UNITED STATES
                    SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C. 20549

                                FORM 10-Q

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

             For the quarterly period ended September 30, 1999

                      Commission file number 0-133312


                          FIRST LIBERTY BANK CORP.
       (Exact name of registrant issuer as specified in its charter)

                           Pennsylvania23-2275242
              (State or other jurisdiction of (I.R.S. Employer
             incorporation or organization) Identification No.)

     645     Washington  Avenue;  P.O. Box 39;  Jermyn  Pennsylvania  18433-0039
             (Address of principal executive offices)(Zip Code)

                    Issuer's telephone number 570-876-6500

                             THE FIRST JERMYN CORP.
                (Former name,  former address and former fiscal year, if changed
since last report) Check  whether the issuer (1) has filed all reports  required
to be filed by Section 13 or 15(d) of the  Exchange  Act of 1934 during the past
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 __

State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.

          Class                            Outstanding at September 30, 1999
          -----                            ---------------------------------
Common stock, $1.25 par value                          1,606,951




<PAGE>





                    FIRST LIBERTY BANK CORP. AND SUBSIDIARIES
                                    FORM 10-Q

                         QUARTER ENDED SEPTEMBER 30, 1999

                                      INDEX

                                                                          Page
PART 1 - FINANCIAL INFORMATION

         ITEM 1. FINANCIAL STATEMENTS (Unaudited):

         Consolidated Balance Sheets - September 30, 1999 and
                  December 31, 1998                                          1

         Consolidated Statements of Income - Three Months and Nine Months
                  Ended September 30, 1999 and 1998                          2

         Consolidated Statements of Cash Flows
                  Nine Months Ended September 30, 1999 and 1998              3

         Notes to Consolidated Financial Statements
                  Nine Months Ended September 30, 1999 and 1998
                  and December 31, 1998                                      4

ITEM 2.  Management's Discussion and Analysis of
                  Financial Condition and Results of Operations              6

ITEM 3.  Quantitative and Qualitative Disclosures
                   About Market Risk                                        13

PART II - OTHER INFORMATION                                                 14

SIGNATURES                                                                  15





<PAGE>


<TABLE>
PART I.   FINANCIAL INFORMATION
         Item I.  Financial Statements

FIRST LIBERTY BANK CORP. AND SUBSIDIARIES

Consolidated Balance Sheets (unaudited)
(In thousands of dollars, except per share information)
-------------------------------------------------------------------------------------------------------------------
                                                                            September 30,              December 31,
Assets                                                                          1999                      1998
-------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>                         <C>

Cash and due from banks                                                          $16,538                20,628
Federal funds sold                                                                   ---                 5,000
-------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents                                                         16,538                25,628

Securities available for sale                                                    191,428               196,563

Loans, gross                                                                     412,518               376,856
Less: Unearned discount and origination fees                                        (730)                 (941)
          Allowance for loan losses                                               (4,784)               (4,618)
-------------------------------------------------------------------------------------------------------------------
Loans, net                                                                       407,004               371,297

Accrued interest receivable                                                        4,090                 3,914
Bank premises, leasehold improvements and furniture and equipment-net             12,918                10,307
Real estate owned other than bank premises                                           562                   479
Other assets                                                                      11,063                 7,182
-------------------------------------------------------------------------------------------------------------------

Total assets                                                                    $643,603               615,370

Liabilities

Deposits:
   Noninterest-bearing demand                                                   $ 49,309                55,272
   Interest-bearing                                                              459,680               441,328
-------------------------------------------------------------------------------------------------------------------

Total deposits                                                                   508,989               496,600
-------------------------------------------------------------------------------------------------------------------
Other borrowed money                                                              50,591                55,660
Fed Funds Purchased                                                               21,500                   ---
Accrued interest payable                                                           2,344                 2,218
Other liabilities                                                                  1,676                 1,984
-------------------------------------------------------------------------------------------------------------------

Total liabilities                                                                585,100               556,462
-------------------------------------------------------------------------------------------------------------------

Shareholders' Equity
Common stock, $1.25 par value, authorized 2,500,000 shares;
     Issued 1,606,951 and 1,602,342 respectively shares                            2,009                 2,003
Surplus                                                                            6,053                 5,905
Retained earnings                                                                 53,912                50,435
Accumulated other comprehensive income (loss)                                     (3,275)                  761
Less treasury stock-at cost (15,205 shares)                                         (196)                 (196)
-------------------------------------------------------------------------------------------------------------------
Total shareholders' equity                                                        58,503                58,908
-------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity                                      $643,603               615,370
===================================================================================================================
</TABLE>


