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

                                       or
For  the quarterly period ended MARCH 31, 1998  |_| 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)  
                                 (724) 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 April 30, 1998:


                                        
                Class                                Outstanding
                -----                                -----------
     $.10 par value common stock                   2,069,007 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 March 31, 1998 and December 31, 1997                                   1
     Consolidated Statements of Income for the Three Months Ended March 31, 1998 and 1997                                       2
     Consolidated Statements of Changes in Shareholders' Equity for the Year Ended December 31,
     1997 and the Three Months Ended March 31, 1998                                                                             3

     Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1998 and 1997                               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
     Item 3.  Quantitative and Qualitative Disclosures about Market Risk                                                       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                                                                                             1998                  1997
                                                                                        -------------------- ----------------------
<S>                                                                                             <C>                    <C>         
Cash and Cash Equivalents:
  Cash and amounts due from depository institutions                                               $1,225,520             $2,069,639
  Interest bearing deposits in financial institutions                                             23,718,144             13,579,118
                                                                                        -------------------- ----------------------
                                                                                                  24,943,664             15,648,757
Investment securities available for sale, carried at fair value                                  116,073,923             94,658,748
Loans held for sale                                                                                3,707,919              3,424,327
Loans receivable, net of allowance for loan losses of $3,248,758 and $3,235,039                  249,519,777            252,581,611
Accrued interest receivable                                                                        2,395,550              2,202,693
REO and other repossessed assets, net                                                              1,154,136              1,111,333
Premises and equipment, net                                                                        5,082,791              5,131,026
Prepaid expenses, sundry assets and deferred taxes                                                   267,972                213,231
                                                                                        -------------------- ----------------------
    TOTAL ASSETS                                                                                $403,145,732           $374,971,726
                                                                                        ==================== ======================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits (including non-interest bearing deposits of $4,716,876 and $4,971,054)                 $275,393,237           $275,221,031
Advances from Federal Home Loan Bank and other borrowings                                         72,032,052             47,724,598
Advance payments by borrowers for taxes and insurance                                              2,565,803              1,876,095
Accrued expenses, deferred taxes and other liabilities                                             4,862,394              2,287,692
                                                                                        -------------------- ----------------------
    TOTAL LIABILITIES                                                                            354,853,486            327,109,416
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                                                                      22,221,466             22,136,466
  Treasury stock at cost (274,091 shares)                                                        (6,233,171)            (6,233,171)
  Less stock acquired by MSBPs and ESOP                                                            (523,185)              (551,287)
  Net unrealized gains on securities available for sale, net of tax                                1,307,553              1,577,880
  Retained earnings (substantially restricted)                                                    31,285,273             30,698,112
                                                                                        -------------------- ----------------------
   TOTAL SHAREHOLDERS' EQUITY                                                                     48,292,246             47,862,310
                                                                                        -------------------- ----------------------
   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                   $403,145,732           $374,971,726
                                                                                        ==================== ======================
</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:                                                                           1998                1997
                                                                                     ----------------- ---------------
<S>                                                                                         <C>             <C>       
  Interest and fees on:
    First mortgage residential loans                                                        $3,236,270      $2,966,997
    Commercial and other real estate loans                                                   1,101,584       1,120,754
    Consumer loans                                                                             801,886       1,092,185
  Interest and dividends on investments available for sale:
    Taxable                                                                                    873,957       1,470,457
    Tax-exempt                                                                                 438,967         419,360
    Dividends                                                                                  252,739         228,086
  Other interest income                                                                        260,023         134,923
                                                                                     ----------------- ---------------
    TOTAL INTEREST INCOME                                                                    6,965,426       7,432,762
                                                                                     ----------------- ---------------
Interest expense:
  Interest on deposits                                                                       3,137,625       3,048,900
