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    June 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           (I.R.S. Employer Identification No.)
incorporation or organization)                          

                                 (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 July 22, 1997:


                                                         Outstanding
                                                         -----------

                          Class
                          -----

               $.10 par value common stock             2,071,257 Shares
     



<PAGE>



                          FIRST SHENANGO BANCORP, INC.


                                      INDEX
<TABLE>
<CAPTION>

                                                                                                                      Page Number

<S>                                                                                                                        <C>
PART I - FINANCIAL INFORMATION

     Item 1.  Financial Statements

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

     Consolidated Statements of Income for the Three Months Ended June 30, 1997 and 1996 and Six
     Months Ended June 30, 1997 and 1996                                                                                        2

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

     Consolidated Statements of Cash Flows for the Six Months Ended June 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                        9 - 12


PART II - OTHER INFORMATION

     Item 1.  Legal Proceedings                                                                                                13

     Item 2.  Changes in Securities                                                                                            13

     Item 3.  Defaults Upon Senior Securities                                                                                  13

     Item 4.  Submission of Matters to a Vote of Security Holders                                                              13

     Item 5.  Other Information                                                                                                13

     Item 6.  Exhibits and Reports on Form 8-K                                                                                 13


SIGNATURES                                                                                                                     14

</TABLE>


<PAGE>



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

<TABLE>
<CAPTION>

                                                                                               June 30,          December 31,
ASSETS                                                                                           1997                1996
                                                                                          ------------------  ------------------
<S>                                                                                             <C>                 <C>         
Cash and Cash Equivalents:
  Cash and amounts due from depository institutions                                               $1,239,894          $1,817,504
  Interest bearing deposits in financial institutions                                             14,154,395          14,916,979
                                                                                          ------------------  ------------------
                                                                                                  15,394,289          16,734,483
Investment securities available for sale, carried at fair value                                  129,025,393         125,288,762
Loans receivable, net of allowance for loan losses of $2,996,446 and $2,867,270                  258,449,714         255,769,702
Accrued interest receivable                                                                        2,799,460           2,331,437
REO and other repossessed assets, net                                                                718,633             736,852
Premises and equipment, net                                                                        4,634,193           4,300,527
Prepaid expenses, sundry assets and deferred taxes                                                   395,334             622,961
                                                                                          ------------------  ------------------
    TOTAL ASSETS                                                                                $411,417,016        $405,784,724
                                                                                          ==================  ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits (including non-interest bearing deposits of $4,958,018 and $4,647,926)                 $268,249,388        $267,619,176
Advances from Federal Home Loan Bank and other borrowings                                         93,049,926          86,455,211
Advance payments by borrowers for taxes and insurance                                              3,006,952           1,600,202
Accrued expenses, deferred taxes and other liabilities                                             2,043,651           7,055,808
                                                                                          ------------------  ------------------
    TOTAL LIABILITIES                                                                            366,349,917         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                                234,310             234,310
shares issued