                                                         1

<PAGE>




FIRST LIBERTY BANK CORP. AND SUBSIDIARIES

Consolidated Statements of Income (unaudited)
(In thousands of dollars, except per share information)
<TABLE>
----------------------------------------------------------------------------------------------------------------------------
                                                             Three months                               Nine months
                                                          Ended September 30                        Ended September 30
                                                          1999          1998                        1999          1998
----------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>                  <C>                   <C>                  <C>
Interest income:
   Interest and fees on loans                         $ 7,782              7,605                  22,704              22,736
   Interest on interest bearing deposits                   11                178                     433                 385
   Interest and dividends on securities:
     Taxable                                            2,467              2,040                   6,765               6,468
     Non-Taxable                                          504                618                   1,705               1,746
  Interest on federal funds sold                          ---                146                      72                 490
----------------------------------------------------------------------------------------------------------------------------

Total interest income                                  10,764             10,587                  31,679              31,825
----------------------------------------------------------------------------------------------------------------------------
Interest expense:
     Deposits                                           4,800              4,983                  14,371              14,878
     Fed Funds Purchased                                  111                ---                     114                  25
     Other borrowed money                                 709                713                   2,108               2,102
----------------------------------------------------------------------------------------------------------------------------

Total interest expense                                  5,620              5,696                  16,593              17,005
----------------------------------------------------------------------------------------------------------------------------

Net interest income                                     5,144              4,891                  15,086              14,820
Provision for loan losses                                 180                135                     540                 405
----------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses     4,964              4,756                  14,546              14,415
----------------------------------------------------------------------------------------------------------------------------

Noninterest income:
     Service charges and fees                             169                122                     513                 518
     Gains on sale of securities                          138                 15                     225                  47
     Trust                                                155                111                     492                 358
     Other                                                205                247                     530                 414
----------------------------------------------------------------------------------------------------------------------------

Total noninterest income                                  667                495                   1,760               1,337
----------------------------------------------------------------------------------------------------------------------------

Noninterest expense:
     Salaries and benefits                              1,837              1,854                   5,380               5,311
     Net occupancy and furniture/
     equipment expenses                                   625                590                   1,794               1,785
     Data processing services                              66                156                     262                 463
     Merger related costs                                 ---                ---                      --               1,098
        Other expenses                                    981              1,009                   2,841               2,926
----------------------------------------------------------------------------------------------------------------------------

Total noninterest expense                               3,509              3,609                  10,277              11,583
----------------------------------------------------------------------------------------------------------------------------

Income before federal income tax provision              2,122              1,642                   6,029               4,169
Income tax provision                                      430                404                   1,280               1,295
----------------------------------------------------------------------------------------------------------------------------

Net income                                              1,692              1,238                   4,749               2,874
----------------------------------------------------------------------------------------------------------------------------
Other comprehensive income net of tax
   Unrealized gains on securities
       Unrealized holding (loss)/gain arising
           during the period                             (870)               325                  (3,887)                451
       Less reclassification adjustment for gains
           included in net income                         (91)               (10)                   (149)                (31)
----------------------------------------------------------------------------------------------------------------------------
 Comprehensive income                                 $   731              1,553                     713               3,294
============================================================================================================================

Per share information
    Net income-basic                                     1.06                .78                    2.99                1.82
    Net income diluted                                   1.06                .78                    2.96                1.80

</TABLE>
                                                         2

<PAGE>



<TABLE>
FIRST LIBERTY BANK CORP. AND  SUBSIDIARIES

Consolidated Statements of Cash Flows (unaudited)
(In thousands of dollars)
------------------------------------------------------------------------------------------------------------------------------
                                                                                           Nine months ended September  30
                                                                                           1999                        1998
                                                                                           ----                        ----
------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>                         <C>
Operating activities:
    Net income                                                                          $ 4,749                     $ 2,874
    Adjustments to reconcile net income to net cash provided by
          operating activities   :
              Gains on sales of securities                                                 (225)                        (47)
              Provision for loan losses                                                     540                         405
              Depreciation and amortization of investment securities, bank
                     premises, leasehold improvements and furniture and equipment           812                         658
              Decrease/(Increase) in interest receivable and other assets                (1,336)                      1,626
              (Decrease)/Increase in interest payable and other liabilities                (182)                        169
------------------------------------------------------------------------------------------------------------------------------

Net cash provided by operating activities                                                 4,307                       5,685
------------------------------------------------------------------------------------------------------------------------------

Investing activities:
     Purchases of securities held to maturity                                               ---                     (18,308)
     Proceeds from maturities of securities                                              50,979                      56,707
    Purchases of securities available for sale                                          (72,540)                    (61,170)
    Proceeds from sales of securities available for sale                                 20,215                      22,419
     Net increase in loans                                                              (36,959)                     (8,204)
    Purchases of bank premises, leasehold improvements and
              Furniture and equipment-net                                                (3,423)                       (914)
    Sales of assets acquired through foreclosure, net                                       629                         785
------------------------------------------------------------------------------------------------------------------------------

