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 March 31, 1999

         Commission file number 0-133312


                            FIRST LIBERTY BANK CORP.
             (Exact name of registrant 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

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 May 6, 1999
                  -----                    --------------------------
Common stock, $1.25 par value                      1,605,512


                                        1

<PAGE>





                    FIRST LIBERTY BANK CORP. AND SUBSIDIARIES

                                    FORM 10-Q

                          QUARTER ENDED MARCH 31, 1999

                                      INDEX


                                                                      Page

PART 1 - FINANCIAL INFORMATION

         ITEM 1. FINANCIAL STATEMENTS UNAUDITED:

         Consolidated Balance Sheets - March 31, 1999 and
                  December 31, 1998                                       1

         Consolidated Statements of Operations - Three Months
                  Ended March 31, 1999 and 1998                           2

         Consolidated Statements of Cash Flows -
                  Three Months Ended March 31, 1999 and 1998              3

         Notes to Consolidated Financial Statements-
                  Three Months Ended March 31, 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


                                        2

<PAGE>



PART I.   FINANCIAL INFORMATION
         Item I.  Financial Statements

FIRST LIBERTY BANK CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>

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

Cash and due from banks                                                          $52,962                20,628
Federal Funds sold                                                                10,000                 5,000
Securities available for sale                                                    167,230               196,563

Loans, gross                                                                     377,092               376,856
Less: Unearned discount and origination fees                                      (1,399)                 (941)
          Allowance for loan losses                                               (4,694)               (4,618)
          -----------------------------------------------------------------------------------------------------
Loans, net                                                                       370,999               371,297

Accrued interest receivable                                                        3,198                 3,914
Bank premises, leasehold improvements and furniture and equipment -net            11,192                10,307
Real estate owned other than bank premises                                           621                   479
Other assets                                                                       9,968                 7,182
--------------------------------------------------------------------------------------------------------------

Total assets                                                                    $626,170               615,370

Liabilities
Deposits:
   Noninterest-bearing demand                                                    $52,634                55,272
   Interest-bearing                                                              459,197               441,328
   -----------------------------------------------------------------------------------------------------------

Total deposits                                                                   511,831               496,600
--------------------------------------------------------------------------------------------------------------
Other borrowed money                                                              50,637                55,660
Accrued interest payable                                                           2,160                 2,218
Other liabilities                                                                  1,453                 1,984
--------------------------------------------------------------------------------------------------------------

Total liabilities                                                                566,081               556,462
--------------------------------------------------------------------------------------------------------------

Shareholders' Equity

Common stock, $1.25 par value, authorized 2,500,000 shares;
     Outstanding 1,605,512 shares and 1,602,342, shares respectively               2,007                 2,003
Surplus                                                                            6,007                 5,905
Retained earnings                                                                 51,954                50,435
Accumulated other comprehensive income                                               317                   761
Less treasury stock-at cost (15,205)                                                (196)                 (196)
---------------------------------------------------------------------------------------------------------------
Total shareholders equity                                                         60,089                58,908
--------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity                                $      626,170               615,370
==============================================================================================================

</TABLE>






                                        1

<PAGE>


<TABLE>
<CAPTION>

FIRST LIBERTY BANK CORP. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands of dollars, except for per share information )
(unaudited)
                                                                                   Three months ended March 31,
                                                                                    1999                  1998
--------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                               <C> 

Interest income:
     Interest and fees on loans                                        $           7,410                 7,530
     Interest on interest bearing deposits                                           255                   100
     Interest and dividends on securities:
     Taxable                                                                       1,999                 2,225
     Exempt from Federal Taxes                                                       625                   539
     Interest of Fed Funds Sold                                                        9                   180

         Total interest income                                                    10,298                10,574
--------------------------------------------------------------------------------------------------------------

Interest expense:
     Deposits                                                                      4,711                 4,908
     Fed Funds Purchased                                                              --                    24
     Capitalized lease obligation and borrowed funds                                 697                   684
--------------------------------------------------------------------------------------------------------------

          Total interest expense                                                   5,408                 5,616
--------------------------------------------------------------------------------------------------------------

Net interest income                                                                4,890                 4,958
Provision for loan losses                                                            180                   135
--------------------------------------------------------------------------------------------------------------

