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    MARCH 31, 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                (I.R.S. Employer Identification No.)
of 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 day                  |X| Yes        |_| No

      The number of shares outstanding of each of the issuer's classes of common
stock as of April 21, 1997:


                      Class                             Outstanding
                      -----                             -----------
           $.10 par value common stock                2,062,860 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 March 31, 1997 and
      December 31, 1996                                                                  1

      Consolidated  Statements  of Income for the Three  Months  Ended March 31,
      1997 and 1996                                                                      2

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

      Consolidated Statements of Cash Flows for the Three Months Ended March 31,
      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 - 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>

                                                                                                March 31,      December 31,
ASSETS                                                                                            1997             1996
                                                                                            --------------------------------
Cash and Cash Equivalents:
<S>                                                                                         <C>              <C>          
  Cash and amounts due from depository institutions                                         $   1,468,277    $   1,817,504
  Interest bearing deposits in financial institutions                                           9,573,970       14,916,979
                                                                                            --------------------------------
                                                                                               11,042,247       16,734,483
Investment securities available for sale, carried at fair value                               127,372,214      125,288,762

Loans receivable, net of allowance for loan losses of $2,927,508 and $2,867,270               253,822,746      255,769,702
Accrued interest receivable                                                                     2,523,070        2,331,437
REO and other repossessed assets, net                                                             737,842          736,852
Premises and equipment, net                                                                     4,325,242        4,300,527
Prepaid expenses, sundry assets and deferred taxes                                              1,091,977          622,961
                                                                                            --------------------------------
    TOTAL ASSETS                                                                            $ 400,915,338    $ 405,784,724
LIABILITIES AND SHAREHOLDERS' EQUITY                                                
Deposits (including non-interest bearing deposits of $4,223,908 and $4,647,926)             $ 269,301,696    $ 267,619,176
Advances from Federal Home Loan Bank and other borrowings                                      83,944,709       86,455,211
Advance payments by borrowers for taxes and insurance                                           2,334,718        1,600,202
Accrued expenses, deferred taxes and other liabilities                                          2,434,371        7,055,808
                                                                                            --------------------------------
    TOTAL LIABILITIES                                                                         358,015,494      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                                                                   22,353,174       22,422,843 
  Treasury stock at cost (280,088 and 283,188 shares)                                          (6,412,475)      (6,374,001) 
  Less stock acquired by  MSBPs  and ESOP                                                        (635,597)        (674,997)
  Net unrealized (losses) gains on securities available  for   sale, net of tax                  (792,773)         190,743  
  Retained earnings (substantially restricted)                                                 28,153,205       27,255,429
                                                                                            --------------------------------
   TOTAL SHAREHOLDERS' EQUITY                                                                  42,899,844       43,054,327
                                                                                            --------------------------------
   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                               $ 400,915,338    $ 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
                                                                      March 31,
Interest income:                                                 1997         1996
                                                             -------------------------
  Interest and fees on:
<S>                                                           <C>          <C>       
    First mortgage residential loans                          $2,966,997   $2,486,962
    Commercial and other real estate loans                     1,120,754      889,450
    Consumer loans                                             1,092,185    1,275,994
  Interest and dividends on investments available for sale:
    Taxable                                                    1,470,457    1,172,798
    Tax-exempt                                                   419,360      172,470
    Dividends                                                    228,086      288,977
  Other interest income                                          134,923      160,744
                                                              ------------------------
    TOTAL INTEREST INCOME                                      7,432,762    6,447,395
                                                              ------------------------
Interest expense:
  Interest on deposits                                         3,048,900    2,929,205
  Interest on borrowed funds                                   1,195,737      555,093
                                                              ------------------------
    TOTAL INTEREST EXPENSE                                     4,244,637    3,484,298
                                                              ------------------------
    NET INTEREST INCOME                                        3,188,125    2,963,097
Provision for loan losses                                        184,634      224,793
                                                              ------------------------
    NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES        3,003,491    2,738,304
Non-interest income:
  Service charges and other fees                                 202,459      191,254
  Gain on sale of investments and loans, net                         435      206,375
  Other                                                            1,177        1,317
                                                              ------------------------
    TOTAL NON-INTEREST INCOME                                    204,071      398,946
Non-interest expense:
  Salaries and employee benefits                                 765,368      739,133
  Occupancy and equipment, net                                   257,948      267,666
  Deposit insurance premiums                                      42,459      146,540
  Professional services                                           50,364       57,875
  REO operations                                                  33,901       78,323
  Other                                                          312,953      330,205
                                                              ------------------------
    TOTAL NON-INTEREST EXPENSE                                 1,462,993    1,619,742
                                                              ------------------------
    INCOME BEFORE INCOME TAXES                                 1,744,569    1,517,508
Income tax expense:
  Federal                                                        489,425      467,700
  State                                                          117,700      101,225
                                                              ------------------------
    TOTAL INCOME TAX EXPENSE                                     607,125      568,925
                                                              ------------------------
    NET INCOME                                                $1,137,444   $  948,583
                                                              ========================
Earnings per share                                            $     0.55   $     0.41
Dividends declared per share                                  $     0.12   $     0.10