Net cash used by investing activities                                                   (41,099)                     (8,685)
------------------------------------------------------------------------------------------------------------------------------

Financing activities:
     Net increase in deposits                                                            12,389                      12,861
     Increase in Fed Funds Purchased                                                     21,500                      10,000
    Principal payments on capitalized lease obligation                                      (69)                        (63)
    Repayment of Borrowed funds                                                          (5,000)                         --
    Proceeds of stock issued thru exercise options                                          154                         349
Dividends paid                                                                           (1,272)                     (1,060)
-----------------------------------------------------------------------------------------------------------------------------

Net cash provided by financing activities                                                27,702                      22,087
-----------------------------------------------------------------------------------------------------------------------------

Increase/(decrease) in cash and  cash equivalents                                        (9,090)                     19,087
Cash and cash equivalents at beginning of period                                         25,628                      21,389
-----------------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents at end of period                                               16,538                      40,476
=============================================================================================================================

Cash paid during the period:
     Interest                                                                           $16,467                      16,760
     Federal Income Taxes                                                                 1,227                       1,151
-----------------------------------------------------------------------------------------------------------------------------

Noncash transactions:
     Transfer of loans to real estate owned other than bank premise                     $   712                         364
 Net unrealized gain on securities available for sale, net of tax                       $(4,036)                        420
=============================================================================================================================
</TABLE>
                                                         3

<PAGE>



FIRST LIBERTY BANK CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)
------------------------------------------------------------------------------

(1)      Summary of Significant Accounting Policies

         Basis of Financial Statement Presentation

         The  accompanying  consolidated  financial  statements of First Liberty
         Bank Corp. and  subsidiaries  (the Company) were prepared in accordance
         with  instructions  to  Form  10-Q,  and  therefore,   do  not  include
         information  or  footnotes  necessary  for a complete  presentation  of
         financial position,  results of operations and cash flows in conformity
         with generally accepted  accounting  principles.  However,  all normal,
         recurring  adjustments  which,  in  the  opinion  of  management,   are
         necessary for a fair  presentation  of the financial  statements,  have
         been included. These financial statements should be read in conjunction
         with the audited financial statements and the notes thereto included in
         the Company's Annual Report for the period ended December 31, 1998. The
         results  for  the  nine  months  ended   September  30,  1999  are  not
         necessarily indicative of the results that may be expected for the year
         ended December 31, 1999.

         Business

         The  Company's  principal  subsidiary,  First Liberty Bank & Trust (the
         Bank),  conducts  business  from its  branch  bank  system  located  in
         Lackawanna and Luzerne Counties,  Pennsylvania.  The Bank is subject to
         competition from other financial institutions and other companies which
         provide financial  services.  The Bank is subject to the regulations of
         certain federal and state agencies and undergoes periodic  examinations
         by those regulatory authorities.

         Principles of Consolidation

         On February 16, 1999, the Company merged its two principal subsidiaries
         , The First  National Bank of Jermyn and NBO National  Bank,  under the
         name First  Liberty  Bank & Trust.  Concurrent  with this  merger,  the
         Company  converted  the  charter  of  the  Bank  to a  State  chartered
         commercial bank subject to regulation by the Pennsylvania Department of
         Banking and the Federal Reserve Bank.

         The consolidated  financial  statements  include the accounts of all of
         the Company's wholly-owned  subsidiaries.  All significant intercompany
         transactions  have  been  eliminated  in  consolidation.  Additionally,
         certain  reclassifications  have been made in order to conform with the
         current year's presentation.  The accompanying  consolidated  financial
         statements have been prepared on an accrual basis.

(2)      Earnings Per Share

         Basic  earnings per share were computed  based on the weighted  average
         number of shares outstanding  during each period.  Diluted earnings per
         share include the dilutive effect of the

                                                         4

<PAGE>



         Company's weighted average stock options outstanding.