  Interest on borrowed funds                                                                   752,954       1,195,737
                                                                                     ----------------- ---------------
    TOTAL INTEREST EXPENSE                                                                   3,890,579       4,244,637
                                                                                     ----------------- ---------------
    NET INTEREST INCOME                                                                      3,074,847       3,188,125
Provision for loan losses                                                                      155,070         184,634
                                                                                     ----------------- ---------------
    NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                                      2,919,777       3,003,491
Non-interest income:
  Service charges and other fees                                                               182,513         202,459
  Gain on sale of investments and loans, net                                                       772             435
  Other                                                                                          7,932           1,177
                                                                                     ----------------- ---------------
    TOTAL NON-INTEREST INCOME                                                                  191,217         204,071
Non-interest expense:
  Salaries and employee benefits                                                               858,758         765,368
  Occupancy and equipment, net                                                                 249,616         257,948
  Deposit insurance premiums                                                                    42,733          42,459
  Professional services                                                                        215,111          50,364
  REO operations                                                                                16,499          33,901
  Other                                                                                        340,234         312,953
                                                                                     ----------------- ---------------
    TOTAL NON-INTEREST EXPENSE                                                               1,722,951       1,462,993
                                                                                     ----------------- ---------------
    INCOME BEFORE INCOME TAXES                                                               1,388,043       1,744,569
Income tax expense:
  Federal                                                                                      409,550         489,425
  State                                                                                         89,250         117,700
                                                                                     ----------------- ---------------
    TOTAL INCOME TAX EXPENSE                                                                   498,800         607,125
                                                                                     ----------------- ---------------
    NET INCOME                                                                                $889,243      $1,137,444
                                                                                     ================= ===============
Earnings per share - basic                                                                       $0.44           $0.58
Earnings per share - diluted                                                                     $0.43           $0.56
</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
                Comprehensive   Common    Paid-In     Treasury   Stock Held  Stock Held   Gain (Loss)   Substantially Shareholders'
                    Income      Stock     Capital       Stock      by ESOP    by MSBPs   on Securities    Restricted      Equity
                -------------- -------- ----------- ------------ ----------- ----------- -------------  ------------- -------------
<S>             <C>            <C>      <C>         <C>           <C>          <C>            <C>         <C>           <C>        
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                              198,756                 112,413      11,297                                     322,466
Stock options 
  exercised                                (485,133)    863,263                                                             378,130
Net income          $4,585,690                                                                              4,585,690     4,585,690
Cash dividends
  declared on
  common stock
  at $.57 per 
  share                                                                                                    (1,143,007)   (1,143,007)
Purchase of 
  28,716 
  shares of
  treasury stock                                       (722,433)                                                           (722,433)
Change in 
  unrealized 
  gain on
  investment 
  securities 
  available 
  for sale, net      1,387,137                                                               1,387,137                    1,387,137
                -------------- -------- ----------- ------------ ----------- ----------- -------------  ------------- -------------
December 31, 1997   $5,972,827  234,310  22,136,466  (6,233,171)   (551,287)          0      1,577,880     30,698,112    47,862,310
                ============== -------- ----------- ------------ ----------- ----------- -------------  ------------- -------------
Deferred and 
  unearned
  compensation 
  amortization 
  of ESOP and
  MSBPs shares                               85,000                  28,102                                                 113,102
Net income            $889,243                                                                                889,243       889,243
Cash dividend 
  declared 
  on common
  stock at 
  $.15 per share                                                                                             (302,082)     (302,082)
Change in 
  unrealized 
  gain on
  investment 
  securities 
  available for
  sale, net          (270,327)                                                                (270,327)                    (270,327)
                -------------- -------- ----------- ------------ ----------- ----------- -------------  ------------- -------------
March 31, 1998        $618,916 $234,310 $22,221,466 $(6,233,171)  $(523,185)         $0     $1,307,553   $31,285,273    $48,292,246
                ============== ======== =========== ============ =========== =========== =============  ============= =============
</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,
                                                                                       1998            1997
                                                                                   -------------   ------------
<S>                                                                                <C>             <C>         
OPERATING ACTIVITIES
                                                                                            