Net interest income after provision for loan losses                                4,710                 4,823
--------------------------------------------------------------------------------------------------------------

Noninterest income:
     Service charges and fees                                                        183                   179
     Gain/loss on sale of securities                                                  74                    28
     Trust                                                                           164                   131
     Other                                                                            31                    93
--------------------------------------------------------------------------------------------------------------
         Total noninterest income                                                    552                   431
--------------------------------------------------------------------------------------------------------------

Noninterest expense:
     Salaries and benefits1,781                                                    1,681
     Net occupancy and furniture/equipment expenses                                  551                   606
     Data processing services                                                        115                   148
     Foreclosures and other real estate expense                                       56                    66
     Other expense                                                                   826                   866
--------------------------------------------------------------------------------------------------------------

         Total noninterest expense                                                 3,329                 3,367
--------------------------------------------------------------------------------------------------------------

Income before income tax provision                                                 1,933                 1,887
Income tax provision                                                                 415                   488
--------------------------------------------------------------------------------------------------------------

Net income                                                                         1,518                 1,399
--------------------------------------------------------------------------------------------------------------

Other comprehensive income net of tax
     Unrealized gains/(losses) on securities                                                                --
     Unrealized holding (loss)/gain arising during the period                       (395)                  100
     Less reclassification adjustment for gains included in net income                49                    18
Comprehensive income                                                               1,074                 1,481
==============================================================================================================

Per share information
    Net income-basic                                                                  .96                   .89
    Net income-diluted                                                                .95                   .88

</TABLE>




                                        2

<PAGE>


<TABLE>
<CAPTION>

FIRST LIBERTY BANK CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands of dollars)
(unaudited)
--------------------------------------------------------------------------------------------------------------
                                                                                   Three months ended March 31,
                                                                                        1999   1998

<S>                                                                       <C>                         <C> 

Operating activities:
     Net income                                                            $           1,518           1,399
Adjustments to reconcile net income to net cash (used) provided by
         Operating activities:
               Provision for loan losses                                                 180             135
               Depreciation and amortization of investment securities,  bank
                  premises, leasehold improvements and furniture and equipm205           231
                Increase in interest receivable and other assets                      (1,918)           (217)
               (Decrease)/Increase in interest payable and other liabilities            (589)            153
------------------------------------------------------------------------------------------------------------

Net cash (used) provided by operating activities                                        (604)          1,701
------------------------------------------------------------------------------------------------------------

Investing activities:

     Purchase of securities held to maturity                                              --         (13,684)
     Proceeds from maturities of securities                                           22,738          35,517
     Purchases of securities available for sale                                       (6,000)        (27,131)
     Proceeds from sales of securities available for sale                             12,000              --
     Net (increase) decrease in loans                                                   (116)            539
     Purchase of bank premises, leasehold improvements and
                  furniture and equipment-net                                         (1,090)            (65)
     Sales of assets acquired through foreclosure, net                                    92             311
------------------------------------------------------------------------------------------------------------

Net cash provided (used) by investing activities                                      27,624          (4,513)
-------------------------------------------------------------------------------------------------------------

Financing activities:
     Net increase in deposits                                                         15,231          12,784
     Repay Fed Funds Purchased                                                        (5,000)             --
     Principal payments on capitalized lease obligation                                  (23)            (21)
     Borrowed funds                                                                       --               7
     Proceeds of stock issued through exercise of options                                106           6,349
     Dividends paid                                                                      ---            (220)
-------------------------------------------------------------------------------------------------------------

Net cash provided by financing activities                                             10,314          18,899
------------------------------------------------------------------------------------------------------------

Increase in cash and cash equivalents                                                 37,334          16,087
Cash and cash equivalents at beginning of period                                      25,628          21,562
------------------------------------------------------------------------------------------------------------

Cash and cash equivalents at end of period                                 $          62,962          37,649
============================================================================================================

Cash paid during the period:
     Interest                                                              $           5,466           5,367
     Federal income taxes                                                                494             514
============================================================================================================

Noncash transactions
     Net unrealized (loss) gain on securities available for sale, net of tax $          (444)             82
     Transfers of loans to real estate owned other than bank premise                     234              63
============================================================================================================
</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 three months  ended March 31, 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  County,  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.

