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 March 31, 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 S. MAIN ST., NAZARETH, PA                              18064
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE                    (ZIP CODE)

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

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

        YES     X            NO   _____

INDICATE THE NUMBER OF SHARES  OUTSTANDING  OF EACH OF THE  ISSUER'S  CLASSES OF
COMMON  STOCK AS OF THE  LATEST  PRACTICABLE  DATE:  1,562,673  SHARES OF COMMON
STOCK, $5 PAR VALUE, OUTSTANDING ON MARCH 31, 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                             16
     ITEM 6  -  Exhibits and Reports on Form 8-K              16


SIGNATURES                                                    17

<PAGE>

                  FIRST COLONIAL GROUP, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                             (Dollars in Thousands)
                                  (Unaudited)
<TABLE>
ASSETS                                                 March 31       Dec. 31
                                                         1997           1996
                                                       --------       --------
<S>                                                 <C>            <C>   
Cash and Due From Banks                               $  10,832      $  11,729
Federal Funds Sold                                           --          2,200
                                                       --------       --------
  Total Cash and Cash Equivalents                        10,832         13,929
Interest-Bearing Deposits With Banks                        142            285
Investment Securities Held-to-Maturity                   21,585         20,999
  (Fair Value:  Mar. 31, 1997 - $21,541;
   Dec. 31, 1996 -  $21,124)
Securities Available-for-Sale at Fair Value              63,325         56,779
Mortgage Loans Held-for-Sale                              1,435            721

Loans, Net of Unearned Discount                         224,153        220,117
  LESS:  Allowance for Possible Loan Losses              (2,537)        (2,532)
                                                       --------       --------
    Net Loans                                           221,616        217,585
Premises and Equipment                                    7,210          7,030
Accrued Interest Income                                   2,451          2,020
Other Real Estate Owned                                     670            595
Other Assets                                              2,876          2,409
                                                       --------       --------
    TOTAL ASSETS                                      $ 332,142      $ 322,352
                                                       ========       ========
LIABILITIES
 Deposits
  Non-Interest Bearing Deposits                       $  31,547      $  31,450
  Interest-Bearing Deposits                             243,157        236,218
                                                       --------       --------
    Total Deposits                                      274,704        267,668
 Securities Sold Under Agreements to Repurchase           3,113          3,795
 Short-Term Borrowing                                     3,330             --
 Long-Term Debt                                          18,458         18,512
 Accrued Interest Payable                                 3,071          3,205
 Other Liabilities                                        2,473          2,367
                                                       --------       --------
    TOTAL LIABILITIES                                   305,149        295,347
                                                       --------       --------
SHAREHOLDERS' EQUITY
 Preferred Stock, Par Value $5.00 a share                    --             --
  Authorized - 500,000 shares, none issued
 Common Stock, Par Value $5.00 a share                    7,813          7,803
  Authorized - 10,000,000 shares  
  Issued --     1,562,673 shares at Mar.1997
  and 1,560,634 shares at Dec. 31, 1996
 Additional Paid in Capital                               9,247          9,212
 Retained Earnings                                       10,403          9,975
 Less Treasury Stock at Cost                                 --            (20)
 Employee Stock Ownership Plan Debt                        (458)          (512)
 Net Unrealized Gain (Loss) on Securities 
   Available-for-Sale                                       (12)           347
                                                       --------       --------
Total Shareholders' Equity                               26,993         26,805
                                                       --------       --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY             $332,142       $322,352
                                                       ========       ========
</TABLE>

See accompanying notes to interim consolidated financial statements.