</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 MSBP shares                     36,000                 28,103     11,297                                      75,400

Stock options exercised                   (105,669)    259,019                                                           153,350

Net income                                                                                               1,137,444     1,137,444

Cash dividend declared on
common stock at $.12 per
share                                                                                                     (239,668)     (239,668)

Purchase of 12,235 shares
of treasury stock                                     (297,493)                                                          (297,493)

Change in unrealized gain
on investment securities
available for sale, net                                                                    (983,516)                    (983,516)
                            --------------------------------------------------------------------------------------------------------

March 31, 1997               $234,310  $22,353,174 $(6,412,475) $(635,597)  $       0    $  (792,773)   $28,153,205   $42,899,844
                            ========================================================================================================

</TABLE>






See notes to consolidated financial statements.

                                            3

<PAGE>




FIRST SHENANGO BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                     Three Months Ended
                                                                                                            March 31, 
                                                                                                    1997                 1996
                                                                                               ----------------------------------
OPERATING ACTIVITIES
<S>                                                                                            <C>                 <C>         
Net Income                                                                                     $  1,137,444        $    948,583

Adjustments to reconcile net income to net cash provided by
  operating activities:
    Net gain on sale of investments and loans                                                          (435)           (206,375)
    Provision for estimated losses on loans                                                         184,634             224,793
    Provisions for net losses on REO, repossessed and other assets                                    7,039              58,754
    Provisions for depreciation and amortization                                                    106,077             117,576
    Amortization of MSBPs and ESOP unearned and deferred
      compensation                                                                                   75,400              75,307
    Deferred federal income taxes                                                                   (15,000)            (42,000)
    Increase in accrued interest receivable, prepaid
      expenses and sundry assets                                                                   (236,649)           (364,432)
    Increase in accrued expenses and other liabilities                                              460,902             673,353
    Increase in interest payable                                                                    824,286             932,759
                                                                                               ----------------------------------
    NET CASH  PROVIDED BY OPERATING  ACTIVITIES                                                   2,543,698           2,418,318
INVESTING ACTIVITIES
Proceeds from maturities of investments                                                           1,505,583           6,000,000 
Proceeds from sales of  investments                                                                                  17,809,593
Proceeds  from sales of education  loans                                                            260,153             197,423
Purchases of investments                                                                         (7,901,101)        (54,093,695)
Principal repayment on  mortgage-backed  securities and CMOs                                      2,706,450           2,453,978
Proceeds from sales of foreclosed real estate,  repossessed and other assets                        112,429             117,638
Loan originations,  net  of  loans  in  process                                                 (11,872,173)        (14,356,058)
Principal reduction on loans                                                                     13,254,319          14,996,054
Redemption (purchase) of Federal Home Loan  Bank  stock                                             115,100          (1,068,700)
Additions  to  premises  and  equipment                                                            (130,792)             (3,400)
                                                                                               ----------------------------------
      NET CASH USED BY INVESTING ACTIVITIES                                                      (1,950,032)        (27,947,167)

