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

                                    FORM 10-Q


(Mark One)

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

For the quarterly period ended    September 30, 1996
                                ----------------------
                                       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
of incorporation or organization)                  Identification No.)

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

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


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

         The number of shares  outstanding  of each of the  issuer's  classes of
common stock as of October 23, 1996:


          Class                                      Outstanding
 ---------------------------                       ----------------
 $.10 par value common stock                       2,258,047 Shares




<PAGE>



                          FIRST SHENANGO BANCORP, INC.


                                      INDEX

                                                                    Page Number

PART I - FINANCIAL INFORMATION

    Item 1.  Financial Statements

    Consolidated  Statements of Financial Position as of 
    September 30, 1996 and December 31, 1995                              1

    Consolidated Statements of Income for the Three Months Ended 
    September 30, 1996 and 1995 and Nine Months Ended September 30, 
    1996 and 1995                                                         2

    Consolidated Statements of Changes in Shareholders' Equity for 
    the Year Ended December 31, 1995 and the Nine Months Ended 
    September 30, 1996                                                    3

    Consolidated Statements of Cash Flows for the Nine Months Ended
    September 30, 1996 and 1995                                           4 - 5

    Notes to Consolidated Financial Statements                            6 - 11
    Item 2.  Management's Discussion and Analysis of Financial 
    Condition and Results of Operations                                  12 - 15
 
PART II - OTHER INFORMATION

    Item 1.  Legal Proceedings                                           16

    Item 2.  Changes in Securities                                       16

    Item 3.  Defaults Upon Senior Securities                             16

    Item 4.  Submission of Matters to a Vote of Security Holders         16

    Item 5.  Other Information                                           16

    Item 6.  Exhibits and Reports on Form 8-K                            16

SIGNATURES                                                               17



<PAGE>



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

<TABLE>
<CAPTION>

                                                                                               September 30,          December 31, 
ASSETS                                                                                              1996                  1995
                                                                                               -------------          ------------
Cash and Cash Equivalents:

<S>                                                                                             <C>                    <C>       
  Cash and amounts due from depository institutions                                             $  1,249,535           $  2,393,990
  Interest bearing deposits in financial institutions                                              6,490,746             13,436,570
                                                                                                 -----------            -----------
                                                                                                   7,740,281             15,830,560
Investment securities available for sale, carried at estimated fair value 
  (amortized cost of $113,233,274 and $78,773,914)                                               112,436,303             80,586,601
Loans receivable, net                                                                            255,453,607            228,277,551
Accrued interest receivable                                                                        2,416,471              1,945,776
REO and other repossessed assets, net                                                                939,084                943,087
Premises and equipment, net                                                                        4,033,886              4,229,021
Prepaid expenses, sundry assets and deferred taxes                                                 1,067,896                308,805
                                                                                                 -----------            -----------
    TOTAL ASSETS                                                                                $384,087,528           $332,121,401
                                                                                                 ===========            ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits (including non-interest bearing deposits of $4,670,483 and $3,647,765)                 $263,167,071           $254,405,745
Advances from Federal Home Loan Bank and other borrowings                                         71,109,815             26,665,654
Advance payments by borrowers for taxes and insurance                                                647,391              1,178,402
Accrued expenses, deferred taxes and other liabilities                                             3,044,956              2,249,014
                                                                                                 -----------            -----------
    TOTAL LIABILITIES                                                                            337,969,233            284,498,815

COMMITMENTS AND CONTINGENCIES
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 issued)                     234,310                234,310
  Additional paid-in capital                                                                      22,386,479             22,339,850
  Treasury stock at cost, (84,901 and 33,790 shares)                                              (1,601,745)              (532,464)
  Less stock acquired by MSBPs and ESOP                                                             (718,160)              (850,822)
  Net unrealized (losses) gains on securities available for sale, net of tax                        (525,970)             1,196,686
  Retained earnings (substantially restricted)                                                    26,343,381             25,235,026
                                                                                                 -----------            -----------
   TOTAL SHAREHOLDERS' EQUITY                                                                     46,118,295             47,622,586
                                                                                                 -----------            -----------
   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                   $384,087,528           $332,121,401
                                                                                                 ===========            ===========

</TABLE>






See notes to consolidated financial statements.

                                        1

<PAGE>

<TABLE>
<CAPTION>



FIRST SHENANGO BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME


                                                                         Three Months Ended               Nine Months Ended
                                                                            September 30,                   September 30,
                                                                      ----------------------          -------------------------

Interest income:                                                          1996             1995            1996            1995
                                                                        --------        ----------      ----------      ----------
  Interest and fees on:
<S>                                                                    <C>              <C>            <C>             <C>        
    First mortgage residential loans                                   $2,871,604       $2,477,607     $ 7,923,459     $ 7,327,817
    Commercial and other real estate loans                              1,063,055          770,097       2,919,926       2,050,989
    Consumer loans                                                      1,256,641        1,357,633       3,794,941       3,975,679
  Interest and dividends on investments and FHLB stock                  1,880,687        1,364,735       5,284,693       3,964,311
  Other interest income                                                    58,148           96,548         365,956         211,203
                                                                        ---------        ---------      ----------      ----------
    TOTAL INTEREST INCOME                                               7,130,135        6,066,620      20,288,975      17,529,999
                                                                        ---------        ---------      ----------      ----------
Interest expense:
  Interest on deposits                                                  2,979,647        2,976,161       8,800,647       8,706,324
  Interest on borrowed funds                                              868,532          276,963       2,101,502         663,452
                                                                        ---------        ---------      ----------      ----------
    TOTAL INTEREST EXPENSE                                              3,848,179        3,253,124      10,902,149       9,369,776
                                                                        ---------        ---------      ----------      ----------
    NET INTEREST INCOME                                                 3,281,956        2,813,496       9,386,826       8,160,223