<PAGE>

                  FIRST COLONIAL GROUP, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME
                             (Dollars in Thousands)
                                  (Unaudited)
<TABLE>
                                                        Three Months Ended
                                                     Mar. 31,      Mar. 31, 
                                                      1997          1996
                                                   ---------      ---------
<S>                                               <C>            <C>   
INTEREST INCOME:
     Interest and Fees on Loans                     $  4,718       $  4,313
     Interest on Investment Securities
        Taxable                                        1,104          1,110
        Tax-Exempt                                       190            123
     Interest on Other Investments
        Deposits With Banks                               17             31
        Federal Funds Sold                                 1              2
                                                   ---------      ---------
           Total Interest Income                       6,030          5,579
                                                   ---------      ---------
INTEREST EXPENSE:
     Interest on Deposits                              2,213          2,177
     Interest on Repurchase Agreements                    34             29
     Interest on Short-Term Borrowing                     35            108
     Interest on Long-Term Debt                          275             30
                                                   ---------      ---------
           Total Interest Expense                      2,557          2,344
                                                   ---------      ---------
NET INTEREST INCOME                                    3,473          3,235
Provision for Possible Loan Losses                       113            105
                                                   ---------      ---------
        Net Interest Income After Provision
           For Possible Loan Losses                    3,360          3,130
                                                   ---------      ---------
OTHER INCOME:
     Trust Income                                        187            174
     Service Charges on Deposit Accounts                 293            244
     Investment Securities Gains, Net                    140            126
     Gain (Loss) on the Sale of Mortgage Loans            (1)             6
     Other Operating Income                              142            131
                                                   ---------      ---------
           Total Other Income                            761            681
                                                   ---------      ---------
OTHER EXPENSES:
     Salaries and Employee Benefits                    1,481          1,414
     Net Occupancy and Equipment Expense                 532            545
     Other Operating Expenses                          1,141            995
                                                   ---------      ---------
           Total Other Expenses                        3,154          2,954
                                                   ---------      ---------

Income Before Income Taxes                               967            857
Provision for Income Taxes                               263            242
                                                   ---------      ---------

NET INCOME                                           $   704       $    615
                                                   =========      =========
     Net Income Per Share                            $  0.46       $   0.41
                                                   =========      =========
     Average Shares Outstanding                    1,537,180      1,517,383
</TABLE>


See accompanying notes to interim consolidated financial statements.

<PAGE>

                  FIRST COLONIAL GROUP, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in Thousands)
<TABLE>
                                                     Three Months Ended
                                                      March 31,    March 31, 
                                                         (Unaudited)
<S>                                                 <C>          <C>   
OPERATING ACTIVITIES
Net Income                                            $    704     $    615
Adjustments to Reconcile Net Income to Net Cash
  Provided by Operating Activities:
    Provision for Possible Loan Losses                     113          105
    Depreciation and Amortization                          202          176
    Amortization of Security Discounts                     (16)         (32)
    Amortization of Security Premiums                       40           38
    Amortization of Deferred Fees on Loans                  (7)          19
    Mortgage Loans Originated for Sale                  (4,201)      (3,080)
    Mortgage Loan Sales                                  3,487        1,332
    (Gain) Loss on Sale of Mortgage Loans                    1           (6)
    Investment Securities Gains, Net                      (140)        (126)
  Changes in Assets and Liabilities:
    Increase in Accrued Interest Income                   (431)        (324)
    Decrease in Accrued Interest Payable                  (134)        (315)
    Net Increase in Other Assets                          (471)        (417)
    Net Increase in Other Liabilities                      291          121
                                                      --------     --------
Net Cash (Used In) Operating Activities                   (563)      (1,894)
                                                      --------     --------
INVESTING ACTIVITIES
Proceeds from Maturities of Securities 
  Available-for-Sale                                     1,281        5,831
Proceeds from Maturities of Securities 
  Held-to-Maturity                                         415        1,621
Proceeds from Sales of Securities Available-for-Sale     2,556        2,698
Purchase of Securities Available-for-Sale              (10,808)     (13,063)
Purchase of Securities Held-to-Maturity                 (1,004)        (998)
Net Decrease in Interest Bearing Deposits With Banks       143          528
Net Increase in Loans                                   (4,397)        (653)
Purchase of Premises and Equipment, Net                   (378)        (235)
Proceeds from Sale of Other Real Estate Owned              184          155
                                                      --------     --------
Net Cash (Used In) Investing Activities                (12,008)      (4,116)
                                                      --------     --------

FINANCING ACTIVITIES
Net Increase in Interest and Non-Interest
 Bearing Demand Deposits and Savings Accounts            3,105        2,473
Net Increase in Certificates of Deposits                 3,931        1,521
Proceeds from Sale of Treasury Stock                        20           --
Net (Decrease) in Repurchase Agreements                   (682)      (3,577)
Net Increase in Short-Term Borrowings                    3,330          575
Proceeds from Issuance of Stock                             45           55
Cash Dividends Paid                                       (276)        (245)
                                                      --------     --------
Net Cash Provided by Financing Activities                9,473          802
                                                      --------     --------
(Decrease) in Cash and Cash Equivalents                 (3,097)      (5,208)
Cash and Cash Equivalents, January 1                    13,929       15,549
                                                      --------     --------
Cash and Cash Equivalents, March 31,                  $ 10,832     $ 10,341
                                                      ========     ========
</TABLE>


See accompanying notes to interim consolidated financial statements.