Additional paid-in capital                                                                        22,100,955          22,422,843
Treasury stock at cost (270,941 and 283,188 shares)                                              (6,236,786)         (6,374,001)
Less stock acquired by MSBPs and ESOP                                                              (607,494)           (674,997)
Net unrealized gains on securities available for sale, net of tax                                    517,507             190,743
Retained earnings (substantially restricted)                                                      29,058,607          27,255,429
                                                                                          ------------------  ------------------
   TOTAL SHAREHOLDERS' EQUITY                                                                     45,067,099          43,054,327
                                                                                          ------------------  ------------------
   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                   $411,417,016        $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 June 30,         Six Months Ended June 30,
Interest income:                                                     1997              1996             1997             1996
                                                              ---------------------------------------------------------------------
<S>                                                                   <C>              <C>              <C>              <C>       
  Interest and fees on:
    First mortgage residential loans                                  $3,026,026       $2,564,893       $5,993,023       $5,051,855
    Commercial and other real estate loans                             1,162,622          967,421        2,283,376        1,856,871
    Consumer loans                                                     1,029,060        1,262,306        2,121,245        2,538,300
  Interest and dividends on investments available for sale:
    Taxable                                                            1,508,562        1,330,825        2,979,019        2,503,623
    Tax-exempt                                                           425,629          176,327          844,989          348,797
    Dividends                                                            222,697          262,609          450,783          551,586
  Other interest income                                                   93,918          147,064          228,841          307,808
                                                              ---------------------------------------------------------------------
    TOTAL INTEREST INCOME                                              7,468,514        6,711,445       14,901,276       13,158,840
                                                              ---------------------------------------------------------------------
  Interest on deposits                                                 3,101,021        2,891,795        6,149,921        5,821,000
  Interest on borrowed funds                                           1,153,626          677,877        2,349,363        1,232,970
                                                              ---------------------------------------------------------------------
    TOTAL INTEREST EXPENSE                                             4,254,647        3,569,672        8,499,284        7,053,970
                                                              ---------------------------------------------------------------------
    NET INTEREST INCOME                                                3,213,867        3,141,773        6,401,992        6,104,870
Provision for loan losses                                                194,988          224,201          379,622          448,994
                                                              ---------------------------------------------------------------------
    NET INTEREST INCOME AFTER PROVISION FOR
        LOAN LOSSES                                                    3,018,879        2,917,572        6,022,370        5,655,876
Non-interest income:
  Service charges and other fees                                         169,720          191,806          372,179          383,060
  Gain (loss) on sale of investments and loans, net                        8,027          (44,033)           8,462          162,342
  Other                                                                      523            1,165            1,700            2,482
                                                              ---------------------------------------------------------------------
    TOTAL NON-INTEREST INCOME                                            178,270          148,938          382,341          547,884
Non-interest expense:
  Salaries and employee benefits                                         755,129          757,874        1,520,497        1,497,007
  Occupancy and equipment, net                                           254,667          262,715          512,615          530,381
  Deposit insurance premiums                                              43,380          146,347           85,839          292,887
  Professional services                                                   46,700           64,180           97,064          122,055
  REO operations                                                          23,673           37,506           57,574          115,829
  Other                                                                  311,808          332,717          624,761          662,922
                                                              ---------------------------------------------------------------------
    TOTAL NON-INTEREST EXPENSE                                         1,435,357        1,601,339        2,898,350        3,221,081
                                                              ---------------------------------------------------------------------
    INCOME BEFORE INCOME TAXES                                         1,761,792        1,465,171        3,506,361        2,982,679

Income tax expense:
  Federal                                                                445,325          473,925          934,750          941,625
  State                                                                  110,200           92,575          227,900          193,800
                                                              ---------------------------------------------------------------------
    TOTAL INCOME TAX EXPENSE                                             555,525          566,500        1,162,650        1,135,425
                                                              ---------------------------------------------------------------------
    NET INCOME                                                        $1,206,267         $898,671       $2,343,711       $1,847,254
                                                              =====================================================================
Earnings per share                                                         $0.58            $0.39            $1.14            $0.80

Dividends declared per share                                               $0.15            $0.12            $0.27            $0.22
</TABLE>

See notes to consolidated financial statements.

                                        2



<PAGE>





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






<TABLE>
<CAPTION>

                                                             Unallocated   Unallocated                   Retained
                                Additional                     Common        Common      Unrealized      Earnings,     Consolidated
                    Common        Paid-In       Treasury     Stock Held    Stock Held    Gain (Loss)   Substantially  Shareholders'
                     Stock        Capital        Stock         by ESOP      by MSBPs    on 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                          74,000                      56,206        11,297                                     141,503

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

Net income                                                                                                 2,343,711     2,343,711

Cash dividends
declared on
common stock
at $.27 per
share                                                                                                       (540,533)     (540,533)

Purchase of 
25,566 shares
of treasury 
stock                                             (636,803)                                                               (636,803)

Change in 
unrealized gain
on investment
securities
available for 
sale, net                                                                                     326,764                      326,764
                  ----------------------------------------------------------------------------------------------------------------
June 30, 1997        $234,310    $22,100,955   ($6,236,786)    ($607,494)           $0       $517,507    $29,058,607   $45,067,099
                  ================================================================================================================


</TABLE>














See notes to consolidated financial statements.

                                        3

<PAGE>




FIRST SHENANGO BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                                     Six Months Ended
                                                                                                         June 30,
                                                                                                  1997              1996
                                                                                            ----------------------------------
OPERATING ACTIVITIES
                                                                                                              
<S>                                                                                              <C>               <C>         
Net Income                                                                                        $2,343,711        $1,847,254

Adjustments to reconcile net income to net cash provided by
  operating activities:

    Net gain on sale of investments and loans                                                         (8,462)         (162,342)

    Provision for estimated losses on loans                                                          379,622           448,994

    Provisions for net losses on REO, repossessed and other assets                                     7,522            64,322

    Provisions for depreciation and amortization                                                     215,425           220,987

    Amortization of MSBPs and ESOP unearned and deferred
      compensation                                                                                   141,503           148,652

