Financial Information
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Management's Discussion and Analysis of
Financial Condition and Results of Operations                    16

Consolidated Statements of Financial Condition                   24

Consolidated Statements of Operations                            25

Consolidated Statements of Changes in
Stockholders' Equity                                             26

Consolidated Statements of Cash Flows                            27

Notes to Consolidated Financial Statements                       28

Independent Auditors' Report                                     41

<PAGE>
Management's Discussion
and Analysis of Financial Condition
and Results of Operations

GENERAL

     Chester  Valley  Bancorp Inc. (the "Holding  Company") is a unitary  thrift
holding  company,  incorporated  in the  Commonwealth  of Pennsylvania in August
1989.  The business of Chester  Valley  Bancorp Inc. and its  subsidiaries  (the
"Company") consists of the operations of First Financial Bank ("First Financial"
or the "Bank"),  a  Pennsylvania-chartered  stock  savings and loan  association
founded in 1922 and Philadelphia Corporation for Investment Services ("PCIS"), a
full-service  investment  advisory  and  securities  brokerage  firm.  The  Bank
provides a wide range of banking services to individual and corporate  customers
through  its eight  branch  offices in Chester  County,  Pennsylvania.  The Bank
provides  residential  real  estate,  commercial  real  estate,  commercial  and
consumer  lending  services  and funds these  activities  primarily  with retail
deposits and borrowings.  Philadelphia  Corporation  for Investment  Services is
registered as a broker/dealer in all 50 states and Washington, DC and it is also
registered as an Investment  Advisor with the  Securities  Exchange  Commission.
PCIS provides many  additional  services,  including  self-directed  and managed
retirement accounts,  safekeeping, daily sweep money market funds, portfolio and
estate  valuations,  life  insurance  and  annuities,  and margin  accounts,  to
individuals and smaller corporate  account.  PCIS's offices are located in Wayne
and Philadelphia, Pennsylvania.

     The Company posted record operating earnings of $4.21 million, or $1.13 per
diluted  share,  for the  fiscal  year ended June 30,  1999,  compared  to $3.63
million or $.98 per diluted share for the same period in 1998. This represents a
16.2% increase in earnings.

ASSET/LIABILITY MANAGEMENT

         The primary asset/liability management goal of the Company is to manage
and  control  its  interest  rate  risk,   thereby   reducing  its  exposure  to
fluctuations in interest rates, and achieving sustainable growth in net interest
income  over the long  term.  Other  objectives  of  asset/liability  management
include:  (1) ensuring adequate liquidity and funding,  (2) maintaining a strong
capital base and (3) maximizing net interest income opportunities.

     In  general,  interest  rate risk is  mitigated  by  closely  matching  the
maturities or repricing periods of interest-sensitive  assets and liabilities to
ensure a  favorable  interest  rate  spread.  Management  regularly  reviews the
Company's interest-rate sensitivity,  and uses a variety of strategies as needed
to adjust that sensitivity  within  acceptable  tolerance ranges  established by
management.  Changing the relative proportions of fixed-rate and adjustable-rate
assets and liabilities is one of the primary strategies  utilized by the Company
to accomplish this objective.

       The matching of assets and  liabilities  may be analyzed by examining the
extent to which such assets and liabilities are "interest-rate sensitive" and by
monitoring an institution's  interest-sensitivity  gap. An  interest-sensitivity
gap is considered  positive when the amount of  interest-rate  sensitive  assets
exceeds the amount of  interest-rate  sensitive  liabilities  repricing within a
defined  period and is  considered  negative  when the  amount of  interest-rate
sensitive  liabilities  exceeds  the amount of  interest-rate  sensitive  assets
repricing within a defined period.
<PAGE>
     To provide a more  accurate  one-year gap position of the Company,  certain
deposit  classifications are based on the interest-rate sensitive attributes and
not on the contractual repricing  characteristics of these deposits.  Management
estimates,  based on historical trends of the Bank's deposit accounts,  that 59%
of money market and NOW accounts are sensitive to interest rate changes and that
7% of savings  deposits are  sensitive to interest  rate  changes.  Accordingly,
these  interest-sensitive  portions  are  classified  in the less  than one year
categories with the remainder in the over five years category.  Deposit products
with interest rates based on a particular index are classified  according to the
specific  repricing  characteristic of the index.  Deposit rates other than time
deposit rates are variable,  and changes in deposit rates are typically  subject
to local market  conditions and  management's  discretion and are not indexed to
any particular rate.

     Generally,  during a period of rising  interest rates, a positive gap would
result  in an  increase  in net  interest  income  while a  negative  gap  would
adversely affect net interest income.  However, the  interest-sensitivity  table
does not provide a comprehensive  representation  of the impact of interest rate
changes on net interest income.  Each category of assets or liabilities will not
be  affected  equally  or  simultaneously  by changes  in the  general  level of
interest rates. Even assets and liabilities which  contractually  reprice within
the same period may not, in fact,  reprice at the same price or the same time or
with the  same  frequency.  It is also  important  to  consider  that the  table
represents a specific point in time. Variations can occur as the Company adjusts
its interest-sensitivity position throughout the year.

OPERATING RESULTS

Interest Income (Taxable-Equivalent Basis)

     Interest income is analyzed on a tax-equivalent  basis, i.e., an adjustment
is made for analysis purposes only, to increase interest income by the amount of
savings of Federal  income  taxes,  which the Company  realizes by  investing in
certain tax-free municipal  securities and by making loans to certain tax-exempt
organizations.  In this way,  the  ultimate  economic  impact of  earnings  from
various assets can be more readily compared.


                                       16

<PAGE>
     Total  interest  income  increased to $30.01  million during fiscal 1999, a
$3.81 million or 14.5%  increase over the comparable  prior year.  This increase
was due to a $68.77 million increase in the average balance of  interest-earning
assets.  Partially  offsetting the effect of the increase in the average balance
on interest  income was the 44 basis-point  decrease in the yield,  to 7.62%, on
the loan  portfolio as the result of the  flattening  yield curve during  fiscal
1998 and 1999 which  resulted  in  customers  refinancing  their  loans to lower
interest rates.

     Total  interest  income  increased to $26.20  million during fiscal 1998, a
$3.28 million or 14.3%  increase over the comparable  prior year.  This increase
was due to a $41.46 million increase in the average balance of  interest-earning
assets.  Partially  offsetting the effect of the increase in the average balance
on interest income was the 5 basis-point decrease in the yield, to 8.44%.

Interest Expense

     Total  interest  expense  increased to $15.68 million during fiscal 1999, a
$2.27 million or 16.9% increase over the comparable  prior year. The increase in
interest  expense  was  primarily  due to a $39.72  million  and $21.78  million
increase in the average  balances of deposits and borrowings,  respectively,  at
June  30,  1999,   which  funded  the  increase  in  the  average   balances  of
interest-earning assets discussed previously.  The average rate paid on deposits
decreased to 4.60% for fiscal 1999 from 4.79% the previous year as the result of
management's  continued  efforts to focus its growth in the areas of low-costing
or no-cost  deposits.  The average  rate paid on  borrowings  decreased 54 basis
points to 5.54%.

     Total  interest  expense  increased to $13.41 million during fiscal 1998, a
$1.90 million or 16.5% increase over the comparable  prior year. The increase in
interest  expense  was  primarily  due to a $24.86  million  and $10.87  million
increase in the average  balances of deposits and borrowings,  respectively,  at
June 30, 1998.  The average  rate paid on deposits  remained at 4.63% for fiscal
1998. The average rate paid on borrowings increased 50 basis points to 6.08%.


<PAGE>
<TABLE>
<CAPTION>

                                         Interest Rate Sensitivity Analysis at June 30, 1999
                                                       (Dollars in thousands)


                                                         More Than    More Than   More Than    More Than
                                                       Three Months   Six Months   One Year   Three Years
                                         Three Months    Through       Through     Through      Through       More Than
                                           or Less      Six Months     One Year  Three Years   Five Years    Five Years     Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>          <C>           <C>          <C>          <C>          <C>          <C>
Interest-Earning Assets
  Loans  (1)
    Real estate (2)                       $   24,051   $   19,954    $  32,306    $  74,466    $  41,968    $   37,740   $ 230,485
    Commercial                                 6,721        2,158        1,822        3,084          630           293      14,708
    Consumer                                   8,218        1,845        3,871       12,740        8,420        16,322      51,416
  Securities and interest-bearing
    deposits                                  48,877        1,683        5,159        5,353       38,997        39,962     140,031

------------------------------------------------------------------------------------------------------------------------------------
  Total interest-earning assets           $   87,867   $   25,640    $  43,158    $  95,643    $  90,015    $   94,317   $ 436,640
------------------------------------------------------------------------------------------------------------------------------------

Interest-Bearing Liabilities
  Savings accounts                        $      501   $      501    $     998    $       -    $       -    $   27,033   $  29,033
  NOW accounts                                   450          450          900            -            -        34,211      36,011
  Money market accounts                       47,464            -            -            -            -             -      47,464
  Certificate accounts                        66,116       29,287       35,708       71,386        9,216         2,285     213,998
  Borrowings                                   4,022           17        2,625        9,829       13,053        21,482      51,028

------------------------------------------------------------------------------------------------------------------------------------
  Total interest-bearing liabilities      $  118,553   $   30,255    $  40,231    $  81,215    $  22,269    $   85,011   $ 377,534
------------------------------------------------------------------------------------------------------------------------------------

Cumulative excess of interest-
  earning assets to
  interest-bearing liabilities            $  (30,686)  $  (35,301)   $ (32,374)   $ (17,946)   $  49,800    $   59,106   $  59,106
====================================================================================================================================
Cumulative ratio of interest
  rate-sensitive assets to
  interest rate-sensitive liabilities          74.1%        76.3%        82.9%        93.4%       117.0%        115.7%      115.7%
====================================================================================================================================
Cumulative difference as a
  percentage of total assets                  (6.8%)       (7.8%)        (7.2%)       (4.0%)       11.0%         13.1%       13.1%
====================================================================================================================================

</TABLE>
(1)  Net of undisbursed loan proceeds.
(2)  Includes commercial mortgage loans.


                                       17
<PAGE>
Net Interest Income

     Net  interest  income  is  the  difference   between   interest  income  on
interest-earning  assets and interest expense on  interest-bearing  liabilities.
Net interest income, on a fully tax equivalent basis, increased 12.00%, or $1.54
million to $14.33  million in 1999 from  $12.80  million in 1998,  compared to a
12.1%  increase of $1.39 million from 1997 to 1998.  Net interest  margin,  on a
fully tax equivalent basis, was 3.64% for the year ended 1999, compared to 3.94%
in 1998 and 4.03% in 1997.

Provision for Loan Losses

     The  Company's  provision  for loan  losses  was  $390,000,  $606,000,  and
$523,000,  during the respective  periods of 1999 through 1997. These provisions
have been  added to the  Company's  allowance  for loan  losses  due to  general
economic  conditions,  loan growth, and management's  assessment of the inherent
risk of loss existing in the loan portfolio. At June 30, 1999, the allowance for
loan losses was $3.65 million or 1.24% of net loans compared to $3.41 million or
1.23% of net loans at June 30, 1998.

     The Company  establishes  provisions for loan losses,  which are charged to
operations,  in order to maintain the allowance for loan losses at a level which
is deemed to be appropriate based upon, among other things,  delinquency trends,
the volume of  non-performing  loans,  prior loss  experience of the  portfolio,
current economic  conditions,  and other relevant factors.  Although  management
believes  it has  used the  best  information  available  to it in  making  such
determinations,  and that the present  allowance  for loan  losses is  adequate,
future  adjustments  to the allowance  may be  necessary,  and net income may be
adversely   affected  if  the  circumstances   differ   substantially  from  the
assumptions  used in determining the level of the allowance for loan losses.  In
addition,  various regulatory agencies, as an integral part of their examination
process,  periodically  review the Company's allowance for losses on loans. Such
agencies may require the Company to recognize  additions to the allowance  based
on their  judgments  about  information  available  to them at the time of their
examination.

Other Operating Income

     Total other  income  increased  $579,000 or 12.5% to $5.20  million for the
year ended June 30, 1999, from the comparable prior period.  Investment services
income  increased  $460,000  or 16.5% to $3.26  million  as the result of PCIS's
increased  commission  income due to the continued  increase in the stock market
activity,  an increase in advisory fee income due to the strategic  plan of PCIS
to focus on advisory  services as it provides a more stable  revenue  stream for
PCIS and stabilizes  expenses for the customer,  and an increase in money market
fund fees due to an  increase  in  customer  balances.  The growth in the Bank's
Investment  Services  and Trust  Division  also  contributed  to the increase in
investment  services  income for fiscal  1999.  An increase in checking  account
fees, as the result of an increased  number of accounts,  and an increase in the
fees  earned  on the  Bank's  debit  card,  due to  increased  usage and also an
increased  number of  cardholders,  contributed  to the  increase of $354,000 or
31.7% in service charges and fees in fiscal 1999. The Company  recognized  gains
on trading  account  securities  of  $171,000  during  fiscal  1999  compared to
$338,000 during fiscal 1998.
<PAGE>
     Total other  income  increased  $968,800 or 26.6% to $4.62  million for the
year ended June 30, 1998, from the comparable prior period.  Investment services
income  increased  $488,400 or 21.2% to $2.80 million as the result of increases
in revenue  generated by PCIS and the Trust  Division.  Service Charges and fees
increased  $139,700  in fiscal  1998.  The Company  recognized  gains on trading
account  securities of $337,500  during  fiscal 1998 compared to $15,700  during
fiscal 1997.

Other Operating Expenses

     Total operating  expenses increased $1.09 million or 9.4% to $12.73 million
for the year ended June 30, 1999 compared to the same period in fiscal 1998. The
increase in operating expenses over the prior fiscal year was primarily due to a
$1.04  million or 17.6%  increase in salaries and employee  benefits  related to
general  salary  increases and  increased  number of staff  associated  with the
Bank's Call Center and its Investment  Services and Trust  Division  established
during the summer and fall of 1997,  respectively.  Also, in the winter of 1999,
the Bank opened its eighth  branch office in Devon,  Pennsylvania  which further
contributed to an increase in staff.  Occupancy and equipment expenses increased
$190,000 or 10.1% to $2.08  million for the year ended June 30, 1999 compared to
the same period in 1998 as a result of the opening of the Bank's  branch  office
in Devon and  capital  expenditures  associated  with  technology  upgrades  and
enhancements.  During fiscal 1998 the Bank made a $291,000  donation in relation
to a project to provide low income housing for the elderly.  As an offset to the
donation, the Bank received a state tax credit in the amount of $146,000 through
the Neighborhood  Assistance Act which was recorded as a reduction to income tax
expense in fiscal 1998.

     Total operating expenses increased $1.78 million or 18.1% to $11.64 million
for the year ended June 30, 1998,  from the comparable  prior period,  excluding
the $1.39  million  one-time  SAIF  assessment  in fiscal 1997.  The increase in
operating expenses over the prior fiscal year was primarily due to a $632,500 or
12.0%  increase in salaries  and  employee  benefits  related to general  salary
increases  and  increased  number of staff  associated  with the addition of the
Bank's new Call Center and its new Investment  Services and Trust  Division.  In
addition,  occupancy and equipment expenses increased $246,900 or 15.1% to $1.89
million  for the year ended June 30,  1998,  from the  comparable  prior  period
related to the  refurbishment of the Bank's Operation Center and the renovations
required  to provide  accommodations  for the  Bank's new Call  Center and Trust
Department.  Also  contributing  to the  increase in operating  expenses  during
fiscal  1998 was the  previously  mentioned  $291,000  donation  to a project to
provide low income housing for the elderly.



