SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON DC 20549

                                   FORM 10-QSB

[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934

                For the quarterly period ended December 30, 1997

                                       Or

[ ]   Transition Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934

             For the transition period from __________ to __________

                          Commission File No.: 0-18833

                           Chester Valley Bancorp Inc.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


               Pennsylvania                            23-2598554
--------------------------------------------------------------------------------
       (State or other jurisdiction of               (I.R.S. Employer
       incorporation or organization)                Identification No.)


      100 E. Lancaster Ave., Downingtown PA                  19335
      -------------------------------------                 --------
      (Address Of Principal Executive Offices)             (Zip Code)

       Registrant's telephone number, including area code: (610) 269-9700

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

Transitional Small Business Disclosure Format. YES  [   ]     NO  [ X ]

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

 
   Common Stock ($1.00 par value)                        2,177,505
   ------------------------------                       ----------
      (Title of Each Class)                    (Number of Shares Outstanding
                                                   as of February 1, 1998)
<PAGE>


                   CHESTER VALLEY BANCORP INC. AND SUBSIDIARY

                                      INDEX

                                                                                
                                                                                
PART 1.  FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS

         CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
           December 31, 1997 and June 30, 1997 (Unaudited)                      

         CONSOLIDATED STATEMENTS OF OPERATIONS
           Three Months Ended December 31, 1997 and 1996 (Unaudited)            

         CONSOLIDATED STATEMENTS OF OPERATIONS
            Six Months Ended December 31, 1997 and 1996 (Unaudited)             

         CONSOLIDATED STATEMENTS OF CASH FLOWS
           Six Months Ended December 31, 1997 and 1996 (Unaudited)              

         NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS    


Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS                            


PART 2.  OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS                                                      

Item 2.  CHANGES IN SECURITIES                                                  

Item 3.  DEFAULTS UPON SENIOR SECURITIES                                        

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS    
Item 5.  OTHER INFORMATION                                                      

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K                                       

SIGNATURES                                                                      
<PAGE>
<TABLE>
<CAPTION>
                                 CHESTER VALLEY BANCORP INC. AND SUBSIDIARY
                               CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                           (Dollars in Thousands)

                                                                                 December 31,     June 30,
                                                                                    1997            1997
                                                                                  ---------      ---------
<S>                                                                               <C>            <C>                       
ASSETS:
Cash in banks ...............................................................     $   5,322      $   2,610
Interest-bearing deposits ...................................................         3,973          6,844
Investment securities available for sale ....................................        24,411         27,566
Investment securities (market value - December 31, $17,317; June 30, $19,393)        17,352         19,469
Accrued interest receivable .................................................         1,780          2,108
Loans held for sale .........................................................           285            106
Loans receivable, less allowance for loan losses of $3,080 and $2,855 .......       264,577        257,040
Property and equipment ......................................................         4,902          4,724
Other assets ................................................................         3,041          3,206
                                                                                  ---------      ---------
     Total Assets ...........................................................     $ 325,643      $ 323,673
                                                                                  =========      =========

LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposit accounts ............................................................     $ 266,648      $ 260,750
Securities sold under agreements to repurchase ..............................           179             12
Advance payments by borrowers for taxes and insurance .......................         1,950          2,999
Employee Stock Ownership Plan ("ESOP") debt .................................           241            333
Federal Home Loan Bank advances .............................................        24,436         30,198
Other borrowings ............................................................           306            249
Accrued interest payable ....................................................           838            788
Other liabilities ...........................................................         2,339          1,279
                                                                                  ---------      ---------
     Total Liabilities ......................................................       296,937        296,608
                                                                                  ---------      ---------

Stockholders' Equity:
Preferred stock - $1.00 par value; 5,000,000 shares authorized; none issued .          --             --
Common stock - $1.00 par value; 15,625,000 shares authorized; 2,174,689 and
  2,072,083 shares issued at December 31 and June 30, respectively ..........         2,175          2,072
Additional paid-in capital ..................................................        14,890         12,772
Common stock acquired by ESOP ...............................................          (241)          (333)
Retained earnings - partially restricted ....................................        11,699         12,750
Net unrealized gain on securities available for sale, net of taxes ..........           298              3
                                                                                  ---------      ---------
  Subtotal ..................................................................        28,821         27,264
Treasury stock, at cost (6,147 shares and 13,213 shares at December 31 and
  June 30, respectively) ....................................................          (115)          (199)
                                                                                  ---------      ---------
     Total Stockholders' Equity .............................................        28,706         27,065
                                                                                  ---------      ---------

     Total Liabilities and Stockholders' Equity .............................     $ 325,643      $ 323,673
                                                                                  =========      =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
                         CHESTER VALLEY BANCORP INC. AND SUBSIDIARY
                            CONSOLIDATED STATEMENTS OF OPERATIONS
                    (Dollars in Thousands, Except for Per Share Amounts)

                                                                      Six Months Ended
                                                                         December 31,
                                                              ----------------------------- 
                                                                    1997             1996
                                                              -----------      ------------ 
<S>                                                           <C>              <C>
INTEREST INCOME:
  Loans .................................................     $     5,569      $     5,138
  Investment securities and interest-bearing deposits ...             791              468
                                                              -----------      -----------
     Total interest income ..............................           6,360            5,606
                                                              -----------      -----------

INTEREST EXPENSE:
  Deposits ..............................................           2,883            2,548
  Securities sold under agreements to repurchase ........               2               24
  Short-term borrowings .................................             303               80
  Long-term borrowings ..................................             165              200
                                                              -----------      -----------
     Total interest expense .............................           3,353            2,852
                                                              -----------      -----------

NET INTEREST INCOME .....................................           3,007            2,754
  Provision for loan losses .............................             120              164
                                                              -----------      -----------
      Net interest income after provision for loan losses           2,887            2,590
                                                              -----------      -----------

OTHER INCOME:
  Service charges and fees ..............................             282              236
  Loss on sale of loans held for sale ...................              (2)            --
  Gain on sale of securities available for sale .........              79               20
  Other .................................................              40               51
                                                              -----------      -----------
     Total other income .................................             399              307
                                                              -----------      -----------