    Deferred federal income taxes                                                                   (101,000)          (82,000)

    Increase in accrued interest receivable, prepaid
      expenses and sundry assets                                                                    (308,396)         (529,761)

    (Decrease) increase in accrued expenses and other liabilities                                    (70,965)        1,343,305

    Increase in interest payable                                                                   1,508,038         1,670,332
                                                                                            ----------------------------------
    NET CASH PROVIDED BY OPERATING ACTIVITIES                                                      4,106,998         4,969,743

INVESTING ACTIVITIES

Proceeds from maturities of investments                                                            5,005,583         8,000,000

Proceeds from sales of investments                                                                                  28,883,852

Proceeds from sales of education loans                                                               697,912           481,584

Purchases of investments                                                                         (12,410,766)      (71,558,656)

Principal repayment on mortgage-backed securities and CMOs                                         4,499,016         4,252,854

Proceeds from sales of foreclosed real estate, repossessed and other assets                          236,713           241,563

Loan originations, net of loans in process                                                       (31,274,838)      (46,140,997)

Principal reduction on loans                                                                      27,299,738        27,943,672

Purchase of Federal Home Loan Bank stock                                                            (334,700)       (1,274,900)

Additions to premises and equipment                                                                 (549,091)          (30,115)
                                                                                             ----------------------------------
      NET CASH USED BY INVESTING ACTIVITIES                                                       (6,830,433)      (49,201,143)



</TABLE>

                                        4

<PAGE>



FIRST SHENANGO BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                                Six Months Ended June 30,
FINANCING ACTIVITIES                                                                              1997              1996
                                                                                             ----------------------------------
<S>                                                                                             <C>              <C>
Net increase in money market and NOW deposits                                                      2,079,082         3,465,385
Net increase (decrease) in savings deposits                                                          262,094          (695,735)
Net (decrease) increase in certificates of deposit                                                (3,225,206)        3,121,720
Proceeds of FHLB borrowings                                                                       36,930,000        28,125,000
Repayment of FHLB borrowings                                                                     (30,234,539)
Net (decrease) increase in other borrowings                                                         (100,746)          150,999
Net increase in advance payments by borrowers                                                      1,406,750         1,338,009
Net decrease in other liabilities for unsettled investment security purchases                     (4,996,627)
Net proceeds from exercise of stock options                                                          378,130            28,470
Payment of cash dividend on common stock                                                            (478,894)         (446,171)
Purchase of treasury stock                                                                          (636,803)         (639,276)
                                                                                             ----------------------------------
    NET CASH PROVIDED BY FINANCING ACTIVITIES                                                      1,383,241        34,448,401
    NET DECREASE IN CASH AND CASH EQUIVALENTS                                                     (1,340,194)       (9,782,999)

Cash and cash equivalents at beginning of period                                                  16,734,483        15,830,560
                                                                                             ----------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                       $15,394,289        $6,047,561
                                                                                             ==================================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
  INFORMATION:

Cash paid during the period for:
  Interest                                                                                        $6,991,247        $5,393,787
  Income taxes                                                                                    $1,282,758        $1,189,492
Non-cash investing activities:
  Transfer from loans to real estate owned                                                                            $271,731
  Transfer from loans to other repossessed assets                                                   $427,196          $438,106
Non-cash financing activities:
  Dividends declared but not paid                                                                   $300,868          $264,437


</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 six  months  ended  June 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 six months  ended  June 30,  1997 and 1996 have been
computed  based on 2,063,307 and 2,295,515  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 six  months  ended  June  30,  1997 or 1996 if FAS 128 had been in
effect for these periods.



                                        6

<PAGE>



NOTE 3.  INVESTMENT SECURITIES

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

 June 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                            $10,999,051          $3,929         ($19,173)        $10,983,807

 Collateralized mortgage obligations                               48,695,210         444,443         (214,124)         48,925,529

 Municipal obligations                                             28,375,032         754,282           (2,328)         29,126,986

 Other debt securities                                                250,000          10,000                              260,000

 Mortgage-backed securities                                        25,038,031         235,185         (494,909)         24,778,307

 FHLB stock                                                         4,624,500                                            4,624,500

 Other marketable equity securities                                10,259,063          73,783           (6,582)         10,326,264
                                                          -------------------------------------------------------------------------
                                                                 $128,240,887      $1,521,622        ($737,116)       $129,025,393
                                                          =========================================================================