</TABLE>

                                        4

<PAGE>




FIRST SHENANGO BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                                      Three Months Ended
                                                                                                            March 31,
FINANCING ACTIVITIES                                                                                 1997               1996
                                                                                               ---------------------------------
<S>                                                                                             <C>                 <C>      
Net increase in money market and NOW deposits                                                     1,278,512           1,815,858
Net increase in savings deposits                                                                     46,503             664,165
Net (decrease) increase in certificates of deposit                                                 (454,936)             88,978
Proceeds of FHLB borrowings                                                                      15,700,000          20,000,000
Repayment of FHLB borrowings                                                                    (18,002,250)
Net decrease in other borrowings                                                                   (208,252)           (124,686)
Net increase in advance payments by borrowers                                                       734,516             686,492
Net decrease in other liabilities for unsettled investment security purchases                    (4,996,627)
Net proceeds from exercise of stock options                                                         153,350
Payment of cash dividend on common stock                                                           (239,225)           (223,151)
Purchase of treasury stock                                                                         (297,493)            (31,635)
                                                                                               ---------------------------------
    NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES                                             (6,285,902)         22,876,021
    NET DECREASE IN CASH AND CASH EQUIVALENTS                                                    (5,692,236)         (2,652,828)
Cash and cash equivalents at beginning of period                                                 16,734,483          15,830,560
                                                                                               ---------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                      $11,042,247         $13,177,732
                                                                                               =================================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
  INFORMATION:
Cash paid during the period for:
  Interest                                                                                     $  3,420,350        $  2,551,539
  Income taxes                                                                                 $    107,500        $     69,600
Non-cash investing activities:
  Transfer from loans to real estate owned                                                                         $    270,046
  Transfer from loans to other repossessed assets                                              $    214,444        $    247,473
Non-cash financing activities:
  Dividends declared but not paid                                                              $    239,668        $    223,019

</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 three  months  ended March 31, 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 three months ended March 31, 1997 and 1996 have been
computed  based on 2,063,449 and 2,303,370  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  months ended March 31, 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:

March 31, 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   $  14,492,544   $      11,243   $    (120,605)   $  14,383,182
Collateralized mortgage obligations        44,917,927         340,984        (489,658)      44,769,253
Municipal obligations                      28,359,213         168,498        (354,624)      28,173,087
Other debt securities                         250,000          10,313                          260,313
Mortgage-backed securities                 26,190,314         191,426        (995,603)      25,386,137
FHLB stock                                  4,174,700                                        4,174,700
Other marketable equity securities         10,189,289          62,500         (26,247)      10,225,542
                                        --------------------------------------------------------------
                                        $ 128,573,987    $    784,964   $  (1,986,737)   $ 127,372,214
                                        ==============================================================
</TABLE>


The amortized  cost and estimated  fair value of investment  securities at March
31,  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.


                                                 ----------------------------
                                                   Amortized       Estimated
                                                     Cost         Fair Value
                                                 ----------------------------
Debt and mortgage-related securities:
  Due in one year or less                        $  1,473,921    $  1,485,168
  Due after one year through five years             8,772,983       8,714,268
  Due after five years through ten years            3,648,817       3,617,639
  Due after 10 through 20 years                    20,507,978      20,494,305
  Due after 20 years                               79,806,299      78,660,592
                                                 ----------------------------
  Total                                           114,209,998     112,971,972
Marketable equity securities and FHLB stock        14,363,989      14,400,242
                                                 ----------------------------
  Total investment securities                    $128,573,987    $127,372,214
                                                 ============================



                                        7

<PAGE>



NOTE 4.  LOANS

                                             March 31, 1997 December 31, 1996
                                            ---------------------------------
First mortgage residential:
 One-to-four family residential                $159,914,746    $158,817,080
 Construction                                     1,073,444       1,287,007
                                            ---------------------------------
                                                160,988,190     160,104,087
Commercial and other real estate                 24,027,497      24,753,320
Commercial business                              21,219,088      20,944,114
Commercial land and land development              3,378,763       3,488,337
Automobile                                       28,622,759      32,239,765
Home equity                                      15,152,004      15,327,772
Other consumer                                    3,669,690       3,796,998
                                            ---------------------------------
Gross loans held for investment                 257,057,991     260,654,393
Less:
   Loans in process                               3,556,843       5,114,248
   Unearned discounts                                88,364         100,115
   Net deferred fees                                373,677         261,344
   Allowance for losses                           2,927,508       2,867,270
                                            ---------------------------------
Net loans held for investment                   250,111,599     252,311,416
Education loans held for sale                     3,711,147       3,458,286
                                            ---------------------------------
                                               $253,822,746    $255,769,702
                                            =================================

