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

                                    FORM 10-Q


(Mark One)

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

For the quarterly period ended    September 30, 1997
                                  ----------------------------------------------
                                       or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

For the transition period from                     to
                               --------------------   --------------------------

Commission File Number:   0-21076
                         -------------------------------------------------------

                          FIRST SHENANGO BANCORP, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

     PENNSYLVANIA                                              25-1698967
--------------------------------------------------------------------------------
(State of other jurisdiction of incorporation               (I.R.S. Employer
   or organization)                                         Identification No.)

                                 (412) 654-6606
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

                                       NA
--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)


         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.            [X]   Yes        [ ]  No

         The number of shares  outstanding  of each of the  issuer's  classes of
common stock as of October 31, 1997:

                                                      Outstanding
                                                      -----------
                     Class
                     -----
          $.10 par value common stock               2,069,007 Shares




<PAGE>


                          FIRST SHENANGO BANCORP, INC.


                                      INDEX

<TABLE>
<CAPTION>

                                                                                      Page Number

PART I - FINANCIAL INFORMATION

<S>                                                                                   <C>                                   
     Item 1. Financial Statements

     Consolidated  Statements of Financial Position as of September 30, 1997 and
     December 31, 1996                                                                      1

     Consolidated  Statements of Income for the Three Months Ended September 30,
     1997 and 1996 and the Nine Months Ended September 30, 1997 and 1996                    2

     Consolidated  Statements  of Changes in  Shareholders'  Equity for the Year
     Ended December 31, 1996 and the Nine Months Ended September 30, 1997                   3

     Consolidated  Statements of Cash Flows for the Nine Months Ended  September
     30, 1997 and  1996                                                                 4 - 5     

     Notes to Consolidated Financial Statements                                         6 - 9

     Item 2.  Management's  Discussion  and Analysis of Financial  Condition and
     Results of Operations                                                            10 - 13

PART II - OTHER INFORMATION

     Item 1.  Legal Proceedings                                                            14

     Item 2.  Changes in Securities                                                        14

     Item 3.  Defaults Upon Senior Securities                                              14

     Item 4.  Submission of Matters to a Vote of Security Holders                          14

     Item 5.  Other Information                                                            14

     Item 6.  Exhibits and Reports on Form 8-K                                             14

SIGNATURES                                                                                 15
</TABLE>




<PAGE>




PART I - FINANCIAL INFORMATION/Item 1. - Financial Statements
FIRST SHENANGO BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

<TABLE>
<CAPTION>
                                                                                  September 30,    December 31,
ASSETS                                                                                1997            1996
                                                                                  ------------     -------------
Cash and Cash Equivalents:
<S>                                                                               <C>              <C>          
  Cash and amounts due from depository institutions                               $   1,325,045    $   1,817,504
  Interest bearing deposits in financial institutions                                11,881,607       14,916,979
                                                                                  -------------    -------------
                                                                                     13,206,652       16,734,483
Investment securities available for sale, carried at fair value                     120,719,226      125,288,762
Loans receivable, net of allowance for loan losses of $3,078,520 and $2,867,270     258,929,461      255,769,702
Accrued interest receivable                                                           2,420,215        2,331,437
REO and other repossessed assets, net                                                   845,865          736,852
Premises and equipment, net                                                           5,016,182        4,300,527
Prepaid expenses, sundry assets and deferred taxes                                      299,287          622,961
                                                                                  -------------    -------------
    TOTAL ASSETS                                                                  $ 401,436,888    $ 405,784,724
                                                                                  =============    =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits (including non-interest bearing deposits of $4,637,553 and $4,647,926)   $ 273,501,593    $ 267,619,176
Advances from Federal Home Loan Bank and other borrowings                            78,125,185       86,455,211
Advance payments by borrowers for taxes and insurance                                   837,569        1,600,202
Accrued expenses, deferred taxes and other liabilities                                2,318,611        7,055,808
                                                                                  -------------    -------------
    TOTAL LIABILITIES                                                               354,782,958      362,730,397
SHAREHOLDERS' EQUITY
Preferred  stock, no stated value, 10,000,000    shares  authorized,  
  none issued  
Common stock, $.10 par value, 15,000,000 shares authorized, 2,343,098 shares
  issued                                                                                234,310          234,310
Additional paid-in capital                                                           22,156,455       22,422,843
Treasury stock at cost (274,091 and 283,188 shares)                                  (6,322,416)      (6,374,001)
Less stock acquired by MSBPs and ESOP                                                  (579,391)        (674,997)
Net unrealized gains on securities available for sale, net of tax                     1,228,372          190,743
Retained earnings (substantially restricted)                                         29,936,600       27,255,429
                                                                                  -------------    -------------
   TOTAL SHAREHOLDERS' EQUITY                                                        46,653,930       43,054,327
                                                                                  -------------    -------------
   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                     $ 401,436,888    $ 405,784,724
                                                                                  =============    =============
</TABLE>




See notes to consolidated financial statements.