                                       18
<PAGE>
Income Taxes

     The Company  incurred  income tax expense of $1.57 million  during the year
ended June 30, 1999,  compared to $1.09 million  during fiscal 1998. The primary
reason for the  increase in income tax  expense  was due to a 22.7%  increase in
income before taxes in fiscal 1999.  Income tax expense for fiscal 1998 includes
a $146,000 state tax credit through the Neighborhood  Assistance Act relating to
a donation  the Bank made to provide  low income  housing for the  elderly.  For
periods  ending prior to May 29, 1998, no expense has been made for income taxes
for PCIS since PCIS had elected to be taxed under the provisions of Subchapter S
of  the  Internal  Revenue  Code  and  similar  state  provisions.  Under  these
provisions,  PCIS does not pay income taxes on its taxable income.  Instead, the
former  stockholders  of PCIS are liable for  individual  income  taxes based on
their respective  shares of PCIS's taxable income.  As a result of all of PCIS's
stock being purchased by Chester Valley Bancorp Inc. on May 29, 1998, PCIS is no
longer eligible to be taxed under the provisions of Subchapter S of the Internal
Revenue Code.

     The Company incurred income tax expense of $757,400 during fiscal 1997. The
primary reason for the increase in income tax expense in fiscal 1998 compared to
fiscal  1997 was due to the  increase in income  before  taxes in fiscal 1998 to
$4.71 million from $2.99 million  during fiscal 1997. The increase in income tax
expense in fiscal 1998 was  partially  offset by the  $146,000  state tax credit
through the Neighborhood Assistance Act donation mentioned earlier.

Capital Resources

     The Company's  assets totaled $451.16 million at June 30, 1999, as compared
with  $377.01  million as of June 30,  1998.  This 19.7%  increase in assets was
primarily  funded by an increase  in  deposits  of $61.32  million or 20.6% from
$298.19  million at June 30, 1998, to $359.51  million at June 30, 1999,  and an
increase in Federal Home Loan Bank advances of $9.44 million from $40.94 million
to $50.38  million at June 30,  1998 and 1999,  respectively.  The  increase  in
deposits  and  advances  was used in part to fund loan  originations  during the
period,  which  contributed to an increase in net loans  receivable from $273.13
million at June 30, 1998, to $291.39 million at June 30, 1999. In addition,  the
Company's  securities  portfolios  along  with  its  interest-bearing   deposits
increased  from  $86.12  million to $140.03  million at June 30,  1998 and 1999,
respectively.

     Stockholders'  equity  inceased to $33.85  million at June 30,  1999,  from
$31.85  million  at June 30,  1998,  as a result of net  income  earned of $4.21
million  during  fiscal  1999,  the  reduction in the  principal  balance of the
Employee  Stock  Ownership  Plan  ("ESOP")  debt by $147,000 (See Note 13 of the
Notes to the  Consolidated  Financial  Statements),  proceeds from stock options
exercised  during the 1999 period of $168,000,  and proceeds  totaling  $514,000
from the  issuance of common  stock.  The increase in  stockholders'  equity was
offset in part by a change in net unrealized  value of securities  available for
sale  of  $1.84  million  from a gain of  $292,000  at  June  30,  1998 to a net
unrealized  loss of $1.55  million at June 30, 1999,  and also offset in part by
the payment of cash  dividends of $1.15 million and the repurchase of $24,000 of
common stock, as well as the payment of $16,000 in lieu of fractional  shares in
connection with the 5% stock dividend paid during fiscal 1999.
<PAGE>
Asset Quality

     Non-performing  assets are  comprised of  non-performing  loans and REO and
totaled $933,000 at June 30, 1999, compared to $1.25 million at June 30, 1998.

     Non-accrual  loans are loans on which the accrual of  interest  ceases when
the collection of principal or interest payments is determined to be doubtful by
management.  It is the  policy of the  Company  to  discontinue  the  accrual of
interest  when  principal or interest  payments are  delinquent  90 days or more
(unless the loan principal and interest are determined by management to be fully
secured  and in  the  process  of  collection),  or  earlier,  if the  financial
condition of the borrower raises significant  concern with regard to the ability
of the  borrower to service the debt in  accordance  with the current loan term.
Interest income is not accrued until the financial  condition and payment record
of the  borrower  once  again  demonstrate  the  ability  to  service  the debt.
Non-performing  assets to total  assets was .21% at June 30,  1999,  compared to
 .33% at June 30,  1998.  Non-performing  loans  of  $933,000  at June 30,  1999,
consisted  of six  residential  mortgage  loans in the amount of  $568,000,  two
commercial loans for $258,000 and $107,000 in consumer loans.

     At June 30, 1999 and 1998, the Company's classified assets, which consisted
of assets  classified as  substandard,  doubtful,  loss, and REO,  totaled $1.24
million  and $1.47  million,  respectively.  Included  in the assets  classified
substandard  at June 30,  1999,  were all loans 90 days past due and loans which
are less than 90 days  delinquent,  but  inadequately  protected  by the current
paying  capacity of the  borrower  or of the  collateral  pledged,  as well as a
well-defined weakness that may jeopardize the liquidation of the debt.

Liquidity and Committed Resources

     Management  monitors  liquidity daily and maintains funding sources to meet
unforeseen changes in cash requirements.  The Company's primary sources of funds
are deposits, borrowings,  repayments, prepayments and maturities of outstanding
loans  and  mortgage-backed  securities,  sales of  assets  available  for sale,
maturities of investment securities and other short-term investments,  and funds
provided from operations.  While scheduled loan and  mortgage-backed  securities
repayments and maturing  investment  securities and short-term  investments  are
relatively  predictable


                                       19
<PAGE>
sources of funds,  deposit flows and loan prepayments are greatly  influenced by
the movement of interest rates in general,  economic conditions and competition.
The Company  manages the pricing of its  deposits to maintain a deposit  balance
deemed appropriate and desirable.  Although the Company's deposits represent the
majority of its total liabilities, the Company has also utilized other borrowing
sources,  namely FHLB  advances.  In addition to its ability to obtain  advances
from  the  FHLB  under  several  different  credit  programs,  the  Company  has
established  a line of credit  with the FHLB,  in an amount not to exceed 10% of
the Company's maximum borrowing  capacity,  which borrowing  capacity was $13.13
million  at the time  the  commitment  was  executed,  and  subject  to  certain
conditions,  including the holding of a  pre-determined  amount of FHLB stock as
collateral.  This  line of  credit  is used  from  time  to time  for  liquidity
purposes.  At June 30,  1999  there was no  outstanding  balance on this line of
credit.

     Liquidity  management  is  both a  daily  and  long-term  function.  Excess
liquidity is generally invested in short-term investments such as FHLB overnight
deposits.  On a longer-term basis, the Company maintains a strategy of investing
in various  lending and investment  securities  products.  During the year ended
June 30,  1999,  the Company  used its sources of funds to  primarily  fund loan
commitments and maintain a substantial portfolio of investment  securities,  and
to meet its ongoing commitments to pay maturing savings certificates and savings
withdrawals.  As of June 30, 1999,  the Company had $7.77 million in commitments
to fund loan originations.  The majority of these commitments are anticipated to
be funded by December 31, 1999.  In addition,  as of June 30, 1999,  the Company
had undisbursed  loans in process for  construction  loans of $11.39 million and
$17.10  million in  undisbursed  lines of credit.  In addition,  the Company has
issued $40,000 in commercial letters of credit fully secured by deposit accounts
or real estate.  The  management  of the Company  believes  that the Company has
adequate resources,  including principal prepayments and repayments of loans and
investment  securities and borrowing capacity, to fund all of its commitments to
the extent required.

     For  regulatory  purposes,  liquidity  is  defined  as a ratio  of cash and
certain  marketable  securities that can be readily converted into cash to total
deposits and short-term borrowings.  At June 30, 1999, liquidity for the Bank as
defined under these guidelines was 18.34%, which exceeded the regulatory minimum
requirement of 4.0%.

Impact of Inflation and Changing Prices

     The Consolidated Financial Statements and Related Notes presented elsewhere
herein have been  prepared in  accordance  with  generally  accepted  accounting
principles  ("GAAP")  which  generally  require  the  measurement  of  financial
position  and  operating   results  in  terms  of  historical   dollars  without
considering  changes in the relative  purchasing power of money over time due to
inflation. Unlike many industrial companies, substantially all of the assets and
liabilities of the Company on a consolidated  basis are monetary in nature. As a
result,  interest  rates  have  a  more  significant  impact  on  the  Company's
performance  than the general level of  inflation.  Over a short period of time,
interest rates may not  necessarily  move in the same direction or with the same
magnitude of inflation.
<PAGE>
Year 2000 Issues

     In order to be ready for the year 2000 (the "Year 2000 Issue"), the Company
has  developed a Year 2000 Action Plan (the "Action  Plan") which was  presented
and approved by the Company's  Board of Directors in December  1998.  The Action
Plan was developed using both the guidelines  outlined in the Federal  Financial
Institutions  Examination  Council's  ("FFIEC")  "The Effect of 2000 on Computer
Systems" as well as guidance provided by the Securities and Exchange  Commission
(the "SEC").  The Company's Board of Directors  assigned  responsibility for the
Action Plan to the Year 2000 Project Team chaired by the Company's President and
Chief  Operating  Officer who reports to the Board of Directors  with respect to
the status of the  implementation  of the Action  Plan on a monthly  basis.  The
Action Plan recognizes that the Company's  operating,  processing and accounting
operations are computer reliant and could be significantly  affected by the Year
2000 Issue.  The  Company is  primarily  reliant on third party  vendors for its
computer  output and  processing,  as well as other  significant  functions  and
services (i.e.,  securities  transactional and safekeeping services,  securities
pricing information, etc.). The Year 2000 Project Team is currently working with
these third party vendors to assess their Year 2000 readiness and are performing
Year  2000  testing  as  required.  Based on an  ongoing  assessment  management
presently  believes that with the recent  conversions and  modifications  to the
Company's  software and  hardware,  including a conversion  by the Bank to a new
core data  processing  system in October  1998,  the Company and its third party
vendors  are  taking  the  appropriate  steps to ensure  critical  systems  will
function properly.

Company's State of Readiness

     The Bank has identified five mission  critical  systems  (without which the
Bank cannot operate) and critical applications  (necessary  applications but the
Company can  function for a moderate  amount of time  without such  applications
being Year 2000 compliant)  operated or supported by third party vendors.  These
five mission  critical  systems  include:  1) the core data  service  processing
system  for  deposit,  loan  and  general  ledger  account  processing;  2)  the
Electronic  Network which controls the Bank's ATMs and telephone  voice response
units,  as well as processes its ATM cards and debit cards; 3) the equipment and
software that processes the Bank's item processing and check inclearing;  4) the
Wide Area Network ("WAN") which facilitates  electronic  commu-


                                       20
<PAGE>
nications  between  the  Bank's  branches  and its  core  processor;  and 5) the
software that processes the backroom  statement  operations for the Bank's Trust
Department.  Of such mission  critical  systems and critical  applications,  the
Company has been informed by a substantial majority of its vendors that they are
either Year 2000 compliant or that they will be compliant and are in the process
of  revising  and  testing  their  systems  for Year 2000  compliance.  The most
critical  system  for the  Bank is its core  data  processing  service  which is
provided by a third party vendor  ("DPS  Provider").  The DPS Provider  services
over 1,000 banks  nationally.  In May 1998,  the Bank  entered into an agreement
with the DPS Provider  whereby the DPS  Provider  warranted  certain  conditions
regarding Year 2000  compliance.  The DPS Provider has informed the Bank that it
has completed the majority of its testing of its systems.  The Bank has received
and will  continue  to  receive  and  review  carefully  the  results of the DPS
Provider testing. Phase I and Phase II of testing of the DPS Provider system was
completed in July 1998 and December 1998,  respectively,  with substantially all
such systems evidencing Year 2000 compliance.

     All of the Company's  vendors of its mission  critical systems and critical
applications  have provided written  assurances that their products and services
will be Year 2000  compliant.  As of June 30,  1999,  the  Company  successfully
completed the majority of its mission critical modifications and conversions and
related testing of all mission critical and non-mission critical systems.

     The  Year  2000  issues  also  affect  certain  of  the  Bank's  customers,
particularly  in the areas of access to funds  and  additional  expenditures  to
achieve  compliance.  As of September 30, 1998, Bank personnel had contacted all
commercial credit customers regarding the customers'  awareness of the Year 2000
Issue.  At that time the Bank  adopted  the  FFIEC  Millennium  Risk  Evaluation
Package  ("FFIEC  Package")  as the  standard  for  evaluating  the Bank risk in
relation to Year 2000 issues. From the customer  responses,  the Bank identified
42 potential risk customers  whose  operations were considered to be heavy users
of  computer  based  systems  or  considered  a risk  either  by virtue of their
business complexity or the complexity of their borrowings. The officer of record
was given the  responsibility  of  determining  the risk level that each  client
posed using the FFIEC  Package.  The risk level was  considered to be low on all
but three of these clients and these three were  considered to have medium risk.
Those identified to be anything but low risk will be monitored  quarterly by the
officer of record.  While no assurance can be given that its  customers  will be
Year 2000  compliant,  management  believes,  based on  representations  of such
customers  and  reviews  of  their  operations  (including  assessments  of  the
borrowers' level of  sophistication  and data and record keeping  requirements),
that the  customers  are  either  addressing  the  appropriate  issues to insure
compliance  or that they are not faced  with  material  Year  2000  issues.  The
respondents stated that they were, at the very least,  sufficiently compliant to
avoid disruption of the cash flow stream necessary to service debt. In addition,
in   substantially   all  cases  the  credit   extended  to  such  borrowers  is
collateralized by real estate or business assets which inherently  minimizes the
Bank's  exposure  in the event that such  borrowers  do  experience  problems or
delays becoming Year 2000 compliant.

     PCIS, pursuant to Section  240.17a-5(e)(5)(iii)  of the Securities Exchange
Act of 1934,  filed Part I and Part II of Form BD-Y2K with the SEC which applies
to brokers with  minimum net capital of $100,000 or more.  Part I and Part II of
Form BD-Y2K was filed in August 1998 and included  PCIS's Year 2000 Action Plan,
including  contingency planning and timeline.  Part I and Part II of Form BD-Y2K

<PAGE>
were also  required to be filed with the SEC by April 30,  1999 and  included an
update for PCIS's Year 2000 planning as of March 15, 1999.  PCIS has  identified
three  mission  critical  systems  within its  operations.  These three  mission
critical  systems  include:  1)  clearing  brokerage  service,   client  account
statement  production  and client  account  maintenance;  2)  investment  market
services  including  stock  and  bond  quote  information  as well  as  newswire
informational  service; and 3) the internal personal computer Local Area Network
("LAN") system.  The two vendors which provide the clearing  brokerage  services
and the investment market services have upgraded to Year 2000 certified software
which PCIS  installed  during the first quarter of calendar  1999. The contracts
signed with both  vendors  include  Year 2000  compliance  assurances.  Industry
related  testing has begun,  and PCIS  testing will begin once  installation  is
completed.  The LAN  networks  are also being  replaced  with  software  that is
assured to be Year 2000 compliant. Virtually all the personal computer equipment
was replaced as a result of the new specification  requirements  dictated by the
clearing  brokerage and  investment  market  service  vendors,  and is Year 2000
compliant certified.  PCIS is a member of the National Association of Securities
Dealers,  Inc.  (the  "NASD") and as such is required to report to the NASD on a
regular basis.  This reporting process is done  electronically  through software
that the NASD provides.  PCIS has been informed by the NASD that the software is
Year 2000 compliant.