Provision for loan losses                                                 224,736          212,482         673,730         685,471
                                                                        ---------        ---------      ----------      ----------
    NET INTEREST INCOME AFTER PROVISION FOR
        LOAN LOSSES                                                     3,057,220        2,601,014       8,713,096       7,474,752
Non-interest income:
  Service charges and other fees                                          200,662          210,968         583,722         629,217
  Gain on sale of investments and loans, net                               51,772           84,157         214,114          86,996
  Other                                                                       656            2,376           3,138           9,703
                                                                        ---------        ---------      ----------      ----------
    TOTAL NON-INTEREST INCOME                                             253,090          297,501         800,974         725,916
Non-interest expense:
  Salaries and employee benefits                                          758,020          687,003       2,255,027       2,075,512
  Occupancy and equipment, net                                            253,371          266,546         783,752         803,016
  Deposit insurance premiums                                            1,814,532          145,827       2,107,419         434,204
  Professional services                                                    60,591           64,861         182,646         205,754
  REO operations                                                           73,140           32,534         188,969          49,585
  Other                                                                   329,961          316,108         992,883         982,124
                                                                        ---------        ---------      ----------      ----------
    TOTAL NON-INTEREST EXPENSE                                          3,289,615        1,512,879       6,510,696       4,550,195
                                                                        ---------        ---------      ----------      ----------
    INCOME BEFORE INCOME TAXES                                             20,695        1,385,636       3,003,374       3,650,473
Income tax expense:
  Federal                                                                  32,650          464,600         974,275       1,158,600
  State                                                                  (22,225)           80,675         171,575         216,700
                                                                        ---------        ---------      ----------      ----------
    TOTAL INCOME TAX EXPENSE                                               10,425          545,275       1,145,850       1,375,300
                                                                        ---------        ---------      ----------      ----------
    NET INCOME                                                         $   10,270       $  840,361     $ 1,857,524     $ 2,275,173
                                                                        =========        =========      ==========      ==========
Earnings per share                                                     $     0.00       $     0.37     $      0.82     $      1.00
Dividends declared per share                                           $     0.12       $     0.10     $      0.34     $      0.28


</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    (Loss) Gain   Substantially  Shareholders'
                            Stock     Capital       Stock        by ESOP     by MSBPs    on Securities   Restricted      Equity
                           -------- ----------    ----------  -----------  ------------  -------------  -------------  -------------

<S>                        <C>      <C>           <C>          <C>          <C>           <C>           <C>             <C>        
December 31, 1994          $234,310 $22,252,610   $(157,000)   $(892,551)   $(158,123)    $(401,406)    $23,002,750     $43,880,590

Deferred and unearned
compensation amortization 
of ESOP and MSBPs shares                100,800                  114,568       85,284                                       300,652

Stock options exercised                 (13,560)     43,560                                                                  30,000

Net income                                                                                                3,079,186       3,079,186

Cash dividends declared on
common stock at $.38 per
share                                                                                                      (846,910)       (846,910)

Purchase of 25,790 shares 
of treasury stock                                  (419,024)                                                               (419,024)

Change in unrealized gain 
on investment securities 
available for sale, net                                                                   1,598,092                       1,598,092
                            -------  ----------    --------     --------      -------     ---------      ----------      ----------
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                 90,000                   86,180       45,635                                       221,815

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

MSBP shares forfeited                      (847)                                  847

Net income                                                                                                1,857,524       1,857,524

Cash dividends declared on
common stock at $.34 per
share                                                                                                      (749,169)       (749,169)

Purchase of 56,458 shares of
treasury stock                                   (1,165,275)                                                             (1,165,275)

Change in unrealized gain
(loss) on investment 
securities available for 
sale, net                                                                                (1,722,656)                     (1,722,656)
                            -------  ----------  ----------      --------      -------     ---------     ----------      ----------

September 30, 1996         $234,310 $22,386,479 $(1,601,745)    $(691,803)   $(26,357)    $(525,970)    $26,343,381     $46,118,295
             
</TABLE>


See notes to consolidated financial statements.

                                        3

<PAGE>


<TABLE>
<CAPTION>


FIRST SHENANGO BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                                        Nine Months Ended
                                                                                                          September 30,
                                                                                                  ----------------------------
                                                                                                     1996              1995
                                                                                                  ----------        ----------
OPERATING ACTIVITIES