                                       1
<PAGE>


FIRST SHENANGO BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                 Three Months Ended          Nine Months Ended 
                                                                     September 30,                September 30         
Interest income:                                                  1997          1996           1997         1996
                                                              -----------   -----------    -----------   -----------
  Interest and fees on:
<S>                                                           <C>           <C>            <C>           <C>        
    First mortgage residential loans                          $ 3,217,801   $ 2,871,604    $ 9,210,824   $ 7,923,459
    Commercial and other real estate loans                      1,183,414     1,063,055      3,466,790     2,919,926
    Consumer loans                                                970,137     1,256,641      3,091,382     3,794,941
  Interest and dividends on investments available for sale:
    Taxable                                                     1,382,589     1,431,656      4,361,608     3,935,279
    Tax-exempt                                                    425,823       243,996      1,270,812       592,793
    Dividends                                                     218,130       205,035        668,913       756,621
  Other interest income                                           159,834        58,148        388,675       365,956
                                                              -----------   -----------    -----------   -----------
    TOTAL INTEREST INCOME                                       7,557,728     7,130,135     22,459,004    20,288,975
                                                              -----------   -----------    -----------   -----------
Interest expense:
  Interest on deposits                                          3,162,652     2,979,647      9,312,573     8,800,647
  Interest on borrowed funds                                    1,181,716       868,532      3,531,079     2,101,502
                                                              -----------   -----------    -----------   -----------
    TOTAL INTEREST EXPENSE                                      4,344,368     3,848,179     12,843,652    10,902,149
                                                              -----------   -----------    -----------   -----------
    NET INTEREST INCOME                                         3,213,360     3,281,956      9,615,352     9,386,826
Provision for loan losses                                         195,963       224,736        575,585       673,730
                                                              -----------   -----------    -----------   -----------
    NET INTEREST INCOME AFTER PROVISION FOR                     3,017,397     3,057,220      9,039,767     8,713,096
        LOAN LOSSES
Non-interest income:
  Service charges and other fees                                  185,211       200,662        557,390       583,722
  Gain on sale of investments and loans, net                       17,400        51,772         25,862       214,114
  Other                                                             1,190           656          2,890         3,138
                                                              -----------   -----------    -----------   -----------
    TOTAL NON-INTEREST INCOME                                     203,801       253,090        586,142       800,974
Non-interest expense:
  Salaries and employee benefits                                  785,973       758,020      2,306,470     2,255,027
  Occupancy and equipment, net                                    240,517       253,371        753,132       783,752
  Deposit insurance premiums                                       42,399     1,814,532        128,238     2,107,419
  Professional services                                            42,709        60,591        139,773       182,646
  REO operations                                                   31,182        73,140         88,756       188,969
  Other                                                           338,780       329,961        963,541       992,883
                                                              -----------   -----------    -----------   -----------
    TOTAL NON-INTEREST EXPENSE                                  1,481,560     3,289,615      4,379,910     6,510,696
                                                              -----------   -----------    -----------   -----------
    INCOME BEFORE INCOME TAXES                                  1,739,638        20,695      5,245,999     3,003,374
Income tax expense:
  Federal                                                         449,475        32,650      1,384,225       974,275
  State                                                           111,775       (22,225)       339,675       171,575
                                                              -----------   -----------    -----------   -----------
    TOTAL INCOME TAX EXPENSE                                      561,250        10,425      1,723,900     1,145,850
                                                              -----------   -----------    -----------   -----------
    NET INCOME                                                $ 1,178,388   $    10,270    $ 3,522,099   $ 1,857,524
                                                              ===========   ===========    ===========   ===========
Earnings per share                                            $      0.57   $      0.00    $      1.71   $      0.82
Dividends declared per share                                  $      0.15   $      0.12    $      0.42   $      0.34

</TABLE>

See notes to consolidated financial statements.

                                       2
<PAGE>


FIRST SHENANGO BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY


<TABLE>
<CAPTION>


                                                                   Unallocated  Unallocated    Unrealized Retained
                                         Additional                   Common       Common        Gain     Earnings,    Consolidated
                              Common      Paid-In      Treasury    Stock Held   Stock Held       on      Substantially Shareholders'
                              Stock       Capital       Stock        by ESOP     by MSBPs     Securities  Restricted      Equity
                              --------  -----------    ----------  -----------  -----------   ---------- ------------- ------------
<S>                           <C>       <C>            <C>          <C>           <C>         <C>         <C>           <C>        
December 31, 1995             $234,310  $22,339,850    $(532,464)   $(777,983)    $(72,839)   $1,196,686  $25,235,026   $47,622,586

Deferred and unearned
compensation amortization
of ESOP and MSBPs shares                    126,364                   114,283       60,695                                  301,342

Stock options exercised                     (42,524)      95,994                                                             53,470

MSBP shares forfeited                          (847)                                   847

Net income                                                                                                  3,009,997     3,009,997

Cash dividends declared
on common stock at $.46
per share                                                                                                    (989,594)     (989,594)

Purchase of 254,745
shares of treasury stock                              (5,937,531)                                                        (5,937,531)

Change in unrealized gain
on investment securities
available for sale, net                                                                       (1,005,943)                (1,005,943)
                            ----------- ------------ ------------- ------------ ------------ ------------- ------------ ------------
December 31, 1996              234,310   22,422,843   (6,374,001)    (663,700)     (11,297)      190,743   27,255,429    43,054,327

Deferred and unearned
compensation amortization
of ESOP and MSBPs shares                    129,500                     84,309       11,297                                 225,106

Stock options exercised                    (395,888)     774,018                                                            378,130

Net income                                                                                                  3,522,099     3,522,099

Cash dividends declared
on common stock at $.42
per share                                                                                                    (840,928)     (840,928)

Purchase of 28,716 shares
of treasury stock                                       (722,433)                                                          (722,433)

Change in unrealized
gain  on investment
securities available for                                                                        
sale, net                                                                                      1,037,629                  1,037,629

                            ----------- ------------ ------------- ------------ ------------ ------------- ------------ ------------

September 30, 1997            $234,310  $22,156,455  ($6,322,416)   ($579,391)    $       0   $1,228,372  $29,936,600   $46,653,930
                            =========== ============ ============= ============ ============ ============ ===========   ===========
</TABLE>






See notes to consolidated financial statements.