Risks of Year 2000

     While  the  Company  has  received  assurances  from  such  vendors  as  to
compliance,  such assurances are not guarantees and may not be  enforceable,  or
often limit the warrantor's  liability or excluded  liability for  consequential
damages. The Company's existing older contracts with such vendors do not include
Year  2000  certifications  or  warranties.  Thus,  in the event  such  vendors'
products and/or services are not Year 2000 compliant,  the Company's recourse in
the event of such  failure may be limited.  If the  required  modifications  and
conversions are not made, or are not completed on a timely basis,  the Year 2000
Issue could have a material  impact on the operations of the Company.  There can
be no assurance that potential systems interruptions or unanticipated


                                       21
<PAGE>
additional  expense  incurred  to obtain Year 2000  compliance  would not have a
material adverse effect on the Company's business,  financial condition, results
of operations and business prospects. Nevertheless, the Company does not believe
that the cost of  addressing  the Year 2000 issues  will be a material  event or
uncertainty  that  would  cause  reported   financial   information  not  to  be
necessarily indicative of future operating results or financial conditions,  nor
does it believe that the costs or the  consequences  of  incomplete  or untimely
resolution  of its  Year  2000  issues  represent  a  known  material  event  or
uncertainty that is reasonably likely to affect its future financial results, or
cause its reported  financial  information  not to be necessarily  indicative of
future operating results or future financial condition.

Contingency Plans

     The Company's Year 2000 Action Plan included its own company-wide Year 2000
contingency plan. Individual  contingency plans concerning specific software and
hardware issues and operational  plans for continuing  operations were completed
for a  substantial  majority  of its  mission  critical  hardware  and  software
applications as of December 31, 1998, with the remainder  completed by March 31,
1999. The Year 2000 Project Team is reviewing substantially all mission critical
test plans and contingency plans to ensure the  reasonableness of the plans. The
Company's  contingency  plans  also  include  plans  which  address  operational
policies and procedures in the event of data  processing,  electric power supply
and/or  telephone   service  failures   associated  with  the  Year  2000.  Such
contingency  plans  provide,  to the best of the Company's  ability,  documented
actions to allow the Company to maintain and/or resume normal  operations in the
event of the failure of mission critical and critical  applications.  Such plans
identify participants,  processes and equipment that will be necessary to permit
the Company to continue  operations on a limited  basis.  Such plans may include
providing off-line system  processing,  back-up electrical and telephone systems
and other methods to ensure the Company's ability to continue to operate.

Costs of Year 2000

     The costs of  modifications  to the existing  software are being  primarily
absorbed by the third party vendors.  However,  the Company  recognizes that the
need exists to purchase new hardware and software. Based upon current estimates,
the Company has  identified  approximately  $649,000 in total  costs,  including
hardware, software, and other items, expected to be or already incurred in order
to complete the Year 2000 project.  The Company  expended  substantially  all of
this  amount  during  fiscal  1999.  Expenditures  for  software  are  typically
depreciated  over three years while  expenditures  for  hardware  are  typically
depreciated  over five  years.  Of the  estimated  $649,000  in total  Year 2000
expenditures,  $585,000 is associated  with the replacement of systems that were
not Year 2000 compliant,  but would have been replaced anyway as a result of the
Company's  aggressive  Strategic  Technology  Plan which is designed to maintain
competitiveness  within the  industry  and to  increase  the  efficiency  of the
Company's  operations.  The  remaining  $64,000 will be expensed as incurred for
matters directly related to the Year 2000 issue,  including promotional material
for consumer and employee  awareness and replacement of non-compliant  Year 2000
software and hardware.
<PAGE>
FORWARD LOOKING STATEMENTS

     In  this  Report,   the  Company  has  included  certain  "forward  looking
statements"  concerning the future operations of the Company. It is management's
desire  to  take  advantage  of the  "safe  harbor"  provisions  of the  Private
Securities  Litigation  Reform Act of 1995.  This  statement  is for the express
purpose of  availing  the  Company of the  protections  of such safe harbor with
respect to all  "forward  looking  statements"  contained  in this  Report.  The
Company has used "forward  looking  statements" to describe the future plans and
strategies  including  management's  expectations  of the  Company's  Year  2000
readiness and future financial results.  Management's ability to predict results
or the effect of future plans and strategy is inherently uncertain. Factors that
could affect  results  include  interest rate trends,  competition,  the general
economic climate in Chester County, the mid-Atlantic region and the country as a
whole, loan delinquency  rates,  changes in federal and state  regulation,  Year
2000 uncertainties discussed previously and other uncertainties described in the
Company's  filings with the  Securities and Exchange  Commission,  including its
Form 10K for the year ended June 30, 1999. These factors should be considered in
evaluating the "forward  looking  statements",  and undue reliance should not be
placed on such statements.


OTHER INFORMATION

Description of Stock

     The holders of the Common Stock of the Holding  Company  possess  exclusive
voting  rights in the  corporation.  Each  holder  of shares of Common  Stock is
entitled to one vote for each share  held,  in  accordance  with the charter and
bylaws,  including  voting on the election of  directors.  Of the 10.00  million
shares of Common Stock  authorized by the Holding  Company,  6.29 million shares
remain unissued. In addition, none of the 5.00 million shares of Preferred Stock
authorized has been issued.

Dividend Policy

     The Board of Directors of Chester Valley  Bancorp Inc.  intends to continue
the policy of paying  dividends when the directors deem it prudent to do so. The
Board of Directors  will  consider

                                       22
<PAGE>
payment of dividends on a quarterly  basis,  after giving  consideration  to the
level of the profit for the prior quarter and other relevant aspects.  On August
18,  1999,  the Board of Directors  of the Holding  Company  declared a $.09 per
share cash dividend and a 5% stock  dividend  based on the financial  results of
the quarter ended June 30, 1999.  The cash dividend will be calculated on shares
held before the issuance of the stock  dividend.  During fiscal 1999,  1998, and
1997 the Holding Company paid a total of $1.15 million, $1.23 million, and $1.06
million,  respectively,  in cash dividends and a 5% stock dividend in each year.
Cash dividends from the Holding  Company are primarily  dependent upon dividends
paid  to it  by  First  Financial,  which,  in  turn,  are  subject  to  certain
restrictions  established by federal  regulators and Pennsylvania law. (See Note
10 to Notes to Consolidated Financial Statements.)

Market Information

     As of  August 1,  1999,  the  Holding  Company's  Common  Stock was held by
approximately  2,000  shareholders,  including  shares held in nominee name. Any
broker or any NASDAQ  member can be contacted  for the latest  quotations of the
Holding Company's Common Stock. Upon the  reorganization  into a holding company
structure  in May 1990,  the  stock of the  Holding  Company  was  approved  for
inclusion in NASDAQ's  National  Market  System.  The Holding  Company's  NASDAQ
symbol is "CVAL".  The transfer  agent for the stock is American  Stock Transfer
and Trust Company,  New York, New York.  During fiscal 1999 and 1998 the Holding
Company paid  dividends of $.31 and $.30 per share,  respectively,  adjusted for
stock dividends and stock splits during those periods.

     The  following  table  sets forth the high and low  closing  prices for the
periods described.  For comparability  purposes,  the closing prices shown below
have been  adjusted  to reflect the 5% stock  dividends  paid in fiscal 1999 and
1998.

<TABLE>
<CAPTION>



Fiscal 1999                        Low                  High
--------------------------------------------------------------------------------
<S>                         <C>                   <C>
     First Quarter          $     17.33           $     20.24
     Second Quarter               17.33                 20.33
     Third Quarter                18.25                 19.50
     Fourth Quarter               16.25                 18.50

Fiscal 1998                        Low                  High
--------------------------------------------------------------------------------

     First Quarter          $     12.25           $     14.60
     Second Quarter               13.49                 18.57
     Third Quarter                18.41                 23.49
     Fourth Quarter               20.16                 22.22


</TABLE>
<PAGE>
Recent Accounting Pronouncements

     In February  1998,  the FASB issued SFAS No. 132,  "Employer's  Disclosures
About  Pensions  and Other  Postretirement  Benefits."  This  statement  revises
employers'  disclosures about pension and other postretirement benefit plans. It
does not change the  measurement or recognition of those plans.  It standardizes
the disclosure  requirements for pensions and other  postretirement  benefits to
the  extent  practicable,  requires  additional  information  on  changes in the
benefit  obligations  and  fair  values  of plan  assets  that  will  facilitate
financial  analysis,  and eliminates  certain  disclosures that are no longer as
useful as they were when "FASB  Statements  No. 87,  Employers'  Accounting  for
Pensions,  No. 88,  Employers'  Accounting for Settlements  and  Curtailments of
Defined  Benefit  Pension  Plans  and for  Termination  Benefits,  and No.  106,
Employers'  Accounting for  Postretirement  Benefits Other Than  Pensions," were
issued.  This statement requires changes in disclosures and would not affect the
financial  condition,  equity or  operating  results  of the  Corporation.  This
statement is effective for fiscal years beginning after December 15, 1997.

     In June 1998 the FASB  issued  SFAS No.  133,  "Accounting  for  Derivative
Instruments and Hedging  Activities." This statement (as amended by SFAS No. 137
in June,  1999)  establishes  accounting and reporting  standards for derivative
instruments,   including  certain  derivative   instruments  embedded  in  other
contracts, (collectively referred to as derivatives) and for hedging activities.
It  requires  that an entity  recognize  all  derivatives  as  either  assets or
liabilities in the statement of financial position and measure those instruments
at fair value.  The  accounting  for  changes in the fair value of a  derivative
depends on the intended use of the derivative and the resulting designation.  If
certain conditions are met, a derivative may be specifically designated as (a) a
hedge of the  exposure  to changes in the fair  value of a  recognized  asset or
liability or an  unrecognized  firm  commitment,  (b) a hedge of the exposure to
variable  cash  flows of a  forecasted  transaction,  or (c) a hedge of  certain
foreign  currency  exposures.  SFAS No. 133, as amended,  is  effective  for all
fiscal quarters of fiscal years beginning after June 15, 2000.  Earlier adoption
is permitted.  The Company has not yet  determined  the impact,  if any, of this
statement,  including  its  provisions  for the potential  reclassifications  of
investments securities, on operations, financial condition or equity.



                                       23
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements Of Financial Condition
                                                                            At June 30,
                                                                 --------------------------------
                                                                      1999                1998
                                                                 -------------      -------------
<S>                                                              <C>                <C>
Assets
     Cash in banks                                               $   5,193,447      $   4,043,627
     Interest-bearing deposits                                      13,408,911         11,861,301
     Trading account securities                                      9,221,027         20,351,747
     Investment securities available for sale                      109,599,940         38,302,791
     Investment securities held to maturity (fair value -
         June 30, 1999, $7,816,320
         June 30, 1998, $15,672,486)                                 7,801,383         15,600,347
     Loans receivable, less allowance for loan
         losses of $3,650,893 and $3,413,830 at
         June 30, 1999 and 1998, respectively                      291,387,858        273,127,856
     Loans held for sale                                                  --            1,101,071
     Accrued interest receivable                                     2,460,823          2,486,224
     Property and equipment - net                                    8,199,882          7,093,850
     Other assets                                                    3,884,333          3,043,102
                                                                 -------------      -------------
         Total Assets                                            $ 451,157,604      $ 377,011,916
                                                                 =============      =============
Liabilities and Stockholders' Equity
     Liabilities:
       Deposits                                                  $ 359,513,516      $ 298,191,412
       Securities sold under agreements to repurchase                     --              144,417
       Advance payments by borrowers for taxes and insurance         3,055,229          2,962,637
       Employee Stock Ownership Plan ("ESOP") debt                        --              146,618
       Federal Home Loan Bank advances                              50,375,002         40,935,822
       Other borrowings                                                653,061            708,409
       Accrued interest payable                                      1,573,007            968,544
       Other liabilities                                             2,135,280          1,105,214
                                                                 -------------      -------------
         Total Liabilities                                         417,305,095        345,163,073

     Commitments and contingencies (Note 8)

     Stockholders' Equity:                                                --                 --
     Preferred stock - $1.00 par value; 5,000,000 shares
         authorized; none issued
     Common stock - $1.00 par value; 10,000,000 shares
         authorized; 3,707,460 and
         3,552,458 shares issued at
         June 30, 1999 and June 30, 1998, respectively               3,707,460          3,552,458
     Additional paid-in capital                                     17,903,651         14,383,521
     Common stock acquired by ESOP                                        --             (146,618)
     Retained earnings - partially restricted                       13,794,043         13,767,573
     Accumulated other comprehensive (loss) income                  (1,552,645)           291,909
                                                                 -------------      -------------
         Total Stockholders' Equity                                 33,852,509         31,848,843
                                                                 -------------      -------------

         Total Liabilities and Stockholders' Equity              $ 451,157,604      $ 377,011,916
                                                                 =============      =============
</TABLE>
                                       24
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements Of Operations

                                                                             Year Ended June 30,
                                                             ------------------------------------------------
                                                                  1999              1998              1997
                                                             ------------      ------------      ------------
Interest Income:
<S>                                                          <C>               <C>               <C>
     Loans                                                   $ 22,772,277      $ 22,190,864      $ 20,388,526
     Mortgage-backed securities                                   981,906           530,425           227,293
     Interest-bearing deposits                                    717,474           253,558           280,490
     Investment securities:
         Taxable                                                3,512,158         1,857,376         1,104,410
         Non-taxable                                            1,401,577           920,792           620,703
                                                             ------------      ------------      ------------

         Total interest income                                 29,385,392        25,753,015        22,621,422
                                                             ------------      ------------      ------------

Interest Expense:
     Deposits                                                  12,702,540        11,467,998        10,285,725
     Securities sold under agreements to repurchase                 8,356             7,636            51,801
     Short-term borrowings                                        999,857           971,431           386,958
     Long-term borrowings                                       1,970,833           961,952           782,218
                                                             ------------      ------------      ------------

         Total interest expense                                15,681,586        13,409,017        11,506,702
                                                             ------------      ------------      ------------

Net interest income                                            13,703,806        12,343,998        11,114,720
Provision for loan losses                                         390,000           605,672           523,413
                                                             ------------      ------------      ------------

Net interest income after provision for loan losses            13,313,806        11,738,326        10,591,307
                                                             ------------      ------------      ------------

Other Income:
     Investment services income, net                            3,257,647         2,797,436         2,309,032
     Service charges and fees                                   1,471,192         1,116,876           977,145
     Gain on trading account securities                           171,496           337,509            15,682
     Gain on sale of assets available for sale                    110,977           166,240           161,303
     Other                                                        185,532           199,508           185,621
                                                             ------------      ------------      ------------

         Total other income                                     5,196,844         4,617,569         3,648,783
                                                             ------------      ------------      ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                          <C>               <C>               <C>
Operating Expenses:
     Salaries and employee benefits                             6,953,188         5,914,592         5,282,068
     Occupancy                                                  1,108,823         1,060,628           993,530
     Furniture and equipment                                      967,245           825,228           645,403
     Data processing                                              739,725           722,479           605,149
     SAIF special assessment                                         --                --           1,386,516
     Deposit insurance premiums                                   175,487           160,994           309,689
     Other                                                      2,786,101         2,959,189         2,023,193
                                                             ------------      ------------      ------------

         Total operating expenses                              12,730,569        11,643,110        11,245,548
                                                             ------------      ------------      ------------

Income before income taxes                                      5,780,081         4,712,785         2,994,542
Income tax expense                                              1,567,580         1,086,755           757,434
                                                             ------------      ------------      ------------
         Net income                                          $  4,212,501      $  3,626,030      $  2,237,108
                                                             ============      ============      ============

Earnings per common share(*):
     Basic                                                   $       1.14      $       1.00      $       0.62
     Diluted                                                 $       1.13      $       0.98      $       0.62

Weighted average number of shares outstanding(*):
     Basic                                                      3,682,104         3,632,624         3,600,693
     Diluted                                                    3,720,631         3,682,358         3,619,618

Other Comprehensive Income, Net of Tax:
     Net income                                              $  4,212,501      $  3,626,030      $  2,237,108
     Net unrealized holding gains (losses) on securities
        available for sale during the period                   (1,784,750)          400,068           203,194
     Less reclassification adjustment for gains included
        in net income                                             (59,804)         (110,873)         (103,258)
                                                             ------------      ------------      ------------

         Comprehensive Income                                $  2,367,947      $  3,915,225      $  2,337,044
                                                             ============      ============      ============
</TABLE>

