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, 1997
                                       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:  1,647,220  SHARES OF COMMON
STOCK, $5 PAR VALUE, OUTSTANDING ON SEPTEMBER 30, 1997.

<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)
<TABLE>
                                                   (Unaudited)       (Audited)
                                                     Sept. 30         Dec. 31 
                                                       1997             1996
                                                     --------        --------
<S>                                                <C>            <C> 
ASSETS
  Cash and Due From Banks                            $ 11,724        $ 11,729
  Federal Funds Sold                                      --            2,200
                                                     --------        --------
    Total Cash and Cash Equivalents                    11,724          13,929
  Interest-Bearing Deposits With Banks                    436             285
  Investment Securities                                20,387          20,999
    (Market Value:  Sept. 30, 1997 - $20,606;
        Dec. 31, 1996 - $21,124)
  Securities Available-for-Sale at Fair Value          71,705          56,779
  Mortgage Loans Held-for-Sale                            627             721
  Total Loans, Net of Unearned Discount               227,705         220,117
    Less:  Allowance for Possible Loan Losses          (2,619)         (2,532)
                                                     --------        --------
      Net Loans                                       225,086         217,585
  Premises and Equipment                                7,372           7,030
  Other Real Estate                                       433             595
  Accrued Interest Income                               2,462           2,020
  Other Assets                                          3,703           2,409
                                                     --------        --------
      TOTAL ASSETS                                   $343,935        $322,352
                                                     ========        ========

LIABILITIES
  Deposits
    Non-Interest Bearing Deposits                    $ 32,218        $ 31,450
    Interest-Bearing Deposits                         252,682         236,218
                                                     --------        --------
      Total Deposits                                  284,900         267,668
  Securities Sold Under Agreements to Repurchase        4,953           3,795
  Long-Term Debt                                       18,406          18,512
  Accrued Interest Payable                              3,366           3,205
  Other Liabilities                                     2,926           2,367
                                                     --------        --------
      TOTAL LIABILITIES                               314,551         295,547