<S>                                                                                               <C>               <C>       
Net Income                                                                                        $1,857,524        $2,275,173
Adjustments to reconcile net income to net cash provided by
  operating activities:
    Net gain on sale of investments and loans                                                       (214,114)          (86,996)
    Provision for estimated losses on loans                                                          673,730           685,471
    Provisions for net losses on REO, repossessed and other assets                                   107,506             7,945
    Provisions for depreciation and amortization                                                     323,984           362,726
    Amortization of MSBPs and ESOP unearned and deferred
      compensation                                                                                   221,815           210,427
    Deferred federal income taxes                                                                   (126,000)           (6,000)
    Increase in accrued interest receivable, prepaid
      expenses and sundry assets                                                                    (832,786)         (520,859)
    Increase in accrued expenses and other liabilities                                             1,200,329         1,229,971
    Increase in interest payable                                                                   2,334,122         2,596,366
                                                                                                 -----------       -----------
    NET CASH PROVIDED BY OPERATING ACTIVITIES                                                      5,546,110         6,754,224
INVESTING ACTIVITIES
Proceeds from maturities of investments available for sale                                         8,000,000         4,000,000
Proceeds from maturities of investments held to maturity and time deposits                                          18,929,000
Proceeds from sales of investment securities available for sale                                   17,891,884        22,755,401
Proceeds from sales of mortgage-backed securities available for sale                              11,787,370
Proceeds from sales of education loans                                                             1,422,538           855,626
Purchases of investments available for sale                                                      (36,689,214)      (21,420,916)
Purchases of investments held to maturity and time deposits                                                        (17,152,146)
Purchases of mortgage-backed securities and CMOs available for sale                              (38,776,663)      (13,358,462)
Principal reduction on mortgage-backed securities and CMOs                                         5,630,653         2,671,295
Proceeds from sales of foreclosed real estate, repossessed and other assets                          563,276           636,818
First mortgage loan originations, net of loans in process                                        (38,034,444)      (12,300,980)
Commercial and other real estate loan originations                                               (19,799,820)      (16,116,539)
Consumer loan originations                                                                       (20,028,049)      (23,213,868)
Principal reduction on loans                                                                      47,950,136        39,312,417
Purchase of Federal Home Loan Bank stock                                                          (2,116,200)          (32,600)
Additions to premises and equipment                                                                 (128,849)         (142,203)
                                                                                                 -----------       -----------
      NET CASH USED BY INVESTING ACTIVITIES                                                      (62,327,382)      (14,577,157)

</TABLE>

                                        4

<PAGE>


<TABLE>
<CAPTION>


FIRST SHENANGO BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                               Nine Months Ended
                                                                                  September 30,
FINANCING ACTIVITIES                                                          1996              1995
                                                                          -----------     -------------

<S>                                                                        <C>              <C>        
Net increase (decrease) in money market and NOW deposits                    7,342,269        (1,508,927)
Net decrease in savings deposits                                           (2,484,663)       (7,957,841)
Net increase in certificates of deposit                                     1,742,649        12,550,634
Proceeds of FHLB borrowings                                                50,768,000        26,216,600
Repayment of FHLB borrowings                                               (6,218,053)      (14,500,000)
Net decrease in other borrowings                                             (105,786)          (91,932)
Net decrease in advance payments by borrowers                                (531,011)         (596,492)
Net proceeds from stock options exercised                                      53,470            30,000
Payment of cash dividend on common stock                                     (710,607)         (558,406)
Purchase of treasury stock                                                 (1,165,275)         (316,524)
                                                                           ----------       -----------
    NET CASH PROVIDED BY FINANCING ACTIVITIES                              48,690,993        13,267,112
    NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                   (8,090,279)        5,444,179
Cash and cash equivalents at beginning of period                           15,830,560        10,026,006
                                                                           ----------       -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                $ 7,740,281      $ 15,470,185
                                                                           ==========       ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
  INFORMATION:
Cash paid during the period for:
  Interest                                                                 $8,571,582        $6,745,953
  Income taxes                                                             $1,867,197        $1,260,957
Non-cash investing activities:
  Transfer from loans to real estate owned                                   $274,369          $308,555
  Transfer from loans to other repossessed assets                            $814,618          $491,672
Non-cash financing activities:
  Dividends declared but not paid                                            $261,670          $222,527

</TABLE>




See notes to consolidated financial statements.


                                        5

<PAGE>




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

                          First Shenango Bancorp, Inc.
                   Notes to Consolidated Financial Statements


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

NOTE 1.  BASIS OF PRESENTATION

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

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

The results of operations  for the nine months ended  September 30, 1996 are not
necessarily  indicative of the results which may be expected for the year ending
December 31, 1996.

The  Consolidated  Statement  of Financial  Position at December  31, 1995,  was
audited by Ernst & Young LLP. Their  unqualified  opinion thereon is included in
the Company's 1995 Annual Report to Shareholders.

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

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

NOTE 2.  EARNINGS PER SHARE

Earnings  per share for the nine months ended  September  30, 1996 and 1995 have
been  computed  based on 2,274,779  and 2,286,132  weighted  average  shares and
common stock equivalents outstanding,  respectively.  Earnings per share for the
three months ended  September 30, 1996 and 1995 have been based on 2,261,295 and
2,294,695  weighted  average  shares and common stock  equivalents  outstanding,
respectively.  The Company  accounts for shares  acquired by its Employee  Stock
Ownership Plan ("ESOP") in accordance  with  Statement of Position 93-6;  shares
controlled  by the  ESOP  are not  considered  in the  weighted  average  shares
outstanding  until the shares are  committed  for  allocation  to an  employee's
individual account.