<PAGE>

                  FIRST COLONIAL GROUP, INC. AND SUBSIDIARIES

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

                                  (Unaudited)


NOTE A  -  GENERAL

The accompanying  financial statements,  footnotes and discussion should be read
in conjunction with the audited financial statements,  footnotes, and discussion
contained in the Company's Annual Report for the year ended December 31, 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  months  ended  March 31,  1997 are not  necessarily
indicative  of results  to be  expected  for the full year or any other  interim
period.

NOTE B  -  CASH DIVIDENDS

On February  21, 1997 the Company  paid its 1997 first  quarter  dividend on its
common stock of $.18 per share to shareholders of record on February 7, 1997.

NOTE C  -  STOCK DIVIDEND

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

NOTE D  -  NEW ACCOUNTING PRONOUNCEMENT

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.  The pro forma effect
of adopting  the new  standard  would be basic  earnings  per share of $0.46 and
$0.41 and diluted  earnings per share of $0.46 and $0.41 for the quarters  ended
March 31, 1997 and 1996.

<PAGE>

NOTE E  -  IMPAIRED LOANS

On  January  1, 1995 the  Company  adopted  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".  SFAS No. 114  requires  that a creditor
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 the  observable  market
price of a loan,  or the fair value of the  collateral if the loan is collateral
dependent.  Regardless  of the  measurement  method,  a  creditor  must  measure
impairment  based  on  the  fair  value  of the  collateral  when  the  creditor
determines that  foreclosure is probable.  SFAS No. 118 allows  creditors to use
existing methods for recognizing interest income on impaired loans.

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

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

                                                   March 31, 
                                                     1997
                                                   --------
     Principal amount of impaired loans            $721,000
     Deferred loan costs                              6,000
                                                   --------
                                                    727,000
     Less valuation allowance                       197,000
                                                   --------
                                                   $530,000

On January 1, 1995 a valuation for credit losses  related to impaired  loans was
established. The activity in this allowance account for the quarter ending March
31, 1997 is as follows:

     Valuation allowance at January 1, 1997        $128,000
     Provision for loan impairment                   95,000
     Direct charge-offs                             (26,000)
                                                   --------
     Valuation allowance at March 31, 1997         $197,000

<PAGE>

Total cash  collected on impaired  loans during the quarter ended March 31, 1997
was  $416,000,   of  which  $401,000  was  credited  to  the  principal  balance
outstanding  on such  loans and  $15,000  was  recognized  as  interest  income.
Interest  that would have been accrued on impaired  loans during the quarter was
$20,000.  Interest  income  recognized  during the quarter was  $6,030,000.  The
valuation allowance for impaired loans of $197,000 at March 31, 1997 is included
in the "Allowance for Possible Loan Losses" which amounts to $2,537,000 at March
31,  1997.  The  provision  for loan  impairment  of $95,000 for the three month
period  ended March 31, 1997 is included in the  "Provision  for  Possible  Loan
Losses" as  reflected  on 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 March 31, 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 trends of
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  performance of the Company and its wholly owned  subsidiaries  for the
three month period ended March 31, 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  liquidity  are  money  market  investments,
securities  available-for-sale,  funds  received  from the  repayment  of loans,
short-term  borrowings and borrowings  from the Federal Home Loan Bank. At March
31, 1997, cash, due from banks, Federal funds sold and interest bearing deposits
with banks totaled $10,974,000,  and securities maturing within one year totaled
$3,015,000.  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  $3,113,000 at March 31, 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 $38,000 at March 31,  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 March 31, 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  $12,148,000  at March 31,  1997,  subject  to  certain
collateral requirements.  The Bank had short-term (overnight) borrowings against
this  line  of  $3,330,000  at  March  31,  1997.  The  Bank  had no  short-term
(overnight)  borrowings at December 31, 1996. The Bank had additional borrowings
from the Federal Home Loan Bank at March 31, 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.

<PAGE>

     Cash flows for the three months ended March 31, 1997 consisted of cash used
in operating  activities  of $563,000 and cash used in investing  activities  of
$12,007,000,  offset in part by cash provided by financing activities $9,473,000
resulting in a decrease in cash and cash equivalents of $3,097,000.