OPERATING EXPENSES:
  Salaries and employee benefits ........................             992              885
  Occupancy and equipment ...............................             427              379
  Data processing .......................................             177              158
  Deposit insurance premiums ............................              41              131
  Other .................................................             480              410
                                                              -----------      -----------
     Total operating expenses ...........................           2,117            1,963
                                                              -----------      -----------

  Income before income taxes ............................           1,169              934
  Income tax expense ....................................             338              276
                                                              -----------      -----------

NET INCOME ..............................................     $       831      $       658
                                                              ===========      ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                         CHESTER VALLEY BANCORP INC. AND SUBSIDIARY
                            CONSOLIDATED STATEMENTS OF OPERATIONS
                    (Dollars in Thousands, Except for Per Share Amounts)
                                        (continued)

                                                                      Six Months Ended
                                                                         December 31,
                                                              ----------------------------- 
                                                                    1997             1996
                                                              -----------      ------------ 
<S>                                                           <C>              <C>
EARNINGS PER SHARE (1):
  Basic .................................................     $      0.38      $      0.31

                                                              ===========      ===========
  Diluted ...............................................     $      0.38      $      0.30
                                                              ===========      ===========

DIVIDENDS PER SHARE PAID DURING PERIOD (1) ..............     $      0.11      $      0.08
                                                              ===========      ===========

WEIGHTED AVERAGE SHARES OUTSTANDING (1):
  Basic .................................................       2,163,109        2,146,914
                                                              ===========      ===========
  Diluted ...............................................       2,197,982        2,158,905
                                                              ===========      ===========
</TABLE>

(1)  Earnings  per  share,  dividends  per share  and  weighted  average  shares
     outstanding  have been  restated  to  reflect  the  effects of the 5% stock
     dividend paid in September 1997 and the five-for-four  stock split effected
     in the form of a dividend in March 1997.

     See accompanying notes to unaudited consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
                         CHESTER VALLEY BANCORP INC. AND SUBSIDIARY
                            CONSOLIDATED STATEMENTS OF OPERATIONS
                    (Dollars in Thousands, Except for Per Share Amounts)

                                                                       Six Months Ended
                                                                         December 31,
                                                              -----------------------------
                                                                    1997             1996
                                                              -----------      ------------ 
<S>                                                           <C>              <C>
INTEREST INCOME:
  Loans .................................................     $    11,071      $     9,993
  Investment securities and interest-bearing deposits ...           1,584              992
                                                              -----------      -----------
     Total interest income ..............................          12,655           10,985
                                                              -----------      -----------

INTEREST EXPENSE:
  Deposits ..............................................           5,724            5,012
  Securities sold under agreements to repurchase ........               3               51
  Short-term borrowings .................................             547              152
  Long-term borrowings ..................................             347              382
                                                              -----------      -----------
     Total interest expense .............................           6,621            5,597
                                                              -----------      -----------

NET INTEREST INCOME .....................................           6,034            5,388
  Provision for loan losses .............................             240              260
                                                              -----------      -----------
      Net interest income after provision for loan losses           5,794            5,128
                                                              -----------      -----------

OTHER INCOME:
  Service charges and fees ..............................             583              508
  Gain (loss) on sale of loans held for sale ............              (1)               3
  Gain on sale of securities available for sale .........             166               68
  Other .................................................              85               97
                                                              -----------      -----------
     Total other income .................................             833              676
                                                              -----------      -----------
OPERATING EXPENSES:
  Salaries and employee benefits ........................           2,007            1,802
  Occupancy and equipment ...............................             851              738
  Data processing .......................................             343              308
  SAIF special assessment ...............................            --              1,387
  Deposit insurance premiums ............................              79              261
  Other .................................................             966              802
                                                              -----------      -----------
     Total operating expenses ...........................           4,246            5,298
                                                              -----------      -----------

  Income before income taxes ............................           2,381              506
  Income tax expense ....................................             697               49
                                                              -----------      -----------

NET INCOME ..............................................     $     1,684      $       457
                                                              ===========      ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                         CHESTER VALLEY BANCORP INC. AND SUBSIDIARY
                            CONSOLIDATED STATEMENTS OF OPERATIONS
                    (Dollars in Thousands, Except for Per Share Amounts)
                                        (continued)

                                                                       Six Months Ended
                                                                         December 31,
                                                              -----------------------------
                                                                    1997             1996
                                                              -----------      ------------ 
<S>                                                           <C>              <C>
EARNINGS PER SHARE (1):
  Basic .................................................     $      0.78      $      0.21
                                                              ===========      ===========
  Diluted ...............................................     $      0.77      $      0.21
                                                              ===========      ===========

DIVIDENDS PER SHARE PAID DURING PERIOD (1) ..............     $      0.21      $      0.15
                                                              ===========      ===========

WEIGHTED AVERAGE SHARES OUTSTANDING (1):
  Basic .................................................       2,162,436        2,150,686
                                                              ===========      ===========
  Diluted ...............................................       2,193,681        2,160,939
                                                              ===========      ===========
</TABLE>



 (1)  Earnings  per  share,  dividends  per share and  weighted  average  shares
      outstanding  have been  restated  to reflect  the  effects of the 5% stock
      dividend paid in September 1997 and the five-for-four stock split effected
      in the form of a dividend in March 1997.