                                       25
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Changes in Stockholders' Equity

                                                               Common      Retained       Accumulated
                                            Additional         Stock       Earnings          Other                         Total
                               Common          Paid-in        Acquired     Partially     Comprehensive    Treasury      Treasury
                                Stock          Capital         by ESOP    Restricted         Income         Stock         Equity
------------------------------------------------------------------------------------------------------------------------------------
<S>                        <C>             <C>               <C>          <C>              <C>          <C>         <C>
Balance at
     June 30, 1996         $    3,361,854  $  10,322,860     $ (510,740)  $13,883,220      $ (97,222)   $ (193,473) $  26,766,499
Net income                                                                  2,237,108                                   2,237,108
Cash dividends paid                                                        (1,061,628)                                 (1,061,628)
Principal payments
     on ESOP debt                                               177,250                                                   177,250
Issuance of stock
     dividend                      77,731      1,438,024                   (1,515,755)                                         --
Cash payment for
     fractional shares                            (6,140)                      (9,787)                                    (15,927)
Stock options exercised                           78,958                                                   258,083        337,041
Common stock issued                   586          4,213                                                    85,382         90,181
Common stock repurchased             (351)        (2,849)                                                 (348,679)      (351,879)
Change in unrealized gain
     (loss) on securities
     available for sale                                                                       99,936                       99,936
------------------------------------------------------------------------------------------------------------------------------------
Balance at
     June 30, 1997              3,439,820     11,835,066       (333,490)   13,533,158          2,714      (198,687)    28,278,581
Net income                                                                  3,626,030                                   3,626,030
Cash dividends paid                                                        (1,229,256)                                 (1,229,256)
Principal payments
     on ESOP debt                                               186,872                                                   186,872
Issuance of stock
     dividend                     102,606      2,052,120                   (2,154,726)                                         --
Cash payment for
     fractional shares                                                         (7,633)                                     (7,633)
Stock options exercised            15,167        268,232                                                   156,703        440,102
Common stock issued                 6,811        325,769                                                   207,283        539,863
Common stock repurchased          (11,946)       (97,666)                                                 (165,299)      (274,911)
Change in unrealized gain
     (loss) on securities
     available for sale                                                                      289,195                      289,195
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                        <C>             <C>               <C>          <C>              <C>          <C>         <C>
Balance at
     June 30, 1998              3,552,458     14,383,521       (146,618)   13,767,573        291,909            --     31,848,843
Net income                                                                  4,212,501                                   4,212,501
Cash dividends paid                                                        (1,153,622)                                 (1,153,622)
Principal payments
     on ESOP debt                                               146,618                                                   146,618
Issuance of stock
     dividend                     116,034      2,900,850                   (3,016,884)                                         --
Cash payment for
     fractional shares                                                        (15,525)                                    (15,525)
Stock options exercised            11,468        132,333                                                    23,800        167,601
Common stock issued                27,500        486,947                                                                  514,447
Common stock repurchased                                                                                   (23,800)       (23,800)
Change in unrealized gain
     (loss) on securities
     available for sale                                                                   (1,844,554)                  (1,844,554)
Balance at
------------------------------------------------------------------------------------------------------------------------------------
     June 30, 1999            $ 3,707,460   $ 17,903,651   $         --   $13,794,043   $ (1,552,645)  $        --    $33,852,509
===================================================================================================================================
</TABLE>
                                       26

<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements Of Cash Flows


                                                                                              Year Ended June 30,
                                                                                1999                 1998                1997
------------------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
<S>                                                                     <C>                  <C>                 <C>
Net income                                                              $     4,212,501      $    3,626,030      $     2,237,108
Add (deduct) items not affecting cash flows from operating activities:
  Depreciation                                                                  878,957             725,434              584,337
  Provision for loan losses                                                     390,000             605,672              523,413
  Gain on trading account securities                                           (171,496)           (337,509)             (15,682)
  Gain on sale of securities available for sale                                 (90,612)           (167,989)            (156,451)
  Loss (gain) on sale of loans held for sale                                    (20,365)              1,749               (2,445)
  Loss (gain) on sale of real estate owned                                           --                  --               (2,407)
  Amortization of deferred loan fees, discounts and premiums                   (753,969)           (586,088)            (530,806)
  Decrease (increase) in trading account securities                          11,302,216         (19,762,661)             106,902
  Decrease (increase) in accrued interest receivable                             25,401            (375,638)            (489,124)
  (Increase) in other assets                                                   (841,231)           (406,987)            (661,282)
  Increase (decrease) in other liabilities                                    1,030,066            (235,232)             259,335
  Increase in accrued interest payable                                          604,463             180,285              134,901
------------------------------------------------------------------------------------------------------------------------------------
Net cash flows from (used in) operating activities                           16,565,931         (16,732,934)           1,987,799
------------------------------------------------------------------------------------------------------------------------------------

Cash flows from investment activities:
  Capital expenditures                                                       (1,984,989)         (2,348,274)          (1,691,371)
  Net increase in loans and loans held for sale                             (17,256,008)        (23,344,652)         (34,923,474)
  Proceeds from sale of loans held for sale                                   1,601,138           6,023,850            1,257,348
  Proceeds from real estate owned                                                    --                  --              571,834
  Purchase of investment securities                                          (2,397,400)         (1,073,100)            (115,645)
  Proceeds from maturities, payments and calls of investment securities      10,187,442           4,929,360            5,237,914
  Purchase of securities available for sale                                (108,846,839)        (51,554,985)        (124,134,642)
  Proceeds from sales and calls of securities available for sale             34,684,943          41,504,286          103,031,326
------------------------------------------------------------------------------------------------------------------------------------
Net cash flows used in investment activities                                (84,011,713)        (25,863,515)         (50,766,710)
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                                     <C>                  <C>                 <C>
Cash flows from financing activities:
  Net increase in deposits before interest credited                          50,464,992          27,568,357           23,847,975
  Interest credited to deposits                                              10,857,112           9,872,744            8,696,779
  (Decrease) increase in securities sold under agreements to repurchase        (144,417)            132,331               12,086
  Proceeds from FHLB advances                                                13,599,000          32,024,225           29,914,500
  Repayments of FHLB advances                                                (4,159,820)        (21,286,650)         (13,688,530)
  Increase in other borrowings                                                  (55,348)            207,655              157,268
  Net decrease in advance payments by borrowers for taxes and insurance          92,592             (36,044)             (16,413)
  Cash dividends on common stock                                             (1,153,622)         (1,229,256)          (1,061,628)
  Repayments of principal on ESOP debt                                         (146,618)           (186,872)            (177,250)
  Common stock repurchased                                                      (23,800)           (274,911)            (351,879)
  Payment for fractional shares                                                 (15,525)             (7,633)             (15,927)
  Stock options exercised                                                       167,601             440,102              337,041
  Reduction of common stock acquired by ESOP                                    146,618             186,872              177,250
  Common stock issued                                                           514,447             539,863               90,181
------------------------------------------------------------------------------------------------------------------------------------
Net cash flows from financing activities                                     70,143,212          47,950,783           47,921,453
------------------------------------------------------------------------------------------------------------------------------------

  Net increase (decrease) in cash                                             2,697,430           5,354,334             (857,458)
  Cash and cash equivalents:
   Beginning of period                                                       15,904,928          10,550,594           11,408,052
------------------------------------------------------------------------------------------------------------------------------------

   End of period                                                        $    18,602,358      $   15,904,928      $    10,550,594
====================================================================================================================================
Supplemental disclosures:
  Cash payments during the year for:
   Taxes                                                                $     1,553,000      $    1,379,000      $       757,000
====================================================================================================================================
   Interest                                                             $    15,077,123      $   13,228,732      $    11,371,801
====================================================================================================================================
Non-cash items:
  Acquisition of real estate in settlement of loans                     $            --      $           --      $       448,427
====================================================================================================================================
  Stock dividend issued                                                 $     3,016,884      $    2,154,726      $     1,515,755
====================================================================================================================================
  Net change in unrealized gain (loss) on investment securities
      available for sale                                               $     (3,004,159)     $      471,001      $       151,727
====================================================================================================================================
  Tax effect on unrealized gain (loss) on investment securities
      available for sale                                               $     (1,159,605)     $      181,806      $        51,791

====================================================================================================================================

</TABLE>


                                       27

<PAGE>
Notes To Consolidated Financial Statements

1 - Summary of Significant Accounting Policies

Business

      Chester  Valley  Bancorp Inc. (the "Holding  Company") is a unitary thrift
holding  company,  incorporated  in the  Commonwealth  of Pennsylvania in August
1989.  The business of Chester  Valley  Bancorp Inc. and its  subsidiaries  (the
"Company") consists of the operations of First Financial Bank ("First Financial"
or the "Bank"),  a  Pennsylvania-chartered  stock  savings and loan  association
founded in 1922 and Philadelphia Corporation for Investment Services ("PCIS"), a
full-service  investment  advisory  and  securities  brokerage  firm.  The  Bank
provides a wide range of banking services to individual and corporate  customers
through its branch banks in Chester  County,  Pennsylvania.  All of the branches
are  full-service  and offer  commercial  and retail  products.  These  products
include checking accounts (non-interest and interest-bearing), savings accounts,
certificates  of  deposit,   commercial  and  installment   loans,  real  estate
mortgages,  and home equity loans. The Bank also offers ancillary  services that
complement  these  products.  The Bank is  subject  to  competition  from  other
financial  institutions  and other  companies that provide  financial  services.
Philadelphia   Corporation   for   Investment   Services  is   registered  as  a
broker/dealer  in all 50 states and Washington,  DC and it is also registered as
an Investment  Advisor with the Securities  Exchange  Commission.  PCIS provides
many  additional  services,   including  self-directed  and  managed  retirement
accounts,  safekeeping,  daily sweep money market  funds,  portfolio  and estate
valuations,  life insurance and annuities,  and margin accounts,  to individuals
and smaller  corporate  accounts.  The Company is subject to the  regulations of
certain federal and state agencies and undergoes periodic  examinations by those
regulatory authorities.

Principles of Consolidation and Presentation

      The accompanying consolidated financial statements include the accounts of
Chester Valley Bancorp Inc. and its wholly-owned  subsidiaries,  First Financial
Bank and Philadelphia  Corporation for Investment Services.  The accounts of the
Bank include its wholly-owned  subsidiary, D & S Service Corp., which owns D & F
Projects  and  Wildman   Projects,   Inc.,   both  of  which  are   wholly-owned
subsidiaries.  All material  inter-company  balances and transactions  have been
eliminated  in  consolidation.   Prior  period  amounts  are  reclassified  when
necessary to conform with the current year's presentation.

      The Company follows  accounting  principles and reporting  practices which
are in accordance with generally accepted  accounting  principles.  In preparing
the consolidated financial statements,  management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of
the date of the  statement of financial  condition and revenues and expenses for
the period.  Actual  results could differ  significantly  from those  estimates.
Material  estimates that are particularly  susceptible to significant  change in
the near-term  relate to the  determination of the allowance for loan losses and
the valuation of real estate owned.  Management  believes that the allowance for
loan  losses  and the  valuation  of real  estate  owned are  adequate.  Various
regulatory  agencies,   as  an  integral  part  of  their  examination  process,
periodically  review the Company's  allowance for loan losses and  valuations of
real estate owned. Such agencies may require the Bank to recognize  additions to
the allowance or adjustments to the valuations  based on their  judgments  about
information available to them at the time of their examination.
<PAGE>
Cash and Cash Equivalents

      For the purpose of the  consolidated  statements  of cash flows,  cash and
cash  equivalents  include cash and  interest-bearing  deposits with an original
maturity of generally three months or less.

Securities

      The Company divides its securities portfolio into three segments: (a) held
to maturity;  (b) available for sale; and (c) trading.  At the time of purchase,
the Company makes a determination on whether or not it will hold the investments
to maturity,  based upon an evaluation of the  probability  of the occurrence of
future events.  Securities classified as held to maturity category are accounted
for at amortized  cost  adjusted for  amortization  of premiums and accretion of
discounts  using a  method  which  approximates  a  level  yield,  based  on the
Company's  intent and ability to hold the  securities  until  maturity.  Trading
securities  are  accounted  for at quoted  market  prices with changes in market
values thereof being recorded as gain or loss in the income statement. All other
securities,  including  investment  securities which the Company believes may be
involved in interest rate risk, liquidity,  or other asset-liability  management
decisions which might reasonably  result in such securities not being held until
maturity,  are included in the available for sale category and are accounted for
at fair value with unrealized gains or losses,  net of taxes, being reflected as
adjustments  to equity.  If investment  securities are sold, any gain or loss is
determined by specific identification and reflected in the operating results for
the period in which the sale occurs.

Allowance for Loan Losses

      The allowance  for loan losses is  maintained  at a level that  management
considers  adequate to provide for potential  losses based upon an evaluation of
known and inherent risks in the loan portfolio. Management's evaluation is based
upon,  among other  things,  delinquency  trends,  the volume of  non-performing
loans, prior loss experience of the portfolio,  current economic  conditions and
other  relevant  factors.  Although  management  believes  it has  used the best
information available to it in making such determinations,  and that the present
allowance for loan losses is adequate,  future  adjustments to the allowance may
be necessary,  and net income may be adversely affected if circumstances  differ
substantially  from  the  assumptions  used  in  determining  the  level  of the
allowance.  In addition,  various  regulatory  agencies,  as an integral part of
their  examination  process,  periodically  review the  Company's  allowance for
losses on loans. Such agencies may require the Company to recognize additions to
the allowance based on their judgments  about  information  available to them at
the time of their  examination.  The allowance is increased by the provision for
loan  losses  which is  charged to  operations.  Loan  losses,  other than those
incurred on loans held for sale, are charged  directly against the allowance and
recoveries on previously charged-off loans are generally added to the allowance.



                                       28
<PAGE>
1 - Summary of Significant Accounting Policies (Continued)


      For purposes of applying the measurement  criteria for impaired loans, the
Company excludes large groups of smaller-balance  homogeneous  loans,  primarily
consisting  of  residential  real  estate  loans and  consumer  loans as well as
commercial  business loans with balances of less than  $100,000.  For applicable
loans,  the Company  evaluates the need for impairment  recognition  when a loan
becomes  non-accrual  or earlier if,  based on  management's  assessment  of the
relevant facts and circumstances, it is probable that the Company will be unable
to collect all proceeds under the contractual  terms of the loan  agreement.  At
and during the  twelve-month  periods ended June 30, 1999,  1998,  and 1997, the
recorded investment in impaired loans was not material. The Company's policy for
the  recognition  of  interest  income  on  impaired  loans  is the  same as for
non-accrual  loans  discussed  below.  Impaired  loans are  charged off when the
Company  determines  that  foreclosure  is  probable  and the fair  value of the
collateral is less than the recorded investment of the impaired loan.

Loans, Loan Origination Fees and Uncollected Interest

      Loans  (other  than  loans  held for  sale)  are  recorded  at cost net of
unearned  discounts,  deferred  fees and  allowances.  Discounts and premiums on
purchased  loans are  amortized  using the  interest  method over the  remaining
contractual  life  of the  portfolio,  adjusted  for  actual  prepayments.  Loan
origination fees and certain direct origination costs are deferred and amortized
over the life of the related loans as an adjustment of the yield on the loans.

      Uncollected  interest  receivable on loans is accrued to income as earned.
Non-accrual  loans are loans on which the accrual of interest has ceased because
the collection of principal or interest payments is determined to be doubtful by
management.  It is the  policy of the  Company  to  discontinue  the  accrual of
interest  when  principal or interest  payments are  delinquent  90 days or more
(unless the loan principal and interest are determined by management to be fully
secured  and in  the  process  of  collection),  or  earlier,  if the  financial
condition of the borrower raises significant  concern with regard to the ability
of the borrower to service the debt in  accordance  with the current loan terms.
Interest  income on such loans is not accrued until the financial  condition and
payment record of the borrower once again demonstrate the ability to service the
debt.