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 -  1,647,220 shares Sept. 30, 1997
    and 1,560,634 shares at Dec. 31, 1996               8,236           7,803
  Additional Paid in Capital                           10,834           9,212
  Retained Earnings                                     9,631           9,975
  Less Treasury Stock at Cost: None at Sept 30, 1997
       and 861 shares at Dec. 31, 1996                    --              (20)
  Employee Stock Ownership Plan Debt                     (406)           (512)
  Net Unrealized Gain on Securities Available-for-Sale  1,089             347
                                                     --------        --------
Total Shareholders' Equity                             29,384          26,805
                                                     --------        --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY           $343,935        $322,352
                                                     ========        ========
</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,
                                       1997      1996        1997       1996
                                   ---------  ---------  ---------  ---------
<S>                                 <C>      <C>         <C>        <C>  
INTEREST INCOME:
 Interest and Fees on Loans           $5,228     $4,634    $14,899    $13,265
 Investment Securities Income
  Taxable                              1,165      1,092      3,426      3,379
  Tax-Exempt                             215        171        595        434
 Interest on Other Investments
  Deposits With Banks                     23          7         52         55
  Federal Funds Sold                      --         --          1          2
                                   ---------  ---------  ---------  ---------
   Total Interest Income               6,631      5,904     18,973     17,135
                                   ---------  ---------  ---------  ---------
INTEREST EXPENSE:
 Interest on Deposits                  2,411      2,068      6,897      6,453
 Interest on Repurchase Agreements        79         37        170        113
 Interest on Short-Term Borrowing         16        251        110        407
 Interest on Long-Term Debt              292         70        856        127
                                   ---------  ---------  ---------  ---------
  Total Interest Expense               2,798      2,426      8,033      7,100
                                   ---------  ---------  ---------  ---------
NET INTEREST INCOME:                   3,833      3,478     10,940     10,035
 Provision for Possible Loan Losses      143        105        443        515
                                   ---------  ---------  ---------  ---------
  Net Interest Income After Provision
   For Possible Loan Losses            3,690      3,373     10,497      9,520
                                   ---------  ---------  ---------  ---------
OTHER INCOME:
 Trust Income                            191        177        570        525
 Service Charges on Deposit Accounts     284        276        835        787
 Investment Securities Gains, Net          6         36        240        308
 Gain (Loss) on the Sale of
   Mortgage Loans                         66        (18)       115        (13)
 Other Operating Income                  219        131        621        431
                                   ---------  ---------  ---------  ---------
  Total Other Income                     766        602      2,381      2,038
                                   ---------  ---------  ---------  ---------
OTHER EXPENSES:
 Salaries and Employee Benefits        1,451      1,385      4,405      4,186
 Net Occupancy and Equipment Expense     549        582      1,655      1,658
 Other Operating Expenses              1,265      1,028      3,528      2,907
                                   ---------  ---------  ---------  ---------
  Total Other Expenses                 3,265      2,995      9,588      8,751
                                   ---------  ---------  ---------  ---------
Income  Before Income Taxes            1,191        980      3,290      2,807
Provision for Income Taxes               336        278        919        800
                                   ---------  ---------  ---------  ---------
NET INCOME                            $  855     $  702    $ 2,371    $ 2,007
                                   =========  =========  =========  =========
 Net Income Per Share                 $ 0.52     $ 0.44    $  1.46    $  1.26
                                   =========  =========  =========  =========
 Average Shares Outstanding        1,631,629  1,605,388  1,627,190  1,600,290
</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
                                                   Sept 30, 1997  Sept 30, 1996
                                                      --------      --------
<S>                                                 <C>           <C>   
OPERATING ACTIVITIES
Net Income                                            $  2,371      $  2,007
Adjustments to Reconcile Net Income to Net Cash
 Provided by (Used In) Operating Activities:
  Provision for Possible Loan Losses                       443           515
  Depreciation and Amortization                            644           545
  Amortization of Security Discounts                       (51)         (105)
  Amortization of Security Premiums                         93           125
  Amortization of Deferred Fees on Loans                  (190)           65
  Investment Securities Gains, Net                        (240)         (308)
  (Gain) Loss on Sale of Mortgage Loans                   (115)           13
  Mortgage Loans Originated for Sale                   (23,242)      (10,128)
  Mortgage Loan Sales                                   23,336         4,218
 Changes in Assets and Liabilities:
  Net Increase in Accrued Interest Income                 (442)         (387)
  Increase (Decrease) in Accrued Interest Payable          161          (435)
  Net Increase in Other Assets                          (1,311)         (765)
  (Increase) Decrease in Other Liabilities                 177          (147)
                                                      --------      --------
Net Cash Provided by (Used In) Operating Activities      1,634        (4,787)
                                                      --------      --------
INVESTING ACTIVITIES
Proceeds from Maturities of Securities
  Available-for-Sale                                     7,389        11,024
Proceeds from Maturities of Securities
  Held-to-Maturity                                       5,541         4,582
Proceeds from Sales of Securities
  Available-for-Sale                                    12,198        19,795
Purchase of Securities Available-for-Sale              (32,282)      (27,010)
Purchase of Securities Held-to-Maturity                 (5,838)       (5,914)
Net (Increase) Decrease in Interest Bearing
  Deposits With Banks                                     (151)          625
Net Increase in Loans                                   (8,154)      (19,586)
Purchase of Premises and Equipment, Net                   (969)         (642)
Proceeds from Sale of Other Real Estate Owned              677           303
                                                      --------      --------
Net Cash Used In Investing Activities                  (21,589)      (16,823)
                                                      --------      --------
FINANCING ACTIVITIES
Net Increase (Decrease) in Interest
   and Non-Interest Bearing Demand Deposits
   and Savings Accounts                                  6,482         4,034
Net Increase in Certificates of Deposits                10,750         2,273
Net Increase in Long-Term Debt                             --          8,000
Increase in Short-Term Borrowings                          --          8,548
Net Increase (Decrease) in Repurchase Agreements         1,158        (2,168)
Proceeds from Issuance of Stock                            190           189
Proceeds from Sale of Treasury Stock                        20            --
Cash Dividends                                            (846)         (750)
Cash in Lieu of Fractional Shares                           (4)           (3)
                                                      --------      --------
Net Cash Provided by Financing Activities               17,750        20,123
                                                      --------      --------
Increase (Decrease) in Cash and Cash Equivalents        (2,205)       (1,487)
Cash and Cash Equivalents, January 1                    13,929        15,549
                                                      --------      --------
Cash and Cash Equivalents, End of Period              $ 11,724      $ 14,062
                                                      ========      ========
</TABLE>

See accompanying notes to interim consolidated financial statements.

<PAGE>

                           FIRST COLONIAL GROUP, INC.