     Cash  used  in  operating  activities  was the  result  of  mortgage  loans
originated for sale of $4,201,000,  an increase in other assets of $471,000,  an
increase  in accrued  interest  income of  $431,000  and a  decrease  in accrued
interest  payable of  $134,000,  partially  reduced by net  operating  income of
$704,000,  mortgage loan sales of $3,487,000,  increases in other liabilities of
$291,000, depreciation and amortization of $202,000 and a provision for possible
loan losses of $113,000.  Cash was used in investing activities for the purchase
of  securities   available-for-sale  and  held-to-maturity  of  $10,808,000  and
$1,004,000,  respectively,  net increase in loans to customers of $4,397,000 and
the net purchase of premises and equipment of $378,000,  partially offset by the
proceeds from the sale of available-for-sale securities of $2,556,000,  proceeds
from the maturities of available-for-sale  securities of $1,281,000 and proceeds
from  maturities of  held-to-maturity  securities of $415,000.  Cash provided by
financing  activities  consisted  principally  of increases in  certificates  of
deposit  of  $3,300,000,  increases  in  short-term  (overnight)  borrowings  of
$3,105,000 and increases in interest and  non-interest  bearing demand  deposits
and savings  accounts of  $3,931,000  offset in part by a decrease in repurchase
agreements  of $682,000  and the payment of cash  dividends  of  $276,000.  Also
affecting  financing  activities  was the issuance of 2,039 new shares of common
stock  and  861  treasury  shares  of  common  stock  pursuant  to the  Dividend
Reinvestment Plan for proceeds of $45,000 and $20,000, respectively.

     The Company  recognizes  the  importance of  maintaining  adequate  capital
levels to support  sound,  profitable  growth  and to  encourage  depositor  and
investor  confidence.  Shareholders' equity at March 31, 1997 was $26,993,000 as
compared to  $26,805,000  at December 31,  1996,  for an increase of $188,000 or
0.70%.  This  increase  was  attributable  to a $428,000  increase  in  retained
earnings  during the first three months of 1997 as a result of operating  income
of $704,000  less the payment of a cash  dividend of  $276,000.  Proceeds of the
sale of common stock in the Dividend  Reinvestment Plan of $45,000,  proceeds of
the sale of  treasury  stock in the  Dividend  Reinvestment  Plan of  $20,000  a
reduction in the unrealized  gain of securities  available-for-sale  of $359,000
due to a  decrease  in the fair value of these  securities  (see  discussion  on
"Investment  Securities"),  and a  reduction  of $54,000 of debt  related to the
Company's Employee Stock Ownership Plan contributed to the change in shareholder
equity.

     The Company  maintains a Dividend  Reinvestment  and Stock  Purchase  Plan.
During  the first  three  months of 1997,  2,900  shares  of common  stock  were
purchased from authorized and unissued shares at an average price of $22.629 per
share for proceeds of approximately $65,000.

<PAGE>

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

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

<TABLE>

                                                                 To Be Well
                                                                 Capitalized
                                                 Required        Under Prompt
                                                For Capital       Corrective
                                Actual           Adequacy           Action
(Dollars in Thousands)
 At December 31, 1995        Amount   Ratio     Amount   Ratio   Amount  Ratio
<S>                       <C>      <C>       <C>       <C>    <C>      <C>

Total Capital
(To Risk-Weighted Assets)
  Company, (Consolidated)   $26,060  15.86%    $13,142   8.00%     N/A
  Bank                      $22,308  13.66%    $13,061   8.00%  $16,327  10.00%

Tier 1 Capital
(To Risk-Weighted Assets)
  Company, (Consolidated)   $24,014  14.62%    $ 6,571   4.00%     N/A
  Bank                      $20,262  12.41%    $ 6,531   4.00%  $ 9,796   6.00%

Tier 1 Capital
(To Average Assets,
 Leverage)
  Company, (Consolidated)   $24,014   8.20%    $11,719   4.00%     N/A
    Bank                    $20,262   6.80%    $11,915   4.00%  $14,895   5.00%
</TABLE>