      See accompanying notes to unaudited consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
                                   CHESTER VALLEY BANCORP INC. AND SUBSIDIARY
                                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                             (Dollars in Thousands)

                                                                               Six Months Ended December 31,
                                                                               -------------------------------- 
                                                                                    1997             1996
                                                                                  ---------      ---------
<S>                                                                               <C>            <C>
Cash flows from operating activities:
Net income ..................................................................     $   1,684      $     457
Add (deduct) items not affecting cash flows from operating activities:
   Depreciation .............................................................           324            284
   Provision for losses on loans ............................................           240            260
   Loss (gain) on sale of loans held for sale ...............................             1             (3)
   Gain on sale of securities available for sale ............................          (166)           (68)
   Amortization of deferred loan fees, discounts and premiums ...............          (271)          (242)
   Decrease (increase) in accrued interest receivable .......................           328            (66)
   Decrease (increase) in other assets ......................................          (165)          (502)
   Increase in other liabilities ............................................         1,060            148
   Increase in accrued interest payable .....................................            50              4
                                                                                  ---------      ---------
Net cash flows from operating activities ....................................         3,415            272
                                                                                  ---------      ---------

Cash flows from (used in) investment activities:
   Capital expenditures .....................................................          (502)          (855)
   Net increase in loans and loans held for sale ............................        (9,621)       (17,687)
   Proceeds from sale of loans held for sale ................................         1,742            162
   Proceeds from maturities, payments and calls of investment securities ....         2,644          2,835
   Purchase of investment securities ........................................          (533)           (20)
   Purchase of securities available for sale ................................      (138,102)       (29,064)
   Proceeds from sale of securities available for sale ......................       141,917         26,334
   Proceeds from real estate owned ..........................................          --               86
                                                                                  ---------      ---------
Net cash flows used in investment activities ................................        (2,455)       (18,209)
                                                                                  ---------      ---------
Cash flows from (used in) financing activities:
   Net increase (decrease) in deposits before interest credited .............         1,009         10,249
   Interest credited to deposits ............................................         4,889          4,272
   Proceeds under securities sold under agreements to repurchase ............           167           --
   Proceeds from FHLB advances ..............................................         6,275          4,815
   Repayments of FHLB advances ..............................................       (12,037)        (1,455)
   Decrease in advance payments by borrowers for taxes and insurance ........        (1,049)        (1,070)
   Proceeds from other borrowings ...........................................            57            250
   Cash dividends on common stock ...........................................          (572)          (353)
   Repayments of principal on ESOP debt .....................................           (92)           (88)
   Sale of common stock under the dividend reinvestment plan ................           273             (4)
   Payment for fractional shares ............................................            (7)           (10)
   Stock options exercised ..................................................            32            216
   Reduction of common stock acquired by ESOP ...............................            92             88
   Stock repurchased as treasury stock ......................................          (156)          (324)
                                                                                  ---------      ---------
Net cash flows from (used in) financing activities ..........................        (1,119)        16,586
                                                                                  ---------      ---------
Decrease in cash and cash equivalents .......................................          (159)        (1,351)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                   CHESTER VALLEY BANCORP INC. AND SUBSIDIARY
                                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                             (Dollars in Thousands)

                                                                               Six Months Ended December 31,
                                                                               -------------------------------- 
                                                                                    1997             1996
                                                                                  ---------      ---------
<S>                                                                               <C>            <C>
Cash and cash equivalents:
   Beginning of period ......................................................         9,454         10,312
                                                                                  =========      =========
   End of period ............................................................     $   9,295      $   8,961
                                                                                  =========      =========

Supplemental disclosures:
   Cash payments during the year for:
      Taxes .................................................................     $     850      $     317
      Interest ..............................................................     $   6,571      $   5,593

Non-cash items:
   Acquisition of real estate in settlement of loans ........................     $    --        $      50
   Stock dividend issued ....................................................     $   2,155      $   1,516
   Net unrealized gain on investment securities available for sale ..........     $     482      $      71
   Tax effect on unrealized  gain on investment securities available for sale     $     187      $      25


</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
                           CHESTER VALLEY BANCORP INC.
                                 AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION

                  The accompanying  consolidated  financial statements have been
                  prepared  in  accordance  with  instructions  to Form  10-QSB.
                  Accordingly,  they do not include all of the  information  and
                  footnotes required by generally accepted accounting principles
                  ("GAAP")  for complete  financial  statements.  However,  such
                  information reflects all adjustments which are, in the opinion
                  of management,  necessary for a fair  presentation  of results
                  for the unaudited interim periods.

                  The results of operations for the three- and six-month periods
                  ended December 31, 1997, are not necessarily indicative of the
                  results to be  expected  for the fiscal  year  ending June 30,
                  1998. The consolidated  financial  statements presented herein
                  should be read in  conjunction  with the audited  consolidated
                  financial statements and the notes thereto included in Chester
                  Valley  Bancorp Inc.'s Annual Report to  Stockholders  for the
                  fiscal year ended June 30, 1997.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

                  Principles of Consolidation

                  The accompanying consolidated financial statements include the
                  accounts of Chester  Valley  Bancorp  Inc.  (the  "Company" or
                  "Chester   Valley"),   its  wholly-owned   subsidiary,   First
                  Financial   Bank  (the   "Bank"  or  "First   Financial"),   a
                  Pennsylvania-chartered  stock  savings  association,  and  the
                  Bank's  wholly-owned  subsidiary,  D & S Service Corp.,  which
                  owns D & F Projects and Wildman Projects,  Inc., both of which
                  are   wholly-owned    subsidiaries   thereof.   All   material
                  inter-company  balances and transactions  have been eliminated
                  in  consolidation.  Prior period amounts are reclassified when
                  necessary to conform with the current period's presentation.

                  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.

                  Investment Securities

                  The  Company  divides  its  securities  portfolio  into  three
                  segments:  (a) held to maturity;  (b) available for sale;  and
                  (c) trading.  Securities in the held to maturity  category are
                  accounted for at amortized cost. Trading  securities,  if any,
                  are  accounted  for at quoted  market  prices with  changes in
                  market  values  being  recorded  as gain or loss in the income
                  statement.  All other securities 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 stockholders' equity.
<PAGE>
                  Investment securities held for investment are carried at 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.  At the  time  of  purchase,  the
                  Company makes a  determination  on whether or not it will hold
                  the   investment   securities  to  maturity,   based  upon  an
                  evaluation  of the  probability  of the  occurrence of certain
                  future  events.   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 classified as available for sale. 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 such 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.