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

                                  (Unaudited)

NOTE A  -  GENERAL

The accompanying  Financial Statements,  Footnotes and Discussion should be read
in conjunction with the Audited Financial Statements,  Footnotes, and Discussion
contained in the Company's Annual Report for the year ended December 31, 1996.

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, 1997 are not
necessarily  indicative of results to be expected for the full year or any other
interim period.

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, 1997 or results of
operations of the Company for the three and nine month periods then ended.

NOTE B  -  CASH DIVIDENDS

On August 22,  1997 the  Company  paid its 1997 third  quarter  dividend  on its
common stock of $.18 per share to shareholders of record on August 8, 1997.

NOTE C  -  STOCK DIVIDEND

On June 19, 1997 the Company paid a 5% stock dividend to  shareholders of record
of May 30, 1997.  Fractional shares were paid in cash based on the closing price
of $23.875 per share on the record date.  Earnings per share and average  shares
outstanding have been restated to reflect the 5% stock dividend.

NOTE D  -  NEW ACCOUNTING PRONOUNCEMENTS

The  Financial  Accounting  Standards  Board has issued  Statement  of Financial
Accounting  Standards  No.  128,  Earnings  Per Share,  which is  effective  for
financial  statements  issued after December 15, 1997. Early adoption of the new
standard is not permitted. The new standard eliminates primary and fully diluted
earnings per share and requires  presentation of basic and diluted  earnings per
share together with disclosure of how the per share amounts were computed. Basic
earnings  per  share  excludes  dilution  and is  computed  by  dividing  income
available  to  common  shareholders  by  the   weighted-average   common  shares
outstanding  for the period.  Diluted  earnings per share reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were  exercised and  converted  into common stock or resulted in the issuance of
common stock that then shared the earnings of the entity.

<PAGE>

In June, 1997, the Financial  Accounting  Standards Board (FASB) has issued SFAS
No.  130,  "Reporting  Comprehensice  Income",  which  is  effective  for  years
beginning  after  December  15,  1997.  This  new  standard   requires  entities
presenting  a  complete  set of  financial  statements  to  include  details  of
comprehensive  income.  Comprehensive  income consists of net income or loss for
the  current  period and  income,  expenses,  gains,  and losses that bypass the
income statement and are reported directly in a separate component of equity. As
of September  30, 1997,  the Bank has not adopted this  standard and as a result
does not believe it will have a material impact on the financial statements.

In June, 1997, the FASB issued SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, which is effective for all periods beginning
after December 15, 1997. SFAS 131 requires that public business enterprises
report certain information about operating segments in complete sets of
financial statements of the enterprise and in condensed financial statements of
interim periods issued to shareholders. It also requires that public business
enterprises report certain information about their products and services, the
geographic areas in which they operate, and their major customers. As of
September 30, 1997, the Bank has not adopted this standard and as a result does
not believe it will have a material impact on the financial statements.

NOTE E - IMPAIRED LOANS

As provided by  Statement  of  Financial  Accounting  Standards  (SFAS) No. 114,
"Accounting for Creditors for Impairment of a Loan", as amended by SFAS No. 118,
"Accounting  by Creditors  for  Impairment  of a Loan - Income  Recognition  and
Disclosures",  the Company  measures  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,  impairment  may be measured  based on a
loans' observable market price, or the fair value of the collecteral if the loan
is collateral dependent. The Company measures impairment based on the fair value
of the collateral when it determines that foreclosure is probable.

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.

The  recorded  investment  in these  loans and the  valuation  for credit  loses
related to loan impairment are as follows:
<TABLE>

                                               At September 30,
                                             1997            1996
                                          ----------      ----------
<S>                                     <C>             <C>   
     Principal amount of impaired loans   $  292,000      $1,241,000
     Accrued interest                           ---             ---
     Deferred loan costs                       3,000           3,000
                                          ----------      ----------
                                             295,000       1,244,000
     Less valuation allowance                 89,000         123,000
                                          ----------      ----------
                                          $  206,000      $1,121,000
                                          ==========      ==========
</TABLE>

<PAGE>

In 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>

                                                1997            1996
                                              --------        --------
<S>                                         <C>             <C>  
     Valuation allowance at January 1,        $128,000        $238,000
     Provision for loan impairment              55,000         149,000
     Direct charge-offs                        (94,000)       (273,000)
     Recoveries                                   ---            9,000
                                              --------        --------
     Valuation allowance at September 30,     $ 89,000        $123,000
                                              ========        ========
</TABLE>