<PAGE>

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

Assets and Liabilities

     Total assets at March 31, 1997 were  $332,142,000, representing an increase
of 3.04% over total  assets of  $322,352,000  at  December  31,  1996.  Deposits
increased  by  $7,036,000  or 2.63% from  $267,668,000  on December  31, 1996 to
$274,704,000 on March 31, 1997.  Contributing to this increase were increases in
certificates  of deposit of  $3,931,000,  savings and money  market  deposits of
$3,153,000,  and non-interest  bearing checking  deposits of $97,000,  partially
offset by a decrease in  interest-bearing  checking deposits of $145,000.  Loans
outstanding at March 31, 1997 were  $224,153,000  as compared to $220,117,000 at
December 31, 1996.  This is an increase of  $4,036,000  or 1.83%.  The growth in
loans  was  primarily  the  result  of an  increase  of  $2,329,000  or 2.69% in
residential  real  estate  loans,  $1,591,000  or 2.72% in  consumer  loans  and
$116,000 or 0.15% in  commercial  loans  during the first three  months of 1997.
During the first quarter of 1997,  $3,487,000 of  residential  real estate loans
were sold. All of the loans sold were  originated in 1996. The Bank continues to
service all of these loans.  There were  $1,435,000 of  residential  real estate
loans  identified as  held-for-sale at March 31, 1997. The loan to deposit ratio
was 81.6% at March 31, 1997 and 82.2% at December 31, 1996.

     Premises and  equipment  increased by $180,000 to  $7,210,000  at March 31,
1997 from  $7,030,000  at December 31, 1996.  This  increase was  primarily  the
result of the purchase of furniture and equipment.

     The Company had long-term  debt totaling  $18,458,000  at March 31, 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 March 31, 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 are 5.96% fixed,  5.89% fixed and 5.84% variable (changes  quarterly based
on the 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 loans.

<PAGE>

     At March 31, 1997 the Bank had total short-term borrowings from the Federal
Home  Loan  Bank  of  Pittsburgh  of  $3,330,000  against  a line of  credit  of
$12,148,000.  The Company had no  short-term  borrowings  at December  31, 1996.
There were no overnight borrowings outstanding at December 31, 1996.

Results of Operations

     Net income for the three months ended March 31, 1997 was $704,000  compared
to $615,000 for the same period in 1996.  The earnings  improvement is primarily
attributable to an increase in net interest income.  During the first quarter of
1997, net interest  income  increased  $238,000 or 7.4% as compared to March 31,
1996.  Also  affecting  earnings  was a $66,000  increase in total other  income
exclusive of security gains of $140,000,  an increase in total other expenses of
$200,000 and and increase in Federal income taxes of $21,000.

     Per share  earnings  for the three  months  ended March 31, 1997 were $0.46
compared to $0.41 for the first three months of 1996. Average shares outstanding
during this three month period were 1,537,180 in 1997 and 1,517,383 in 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 $3,473,000 for the three months ended March 31, 1997, as compared to
$3,235,000 for the three months ended March 31, 1996, an increase of $238,000 or
7.4%.  During the three month  period  ended  March 31,  1997,  interest  income
increased  $451,000 or 8.1% and interest  expense  increased by $213,000 or 9.1%
over the same period in 1996.  The increase in interest  expense was due in part
to growth in certificates of deposits.

     This increase in net interest  income during this three month period is due
in part to the  increase in  interest  earned on loans  being  greater  than the
increase in interest  paid on  deposits  as a result of rising  interest  rates.
Interest earning assets,  including loans were $310,640,000 at March 31, 1997 as
compared to  $279,004,000  at March 31,  1996.  This  represents  an increase of
$31,636,000  or 11.3%.  Interest  bearing  liabilities  at March  31,  1997 were
$268,058,000  as  compared  to  $240,813,000.  This  represents  an  increase of
$27,245,000 or 11.3%.

Other Income and Other Expenses

     Otherincome  for the three  months ended March 31, 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 $621,000 as compared to
$555,000  for the same  period in 1996 This was an increase of $66,000 or 11.9%.
In the three month period ended March 31, 1997 service charges were $293,000,  a
$49,000 or 20.1%  increase  over the 1996 amount of  $244,000.  The  increase in
service  charge  income is the  result of  increases  in deposit  accounts.  The
revenues from the Trust Department operations were $187,000 for the three months
ended March 31, 1997 as compared to $174,000  for the three  months  ended March
31, 1996,  an increase of $13,000 or 7.5%.  During the three months ending March
31, 1997,  sales of mortgage loans resulted in a loss of $1,000 as compared to a
gain of $16,000  for the same  period in 1996.  Other  operating  income for the
three  months  ended March 31, 1997 was $142,000 as compared to $131,000 for the
same period in 1996, an increase of $11,000 or 8.4%.