                  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 due according to the contractual terms
                  of the loan  agreement.  At and  during the  six-month  period
                  ended December 31, 1997,  the recorded  investment in impaired
                  loans  was  not  material.   The  Company's   policy  for  the
<PAGE>
                  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.
                                                                               9
                  Loans Held for Sale

                  The Company periodically  identifies certain loans as held for
                  sale at the time of 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 the resulting gain or 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 the
                  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

                  In February  1997 the  Financial  Accounting  Standards  Board
                  ("FASB")  issued SFAS No.  128,  "Earnings  Per  Share."  This
                  statement  establishes  standards for computing and presenting
                  earnings per share (EPS) and applies to entities with publicly
                  held common stock or potential  common stock.  This  statement
                  simplifies  the  standards  for  computing  earnings per share
                  previously  found in APB Opinion No. 15,  Earnings  per Share,
                  and makes them comparable to international  EPS standards.  It
                  replaces the  presentation  of primary EPS with a presentation
                  of basic EPS. It also requires dual  presentation of basic and
                  diluted  EPS on the  face  of the  income  statement  for  all
                  entities  with  complex  capital  structures  and  requires  a
                  reconciliation  of the numerator and  denominator of the basic
                  EPS  computation  to  the  numerator  and  denominator  of the
                  diluted EPS  computation.  This  statement  is  effective  for
                  financial  statements issued for periods ending after December
                  15, 1997,  including interim periods;  earlier  application is
                  not  permitted.  This  statement  requires  restatement of all
                  prior-period EPS data presented.  The Company adopted SFAS No.
                  128 as of December  31,  1997.  Accordingly,  the EPS has been
                  restated for all periods presented.
<PAGE>
                  The  following  table  presents  the   reconciliation  of  the
                  numerators  and  denominators  of the  basic and  diluted  EPS
                  computations.
<TABLE>
<CAPTION>
                                    Three Months Ended             Six Months Ended
                                       December 31,                   December 31,
                               -------------------------     -------------------------        
                                                 (Dollars in Thousands)

Basic EPS Computation             1997           1996           1997            1996
                               ----------     ----------     ----------     ----------
<S>                            <C>            <C>            <C>            <C>
Numerator: ...............     $      831     $      658     $    1,684     $      457

Denominator:
   Weighted average common
   shares outstanding ....      2,163,109      2,146,914      2,162,436      2,150,686

Basic EPS ................     $      .38     $      .31     $      .78     $      .21
                               ==========     ==========     ==========     ==========

Diluted EPS Computation

Numerator: ...............     $      831     $      658     $    1,684     $      457
Denominator:
   Weighted average common
   shares outstanding ....      2,163,109      2,146,914      2,162,436      2,150,686
      Options outstanding          34,873         11,991         31,245         10,253
                               ----------     ----------     ----------     ----------
      Total shares .......      2,197,982      2,158,905      2,193,681      2,160,939
                               ==========     ==========     ==========     ==========

Diluted EPS ..............     $      .38     $      .30     $      .77     $      .21
                               ==========     ==========     ==========     ==========

</TABLE>
                  Earnings per share and  weighted  average  shares  outstanding
                  have been  adjusted  to  reflect  the  effects of the 5% stock
                  dividend paid in September  1997 and the  five-for-four  stock
                  split effected in the form of a dividend in March 1997.

<PAGE>
NOTE 3 - LOANS RECEIVABLE

                  Loans receivable are summarized as follows:
<TABLE>
<CAPTION>
                                                 At December 31,     At June 30,
                                                      1997              1997
                                                   ---------          ---------
                                                       (Dollars in Thousands)
<S>                                                <C>                <C>
First mortgage loans:
   Residential ...........................         $ 158,952          $ 159,431
   Construction-residential ..............            11,000              9,873
   Land acquisition and
      development ........................             7,495              6,763
   Commercial ............................            33,309             33,981
   Construction-commercial ...............             8,941              6,271
Commercial business ......................            11,921              7,863
Consumer .................................            48,973             47,343
                                                   ---------          ---------

Total loans ..............................           280,591            271,525
                                                   ---------          ---------

Less:
   Undisbursed loan proceeds:
      Construction-residential ...........            (7,181)            (6,599)
      Construction-commercial ............            (4,217)            (3,494)
   Deferred loan fees - net ..............            (1,536)            (1,537)
   Allowance for loan losses .............            (3,080)            (2,855)
                                                   ---------          ---------

Net loans ................................         $ 264,577          $ 257,040
                                                   =========          =========

</TABLE>

NOTE 4 - COMMITMENTS

                  Commitments  to potential  mortgagors  of the Bank amounted to
                  $4.54  million as of December 31, 1997, of which $1.12 million
                  was for  variable-rate  loans.  The balance of the commitments
                  represents  $3.42 million of fixed-rate loans bearing interest
                  rates of between  6.00% and 7.20%.  At December 31, 1997,  the
                  Company had $11.40  million of undisbursed  construction  loan
                  funds  as well as  $13.89  million  of  undisbursed  remaining
                  credit line balances.
<PAGE>
NOTE 5 - REGULATORY CAPITAL

                  The Bank is  required by  regulations  of the Office of Thrift
                  Supervision  ("OTS") to maintain  minimum levels of capital as
                  measured by three ratios.  Savings  institutions are currently
                  required to  maintain a minimum  regulatory  tangible  capital
                  equal to 1.5% of total  assets,  minimum core capital of 3% of
                  total  assets,  and  risk-based  capital  equal to 8% of total
                  risk-weighted assets. At December 31, 1997, and June 30, 1997,
                  the Bank exceeded all  regulatory  capital  requirements.  The
                  following  sets  forth  the   reconciliation   of  the  Bank's
                  compliance  with each of the regulatory  capital  requirements
                  (dollars in thousands):
<TABLE>
<CAPTION>