Total cash  collected  on  impaired  loans  during the nine month  period  ended
September 30, 1997 was $669,000, of which $643,000 was credited to the principal
balance outstanding on such loans and $26,000 was recognized as interest income.
Interest  that would have been  accrued on impaired  loans during the first nine
months of 1997 was $50,000.  Interest  income on loans  recognized for the first
nine months of 1997 was $14,899,000.  The valuation allowance for impaired loans
of $89,000 at September  30, 1997 and $123,000 at September 30, 1996 is included
in the  "Allowance  for Possible  Loan Losses"  which  amounts to  $2,619,000 at
September 30, 1997. The provision for loan  impairment for the nine month period
ended  September  30, 1997 and 1996 is a part of  "Provision  for Possible  Loan
Losses" included in the "Consolidated Statement of Income" for the same period.

NOTE F -  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 G  -  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,  1996,  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 H  -  FORWARD LOOKING STATEMENTS

The  information  contained  in this  Quarterly  Report on Form  10-QSB  for the
quarterly  period ended September 30, 1997 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
the Company's or 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, 1996, a
copy of which may be obtained  from the Company upon request and without  charge
(except for the exhibits thereto) as described in Note G above.

<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 perform- ance of the Company and its wholly owned  subsidiaries for the
three and nine month periods ended September 30, 1997.

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,   1997,   cash,   due  from  banks,   Federal   Funds  Sold  and
interest-bearing  deposits  with  banks  totaled  $12,160,000,   and  securities
maturing  within one year totaled  $4,180,000.  At December 31, 1996,  cash, due
from banks Federal Funds Sold and interest  bearing  deposits with banks totaled
$14,214,000, and securities maturing within one year were $2,892,000. Securities
sold under an agreement to repurchase  totaled  $4,953,000 at September 30, 1997
and  $3,795,000  at December 31, 1996.  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 $397.000 at September 30,
1997 and $82,000 at December 31, 1996.  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, 1997. At December
31, 1996, Federal Funds Sold totaled $2,200,000.

     The Federal Home Loan Bank of  Pittsburgh  provides the Bank with a line of
credit in the amount of $12,895,000, subject to certain collateral requirements.
The Bank had no  short-term  (overnight)  borrowings  at September  30, 1997 and
December 31, 1996. The Bank had long-term  borrowings from the Federal Home Bank
at  September  30,  1997  totaling  $18,000,000  of which  $5,000,000  is due in
November  1998,  $8,000,000  is due in  August  2000  and  $5,000,000  is due in
December 2001.

     Cash flows for the nine months ended  September 30, 1997  consisted of cash
used in investing  activities of $21,589,000  offset in part by cash provided by
operating  activities of $1,634,000 and cash provided by financing activities of
$17,750,000, resulting in a decrease in cash and cash equivalents of $2,205,000.

     Cash provided by operating activities was the result of mortgage loan sales
of  $23,336,000,   net  operating   income  of  $2,371,000,   depreciation   and
amortization  of $644,000 and a provision  for possible loan losses of $443,000,
partially  reduced by mortgage  loans  originated for sale of  $23,242,000,  net
increase in other assets of $1,311,000,  an increase in accrued  interest income
of $442,000 and net  investment  security  gains of  $240,000.  Cash was used in
investing  activities  for  the  purchase  of securities  available-for-sale and

<PAGE>

held-to-maturity  of $32,282,000 and $5,838,000  respectively,  net increases in
loans to customers of  $8,154,000  and the purchase of premises and equipment of
$969,000,  partially offset by the proceeds from the sale of  available-for-sale
securities of $12,198,000,  from the maturities of available-for-sale securities
of  $7,389,000  and  from  the  proceeds  from  maturities  of  held-to-maturity
securities of  $5,541,000.  Cash provided by financing  activities  consisted of
increases in certificates  of deposit of $10,750,000,  increases in interest and
non-interest  bearing  demand  deposits and savings  accounts of $6,482,000  and
increases in repurchase agreements of $1,158,000,  offset in part by the payment
of cash  dividends of $846,000.  Also  affecting  financing  activities  was the
issuance  of 8,454 new shares of common  stock  (7,586  shares  pursuant  to the
Dividend  Reinvestment  Plan and 868 pursuant to the exercising of Stock Options
by a Director of the Company)  for proceeds of $190,000 and 861 treasury  shares
of common stock totaling $20,000.