                                       3

<PAGE>


FIRST SHENANGO BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                    Nine Months Ended
                                                                                       September 30,
                                                                                  1997            1996
                                                                              -----------------------------
OPERATING ACTIVITIES
<S>                                                                           <C>             <C>         
Net Income                                                                    $  3,522,099    $  1,857,524
Adjustments to reconcile net income to net cash provided by
  operating activities:
    Net gain on sale of investments and loans                                      (25,862)       (214,114)
    Provision for estimated losses on loans                                        575,585         673,730
    Provisions for net losses on REO, repossessed and other assets                  12,523         107,506
    Provisions for depreciation and amortization                                   310,085         323,984
    Amortization of MSBPs and ESOP unearned and deferred                                           
      compensation                                                                 225,106         221,815
    Deferred federal income taxes                                                 (192,000)       (126,000)
    Increase in accrued interest receivable, prepaid
      expenses and sundry assets                                                    (6,104)       (832,786)
    Increase in accrued expenses and other liabilities                             128,164       1,200,329
    Increase in interest payable                                                 2,109,212       2,334,122
                                                                              ------------    ------------
    NET CASH PROVIDED BY OPERATING ACTIVITIES                                    6,658,808       5,546,110
INVESTING ACTIVITIES
Proceeds from maturities of investments                                         13,948,250       8,000,000
Proceeds from sales of investments                                                              29,679,254
Proceeds from sales of education loans                                           1,571,252       1,422,538
Purchases of investments                                                       (14,478,389)    (75,465,877)
Principal repayment on mortgage-backed securities and CMOs                       6,256,804       5,630,653
Proceeds from sales of foreclosed real estate, repossessed and other assets        299,986         563,276
Loan originations, net of loans in process                                     (51,913,915)    (77,862,313)
Principal repayment on loans                                                    46,211,659      47,950,136
Redemption (purchase) of Federal Home Loan Bank stock                              415,500      (2,116,200)
Additions to premises and equipment                                             (1,025,740)       (128,849)
                                                                              ------------    ------------
      NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES                           1,285,407     (62,327,382)

</TABLE>

                                       4


<PAGE>



FIRST SHENANGO BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                   Nine Months Ended 
                                                                                      September  30,
FINANCING ACTIVITIES                                                               1997             1996
                                                                                -----------------------------
<S>                                                                             <C>             <C>      
Net increase in money market and NOW deposits                                        499,312       7,342,269
Net decrease in savings deposits                                                  (1,219,485)     (2,484,663)
Net increase in certificates of deposit                                            4,461,478       1,742,649
Proceeds of FHLB borrowings                                                       61,930,000      50,768,000
Repayment of FHLB borrowings                                                     (70,238,375)     (6,218,053)
Net decrease in other borrowings                                                     (21,651)       (105,786)
Net decrease in advance payments by borrowers                                       (762,633)       (531,011)
Net decrease in other liabilities for unsettled investment security purchases     (4,996,627)
Net proceeds from exercise of stock options                                          378,130          53,470
Payment of cash dividend on common stock                                            (779,762)       (710,607)
Purchase of treasury stock                                                          (722,433)     (1,165,275)
                                                                                ------------    ------------
    NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES                             (11,472,046)     48,690,993
    NET DECREASE IN CASH AND CASH EQUIVALENTS                                     (3,527,831)     (8,090,279)
Cash and cash equivalents at beginning of period                                  16,734,483      15,830,560
                                                                                ------------    ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                      $ 13,206,652    $  7,740,281
                                                                                ============    ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
  INFORMATION:
Cash paid during the period for:
  Interest                                                                      $ 10,701,570    $  8,571,582
  Income taxes                                                                  $  1,838,758    $  1,867,197
Non-cash investing activities:
  Transfer from loans to real estate owned                                      $    125,015    $    274,369
  Transfer from loans to other repossessed assets                               $    584,746    $    814,618
Non-cash financing activities:
  Dividends declared but not paid                                               $    300,396    $    261,670

</TABLE>



See notes to consolidated financial statements.


                                       5
<PAGE>







                          FIRST SHENANGO BANCORP, INC.
                         PART I - FINANCIAL INFORMATION
                         Item 1. - Financial Statements

                          First Shenango Bancorp, Inc.
                   Notes to Consolidated Financial Statements

--------------------------------------------------------------------------------

NOTE 1.  BASIS OF PRESENTATION

The unaudited  consolidated  financial  statements include the accounts of First
Shenango Bancorp, Inc. (the "Company"), First Federal Savings Bank of New Castle
(the  "Savings  Bank")  and  Tri-State  Service  Corporation.   All  significant
intercompany balances and transactions have been eliminated in consolidation.