                                             December 31, 1997                                 June 30, 1997
                                 ------------------------------------------      ------------------------------------------ 
                                  Tangible          Core         Risk-based      Tangible          Core         Risk-based
                                   Capital         Capital         Capital        Capital          Capital        Capital
                                 ----------      ----------      ---------      ==========      ----------      ----------   
<S>                              <C>            <C>              <C>           <C>              <C>             <C>
Total Regulatory Capital ...     $   27,780     $    27,780      $  29,740     $    26,750      $   26,750      $   29,057
Minimum Required  Regulatory          4,880           9,760         16,345           4,855           9,710          15,689
                                 ----------      ----------      ---------      ==========      ----------      ----------
Excess Regulatory Capital ..     $   22,900     $    18,020      $  13,395     $    21,895      $   17,040      $   13,368
                                 ==========      ==========      =========      ==========      ==========      ==========
Regulatory Capital as a
  Percentage of Assets .....           8.54%           8.54%      14.56%              8.26%           8.26%          14.82%
Minimum Capital  Required as
a Percentage of Assets .....           1.50            3.00        8.00               1.50            3.00            8.00
                                 ==========      ==========      =========      ==========      ==========      ==========
Excess Regulatory Capital
as a Percentage of Assets ..           7.04%           5.54%       6.56%              6.76%           5.26%           6.82%
                                 ==========      ==========      =========      ==========      ==========      ==========
</TABLE>


The Bank is not under any agreement with the regulatory  authorities,  nor is it
aware of any current  recommendations  by the regulatory  authorities  which, if
they were to be  implemented,  would  have a material  effect on the  liquidity,
capital resources or operations of the Company.
<PAGE>
Item 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL  
                  CONDITION AND RESULTS OF OPERATION

                                                  

Certain   information  in  this  Form  10-QSB  may  constitute   forward-looking
information  that  involves  risks and  uncertainties  that could  cause  actual
results to differ  materially from those  estimated.  Persons are cautioned that
such forward-looking statements are not guarantees of future performance and are
subject to various factors which could cause actual results to differ materially
from these  estimated.  These factors  include  changes in general  economic and
market  conditions  and the  development  of an interest rate  environment  that
adversely  affects the interest  rate spread or other income from the  Company's
and the Bank's investments and operations.

The Company's  total assets  increased to $325.64  million at December 31, 1997,
from $323.67  million at June 30, 1997,  largely as the result of an increase in
deposits  from $260.75  million to $266.65  million,  which funded growth in the
loan portfolio from $257.04 million to $264.58  million during the period.  This
increase  in net  loans was  offset  by a  decrease  in cash,  investments,  and
interest-bearing  deposits from $56.49 million to $51.06 million.  This decrease
in cash,  investments,  and  interest-bearing  deposits was concurrent  with the
decrease in Federal Home Loan Bank of Pittsburgh advances from $30.20 million to
$24.44 million.

Stockholders'  equity  increased to $28.71  million at December  31, 1997,  from
$27.07  million at June 30,  1997,  primarily as a result of net income of $1.68
million,  the  recognition of an increase in net unrealized  gains on securities
available for sale,  net of taxes,  of $295,000,  the sale of $273,000 of common
stock in  connection  with the Company's  dividend  reinvestment  plan,  $32,000
received as a result of the exercise of stock options,  and the reduction in the
principal  balance of the ESOP debt by $92,000.  The  increase in  stockholders'
equity was offset,  in large part,  by the  payment of cash  dividends  totaling
$572,000  combined with the repurchase of $156,000 of the Company's common stock
during the six month period ended December 31, 1997.


                              RESULTS OF OPERATIONS

Net interest income, on a fully tax equivalent  basis,  increased 10.6% to $3.12
million for the  three-month  period ended December 31, 1997, and 13.4% to $6.25
million for the  six-month  period ended  December  31, 1997,  compared to $2.82
million and $5.51 million for the same periods in 1996.  Total interest  income,
on a fully tax equivalent  basis,  increased to $6.47 million and $12.87 million
for the three- and six-month periods ended December 31, 1997, from $5.67 million
and $11.11  million for the same  periods in 1996,  primarily as a result of the
combined effects of the increase in both the average balance of interest-earning
assets and the average yield on such assets.

The average balance of interest-earning  assets increased to $312.71 million and
$312.55  million for the three- and six-month  periods ended  December 31, 1997,
respectively,  from $276.51 million and $272.66 million,  respectively,  for the
same periods in 1996. In addition, the average yield on interest-earning  assets
increased to 8.28% and 8.24% for the three- and six-month periods ended December
31, 1997, from 8.20% and 8.15% for the same periods in 1996.
<PAGE>
Loan  originations  of $46.39  million  during the six months ended December 31,
1997,   contributed   to  both  the   increase   in  the   average   balance  of
interest-earning  assets  as  well  as the  increase  in the  average  yield  on
interest-earning  assets.  The  increase  in the  average  yield of such  assets
reflects the results of the Bank's  increased  origination  of  commercial  real
estate as well as small  business  loans and  consumer  installment  loans which
generally bear higher interest rates than single-family  residential loans. Such
loans  accounted  for 52% of the loan  originations  during the six months ended
December 31, 1997, and  contributed to a shift in the  composition of the Bank's
loan  portfolio from  lower-yielding  residential  mortgages to  higher-yielding
consumer and small  business  loans.  Also  contributing  to the increase in the
average yield was a slight  increase in market interest rates in the 1997 period
as compared to the 1996 period.

Total interest  expense  increased to $3.35 million and $6.62 million from $2.85
million and $5.60 million for the  respective  three- and  six-month  periods in
1997 and 1996,  largely as a result of the  increase in the  average  balance of
interest-bearing  liabilities  to $269.63  million and  $269.83  million for the
three and six months  ended  December  31,  1997,  respectively,  as compared to
$239.70  million  and  $235.24  million  for the  same  periods  in  1996.  Also
contributing to the increase in interest  expense was an increase in the average
rate paid on those  liabilities to 4.97% and 4.91% for the respective  three-and
six-month  periods ended  December 31, 1997,  from 4.76% for the same periods in
1996, respectively.

The tax equivalent  interest rate spread  decreased to 3.33% from 3.39%, and the
average net yield on  interest-earning  assets decreased to 4.00% from 4.04% for
the six-month periods ended December 31, 1997 and 1996, respectively, due to the
reasons discussed above.

