,000,000 matures on
October 30, 1996.  The  interest  rate on these loans are 5.35% (fixed rate) and
5.625% (LIBOR plus 2 basis points, changes quarterly).  The loans are secured by
the Bank's investment  securities and residential real estate loans. These funds
were borrowed to improve liquidity and to fund loans.

Results of Operations

     The net income for the three  months  period ended  September  30, 1996 was
$702,000,  a $43,000 or 6.5% increase compared to net income of $659,000 for the
same period in 1995. This increase was primarily  attributable to an increase in
net interest income in 1996 of $278,000.  Also affecting  earnings for the three
months  ended  September  30, 1996 as compared to the same period in 1995 was an
increase in the  provision  for possible  loans losses of $5,000,  a decrease in
total other  income of $5,000,  an increase in total other  expenses of $237,000
and a reduction in Federal income taxes of $12,000.

     The net income for the nine months ended September 30, 1996 was $2,007,000,
a $1,240,000  increase  from net income of $767,000 for the same period in 1995.
This  increase is primarily  attributable  to a reduction of  $1,183,000  in the
provision for possible loan losses to $515,000 in 1996 from  $1,698,000 in 1995.
The 1995  provision  for possible  loans losses was increased as a result of the
unexpected  loss the  Company  experienced  in the first  quarter of 1995 due to
overdrawn  checking  accounts of a certain  customer.  Also  contributing to the
increase in net income were  increases  in net  interest  income of $551,000 and
total other  income of  $343,000.  This was  partially  offset by an increase in
total  other  expenses of $278,000  and an increase in Federal  income  taxes of
$559,000.

     Per share  earnings for the three  months ended  September 30 were $.46 and
$.44 for 1996 and 1995,  respectively.  Average shares  outstanding  during this
three month period were  1,527,717 in 1996 and 1,508,401 in 1995. The net income
per share was $1.32 for the first nine  months of 1996 as  compared  to earnings
per share of $.51 for the same period in 1995.  Average shares  outstanding were
1,522,862  for the first nine  months of 1996 and  1,502,870  for the first nine
months of 1995.  Per share  earnings and average  shares  outstanding  have been
restated to reflect the 5% stock dividend paid on June 19, 1996.

Net Interest Income

     Net interest income is the difference between the interest earned on loans,
other  investments  and other  interest  earning assets and the interest paid on
deposits  and  other  interest  bearing  liabilities.  The net  interest  income
amounted to  $3,478,000  for the three  months  ended  September  30,  1996,  as

<PAGE>

compared to $3,200,000 for the three months ended September 30, 1995, an
increase of $278,000 or 8.7%. During the three month period ended September 30,
1996, interest income increased $284,000 or 5.1% and interest expense increased
by $6,000 or 0.3% over the same time period of 1995. The increase in net
interest income was the result of the increases in interest earned on interest
earning assets being greater than the increase in the cost of funds.

     For the nine month period ended  September  30, 1996,  net interest  income
increased  $551,000  or 5.8% to  $10,035,000  over  the same  period  in 1995 of
$9,484,000.  In this nine month period, interest income increased by $841,000 or
5.2% and interest expense  increased  $290,000 or 4.3% as compared to 1995. This
increase in interest  income  during the nine month period is due to an increase
on interest rates earned on loans and investments as a result of higher interest
rates.  The increase in interest expense for the nine month period was primarily
due to an increase in certificate of deposit balances and higher interest rates.
Interest earning assets, including loans were $294,788,000 at September 30, 1996
as compared to  $276,616,000  at September 30, 1995. This represents an increase
of $18,172,000 or 6.6%.

Other Income and Other Expenses

     Other  income for the three  months  ended  September  30,  1996  including
service  charges,  trust  fees,  gains on the sale of  mortgage  loans and other
miscellaneous  income, but exclusive of securities gains or losses, was $566,000
as  compared to  $578,000  for the same  period in 1995.  This was a decrease of
$12,000 or 2.1%.  In the three month  period  ended  September  30, 1996 service
charges  were  $276,000,  a $16,000  or 6.0%  increase  over the 1995  amount of
$260,000.  The revenues from the Trust  Department  operations were $177,000 for
the three months ended  September 30, 1996 as compared to $161,000 for the three
months  ended  September  30, 1995,  an increase of $16,000 or 9.9%.  There were
$18,000  in losses on the sale of  mortgage  loans  for the three  month  period
ending September 30, 1996 compared to losses of $4,000 for the same period ended
in 1995.  Other  miscellaneous  income for the three months ended  September 30,
1996 was  $131,000  as  compared  to  $161,000  for the same  period in 1995,  a
decrease of $30,000 or 18.6%.