The accompanying  unaudited  condensed  consolidated  financial  statements were
prepared in accordance with generally accepted accounting principles for interim
financial  information  and with  instructions  for Form 10-Q and  Article 10 of
Regulation S-X. Accordingly, they do not include all information and disclosures
required by generally  accepted  accounting  principles  for complete  financial
statements.  However, all normal recurring  adjustments have been made which, in
the  opinion  of  management,  are  necessary  to the fair  presentation  of the
financial statements.

The results of operations  for the nine months ended  September 30, 1997 are not
necessarily  indicative of the results which may be expected for the year ending
December 31, 1997.

The  Consolidated  Statement  of  Financial  Position at  December  31, 1996 was
audited by Ernst & Young LLP. Their  unqualified  opinion thereon is included in
the Company's 1996 Annual Report to Shareholders.

The  presentation  of financial  statements  in  conformity  with GAAP  requires
management to make estimates and assumptions that affect the amounts reported in
the financial  statements and  accompanying  notes.  Actual results could differ
from  these  estimates.  Most  significantly,  the  Company  uses  estimates  in
determining the allowance for loan losses.

Certain items  previously  reported have been  reclassified  to conform with the
current period's reporting format.

NOTE 2.  EARNINGS PER SHARE

Earnings  per share for the nine months ended  September  30, 1997 and 1996 have
been  computed  based on 2,064,559  and 2,274,779  weighted  average  shares and
common stock equivalents outstanding,  respectively.  Earnings per share for the
three  months  ended  September  30, 1997 and 1996 have been  computed  based on
2,064,978 and 2,261,295  weighted  average  shares and common stock  equivalents
outstanding,  respectively.  The  Company  accounts  for shares  acquired by its
Employee  Stock  Ownership  Plan  ("ESOP")  and  Management  Stock  Bonus  Plans
("MSBPs") in accordance  with Statement of Position 93-6;  shares  controlled by
the ESOP and MSBPs are not considered in the weighted average shares outstanding
until the  shares are  committed  for  allocation  to an  employee's  individual
account or are granted to an individual.

During February 1997, the Financial Accounting Standards Board adopted Statement
No. 128, "Earnings per Share," ("FAS 128") which is effective for periods ending
after December 15, 1997. FAS 128 supersedes  Accounting Principles Board Opinion
15 and supersedes or amends  various other  accounting  pronouncements.  FAS 128
simplifies the standards for computing earnings per share ("EPS") and makes them
comparable to international  standards.  It replaces the presentation of primary
EPS with a  presentation  of basic EPS. It also  requires dual  presentation  of
basic and diluted EPS on the face of the income  statement for all entities with
complex capital  structures and requires a  reconciliation  of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS  computation.  Early adoption of FAS 128 is not permitted,  however,
restatement  of all  prior  period  EPS data  presented  will be  required  upon
adoption.

Based on management's calculations, there would be no change to reported EPS for
the three or nine months ended  September 30, 1997 or for the three months ended
September  30, 1996 if FAS 128 had been in effect for these  periods.  Under FAS
128, EPS for the nine months ended  September  30, 1996 would have been $0.81 as
compared to EPS of $0.82 as reported.


                                       6

<PAGE>




NOTE 3.  INVESTMENT SECURITIES

A summary of investment  securities available for sale is as follows:  

  September 30, 1997

<TABLE>
<CAPTION>
                                                           Gross             Gross          Estimated
                                          Amortized      Unrealized        Unrealized         Fair
                                             Cost           Gains            Losses           Value
                                        -------------   -------------    -------------    -------------
<S>                                     <C>             <C>              <C>              <C>          
U.S. Government and agency securities   $   8,996,309   $      33,548                     $   9,029,857
Collateralized mortgage obligations        43,140,115         540,604          (63,252)      43,617,467
Municipal obligations                      28,391,046       1,141,052                        29,532,098
Other debt securities                         250,000           8,750                           258,750
Mortgage-backed securities                 24,375,648         315,423         (212,746)      24,478,325
FHLB stock                                  3,874,300                                         3,874,300
Other marketable equity securities          9,830,436          98,363             (370)       9,928,429
                                        -------------   -------------    -------------    -------------
                                        $ 118,857,854   $   2,137,740    ($    276,368)   $ 120,719,226
                                        =============   =============    =============    =============
</TABLE>


The  amortized  cost and  estimated  fair  value  of  investment  securities  at
September 30, 1997 by  contractual  maturity are shown in the  following  table.
Actual maturities may differ from contractual  maturities  because borrowers may
have the right to call or prepay  obligations with or without call or prepayment
penalties.  For purposes of the maturity table,  mortgage-backed  securities and
CMOs,  which are not due at a single  maturity  date,  have been  allocated over
maturity  groupings  based on the  weighted-average  contractual  maturities  of
underlying  collateral.  The  mortgage-backed  securities  and CMOs  may  mature
earlier than their weighted-average  contractual maturities because of principal
prepayments.

