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 June 30, 1999

         Commission file number 0-133312


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

Pennsylvania                                                23-2275242
(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 717-876-6500

                             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 June 30, 1999
           -----                            ----------------------------
Common stock, $1.25 par value                         1,606,262


                                        1

<PAGE>





                    FIRST LIBERTY BANK CORP. AND SUBSIDIARIES
                                    FORM 10-Q

                           QUARTER ENDED JUNE 30, 1999

                                      INDEX



PART 1 - FINANCIAL INFORMATION                                             Page

         ITEM 1. FINANCIAL STATEMENTS:

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

         Consolidated Statements of Income - Three Months and Six Months
                  Ended June 30, 1999 and 1998                                2

         Consolidated Statements of Cash Flows
                  Six Months Ended June 30, 1999 and 1998                     3

         Notes to Consolidated Financial Statements                           4
                  Six Months Ended June 30, 1999 and 1998
                  and December 31, 1998

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



                                        2

<PAGE>

PART I.   FINANCIAL INFORMATION
         Item I.  Financial Statements

<TABLE>
<CAPTION>

FIRST LIBERTY BANK CORP. AND SUBSIDIARIES

Consolidated Balance Sheets
(In thousands of dollars, except per share information)

                                                                                June 30,              December 31,
Assets                                                                           1999                    1998
-----------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>                     <C>


Cash and due from banks                                                          $14,921                20,628
Federal funds sold                                                                   -0-                 5,000
Securities available for sale                                                    209,997               196,563

Loans, gross                                                                     387,145               376,856
Less: Unearned discount and origination fees                                        (781)                 (941)
          Allowance for loan losses                                               (4,782)               (4,618)
---------------------------------------------------------------------------------------------------------------
Loans, net                                                                       381,582               371,297

Accrued interest receivable                                                        3,616                 3,914
Bank premises, leasehold improvements and furniture and equipment -net            12,036                10,307
Real estate owned other than bank premises                                           527                   479
Other assets                                                                      10,975                 7,182
--------------------------------------------------------------------------------------------------------------

Total assets                                                                    $633,654               615,370

Liabilities

Deposits:
   Noninterest-bearing demand                                                    $57,794                55,272
   Interest-bearing                                                              463,823               441,328
--------------------------------------------------------------------------------------------------------------

Total deposits                                                                   521,617               496,600
--------------------------------------------------------------------------------------------------------------
Other borrowed money                                                              50,614                55,660
Accrued interest payable                                                           2,395                 2,218
Other liabilities                                                                  1,279                 1,984
--------------------------------------------------------------------------------------------------------------

Total liabilities                                                                575,905               556,462
--------------------------------------------------------------------------------------------------------------

Shareholders' Equity
Common stock, $1.25 par value, authorized 2,500,000 shares;
     Issued 1,606,262 and 1,602,342 respectively shares                            2,008                 2,003
Surplus                                                                            6,031                 5,905
Retained earnings                                                                 52,220                50,435
Accumulated other comprehensive income                                            (2,314)                  761
Less treasury stock-at cost (15,205 shares)                                         (196)                 (196)
---------------------------------------------------------------------------------------------------------------
Total shareholders' equity                                                        57,749                58,908
--------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity                                $      633,654               615,370
==============================================================================================================

</TABLE>





                                        1

<PAGE>

<TABLE>
<CAPTION>


FIRST LIBERTY BANK CORP. AND SUBSIDIARIES

Consolidated Statements of Income
(In thousands of dollars, except per share information)

                                                     Three months                            Six months
                                                    Ended June 30                           Ended June 30
                                              1999               1998                    1999               1998
------------------------------------------------------------------------------------------------------------------
<S>                                           <C>               <C>                     <C>               <C>

Interest income:
   Interest and fees on loans       $         7,512              7,601                  14,922              15,131
   Interest on interest bearing deposits        167                107                     422                 207
   Interest and dividends on securities:
     Taxable                                  2,299              2,203                   4,298               4,428
     Non-Taxable                                576                589                   1,201               1,128
  Interest on federal funds sold                 63                164                      72                 344
------------------------------------------------------------------------------------------------------------------

Total interest income                        10,617             10,664                  20,915              21,238
------------------------------------------------------------------------------------------------------------------
Interest expense:
     Deposits                                 4,860              4,987                   9,571               9,895
     Fed Funds Purchased                          3                  1                       3                  25
     Other borrowed money                       702                705                   1,399               1,389
------------------------------------------------------------------------------------------------------------------

Total interest expense                        5,565              5,693                  10,973              11,309
------------------------------------------------------------------------------------------------------------------

Net interest income                           5,052              4,971                   9,942               9,929
Provision for loan losses                       180                135                     360                 270
------------------------------------------------------------------------------------------------------------------