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

                                                                                       3 months ended March 31
                                                                                        1999              1998
                                                                                        ----              ----
<S>                                                                             <C>                <C> 

Numerator:
         Net income                                                             $       1,518       $      1,399

Denominator:
         Denominator for basic earnings
         per share weighted average
         shares                                                                         1,588              1,572

Effect of dilutive securities:
         Employee stock options                                                            13                 18
Denominator for diluted earnings
         per share adjusted weighted
         average shares and assumed
         exercise                                                                       1,601              1,590

Basic earnings per share                                                                 .96                 .89

Diluted earnings per share                                                               .95                 .88


</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  three  months  ended  March  31,  1999 was
$1,518,000  or $ .95 per  diluted  share  compared  to  $1,399,000  and $.88 per
diluted  share  for the same  three-month  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 1.00 % for the
three-month  period ending March 31, 1999,  compared to .95% for the same period
in 1998.  Return on average  equity of 10.43% was recorded  for the  three-month
period ended March 31, 1999, compared to 10.18% for the same period in 1997.

At March 31, 1999, the Company had total assets of $626 million compared to $615
million at December 31, 1998. The increase in total assets was driven by a $32.4
million  increase in cash and due from  banks,  and a $5.0  million  increase in
federal funds sold,  which were primarily  funded by a $15.2 million increase in
deposits and a $29.4 million decrease in securities available for sale.

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 increased  approximately  $32.4 million to $53.0 million
at March 31,  1999 from  $20.6  million  at  December  31,  1998 as the  company
invested excess liquidity with the Federal Home Loan Bank of Pittsburgh. Federal
funds sold  increased  to $5.0  million at March 31,  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  $29.4 million or 14.9 % to $167.2
million from $196.6  million at December 31, 1998.  This  decrease was primarily
driven by the maturity of $22.7 million of securities.

                                        6

<PAGE>

Loans Receivable, Net

Aggregate loans receivable  totaled $371.0 million at March 31, 1999, a decrease
of $0.3  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  was  relatively   constant  at
approximately  $2.7  million  or 0.4% of  total  assets  at March  31,  1999 and
December 31, 1998.  Loans greater than ninety days delinquent but still accruing
decreased  from  $445,000  at December  31,  1998 to $83,000 at March 31,  1999.
However, nonaccrual loans increased approximately $218,000 to $1,958,000.

Real estate owned,  increased  from $479,000 as of December 31, 1998 to $621,000
as of March 31, 1999, due to three 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 March 31, 1999 and 1998.
<TABLE>
<CAPTION>


                                                           3/31/99                       12/31/98
<S>                                                     <C>                              <C> 
         Nonaccrual                                      1,958,000                       1,740,000

         Loans 90 days or more delinquent                  83,000                          445,000

         Restructured                                          ---                             ---
                                                        ----------                       ---------

             Total non-performing loans                 $2,041,000                      $2,185,000

         Real estate owned other than

             Bank premises                                 621,000                         479,000
                                                           -------                         -------

             Total non-performing assets                $2,662,000                      $2,664,000
</TABLE>


At March 31, 1999,  the Company's  allowance  for loan losses  amounted to $4.69
million or 1.24% of gross loans receivable.  At December 31, 1998, the Company's
allowance for loan losses was $4.62 million or l.23% of gross loans receivable.

Deposits

Deposits  increased  $15.2  million or 3.1% from $496.6  million at December 31,
1998 to $511.8 million at March 31, 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 March 31,  1999,  total  equity  was $60.1  million  or 9.6% of total  assets
compared  to $58.9  million or 9.6 % of total  assets as of December  31,  1998.
Total equity  increased  primarily due to the retention of net income during the
intervening period.

Results of Operations

Net Income

The  Company's  net income was  $1,518,000  for the three months ended March 31,
1999,  compared to $1,399,000  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  $4.9 million for the three months ended March 31, 1999 compared to
$5.0 million for the three months ended March 31, 1998.  The Company was able to
increase the level of noninterest  income by $121,000 to $552,000 for the period
ending March 31, 1999, while  noninterest  expense decreased to $3.3 million for
the three  months  ended  March  31,  1999,  compared  to $3.4  million  for the
comparable prior period.