<TABLE>
<CAPTION>
                                               Amortized       Estimated
                                                 Cost          Fair Value
                                              ------------   ------------
Debt and mortgage-related securities:
<S>                                           <C>            <C>         
  Due after one year through five years       $  4,272,720   $  4,292,247
  Due after five years through ten years         6,359,184      6,424,142
  Due after 10 through 20 years                 17,852,619     18,566,026
  Due after 20 years                            76,668,595     77,634,082
                                              ------------   ------------
  Total                                        105,153,118    106,916,497
Marketable equity securities and FHLB stock     13,704,736     13,802,729
                                              ------------   ------------
  Total investment securities                 $118,857,854   $120,719,226
                                              ============   ============

</TABLE>

On October  3,  1997,  the  Savings  Bank sold GNMA  fixed rate  mortgage-backed
securities  with an amortized  cost and market  value at  September  30, 1997 of
$16,486,223  and  $16,313,203,  respectively,  at a net  loss  of  $17,256.  The
proceeds from the sale of these  securities were used to reduce FHLB borrowings.
The securities which were sold are included in the "Due after 20 years" category
in the maturity table above.

                                       7
<PAGE>
NOTE 4.  LOANS
<TABLE>
<CAPTION>
                                                          September 30, 1997  December 31, 1996
                                                          ------------------  -----------------
First mortgage residential:
<S>                                                           <C>              <C>          
 One-to-four family residential                               $ 170,954,648    $ 158,817,080
 Construction                                                       838,937        1,287,007
                                                              -------------    -------------
                                                                171,793,585      160,104,087
Commercial and other real estate                                 21,973,869       24,753,320
Commercial business                                              20,668,999       20,944,114
Commercial land and land development                              8,051,699        3,488,337
Automobile                                                       21,203,479       32,239,765
Home equity                                                      15,235,354       15,327,772
Other consumer                                                    3,600,020        3,796,998
                                                              -------------    -------------
Gross loans held for investment                                 262,527,005      260,654,393
Less:
   Loans in process                                               3,040,031        5,114,248
   Unearned discounts                                                82,883          100,115
   Net deferred fees                                                666,138          261,344
   Allowance for losses                                           3,078,520        2,867,270
                                                              -------------    -------------
Net loans held for investment                                   255,659,433      252,311,416
Education loans held for sale                                     3,270,028        3,458,286
                                                              -------------    -------------
                                                              $ 258,929,461    $ 255,769,702
                                                              =============    =============
</TABLE>

Activity in the allowance for loan losses is 
summarized as follows:
<TABLE>
<CAPTION>
                                                          For the Nine Months Ended September 30,
                                                                   1997             1996
                                                              -------------    -------------
<S>                                                           <C>              <C>          
Balance at beginning of year                                  $   2,867,270    $   2,471,658
Provision charged to income - mortgage                               90,000
Provision charged to income - commercial                            170,707          225,000
Provision charged to income - consumer                              314,878          448,730
Charge-offs - commercial                                            (36,011)         (60,000)
Charge-offs - consumer                                             (360,667)        (427,749)
Recoveries - consumer                                                32,343           33,049
                                                              -------------    -------------
Balance at end of period                                      $   3,078,520    $   2,690,688
                                                              =============    =============

The allowance for loan losses at September 30 consisted of:

Mortgage                                                      $     422,000    $     332,000
Commercial                                                        1,228,496        1,018,800
Consumer                                                          1,428,024        1,339,888
                                                              -------------    -------------
                                                              $   3,078,520    $   2,690,688
                                                              =============    =============
</TABLE>
                                       8
<PAGE>


The  estimated  fair value of education  loans held for sale  approximates  book
value at September 30, 1997 and December 31, 1996.

The Company held one loan with a balance of $1.70  million and $1.76  million at
September  30, 1997 and December 31, 1996,  respectively,  which was  considered
impaired.  Because the market value of the collateral securing this loan exceeds
the loan's  recorded  balance,  no specific  loss  reserve is deemed  necessary;
however,  the loan has been included in management's  assessment of the adequacy
of general  valuation  allowances.  This loan has not been placed on non-accrual
status,  nor does management  expect it to be in the foreseeable  future.  There
were no other loans  considered  impaired during the nine months ended September
30, 1997.

Loans  which  the  Company  considers  non-performing  due to  being  placed  on
non-accrual  status as a result of being in arrears  three months or more are as
follows:

<TABLE>
<CAPTION>

Period                               Number of Loans                  Balance             Percent of net loans held for investment
------------------------------------------------------------------------------------- --------------------------------------------
<S>                                        <C>                      <C>                                    <C>  
September 30, 1997                         56                       $1,174,735                             0.46%
December 31, 1996                          92                       $1,013,103                             0.40%
</TABLE>


The foregone  interest on  non-performing  loans for the periods ended September
30, 1997 and December 31, 1996 was $92,921 and $41,709, respectively.

At September  30, 1997 the Company was  committed  under  various  agreements to
purchase  first mortgage  loans of $379,800;  originate  first mortgage loans of
$2,021,875;  originate commercial loans of $7,771,401;  originate consumer loans
of $545,943; and had $2,389,681 in unused commercial lines of credit; $2,625,328
in commercial  letters of credit issued;  $6,420,692 in unused home equity lines
of credit; $2,001,311 in unused personal unsecured lines of credit; and $568,031
in unused credit card lines.  There were no commitments to lend additional funds
to debtors whose loans with the Company were  non-performing as of September 30,
1997.