Net Income                                                                         $    889,243    $  1,137,444
Adjustments to reconcile net income to net cash provided by
  operating activities:
    Net gain on sale of investments and loans                                              (772)           (435)
    Proceeds from sale of loans held for sale                                           282,122         260,153
    Disbursements for loans held for sale                                              (608,286)       (578,243)
    Provision for estimated losses on loans                                             155,070         184,634
    (Recovery of) provisions for net losses on REO, repossessed and other assets         (6,665)          7,039
    Provisions for depreciation and amortization                                         98,209         106,077
    Amortization of MSBPs and ESOP unearned and deferred compensation                   113,102          75,400
    Deferred federal income taxes                                                       (26,000)        (15,000)
    Increase in accrued interest receivable, prepaid
      expenses and sundry assets                                                       (247,598)       (236,649)
    Increase in accrued expenses and other liabilities                                  372,371         460,902
    Increase in interest payable                                                        766,289         824,286
                                                                                   ------------    ------------
    NET CASH PROVIDED BY OPERATING ACTIVITIES                                         1,787,085       2,225,608
INVESTING ACTIVITIES
Proceeds from maturities of investments                                              10,500,000       1,505,583
Purchases of investments                                                            (34,089,683)     (7,901,101)
Principal repayment on mortgage-backed securities and CMOs                            2,764,981       2,706,450
Proceeds from sales of foreclosed real estate, repossessed and other assets              85,919         112,429
Loan originations, net of loans in process                                           (9,693,206)    (11,293,930)
Principal reduction on loans                                                         12,521,257      13,254,319
(Purchase) redemption of Federal Home Loan Bank stock                                  (999,800)        115,100
Additions to premises and equipment                                                     (49,974)       (130,792)
                                                                                   ------------    ------------
      NET CASH USED BY INVESTING ACTIVITIES                                         (18,960,506)     (1,631,942)
</TABLE>


                                        4

<PAGE>




FIRST SHENANGO BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                               Three Months Ended
                                                                                                     March 31,
FINANCING ACTIVITIES                                                                            1998            1997
                                                                                           ------------    ------------
<S>                                                                                        <C>             <C>      
Net increase in money market and NOW deposits                                                 5,022,811       1,278,512
Net (decrease) increase in savings deposits                                                     (19,699)         46,503
Net decrease in certificates of deposit                                                      (5,510,173)       (454,936)
Proceeds of FHLB borrowings                                                                  50,000,000      15,700,000
Repayment of FHLB borrowings                                                                (26,003,963)    (18,002,250)
Net increase (decrease) in other borrowings                                                     311,417        (208,252)
Net increase in advance payments by borrowers                                                   689,708         734,516
Net increase (decrease) in other liabilities for unsettled investment security purchases      2,280,309      (4,996,627)
Net proceeds from exercise of stock options                                                                     153,350
Payment of cash dividend on common stock                                                       (302,082)       (239,225)
Purchase of treasury stock                                                                                     (297,493)
                                                                                           ------------    ------------
    NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES                                         26,468,328      (6,285,902)
    NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                      9,294,907      (5,692,236)
Cash and cash equivalents at beginning of period                                             15,648,757      16,734,483
                                                                                           ------------    ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                 $ 24,943,664    $ 11,042,247
                                                                                           ============    ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
  INFORMATION:
Cash paid during the period for:
  Interest                                                                                 $  3,124,290    $  3,420,350
  Income taxes                                                                             $     86,800    $    107,500
Non-cash investing activities:
  Transfer from loans to real estate owned                                                 $     12,000
  Transfer from loans to other repossessed assets                                          $    194,532    $    214,444
Non-cash financing activities:
  Dividends declared but not paid                                                          $    302,082    $    239,668

</TABLE>




See notes to consolidated financial statements.


                                        5

<PAGE>



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

                   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, 1998 are not
necessarily  indicative of the results which may be expected for the year ending
December 31, 1998.