     Total other income,  including  service  charges,  trust fees, gains on the
sale of  mortgage  loans  and  other  miscellaneous  income,  but  exclusive  of
securities  gains or losses,  increased  by 3.0% or $50,000 to  $1,730,000  from
$1,680,000  for the nine  months  ended  September  30,  1996 over the same time
period in 1995.  Service charges  amounted to $787,000 for the nine months ended
September 30, 1996 compared to $776,000 for the nine months ended  September 30,
1995,  an increase of $11,000 or 1.4%.  The  revenue  from the Trust  Department
operations  was  $525,000  for  the  nine  months  ended   September  30,  1996,
representing  a $44,000 or 9.2%  decrease  from the $481,000 for the nine months
ended  September 30, 1995.  The loss on the sale of mortgage  loans  amounted to
$13,000  for the first nine  months of 1996 as compared to a $9,000 gain for the
same period in 1995.  Other income for the nine months ended  September 30, 1996
was  $431,000 as compared  to $414,000  for the same period in 1995.  This is an
increase of $17,000 or 4.1%.

<PAGE>

     Total other  expenses for the three month period ended  September  30, 1996
increased by $237,000 or 8.6% to  $2,995,000  over the total other  expenses for
the same period in 1995 of  $2,758,000.  Included in this increase is a $112,000
or 8.8%  increase  in salary  and  benefit  expenses  which were  $1,385,000  as
compared  to  $1,273,000  in 1995.  These  increases  are  primarily  due to the
additional  staff as a result of the  opening of the new  Northampton  Crossings
branch in December  1995,  and general  salary  increases of  approximately  4%.
Occupancy and equipment  expenses were $582,000 for the three month period ended
September  30, 1996 and $476,000 for the three month period ended  September 30,
1995,  an  increase  of  $106,000  or 22.3%.  Most of this  increase  was due to
increases  in rent  and  maintenance  expenses  related  to the new  branch  and
expenses  related  to winter  storms  during the first  quarter  of 1996.  Other
operating  expenses  for the three month period  ended  September  30, 1996 were
$1,028,000, an increase of $19,000 or 1.9% over the $1,009,000 in other expenses
for the same period in 1995.

     Other  expenses for the nine months ended  September 30, 1996  increased by
$278,000 or 3.3%, to  $8,751,000  from  $8,473,000  for the same period in 1995.
Salaries  and  employee  benefits  were  $4,186,000  for the nine  months  ended
September 30, 1996 as compared to $3,867,000 for the nine months ended September
30, 1995  representing  an increase of  $319,000 or 8.3%.  These  increases  are
primarily due to the addition of the Northampton Crossings branch. Occupancy and
equipment  expenses were $1,658,000 for the nine months ended September 30, 1996
and  $1,391,000  for the nine months ended  September  30, 1995,  an increase of
$267,000 or 19.2%. Most of this increase is also due to the new branches.  Other
operating  expenses for the nine months ended September 30, 1996 were $2,907,000
in relation to  $3,215,000  for the nine months  ended  September  30,  1995,  a
decrease  of  $308,000  or 9.6%.  The lower 1996  expenses  were the result of a
reduction in Federal Deposit Insurance premiums and lower legal fees.

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 September
30, 1996 and December 31, 1995.

     Available-for-sale  securities  are  carried  at fair  value  with  the net
unrealized  gains or losses  reported in equity.  The Company had $54,771,000 in
available-for-sale  securities at September 30, 1996 with a net unrealized  loss
of $133,000.  At December  31, 1995  available-for-sale  securities  amounted to
$59,049,000  with a net unrealized  gain of $520,000.  The reduction in the fair
value of the available-for-sale  securities was primarily due to rising interest
rates during the first half of 1996.