                                       9

<PAGE>


                          FIRST SHENANGO BANCORP, INC.
                         PART I - FINANCIAL INFORMATION
                Item 2. - Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

<TABLE>
<CAPTION>
                                                           At or For the Nine Months      At or For the Three Months
                                                              Ended September 30,             Ended September 30,
Statistical Data:                                          1997 (1)        1996 (1)        1997 (1)         1996 (1)
                                                         -------------- --------------- ---------------- ---------------
<S>                                                             <C>             <C>              <C>             <C>  
Return on average assets                                         1.17%           0.69%            1.16%           0.01%
Return on average assets (2)                                       n/a           1.07%              n/a           1.10%
Return on average equity                                        10.65%           5.25%           10.24%           0.09%
Return on average equity (2)                                       n/a           8.17%              n/a           8.87%
Average equity to average assets                                11.02%          13.10%           11.35%          12.41%
Average interest rate spread (FTE)                               2.98%           3.08%            2.92%           3.12%
Net yield on average interest-earning assets (FTE)               3.50%           3.68%            3.46%           3.69%
Non-interest expense to average assets                           1.46%           2.41%            1.46%           3.48%
Non-interest expense to average assets (2)                         n/a           1.79%              n/a           1.72%
Efficiency ratio                                                43.06%          65.30%           43.61%          94.43%
Efficiency ratio (2)                                               n/a          48.59%              n/a          46.63%
Nonperforming assets to total assets                             0.52%           0.51%            0.52%           0.51%
Allowance for loan losses to gross loans receivable
                                                                 1.17%           1.04%            1.17%           1.04%
Book value per share, net of treasury shares                    $22.55          $20.42           $22.55          $20.42

</TABLE>

(1)  Applicable  income and expense  figures have been annualized in calculating
     these ratios.
(2)  Proforma  excluding the effect of the SAIF special  assessment on September
     30, 1996.
(FTE) Fully taxable-equivalent basis.


Management's  Discussion  and  Analysis of Results of  Operations  for the Three
Months Ended September 30, 1997 and 1996.

During the three months ended September 30, 1997, the Company benefited from the
continuing  growth  in the  mortgage  and  commercial  loan  portfolios  and the
leveraging of the investment  portfolio  during 1996. While the average interest
rate spread and net yield on average interest-earning assets, both calculated on
a fully taxable-equivalent basis, declined from the three months ended September
30, 1996 to the same period in 1997,  net interest  income  increased as average
interest-earning assets increased by $25.81 million. The effect of this increase
was  partially  offset  by  a  $27.57  million   increase  in   interest-bearing
liabilities.  Management  anticipates  a continuing  tightening  of spreads as a
result of the Federal  Reserve  Board's  decision to raise  short-term  interest
rates in the first quarter of 1997.

Provisions  for loan losses  decreased  $30,000 to $195,000 for the three months
ended  September 30, 1997 from  $225,000 for same period in 1996.  The provision
was established as a result of management's  monitoring of non-performing  loans
and assets and other potential problem credits. Non-accrual loans and loans more
than 90 days past due totalled $1.21 million, and other  non-performing  assets,
namely REO and other  repossessed  assets,  were $846,000 at September 30, 1997,
for a total of $2.06 

                                       10

<PAGE>

million  in  non-performing  assets.  Interest  received  in cash of  $7,000  on
non-accrual  loans is included in net income for the 1997 third  quarter.  Total
allowance  for losses as a percentage of gross loans  receivable,  REO and other
repossessed  assets was 1.18% at  September  30, 1997 and 1.11% at December  31,
1996. Total  non-performing  assets as a percentage of total assets was 0.52% at
September 30, 1997 and 0.43% at December 31, 1996.

Total  non-interest  income decreased $49,000 in 1997 primarily due to a $32,000
gain on the  sale of two  municipal  bonds in the 1996  quarter.  There  were no
investment  sales in the current year  quarter.  Service  charges and other fees
also decreased by $15,000 during the 1997 quarter.

Total  non-interest  expense  decreased $1.81 million from $3.29 million for the
three months ended September 30, 1996 to $1.48 million for the same quarter this
year.  This is  primarily  the  result of the  one-time  special  assessment  to
recapitalize  the Savings  Association  Insurance  Fund which was recorded as of
September 30, 1996.  This event  resulted in a pre-tax charge to income of $1.67
million for the 1996 quarter.  A lower SAIF premium in 1997 reduced  expenses an
additional  $106,000.  Also  contributing  to the  reduction in expenses  were a
$42,000 decrease in REO expense,  an $18,000  reduction in professional  service
fees,  and a $13,000  reduction in occupancy and equipment  expense from year to
year.

Excluding the effect of the 1996 SAIF assessment, the Company's efficiency ratio
improved from 46.63% at September 30, 1996 to 43.61% at September 30, 1997.  The
ratio  of  non-interest  expenses  to  average  assets  improved  from  1.72% to
1.46%,again excluding the effect of the SAIF assessment. The improvement in both
of these key ratios is due to lower SAIF  premiums and  management's  continuing
dedication to cost control.

Management's  Discussion  and  Analysis  of Results of  Operations  for the Nine
Months Ended September 30, 1997 and 1996.