     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, 1997 was $29,384,000
as compared to  $26,805,000  at December 31, 1996, for an increase of $2,579,000
or 9.62%. This increase was attributable to net income for the first nine months
of 1997 of  $2,371,000,  proceeds  of the sale of common  stock  pursuant to the
Dividend  Reinvestment Plan and the Non-Employee  Directors Stock Option Plan of
$190,000,  proceeds of the sale of treasury  stock in the Dividend  Reinvestment
Plan of $20,000 and a reduction  of  $106,000 of debt  related to the  Company's
Employee  Stock  Ownership  Plan less the payment of cash dividends of $846,000,
the  payment of cash in lieu of  fractional  shares  from the stock  dividend of
$4,000  and  an  increase   of   $742,000   in  the  value  of  the   securities
available-for-sale (see discussion on "Investment Securities").

     On June 19, 1997 the Company paid a 5% stock  dividend to  shareholders  of
record on May 30, 1997. Fractional shares were paid in cash based on the closing
price of $23.875 per share on the record date.

     The Company  maintains a Dividend  Reinvestment  and Stock  Purchase  Plan.
During  the first  nine  months of 1997,  8,454  shares  of  common  stock  were
purchased from authorized and unissued shares at an average price of $23.522 per
share.

     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
1  capital  of at  least  4% and  total  capital,  Tier 1 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, 1997, 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           Adequacy           Action
(Dollars in Thousands)
 At September 30, 1997       Amount   Ratio     Amount   Ratio   Amount  Ratio
<S>                       <C>      <C>       <C>       <C>    <C>      <C>

Total Capital
(To Risk-Weighted Assets)
  Company, (Consolidated)   $30,515  15.59%    $15,657   8.00%     N/A
  Bank                      $26,797  13.71%    $15,372   8.00%  $19,216  10.00%

Tier 1 Capital
(To Risk-Weighted Assets)
  Company, (Consolidated)   $28,066  14.34%    $ 7,829   4.00%     N/A
  Bank                      $23,752  12.15%    $ 7,686   4.00%  $11,529   6.00%

Tier 1 Capital
(To Average Assets,
 Leverage)
  Company, (Consolidated)   $28,066   8.11%    $13,843   4.00%     N/A
    Bank                    $23,752   6.93%    $13,701   4.00%  $17,126   5.00%
</TABLE>

<TABLE>
                                                                  To Be Well
                                                                 Capitalized
                                                 Required        Under Prompt
                                                For Capital       Corrective
                                Actual           Purposes         Provisions
(Dollars in Thousands)
 At December 31, 1996        Amount   Ratio     Amount   Ratio   Amount  Ratio
<S>                       <C>       <C>      <C>       <C>    <C>      <C>

Total Capital
(To Risk-Weighted Assets)
  Company, (Consolidated)   $28,596   15.20%   $15,046   8.00%     N/A 
  Bank                      $25,591   13.59%   $15,065   8.00%  $18,831  10.00%

Tier 1 Capital
(To Risk-Weighted Assets)
  Company, (Consolidated)   $26,243   13.95%   $ 7,522   4.00      N/A
  Bank                      $22,435   11.91%   $ 7,532   4.00%  $11,299   6.00%

Tier 1 Capital
(To Average Assets,
 Leverage)
  Company, (Consolidated)   $26,243   8.35%    $12,578   4.00%     N/A
  Bank                      $22,435   7.20%    $12,456   4.00%  $15,570   5.00%
</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 a reduction in net
interest income 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, 1997 were  $343,935,000,  representing  an
increase  of 6.70% over total  assets of  $322,352,000  at  December  31,  1996.
Deposits  increased by  $17,232,000 or 6.44% from  $267,668,000  on December 31,
1996 to  $284,900,000  on September  30, 1997.  This  increase was the result of
growth of  $10,750,000  in  certifiicates  of  deposit,  $5,967,000  in interest
bearing  checking  checking  deposits,   $1,768,000  in  non-interest   checking
deposits,  offset in part by a decline of $250,000 in savings and club  accounts
and $3,000 in money market  deposits.  Loans  outstanding  at September 30, 1997
were  $227,705,000  as compared to $220,117,000 at December 31, 1996. This is an
increase of $7,588,000 or 3.45%. The growth in loans was comprised  primarily of
an increase of $7,085,000 or 12.12% in consumer  loans and a $3,107,000 or 3.59%
increase in residential real estate loans, offset in part by $2,604,000 or 3.47%
decrease in commercial loans. During the first nine months of 1997,  $23,336,000
of  residential  real  estate  loans were  sold.  The amount of these sold loans
originated in the first nine months of 1997 was  $13,914,000  with the remaining
$9,422,000 being originated in prior years. The Bank continues to service all of
these loans.  As of  September  30, 1997 there were  $627,000 of mortgage  loans
identified  as  held-for-sale.  The loan to deposit ratio was 79.9% at September
30, 1997 and 82.2% at December 31, 1996.