     During the three  month  period  ended  September  30, 1996  $9,500,000  of
securities  available-for-sale were sold for a net gain of $36,000. For the same
period in 1995,  $80,000 of  available-for-sale  securities  were sold for a net
gain of  $29,000.  For the first  nine  months  of 1996,  net  securities  gains

<PAGE>

amounted  to  $308,000  on  the   sale  of  $19,795,000   of  available-for-sale
securities   as   compared   to   $15,000   on  the   sale  of   $6,156,000   of
available-for-sale securities for the same period in 1995.

     Held-to-maturity  securities  are  carried  at cost.  The  held-to-maturity
securities  totaled  $21,154,000 at September 30, 1996. At December 31, 1995 the
held-to-maturity securities totaled $20,054,000.  The Company has the intent and
ability to hold the  held-to-maturity  securities to maturity.  The Company,  at
September 30, 1996 and December 31, 1995, did not hold any securities identified
as derivatives. At September 30, 1996 and December 31, 1995 the Company did hold
$1,000,000 ( in held-to-maturity) and $8,000,000, respectively, in various U. S.
Agency Step-up or Multi Step-up securities.

Allowance and Provision for Possible Loan Losses

     The  provision  for loan losses for the three month period ended  September
30, 1996 was  $105,000  compared to  $100,000  for the same period in 1995.  The
provision  for loan  losses for the first nine  months of 1996 was  $515,000  as
compared to $1,698,000  for the first nine months of 1995.  Included in the 1995
nine month provision is $1,550,000 for overdrawn  checking accounts of a certain
customer less recoveries of $272,000.

     Net loan losses were $105,000 for the three month period  ending  September
30, 1996 compared to net loan recoveries of $19,000 for the same period in 1995.
For the first nine months of 1996,  net loan losses were $463,000 as compared to
$1,463,000 during the first nine months of 1995, including $1,278,000 related to
the overdrawn checking accounts.

     The  allowance  for  possible  loan losses at  September  30, 1996  totaled
$2,494,000  an  increase  of  $51,000  over the  December  31,  1995  amount  of
$2,443,000.  The  allowance  for possible  loan losses as a percentage  of total
loans  outstanding  at September  30, 1996 was 1.15%.  This compares to 1.26% at
December  31,  1995.  As  provided  by SFAS No. 114, as amended by SFAS No. 118,
$123,000 of the  allowance  for  possible  loan losses is  allocated to impaired
loans at September 30, 1996 (see Note D "Impaired Loans").

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 efforts,  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 dates indicated.

<PAGE>
<TABLE>

                                           Sept. 30,       December 31,  
                                             1996             1995
<S>                                     <C>           <C>

Non-accrual loans on a cash basis         $1,465,000       $2,181,000
Non-accrual loans as a percentage  
 of total loans                                 .67%            1.13%
Accruing loans past due 90 days or more   $1,190,000       $1,115,000
Accruing loans past due 90 days or more
 as a percentage of total loans                 .55%             .58%
Other Real Estate Owned from
 Foreclosed Property                      $  498,000       $  364,000
</TABLE>

     There are no significant loans classified for regulatory purposes that have
not been included in the above table of  non-performing  loans. At September 30,
1996 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".

<PAGE>

PART 11  -  OTHER INFORMATION

ITEM 5. Other Information

     In August of 1996 Charles J. Peischl, Esquire was appointed to the Board of
Directors  of the  Company as a Class 1 director  to serve until the 1997 annual
meeting. Mr. Peischl is a member of the firm of Peters, Moritz,  Peischl, Zulick
& Landes.  In addition,  Mr. Peischl is the Chairman of the Board of Trustees of
Moravian College, a member of the Board of Directors of C. F. Martin & Co., Inc.
and the Chancellor of the Northern Province of the Moravian Church in America.

ITEM 6. Exhibits and Reports on Form 8-K
        (a)     Exhibits
                11.1 Statement Re:   Computation of Per Share Earnings
                27.1 Financial Data Schedule

        (b)     Reports on Form 8-K
                     No reports on Form 8-K 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 15, 1996               BY: /S/  S. ERIC BEATTIE
                                             S. ERIC BEATTIE
                                             PRESIDENT
                                             (PRINCIPAL EXECUTIVE OFFICER)

DATE:   November 15, 1996               BY: /S/  REID L. HEEREN
                                             REID L. HEEREN
                                             VICE PRESIDENT
                                             (PRINCIPAL FINANCIAL OFFICER)