                                        6

<PAGE>



NOTE 3.  INVESTMENT SECURITIES

A summary of investment securities is as follows:

<TABLE>
<CAPTION>


September 30, 1996                                                                     Available for sale
                                                          ------------------------------------------------------------------------
                                                                                   Gross            Gross           Estimated
                                                               Amortized        Unrealized        Unrealized           Fair
                                                                  Cost             Gains            Losses             Value
                                                          ------------------- ---------------  ---------------- ------------------
<S>                                                              <C>                 <C>           <C>                <C>         
U.S. Government and agency securities                            $ 15,598,052        $ 27,553      $   (94,908)       $ 15,530,697
Collateralized mortgage obligations                                36,012,956         222,522         (467,282)         35,768,196
Municipal obligations                                              18,517,226         202,491          (36,392)         18,683,325
Other debt securities                                                 250,000          11,094                              261,094
Mortgage-backed securities                                         29,263,083         227,876         (864,273)         28,626,686
FHLMC preferred stock                                                 500,000          11,140                              511,140
FNMA preferred stock                                                2,000,000           4,372                            2,004,372
FHLB stock                                                          3,538,400                                            3,538,400
Adjustable rate mortgage-backed security mutual funds               7,553,557                          (41,164)          7,512,393
                                                                  -----------         -------       ----------         -----------
                                                                 $113,233,274        $707,048      $(1,504,019)       $112,436,303
                                                                  ===========         =======       ==========         ===========

</TABLE>

The  amortized  cost and  estimated  fair  value  of  investment  securities  at
September 30, 1996 by contractual maturity are as follows. 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.
Mortgage-backed  securities  and  CMOs are not due at a  single  maturity  date;
periodic  payments are received on the securities  based on the payment patterns
of the underlying collateral.

<TABLE>
<CAPTION>


                                                                                  Available for Sale
                                                                        ------------------------------------
                                                                             Amortized         Estimated
                                                                               Cost            Fair Value
                                                                        ------------------ -----------------
Debt securities:
<S>                                                                         <C>               <C>         
  Due in one year or less                                                   $  2,459,291      $  2,486,844
  Due after one year through five years                                       10,250,000        10,198,594
  Due after five years through ten years                                       3,181,585         3,166,622
  Due after 10 years through 20 years                                          9,534,658         9,613,695
  Due after 20 years                                                           8,939,744         9,009,361
                                                                             -----------       -----------
  Total                                                                       34,365,278        34,475,116
Mortgage-backed securities and CMOs maturing at various dates
through 2026                                                                  65,276,039        64,394,882
Equity securities, including FHLB stock                                       13,591,957        13,566,305
                                                                             -----------       -----------
  Total investment securities                                               $113,233,274      $112,436,303
                                                                             ===========       ===========

</TABLE>


                                        7

<PAGE>



NOTE 4.  FIRST MORTGAGE LOANS

<TABLE>
<CAPTION>


                                                                 September 30, 1996        December 31, 1995
                                                                 ------------------        -----------------
Conventional:                                          
<S>                                                                <C>                      <C>         
  1 - 4 family residential                                         $154,361,988             $125,782,247
  Construction loans to builders                                        926,563                1,291,600
Partially guaranteed by the Veterans Administration                   1,419,546                1,720,688
Insured by the Federal Housing Administration                         1,168,792                1,302,768
                                                                    -----------              -----------
                                                                    157,876,889              130,097,303
Less loans in process                                                 5,755,860                1,178,284
                                                                    -----------              -----------
                                                                    152,121,029              128,919,019
Unearned discounts                                                       (9,194)                 (11,042)
Net deferred loan fees and expenses                                    (923,720)                (642,473)
Allowance for loan losses                                              (332,000)                (332,000)
                                                                    -----------              -----------
                                                                   $150,856,115             $127,933,504
                                                                    ===========              ===========
</TABLE>


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


                                              Nine Months Ended
                                                September 30,
                                    --------------------------------------
                                           1996                1995
                                    ------------------  ------------------
Balance at beginning of period                $332,000            $331,744
Provisions charged to income                                           256
                                               -------             -------
Balance at end of period                      $332,000            $332,000
                                               =======             =======


Mortgage loans in arrears three months or more or in process of foreclosure were
as follows:

<TABLE>
<CAPTION>
                                                              Percentage of
Period                  Number of Loans       Amount       First Mortgage Loans
----------------------  ---------------       -------      --------------------
<S>                           <C>            <C>                 <C> 
September 30, 1996            20             $752,787            0.50
December 31, 1995             11             $201,572            0.16

</TABLE>


The foregone  interest on these loans for the periods  ended  September 30, 1996
and December 31, 1995 was $27,434 and $9,695, respectively.

                                        8

<PAGE>



NOTE 5.  COMMERCIAL AND OTHER REAL ESTATE LOANS

<TABLE>
<CAPTION>


                                               September 30, 1996        December 31, 1995
                                            ------------------------  -----------------------
<S>                                                     <C>                       <C>        
Commercial and other real estate loans                  $ 23,769,782              $23,140,948
Commercial business loans                                 22,949,704               13,531,196
Commercial land development loans                          2,489,475                3,069,209
Land loans                                                   274,008                  194,764
                                                         -----------               ----------
                                                          49,482,969               39,936,117
Less loans in process                                      1,771,783                  601,876
                                                         -----------               ----------
                                                          47,711,186               39,334,241
Unearned discounts                                           (88,310)                 (88,310)
Net deferred fees and expenses                              (257,234)                (212,728)
Allowance for loan losses                                 (1,018,800)                (853,800)
                                                         -----------               ----------
                                                        $ 46,346,842              $38,179,403
                                                         ===========               ==========
</TABLE>


Activity in the allowance for loan losses for  commercial  and other real estate
loans is summarized as follows:


                                             Nine Months Ended
                                               September 30,
                                     ----------------------------------
                                           1996              1995
                                     ----------------- ----------------
Balance at beginning of period                $853,800       $1,125,434
Provisions charged to income                   225,000          450,000
Charge-offs                                    (60,000)         (56,634)
                                             ---------        ---------
Balance and end of period                   $1,018,800       $1,518,800
                                             =========        =========


Commercial  and other real estate loans in arrears  three months or more,  other
non-performing loans or loans in process of foreclosure were as follows:

<TABLE>
<CAPTION>

                                                      Percentage of Commercial and Other
Period              Number of Loans     Amount                 Real Estate Loans
------------------- ---------------    -------        ----------------------------------
<S>                       <C>         <C>                          <C> 
September 30, 1996        6            $49,364                     0.11
December 31, 1995         1           $294,798                     0.77

</TABLE>


The foregone  interest on these loans for the periods  ended  September 30, 1996
and December 31, 1995 was $2,307 and $18,643, respectively.

At September 30, 1996, the Company held one loan with a balance of $1.79 million
considered  impaired  under FAS 114.  Because the market value of the collateral
securing this loan exceeds the loan's recorded  balance,  no specific reserve is
deemed necessary, however, the loan has been included in management's assessment
of the  adequacy  of general  valuation  allowances.  Approximately  $107,000 in
interest income was recorded on this loan during the nine months ended September
30,  1996.  This  loan has not  been  placed  on  non-accrual  status,  nor does
management expect it to be in the foreseeable future.  There were no other loans
considered impaired during the nine months ended September 30, 1996.




                                        9

<PAGE>



NOTE 6.  CONSUMER LOANS

<TABLE>
<CAPTION>


                                                     September 30, 1996       December 31, 1995
                                                     ------------------       -----------------
<S>                                                    <C>                      <C>         
Education loans held for sale                          $  3,473,036             $  3,587,283
Loans secured by deposit accounts                         1,298,126                1,230,422
FHA Title I improvement loans, net of unearned                                
  interest of $0 and $197                                   294,664                  523,912
Mobile home loans, net of unearned                                            
  interest of $0 and $3,736                                  46,490                   88,254
Automobile loans                                         35,706,502               42,845,656
Consumer loans                                            2,311,497                2,287,067
Home equity loans                                        15,346,654               11,465,463
                                                        -----------              -----------
                                                         58,476,969               62,028,057
Net deferred loan fees and expenses                       1,113,569                1,422,445
Allowance for loan losses                                (1,339,888)              (1,285,858)
                                                        -----------              -----------
                                                       $ 58,250,650             $ 62,164,644
                                                        ===========              ===========


</TABLE>
                                                                                
The fair  value of  education  loans  held for sale  approximates  book value at
September 30, 1996 and December 31, 1995.

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


                                               Nine Months Ended
                                                 September 30,
                                       ---------------------------------
                                             1996             1995
                                       ---------------- ----------------
Balance at beginning of period            $1,285,858       $1,242,454
Provisions charged to income                 448,730          235,215
Charge-offs                                 (427,749)        (246,281)
Recoveries                                    33,049           31,988
                                           ---------        ---------
Balance at end of period                  $1,339,888       $1,263,376
                                           =========        =========


Consumer loans in arrears three months or more were as follows:

<TABLE>
<CAPTION>


Period                   Number of Loans        Amount       Percentage of Consumer Loans*
------------------       ---------------      ---------      -----------------------------
<S>                             <C>            <C>                    <C> 
September 30, 1996              67             $177,682               0.32
December 31, 1995               38             $215,933               0.37


</TABLE>

*Excluding education loans held for sale.

The foregone  interest on these loans for the periods ended  September 30, 1996,
and December 31, 1995, was $7,306 and $6,595, respectively.


                                       10

<PAGE>



NOTE 7.  COMMITMENTS

Commitments for financial instruments with off-balance 
sheet risk are as follows at September 30, 1996:

Commitments to originate first mortgage loans                 $ 3,273,725

Commitments to originate commercial and other real 
estate loans                                                    1,326,471

Commitments to originate consumer loans                         1,957,686

Commercial lines of credit available                            3,624,337

Commercial letters of credit                                    2,406,475

Home equity lines of credit available                           6,035,087

Personal unsecured lines of credit available                    1,999,752
                                                               ----------
                                                              $20,623,533
                                                               ==========

The Company,  which  includes the Savings Bank,  from time to time is a party to
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  effect  on the  financial
position or results of operations of the Company or Savings Bank.

NOTE 8.  SUBSEQUENT EVENTS

On October 8, 1996, the Savings Bank's Board of Directors declared a dividend of
$50.00 per share on its common stock to be paid on or about November 18, 1996 to
the Company,  which is the Bank's sole shareholder.  The Savings Bank obtained a
six month advance from the FHLB of Pittsburgh in order to pay this dividend.

On October 24, 1996,  the Company  announced an offer to purchase for cash up to
200,000  shares of its common stock at a purchase  price not in excess of $23.75
nor less than $20.50 per share.  The Company will, upon the terms and subject to
the  conditions of the offer,  determine the purchase price that it will pay for
shares validly tendered  pursuant to the offer taking into account the number of
shares so tendered  and the prices  specified  by  tendering  shareholders.  The
Company  reserves  the right,  in its sole  discretion,  to  purchase  more than
200,000 shares pursuant to the offer. The offer will expire on Monday,  November
25, 1996 at 5:00 p.m., eastern time unless the offer is extended. The purpose of
this  offer is to  increase  the  Company's  leverage,  its return on equity and
earnings  per  share.  The  number of shares  and the price at which they may be
tendered  can not be reliably  estimated  at this time.  The  Savings  Bank will
remain "well capitalized"  according to regulatory  guidelines at the conclusion
of the offer.