</TABLE>

The amortized cost and estimated fair value of investment securities at June 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
                                                                                           ------------------------------------
<S>                                                                                             <C>               <C>       
Debt and mortgage-related securities:

 Due in one year or less                                                                            $999,821        $1,003,750

 Due after one year through five years                                                             6,274,461         6,273,582

 Due after five years through ten years                                                            4,041,856         4,054,447

 Due after 10 through 20 years                                                                    18,986,356        19,487,037
 
 Due after 20 years                                                                               83,054,830        83,255,813
                                                                                           ------------------------------------
  Total                                                                                          113,357,324       114,074,629

Marketable equity securities and FHLB stock                                                       14,883,563        14,950,764
                                                                                           ------------------------------------
 Total investment securities                                                                    $128,240,887      $129,025,393
                                                                                           ====================================



</TABLE>

                                        7

<PAGE>



NOTE 4.  LOANS

<TABLE>
<CAPTION>

                                                                                               June 30, 1997      December 31, 1996
                                                                                       --------------------------------------------
First mortgage residential:
<S>                                                                                             <C>                    <C>         
 One-to-four family residential                                                                 $166,766,889           $158,817,080
 Construction                                                                                        928,938              1,287,007
                                                                                       --------------------------------------------
                                                                                                 167,695,827            160,104,087
Commercial and other real estate                                                                  23,632,734             24,753,320
Commercial business                                                                               21,911,522             20,944,114
Commercial land and land development                                                               5,462,220              3,488,337
Automobile                                                                                        25,315,513             32,239,765
Home equity                                                                                       15,016,851             15,327,772
Other consumer                                                                                     3,596,893              3,796,998
                                                                                       --------------------------------------------
Gross loans held for investment                                                                  262,631,560            260,654,393
Less:
   Loans in process                                                                                3,944,640              5,114,248
   Unearned discounts                                                                                 88,179                100,115
   Net deferred fees                                                                                 564,684                261,344
   Allowance for losses                                                                            2,996,446              2,867,270
                                                                                       --------------------------------------------
Net loans held for investment                                                                    255,037,611            252,311,416
Education loans held for sale                                                                      3,412,103              3,458,286
                                                                                       --------------------------------------------
                                                                                                $258,449,714           $255,769,702
                                                                                       ============================================
</TABLE>

Activity in the allowance for loan losses is summarized as follows:

<TABLE>
<CAPTION>

                                                                                           For the Six Months Ended June 30,
                                                                                             1997                    1996
                                                                                     --------------------------------------------
<S>                                                                                            <C>                    <C>       
 Balance at beginning of year                                                                  $2,867,270             $2,471,658
 Provision charged to income - mortgage                                                            60,000
 Provision charged to income - commercial                                                         109,997                150,000
 Provision charged to income - consumer                                                           209,625                298,994
 Charge-offs - commercial                                                                                               (60,000)
 Charge-offs - consumer                                                                         (267,754)              (202,859)
 Recoveries - consumer                                                                             17,308                 26,311
                                                                                     --------------------------------------------
 Balance at end of period                                                                      $2,996,446             $2,684,104
                                                                                     ============================================

The allowance for loan losses at June 30 consisted of:

 Mortgage                                                                                        $392,000               $332,000
 Commercial                                                                                     1,203,797                943,800
 Consumer                                                                                       1,400,649              1,408,304
                                                                                    ---------------------------------------------
                                                                                               $2,996,446             $2,684,104
                                                                                    =============================================

</TABLE>
                                        8
<PAGE>

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

The Company held one loan with a balance of $1.72  million and $1.76  million at
June 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 forseeable future. There were
no other loans considered impaired during the six months ended June 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 loans held for investment
-----------------------------  ----------------------------- -----------------------------  ---------------------------------------
<S>                                         <C>                       <C>                                     <C>  
June 30, 1997                               69                        $1,448,784                              0.57%
December 31, 1996                           92                        $1,013,103                              0.40%

</TABLE>

The foregone  interest on  non-performing  loans for the periods  ended June 30,
1997 and December 31, 1996 was $74,280 and $41,709, respectively.

At June 30, 1997 the Company was committed under various  agreements to purchase
first mortgage loans of $740,100;  originate first mortgage loans of $2,401,090;
originate commercial loans of $7,326,117;  originate consumer loans of $568,134;
and  had  $4,159,024  in  unused  commercial  lines  of  credit;  $3,093,098  in
commercial  letters of credit issued;  $6,356,508 in unused home equity lines of
credit; $2,025,906 in unused personal unsecured lines of credit; and $557,308 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 June 30, 1997.