During the nine months ended  September  30, 1997, a $5.88  million  increase in
deposits along with a continuing  reduction in the automobile loan portfolio and
a  $4.57  million  reduction  in the  investment  portfolio  were  used  to fund
increased  mortgage loan  originations and repay FHLB  borrowings.  The interest
rate  environment has not been as conducive to leveraging the Company's  balance
sheet during 1997 to the same extent that it was in recent  years.  As a result,
the Company has focused more on improving the  performance of its loan portfolio
and holding the line on operating  costs.  The average  interest rate spread and
net  yield  on  average  interest-earning  assets,  both  calculated  on a fully
taxable-equivalent  basis,  experienced ten basis point and eighteen basis point
decreases,  respectively,  from the nine months ended  September 30, 1996 to the
same period in 1997,  in large part due to the impact a 25 basis point  increase
in short-term interest rates in the first quarter of 1997.

Provisions  for loan losses  decreased  $99,000 to $575,000  for the nine months
ended  September  30,  1997  from  $674,000  for the same  period  in 1996.  The
provision  was   established   as  a  result  of   management's   monitoring  of
non-performing loans and assets and other potential problem credits. Non-accrual
loans and loans  more that 90 days past due  totalled  $1.21  million  and other
non-performing assets, namely REO and other repossessed assets, were $846,000 at
September  30,  1997,  for a total of $2.06  million in  non-performing  assets.
Interest  received  in cash of $33,000 on  non-accrual  loans is included in net
income  for the  1997  nine  month  period.  Total  allowance  for  losses  as a
percentage of gross loans receivable, REO and other repossessed assets was 1.18%
at September  30, 1997.  Total  non-performing  assets as a percentage  of total
assets was 0.52% at September 30, 1997.

Total non-interest income decreased $215,000 in 1997 primarily due to a $188,000
decrease in the gain on sale of investments  and loans.  The 1996 gains were due
to the sale of GNMA mortgage-backed  securities in the first quarter of 1996 and
municipal bond sales in the third quarter of 1996, partially offset by a $49,000
loss on the sale of an adjustable rate  mortgage-backed  security mutual fund in
the second  quarter  of that  year.  Service  charges  and other fees  decreased
$26,000 from year to year,  as increases in late charges  collected on loans and
miscellaneous  service  fees  were  offset  by a  reduction  in fees on  deposit
accounts.

Total non-interest expense decreased from 1996 to 1997, primarily as a result of
a  $1.98  million  reduction  in  deposit  insurance  premiums  due to the  SAIF
recapitalization  in the third  quarter of 1996 and the lower  rates paid to the
SAIF  during 1997 as  discussed  above.  Also  contributing  to the  decrease in
non-interest  expense was a $100,000  decrease in REO  expense,  as reserves for
losses  totalling  $85,000 were recorded on two REO properties  during the first
nine months of 1996,  while only $11,000 in REO reserves  have been  established
during the same period in 1997. Salaries and employee benefits increased $51,000
between the 1996 and 1997 quarters, primarily as a result of normal annual merit
increases in salaries and increased ESOP amortization expenses due to the higher
average stock price.  Occupancy and equipment,  professional  services and other
non-interest expense all declined in 1997 from 1996.

                                       11

<PAGE>

Excluding the effect of the 1996 SAIF assessment, the Company's efficiency ratio
improved from 48.59% at September 30, 1996 to 43.06% at September 30, 1997.  The
ratio of  non-interest  expenses to average assets improved from 1.79% to 1.46%,
again  excluding the effect of the SAIF  assessment.  The improvement in both of
these key ratios is due to the lower SAIF premiums and  management's  continuing
dedication to cost control. 

Liquidity and Capital Resources

The Savings  Bank is required to  maintain  minimum  levels of liquid  assets as
defined by Office of Thrift Supervision ("OTS")  regulations.  This requirement,
which may be varied from time to time  depending  upon economic  conditions  and
deposit flows, is based upon a percentage of deposits and short-term borrowings.
The  required  minimum  ratio is  currently  5%. The Savings  Bank's  regulatory
liquidity ratio averaged 5.30% during the three months ended September 30, 1997.
The  Savings  Bank  manages  its  liquidity  ratio  to meet its  funding  needs,
including deposit outflows,  disbursements of payments  collected from borrowers
for taxes and insurance,  and loan principal disbursements and to meet its asset
and liability management objectives.

In addition to funds provided from operations, the Saving Bank's primary sources
of funds  are  savings  deposits  and  borrowings  from the FHLB of  Pittsburgh.
Principal  repayments on loans and  mortgage-backed  securities,  and matured or
called investment securities also provide cash inflows.

Scheduled  loan  repayments  and maturing  investment  securities are relatively
predictable sources of funds. However,  savings deposit flows and prepayments on
loans and mortgage-backed  securities are significantly influenced by changes in
market interest rates,  economic conditions,  and competition.  The Savings Bank
strives to manage the pricing of its  deposits to maintain a balanced  stream of
cash flows commensurate with its loan commitments and other predictable  funding
needs.

The Savings Bank invests its excess funds in an overnight  deposit  account with
the Federal Home Loan Bank of Pittsburgh.  This provides sufficient liquidity to
meet immediate loan commitment and savings withdrawal funding requirements. When
applicable,  cash  in  excess  of  immediate  funding  needs  is  invested  into
longer-term  investments and  mortgage-backed  securities which typically earn a
higher yield than overnight deposits.  These types of investments may qualify as
liquid investments under OTS regulations.