     Premises and equipment increased by $342,000 to $7,372,000 at September 30,
1997 from  $7,030,000  at December 31, 1996.  This  increase was  primarily  the
result of the purchase of leasehold  improvements,  furniture  and equipment for
our new East Stroudsburg branch and renovations to the Main Office.

     The Company had long-term  debt totaling  $18,406,000 at September 30, 1997
as compared to  $18,512,000  at December 31, 1996.  Included in this total,  the
Bank had outstanding  borrowings of $18,000,000  from the Federal Home Loan Bank
of  Pittsburgh  at September  30, 1997 and  December  31,  1996.  Of this amount
$5,000,000  matures in November 1998,  $8,000,000 matures in August 2000 and the
remaining  $5,000,000  matures in December 2001.  The interest rates  associated
with these loans as of September 30, 1997 are 5.96% fixed, 5.89% fixed and 5.86%
variable (changes  quarterly based onthe three month LIBOR plus 8 basis points),
respectively.  The loans are secured by the Bank's  investment  and  residential
real estate loans and securities. These funds were borrowed to improve liquidity
and to fund residential real estate loans.

<PAGE>

Results of Operations

     The net income for the three  month  period  ended  September  30, 1997 was
$855,000,  a $153,000 or 21.79% increase  compared to net income of $702,000 for
the same period in 1996. The earnings  improvement is primarily  attributable to
increases in net interest  income and other income.  During the third quarter of
1997, net interest income increased  $355,000 or 10.21% as compared to September
30, 1996. Also affecting  earnings was a $138,000  increase in the provision for
possible loan losses,  a $194,000  increase in total other income,  exclusive of
net security  gains of $96,000,  an increase in total other expenses of $270,000
and an increase in Federal income taxes of $58,000.

     The net income for the nine months ended September 30, 1997 was $2,371,000,
a $364,000  increase from net income of $2,007,000  for the same period in 1996.
This increase is primarily attributable to an increase in net interest income of
$905,000,  a reduction in the provision  for possible loan losses of $72,000,  a
$411,000 increase in other income,  exclusive of net security gains of $240,000,
partially  offset by  increases in other  expenses  and Federal  income taxes of
$837,000 and $119,000, respectively.

     Per share  earnings for the three  months ended  September 30 were $.52 and
$.44 for 1997 and 1996,  respectively.  Average shares  outstanding  during this
three month period were  1,631,629 in 1997 and  1,605,388 in 1996.  The earnings
per share were $1.46 for the first nine  months of 1997 as  compared to earnings
per share of $1.26 for the same period in 1996.  Average shares outstanding were
1,627,190  for the first nine  months of 1997 and  1,600,290  for the first nine
months of 1996.  Per share  earnings and average  shares  outstanding  have been
restated to reflect the 5% stock dividend paid on June 19, 1997.

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  $3,833,000  for the three  months  ended  September  30,  1997,  as
compared to  $3,478,000  for the three  months  ended  September  30,  1996,  an
increase of $355,000 or 10.21%.  During the three month period  ended  September
30, 1997,  interest  income  increased  $727,000 or 12.31% and interest  expense
increased  by $372,000 or 15.33% and interest  expense  increased by $372,000 or
15.33% over the same time period of 1996.  The increase in net interest  expense
was due in part to growth in certificates of deposit.

     For the nine month period ended  September  30, 1997,  net interest  income
increased  $905,000  or 9.02% to  $10,940,000  over the same  period  in 1996 of
$10,035,000.  In this nine month period, interest income increased by $1,838,000
or 10.73% and interest expense increased $933,000 or 13.14% as compared to 1996.
This  increase in net 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  $320,860,000 at
September  30, 19976 as compared to  $294,788,000  at September  30, 1996.  This
represents an increase of $26,072,000 or 8.84%.