                                       11

<PAGE>


<TABLE>
<CAPTION>


                                                    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 Nine            At or For the Three
                                                                 Months Ended                   Months Ended
                                                                 September 30,                 September 30,
                                                         ---------------------------    --------------------------
Statistical Data:                                           1996 (1)       1995 (1)        1996 (1)      1995 (1)
                                                         ------------- -------------    ------------ -------------
<S>                                                        <C>           <C>             <C>           <C>  
Return on average assets                                     0.69%         0.96%           0.01%         1.04%
Return on average assets (2)                                 1.07%          N/A            1.10%          N/A
Return on average equity                                     5.25%         6.73%           0.09%         7.33%
Return on average equity (2)                                 8.17%          N/A            8.87%          N/A
Average equity to average assets                            13.10%        14.27%          12.41%        14.14%
Average interest rate spread (FTE)                           3.08%         3.02%           3.12%         3.04%
Net yield on average interest-earning assets (FTE)           3.68%         3.65%           3.69%         3.70%
Non-interest expense to average assets                       2.41%         1.92%           3.48%         1.87%
Non-interest expense to average assets (2)                   1.79%          N/A            1.72%          N/A
Efficiency ratio                                            65.30%        51.77%          94.43%        50.02%
Efficiency ratio (2)                                        48.59%          N/A           46.63%          N/A
Nonperforming assets to total assets                         0.51%         0.75%           0.51%         0.75%
Allowance for loan losses to gross loans receivable          1.04%         1.36%           1.04%         1.36%
Book value per share, net of treasury shares               $20.42        $19.99          $20.42        $19.99

</TABLE>

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

Management's  Discussion  and  Analysis of Results of  Operations  for the Three
Months Ended September 30, 1996 and 1995.

On September 30, 1996,  President Clinton signed the Deposit Insurance Funds Act
of 1996 which included long anticipated  legislation to recapitalize the Savings
Association  Insurance Fund (SAIF) via a special  assessment on thrift  industry
deposits. As a result of this legislation,  the Company recorded a liability and
corresponding  pre-tax  charge to income of $1.67 million as of September 30 for
the payment anticipated to be made to the SAIF on November 27, 1996. This charge
to income  reduced  the  Company's  net income by $1.03  million for the quarter
ending September 30, 1996 after considering the associated income taxes. Without
this  charge,  for the quarter the  Company's  net income  would have been $1.04
million,  earnings per share $0.46,  the return on average  assets 1.10% and the
return on average equity 8.87%.

This  legislation  will also reduce the Company's SAIF insurance fees from $0.23
per  $100.00  (23 basis  points)  annually  to  approximately  6.4 basis  points
annually  effective  January 1, 1997.  Although  this  remains  higher  than the
approximately  1.3 basis points to be paid by Bank  Insurance Fund (BIF) insured
institutions,  it represents a significant  improvement  from the 23 basis point
disparity which has been present.

During the three  months ended  September  30,  1996,  the Company  continued to
experience  balance  sheet growth as increases in deposits and FHLB advances and
other  borrowings of $1.29 million and $16.17 million,  respectively,  were used
along with available funds to fund growth of $8.52 million in mortgage loans and
$4.54 million in commercial and other real estate loans

                                       12
<PAGE>

since  June 30.  The  average  interest  rate  spread  and net yield on  average
interest-earning  assets, both calculated on a fully  taxable-equivalent  basis,
experienced  an  8  basis  point   increase  and  a  1  basis  point   decrease,
respectively,  from the three months ended September 30, 1995 to the same period
in  1996.  A  series  of  leveraging  transactions  has  increased  the  average
investment  portfolio $27.88 million,  while the average mortgage loan portfolio
increased  $21.52 million and the average  commercial and other real estate loan
portfolio increased $11.64 million from year to year. These increases, partially
offset by a $4.95 million decrease in the average consumer loan portfolio,  have
helped increase net interest income.  Demand has been strong  throughout most of
1996 for first  mortgage  and  commercial  and other real  estate  loans,  while
management  has elected to reduce its exposure  somewhat to indirect  automobile
lending.

Provisions  for loan losses  increased  $13,000 to $225,000 for the three months
ended  September 30, 1996 from  $212,000 for same period in 1995.  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 $980,000, and other non-performing assets, namely
REO and other  repossessed  assets,  were $939,000 at September 30, 1996,  for a
total of $1.92  million in  non-performing  assets.  The primary  reason for the
increase in non-accrual  loans from June 30, 1996 is one  single-family  loan in
the amount of $334,000 which became 90 days delinquent during the third quarter.
Interest  received  in cash of $9,038 on  non-accrual  loans is  included in net
income for the 1996 quarter. Total allowance for losses as a percentage of gross
loans receivable,  REO and other  repossessed  assets was 1.06% at September 30,
1996. Total  non-performing  assets as a percentage of total assets was 0.51% at
September 30, 1996.