Loans Held for Sale

      The Company periodically  identifies certain loans as held for sale at the
time  of  their  origination.  These  loans  consist  primarily  of  fixed-rate,
single-family   residential   mortgage   loans   which  meet  the   underwriting
characteristics of certain government-sponsored  enterprises (conforming loans).
Loans held for sale are  carried at the lower of  aggregate  cost or fair value,
with any resulting loss included in other income for the period.  Realized gains
or losses are included in other income for the period.

Real Estate Owned ("REO")

      Real estate acquired through foreclosure or by deed in lieu of foreclosure
is  classified  as REO.  REO is carried at the lower of cost (lesser of carrying
value of the loan or fair value of the property at date of  acquisition) or fair
value less selling expenses. Costs relating to the development or improvement of
the property are capitalized; holding costs are charged to expense.
<PAGE>
Property and Equipment

      Property and equipment are stated at cost, less accumulated  depreciation.
Depreciation  is computed  using the  straight-line  method  over the  estimated
useful lives of the assets.  When assets are retired or  otherwise  disposed of,
the cost and related accumulated depreciation are removed from the accounts. The
cost of  maintenance  and repairs is charged to expense as incurred and renewals
and betterments are capitalized.

Deferred Income Taxes

      The  Company  accounts  for  income  taxes  under the asset and  liability
method.  Deferred tax assets and  liabilities  are recognized for the future tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases and operating loss and tax credit  carryforwards.  Deferred tax assets and
liabilities  are measured  using enacted tax rates  expected to apply to taxable
income in the years in which  those  temporary  differences  are  expected to be
recovered  or settled.  The effect on deferred tax assets and  liabilities  of a
change in tax rates is  recognized  in income in the period  that  includes  the
enactment date.

Earnings Per Share

      The dilutive  effect of stock options is excluded from basic  earnings per
share but included in the  computation of diluted  earnings per share.  Earnings
per share and weighted average shares  outstanding have been adjusted to reflect
the  effects of the 5% stock  dividends  paid in  September  1998 and 1997,  the
three-for-two  stock split  effected in the form of a dividend in December  1998
and the  five-for-four  stock split  effected in the form of a dividend in March
1997.

      The  following  table  sets  forth the  computation  of basic and  diluted
earnings per share (in thousands, except per share data):

<PAGE>
<TABLE>
<CAPTION>


                                                       Year Ended June 30,
                                                 1999         1998        1997
                                                ------       ------       ------
<S>                                             <C>          <C>          <C>
Numerator:
  Net income                                    $4,213       $3,626       $2,237
                                                ======       ======       ======

Denominator:
  Denominator for basic
  earnings per share-weighted
  average shares                                 3,682        3,632        3,601

Effect of dilutive securities:
  Employee stock options                            39           50           19
                                                ------       ------       ------

Denominator for diluted earnings
  per share-adjusted weighted
  average shares and
  assumed exercise                               3,721        3,682        3,620
                                                ------       ------       ------

Basic earnings per share                        $ 1.14       $ 1.00       $ 0.62
                                                ------       ------       ------

Diluted earnings per share                      $ 1.13       $ 0.98       $ 0.62
                                                ======       ======       ======

</TABLE>
                                       29
<PAGE>
2 - Investment Securities
-------------------------

Investment securities are summarized as follows:
<TABLE>
<CAPTION>
                                                                            At June 30,
                          ----------------------------------------------------------------------------------------------------------
                                                   1999                                                   1998
                          ------------------------------------------------------  --------------------------------------------------
                                             Gross       Gross        Estimated                    Gross       Gross     Estimated
                           Amortized     Unrealized    Unrealized       Fair       Amortized    Unrealized  Unrealized      Fair
                              Cost           Gains       Losses         Value         Cost         Gains       Losses       Value
                          ------------     --------   -----------   ------------  -----------    --------    --------   ------------
<S>                       <C>              <C>        <C>           <C>           <C>            <C>         <C>       <C>
Held to Maturity:
   U.S. Government
   agency notes
   and bonds              $       --       $   --     $      --     $       --    $ 4,500,000    $  8,630    $ (4,737)  $  4,503,893
   Federal Home
   Loan Bank of
   Pittsburgh stock          3,781,100         --            --        3,781,100    2,583,100        --          --        2,583,100
   Municipal notes
   and bonds                 3,229,291       11,229        (2,013)     3,238,507    7,394,443      47,512     (12,021)     7,429,934
   Mortgage-Backed
   securities                  790,960        9,061        (4,146)       795,875    1,122,772      32,052        --        1,154,824
   Other                            32          806          --              838           32         703        --              735
                          ------------     --------   -----------   ------------  -----------    --------    --------   ------------

Total held to maturity    $  7,801,383     $ 21,096   $    (6,159)  $  7,816,320  $15,600,347    $ 88,897    $(16,758)  $ 15,672,486
                          ============     ========   ===========   ============  ===========    ========    ========   ============

Available for sale:
   U.S. Government
   agency notes
   and bonds              $ 48,286,934     $  3,504   $(1,048,381)  $ 47,242,057  $12,298,216   $   7,334    $ (9,959)  $ 12,295,591
   Municipal notes
   and bonds                27,975,449      492,308    (1,089,658)    27,378,099   15,072,678     136,492     (36,458)    15,172,712
   Mortgage-Backed
   securities               16,231,504      103,505      (518,476)    15,816,533    9,228,956     202,553        --        9,431,509
   Equity securities         1,450,316      110,733      (224,500)     1,336,549      886,230     222,522     (12,419)     1,096,333
   Debt securities          15,848,975       18,906      (438,008)    15,429,873      313,223        --        (6,577)       306,646
   Other                     2,335,500       61,329          --        2,396,829         --          --          --             --
                          ------------     --------   -----------   ------------  -----------    --------    --------   ------------

Total available for sale  $112,128,678     $790,285   $(3,319,023)  $109,599,940  $37,799,303    $568,901    $(65,413)  $ 38,302,791
                          ============     ========   ===========   ============  ===========    ========    ========   ============

</TABLE>
<PAGE>
The amortized cost and estimated fair value of investment securities at June 30,
1999, by contractual maturity, are shown below.
<TABLE>
<CAPTION>


                                                              Estimated         Weighted
                                              Amortized          Fair           Average
                                                 Cost            Value            Yield
                                             ------------     ------------        ----
<S>                                          <C>              <C>                 <C>
Held to Maturity:
  Due in one year or less                    $  1,839,873     $  1,848,119        7.22%
  Due after one year through five years         1,087,374        1,087,730        6.27%
  Due after five years through ten years             --               --            --
  Due after ten years                           1,093,004        1,098,533        6.96%
  No stated maturity                            3,781,132        3,781,938        0.00%
                                             ------------     ------------        ----

   Total held to maturity                     $  7,801,383     $  7,816,320        3.55%
                                             ============     ============        ====

Available for Sale:
  Due in one year or less                    $    339,808     $    341,366        5.52%
  Due after one year through five years        25,804,961       25,528,208        6.28%
  Due after five years through ten years       27,982,555       27,312,878        6.36%
  Due after ten years                          56,551,038       55,080,939        6.97%
  No stated maturity                            1,450,316        1,336,549        0.00%
                                             ------------     ------------        ----

  Total available for sale                   $112,128,678     $109,599,940        6.56%
                                             ============     ============        ====

</TABLE>
      Expected  maturities  may  differ  from  contractual   maturities  because
borrowers  generally  have  the  right  to call or  prepay  obligations  without
prepayment  penalties.  The weighted average yield,  based on amortized cost, is
presented on a taxable  equivalent  basis using the Federal marginal rate of 34%
adjusted for the 20% interest expense disallowance (27.2%).  Proceeds from sales
and calls of investment  securities available for sale during fiscal 1999, 1998,
and 1997 were $34.68 million, $41.50 million, and $103.03 million, respectively.
Gains of  $94,247,  $171,135,  and  $162,284  in fiscal  1999,  1998,  and 1997,
respectively,  and gross  losses of $3,635,  $3,146,  and $5,833 in fiscal 1999,
1998, and 1997,  respectively,  were realized on those sales.  Accrued  interest
receivable on  investments  amounted to $1,035,000 and $703,800 at June 30, 1999
and  1998,  respectively.  At  June  30,  1999,  $53.23  million  of  investment
securities  were pledged as collateral for Municipal  savings  deposits with the
Bank, for  securities  sold under  agreements to repurchase,  and for the Bank's
treasury, tax and loan account with the Federal Reserve.


                                       30
<PAGE>
3 - Loans Receivable
--------------------

Loans receivable are summarized as follows:
<TABLE>
<CAPTION>
                                                          At June 30,
                                             ----------------------------------
                                                  1999                  1998
                                             -------------        -------------
<S>                                          <C>                  <C>
First mortgage loans:
   Residential                               $ 157,341,833        $ 155,627,889
   Construction-residential                     14,469,204           13,501,993
   Land acquisition and
      development                                5,075,535            6,529,495
   Commercial                                   55,197,514           41,001,909
   Construction-commercial                       9,793,986           10,614,137
Commercial business                             14,708,274           11,437,190
Consumer                                        51,416,108           51,828,965
                                             -------------        -------------

Total loans                                    308,002,454          290,541,578

Less:
   Undisbursed loan proceeds:
      Construction-residential                  (8,711,869)          (7,915,210)
      Construction-commercial                   (2,681,071)          (4,464,863)
   Deferred loan fees                           (1,570,763)          (1,619,819)
   Allowance for loan losses                    (3,650,893)          (3,413,830)
                                             -------------        -------------
Net loans                                    $ 291,387,858        $ 273,127,856
                                             =============        =============
</TABLE>

      Accrued interest receivable on loans amounted to $1,353,118 and $1,387,721
at June 30, 1999 and 1998,  respectively.  At June 30, 1999, 1998, and 1997, the
Company serviced loans for others of $26.74 million,  $28.87 million, and $24.89
million, respectively.

      The  aggregate  amount  of  loans  by the  Company  to its  directors  and
executive  officers was  $4,294,400  and  $3,789,600  at June 30, 1999 and 1998,
respectively.  These  loans  were made in the  ordinary  course of  business  at
substantially the same terms and conditions as those with other borrowers.

An analysis of the activity of these loans follows:

                    Balance at July 1, 1998             $3,789,600
                         New Loans                         784,700
                         Repayments                        279,900
                                                        ----------
                    Balance at June 30, 1999            $4,294,400
                                                        ==========

      The total amount of non-performing loans was $933,000,  $1.25 million, and
$748,000 at June 30, 1999, 1998 and 1997, respectively.  If these non-performing
loans had been  current in  accordance  with their  original  terms and had been
outstanding  throughout the period,  the gross interest  income for fiscal 1999,
1998,  and 1997 that  would  have been  recorded  for these  loans was  $75,200,
$111,800, and $71,400. Interest income on these non-performing loans included in
income for fiscal  1999,  1998,  and 1997  amounted  to  $26,100,  $57,560,  and
$35,200,  respectively. At June 30, 1999, and throughout fiscal 1999, there were
no loans for which impairment was required to be recognized.
<PAGE>

The activity in the allowance for loan losses was as follows:
<TABLE>
<CAPTION>


                                              Year Ended June 30,
                                  ---------------------------------------------
                                      1999             1998              1997
                                  -----------      -----------      -----------
<S>                               <C>              <C>              <C>
Balance, beginning of period      $ 3,413,830      $ 2,855,003      $ 2,667,104
Provision for loan losses             390,000          605,672          523,413
Loans charged off                    (177,287)         (81,411)        (377,923)
Recoveries                             24,350           34,566           42,409
                                  -----------      -----------      -----------
Balance, end of period            $ 3,650,893      $ 3,413,830      $ 2,855,003
                                  ===========      ===========      ===========
</TABLE>



                                       31
<PAGE>
4 - Property and Equipment
--------------------------

Property and equipment by major classification are summarized as follows:
<TABLE>
<CAPTION>
                                                         At June 30,
                                               -------------------------------
                                                    1999                1998
                                               ------------        ------------
<S>                                            <C>                 <C>
Land                                           $  1,263,160        $  1,096,715
Buildings and Improvements                        6,237,529           5,878,644
Furniture, Fixtures and Equipment                 4,212,324           3,980,286
                                               ------------        ------------
Total                                            11,713,013          10,955,645
Less Accumulated Depreciation                    (3,513,131)         (3,861,795)
                                               ------------        ------------
Net                                            $  8,199,882        $  7,093,850
                                               ============        ============
</TABLE>

5 - Deposits
------------

Deposits consist of the following major classifications:
<TABLE>
<CAPTION>

                                                                                At June 30,
                                       ------------------------------------------------------------------------------------------
                                                        1999                                                1998
                                       --------------------------------------               -------------------------------------
                                       Weighted                       Percent               Weighted                      Percent
                                       Average                          of                  Average                          of
                                        Rate           Amount          Total                 Rate          Amount          Total
                                        ----        ------------       -----                 ----       ------------       -----
<S>                                     <C>         <C>                  <C>                <C>         <C>                 <C>
Non-interest bearing                    --  %       $33,007,163          9.2%                --  %      $32,361,445         10.9%
                                        ----        ------------       -----                 ----       ------------       -----

Interest-bearing:
     NOW checking accounts               1.47        36,011,370         10.0                  1.55        31,769,680        10.6
     Money market deposit accounts       3.82        47,464,015         13.2                  3.77        35,609,735        11.9
     Savings accounts                    1.87        29,033,243          8.1                  2.39        27,163,761         9.1
     Certificates less than $100,000     5.36       137,558,712         38.2                  5.64       133,801,531        44.9
     Certificates $100,000 and greater   5.07        76,439,013         21.3                  5.73        37,485,260        12.6
                                        ----        ------------       -----                 ----       ------------       -----

     Total interest-bearing              4.33       326,506,353         90.8                  4.58       265,829,967        89.1
                                        ----        ------------       -----                 ----       ------------       -----

Total deposits                          3.93%       $359,513,516       100.0%                4.08%      $298,191,412       100.0%
                                        ====        ============       =====                 ====       ============       =====
</TABLE>
While the certificates  frequently are renewed at maturity rather than paid out,
a  summary  of  certificates  by  contractual  maturity  at June 30,  1999 is as
follows:

<PAGE>


                   Years Ending June 30,                        Amount
                   ---------------------                        ------

                          2000                            $    131,158,982
                          2001                                  22,518,824
                          2002                                  48,751,670
                          2003                                   4,511,095
                          2004                                   4,714,419
                   2005 and thereafter                           2,342,735
                                                          ----------------
                                                          $    213,997,725
                                                          ================

Interest expense on deposits is comprised of the following:
<TABLE>
<CAPTION>
                                                   Year Ended June 30,
                                      -------------------------------------------
                                         1999            1998            1997
                                      -----------     -----------     -----------

<S>                                  <C>             <C>             <C>
NOW Checking Accounts                $   491,758     $   530,069     $   461,510
Money Market Deposit Accounts          1,281,591       1,048,056         875,546
Savings Accounts                         569,724         694,306         719,751
Certificates Less than $100,000        7,627,071       7,079,114       6,639,858
Certificates $100,000 & Greater        2,732,396       2,116,453       1,589,060
                                     -----------     -----------     -----------
Total                                $12,702,540     $11,467,998     $10,285,725
                                     ===========     ===========     ===========

</TABLE>
                                       32
<PAGE>
6 - Advances From Federal Home Loan Bank of Pittsburgh ("FHLBP")

         Under terms of its  collateral  agreement  with the FHLBP,  the Company
maintains  otherwise  unencumbered  qualifying  assets  (principally  1-4-family
residential  mortgage loans and U.S. Government & Agency notes and bonds) in the
amount of at least as much as its advances from the FHLBP.  The Company's  FHLBP
stock is also pledged to secure these advances.  At June 30, 1999 and 1998, such
advances mature as follows:
<TABLE>
<CAPTION>


                            Weighted                                                             Weighted
                             Average            June 30,                                          Average            June 30,
Due by June 30,               Rate                1999               Due by June 30,               Rate               1998
----------------------------------------------------------           ---------------------------------------------------------
<S>                           <C>           <C>                      <C>                            <C>          <C>
2000                          6.42%         $    3,241,147           1999                           5.63%        $   3,284,594

2001                          5.76               5,526,281           2000                           6.33             3,517,372

2002                          5.75               4,316,269           2001                           5.76             5,526,281

2003                          5.86               7,351,822           2002                           5.75             4,316,268

2004                          5.79                 701,878           2003                           5.86             7,351,822

Thereafter                    5.31              29,237,605           Thereafter                     5.36            16,939,485
----------------------------------------------------------           ---------------------------------------------------------

Total FHLBP advances          5.55%         $   50,375,002           Total FHLBP advances           5.65%        $  40,935,822
==========================================================           =========================================================
</TABLE>

      Included  in the table  above at June 30,  1999 are  convertible  advances
whereby  the FHLBP has the option at a  predetermined  time to convert the fixed
interest rate to an adjustable rate tied to LIBOR.  The Bank then has the option
to prepay these advances if the FHLBP converts the interest rate. These advances
are included in the year in which they mature.