The  Consolidated  Statement  of Financial  Position at December  31, 1997,  was
audited by Ernst & Young LLP. Their  unqualified  opinion thereon is included in
the Company's 1997 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, 1998, 1997 and 1996 were
calculated as follows:
<TABLE>
<CAPTION>
                                                   1998           1997           1996
                                               -----------    -----------    -----------
<S>                                            <C>            <C>            <C>        
Net income                                     $   889,243    $ 1,137,444    $   948,583
                                               ===========    ===========    ===========
Weighted average common shares issued            2,343,098      2,343,098      2,343,098
Average unallocated ESOP shares                    (55,129)       (66,370)       (75,031)
Average unvested and forfeited MSBP shares         (10,367)       (27,175)       (45,338)
Weighted average treasury shares                  (274,091)      (282,872)       (34,120)
                                               -----------    -----------    -----------
Weighted common shares outstanding - basic       2,003,511      1,966,681      2,188,609
                                               ===========    ===========    ===========
Basic earnings per share                       $      0.44    $      0.58    $      0.43
                                               ===========    ===========    ===========

Weighted common shares outstanding - basic       2,003,511      1,966,681      2,188,609
Average unvested MSBP shares                                       16,808         33,573
Net effect of dilutive stock options                63,031         63,498         63,020
                                               -----------    -----------    -----------
Weighted common shares outstanding - diluted     2,066,542      2,046,987      2,285,202
                                               ===========    ===========    ===========
Diluted earnings per share                     $      0.43    $      0.56    $      0.42
                                               ===========    ===========    ===========
</TABLE>

                                       6
<PAGE>

NOTE 3.  INVESTMENT SECURITIES

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

March 31, 1998
<TABLE>
<CAPTION>

                                                            Gross            Gross
                                           Amortized      Unrealized      Unrealized         Fair
                                             Cost           Gains            Losses          Value
                                        -------------   -------------  ---------------- ---------------
<S>                                     <C>             <C>              <C>              <C>          
U.S. Government and agency securities   $   3,006,535   $       7,740    $      (7,857)   $   3,006,418
Collateralized mortgage obligations        31,002,726         476,687          (56,553)      31,422,860
Municipal obligations                      32,420,756       1,359,435          (71,141)      33,709,050
Other debt securities                         250,000           7,188                           257,188
Mortgage-backed securities                 23,809,527         257,780          (78,647)      23,988,660
FHLB stock                                  3,574,000                                         3,574,000
Other marketable equity securities         20,028,826         117,500          (30,579)      20,115,747
                                        -------------   -------------    -------------    -------------
                                        $ 114,092,370   $   2,226,330    $    (244,777)   $ 116,073,923
                                        =============   =============    =============    =============
</TABLE>


The amortized  cost and estimated  fair value of investment  securities at March
31,  1998 by  contractual  maturity  are shown in the  following  table.  Actual
maturities may differ from contractual  maturities  because issuers 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
                                                   Cost       Fair Value
                                              ------------   ------------
Debt and mortgage-related securities:
  Due after one year through five years       $    265,172   $    272,842
  Due after five years through ten years         2,654,178      2,720,434
  Due after 10 through 20 years                 24,886,391     25,868,107
  Due after 20 years                            62,683,803     63,522,793
                                              ------------   ------------
  Total                                         90,489,544     92,384,176
Marketable equity securities and FHLB stock     23,602,826     23,689,747
                                              ------------   ------------
  Total investment securities                 $114,092,370   $116,073,923
                                              ============   ============




                                        7

<PAGE>



NOTE 4.  LOANS

                                      March 31, 1998   December 31, 1997  
                                       ------------    -----------------
First mortgage residential:                              
 One-to-four family residential        $174,096,660       $172,746,874
 Construction                               735,725            746,288
                                       ------------       ------------
                                        174,832,385        173,493,162
Commercial and other real estate         21,436,826         22,230,915
Commercial business                      20,434,397         19,515,048
Commercial land and land development      6,866,790          7,349,649
Automobile                               15,026,308         18,133,970
Home equity                              14,435,932         14,947,568
Other consumer                            3,229,021          3,622,586
                                       ------------       ------------
Gross loans held for investment         256,261,659        259,292,898
Less:                                                    
   Loans in process                       2,598,790          2,662,374
   Unearned discounts                        74,498             82,539
   Net deferred fees                        819,836            731,335
   Allowance for losses                   3,248,758          3,235,039
                                       ------------       ------------
Net loans held for investment           249,519,777        252,581,611
Education loans held for sale             3,707,919          3,424,327
                                       ------------       ------------
                                       $253,227,696       $256,005,938
                                       ============       ============
                                                         