Total non-interest income decreased $43,000, or 14.48%, in 1996 primarily due to
a $32,000 decrease in the gain on sale of investments and loans. During the 1996
quarter,  two  municipal  bonds were sold at a gain of  $32,000,  while the 1995
gains were due to the sale of three GNMA mortgage-backed securities at a gain of
$64,000. Service charges and other fees decreased $10,000 from year to year, and
other non-interest income declined by $1,000.

Total non-interest expense increased $1.78 million, or 117.38%, primarily due to
the  previously  discussed  SAIF  assessment.  Salaries  and  employee  benefits
increased $71,000, or 10.34% between the 1995 and 1996 quarters,  primarily as a
result of normal  annual merit  increases in  salaries,  increased  amortization
expense  relating to the ESOP due to the Company's higher average stock price in
1996, and overtime  worked in order to meet loan demand.  REO operation  expense
increased  $41,000  in 1996  due to a $7,000  loss on the  sale of a  foreclosed
property,  the establishment of an additional $30,000 reserve on a property held
in REO and expenses  associated  with the former BFH office  building  which was
acquired in the fourth  quarter of 1995.  Other expense  categories  experienced
nominal dollar variances.

Excluding  the effect of the SAIF  assessment,  the Company's  efficiency  ratio
improved  from 50.02% for the three months  ending  September 30, 1995 to 46.63%
for the three months ending  September 30, 1996, while the ratio of non-interest
expenses to average assets improved from 1.87% to 1.72%. The improvement in both
of these key ratios is evidence of  management's  continuing  dedication to cost
control.  The improvement in the efficiency ratio is also due to the increase in
net interest income.

Management's  Discussion  and  Analysis  of Results of  Operations  for the Nine
Months Ended September 30, 1996 and 1995.

On September 30, 1996,  President Clinton signed the Deposit Insurance Funds Act
of 1996 which included long anticipated  legislation to recapitalize the Savings
Association  Insurance Fund (SAIF) via a special  assessment on thrift  industry
deposits. As a result of this legislation,  the Company recorded a liability and
corresponding  pre-tax  charge to income of $1.67 million as of September 30 for
the payment anticipated to be made to the SAIF on November 27, 1996. This charge
to income  reduced the Company's net income by $1.03 million for the nine months
ending September 30, 1996 after considering the associated income taxes. Without
this charge,  for the nine months the Company's net income would have been $2.89
million,  earnings per share $1.27,  the return on average  assets 1.07% and the
return on average equity 8.17%.

This  legislation  will also reduce the Company's SAIF insurance fees from $0.23
per  $100.00  (23 basis  points)  annually  to  approximately  6.4 basis  points
annually  effective  January 1, 1997.  Although  this  remains  higher  than the
approximately  1.3 basis points to be paid by Bank  Insurance Fund (BIF) insured
institutions,  it represents a significant  improvement  from the 23 basis point
disparity which has been present.

During the nine months  ended  September  30,  1996,  the Company  continued  to
implement its strategy of increasing  earnings  through  leveraging  the balance
sheet.  The Savings Bank borrowed $50.77 million from the Federal Home Loan Bank
of  Pittsburgh  (FHLB)  during the nine months which was used to repay  maturing
FHLB advances and to fund  purchases of investment  securities and growth in the
mortgage and commercial and other real estate loan portfolios.  In addition,  an
increase of $8.76  million in deposits  was used along with  available  funds to
fund this balance sheet growth.  The average  interest rate spread and net yield



on   average    interest-earning    assets,   both   calculated   on   a   fully
taxable-equivalent basis, experienced 6 basis                                

                                       13


<PAGE>
point and 3 basis point  increases,  respectively,  from the nine  months  ended
September  30,  1995  to the  same  period  in  1996.  A  series  of  leveraging
transactions  has increased the average  investment  portfolio  $22.67  million,
while the  average  mortgage  loan  portfolio  increased  $9.38  million and the
average  commercial  and other  real  estate  loan  portfolio  increased  $11.19
million.  These  increases,  partially offset by a $3.72 million decrease in the
average  consumer loan portfolio,  have helped increase net interest income from
year to year.  Demand has been strong throughout most of 1996 for first mortgage
and  commercial  and other real estate loans,  while  management  has elected to
reduce its exposure somewhat to indirect automobile lending.

Provisions  for loan losses  decreased  $11,000 to $674,000  for the nine months
ended  September 30, 1996 from  $685,000 for same period in 1995.  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 $980,000, and other non-performing assets, namely
REO and other  repossessed  assets,  were $939,000 at September 30, 1996,  for a
total of $1.92  million in  non-performing  assets.  The primary  reason for the
increase in non-accrual  loans from June 30, 1996 is one  single-family  loan in
the amount of $334,000 which became 90 days delinquent during the third quarter.
Interest  received in cash of $40,187 on  non-accrual  loans is included in 1996
net  income.  Total  allowance  for  losses  as  a  percentage  of  gross  loans
receivable,  REO and other  repossessed  assets was 1.06% at September 30, 1996.
Total  non-performing  assets  as a  percentage  of total  assets  was  0.51% at
September 30 ,1996.

Total  non-interest  income  increased  $75,000,  or  10.33%,  in 1996  due to a
$127,000  increase in the gain on sale of investments and loans.  The 1996 gains
were primarily due to the sale of GNMA  mortgage-backed  securities in the first
quarter and municipal bonds in the third quarter of 1996,  partially offset by a
$49,000 loss on the sale of an adjustable rate  mortgage-backed  security mutual
fund in the second  quarter.  Service  charges and other fees decreased  $45,000
from year to year, and other non-interest income declined by $7,000.