      The Company has  available  an  annually  renewable  line of credit not to
exceed 10% of the Company's maximum borrowing  capacity which was $13.13 million
at the time the  commitment  was executed.  The Company,  from time to time, has
used the line of  credit to meet  liquidity  needs.  At June 30,  1999 and 1998,
there were no balances outstanding on the line of credit.

<PAGE>
7 - Income Taxes
----------------

The provision (and benefit) for income taxes is summarized as follows:
<TABLE>
<CAPTION>
                                                      Year Ended June 30,
                                    -------------------------------------------------------
                                          1999                1998                  1997
                                    --------------      ---------------      --------------
<S>                                 <C>                 <C>                  <C>
Current:
   Federal                          $    1,388,865      $     1,177,200      $      753,774
   State                                   304,209               75,547             144,145
Deferred - Federal                        (125,494)            (165,992)           (140,485)
                                    --------------      ---------------      --------------
Total                               $    1,567,580      $     1,086,755      $      757,434
                                    ==============      ===============      ==============
</TABLE>

The  provision  for income  taxes  differs  from the  statutory  rate due to the
following:

<TABLE>
<CAPTION>
                                                            Year Ended June 30,
                                          ------------------------------------------------------
                                                1999                1998                1997
                                          --------------      ---------------      --------------

<S>                                       <C>                 <C>                  <C>
Federal income taxes at statutory rate    $    1,965,228      $     1,602,347      $    1,018,144
Tax exempt interest, net                        (509,621)            (367,469)           (222,162)
State taxes net of Federal benefit               201,372               50,454              95,136
Non-taxable S Corp income                             --             (212,735)           (105,892)
Non-deductible merger expenses                        --               71,484                  --
Other, net                                       (89,399)             (57,326)            (27,792)
                                          --------------      ---------------      --------------
Total                                     $    1,567,580      $     1,086,755      $      757,434
                                          ==============      ===============      ==============
</TABLE>


                                       33
<PAGE>
7 - Income Taxes (Continued)
----------------------------

The deferred tax assets and liabilities at June 30, 1999 and 1998,  consisted of
the following:
<TABLE>
<CAPTION>
                                                                                             At June 30,
                                                                                     ------------------------
                                                                                         1999          1998
                                                                                     ----------     ----------
Deferred tax assets:
<S>                                                                                  <C>            <C>
   Allowance for loan losses                                                         $1,241,304     $1,135,202
   Deferred loan fees                                                                    51,656         75,841
   Uncollected interest                                                                  52,172         35,172
   Net unrealized loss on securities available for sale                                 976,093           --
   Other                                                                                 22,524         40,393
                                                                                     ----------     ----------
Gross deferred tax assets                                                             2,343,749      1,286,608

Deferred tax liabilities:
   Tax bad debt reserves                                                                138,297        165,957
   Loan discount                                                                        115,732        129,586
   Depreciation                                                                          12,065         14,998
   Net unrealized gain on securities available for sale                                    --          183,512
                                                                                     ----------     ----------
Gross deferred tax liabilities                                                          266,094        494,053
                                                                                     ----------     ----------
Net deferred tax assets                                                              $2,077,655     $  792,555
                                                                                     ==========     ==========
</TABLE>

 The  realizability  of  deferred  tax  assets is  dependent  upon a variety  of
factors,  including the  generation of future taxable  income,  the existence of
taxes paid and  recoverable,  the reversal of deferred tax  liabilities  and tax
planning strategies.  Based upon these and other factors, management believes it
is more  likely  than not that the Company  will  realize the  benefits of these
deferred tax assets.

      For periods  ending prior to May 29, 1998,  no provision has been made for
income taxes for PCIS since PCIS had elected to be taxed under the provisions of
Subchapter S of the Internal  Revenue Code and similar state  provisions.  Under
these provisions, PCIS does not pay income taxes on its taxable income. Instead,
the former  stockholders of PCIS are liable for individual income taxes based on
their respective  shares of PCIS's taxable income.  As a result of all of PCIS's
stock being purchased by Chester Valley Bancorp Inc. on May 29, 1998, PCIS is no
longer eligible to be taxed under the provisions of Subchapter S of the Internal
Revenue Code.

      The Small Business Job  Protection Act of 1996 ("Act"),  enacted on August
20, 1996,  provides for the repeal of the tax bad debt deduction  computed under
the percentage of taxable income method. The repeal of the use of this method is
effective for tax years beginning  after December 31, 1995.  Prior to the change
in law, the Bank had qualified under the provisions of the Internal Revenue Code
which  permitted  it to deduct from taxable  income an  allowance  for bad debts
based on 8% of taxable income.
<PAGE>
      Upon  repeal,  the Bank is  required  to  recapture  into  income,  over a
six-year  period,  the portion of its tax bad debt reserves that exceed its base
year reserves (i.e., tax reserves for tax years beginning before 1988). The base
year tax  reserves,  which may be subject  to  recapture  if the Bank  ceases to
qualify as a bank for federal income tax purposes,  are restricted  with respect
to certain  distributions.  The Bank's  total tax bad debt  reserves at June 30,
1999, are  approximately  $3.04 million,  of which $2.64 million  represents the
base year  amount  and  $407,000  is  subject  to  recapture.  The  Company  has
previously  recorded a deferred tax  liability for the excess base year reserves
to be  recaptured;  therefore,  this  recapture will not impact the statement of
operations.


8 - Commitments And Contingencies
---------------------------------

Financial instruments with off-balance-sheet risk:

      The Company is a party to  financial  instruments  with  off-balance-sheet
risk in the  normal  course  of  business  to meet  the  financing  needs of its
customers  and to reduce its own  exposure to  fluctuations  in interest  rates.
Commitments to originate loans amounted to $7.77 million as of June 30, 1999, of
which $6.08 million was for variable-rate  loans. The balance of the commitments
represent  fixed-rate  loans with interest rates ranging from 6.38% to 9.00%. At
June 30, 1999,  the Company had  undisbursed  loans in process for  construction
loans of $11.39 million and $17.10 million in  undisbursed  lines of credit.  In
addition,  the Company has issued $40,000 in commercial  letters of credit fully
secured by deposit accounts or real estate.

Concentration of credit risk:

      The Company is  principally a local lender and therefore has a significant
concentration  of  residential  and  commercial  real  estate  loans  as well as
consumer and  commercial  business loans to borrowers who reside in and/or which
are   collateralized  by  real  estate  located  primarily  in  Chester  County,
Pennsylvania.  The  ability of such  customers  to honor  these  obligations  is
dependent,  to varying  degrees,  on the overall  economic  performance  of this
diversified region.

Other commitments:

      The Bank and PCIS have entered into operating  leases for several of their
branch and office  facilities.  The minimum  annual rental  payments under these
leases at June 30, 1999, are as follows:

            Year                          Minimum Lease Payments
            ----                          ----------------------

            2000                               $407,112
            2001                                295,862
            2002                                289,601
            2003                                264,360
            2004                                237,919
            2005 and after                      922,081

      Rent expense under these leases for each of the years ended June 30, 1999,
1998, and 1997, was $536,694, $521,175, and $499,213, respectively.


                                       34
<PAGE>
9 - Affiliated Transactions
---------------------------

      During  fiscal 1999,  1998 and 1997 the Company  entered into an agreement
with one of the  directors of the Company to perform  reviews of  appraisals  in
connection  with the origination of residential  mortgage  loans.  During fiscal
1997 the Company entered into an agreement with another  director of the Company
for the  improvement  and renovation of certain of the Bank's  offices,  for the
performance of routine maintenance and repair at all of the Bank's offices,  and
for the inspection  services  performed in connection  with loans.  The Board of
Directors approved the agreements with both directors,  one a general contractor
and the other an architect.  The total paid was $4,625 in 1999,  $5,060 in 1998,
and $26,638 in 1997.

      Two  directors  of the Company are a principal  and a partner in law firms
which the Company  retained during fiscal years 1999,  1998, and 1997, and which
the Company  intends to retain  during  fiscal year 2000.  During the year ended
December 31, 1998, the amount of legal fees paid to the law firms did not exceed
5% of those firms' gross revenues for such fiscal year.

      A director of the Company is an executive officer,  director and principal
of an  investment  banking  firm  from  which  the  Company  purchased  and sold
investment  securities  during fiscal years 1999,  1998,  and 1997.  The Company
intends to continue the business  relationship during fiscal 2000. The purchases
of investment  securities  from the investment  banking firm amounted to $343.29
million,  $321.78 million, and $119.11 million and the sales amounted to $240.74
million, $272.34 million, and $103.03 million during fiscal years 1999, 1998 and
1997, respectively. These securities were purchased and sold at market rates and
on terms no more favorable to the investment  banking firm than those obtainable
on an arm's-length  basis. The investment  banking firm receives income on these
transactions as a result of a spread differential (on a net yield basis). During
the year ended  December 31, 1998, the amount of income earned by the investment
banking firm related to the investment  activity with the Company did not exceed
5% of that firm's gross revenues for such fiscal year.

      A  director  of the  Company  is a director  and  president  of a mortgage
banking firm from which the Company purchased single-family residential mortgage
loans  during  fiscal years 1999,  1998,  and 1997,  and the Company  intends to
continue the business  relationship during fiscal year 2000. During fiscal 1999,
1998 and 1997, the purchases of loans from the mortgage banking firm amounted to
$4.73 million,  $7.28 million,  and $16.32 million,  respectively,  with fees of
$50,471, $93,314, and $135,061,  respectively,  paid to the firm. The loans were
purchased  at market rates and terms no more  favorable to the mortgage  banking
firm than those obtainable on an arm's-length basis.

      During  fiscal 1999,  1998 and 1997 the Company  entered into an agreement
with one of the  directors of the Company to perform  reviews of  appraisals  in
connection  with the origination of residential  mortgage  loans.  During fiscal
1997 the Company entered into an agreement with another  director of the Company
for the  improvement  and renovation of certain of the Bank's  offices,  for the
performance of routine maintenance and repair at all of the Bank's offices,  and
for the inspection  services  performed in connection  with loans.  The Board of
Directors approved the agreements with both directors,  one a general contractor
and the other an architect.  The total paid was $4,625 in 1999,  $5,060 in 1998,
and $26,638 in 1997.
<PAGE>
      Two  directors  of the Company are a principal  and a partner in law firms
which the Company  retained during fiscal years 1999,  1998, and 1997, and which
the Company  intends to retain  during  fiscal year 2000.  During the year ended
December 31, 1998, the amount of legal fees paid to the law firms did not exceed
5% of those firms' gross revenues for such fiscal year.

      A director of the Company is an executive officer,  director and principal
of an  investment  banking  firm  from  which  the  Company  purchased  and sold
investment  securities  during fiscal years 1999,  1998,  and 1997.  The Company
intends to continue the business  relationship during fiscal 2000. The purchases
of investment  securities  from the investment  banking firm amounted to $343.29
million,  $321.78 million, and $119.11 million and the sales amounted to $240.74
million, $272.34 million, and $103.03 million during fiscal years 1999, 1998 and
1997, respectively. These securities were purchased and sold at market rates and
on terms no more favorable to the investment  banking firm than those obtainable
on an arm's-length  basis. The investment  banking firm receives income on these
transactions as a result of a spread differential (on a net yield basis). During
the year ended  December 31, 1998, the amount of income earned by the investment
banking firm related to the investment  activity with the Company did not exceed
5% of that firm's gross revenues for such fiscal year.

      A  director  of the  Company  is a director  and  president  of a mortgage
banking firm from which the Company purchased single-family residential mortgage
loans  during  fiscal years 1999,  1998,  and 1997,  and the Company  intends to
continue the business  relationship during fiscal year 2000. During fiscal 1999,
1998 and 1997, the purchases of loans from the mortgage banking firm amounted to
$4.73 million,  $7.28 million,  and $16.32 million,  respectively,  with fees of
$50,471, $93,314, and $135,061,  respectively,  paid to the firm. The loans were
purchased  at market rates and terms no more  favorable to the mortgage  banking
firm than those obtainable on an arm's-length basis.

10 - Stockholders' Equity
-------------------------
      At the time of its conversion from a state-chartered mutual association to
a state-chartered capital stock association,  the Bank established a liquidation
account in an amount equal to $4,845,000 at September 30, 1986. The  liquidation
account is maintained for the benefit of eligible  savings  account  holders who
have  maintained  their  savings  account in the Bank after  conversion.  In the
unlikely event of a complete  liquidation,  each eligible savings account holder
will be  entitled to receive a  liquidation  distribution  from the  liquidation
account,  in the amount of the then  current  adjusted  sub-account  balance for
savings  accounts held,  before any  liquidation  distribution  may be made with
respect to capital stock.

      Except for the  repurchase  of stock and payment of dividends by the Bank,
the  existence  of  the  liquidation  account  does  not  restrict  the  use  or
application  of such  net  worth.  The  Company  may not  declare  or pay a cash
dividend on, or repurchase,  any of its common stock if the effect thereof would
cause the net worth of the Bank to be reduced  below either the amount  required
for the liquidation account or the net worth requirements  imposed by the Office
of Thrift Supervision.

      In September  1998 and 1997 the Company paid 5% common stock  dividends in
the amounts of 116,034 and 102,606  shares,  respectively,  from  authorized but
unissued  common  stock  with  fractional  shares  paid in the form of cash.  In
December 1998 the Company paid a three-for-two  stock split effected in the form
of a dividend in the amount of 1,224,980 shares,  with fractional shares paid in
the form of cash.


                                       35
<PAGE>
11 - Regulatory Capital
-----------------------

      The  Bank  is   subject  to  various   regulatory   capital   requirements
administered  by the federal banking  agencies.  Failure to meet minimum capital
requirements   can  initiate   certain   mandatory   and   possibly   additional
discretionary  actions by regulators  that, if  undertaken,  could have a direct
material  effect on the Company's  and the Bank's  financial  statements.  Under
capital adequacy  guidelines and the regulatory  framework for prompt corrective
action, the Bank must meet specific capital guidelines that involve quantitative
measures of the Bank's assets, liabilities,  and certain off balance sheet items
as calculated under regulatory accounting practices.  The Bank's capital amounts
and classification  are also subject to qualitative  judgments by the regulators
about components, risk weightings, and other factors.

      Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain  minimum amounts and ratios (set forth in the table
below)  of  total  and  Tier  1  capital  (as  defined  in the  regulations)  to
risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average
assets (as defined).  At June 30, 1999 and 1998 the Bank was in compliance  with
all  such  requirements  and is  deemed  a  "well-capitalized"  institution  for
regulatory purposes.  There are no conditions or events since June 30, 1999 that
management believes have changed the institution's category.