Activity in the allowance for loan losses for the three months ended March 31 is
summarized as follows:
<TABLE>
<CAPTION>

                                                             1998           1997
                                                          -----------    -----------
<S>                                                       <C>            <C>        
Balance at beginning of year                              $ 3,235,039    $ 2,867,270
Provision charged to income - mortgage                         10,000         30,000
Provision charged to income - commercial                       70,430         49,997
Provision charged to income - consumer                         74,640        104,637
Charge-offs - commercial                                      (31,496)
Charge-offs - consumer                                       (128,147)      (132,140)
Recoveries - consumer                                          18,292          7,744
                                                          -----------    -----------
Balance at end of period                                  $ 3,248,758    $ 2,927,508
                                                          ===========    ===========

The allowance for loan losses at March 31 consisted of:

Mortgage                                                  $   462,000    $   362,000
Commercial                                                  1,343,007      1,143,797
Consumer                                                    1,443,751      1,421,711
                                                          -----------    -----------
                                                          $ 3,248,758    $ 2,927,508
                                                          ===========    ===========
</TABLE>


                                        8

<PAGE>



The  estimated  fair value of education  loans held for sale  approximates  book
value at March 31, 1998 and December 31, 1997.

The Company held two loans with a combined balance of $2.75 million at March 31,
1998 and $2.77  million at  December  31, 1997 which were  considered  impaired.
Because the market  value of the  collateral  securing  these loans  exceeds the
loans' recorded balance, no specific loss reserve is deemed necessary;  however,
the loans have been  included  in  management's  assessment  of the  adequacy of
general valuation allowances. One of these loans with a balance of $1.11 million
was placed on non-accrual  status during the fourth quarter of 1997. No interest
income has been recorded on this loan during 1998. The other loan with a balance
of $1.64  million at March 31, 1998 has not been placed on  non-accrual  status,
nor does management expect it to be in the foreseeable  future.  Interest income
of $33,078 has been recorded on this loan during 1998. There were no other loans
considered impaired during the three months ended March 31, 1998.

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, 1998            134        $2,741,421                  1.10%
December 31, 1997         123        $2,774,357                  1.10%
</TABLE>

The foregone  interest on  non-performing  loans for the periods ended March 31,
1998 and December 31, 1997 was $61,062 and $148,651, respectively.

At March 31, 1998 the Company was committed under various agreements to purchase
first  mortgage  loans  of  $1,370,728;   originate   first  mortgage  loans  of
$3,440,755;  originate or disburse  commercial  loans of  $4,899,554;  originate
consumer  loans of $213,000;  and had $2,478,247 in unused  commercial  lines of
credit;  $1,180,478 in commercial letters of credit issued; $6,314,341 in unused
home equity lines of credit;  $2,038,605 in unused  personal  unsecured lines of
credit;  and $622,673 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, 1998.


NOTE 5.  DEFINITIVE MERGER AGREEMENT

On February 6, 1998, the Company  entered into an Agreement of  Affiliation  and
Plan of Merger (the  "Agreement")  with  FirstFederal  Financial  Services  Corp
("FFSW") of Wooster,  Ohio.  Under the terms of the Agreement,  the Company will
merge with and into  FFSW,  with the  Company's  shareholders  to receive  1.143
shares  of FFSW  common  stock  in  exchange  for each of  their  shares  of the
Company's  common  stock.  FFSW is a bank  holding  company with total assets of
$1.46 billion at December 31, 1997. The transaction, which will be accounted for
as a pooling of interests,  is subject to regulatory and  shareholder  approvals
and is expected to be completed in the third quarter of 1998.



                                        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:                                    1998 (1)           1997 (1)
                                                     ------------- -------------
Return on average assets                                 0.93%          1.15%
Return on average equity                                 7.48%         10.68%
Average equity to average assets                        12.46%         10.72%
Average interest rate spread (FTE)                       2.94%          2.98%
Net yield on average interest-earning assets (FTE)       3.55%          3.50%
Non-interest expense to average assets                   1.81%          1.47%
Efficiency ratio                                        52.89%         43.15%
Nonperforming assets to total assets                     0.97%          0.51%
Allowance for loan losses to gross loans receivable      1.27%          1.14%
Book value per share, net of treasury shares           $23.34         $20.79

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

(FTE) Fully taxable-equivalent basis.