Net interest income after provision
  for loan losses                             4,872              4,836                   9,582               9,659
------------------------------------------------------------------------------------------------------------------

Noninterest income:
     Service charges and fees                   161                183                     344                 371
     Gains on sale of securities                 13                  4                      87                  32
     Trust                                      173                116                     337                 247
     Other                                      194                108                     325                 192
------------------------------------------------------------------------------------------------------------------

Total noninterest income                        541                411                   1,093                 842
------------------------------------------------------------------------------------------------------------------

Noninterest expense:
     Salaries and benefits                    1,762              1,776                   3,543               3,457
     Net occupancy and furniture/
     equipment expenses                         618                586                   1,169               1,195
     Data processing services                    81                152                     196                 307
     Merger related costs                       ---              1,081                      --               1,098
        Other expenses                          978              1,010                   1,860               1,917
------------------------------------------------------------------------------------------------------------------

Total noninterest expense                     3,439              4,605                   6,768               7,974
------------------------------------------------------------------------------------------------------------------

Income before federal income tax provision    1,974                642                   3,907               2,527
Income tax provision                            435                403                     850                 891
------------------------------------------------------------------------------------------------------------------

Net income                                    1,539                239                   3,057               1,636
------------------------------------------------------------------------------------------------------------------

Other comprehensive income net of tax
   Unrealized gains on securities
       Unrealized holding (loss)/gain
           arising during the period         (2,622)                36                  (3,018)                 25
       Less reclassification adjustment
           for gains included in net income      (9)               (13)                    (57)                 80
 Comprehensive income               $        (1,092)               262                     (18)              1,741
-=================================================================================================================

Per share information
    Net income-basic                             .97               .15                     1.92               1.04
    Net income-diluted                           .96               .15                     1.91               1.03
</TABLE>

                                        2

<PAGE>

<TABLE>
<CAPTION>

 FIRST LIBERTY BANK CORP. AND  SUBSIDIARIES

Consolidated Statements of Cash Flows
(In thousands of dollars)

                                                                                       Six months ended June 30
                                                                                     1999               1998
                                                                                     ----               ----

<S>                                                                               <C>                 <C>

Operating activities:
    Net income                                                                     $3,057              $1,636
    Adjustments to reconcile net income to net cash provided by
          operating activities   :
               Gains on sales of securities                                           (87)                (32)
              Provision for loan losses                                               360                 270
              Depreciation and amortization of investment securities, bank
                        premises, leasehold improvements and furniture
                        and equipment                                                 483                 441
               Decrease/(Increase) in interest receivable and other assets         (1,661)              1,175
               (Decrease)/Increase in interest payable and other liabilities         (528)               (126)
--------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities                                           1,624               3,364
-------------------------------------------------------------------------------------------------------------

Investing activities:
     Purchases of securities held to maturity                                         ---             (12,426)
     Proceeds from maturities of securities                                        41,109              51,303
    Purchases of securities available for sale                                    (72,540)            (45,230)
    Proceeds from sales of securities available for sale                           13,175                  --
     Net increase in loans                                                        (11,076)            (12,772)
    Purchases of bank premises, leasehold improvements and
              Furniture and equipment-net                                          (2,212)               (287)
    Sales of assets acquired through foreclosure, net                                 383                 623
-------------------------------------------------------------------------------------------------------------
Net cash used by investing activities                                             (31,161)            (18,789)
--------------------------------------------------------------------------------------------------------------

Financing activities:
     Net increase in deposits                                                      25,017              13,371
     Borrow (repay) Fed Funds Purchased                                            (5,000)             10,000
    Principal payments on capitalized lease obligation                                (46)                (42)
    Borrowed funds                                                                      --                 --
    Proceeds of stock issued thru exercise options                                    131                 164
    Dividends paid                                                                 (1,272)             (1,060)
--------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities                                          18,830              22,433
-------------------------------------------------------------------------------------------------------------

Increase in cash and cash equivalents                                             (10,707)              7,008
Cash and cash equivalents at beginning of period                                   25,628              21,389
-------------------------------------------------------------------------------------------------------------

Cash and cash equivalents at end of period                                         14,921              28,397
=============================================================================================================

Cash paid during the period:
     Interest                                                               $      10,796              10,983
     Federal Income Taxes                                                             877                 796
-------------------------------------------------------------------------------------------------------------

Noncash transactions:
     Transfer of loans to real estate owned other than bank premise         $         431                 331
     Net unrealized gain on securities available for sale, net of tax       $      (3,075)                105
=============================================================================================================
</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 six  months  ended June 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.