Provision for Loan Losses

The Company provided $120,000 and $240,000 for loan losses during the three- and
six-month periods ended December 31, 1997, respectively, as compared to $164,000
and $260,000,  respectively, for the same periods in 1996. These provisions have
been added to the  Company's  allowance  for possible loan losses due to current
economic  conditions  and  management's  assessment of the inherent risk of loss
existing in the loan  portfolio.  At December 31, 1997,  the  allowance for loan
losses  totaled  $3.08  million or 1.15% of net loans  (before the  allowances),
compared  to $2.86  million or 1.10% of net loans and $2.91  million or 1.21% of
net loans at June 30, 1997, and December 31, 1996, respectively. As a percentage
of  non-performing  assets,  the  allowance for possible loan losses was 386% at
December 31, 1997,  compared to 220% at June 30, 1997,  and further  compared to
160% at December 31, 1996.

Other Income

Total other income  increased  to $399,000  and  $833,000  during the three- and
six-month periods ended December 31, 1997, respectively, as compared to $307,000
and $676,000 during the same periods in 1996 due to increases in service charges
and fees,  primarily as a result of an increase in the number of demand  deposit
accounts as well as an increase in gains on sale of securities.  Service charges
and fees increased to $583,000 from $508,000 during the six-month  periods ended
December 31, 1997 and 1996, respectively. Gains on sales of securities increased
to $166,000  for the six months ended  December  31, 1997,  from $68,000 for the
same period in 1996.
<PAGE>
Operating Expenses

Total  operating  expenses for the  three-month  period ended December 31, 1997,
increased to $2.12 million from $1.96 million for the same three-month period in
1996. Total operating expenses for the six-month period ended December 31, 1997,
decreased  to $4.25  million  from $5.30  million  for the same  period in 1996.
Operating  expenses for the six months ended  December 31, 1996,  included $1.39
million  attributable  to  the  payment  of  the  one-time  Savings  Institution
Insurance Fund ("SAIF") special  assessment  charged during the first quarter of
fiscal  1997 to all  insured  institutions  having  SAIF-insured  deposits.  The
one-time assessment was part of legislation adopted to recapitalize the SAIF and
required  the Bank to pay $.65 for every $100 of deposits as of March 31,  1995.
However,  in connection with the special  assessment,  deposit insurance premium
rates were decreased from $.23 per $100 of deposits to $.06 per $100 of deposits
beginning in the third fiscal quarter of 1997.

Excluding the $1.39 million  one-time SAIF assessment,  the Company's  operating
expenses would have increased  during the six months ended December 31, 1997, as
compared to the same period in 1996. The increase in operating  expenses for the
three-  and  six-month  periods  in  fiscal  1998 was due to (i)  normal  salary
increases   combined  with  benefits  expense  and  increased  number  of  staff
associated with the addition of the Bank's new Call Center and its new Trust and
Investment  Services  Division  established  during the summer and fall of 1997,
respectively;  (ii)  an  increase  in data  processing  expenses  related  to an
increased  number of accounts  in usage;  (iii) an  increase  in  occupancy  and
equipment  expenses related to the refurbishment of the Bank's Operations Center
and the purchase of imaging  equipment  used for the  processing  of  customers'
statements,  and (iv) the  opening of the  Bank's  Brandywine  Square  office in
October 1996,  whereby  expenses for this office were incurred during the entire
six-month  period of fiscal  1998 as opposed to only the  three-month  period in
fiscal 1997.

Income Tax Expense

Income tax  expense  was  $338,000  and  $697,000  for the three- and  six-month
periods  ended  December  31,  1997,  respectively,  as compared to $276,000 and
$49,000 for the same periods in 1996, reflecting the increased  profitability of
the Company in the 1997 periods.

                                  ASSET QUALITY

Non-performing  assets are  comprised of  non-accrual  loans and REO and totaled
$798,000 and $748,000 at December  31,  1997,  and June 30, 1997,  respectively.
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 is not accrued until the financial  condition and payment record
of the  borrower  once again  demonstrate  the ability to service  the debt.  At
December  31,  1997,  the  Company did not have any loans  greater  than 90 days
<PAGE>
delinquent which were accruing interest.  Non-performing  assets to total assets
and  non-performing  loans to total  assets  were  .25% at  December  31,  1997,
compared to .23% at June 30, 1997, and .64% and .61%, respectively,  at December
31, 1996.  Non-performing  loans,  which totaled  $798,000 at December 31, 1997,
consisted  of  eight  residential  mortgage  loans  aggregating  $627,000,   one
construction loan totaling $55,000, and $116,000 in consumer loans.

At December 31, 1997, the Company's classified assets, which consisted of assets
classified  as  substandard,  doubtful or loss,  as well as REO,  totaled  $1.38
million  compared to $1.40  million at June 30,  1997,  and further  compared to
$1.97  million  at  December  31,  1996.   Included  in  the  assets  classified
substandard at December 31, 1997 and 1996, and at June 30, 1997,  were all loans
90 days  past  due and  loans  which  were  less  than  90 days  delinquent  but
inadequately  protected by the current paying capacity of the borrower or of the
collateral pledged, or which were subject to one or more well-defined weaknesses
which may  jeopardize the  satisfaction  of the debt. The $584,000 of classified
assets which were not  considered  non-performing  at December  31,  1997,  were
comprised  primarily of three loans to one borrower  totaling $256,000 and three
loans to another borrower totaling $255,000,  which were classified  substandard
but were performing in accordance with the terms and conditions of the loans.


                         LIQUIDITY AND CAPITAL RESOURCES

The Company's primary sources of funds have historically  consisted of deposits,
regular principal  payments and prepayments of outstanding loans, and borrowings
from the Federal  Home Loan Bank of  Pittsburgh  and other  sources.  During the
first  six  months  of fiscal  1998,  the  Company  used its  capital  resources
primarily to meet its ongoing commitments to fund maturing savings  certificates
and deposit  withdrawals,  fund existing and new loan commitments,  and maintain
its  liquidity.  At  December  31,  1997,  the total of approved  mortgage  loan
commitments amounted to $4.54 million. In addition, at such date the Company had
$11.40  million of  undisbursed  construction  loan funds and $13.89  million of
undisbursed  remaining  credit line balances.  Certificates of deposit  totaling
$75.22  million are scheduled to mature during the remainder of fiscal 1998, the
majority of which the Company believes,  on the basis of prior experience,  will
be reinvested with the Company.