      The Bank's actual capital amounts and ratios are presented in the table as
follows (dollars in thousands):
<TABLE>
<CAPTION>
                                                                                                           To Be Well Capitalized
                                                                                    For Capital            Under Prompt Corrective
                                                         Actual                  Adequacy Purposes            Action Provisions
----------------------------------------------------------------------------------------------------------------------------------
                                                Amount            Ratio       Amount           Ratio       Amount            Ratio
----------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>               <C>         <C>               <C>        <C>              <C>
As of June 30, 1999:

   Total Capital (to Risk Weighted Assets)     $  34,005         13.05%      $ 20,848          8.00%      $  26,060        10.00%

   Tier 1 Capital (to Risk Weighted Assets)    $  30,768         11.81%      $ 10,424          4.00%      $  15,636         6.00%

   Tier 1 Capital (to Average Assets)          $  30,768          6.86%      $ 17,934          4.00%      $  22,418         5.00%

As of June 30, 1998:

   Total Capital (to Risk Weighted Assets)     $  31,328         14.18%      $ 17,678          8.00%      $  22,098        10.00%

   Tier 1 Capital (to Risk Weighted Assets)    $  28,560         12.92%      $  8,839          4.00%      $  13,259         6.00%

   Tier 1 Capital (to Average Assets)          $  28,560          7.64%      $ 14,945          4.00%      $  18,682         5.00%


</TABLE>
<PAGE>
12 - Fair Value Of Financial Instruments
----------------------------------------

      The  Company  is  required  to  disclose  estimated  fair  values  for its
financial instruments.

Limitations

      Estimates of fair value are made at a specific point in time,  based upon,
where  available,  relevant  market prices and  information  about the financial
instrument.  Such  estimates  do not include any premium or discount  that could
result from  offering for sale at one time the  Company's  entire  holdings of a
particular  financial  instrument.  For a  substantial  portion of the Company's
financial  instruments,  no quoted market exists.  Therefore,  estimates of fair
value are  necessarily  based on a number of  significant  assumptions  (many of
which  involve  events  outside the  control of  management).  Such  assumptions
include assessments of current economic  conditions,  perceived risks associated
with these financial  instruments and their  counterparts,  future expected loss
experience  and  other  factors.  Given  the  uncertainties   surrounding  these
assumptions,  the reported fair values  represent  estimates only, and therefore
cannot  be  compared  to the  historical  accounting  model.  Use  of  different
assumptions or  methodologies  are likely to result in  significantly  different
fair value estimates.

      The estimated fair values presented neither include nor give effect to the
values  associated with the Company's  banking,  or other  businesses,  existing
customer relationships,  extensive branch banking network, property,  equipment,
goodwill or certain tax  implications  related to the  realization of unrealized
gains or losses.  Also, the fair value of non-interest  bearing demand deposits,
savings  and NOW  accounts  and money  market  deposit  accounts is equal to the
carrying amount because these deposits have no stated maturity. This approach to
estimating  fair value  excludes the  significant  benefit that results from the
low-cost  funding  provided  by  such  deposit   liabilities,   as  compared  to
alternative sources of funding.  As a consequence,  the fair value of individual
assets  and  liabilities  may not be  reflective  of the fair value of a banking
organization that is a going concern.

      The following methods and assumptions were used to estimate the fair value
of each major classification of financial instruments at June 30, 1999 and 1998:

Cash and cash equivalents:

      Current carrying amounts approximate estimated fair value.


                                       36
<PAGE>
12 - Fair Value Of Financial Instruments (Continued)
----------------------------------------------------

Trading account securities, securities held to maturity and securities available
for sale:

      Current quoted market prices were used to determine fair value.

Loans:

      Fair values were estimated for portfolios of loans with similar  financial
characteristics.  Loans were  segregated  by type,  and each loan  category  was
further  segmented by fixed- and  adjustable-rate  interest terms. The estimated
fair value of the segregated portfolios was calculated by discounting cash flows
through the  estimated  maturity and  prepayment  speeds  while using  estimated
market  discount rates that  reflected  credit and interest risk inherent in the
loans.  The estimate of the maturities  and  prepayment  speeds was based on the
Company's historical  experience.  Cash flows were discounted using market rates
adjusted for the various types of loan portfolios.

Deposits:

      The fair value of deposits with no stated  maturity,  such as non-interest
bearing deposits,  savings, NOW and money market accounts, as well as repurchase
agreements,  is  equal to the  amount  payable  on  demand.  The  fair  value of
certificates of deposit was estimated by discounting the contractual  cash flows
using current  market rates  offered in the  Company's  market area for deposits
with comparable terms and maturities.

Borrowed Funds:

      The fair value of borrowings was estimated using rates currently available
to the Company for debt with similar terms and remaining maturities.

Commitments to extend credit:

      The majority of the Company's  commitments  to extend credit carry current
market  interest  rates if converted  to loans.  Because  commitments  to extend
credit are generally  unassignable  by either the Company or the borrower,  they
only have  value to the  Company  and the  borrower.  The  estimated  fair value
approximates the recorded deferred fee amounts.

The  carrying  amounts  and  estimated  fair values of the  Company's  financial
instruments were as follows (in thousands):
<PAGE>
<TABLE>
<CAPTION>
                                                                                    At June 30,
                                               ----------------------------------------------------------------------------------
                                                              1999                                            1998
                                               ----------------------------------                --------------------------------
                                                Carrying               Estimated                  Carrying              Estimated
                                                 Amount                Fair Value                   Amount             Fair Value
                                               ---------               ---------                 ---------             ----------
Financial Assets:
<S>                                            <C>                     <C>                       <C>                    <C>
Cash and cash equivalents                      $  18,602               $  18,602                 $  15,905              $  15,905
Trading account securities                         9,221                   9,221                    20,352                 20,352
Investment securities available for sale         109,600                 109,600                    38,303                 38,303
Investment securities                              7,801                   7,816                    15,600                 15,672
Loans receivable, net                            291,388                 289,314                   274,229                275,243
Accrued interest receivable                        2,461                   2,461                     2,486                  2,486
                                               ---------               ---------                 ---------             ----------
   Total financial assets                      $ 439,073               $ 437,014                 $ 366,875             $  367,961
                                               =========               =========                 =========             ==========

Financial Liabilities:
Deposits and repos                             $ 359,514               $ 360,037                 $ 298,336              $ 299,123
Borrowed funds                                    51,028                  51,322                    41,791                 41,893
Accrued interest payable                           1,573                   1,573                       969                    969

                                               ---------               ---------                 ---------             ----------
   Total financial liabilities                 $ 412,115               $ 412,932                 $ 341,096              $ 341,985
                                               =========               =========                 =========             ==========

</TABLE>


13 - Employee Benefits
----------------------

Stock Compensation Program

      The Company has two stock option plans (collectively,  the "Plans") -- the
1993 Plan and the 1997 Plan. An aggregate of 179,477 and 236,250  authorized but
unissued  shares  of  common  stock of the  Company,  adjusted  for the 5% stock
dividends  in  September  1998,  1997,  1996 and  1995,  and the  December  1998
three-for-two  stock split and the March 1997  five-for-four  stock split,  were
reserved for issuance under the 1993 Plan and the 1997 Plan, respectively. As of
June 30, 1999 there were 155,908 and 33,762  options  granted under the 1993 and
1997  Plans,  respectively.  Under the  Plans,  the  option  price per share for
incentive  options  granted  may not be less than the fair  market  value of the
common  stock on the date of grant.  Options may be granted  under the 1993 Plan
and  the  1997  Plan  during  the  ten-year   periods   ending  2003  and  2007,
respectively,  and options  granted  under the Plans are  exercisable  up to ten
years from the date of grant.  Rights to exercise options under the Plans may be
limited by imposition of vesting schedules at the time the options are granted.


                                       37
<PAGE>
      The  following  table is a summary of option  transactions  since June 30,
1997.  These options and option prices for the years 1997,  1998,  and 1999 have
been adjusted to reflect the stock  dividends in fiscal 1997,  1998 and 1999 and
the stock splits in fiscal 1997 and fiscal 1999:
<TABLE>
<CAPTION>

                                                                           Year Ended June 30,
                                     --------------------------------------------------------------------------------------------
                                              1999                               1998                          1997
                                     ----------------------              ----------------------         ----------------------
                                                   Weighted                           Weighted                        Weighted
                                                    Average                            Average                         Average
                                                  Exercise                           Exercise                         Exercise
                                      Shares        Price                Shares        Price             Shares        Price
                                      ------        -----                ------        -----             ------        -----
<S>                                   <C>         <C>                    <C>          <C>                <C>         <C>
Outstanding at beginning of year      84,182      $   9.08               117,188      $  8.58            138,675     $   7.50
Granted                               97,059          20.40               10,336         14.51            20,734          8.51
Exercised                            (14,810)          8.99              (31,705)         8.60           (29,284)         3.40
Forfeited                             (8,095)         19.10              (11,637)        10.23           (12,937)         8.64
                                    --------                            --------                        --------
Outstanding at end of year           158,336          15.51               84,182          9.08           117,188          8.58
Exercisable at end of year            90,635                              52,989                          46,023
Weighted-average fair value
     of options granted             $   6.75                            $   4.90                        $   2.89
</TABLE>


      At June 30, 1999, the range of exercise  prices was $8.41 - $20.40 and the
weighted average remaining  contractual life of the outstanding  options was 7.6
years.  The  Black-Scholes  option-pricing  model  was  used  to  determine  the
grant-date  fair value of  options.  Significant  assumptions  used in the model
included a weighted  average risk free rate of return of 5.81% in 1999, 6.39% in
1998 and 6.49% in 1997;  expected option life of 6 years for 1999, 1998 and 1997
options; expected stock price volatility of 29.73% for 1999, 27.64% for 1998 and
28.04% in 1997 and expected dividends of 1.82%, 1.51%, and 1.82% for 1999, 1998,
and 1997, respectively.

      The  Company,  as  permitted,  has  elected  not to adopt  the fair  value
accounting provisions of SFAS 123 "Accounting for Stock-based Compensation", and
has instead  continued  to apply APB Opinion 25 and related  Interpretations  in
accounting for plans and provide the required proforma  disclosures of SFAS 123.
Had the grant-date  fair-value  provisions of SFAS 123 been adopted, the Company
would have  recognized  $126,109  in 1999 and  $26,500  in 1998 in  compensation
expense  related to its Option  Plans.  As a result,  proforma net income of the
Company would have been  $4,086,400 in 1999 and  $3,599,500 in 1998 and proforma
diluted earnings per share would have been $1.10 in 1999 and $.98 in 1998.

      The  effects of  proforma  net income and  diluted  earnings  per share of
applying  the  disclosure  requirements  of SFAS  123 in past  years  may not be
representative  of the future proforma  effects on net income and EPS due to the
vesting  provisions  of the options and future  awards that are  available to be
granted.
<PAGE>
Employee Stock Ownership Plan

      The Bank maintains an ESOP for all employees of the Bank with at least one
year of  credited  service.  Benefits  become 20% vested  after  three  years of
service, increasing to 100% after seven years. Forfeitures are reallocated among
remaining  participating  employees.  Vested benefits are generally payable upon
retirement, disability or separation from service.

      The ESOP is subject to the requirements of the Employee  Retirement Income
Security Act of 1974, as amended,  and the  regulations of the Internal  Revenue
Service and the Department of Labor.

      The ESOP is funded by the Bank's  contributions,  and all contributions to
date have been used to pay principal,  interest and other fees  associated  with
the ESOP's loan referred to below. Benefits to participants are normally paid in
whole shares of common stock.

      The ESOP  borrowed  funds to acquire the initial  78,125  shares of common
stock at $5.76 per share,  adjusted for the subsequent  stock splits effected in
the form of dividends.  The ESOP  purchased an additional  101,544 shares of the
common stock at a weighted  average price of $8.69 per share,  also adjusted for
the subsequent  stock splits effected in the form of dividends.  Funds necessary
to purchase such shares were borrowed from an  independent  third-party  lender.
The Company has not guaranteed the debt but anticipates  contributing sufficient
funds  to the ESOP to  enable  it to meet its  debt  service  requirements.  The
outstanding  loan balance has been  reflected as a liability  and a reduction of
stockholders'  equity in the  consolidated  statements  of financial  condition.
Shares  purchased  with such loan  proceeds  are held in a suspense  account for
allocation  among members as the loan is repaid.  Contributions  to the ESOP and
shares  released from the suspense  account are  allocated  among members on the
basis of  compensation  and years of  service.  A total of 57,901,  85,094,  and
27,928, shares were allocated in fiscal 1999, 1998, and 1997, respectively.

      Contributions  by the  Bank to the  ESOP in  fiscal  1999,  1998  and 1997
amounted to $128,609, $173,957, and $181,240,  respectively, and are included in
the accompanying  consolidated statements of operations in salaries and employee
benefits.  Interest expense paid during 1999, 1998, and 1997 by the ESOP for the
loan amounted to $10,568, $19,839, and $34,298, respectively.

      The interest  rate on the ESOP loan is fixed at 7.50% until  maturity with
interest  expense being computed on the unpaid principal  balance.  As principal
payments  are made by the ESOP,  the  corresponding  liability  is  reduced  and
stockholders' equity is increased. Principal payments and cash dividends paid on
the common stock held by the ESOP in fiscal 1999  amounted to  $146,618,  on the
loan which matured on April 1, 1999.

Pension Plan

      The Bank has a noncontributory defined benefit pension plan which is fully
funded through a  multi-employer  investment trust covering  qualified  salaried
employees.  Costs  recognized for the years ended June 30, 1999,  1998 and 1997,
totaled $5,158,  $3,884, and $4,953,  respectively.  Information relative to the
financial status of the Bank's portion of the Plan is not currently available.



                                       38
<PAGE>
14 - Acquisition
----------------

      On May  29,  1998,  the  Company  acquired  Philadelphia  Corporation  for
Investment Services, a full-service investment advisory and securities brokerage
firm.  The  transaction  was  accounted  for as a pooling of  interests  and the
shareholders  of PCIS received  23.4239  shares of Chester  Valley  Bancorp Inc.
stock for each share of PCIS stock.  Approximately  134,000 shares of CVAL stock
were issued in the exchange.

      The results of operations  previously  reported by the separate  companies
and the combined amounts  presented in the accompanying  consolidated  financial
statements are summarized in the Segment Reporting footnote (see footnote 15).

15 - Segment Reporting
----------------------

      The Company has two reportable segments:  First Financial Bank ("FFB") and
Philadelphia Corporation for Investment Services ("PCIS"). FFB operates a branch
bank network with eight  full-service  banking offices and provides deposits and
loan  services to  customers.  Additionally,  FFB offers  trust  services at its
Downingtown  headquarters.  PCIS operates a full service investment advisory and
securities  brokerage  firm  through  two  offices.  Both  segments  operate  in
southeastern Pennsylvania.

      The Company evaluates  performance based on profit or loss from operations
before income taxes not including  nonrecurring  gains and losses.  There are no
material intersegment sales or transfers.

      The Company's  reportable segments have traditionally been two independent
financial  services  institutions.  PCIS was  acquired by the Company on May 29,
1998.  The two segments are managed  separately.  All senior  officers from PCIS
prior to the acquisition have been retained to manage the segment.