                                        4

<PAGE>



(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 Company's  weighted  average
         stock options outstanding.
<TABLE>
<CAPTION>

         The following table sets forth the computation of basic and diluted earnings per share (in
         thousands)

                                                3 months ended June 30                 6 months ended June 30
                                              1999                    1998          1999                    1998
                                              ----                    ----          ----                    ----
<S>                                          <C>                    <C>           <C>                 <C>

Numerator:
         Net Income                    $      1,539        $         239     $     3,057        $       1,636
                                              =====                  ===           =====                =====

Denominator:
         Denominator for basic
         earnings per weighted
         average shares                       1,591                1,579           1,589                1,579

Effect of diluted securities:
         Employee Stock options                  12                   15              13                   15
                                                 --                   --              --                   --
Denominator for diluted earnings
         per share adjusted weighted
         average shares and assumed
         exercise                             1,603                1,594           1,602                1,594

Basic earnings per share                        .97                  .15            1.92                 1.04
Diluted earnings per share                      .96                  .15            1.91                 1.03
</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 six months ended June 30, 1999 was  $3,057,000
or $1.91 per diluted share  compared to  $1,636,000  and $1.03 per diluted share
for the same six-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 and the federal income tax provision.

The Company  recorded  an  annualized  return on average  assets of .99% for the
six-month period ending June 30, 1999,  compared to .84 % for the same period in
1998.  Return on average equity of 10.40% was recorded for the six-month  period
ended June 30, 1999, compared to 8.95% for the same period in 1998.

At June 30, 1999, the Company had total assets of $634 million  compared to $615
million at December 31, 1998. The increase in total assets was driven by a $10.3
million  increase  in net  loans  and a $13.4  million  increase  in  securities
available for sale,  which were primarily  funded by a $25.0 million increase in
deposits.

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 $5.7 million to $14.9 million at
June 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 June 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  increased  $13.4  million or 6.8% to 210.0
million from $196.6  million at December 31, 1998.  This  increase was primarily
driven by investing the funding created by growth in the Company's  deposit base
which was in excess of loan demand.




                                        6

<PAGE>



Loans Receivable, Net

Aggregate loans receivable  totaled $381.6 million at June 30, 1999, an increase
of $10.3 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  $585,000 to
$2.1  million  or 0.3% of total  assets  at June 30,  1999 as  compared  to $2.7
million or 0.4% of total assets at December 31, 1998.  Loans greater than ninety
days delinquent but still accruing  decreased from $445,000 at December 31, 1998
to $121,000 at June 30, 1999. Nonaccrual loans decreased  approximately $633,000
to $1,552,000.

Real estate owned,  increased  from $479,000 as of December 31, 1998 to $527,000
as of June 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 June 30, 1999 and 1998.
<TABLE>
<CAPTION>


                                                             6/30/99                            12/31/98
<S>                                                       <C>                                   <C>

Nonaccrual                                                  1,431,000                          1,740,000

Loans 90 day or mor delinquent                                121,000                            445,000

                                                          ------------                        ----------
         Total non-performing                               1,552,000                          2,185,000


Real estate owned other than

         Bank premises                                        527,000                            479,000
                                                           ------------                       -----------
         Total non-performing assets                        2,079,000                          2,664,000
</TABLE>

At June 30,  1999,  the  Company's  allowance  for loan losses  amounted to $4.8
million or 1.24% 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 June 30, 1999 has been deemed  adequate by
management.  The allowance is maintained at a level  adequate to cover  inherent
losses in the loan  portfolio  given the  present  past due,  nonperforming  and
classified levels.

Deposits

Deposits  increased  $25.0  million or 5.0% from $496.6  million at December 31,
1998 to $521.6  million at June 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 June 30,  1999,  total  equity  was  $57.7  million  or 9.1% or total  assets
compared to $58.9 million or 9.6% of total assets as of December 31, 1998. Total
equity decreased  primarily due to a $3.1 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 June 30, 1999  increased to
$1,539,000  compared  to  239,000  for the  three  months  ended  June 30,  1998
primarily  due to the  recognition  in the second  quarter  of 1998 of  expenses
related to  completion of the Company's  June 1998  acquisition  of Upper Valley
Bancorp.

The Company's net income was  $3,057,000 for the six months ended June 30, 1999,
compared to $1,636,000 recorded in the comparable prior period. In a competitive
rate  environment,  the Company was able to substantially  maintain its level of
core  earnings  as  net  interest  income  before   provision  for  loan  losses
approximated  $9.9  million for the six months  ended June 30, 1999 and June 30,
1998.  The  Company  was able to  increase  the level of  noninterest  income by
$251,000  to  $1,093,000  for  the  six  months  ending  June  30,  1999,  while
noninterest  expense decreased to $6.8 million for the six months ended June 30,
1999,  compared to $8.0 million for the comparable prior period primarily due to
the aforementioned acquisition expenses.

Net Interest Income

Net interest  income before  provision for loan losses  amounted to $5.1 million
and $9.9 million for the three-month  and six-month  periods ended June 30, 1999
versus $5.0  million and $9.9  million for the six months ended June 30, 1998. A
competitive  interest rate environment lead to decreases in both interest income
and interest expense for 1999 compared to 1998.