The Company's current dividend policy is to declare a regular quarterly dividend
with the intent  that the level of the  dividend  per share be  reviewed  by the
Board of Directors on a quarterly  basis.  Dividends will be in the form of cash
and/or  stock  after  giving  consideration  to all  aspects  of  the  Company's
performance  for the  quarter.  On November  19,  1997,  the Board of  Directors
declared a quarterly cash dividend of $.11 per share, which was paid on December
18, 1997, to stockholders of record as of December 4, 1997.

The Bank, which is the Company's  wholly-owned  subsidiary,  is required,  under
applicable  federal   regulations,   to  maintain  specified  levels  of  liquid
investments and qualifying types of United States  Treasury,  federal agency and
other investments having maturities of five years or less. Regulations currently
in effect  require the Bank to maintain a liquid asset ratio of not less than 5%
of its net withdrawable accounts plus short-term borrowings, of which short-term
liquid  assets must amount to not less than 1%.  These  levels are changed  from
time to  time  by the OTS to  reflect  economic  conditions.  First  Financial's
average  regulatory  liquidity  ratio for the month ended  December 31, 1997 was
8.40%.
<PAGE>
                         ASSET AND LIABILITY MANAGEMENT

The principal objective of the Company's asset and liability management function
is  to  maximize  the  Company's  net  interest  margin  while   maintaining  an
appropriate  level  of  risk  given  the  Company's  business  focus,  operating
environment,  capital and liquidity  requirements  and  performance  objectives.
Through such  management,  the Company seeks to reduce the  vulnerability of its
operations  to changes  in  interest  rates and to manage the ratio of  interest
rate-sensitive  assets to interest  rate-sensitive  liabilities within specified
maturity periods or repricing  dates.  The Company's  actions in this regard are
taken under the guidance of the Asset-Liability Management Committee.

Interest rate risk is derived from timing differences in the repricing of assets
and  liabilities,  loan  prepayments,  deposit  withdrawals,  and differences in
lending and funding  rates.  One measure of interest rate risk is the GAP ratio,
which is defined as the difference between the dollar volume of interest-earning
assets and  interest-bearing  liabilities  maturing or repricing within the same
specified period of time expressed as a percentage of total assets.

The Company's asset and liability  management strategy currently is to emphasize
the origination of adjustable-rate mortgages, short-term consumer and commercial
business loans, and floating-rate  construction loans and commercial real estate
loans.  As of December  31, 1997,  $117.47  million,  or 37.3% of the  Company's
interest-sensitive   assets  and  $154.70  million  of  its   interest-sensitive
liabilities  were  scheduled  to  reprice  within  a  one-year  period,  and the
Company's cumulative one-year interest rate GAP was negative 11.4%. The table on
page 21  summarizes  the  contractual  maturities  or  repricing  periods of the
Company's  interest-earning  assets  and  interest-bearing   liabilities  as  of
December  31, 1997.  Adjustable-  and  floating-rate  assets are included in the
period in which interest rates are next scheduled to adjust,  rather than in the
period for which they are  contractually  due.  Fixed-rate loans are included in
the periods in which they are anticipated to be repaid.  The analysis on page 21
takes  into  consideration  the timing of the  repricing  but does not take into
consideration   any   restrictions   on   the   magnitude   of   the   repricing
interest-sensitive assets.

Rates of interest paid on deposits are priced to be sufficiently  competitive in
the Company's  primary  market area to meet its asset and  liability  management
objectives and requirements.  The Company generally  maintains a pricing program
for its  certificate  accounts  which entails paying higher rates of interest on
longer-term  certificates  to encourage  customers to invest in  certificates of
deposit  for longer  maturities.  This  strategy  has  assisted  the  Company in
controlling  its cost of funds and  supported its goal of extending the maturity
of its liabilities.

The Company  periodically  identifies certain loans as held for sale at the time
of origination,  primarily consisting of fixed-rate,  single-family  residential
mortgage  loans  which  meet  the   underwriting   characteristics   of  certain
government-sponsored  enterprises  (conforming  loans).  The  Company  regularly
re-evaluates  its policy and  revises it as deemed  necessary.  The  majority of
loans sold to date have consisted of sales to Freddie Mac of whole loans and 95%
participation  interests in  long-term,  fixed-rate,  single-family  residential
mortgage  loans in  furtherance  of the  Company's  goal of better  matching the
maturities and  interest-rate  sensitivity of its assets and  liabilities.  When
selling loans, the Company has generally retained servicing in order to increase
its  non-interest  income.  At December 31, 1997,  the Company  serviced  $26.43
million of mortgage loans for others.  Sales of loans produce  future  servicing
income and provide funds for additional lending and other purposes.
<PAGE>
                        RECENT ACCOUNTING PRONOUNCEMENTS

In February 1997 the Financial  Accounting  Standards Board ("FASB") issued SFAS
No.  128,  "Earnings  Per  Share."  This  statement  establishes  standards  for
computing and  presenting  earnings per share (EPS) and applies to entities with
publicly held common stock or potential common stock. This statement  simplifies
the standards for computing  earnings per share  previously found in APB Opinion
No. 15,  Earnings per Share,  and makes them  comparable  to  international  EPS
standards.

It replaces the presentation of primary EPS with a presentation of basic EPS. It
also  requires  dual  presentation  of basic and  diluted EPS on the face of the
income statement for all entities with complex capital structures and requires a
reconciliation  of the numerator and denominator of the basic EPS computation to
the numerator and denominator of the diluted EPS computation.  This statement is
effective for financial  statements issued for periods ending after December 15,
1997,  including  interim periods;  earlier  application is not permitted.  This
statement  requires  restatement of all  prior-period  EPS data  presented.  The
Company adopted SFAS No. 128 as of December 31, 1997.  Accordingly,  the EPS has
been restated for all periods presented.

In June 1997 the FASB  issued SFAS No. 130,  "Reporting  Comprehensive  Income."
This  statement   establishes   standards  for  the  reporting  and  display  of
comprehensive  income  and  its  components  in a full  set  of  general-purpose
financial statements.  SFAS No. 130 requires that all items that are required to
be recognized as components of  comprehensive  income be reported in a financial
statement  that is  displayed  with  the  same  prominence  as  other  financial
statements.  The statement does not require a specific format for that financial
statement but requires that an enterprise  display an amount  representing total
comprehensive income for the period in that financial statement. SFAS No. 130 is
effective for fiscal years beginning after December 15, 1997. Management has not
yet determined the impact, if any, of this statement on the Company.