<PAGE>

     Other expenses for  the three  months  ended  March 31,  1997 increased  by
$200,000 or 6.8%, to  $3,154,000  from  $2,954,000  for the same period in 1996.
Salaries and employee  benefits were $1,481,000 for the three months ended March
31, 1996 as compared to  $1,414,000  for the three  months  ended March 31, 1996
representing  an increase of $67,000 or 4.7%.  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 $532,000 for the three months ended
March 31,  1997 and  $545,000  for the three  months  ended  March 31,  1996,  a
decrease of $13,000 or 2.4%.  Most of this decrease 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  months ended March 31, 1997 were  $1,141,000  in relation to $995,000 for
the three months ended March 31, 1996, an increase of $146,000 or 14.7%.

Investment Securities

     The  Company  classifies  its debt and  marketable  securities  into  three
categories: trading, available-for-sale, and held-to-maturity as provided by the
Financial  Accounting  Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities".  The Company had no trading securities at March 31,
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 $63,325,000 in
available-for-sale  securities at March 31, 1997 with a net  unrealized  loss of
$18,000.  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 March 31, 1997 $2,556,000 of securities
available-for-sale  were  sold  for  a net  gain  of  $140,000  as  compared  to
$2,698,000 of securities available-for-sale were sold for a net gain of $126,000
for the same time period in 1996.

     Held-to-maturity  securities  totaling  $21,585,000  at March 31,  1997 are
carried at cost. 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 until maturity. The Company, at March 31, 1997 and December 31, 1996,
did not hold any  securities  identified as  derivatives.  At March 31, 1997 and
December  31, 1996 the Company did hold  $2,000,000  and  $1,000,000,  par value
respectively  in  various  U. S.  Agency  Step-up  or Multi  Step-up  securities
($1,000,000 in  available-for-sale  and $1,000,000 in  held-to-maturity at March
31, 1997).

<PAGE>

Allowance and Provision for Possible Loan Losses

     The  provision  for loan losses for the three month  period ended March 31,
1997 was  $113,000  compared to a provision  of $105,000  for the same period in
1997.  Net loan losses were  $107,000  and  $161,000  for the three month period
ending March 31, 1997 and 1996,  respectively.  The  allowance for possible loan
losses at March 31,  1997  totaled  $2,537,000,  an  increase of $5,000 over the
December 31, 1996 amount of  $2,532,000.  The allowance for possible loan losses
as a percentage of total loans  outstanding as of March 31, 1997 was 1.13%. This
compares to 1.15% at December 31, 1996.  As provided by SFAS No. 114, as amended
by SFAS No. 118, $197,000 of the Allowance for Possible Loan Losses is allocated
to impaired loans at March 31, 1997 (see Note E "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 effort, that
the  borrower's  financial  condition is such that the collection of interest is
doubtful.  The Company  views  these loans as  non-accrual,  but  considers  the
principal to be  substantially  collectible  because the loans are  protected by
adequate  collateral or other  resources.  Interest on these loans is recognized
only when  received.  The  following  table shows the balance of  non-performing
loans for each of the periods indicated.

NON-PERFORMING LOANS
<TABLE>

                                               March 31,     December 31, 
<S>                                         <C>             <C>   
Non-accrual loans on a cash basis             $1,006,000      $1,440,000
Non-accrual loans as a percentage
   of total loans                                   .45%            .65%
Accruing loans past due 90 days
   or more                                    $1,100,000      $  986,000
Accruing loans past due 90 days
   or more as a percentage of
   total loans                                      .49%            .45%
Other Real Estate Owned from
   Foreclosed Property                        $  670,000      $  595,000
</TABLE>

     Thereare no significant loans classified for regulatory  purposes that have
not been included in the above table of non-performing loans. The Company has no
significant  loans that qualify as "Troubled Debt  Restructuring"  as defined by
the Financial  Accounting  Standards Board's  Statement of Financial  Accounting
Standards  No. 15  "Accounting  for  Debtors and  Creditors  for  Troubled  Debt
Restructuring" at March 31, 1997.

<PAGE>

PART II  -  OTHER INFORMATION

ITEM 5. Other Information

        None



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 8K

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

<PAGE>

                                   SIGNATURES


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



                                        FIRST COLONIAL GROUP, INC.


DATE:   May 9, 1996                     BY: /S/  S. ERIC BEATTIE
                                             S. ERIC BEATTIE
                                             PRESIDENT
                                            (PRINCIPAL EXECUTIVE OFFICER)


DATE:   May 9, 1996                     BY: /S/  REID L. HEEREN
                                             REID L. HEEREN
                                             VICE PRESIDENT
                                            (PRINCIPAL FINANCIAL OFFICER)