                          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 Six Months          At or For the Three Months
                                                                 Ended June 30,                     Ended June 30,
Statistical Data:                                           1997 (1)         1996 (1)          1997 (1)          1996 (1)
                                                        ---------------------------------------------------------------------
<S>                                                           <C>              <C>                <C>              <C>   
Return on average assets                                        1.18%            1.05%              1.21%            1.01%

Return on average equity                                       10.86%            7.82%             11.07%            7.67%

Average equity to average assets                               10.86%           13.46%             10.96%           13.10%

Average interest rate spread (FTE)                              3.00%            3.05%              3.03%            3.10%

Net yield on average interest-earning assets (FTE)              3.52%            3.68%              3.53%            3.71%

Non-interest expense to average assets                          1.46%            1.84%              1.44%            1.79%

Efficiency ratio                                               42.79%           49.65%             42.41%           48.03%

Nonperforming assets to total assets                            0.54%            0.48%              0.54%            0.48%

Allowance for loan losses to gross loans                        1.15%            1.08%              1.15%            1.08%
receivable

Book value per share, net of treasury shares                   $21.75           $20.53             $21.75           $20.53

</TABLE>

(1) Applicable  income and expense  figures have been  annualized in calculating
these ratios. 
(FTE) Fully taxable-equivalent basis.

                                        9

<PAGE>
Management's  Discussion  and  Analysis of Results of  Operations  for the Three
Months Ended June 30, 1997 and 1996.

During the three  months  ended June 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 June 30,
1996 to the same  period in 1997,  net  interest  income  increased  as  average
interest-earning assets increased by $39.03 million. The effect of this increase
was  partially  offset  by  a  $44.51  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  $29,000 to $195,000 for the three months
ended June 30, 1997 from  $224,000 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 $1.46 million, and other  non-performing  assets,
namely REO and other repossessed  assets,  were $719,000 at June 30, 1997, for a
total of $2.18 million in  non-performing  assets.  Interest received in cash of
$9,000 on  non-accrual  loans is  included  in net  income  for the 1997  second
quarter.  Total allowance for losses as a percentage of gross loans  receivable,
REO and  other  repossessed  assets  was  1.14%  at June 30,  1997 and  1.11% at
December 31, 1996. Total  non-performing  assets as a percentage of total assets
was 0.53% at June 30, 1997 and 0.43% at December 31, 1996.

Total  non-interest  income increased $29,000 in 1997 primarily due to an $8,000
gain on sale of education loans in the 1997 quarter as compared to a net loss of
$44,000 on the sale of investments and loans in the prior year quarter. The 1996
loss was due to the sale of an adjustable rate  mortgage-backed  security mutual
fund. There were no investment sales in the current year quarter.  The impact of
these items was partially offset by a $28,000 reduction in fee income on deposit
accounts between the two years.

Total non-interest  expense decreased  $166,000,  or 10.37%,  primarily due to a
$103,000  decrease  in  deposit  insurance  premiums  as a  result  of the  SAIF
recapitalization  during the third  quarter of 1996.  Also  contributing  to the
improvement  were  a  $14,000  decrease  in REO  operation  expense,  a  $17,000
reduction in professional service fees, and a $21,000 reduction in miscellaneous
other  non-interest  expense  from  year to  year.  Salaries  and  benefits  and
occupancy and equipment expenses also experienced improvements.

The Company's  efficiency  ratio improved from 48.03% at June 30, 1996 to 42.41%
at June 30, 1997,  while the ratio of  non-interest  expenses to average  assets
improved from 1.79% to 1.44%. The improvement in both of these key ratios is due
to the lower  SAIF  premiums  and  management's  continuing  dedication  to cost
control.  The improvement in the efficiency ratio is also due to the increase in
net interest income.