         The  following  table sets forth the computation of basic  and  diluted
         earnings per share (in thousands)
<TABLE>
                                                   3 months ended                        9 months ended
                                                    September 30                          September 30
                                              1999                 1998            1999                1998
                                              ----                 ----            ----                ----
<S>                                       <C>                  <C>              <C>                 <C>
Numerator:
         Net Income                       $  1,692             $  1,238         $  4,749            $  2,874

Denominator:
         Denominator for basic
         earnings per weighted
         average shares                      1,591                1,580            1,590               1,579

Effect of diluted securities:
         Employee Stock options                 11                   15               12                  15
Denominator for diluted earnings             _____                _____            _____               _____
         per share adjusted weighted
         average shares and assumed
         exercise                            1,602                1,595            1,602               1,594
                                             =====                =====            =====               =====

Basic earnings per share                  $   1.06             $    .78         $   2.99            $   1.82
Diluted earnings per share                $   1.06             $    .78         $   2.96            $   1.80

</TABLE>























                                                          5

<PAGE>



Item 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Overview

The  Company's  net income for the nine months  ended  September  30, 1999 was $
4,749,000  or $ 2.96 per diluted  share  compared to $ 2,874,000  and $ 1.80 per
diluted  share  for the same  nine-months  period  in the  preceding  year.  The
increase in net income was primarily  attributable to an increase in noninterest
income, as well as decreases in noninterest expense.

The Company  recorded an  annualized  return on average  assets of 1.01% for the
nine-month  period  ending  September  30, 1999,  compared to .64 % for the same
period  in 1998.  Return  on  average  equity  of 10.80 % was  recorded  for the
nine-month period ended September 30, 1999, compared to
 6.92 % for the same period in 1998.

At September 30, 1999, the Company had total assets of $ 643.6 million  compared
to $ 615.4 million at December 31, 1998. The increase in total assets was driven
by a $ 35.7 million increase in net loans which was primarily funded by a $ 12.4
million  increase  in deposits  and a $21.5  million  increase in Federal  Funds
Purchased.

The Company is susceptible to a continued  increasing  interest rate environment
that may erode the net  interest  margin.  Strategies  to enhance  earnings  and
improve the interest  rate exposure of the Company will be  considered,  such as
the  sale  of  existing  mortgage-backed   securities  available  for  sale  and
purchasing higher yielding, rate sensitive assets with the proceeds.

The Company's wholly owned subsidiary, First Liberty Bank & Trust, is one of the
largest  community  banks in Northeastern  Pennsylvania.  The Company intends to
increase its market penetration  through,  among other things, the opening of de
novo branches.

Financial Condition

Cash and Due From Banks and Federal Funds Sold

Cash and due from banks decreased approximately $4.1 million to $16.5 million at
September  30,  1999 from $20.6  million at  December  31,  1998 as the  company
utilized excess  liquidity to pay down other borrowed money.  Federal funds sold
decreased to zero at  September  30, 1999 from $5.0 million at December 31, 1998
due to normal fluctuations resulting from the conduct of customer business.

Securities

Securities  available  for sale have  decreased  $5.1 million or 2.6 % to $191.4
million at September  30, 1999 from $196.6  million at December  31, 1998.  This
decrease was used to provide funding for growth in the Company's loan portfolio.



                                       6

<PAGE>



Loans Receivable, Net

Aggregate  loans  receivable  totaled  $407.0  million at September 30, 1999, an
increase of $35.7 million from $ 371.3 million at December 31, 1998.  The mix of
loans is substantially unchanged at those dates.

Non-Performing Assets

The Company's total non-performing  assets decreased  approximately  $578,000 to
$2.1 million or 0.32 % of total assets at September 30, 1999 as compared to $2.7
million or 0.43 % of total  assets at December  31,  1998.  Loans  greater  than
ninety days  delinquent but still  accruing  increased from $445,000 at December
31,  1998 to $  485,000  at  September  30,  1999.  Nonaccrual  loans  decreased
approximately $701,000 to $1.0 million.

Real estate owned increased from $479,000 as of December 31, 1998 to $562,000 as
of September 30, 1999, due to six foreclosed  residential properties transferred
into real estate owned. There were no significant gains or losses on the sale of
real estate owned during the quarters ended September 30, 1999 and 1998.
<TABLE>
<S>                                                     <C>                     <C>
                                                           9/30/99             12/31/98

Nonaccrual                                               1,039,000            1,740,000

Loans 90 day or more delinquent                            485,000              445,000

                                                         ---------            ---------
         Total non-performing                            1,524,000            2,185,000


Real estate owned other than

         Bank premises                                     562,000              479,000
                                                         ---------            ---------
         Total non-performing assets                     2,086,000            2,664,000
</TABLE>

At September 30, 1999, the Company's  allowance for loan losses amounted to $4.8
million or 1.16 % of gross loans receivable. At December 31, 1998, the Company's
allowance for loan losses was $4.6 million or 1.23 % of gross loans  receivable.
The allowance for loan losses as of September 30, 1999 has been deemed  adequate
by  management.  The allowance is maintained at a level  adequate to cover known
and  inherent  losses  in  the  loan  portfolio  given  the  present  past  due,
nonperforming and classified levels.