The Savings Bank  anticipates  that it will have  sufficient  funds available to
meet its current loan commitments and normal savings  withdrawals.  At September
30, 1997, the Savings Bank had outstanding commitments to fund off balance sheet
items of $24.72 million.  In addition,  it had certificates of deposit scheduled
to mature  within  six  months of $62.61  million,  substantially  most of which
management  believes  will remain with the Savings  Bank. In the event that loan
demand and deposit  outflows exceed available funds, the Savings Bank may borrow
from the FHLB or sell securities from its available for sale portfolio.

The Company,  which  includes the Savings Bank,  from time to time is a party to
ordinary routine litigation, which arises in the normal course of business, such
as claims to enforce liens,  condemnation proceedings on properties in which the
Company or Savings Bank holds security  interests,  claims  involving the making
and servicing of real property  loans and other issues  incident to the business
of the Company or Savings Bank. In the opinion of management,  the resolution of
these  lawsuits  would  not have a  material  adverse  affect  on the  financial
position or results of operations of the Company or Savings Bank.

There has been much publicity  recently regarding the inability of many computer
systems to function  properly  after  December 31, 1999 due to how many computer
programs  calculate dates. The date September 9, 1999 (9/9/99) will also present
problems for some programs, due to "99" or "9999" being used in some date fields
to indicate  something  other than a date.  Management has formed a committee to
evaluate the Company's exposure to these issues and determine the best course of
action to avoid interruptions in operations when these dates arrive. The Company
has filed a report with the Office of Thrift  Supervision  ("OTS"),  its primary
regulator, detailing the progress made to date by this committee. Management and
the  committee  will  continue to work with  various  vendors to ensure that all
necessary steps are taken to minimize the Company's  potential exposure to these
issues. The total cost to the Company has not yet been determined, however, most
of the  expenditures  are expected to be for the replacement of certain computer
hardware and software purchased from third parties, and thus will be capitalized
and depreciated  over their estimated useful lives.  Other costs,  such as those
related to the  committee's  ongoing work, are being  expensed as incurred.  The
impact on  earnings  is not  expected  to be  material  in any single  reporting
period.

Management is not aware of any trends, events,  uncertainties or recommendations
by any regulatory  authority  that will have, or that are  reasonably  likely to
have, material effects on liquidity, capital resources or operations.

                                       12

<PAGE>

To be categorized as well  capitalized,  the Savings Bank must maintain  minimum
ratios as set forth in the table.  As of  September  30,  1997,  the most recent
notification from the Office of Thrift Supervision  categorized the Savings Bank
as well capitalized under the regulatory framework for prompt corrective action.
There are no  conditions  or events  since  that  notification  that  management
believes have changed the institution's category.

<TABLE>
<CAPTION>

(Dollar amounts in thousands)                      Tier I Core    Tier I Risk-Based    Tier II Risk-Based
                                                     Capital           Capital              Capital
                                                  --------------------------------------------------------
<S>                                               <C>                 <C>                 <C>      
Equity capital (1)                                $  38,564           $  38,564           $  38,564
Non-includable portion of investment in
subsidiary                                              (22)                (22)                (22)
Unrealized gain on certain securities available
for sale                                             (1,223)             (1,223)             (1,223)
General valuation allowances (2)                                                              2,617
                                                  ---------           ---------           ---------
Regulatory capital                                   37,319              37,319              39,936
Minimum capital requirement                          15,837               8,362              16,724
                                                  ---------           ---------           ---------
Excess regulatory capital                         $  21,482           $  28,957           $  23,212
                                                  =========           =========           =========
       Adjusted total assets                      $ 395,935           $ 209,046           $ 209,046
Regulatory capital as a percentage                     9.43%              17.85%              19.10%
Minimum capital requirement as a percentage            4.00%               4.00%               8.00%
                                                  ---------           ---------           ---------
Excess regulatory capital as a percentage              5.43%              13.85%              11.10%
                                                  =========           =========           =========
Well capitalized requirement as a percentage           5.00%               6.00%              10.00%
                                                  =========           =========           =========
</TABLE>


(1)   Represents equity capital of the consolidated  Savings Bank as reported to
      the OTS on Form 1313.
(2)   Limited to 1.25% of risk-based assets.


                                       13
<PAGE>


FIRST SHENANGO BANCORP, INC.
PART II - OTHER INFORMATION

-------------------------------------------------------------------------------


Item 1 - Legal Proceedings                                                None

Item 2 - Changes in Securities                                            N/A

Item 3 - Defaults Upon Senior Securities                                  N/A

Item 4 - Submission of Matters to a Vote of Security Holders

Item 5 - Other Information                                                None

Item 6 - Exhibits and Reports on Form 8-K
         (a)  Exhibits
           11.   Computation of per share earnings
           27.   Financial data schedule
         (b)  Reports on Form 8-K                                         None


                                       15
<PAGE>


                                   SIGNATURES


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



                                     FIRST SHENANGO BANCORP, INC.




Date:       November 5, 1997         By:  /S/ Francis A. Bonadio
         -----------------------          ----------------------
                                          FRANCIS A. BONADIO
                                          President and Chief Executive Officer




Date:       November 5, 1997         By:  /S/ Lonny D. Robinson
         ----------------------           ---------------------
                                          LONNY D. ROBINSON
                                          Vice President and Chief Financial
                                            Officer