In June 1997 the FASB  issued SFAS No. 131,  "Disclosures  About  Segments of an
Enterprise and Related  Information." SFAS No. 131 establishes standards for the
way that public business enterprises report information about operating segments
in annual  financial  statements  and  requires  that those  enterprises  report
selected  information  about  operating  segments in interim  financial  reports
issued to shareholders.  It also establishes  standards for related  disclosures
about products and services, geographic areas, and major customers. SFAS No. 131
is effective for financial  statements for periods  beginning after December 15,
1997. Management has not yet determined the impact, if any, of this statement on
the Company.
<PAGE>
<TABLE>
<CAPTION>
                                     Interest Rate Sensitivity Analysis at December 31, 1997
                                                     (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      
                                                        or Less       Six Months     One Year      Three Years     Five Years 
                                                       --------       --------       --------       --------       --------
<S>                                                    <C>            <C>            <C>            <C>            <C> 
INTEREST-EARNING ASSETS:
   Loans (1):
       Adjustable- and floating-rate mortgages (2)     $ 22,391       $ 15,105       $ 31,157       $ 20,090       $  6,474

       Balloon and fixed-rate mortgages (2) ......        5,809          2,906          7,887         24,591         24,542
       Consumer (2) (3) ..........................        7,763          1,170          2,410         10,687          8,934
       Commercial business .......................        6,528            238            474          1,845          1,767
   Securities and interest-bearing deposits (4) ..        7,632          1,799          4,199          9,272          3,411
                                                       --------       --------       --------       --------       --------

   Total interest-earning assets .................     $ 50,123       $ 21,217       $ 46,126       $ 66,484       $ 45,128
                                                       --------       --------       --------       --------       --------

INTEREST-BEARING LIABILITIES:
   Savings accounts (5) ..........................     $    501       $    500       $    999           --             --   
   NOW accounts (5) ..............................          450            450            900           --             --   
   Money market accounts (5) .....................       28,272           --             --             --             --   
   Certificate accounts ..........................       53,195         21,933         32,535         35,886         12,414
   Securities sold under agreements to repurchase           179           --             --             --             --   
   Borrowings ....................................       12,171            517          2,097          5,682          2,518
                                                       --------       --------       --------       --------       --------
   Total interest-bearing liabilities ............     $ 94,768       $ 23,400       $ 36,531       $ 41,568       $ 14,932
                                                       --------       --------       --------       --------       --------

Cumulative excess of interest-earning assets
   to interest-bearing liabilities ...............     ($44,645)      ($46,828)      ($37,233)      ($12,317)      $ 17,879
                                                       ========       ========       ========       ========       ========
Cumulative ratio of interest rate-sensitive
   assets to interest rate-sensitive liabilities .           53%            60%            76%            94%           108%
                                                       ========       ========       ========       ========       ========
Cumulative difference as a percentage of
   total assets ..................................        (13.7%)        (14.4%)        (11.4%)         (3.8%)          5.5%
                                                       ========       ========       ========       ========       ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
             Interest Rate Sensitivity Analysis at December 31, 1997
                             (Dollars in thousands)
                                  (continued)


                                                        More Than                   
                                                       Five Years      Total 
                                                       --------      --------
<S>                                                    <C>           <C>
INTEREST-EARNING ASSETS:
   Loans (1):
       Adjustable- and floating-rate mortgages (2)     $  1,040      $ 96,255

       Balloon and fixed-rate mortgages (2) ......       46,311       112,044
       Consumer (2) (3) ..........................       18,009        48,973
       Commercial business .......................        1,069        11,921
   Securities and interest-bearing deposits (4) ..       19,423        45,736
                                                       --------      --------

   Total interest-earning assets .................     $ 85,851      $314,929
                                                       --------      --------

INTEREST-BEARING LIABILITIES:
   Savings accounts (5) ..........................     $ 23,080      $ 25,080
   NOW accounts (5) ..............................       27,680        29,480
   Money market accounts (5) .....................         --          28,272
   Certificate accounts ..........................        4,221       160,184
   Securities sold under agreements to repurchase          --             179
   Borrowings ....................................        1,998        24,983
                                                       --------      --------
   Total interest-bearing liabilities ............     $ 56,979      $268,178
                                                       --------      --------

Cumulative excess of interest-earning assets
   to interest-bearing liabilities ...............     $ 46,751      $ 46,751
                                                       ========      ========
Cumulative ratio of interest rate-sensitive
   assets to interest rate-sensitive liabilities .          117%          117%
                                                       ========      ========
Cumulative difference as a percentage of
   total assets ..................................         14.4%         14.4%
                                                       ========      ========

</TABLE>
(1)  Net of undisbursed loan proceeds.                                
(2)  Assumes market prepayment rates.                                  
(3)  Includes  home  improvement,  home equity,  automobile  and other  consumer
     loans.                                                    
(4)  Includes   investment    securities,    mortgage-backed    securities   and
     interest-bearing deposits.                                               
(5)  Balances  distributed  among the various  repricing time intervals based on
     historical and anticipated repricing patterns.
<PAGE>


Part II.          Other Information

                  Item 1.  Legal Proceedings

                           None

                  Item 2.  Changes in Securities

                           None

                  Item 3.  Defaults Upon Senior Securities

                           Not Applicable.

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

                           None

                  Item 5.  Other Information

                           None

                  Item 6.  Exhibits and Reports on Form 8-K

                           None



<PAGE>

                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                         Chester Valley Bancorp Inc.



Date     2-12-98                         /s/Ellen Ann Roberts
                                         --------------------
                                         Ellen Ann Roberts
                                         Chairman and Chief Executive Officer



Date    2-12-98                          /s/Christine N. Dullinger 
                                         Christine N. Dullinger
                                         Treasurer and Chief Financial Officer