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

                                                 Three Months Ended March 31,

                                                 1997            1996
                                            ---------------------------------
Balance at beginning of year                     $2,867,270      $2,471,658
Provision charged to income - mortgage               30,000
Provision charged to income - commercial             49,997          75,000
Provision charged to income - consumer              104,637         149,793
Charge-offs - commercial                                           (60,000)
Charge-offs - consumer                            (132,140)       (110,743)
Recoveries - consumer                                 7,744           5,416
                                            ---------------------------------
Balance at end of period                         $2,927,508      $2,531,124
                                            =================================

The allowance for loan losses at March 31 consisted of:

Mortgage                                          $362,000         $332,000
Commercial                                       1,143,797          868,800
Consumer                                         1,421,711        1,330,324
                                            ---------------------------------
                                                $2,927,508       $2,531,124
                                            =================================
                                        8
<PAGE>

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

The Company held one loan with a balance of $1.73  million and $1.76  million at
March 31,  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 three months ended March 31, 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>  
March 31, 1997                69               $1,283,920                 0.51%
December 31, 1996             92               $1,013,103                 0.40%

</TABLE>


The foregone  interest on  non-performing  loans for the periods ended March 31,
1997 and December 31, 1996 was $25,087 and $41,709, respectively.

At March 31, 1997 the Company was committed under various agreements to purchase
first mortgage loans of $33,750;  originate  first mortgage loans of $2,012,150;
originate   commercial  loans  of  $7,817,765;   originate   consumer  loans  of
$1,736,999;  and had $3,172,717 in unused commercial lines of credit; $2,555,887
in commercial  letters of credit issued;  $6,146,539 in unused home equity lines
of credit; $2,042,616 in unused personal unsecured lines of credit; and $504,117
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 March 31,
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

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

                                                 At or For the Three Months
                                                      Ended March 31,
Statistical Data:                                  1997 (1)     1996 (1)
                                                 ----------------------------
Return on average assets                                1.15%        1.10%
Return on average equity                               10.68%        7.99%
Average equity to average assets                       10.72%       13.80%
Average interest rate spread (FTE)                      2.98%        3.00%
Net yield on average interest-earning assets (FTE)      3.50%        3.64%
Non-interest expense to average assets                  1.47%        1.88%
Efficiency ratio                                       43.15%       51.35%
Nonperforming assets to total assets                    0.51%        0.50%
Allowance for loan losses to gross loans receivable     1.14%        1.13%
Book value per share, net of treasury shares           $20.79       $20.40

(1) Applicable  income and expense  figures have been  annualized in calculating
    these ratios.

(FTE) Fully taxable-equivalent basis.

                                       10

<PAGE>

Management's  Discussion  and  Analysis of Results of  Operations  for the Three
Months Ended March 31, 1997 and 1996.

During the three  months ended March 31, 1997,  the Company  benefited  from the
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 March 31, 1996 to
the  same  period  in  1997,   net   interest   income   increased   as  average
interest-earning assets increased by $57.21 million. The effect of this increase
was  partially  offset  by  a  $59.93  million   increase  in   interest-bearing
liabilities.  Management  anticipates  a continuing  tightening  of spreads as a
result of the  recent  move by the  Federal  Reserve  Board to raise  short-term
interest rates.

Provisions  for loan losses  decreased  $40,000 to $185,000 for the three months
ended March 31, 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 $1.28 million, and other  non-performing  assets,
namely REO and other repossessed  assets, were $738,000 at March 31, 1997, for a
total of $2.02 million in  non-performing  assets.  Interest received in cash of
$11,602  on  non-accrual  loans is  included  in net  income  for the 1997 first
quarter.  Total allowance for losses as a percentage of gross loans  receivable,
REO and  other  repossessed  assets  was  1.14% at March  31,  1997 and 1.11% at
December 31, 1996. Total  non-performing  assets as a percentage of total assets
was 0.51% at March 31, 1997 and 0.43% at December 31, 1996.