<PAGE>

Other  Income  and  Other  Expenses

     Other  income for the three  months  ended  September  30,  1997  including
service  charges,  trust  fees,  gains on the sale of  mortgage  loans and other
miscellaneous  income, but exclusive of securities gains or losses, was $760,000
as  compared to  $566,000  for the same period in 1996.  This was an increase of
$194,000 or 34.28%.  In the three month period ended  September 30, 1997 service
charges  were  $284,000,  a $8,000  or 2.90%  increase  over the 1996  amount of
$276,000.  The revenues from the Trust  Department  operations were $191,000 for
the three months ended  September 30, 1997 as compared to $177,000 for the three
months ended  September  30, 1996,  an increase of $14,000 or 7.91%.  There were
$66,000 in gains on the sale of mortgage loans for the three month period ending
September  30,  1997 and losses of $18,000  for the same  period  ended in 1996.
Other  operating  income  for the three  months  ended  September  30,  1997 was
$219,000 as compared  to  $131,000  for the same period in 1996,  an increase of
$88,000 or 67.18%.

     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 23.76% or $411,000 to $2,141,000 from
$1,730,000  for the nine  months  ended  September  30,  1997 over the same time
period in 1996.  Service charges  amounted to $835,000 for the nine months ended
September 30, 1997 compared to $787,000 for the nine months ended  September 30,
1996,  an increase of $48,000 or 6.10%.  The revenue  from the Trust  Department
operations  was  $570,000  for  the  nine  months  ended   September  30,  1997,
representing a $45,000 or 8.57% increase for the nine months ended September 30,
1996.  The gain on the sale of mortgage loans amounted to $115,000 for the first
nine months of 1997 as  compared to a $13,000  loss for the same period in 1996.
Other operating income for the nine months ended September 30, 1997 was $621,000
as  compared to  $431,000  for the same  period in 1996.  This is an increase of
$190,000 or 44.08%.

     Included  in net  gains on the sale of  mortgages  loans is  $287,000  as a
result of the  capitalization of mortgage servicing rights (an intangible asset)
in accordance with Financial Accounting Standards Board's Statement of Financial
Accounting  Standards (FASB) No. 125,  Accounting for Transfers and Servicing of
Financial  Assets and  Extinguishments  of Liabilitites.  Additionally,  related
amortization of $4,000 is included in Other Operating Expenses.

     Total other  expenses for the three month period ended  September  30, 1997
increased by $270,000 or 9.02% to $3,265,000  over the total other  expenses for
the same period in 1996 of $2,995,000. Included in this increase is a $66,000 or
4.77%  increase in salary and benefit  expenses  which were  $1,451,000  for the
three  months  ended  September  30,  1997 as  compared  to  $1,385,000  for the
comparable  period in 1996.  These increases are primarily due to the additional
staff as a result of the opening of the new East Stroudsburg  Wal-Mart branch in
January 1997, and general salary  increases of  approximately  4%. Occupancy and
equipment  expenses were $599,000 for the three month period ended September 30,
1997 and  $582,000  for the three month  period  ended  September  30,  1996,  a
decrease  of $33,000 or 5.67%.  Other  operating  expenses  for the three  month
period  ended  September  30, 1997 were  $1,265,000,  an increase of $238,000 or
23.05% over the  $1,028,000 in other  operating  expenses for the same period in
1996. These increases are primarily attributable to additional advertising costs
associated  with  heightened  marketing  efforts and increased  data  processing
services.

     Other  expenses for the nine months ended  September 30, 1997  increased by
$837,000 or 9.56%,  to $9,588,000  from  $8,751,000 for the same period in 1996.
Salaries  and  employee  benefits  were  $4,405,000  for the nine  months  ended
September 30, 1997 as compared to $4,186,000 for the nine months ended September
30, 1996  representing  an increase of $219,000 or 5.23%.  These  increases  are
primarily due to the addition of the East Stroudsburg Wal-Mart branch. Occupancy
and equipment  expenses were  $1,665,000 for the nine months ended September 30,
1997 and $1,658,000 for the nine months ended  September 30, 1996, a decrease of
$3,000 or 0.18%.  Most of this  increase  is also due to the new  branch.  Other
operating  expenses for the nine months ended September 30, 1997 were $3,528,000
in relation to  $2,907,000  for the nine months ended  September  30,  1996,  an
increase of $621,000 or 21.36%.  These  increases are primarily  attributable to
additional  advertising  costs associated with heightened  marketing efforts and
increased data processing services.