Total interest income decreased to $10.6 million and $20.9 million for the three
and six month  periods  ended June 30, 1999 from $10.7 million and $21.2 million
during  the  comparable  prior  periods.  The  average  interest-earning  assets
increased $ 17.9 million for the six months ended June 30, 1999  compared to the
six months ended June 30, 1998. However, this was partially offset by a 31 basis
point decline in the yield earned on average  interest-earning assets during the
six months ended June 30, 1999 compared to the 1998 period.

Total interest expense decreased to $5.6 million and $11.0 million for the three
and six months ended June 30, 1999 from $5.7  million and $11.3  million for the
comparable prior period.  The decrease was due to a decrease in interest expense
associated  with deposits.  The average  balance of deposits  increased by $10.4
million  during the six months ended June 30, 1999,  compared to the  comparable
1998 period.  However, the increased volume of deposits was offset by a 23 basis
point  decrease in the average rates paid for the six months ended June 30, 1999
over the comparable 1998 period.


                                        8

<PAGE>



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 June 30, 1999  compared to $135,000  for the three  months  ended June 30,
1998.  For the  six-month  period ended June 30, 1999,  the  provision  for loan
losses amounted to $360,000, an increase of $90,000 compared to $270,000 for the
six months ended June 30, 1999.

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 the 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 six month periods ending June 30, 1999 was
$541,000 and  $1,093,000  compared to $411,000 and $842,000 for the same periods
in the prior year.  These  increases  were primarily the result of growth in the
Company's trust business,  generated a $90,000  increase in trust fee income for
the six months  ended June 30,  1999.  Other  noninterest  income  increased  by
$133,000 for the six months ended June 30, 1999  compared to 1998 as a result of
increases in the cash surrender value of bank owned life insurance.

Noninterest  expenses for the three and six-month  periods  ending June 30, 1999
decreased to $3,439,000  and  $6,768,000  from the $4,605,000 and $7,974,000 for
the comparable prior period. The largest contributing factor to the decrease was
$1,081,000 of merger related expenses in the second quarter of 1998.  Salary and
benefits  increased  $86,000  for the six month  period as a result of  employee
raises. Net occupancy expense decreased by $26,000; data processing decreased by
$111,000; and other expense decreased by $57,000 over the prior six month period
as a result of efficiencies  gained from the Company's  recent merger with Upper
Valley Bancorp.

Income Taxes

Income tax expense  totaled  $435,000 and  $850,000 for the three and  six-month
periods ended June 30, 1999 compared to $403,000 and $891,000 for the comparable
prior periods.  These amounts  resulted in effective tax rates calculated at 22%
for the three and six month  periods ended June 30, 1999 compared to 63% for the
three months ended June 30, 1998 and 35% for the six months ended June 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.


                                        9

<PAGE>



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.

Shareholders'  equity  decreased  $1,159,000  to  $57,749,000  at June 30,  1999
primarily  as  a  result  of  decreases  in  the  Company's   accumulated  other
comprehensive  income.  It  is  management's  intention  to  continue  paying  a
reasonable return on shareholders'  investment while retaining adequate earnings
to allow for continued growth.

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 June  30,  1999,  of which 4% must be Tier 1
capital.  The Company's  total  risk-based  capital ratio was 17.30% at June 30,
1999. The Company's Tier 1 risk-based capital ratio was 16.05% at June 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 9.61% at June 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  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 June 30, 1999, the Bank's total risk-based capital, Tier I risk-based capital
and Tier I leverage ratios were 17.30%, 16.05% and 9.61%, respectively.


                                       10

<PAGE>



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 change 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 June 30, 1999 are as follows:

          Change in Rate   Net Interest Income Change (After tax, in thousands)
          --------------   ----------------------------------------------------
                +300                         (2,388.30)
                +200                         (1,581.40)
                +100                           (783.70)
                -100                            543.60
                -200                            844.30
                -300                            979.50

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
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  intends to fully
test that software by September 30, 1999.



                                       11

<PAGE>



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  $45,000  amortized  in that  same  year  and the  remainder
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  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.

                                       12

<PAGE>



Contingency Plans

The Company is in the process of obtaining back-up service providers, working up
contingency plans and assessing 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 will be 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
will identify 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
June 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
June 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        August 10, 1999           By /s/    William M. Davis
                     ---------------                 --------------------
                                               William M. Davis
                                               Chairman, President and
                                               Director
                                               (Principal Executive Officer)

         Date        August 10, 1999           By /s/   Donald J. Gibbs
                     ---------------                 ------------------
                                               Donald J. Gibbs
                                               (Principal Financial Officer
                                               And Treasurer)

                                      15