Total non-interest income decreased  $195,000,  or 48.85%, in 1997 primarily due
to a $206,000  decrease in the gain on sale of investments  and loans.  The 1996
gains  were  due  mainly  to the  sale of GNMA  mortgage-backed  securities.  No
securities were sold during the first quarter of 1997. Service charges and other
fees  increased  $11,000  from year to year,  primarily  due to  increased  late
charges received on loans.

Total  non-interest  expense decreased  $157,000,  or 9.68%,  primarily due to a
$104,000  decrease  in  deposit  insurance  premiums  as a  result  of the  SAIF
recapitalization  during the third  quarter of 1996.  Also  contributing  to the
improvement was a $44,000  decrease in REO operation  expense from year to year.
Salaries and employee benefits increased $26,000,  or 3.55% between the 1997 and
1996  quarters,  primarily  as a result  of normal  annual  merit  increases  in
salaries.

The Company's  efficiency ratio improved from 51.35% at March 31, 1996 to 43.15%
at March 31, 1997,  while the ratio of  non-interest  expenses to average assets
improved from 1.88% to 1.47%. 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.

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 5.26% during the three months ended March 31, 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.

                                       11
<PAGE>



The Savings Bank  anticipates  that it will have  sufficient  funds available to
meet its current loan commitments and normal savings  withdrawals.  At March 31,
1997,  the Savings Bank had  outstanding  commitments  to fund off balance sheet
items of $26.02 million.  In addition,  it had certificates of deposit scheduled
to mature  within  six  months of $60.74  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.

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 March  31,  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)                                $  34,147       $  34,147          $  34,147
Non-includable portion of investment in
subsidiary                                              (22)            (22)               (22)
Unrealized loss on certain securities available
for sale                                                783             783                783
General valuation allowances (2)                                                         2,639
                                                  ----------------------------------------------------
Regulatory capital                                   34,908          34,908             37,547
Minimum capital requirement                          15,868           8,446             16,893
                                                  ----------------------------------------------------
Excess regulatory capital                         $  19,040       $  26,414          $  20,654
                                                  ====================================================
       Adjusted total assets                      $ 396,712       $ 211,157          $ 211,157
Regulatory capital as a percentage                     8.80%          16.53%             17.78%
Minimum capital requirement as a
percentage                                             4.00%           4.00%              8.00%
                                                  ----------------------------------------------------
Excess regulatory capital as a percentage              4.80%          12.53%              9.78%
                                                  ====================================================
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) The 1997 Annual Meeting of  Shareholders  of First  Shenango  Bancorp,
      Inc. was held on April 22, 1997.  Of  2,058,610  shares  eligible to vote,
      1,417,016 or 68.83% were voted in person or by proxy.

      (b) The  shareholders  voted to elect the three nominees for director,  as
      described in the Proxy Statement for the Annual  Meeting.  The results for
      the  re-election of Francis A. Bonadio were 1,404,234  shares in favor and
      12,782  shares  withheld.  The results for the election of R. Joseph Hrach
      were 1,401,954 shares in favor and 15,062 shares withheld. The results for
      the  re-election of Richard E. Rentz,  Jr. were 1,402,999  shares in favor
      and 14,017 shares withheld. There were no broker non-votes. In addition to
      Messrs.  Bonadio,  Hrach and Rentz,  the  directors  following the meeting
      consisted of William G. Eckles, II; Dale R. Perelman; Ronald P. Bergey and
      Robert H. Carlson.

      (c) The recommendation by the Board of Directors to ratify the appointment
      of Ernst & Young LLP as the Company's  independent  auditors, as described
      in the Proxy Statement for the Annual Meeting, was approved with 1,406,588
      shares in favor, 3,529 against and 6,899 abstaining.  There were no broker
      non-votes.

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:  April 28, 1997               By:  /S/ Francis A. Bonadio
      ------------------------------     ---------------------------------------
                                         FRANCIS A. BONADIO
                                         President and Chief Executive Officer




Date:  April 28, 1997               By:  /S/ Lonny D. Robinson
      ------------------------------     ---------------------------------------
                                         LONNY D. ROBINSON
                                         Vice President and Chief Financial
                                          Officer



                                       14