Deposits

Deposits  increased  $12.4 million or 2.49 % from $496.6 million at December 31,
1998 to $509.0  million at  September  30,  1999.  The  increase in deposits was
primarily due to an increase in  Certificate  of Deposits from the local market.
The Company believes this increase is due to the Bank's competitive rates.

                                           7

<PAGE>



Equity

At September 30, 1999,  total equity was $58.5 million or 9.09 % or total assets
compared to $58.9  million or 9.57 % of total  assets as of December  31,  1998.
Total equity  decreased  primarily due to a $4 million  decrease in  accumulated
other comprehensive  income resulting from an increase in interest rates causing
unrealized losses in the available for sale securities portfolio.  This decrease
was partially offset by an increase in retained earnings due to the retention of
net income during the intervening period.

Results of Operations

Net Income

The Company's net income for the three months ended September30,  1999 increased
to $1.7 million  compared to $1.2  million for the three months ended  September
30, 1998  primarily  due to  increases  of $253,000 and $172,000 in net interest
income and non interest income, respectively,  as well as a $100,000 decrease in
noninterest expense.

The  Company's  net income was $4.7 million for the nine months ended  September
30, 1999,  compared to $2.9 million recorded in the comparable prior period. Net
interest income before provision for loan losses  approximated $15.1 million and
$14.8  million for the nine months ended  September  30, 1999 and  September 30,
1998,  respectively.  The Company was able to increase the level of  noninterest
income by $423,000 to $1.8  million for the nine  months  ending  September  30,
1999, while  noninterest  expense decreased to $10.3 million for the nine months
ended  September 30, 1999,  compared to $11.6 million for the  comparable  prior
period primarily due to the merger related costs in 1998 which were not repeated
in 1999.

Net Interest Income

Net interest  income before  provision for loan losses  amounted to $5.1 million
and $15.1 million for the three-month and nine-month periods ended September 30,
1999 versus $4.9 million and $14.8 million for the  three-month  and  nine-month
periods  ended  September  30, 1998. A  competitive  interest  rate  environment
resulted in decreases in both interest income and interest  expense for the nine
months  ended 1999  compared to 1998.  Growth in the loan  portfolio,  increased
total interest  income,  while  aggressive  pricing  strategies  decreased total
interest expense for the three months ended September 30, 1999 versus 1998.

Total  interest  income  increased  to $10.8  million for the three month period
ended September 30, 1999 from $10.6 million during the comparable  prior period.
Total interest income decreased to $31.7 million for the nine month period ended
September 30, 1999 from $31.8 million  during the comparable  prior period.  The
average  interest-earning  assets  increased  $20.6  million for the nine months
ended  September 30, 1999 compared to the nine months ended  September 30, 1998.
However,  this was more than  offset by a 26 basis  point  decline  in the yield
earned on average interest-earning assets during the nine months ended September
30, 1999 compared to the 1998 period.

Total interest expense decreased to $5.6 million and $16.6 million for the three
and nine months ended September 30, 1999 from $5.7 million and $17.0 million for
the comparable prior period.

                                                8

<PAGE>



The decrease was due to a decrease in interest expense associated with deposits.
The average  balance of interest  bearing  deposits  increased by $14.2  million
during the nine months ended September 30, 1999, compared to the comparable 1998
period.  However,  the increased volume of deposits was more than offset by a 26
basis  point  decrease  in the  average  rates  paid for the nine  months  ended
September 30, 1999 over the comparable 1998 period.

Provision for Loan Losses

The  Company  establishes  a  provision  for loan  losses,  which is  charged to
operations,  in order to maintain the allowance for loan losses at a level which
is deemed to be appropriate  based upon an assessment of prior loss  experience,
the  volume  and type of  lending  presently  being  conducted  by the  Company,
industry standards,  past due loans, economic conditions in the Company's market
area generally and other factors related to the  collectability of the Company's
loan  portfolio.  The provision for loan losses as $180,000 for the three months
ended  September  30,  1999  compared  to $135,000  for the three  months  ended
September 30, 1998.  For the  nine-month  period ended  September 30, 1999,  the
provision for loan losses amounted to $540,000, an increase of $135,000 compared
to $405,000 for the nine months ended  September 30, 1998,  primarily due to the
growth of the loan portfolio.

Although  management  utilizes its best  judgement in  providing  for  potential
losses, there can be no assurance that the Company will not have to increase its
provisions  for loan  losses in the  future as a result of future  increases  in
non-performing  loans or for other  reasons  which  could  adversely  affect the
Company's results of operations. In addition, various regulatory agencies, as an
integral part of their examination  process,  periodically  review the allowance
for loan losses. Such agencies may require the Company to recognize additions to
the allowance for loan losses based on their judgements of information  which is
available to them at the time of their examination.