Management's  Discussion  and  Analysis of Results of  Operations  for the Three
Months Ended March 31, 1998 and 1997.

Net income for the three months ended March 31, 1998 declined $248,000 or 21.82%
from the same quarter in 1997. The primary reasons for this decline are $165,000
in  professional  service  fees  related to the  Company's  pending  merger with
FirstFederal  Financial  Services  Corp which was announced on February 9, 1998,
the  continued  run-off of the  indirect  automobile  loan  portfolio  which was
partially  offset by growth in mortgage  loans,  and lower income related to the
investment  securities  portfolio  which  was also  partially  offset  by higher
interest  earnings  on  overnight  deposits  at the  Federal  Home  Loan Bank of
Pittsburgh.  Excluding the merger-related  expenses,  net income for the quarter
would have been $1.02 million.

Provisions  for loan losses  decreased  $30,000 to $155,000 for the three months
ended March 31, 1998 from  $185,000 for same period in 1997.  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 $2.74 million, and other  non-performing  assets,
namely REO and other repossessed  assets,  were $1.15 million at March 31, 1998,
for a total of $3.89 million in non-performing  assets,  unchanged from December
31, 1997.  Interest received in cash of $15,000 on non-accrual loans is included
in net  income  for the 1998  first  quarter.  Total  allowance  for losses as a
percentage of gross loans receivable, REO and other repossessed assets was 1.26%
at March 31, 1998 and 1.24% at December 31, 1997. Total non-performing assets as
a  percentage  of total assets was 0.97% at March 31, 1998 and 1.04% at December
31, 1997.

Total non-interest  income decreased $13,000, or 6.30%, in 1998 primarily due to
$16,000 in late charges  received on a commercial  loan in the first  quarter of
1997. Other non-interest income did not change significantly from year to year.

Total non-interest expense increased $260,000,  or 17.77%,  primarily due to the
$165,000 in merger  related fees mentioned  above.  These payments to attorneys,
accountants and investment  bankers will continue to reduce earnings through the
effective date of the

                                        10

<PAGE>



merger.  Salaries and employee benefits  increased $93,000 from year to year due
to annual merit salary increases,  increased staffing in certain departments and
higher costs  associated  with the employee stock  ownership plan as a result of
the Company's  higher stock price. REO expense declined $17,000 or 51.33% due to
a reduction in losses on the sale of repossessed automobiles. Other non-interest
expense increased $27,000 or 8.72%. This line item represents an accumulation of
several expense categories, none of which increased significantly.

The  Company's  effective  tax rate  increased  from 34.80% for the three months
ending  March 31, 1997 to 35.94% for the same period in 1998.  This is primarily
due to the  professional  service fees  discussed  above,  some of which are not
deductible for federal income tax purposes.

The Company's  efficiency ratio declined from 43.15% at March 31, 1997 to 52.89%
at March 31, 1998,  while the ratio of  non-interest  expenses to average assets
increased  from 1.47% to 1.81%.  These  changes  are  attributable  to the items
discussed above.

Asset and Liability Management

During the quarter ended March 31, 1998,  the Company  borrowed  $50.00  million
from and repaid  $26.00  million to the  Federal  Home Loan Bank of  Pittsburgh.
These transactions have increased the interest-rate sensitivity of the Company's
assets and reduced the interest-rate  sensitivity of its liabilities.  Overnight
deposits at the FHLB  increased  $10.14 million from December 31, 1997 to $23.72
million  at March 31,  1998.  Management  is  continually  reviewing  investment
opportunities for these funds.  Given the increasing  possibility of an increase
in the target  federal funds rate as evidenced by recent  movements in financial
markets,  these funds will be invested  into  longer term  securities  only when
management is satisfied that the yields offered are sufficient to compensate for
the risk of further increases in market interest rates.