Total non-interest  expense increased $1.96 million,  or 43.08%,  primarily as a
result of the previously  discussed SAIF  assessment and a $139,000  increase in
REO operation  expense.  Reserves for losses totalling  $55,000 were recorded on
two REO properties in March 1996, an additional  $30,000 reserve was established
in July 1996 and a loss of $7,000 was taken on the sale of a foreclosed property
in the third quarter. The remainder of the increase is primarily due to expenses
associated with the former BFH office building acquired in the fourth quarter of
1995.  Salaries and employee benefits increased  $180,000,  or 8.65% between the
1995 and 1996 periods, primarily as a result of normal annual merit increases in
salaries,  increased ESOP amortization  expenses due to the higher average stock
price  and  overtime  worked  to meet  loan  demand.  Other  expense  categories
experienced nominal dollar variances.

Excluding  the effect of the SAIF  assessment,  the Company's  efficiency  ratio
improved  from 51.77% at  September  30, 1995 to 48.59% at  September  30, 1996,
while the ratio of  non-interest  expenses to average assets improved from 1.92%
to  1.79%.  The  improvement  in  both  of  these  key  ratios  is  evidence  of
management's  continuing  dedication to cost  control.  The  improvement  in the
efficiency ratio is also due to the increase in net interest income.

Liquidity and Capital Resources

The Savings  Bank is required to  maintain  minimum  levels of liquid  assets as
defined by Office of Thrift Supervision ("OTS")  regulations.  This requirement,
which may be varied from time to time  depending  upon economic  conditions  and
deposit flows, is based upon a percentage of deposits and short-term borrowings.
The  required  minimum  ratio is  currently  5%. The Savings  Bank's  regulatory
liquidity ratio averaged 6.06% during the three months ended September 30, 1996.
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. The Savings Bank also
manages  its  liquidity  ratio  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, principal repayments on loans and mortgage-backed
securities,  and matured or called investment securities.  The Savings Bank also
has the ability to borrow funds from the Federal Home Loan Bank of Pittsburgh.

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

                                       14

<PAGE>



typically  earn  a  higher  yield  than  overnight  deposits.   These  types  of
investments may qualify as liquid  investments  under the OTS  regulations.  The
Company's  entire  investment  portfolio is  classified as available for sale to
provide greater flexibility for a source of funds.

The Savings Bank  anticipates  that it will have  sufficient  funds available to
meet its current loan commitments and normal savings  withdrawals.  At September
30, 1996, the Savings Bank had outstanding commitments to fund off balance sheet
items of $20.62 million.  In addition,  it had certificates of deposit scheduled
to mature  within  six  months of $83.29  million,  substantially  most of which
management believes will remain with the 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.

As required by the Financial Institutions Reform Recovery and Enforcement Act of
1989  ("FIRREA"),  the  OTS  prescribed  three  separate  standards  of  capital
adequacy.  The  regulations  require  financial  institutions  to  have  minimum
regulatory capital equal to 1.50% of tangible assets, minimum core capital equal
to 3.00% of adjusted tangible assets,  and risk-based  capital equal to 8.00% of
risk  adjusted  assets.  Set forth  below is the table  showing  the  regulatory
capital calculation.

The  Savings  Bank's  capital  requirements  and  actual  capital  under the OTS
regulations are as follows at September 30, 1996:

<TABLE>
<CAPTION>


                                                                   Percent of Regulatory
(Dollar Amounts in Thousands)                        Amount            Tangible Assets
                                                     ------        ---------------------
Tangible Capital:
<S>                                               <C>                 <C> 
  Actual                                          $ 37,572,000                9.88
  Required                                           5,703,000                1.50
                                                   -----------               -----
  Excess                                          $ 31,869,000                8.38
                                                   ===========               =====

Core Capital:
  Actual                                           $37,572,000                9.88
  Required                                          11,406,000                3.00
                                                   -----------               -----
  Excess                                          $ 26,166,000                6.88
                                                   ===========               =====

                                                                       Percent of Risk
                                                     Amount            Adjusted Assets
                                                     ------            ---------------
Risk-Based Capital:
  Actual                                          $ 40,205,000               18.90
  Required                                          17,018,000                8.00
                                                   -----------               -----
  Excess                                          $ 23,187,000               10.90
                                                   ===========               =====
Regulatory assets                                 $380,204,000
                                                   ===========
Risk-adjusted assets for regulatory purposes      $212,727,000
                                                   ===========
</TABLE>


                                       15

<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          None

Item 5 - Other Information                                            None

Item 6 - Exhibits and Reports on Form 8-K
         (a)  Exhibits
              11.   Statement re computation of per share earnings
              27.   Financial data schedule
         (b)  Reports on Form 8-K
                  The Company filed Form 8-K (Item 5) on 
                  September 10, 1996 to announce the appointment 
                  of R. Joseph Hrach to the Company's Board of 
                  Directors.


                                       16

<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:      October 25, 1996          By:  /s/ Francis A. Bonadio
           ----------------               ----------------------
                                          FRANCIS A. BONADIO
                                          President and Chief Executive Officer




Date:      October 25, 1996          By:  /s/ Lonny D. Robinson
           ----------------               ---------------------
                                          LONNY D. ROBINSON
                                          Vice President and Chief Financial 
                                            Officer



                                       17