Noninterest Income

Noninterest income for the three and nine month periods ended September 30, 1999
was $667,000 and $1.8 million compared to $495,000 and $1.3 million for the same
periods in the prior year.  These  increases were primarily the result of growth
in the Company's  trust business,  which generated a $134,000  increase in trust
fee income for the nine months ended  September  30, 1999.  Other  components of
noninterest income increased by $289,000 net for the nine months ended September
30,  1999  compared  to 1998 as a result  of  increases  in the gains on sale of
securities.

Noninterest  expenses for the three and nine-month  periods ending September 30,
1999  decreased  to $3.5  million and $10.3  million from $3.6 million and $11.6
million for the comparable prior period. The largest  contributing factor to the
decrease was $1.1 million of merger  related  expenses in the second  quarter of
1998.  Salary and  benefits  increased  $69,000  for the nine month  period as a
result of employee  raises.  Data  processing  decreased by $201,000;  and other
expense  decreased  by $85,000  over the prior nine month  period as a result of
efficiencies gained from the Company's recent merger with Upper Valley Bancorp.

Income Taxes

Income  tax  expense  totaled  $430,000  and  $1.28  million  for the  three and
nine-month  periods  ended  September  30, 1999  compared  to $404,000  and $1.3
million for the comparable prior periods.

                                             9

<PAGE>



These amounts  resulted in effective tax rates  calculated at 20 % for the three
month and 21% for the nine month periods ended September 30, 1999 compared to 25
% for the three  months  ended  September  30,  1998 and 31% for the nine months
ended  September 30, 1998. The 1999 effective tax rate decrease is primarily due
to merger  related costs  incurred in 1998 which were not tax deductible as well
as implementation of the Company's tax strategy, including increasing tax-exempt
income as a percentage  of total net income  through  investments  in tax-exempt
securities, bank owned life insurance, and low income housing credits.

Liquidity & Capital Adequacy

The  Company's  primary  source of funds on long term and short  term  basis are
deposits,  principal and interest payments on loan,  mortgage backed securities,
and FHLB advances.  The Company uses the funds  generated to support its lending
and  investment  activities as well as any other  demands for liquidity  such as
deposit out flows.

The Company has  continued to maintain the required  levels of liquid  assets as
defined by Federal regulations.

A strong  capital  position is important to the continued  profitability  of the
Company and promotes  depositor and investor  confidence.  The Company's capital
consists of shareholders'  equity,  which provides a basis for future growth and
expansion  and  also  provides  a  buffer  against   unexpected  losses.  It  is
management's  intention to continue paying a reasonable  return on shareholders'
investment while retaining adequate earnings to allow for continued growth.

Shareholders'  equity decreased  $405,000 to $58.5 million at September 30, 1999
primarily  as  a  result  of  decreases  in  the  Company's   accumulated  other
comprehensive income.

The Federal Reserve Board measures capital  adequacy for bank holding  companies
by using a risk- based  capital  frame-work  and by monitoring  compliance  with
minimum leverage ratio guidelines. The minimum ratio of total risk-based capital
to risk-adjusted assets is 8 % at September 30, 1999, of which 4% must be Tier 1
capital.  The Company's total  risk-based  capital ratio was 16.74% at September
30, 1999. The Company's Tier 1 risk-based  capital ratio was 15.53% at September
30, 1999.

In addition,  the Federal Reserve Board has established  minimum  leverage ratio
guidelines for bank holding  companies.  These guidelines  provide for a minimum
leverage  ratio of 3% for bank holding  companies  that meet  certain  criteria,
including  that they  maintain  the highest  regulatory  rating.  All other bank
holding  companies  are  required  to  maintain a  leverage  ratio of 3% plus an
additional  cushion of at least 100 to 200 basis  points.  The  Federal  Reserve
Board has not  advised  the  Company  of any  specific  minimum  leverage  ratio
applicable to it. The Company's leverage ratio was 9.62% at September 30, 1999.

The Federal Deposit Insurance  Corporation  Improvement Act (FDICIA) establishes
minimum capital  requirements  for all depository  institutions  and established
five   capital   tiers:   "well    capitalized",    "adequately    capitalized,"
"under-capitalized:,    "significantly   under-capitalized,"   and   "critically
under-capitalized," FDICIA imposes significant restrictions on the operations of
a bank which is not at least adequately capitalized.  A depository institutions'
capital  tier will  depend  upon where its  capital  levels are in  relation  to
various other capital measures which include a risk-based

                                            10

<PAGE>



capital  measure,  a leverage  ratio capital  measure and other  factors.  Under
regulations  adopted,  for an institution to be well  capitalized it must have a
total  risk-based  capital  ratio of at least 10%, a Tier I  risk-based  capital
ratio of at least 6%,  and a Tier I  leverage  ratio of at least 5%,  and not be
subject to any specific capital order or directive.