<PAGE>

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, 1997 and December 31, 1996.

     Available-for-sale  securities  are  carried  at fair  value  with  the net
unrealized  gains or losses  reported in equity.  The Company had $71,705,000 in
available-for-sale  securities at September 30, 1997 with a net unrealized  gain
of $1,089,000.  At December 31, 1996  available-for-sale  securities amounted to
$56,779,000 with a net unrealized gain of $347,000.

     During the three  month  period  ended  September  30, 1997  $5,506,000  of
securities  available-for-sale  were sold for a net gain of $6,000. For the same
period in 1996, $9,500,000 of available-for-sale  securities were sold for a net
gain of  $36,000.  For the first  nine  months  of 1997,  net  securities  gains
amounted to $240,000 on the sale of $12,198,000 of available-for-sale securities
as  compared to  securities  gains of  $300,000  on the sale of  $19,795,000  of
available-for-sale securities for the same period in 1996.

     Held-to-maturity  securities  are  carried  at cost.  The  held-to-maturity
securities  totaled  $20,387,000 at September 30, 1997. At December 31, 1996 the
held-to-maturity securities totaled $20,999,000.  The Company has the intent and
ability to hold the  held-to-maturity  securities to maturity.  The Company,  at
September 30, 1997 and December 31, 1996, did not hold any securities identified
as derivatives. At September 30, 1997 and December 31, 1996 the Company did hold
$1,000,000  and  $1,000,000  par value,  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, 997 was  $143,000  compared  to $105,000  for the same  period in 1996.  The
provision  for loan  losses for the first nine  months of 1997 was  $443,000  as
compared to $515,000 for the first nine months of 1996.

     Net loan losses were $113,000 for the three month period  ending  September
30,  1997.  Net loan losses for the same period in 1996 were  $105,000.  For the
first nine months of 1997, net loan losses were $356,000 as compared to $463,000
during the first nine months of 1996.

     The  allowance  for  possible  loan losses at  September  30, 1997  totaled
$2,619,000  an  increase  of  $87,000  over the  December  31,  1996  amount  of
$2,532,000.  The  allowance  for possible  loan losses as a percentage  of total
loans  outstanding  at September  30, 1997 was 1.15%.  This compares to 1.15% at
December  31,  1996.  As  provided  by SFAS No. 114, as amended by SFAS No. 118,
$89,000 of the allowance for possible loan losses is allocated to impaired loans
at September 30, 1996 (see Note E "Impaired Loans").

<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 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 periods indicated.
<TABLE>

                                                  Sept. 30,    December 31,  
                                                    1997          1996
<S>                                            <C>           <C>   

     Non-accrual loans on a cash basis           $  554,000    $1,440,000
     Non-accrual loans as a percentag 
        of total loans                                 .24%          .65%
     Accruing loans past due 90 days or more     $1,240,000    $  986,000
     Accruing loans past due 90 days or more 
        as a percentage of total loans                 .54%          .45%
     Other Real Estate Owned from 
        Foreclosed Property                      $  433,000    $  595,000
</TABLE>

     There are no significant loans classified for regulatory purposes that have
not been included in the above table of non-performing loans. The Company has no
significant  loans that qualify as "Troubled Debt  Restructuring"  as defined by
The Financial  Accounting  Standards Board's  Statement of Financial  Accounting
Standards  No. 15  "Accounting  for  Debtors and  Creditors  for  Troubled  Debt
Restructuring" at September 30, 1997.

<PAGE>

PART 11  -  OTHER INFORMATION

ITEM 5.  Other  Information

     In September,  Tomas J. Bamberger was appointed  Executive Vice President /
Senior  Lender.  Mr.  Bamberger has extensive  lending  experience in the Lehigh
Valley. Prior to joining the Bank, he was employed as Executive Vice President /
Senior  Loan  Officer  for  Summit  Bank  and  First  Valley  Bank  prior to its
acquisition.

     Also in September,  Gerald E. Kemmerer  retired as Senior Vice President of
Lending.  Mr.  Kemmerer will continue with the Bank as Senior Vice  President of
Special Projeects.


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 13, 1997                BY: ______________________________
                                            S. ERIC BEATTIE
                                            PRESIDENT
                                           (PRINCIPAL EXECUTIVE OFFICER)


DATE:  November 13, 1997                BY:_______________________________
                                           REID L. HEEREN
                                           VICE PRESIDENT
                                          (PRINCIPAL FINANCIAL OFFICER)