      The  following  table  highlights   income  statement  and  balance  sheet
information  for each of the  segments at or for the years ended June 30,  1999,
1998 and 1997 (in thousands):

                               For The Year Ended June 30, 1999
---------------------------------------------------------------
                                    FFB       PCIS       Total
---------------------------------------------------------------
Net interest income              $ 13,633  $     71   $ 13,704
Other income                        2,056     3,141      5,197
Total net income                    3,855       358      4,213
Total assets                      448,901     2,257    451,158
Total interest-bearing deposits    11,971     1,438     13,409
Total trading securities            8,815       406      9,221
==============================================================

                              For The Year Ended June 30, 1998
--------------------------------------------------------------
                                    FFB       PCIS       Total
--------------------------------------------------------------
Net interest income              $ 12,291  $     53   $ 12,344
Other income                        1,851     2,767      4,618
Total net income                    3,196       430      3,626
Total assets                      375,153     1,859    377,012
Total interest-bearing deposits    10,643     1,218     11,861
Total trading securities           19,944       408     20,352
==============================================================
<PAGE>

                              For The Year Ended June 30, 1997
--------------------------------------------------------------
                                    FFB       PCIS       Total
--------------------------------------------------------------
Net interest income              $ 11,066  $     49   $ 11,115
Other income                        1,324     2,325      3,649
Total net income                    1,926       311      2,237
Total assets                      323,673     1,528    325,201
Total interest-bearing deposits     6,844     1,057      7,901
Total trading securities               --       252        252
==============================================================


16 - Summarized Quarterly Financial Data For Fiscal 1999 and 1998 (Unaudited)
----------------------------------------------------------------------------

(Dollars in thousands except per share data)
<TABLE>
<CAPTION>

                                                     1999                                                1998
---------------------------------------------------------------------------------------------------------------------------------
                                  First       Second       Third       Fourth          First      Second        Third      Fourth
                                Quarter      Quarter     Quarter      Quarter        Quarter     Quarter      Quarter     Quarter
---------------------------------------------------------------------------------------------------------------------------------
<S>                            <C>          <C>         <C>          <C>            <C>         <C>          <C>         <C>
Interest income                $  6,990     $  7,172    $  7,354     $  7,869       $  6,310    $  6,377     $  6,404    $  6,662
Interest expense                  3,771        3,783       3,909        4,218          3,267       3,355        3,278       3,509
---------------------------------------------------------------------------------------------------------------------------------
Net interest income               3,219        3,389       3,445        3,651          3,043       3,022        3,126       3,153

Provision for loan losses            45           45          45          255            120         120          201         165
---------------------------------------------------------------------------------------------------------------------------------

Net interest income after
     provision for loan losses    3,174        3,344       3,400        3,396          2,923       2,902        2,925       2,988
Other income                      1,386        1,387       1,170        1,254          1,115       1,004        1,349       1,150
Operating expenses(1)             2,989        3,028       3,263        3,450          2,674       2,659        2,870       3,440
---------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 1,571        1,703       1,307        1,200          1,364       1,247        1,404         698
Income tax expense(1)               472          535         288          273            360         338          346          43
---------------------------------------------------------------------------------------------------------------------------------

Net Income                     $  1,099     $  1,168    $  1,019     $    927       $  1,004    $    909     $  1,058    $    655
=================================================================================================================================

Earnings per common share(2)
     Basic                     $   0.30     $   0.32    $   0.28     $   0.24       $    0.28   $   0.25     $   0.29    $   0.18
=================================================================================================================================
     Diluted                   $   0.30     $   0.31    $   0.27     $   0.25       $    0.27   $   0.25     $   0.29    $   0.17
=================================================================================================================================
</TABLE>
(1)  The fourth quarter of fiscal 1998 includes PCIS  acquisition  costs of $.21
     million in addition to a charitable donation of $.29 million which resulted
     in a $.15 million state tax credit.
(2)  Earnings  per share have been  restated  to reflect  the  effects of the 5%
     stock dividend paid in September 1998 and 1997 and the three-for-two  stock
     split effected in the form of a dividend in December 1998.

                                       39
<PAGE>
17 - Parent Company Financial Information
-----------------------------------------

Financial  information  of Chester  Valley  Bancorp Inc.  (parent  company only)
follows:
<TABLE>
<CAPTION>
Statements of Financial Condition
---------------------------------
                                                             At June 30,
                                                     ---------------------------
                                                         1999           1998
                                                     -----------     -----------
Assets
<S>                                                  <C>             <C>
     On deposit with subsidiaries                    $   782,599     $   375,801
     Securities available for sale                     1,962,797       1,402,979
     Investment in subsidiaries                       31,051,563      30,274,690
     Other assets                                         55,550          25,523
                                                     -----------     -----------
         Total Assets                                $33,852,509     $32,078,993
                                                     ===========     ===========

Liabilities
     ESOP debt                                       $      --       $   146,618
     Other liabilities                                      --            83,532
                                                     -----------     -----------
         Total Liabilities                                  --           230,150

Stockholders' Equity                                  33,852,509      31,848,843
                                                     -----------     -----------
     Total Liabilities and Stockholders' Equity      $33,852,509     $32,078,993
                                                     ===========     ===========

<CAPTION>

Statements of Operations
------------------------
                                                                  Year Ended June 30,
                                                        ----------------------------------------
                                                           1999           1998          1997
                                                        ----------     ----------     ----------
Income
<S>                                                     <C>            <C>            <C>
     Distributed income from subsidiaries               $1,796,652     $2,188,259     $1,049,582
     Interest income                                        98,020         28,490         16,598
     Equity in undistributed income of subsidiaries      2,329,245      1,587,662      1,188,273
                                                        ----------     ----------     ----------
Expense
     Other expense                                          11,416        178,381         17,345
                                                        ----------     ----------     ----------
         Net Income                                     $4,212,501     $3,626,030     $2,237,108
                                                        ==========     ==========     ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of Cash Flows
------------------------
                                                                                      Year Ended June 30,
                                                                        ---------------------------------------------
                                                                            1999             1998              1997
                                                                        -----------      -----------      -----------
Operating activities:
<S>                                                                     <C>              <C>              <C>
     Net income                                                         $ 4,212,501      $ 3,626,030      $ 2,237,108
     Add (deduct) items not affecting cash flows
     from operating activities:
         Equity in undistributed income of subsidiaries                  (2,329,245)      (1,587,662)      (1,188,273)
         Increase in other assets                                           (30,027)         (22,169)            --
         Increase (decrease) in other liabilities                           (83,532)          83,532             --
         Reduction of common stock acquired by ESOP                         146,618          186,872          177,250
                                                                        -----------      -----------      -----------
     Net cash flows from operating activities                             1,916,315        2,286,603        1,226,085
                                                                        -----------      -----------      -----------
Investment activities:
     Purchase of securities available for sale                             (908,446)      (1,402,979)            --
     Proceeds from sales and calls of securities available for sale          99,900             --
                                                                        -----------      -----------      -----------
     Net cash flows used in investment activities                          (808,546)      (1,402,979)            --
                                                                        -----------      -----------      -----------
Financing activities:
     Income tax benefit on exercise of stock options                        (43,454)         (98,270)         (92,246)
     Cash dividends                                                      (1,153,622)      (1,229,256)      (1,061,628)
     Payment for fractional shares                                          (15,525)          (7,633)         (15,927)
     Common stock repurchased                                               (23,800)        (274,911)        (351,879)
     Repayments of principal on ESOP debt                                  (146,618)        (186,872)        (177,250)
     Proceeds from exercise of stock options                                167,601          440,102          337,041
     Proceeds from issuance of common stock                                 514,447          539,863           90,181
                                                                        -----------      -----------      -----------
     Net cash flows used in financing activities                           (700,971)        (816,977)      (1,271,708)
                                                                        -----------      -----------      -----------
Net increase (decrease) in cash                                             406,798           66,647          (45,623)
Cash and cash equivalents:
     Beginning of period                                                    375,801          309,154          354,777
                                                                        -----------      -----------      -----------
     End of period                                                      $   782,599      $   375,801      $   309,154
                                                                        ===========      ===========      ===========
Non-cash items:
     Net unrealized gain (loss) on investment securities
         available for sale, net of taxes                               $(1,844,554)     $   289,195      $    99,936
     Stock dividend issued                                              $ 3,016,884      $ 2,154,726      $ 1,515,755
                                                                        ===========      ===========      ===========

</TABLE>

                                       40
<PAGE>
Independent Auditors' Report

[GRAPHIC-LOGO FOR KPMG]


To the Board of Directors and Stockholders of
      Chester Valley Bancorp Inc:


      We have  audited the  accompanying  consolidated  statements  of financial
condition of Chester  Valley Bancorp Inc. and  subsidiaries  as of June 30, 1999
and 1998,  and the related  consolidated  statements of  operations,  changes in
stockholders'  equity,  and cash  flows for each of the years in the  three-year
period ended June 30, 1999.  These  consolidated  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

      We conducted our audits in accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

      In our opinion,  the consolidated  financial  statements referred to above
present  fairly,  in all material  respects,  the financial  position of Chester
Valley  Bancorp  Inc.  and  subsidiaries  as of June 30, 1999 and 1998,  and the
results  of their  operations  and their cash flows for each of the years in the
three-year  period ended June 30, 1999, in conformity  with  generally  accepted
accounting principles.




/s/KPMG LLP
-----------
KPMG LLP

Philadelphia, Pennsylvania
July 22, 1999



                                       41
<PAGE>

                     [GRAPHIC-PHOTOS OF BOARD OF DIRECTORS]


                                       42
<PAGE>
Directors Serving in the
Same Capacity for Chester Valley Bancorp Inc. and
First Financial Bank:

Anthony J. Biondi
Director, President, and
Chief Operating Officer
of the Company and the Bank

Edward T. Borer
Chairman
Philadelphia Corporation
for Investment Services

Robert J. Bradbury
Co-chairman
Dolphin & Bradbury Incorporated

John J. Cunningham, III, Esquire
Partner
Schnader Harrison Segal & Lewis  LLP

Gerard F. Griesser
President
Trident Financial Group

James E. McErlane, Esquire
Partner
Lamb, Windle & McErlane, PC

Richard L. Radcliff
President and Co-owner (Retired)
Radcliff & Sipe Architectural Firm

Ellen Ann Roberts
Director, Chairman, and
Chief Executive Officer
of the Company and the Bank

Emory S. Todd
Certified Public Accountant

William M. Wright
Retired General Manager
Malcolm Wright Buick Olds, Inc.

Directors on the Board of Philadelphia Corporation for Investment Services:

Philip J. Baldassari
Senior Vice President
<PAGE>
Anthony J. Biondi
Director, President, and
Chief Operating Officer
of the Company and the Bank

Frederick A. Bluefeld
Vice President

Edward T. Borer
Chairman

Robert J. Bradbury
Co-chairman
Dolphin & Bradbury Incorporated

A. Louis Denton
President and Chief Executive Officer
James E. McErlane, Esquire
Partner
Lamb, Windle & McErlane, PC

R. Wayne Raffety
Senior Vice President

Ellen Ann Roberts
Director, Chairman, and
Chief Executive Officer
of the Company and the Bank

Vernon C. Walker
Senior Vice President

Spencer D. Wright, III
Chairman Emeritus

Executive Officers of Chester Valley Bancorp Inc:

Ellen Ann Roberts
Chairman and Chief Executive Officer

Anthony J. Biondi
President and Chief Operating Officer

James E. McErlane, Esquire
Secretary

Colin N. Maropis
Executive Vice President

Executive Officers of
First Financial Bank:

Ellen Ann Roberts
Chairman and Chief Executive Officer
<PAGE>
Anthony J. Biondi
President and Chief Operating Officer

Steven C. Cunningham
Vice President

Kay B. Falkow
Vice President

Edward S. Lawrence
Senior Vice President

Colin N. Maropis
Executive Vice President

David L. Summers
Vice President

Other Officers of
First Financial Bank:

Frank J. Baldassarre
Vice President

C. Ward Braceland
Vice President

Shelley A. Castrinoes
Assistant Vice President

Pamela M. Collins
Secretary
Arlene S. Cunningham
Assistant Vice President
Assistant Secretary

Linda B. Draper
Assistant Vice President

Romaine R. Dunlap
Assistant Vice President

William G. Eads, Jr.
Vice President

Veronica Gilken
Assistant Vice President

Michelle L. Guerrero
Assistant Vice President

Anne S. Johnson
Assistant Vice President

Kelly L. Laurento
Assistant Vice President
<PAGE>
Celeste L. Moore
Assistant Vice President

Cheryl M. Owens
Assistant Vice President

Carol F. Reichard
Assistant Vice President

Paula D. Stevens
Assistant Vice President

Joseph M. Swarr
Assistant Vice President

Phillis D. Weidenhammer
Vice President

Jo Ann Willenbrock
Assistant Vice President

Paige M. Willover
Assistant Vice President

Executive and Administrative Officers of Philadelphia
Corporation for Investment Services:

Edward T. Borer
Chairman

A. Louis Denton
President and Chief Executive Officer

Mary Kay Greenwood
Assistant Vice President and Secretary

Kathleen D. Hartung
Treasurer


                                       43

<PAGE>
First Financial Bank
Advisory Board Members:

Coatesville Advisory Board:
   Milton Allen
   Albert W. Eastburn
   Nicholas J. Fantanarosa, Jr.
   Dr. Louis M. Laurento
   Aleda P. Loughman
   John H. Newton, Jr.

Devon Advisory Board:
   Matthew DiDomenico
   Alan F. Hark
   William T. McDonnell
   Dennis C. Reardon, LL.M.

Exton Advisory Board:
   William E. Augustine
   Raymond H. Carr
   Carl K. Croft, CPA
   Jay G. Fischer
   Kevin Holleran, Esquire
   James Knipe, Sr.

Frazer Advisory Board:
   Timothy O. Fanning
   David M. Frees, III
   Florence D. Hunt
   Albert P. Massey, Jr.
   R. Wayne Raffety
   A. Joseph Rubino

Westtown Advisory Board:
   Wayne W. Grafton
   Charles A. Hackett, CPA
   Marita M. Hutchinson, Esquire
   Conrad E. Muhly, III
   Earl Stoltzfus
   John R. Williams
   George C. Zumbano, Esquire


CORPORATE INFORMATION:

Annual Meeting
The Annual Meeting of Stockholders  will be held at 10 AM on Wednesday,  October
27, 1999, at:
Chester Valley Golf and Country Club
430 Swedesford Road
Malvern, Pennsylvania 19355

Stock Listing
Chester Valley Bancorp Inc. Stock is traded on the NASDAQ National Market System
under the symbol "CVAL".
<PAGE>
Market Makers:
F. J. Morrissey & Co., Inc.
Philadelphia, Pennsylvania
(215) 563-8500

Herzog Heine & Geduld, Inc.
Philadelphia, Pennsylvania
(800) 462-0443

Janney Montgomery Scott
Philadelphia, Pennsylvania
(215) 563-8671

Knight Securities LP
Jersey City, NJ 07310

Hopper Soliday Division of Tucker Anthony
Lancaster, Pennsylvania
(800) 456-9234

Spear, Leeds & Kellog
Jersey City, NJ 07302

Investor Information:
Patricia A. Ferretti
Shareholder Relations Administrator
Chester Valley Bancorp Inc.
100 E. Lancaster Avenue
Downingtown, Pennsylvania 19335
(610) 269-9700

Transfer Agent, Registrar and Dividend Disbursing Agent:
American Stock Transfer and Trust Co.
40 Wall Street, 46th Floor
New York, New York 10005
(212) 936-5100

Form 10-K
Subsequent to the required  filing with the Securities  and Exchange  Commission
under the  Securities  Exchange  Act of 1934,  the Company  will  furnish to any
shareholder,  without charge, a copy of the Company's Annual Report on Form 10-K
for the year ended June 30, 1999 and the exhibits thereto,  upon written request
to Patricia A. Ferretti, Shareholder Relations Administrator.

Auditors:
KPMG LLP
1600 Market Street
Philadelphia, Pennsylvania 19103

Counsel:
Lamb, Windle & McErlane, PC
24 E. Market Street
West Chester, Pennsylvania 19381

Schnader Harrison Segal & Lewis LLP
1600 Market Street
Suite 3600
Philadelphia, Pennsylvania  19103
<PAGE>
Elias, Matz, Tiernan & Herrick
The Walker Building, 12th Floor
734 15th Street, NW
Washington DC  20005

Executive Office:
Chester Valley Bancorp Inc.
100 E. Lancaster Avenue
Downingtown, Pennsylvania 19335
(610) 269-9700