At September 30, 1999, the Bank's total  risk-based  capital,  Tier I risk-based
capital and Tier I leverage ratios were 16.74 %,15.53% and 9.62%, respectively.

Market Risk and Interest Rate Risk

Market risk is the risk of loss from adverse changes in market prices and rates.
The Company's  market risk arises  primarily from interest rate risk inherent in
its lending,  investment, and deposit taking activities. To that end, management
actively monitors and manages its interest rate risk exposure.

The Company uses  simulation  analysis to help monitor and manage  interest rate
risk. In this analysis the Company examines the result of 100, 200 and 300 basis
point changes in market interest rates and the effect on net interest income. It
is  assumed  that the  change  is  instantaneous  and that all  rates  move in a
parallel manner. In addition,  it is assumed that rates on core deposit products
such as NOWs, savings accounts, and the MMDA accounts will be adjusted by 50% of
the assumed rate change.  Assumptions are also made concerning prepayment speeds
on mortgage loans and mortgage securities.  The results of this rate shock are a
useful tool to assist the Company in assessing  interest  rate risk  inherent in
their balance sheet.

The results of this rate shock analysis as of September 30, 1999 are as follows:

   Change in Rate        Net Interest Income Change (After tax, in thousands)
   --------------        ----------------------------------------------------
        +300                                    (2,817.8)
        +200                                    (1,877.3)
        +100                                      (927.8)
        -100                                       777.6
        -200                                     1,369.2
        -300                                     1,815.6

Year 2000 Issues

Year  2000  issues  result  from the  inability  of many  computer  programs  or
computerized  equipment  to  accurately  calculate,  store  or use a date  after
December  31,  1999.  The  erroneous  date can be  interpreted  in a  number  of
different  ways,  the most common being Year 2000  represented as the year 1900.
Correctly  identifying  and  processing  Year 2000 as a leap year may also be an
issue. These  misinterpretations  of various dates in the Year 2000 could result
in a system failure or  miscalculations  causing  disruptions of normal business
operation  including,  among  other  things,  a temporary  inability  to process
transactions,   track  important  customer  account   information,   or  provide
convenient access to this information.

Company's State of Readiness

The Company  has  completed  an  assessment  of its  financial  and  operational


                                             11

<PAGE>


software  systems  in  accordance  with the various  regulatory  agency guidance
documents.  The Company is  maintaining  an  inventory  of hardware and software
systems,  which  ranges from  mission  critical  software  systems and  personal
computers to security and video equipment, backup generators, and general office
equipment.  The Company has  prioritized  its hardware  and software  systems to
focus on the most  critical  systems  first.  In  connection  with the Company's
assessment,  a number of the significant third party vendors advised the Company
that their software is Year 2000 compliant, and the Company has fully tested the
software as of September 30, 1999, and found it to be Year 2000 compliant.

From a technology perspective, the Company uses application software systems and
receives  technical  support  from one of the world's  largest  data  processing
providers  to  financial  institutions,  for nearly all of its mission  critical
customer applications.

The Company will devote the  necessary  resources  to test all mission  critical
customer  systems  and  resolve  all  significant  Year 2000  issues in a timely
manner. If testing were to uncover any system problems, the vendor would work to
correct the problem and the Company would test again until resolved. At the same
time, the Company is upgrading  personal  computers to meet both system and Year
2000 requirements.

Costs of Year 2000

Over the past several  years,  the Company's  Technology  Plan has called for an
aggressive schedule for installing new systems or upgrading old systems in order
to build a  technology  infrastructure  which  will  allow the  Company to offer
competitive  products  while  providing for internal  efficiencies  and customer
service improvement. The Technology Plan has resulted in positioning the Company
to continue its technology  improvements while avoiding costly Year 2000 issues.
The Company estimates expenditures associated with Year 2000 at $125,000 (all of
which is for capital  expenditures)  during the year ending  December  31, 1999,
with  approximately  $25,000 amortized in that same year and the remainder to be
amortized in subsequent fiscal years.

The  Company  does not  expect  any Year 2000  expenditures  beyond  1999.  With
assistance from its third party vendors, the Company is utilizing internal staff
to perform Year 2000 compliance work,  including  internal  Information  Systems
staff.

The Company believes that the cost of addressing the Year 2000 issue will not be
a material event or uncertainty that would cause reported financial  information
not to be  necessarily  indicative  of future  operating  results  or  financial
conditions.  However,  if  compliance  is not achieved in a timely manner by the
Company or any of its significantly related  third-parties,  be it a supplier of
services or customer,  the Year 2000 issue could possibly have a material effect
on the Company's operating and financial position.