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

During the six months  ended June 30, 1997,  the Company  continued to implement
its strategy of increasing  earnings  through  leveraging the balance sheet. The
Savings Bank borrowed  $6.70 million,  net of repayments,  from the Federal Home
Loan Bank of  Pittsburgh  during  the six  months  which was used  primarily  to
purchase a high quality collateralized  mortgage obligation with a short average
life.  This security was called by the issuer  subsequent to June 30, 1997,  and
management  anticipates  using the proceeds to repay short-term FHLB borrowings.
In  addition,  increases  of $630,000 in  deposits  and $1.41  million in escrow
deposits were used along with available funds to fund growth of $8.68 million in
mortgage loans and $1.73 million in commercial and other real estate loans since
December 31,  1996.  The average  interest  rate spread and net yield on average
interest-earning  assets, both calculated on a fully  taxable-equivalent  basis,
experienced  five basis point and sixteen basis point  increases,  respectively,
from the six months  ended June 30, 1996 to the same period in 1997,  reflecting
the Company's  increase in short-term  borrowing  costs.  A series of leveraging
transactions  has increased the average  investment  portfolio  $25.96  million,
while the average  mortgage  loan  portfolio  increased  $26.32  million and the
average commercial and other real estate loan portfolio increased $8.88 million.
These  increases,  partially  offset by a $10.95 million decrease in the average
consumer loan  portfolio,  have  increased  net interest  income and net income.
Demand for first mortgage and  commercial and other real estate loans  increased
during the second quarter of 1997,  while management has continued to reduce the
Company's exposure to indirect automobile lending.

Provisions  for loan losses  decreased  $69,000 to  $380,000  for the six months
ended June 30, 1997 from $449,000 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  $1.46 million and other  non-performing  assets,
namely REO and other repossessed  assets,  were $719,000 at June 30, 1997, for a
total of $2.18 million in non-performing assets.

                                       10
<PAGE>



Interest  received  in cash of $23,000 on  non-accrual  loans is included in net
income for the 1997 six month period. Total allowance for losses as a percentage
of gross loans receivable,  REO and other  repossessed  assets was 1.14% at June
30, 1997. Total non-performing  assets as a percentage of total assets was 0.53%
at June 30, 1997.

Total non-interest  income decreased $166,000 in 1997 due to a $154,000 decrease
in the gain on sale of investments and loans.  The 1996 gains were primarily due
to the sale of GNMA  mortgage-backed  securities  in the first  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 $11,000 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  primarily  as a  result  of a  $207,000
reduction in deposit insurance  premiums and a $58,000 decrease in REO operation
expense.  Reserves  for  losses  totalling  $55,000  were  recorded  on two  REO
properties  in  March  1996,  while  only  $5,000  in  REO  reserves  have  been
established  during  1997.  Salaries  and employee  benefits  increased  $23,000
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.

The Company's  efficiency  ratio improved from 49.65% at June 30, 1996 to 42.79%
at June 30, 1997,  while the ratio of  non-interest  expenses to average  assets
improved  from 1.84% to 1.46%.  The  improvement  in both of these key ratios is
evidence of management's  continuing dedication to cost control. The improvement
in the efficiency ratio is also due to the increase in net interest income.


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 5.22% during the three months ended June 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 June 30,
1997,  the Savings Bank had  outstanding  commitments  to fund off balance sheet
items of $27.23 million.  In addition,  it had certificates of deposit scheduled
to mature  within  six  months of $58.48  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

                                       11

<PAGE>



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.

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.

To be categorized as well  capitalized,  the Savings Bank must maintain  minimum
ratios  as set  forth  in the  table.  As of June  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)                                           $36,652                   $36,652                      $36,652
 Non-includable portion of investment in
 subsidiary                                                       (25)                      (25)                         (25)
 Unrealized gain on certain securities
 available for sale                                              (516)                     (516)                        (516)
 General valuation allowances (2)                                                                                      2,671
                                                 ----------------------------------------------------------------------------
 Regulatory capital                                            36,111                    36,111                       38,782
 Minimum capital requirement                                   16,249                     8,539                       17,079
                                                 ----------------------------------------------------------------------------
 Excess regulatory capital                                    $19,862                   $27,572                      $21,703
                                                 ============================================================================
       Adjusted total assets                                 $406,233                  $213,487                     $213,487

 Regulatory capital as a percentage                             8.89%                    16.91%                       18.17%

 Minimum capital requirement as a
 percentage                                                     4.00%                     4.00%                        8.00%
                                                 ----------------------------------------------------------------------------
 Excess regulatory capital as a percentage                      4.89%                    12.91%                       10.17%
                                                 ============================================================================
 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.


                                       12

<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 
         (a) Information concerning an April 22, 1997 meeting
             was reported in the Form 10-Q for the three 
             months ended March 31, 1997.

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


                                       13

<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:     July 30, 1997      By:  /s/ Francis A. Bonadio
      ----------------------     -----------------------------------------
                                     FRANCIS A. BONADIO
                                     President and Chief Executive Officer




Date:     July 30, 1997      By:  /s/ Lonny D. Robinson
      ----------------------     ----------------------------------------
                                      LONNY D. ROBINSON
                                      Vice President and Chief Financial Officer



                                       14