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  4%. The Savings  Bank's  regulatory
liquidity ratio averaged 9.58% during the three months ended March 31, 1998. 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 March 31,
1998,  the Savings Bank had  outstanding  commitments  to fund off balance sheet
items of $22.56 million.  In addition,  it had certificates of deposit scheduled
to mature  within  six  months of $60.00  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

                                       11

<PAGE>



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.

The  Company's  Y2K  Committee  continues to work on  identifying  and resolving
potential  problems  related  to the year 2000 and its  impact on the  Company's
computer  systems,  its vendors and customers.  Management is also  coordinating
these efforts with those of  FirstFederal  Financial  Services Corp to eliminate
redundant  work and  evaluate  the  potential  efficiencies  to be  gained  from
adopting common solutions. The total cost to the Company will depend on the need
or desire for change in these systems, but is not expected to be material to any
single reporting period.

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

To be categorized as well  capitalized,  the Savings Bank must maintain  minimum
ratios  as set  forth  in the  table.  As of March  31,  1998,  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>
                                                            Tier I Core  Tier I Risk-Based        Tier II Risk-Based
                                                           Capital (1)     Capital (1)               Capital (1)
                                                           ------------  -----------------        ------------------
<S>                                                        <C>                 <C>                    <C>         
Equity capital (2)                                         $  40,866           $  40,866              $  40,866   
Non-includable portion of investment in subsidiary               (24)                (24)                   (24)
Unrealized gain on certain securities available for sale      (1,323)             (1,323)                (1,323)
General valuation allowances (3)                                                                          2,536    
                                                           ---------           ---------              ---------
Regulatory capital                                            39,519              39,519                 42,055
Minimum capital requirement                                   15,905               8,102                 16,204
                                                           ---------           ---------              ---------
Excess regulatory capital                                  $  23,614           $  31,417              $  25,851
                                                           =========           =========              =========
       Adjusted total assets                               $ 397,618           $ 202,548              $ 202,548
Regulatory capital as a percentage                              9.94%              19.51%                 20.76%
Minimum capital requirement as a percentage                     4.00%               4.00%                  8.00%
                                                           ---------           ---------              ---------
Excess regulatory capital as a percentage                       5.94%              15.50%                 12.76%
                                                           =========           =========              =========
Well capitalized requirement as a percentage                    5.00%               6.00%                 10.00%
                                                           =========           =========              =========
</TABLE>                                                       
                                                                             
(1)  Dollar amounts in thousands.
(2)  Represents  equity capital of the consolidated  Savings Bank as reported to
     the OTS on Form  1313. 
(3) Limited to 1.25% of risk-based assets.

The  statements  in this Form 10-Q  which are not  historical  fact are  forward
looking  statements  that involve risks and  uncertainties,  including,  but not
limited  to, the  interest  rate  environment,  the effect of federal  and state
banking and tax regulations,  the effect of economic  conditions,  the impact of
competitive products and pricing and other risks as may arise from time to time.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

Please  refer to Item 2,  Management's  Discussion  and  Analysis  of  Financial
Condition  and  Results  of  Operations  - Asset and  Liability  Management  for
information relative to this Item.

                                       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             N/A

Item 5 - Other Information                                               None

Item 6 - Exhibits and Reports on Form 8-K
         (a)  Exhibits
           27.   Financial data schedule
         (b)  Reports on Form 8-K
                  The Company  filed a Form 8-K (Items 5 and 7) on February  26,
                  1998 to announce the signing of a definitive  merger agreement
                  with  FirstFederal  Financial  Services Corp dated February 6,
                  1998.

                  The  Company  filed  a Form  8-K  (Item  5) on May 1,  1998 to
                  announce March 31, 1998 earnings.


                                       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:     May 8, 1998          By:  /S/ Francis A. Bonadio
         -------------------        --------------------------------------------
                                    FRANCIS A. BONADIO
                                    President and Chief Executive Officer




Date:     May 8, 1998          By:  /S/ Lonny D. Robinson
         -------------------        --------------------------------------------
                                    LONNY D. ROBINSON
                                    Vice President and Chief Financial Officer



                                       14