Risk of Year 2000

The Year 2000 issue presents potential risks of uncertain  magnitude.  The risks
arise both with regard to systems  purchased by the Company  through third party
vendors as well as those  outside the control of the  Company,  such as with ATM
networks or credit  card  processors.  These  failures  may cause  delays in the
ability of customers to access their funds through automated teller

                                              12

<PAGE>



machines, point of sale terminals at retail locations, or other shared networks.
The Year 2000 issue also poses the potential risk for business disruption due to
a mission  critical  software system  failure,  which could result in inaccurate
interest payment  calculations,  credit  transactions,  or  record-keeping.  The
Company and the banking  regulators are closely monitoring the progress of First
Liberty Bank & Trust's  major third party  vendors and, to date,  the Company is
satisfied  with their  progress.  However,  if the Company,  its  customers,  or
vendors  are unable to resolve  Year 2000  issues in a timely  manner,  it could
result in a material financial risk.

Successful  and  timely  completion  of  the  Year  2000  project  is  based  on
management's best estimates  derived from various  assumptions of future events,
which are  inherently  uncertain,  including  the  progress and results of third
party modification and testing plans and other factors.

Contingency Plans

The Company has obtained back-up service providers,  developed contingency plans
and  assessed  the  potential  adverse  risks  to  the  Company.  The  Company's
contingency  plans involve the use of manual labor to compensate for the loss of
certain automated  computer systems and  inconveniences  caused by disruption in
command systems.

A contingency plan was developed for mission-critical and required mainframe and
PC  based  applications,   third-party  relationships,   environmental  systems,
proprietary  programs,  and non- computer related systems.  The contingency plan
identifies scheduled completion dates, test dates and trigger dates.

A business resumption contingency plan was developed with the completion date of
June 15, 1999. The resumption  contingency plan will calculate a risk factor for
each core business line and\or  project.  Based upon the calculated risk factor,
such business resumption contingency plan will be designed and tested.

Forward Looking Statements

Within these  financial  statements we have included  certain  "forward  looking
statements"  concerning the future operations of the Company. It is management's
desire  to  take  advantage  of the  "safe  harbor"  provisions  of the  Private
Securities  Litigation  Reform Act of 1995.  This  statement  is for the express
purpose of  availing  the  Company of the  protections  of such safe harbor with
respect  to  all  "forward  looking  statements"   contained  in  our  financial
statements.  We have used "forward  looking  statements"  to describe the future
plans  and  strategies  including  our  expectations  of  the  Company's  future
financial  results.  Management's  ability to  predict  results or the effect of
future plans and  strategy is  inherently  uncertain.  Factors that could affect
results include interest rate trends, competition,  the general economic climate
in Northeastern  Pennsylvania,  the mid-Atlantic  region and country as a whole,
loan  delinquency  rates,  Year 2000  uncertainties,  and changes in federal and
state regulation.  These factors should be considered in evaluating the "forward
looking statements", and undue reliance should not be placed on such statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The  information  set forth was under the caption "Market Risk and Interest Rate
Risk" under Item 2 of Part I is incorporated herein by reference.

                                               13

<PAGE>





FIRST LIBERTY BANK CORP. AND SUBSIDIARIES
September  30, 1999



               PART II.      OTHER INFORMATION

         ITEM 1.     LEGAL PROCEEDINGS
                     None

         ITEM 2.     CHANGES IN SECURITIES AND USE OF PROCEEDS
                     None

         ITEM 3.     DEFAULTS UPON SENIOR SECURITIES
                     None

         ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
                     None

         ITEM 5.     OTHER INFORMATION
                     None

         ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K
                     (a):           Exhibits:
                                    None

                     (b):           Reports on Form 8-K:
                                    None



















                                                         14

<PAGE>



FIRST LIBERTY BANK CORP. AND SUBSIDIARIES
September  30, 1999




         SIGNATURES

         In accordance  with  requirement  of the Exchange  Act, the  registrant
caused this report to be signed on its behalf by the undersigned  thereunto duly
authorized.

                               THE FIRST JERMYN CORP.
                                     (Registrant)


  Date        November12, 1999             By /s/    William M. Davis
              ----------------                     --------------------
                                                   William M. Davis
                                                   Chairman, President and
                                                   Director
                                                   (Principal Executive Officer)

  Date        November 12, 1999            By /s/   Donald J. Gibbs
              -----------------                    ------------------
                                                   Donald J. Gibbs
                                                   (Principal Financial Officer
                                                   And Treasurer)
























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