Net Interest Income

Net interest  income before  provision for loan losses  amounted to $4.9 million
for the  three-month  periods  ended March 31, 1999 versus $5.0  million for the
three months ended March  31,1998.  A lower  interest rate  environment  lead to
decreases  in both  interest  income and interest  expense for 1999  compared to
1998.

Total interest income decreased by $276,000 or 2.6% to $10,298,000 for the three
month period ended March 31, 1999 from  $10,574,000  during the comparable prior
period. The average  interest-earning assets increased $14,105,000 for the three
months  ended March 31, 1999  compared to the three months ended March 31, 1998.
However,  this was  partially  offset by a 16 basis  point  decline in the yield
earned on average  interest-earning  assets  during the three months ended March
31, 1999 compared to the 1998 period.

Total interest expense decreased by $208,000 or 3.7% to $5,408,000 for the three
months ended March 31, 1999 from $5,616,000 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  $11,245,000  during the three months
ended March 31,  1999,  compared to the  comparable  1998 period.  However,  the
increased  volume of  deposits  was offset by a 25 basis  point  decrease in the
average rates paid for the three months ended March 31, 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

                                        8

<PAGE>

Company's market area generally and other factors related to the  collectability
of the Company's  loan  portfolio.  For the  three-month  period ended March 31,
1999, the provision for loan losses amounted to $180,000, an increase of $45,000
compared to $135,000 for the three months ended March 31, 1998.

Although  management  utilizes  its best  judgment 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  judgments of information  which is
available to them at the time of their examination.

Noninterest Income

Noninterest income for the period ending March 31, 1999 increased  approximately
$121,000  to $552,000  from the  comparable  prior  period,  primarily  due to a
$46,000  increase in gains on the sale of securities and growth in the Company's
trust business generating a $33,000 increase in trust fee income.

Noninterest Expenses

Noninterest   expenses  for  the  period   ending   March  31,  1999   decreased
approximately  $38,000 from the  comparable  prior  period.  Salary and benefits
increased  $100,000  as a result  of  employee  raises.  Net  occupancy  expense
decrease by $55,000;  data  processing  decreased by $33,000;  and other expense
decreased by $40,000 over the prior  period as a result of  efficiencies  gained
from the Company's recent merger with Upper Valley Bancorp.

Income Taxes

Income tax expense totaled  $415,000 for the three-month  period ended March 31,
1999  compared  to $488,000  for the  comparable  prior  period.  These  amounts
resulted in effective tax rates calculated at 21.5% and 25.9%, respectively. The
1999  effective  tax  rate  decrease  primarily  due  to  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 and bank owned
life insurance as well as 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 loans, 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.


                                        9

<PAGE>
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 increased  $1,181,000 to $60,089,000 at March 31, 1999. 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 March 31,  1999,  of which 4% must be Tier 1
capital.  The Company's total  risk-based  capital ratio was 17.30% at March 31,
1999.  The  Company's  Tier 1 risk-based  capital  ratio was 16.05% at March 31,
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 March 31, 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 March 31,  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.

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

                                       10

<PAGE>
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 March 31, 1999 are as follows:

 Change in Rate            Net Interest Income Change (After tax, in thousands)
 --------------           ----------------------------------------------------
      +300                                      (1,179)
      +200                                        (776)
      +100                                        (367)
      -100                                         201
      -200                                         270
      -300                                         380

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 less  significant  third party vendors  advised the
Company that their software is Year 2000  compliant,  and the Company intends to
fully test that software by June 30, 1999.

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.

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<PAGE>

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 predict for the Year 2000 driven  expenditures in the Year
2000.  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.

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

                                       12

<PAGE>



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 is currently under  development with a
target  completion  date of June  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
March 31, 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
March 31, 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        May 13, 1999           By/s/   William M. Davis
                     ------------                   --------------------
                                                    William M. Davis
                                                    Chairman, President and
                                                    Director
                                                   (Principal Executive Officer)

         Date        May 13,1999           By /s/   Donald J. Gibbs
                     ------------                   --------------------
                                                    Donald J. Gibbs
                                                    (Principal Financial Officer
                                                    And Treasurer)

























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