SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q

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

                For the quarterly period ended September 30, 1999

                                       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)                 3,880,919
         ------------------------------                 ---------
               (Title of Each Class)          (Number of Shares Outstanding
                                                  as of November 1, 1999)
<PAGE>
                  CHESTER VALLEY BANCORP INC. AND SUBSIDIARIES

                                      INDEX

PART 1.  FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS

         CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
         September 30, 1999 and June 30, 1999 (Unaudited)

         CONSOLIDATED STATEMENTS OF OPERATIONS
         Three Months Ended September 30, 1999 and 1998 (Unaudited)

         STATEMENT OF OTHER COMPREHENSIVE INCOME
         Three Months Ended September 30, 1999 and 1998 (Unaudited)

         CONSOLIDATED STATEMENTS OF CASH FLOWS
         Three Months Ended September 30, 1999 and 1998 (Unaudited)

         NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

PART 2.  OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS

Item 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

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 SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                             (Dollars in Thousands)

                                                                       September 30,   June 30,
                                                                           1999          1999
                                                                         ---------    ---------
<S>                                                                      <C>          <C>
ASSETS:

Cash in banks                                                            $   7,806    $   5,194
Interest-earning deposits                                                    5,251       13,409
                                                                         ---------    ---------
     Total cash and cash equivalents                                        13,057       18,603
Trading account securities                                                   8,947        9,221
Investment securities available for sale                                   122,473      109,600
Investment securities (fair value - September 30,

      $7,474; June 30, $7,816)                                               7,459        7,801
Loans receivable, less allowance for
      loan losses of $3,721 and $3,651                                     305,115      291,388
Accrued interest receivable                                                  3,038        2,461
Property and equipment - net                                                 8,064        8,200
Other assets                                                                 5,096        3,884
                                                                         =========    =========
     Total Assets                                                        $ 473,249    $ 451,158
                                                                         =========    =========

LIABILITIES AND STOCKHOLDERS' EQUITY:

Deposits                                                                 $ 346,169    $ 359,514
Advance payments by borrowers for taxes and insurance                        1,154        3,055
Federal Home Loan Bank advances                                             88,760       50,375
Other borrowings                                                               711          653
Accrued interest payable                                                     1,362        1,573
Other liabilities                                                            1,806        2,135
                                                                         ---------    ---------
     Total Liabilities                                                   $ 439,962    $ 417,305
                                                                         ---------    ---------

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;
      3,898,170 and 3,707,460 shares issued at September 30,
     and June 30, respectively                                               3,898        3,707
Additional paid-in capital                                                  20,753       17,904
Retained earnings - partially restricted                                    11,720       13,794
Accumulated other comprehensive income (loss)                               (3,084)      (1,552)
                                                                         ---------    ---------
     Total Stockholders' Equity                                             33,287       33,853
                                                                         ---------    ---------

     Total Liabilities and Stockholders' Equity                          $ 473,249    $ 451,158
                                                                         =========    =========
</TABLE>

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

                                                                    (Unaudited)
                                                                Three Months Ended
                                                                  September 30,
                                                            --------------------------
                                                                1999          1998
                                                            -----------    -----------
<S>                                                         <C>            <C>
INTEREST INCOME:
  Loans                                                     $     5,900    $     5,650
  Investment securities and interest-bearing deposits             2,342          1,340
                                                            -----------    -----------
     Total interest income                                        8,242
                                                                                 6,990
                                                            -----------    -----------
INTEREST EXPENSE:
  Deposits                                                        3,457          3,112
  Securities sold under agreements to repurchase                   --                3
  Short-term borrowings                                             388            237
  Long-term borrowings                                              526            419
                                                            -----------    -----------
     Total interest expense                                       4,371          3,771
                                                            -----------    -----------
NET INTEREST INCOME                                               3,871          3,219
  Provision for loan losses                                         105             45
                                                            -----------    -----------
      Net interest income after provision for loan losses         3,766          3,174
                                                            -----------    -----------
OTHER INCOME:
  Investment services income, net                                   812            746
  Service charges and fees                                          399            360
  (Loss) gain on trading account securities                         (12)           153
  Gain on sale of assets available for sale                          13             80
  Other                                                              46             47
                                                            -----------    -----------
     Total other income                                           1,258          1,386
                                                            -----------    -----------
OPERATING EXPENSES:
  Salaries and employee benefits                                  1,803          1,668
  Occupancy and equipment                                           540            508
  Data processing                                                   218            190
  Deposit insurance premiums                                         48             42
  Other                                                             713            581
                                                            -----------    -----------
     Total operating expenses                                     3,322          2,989
                                                            -----------    -----------
  Income before income taxes                                      1,702          1,571
  Income tax expense                                                422            472
                                                            -----------    -----------
NET INCOME                                                  $     1,280    $     1,099
                                                            ===========    ===========

<PAGE>
<CAPTION>
                                                                    (Unaudited)
                                                                Three Months Ended
                                                                  September 30,
                                                            --------------------------
                                                                1999          1998
                                                            -----------    -----------
<S>                                                         <C>            <C>
EARNINGS PER SHARE (1):

  Basic                                                     $       .33    $       .29
                                                            ===========    ===========
  Diluted                                                   $       .33    $       .28
                                                            ===========    ===========
DIVIDENDS PER SHARE PAID DURING PERIOD (1)                  $       .09    $       .07
                                                            ===========    ===========
WEIGHTED AVERAGE SHARES OUTSTANDING (1):

  Basic                                                       3,889,814      3,849,890
                                                            ===========    ===========
  Diluted                                                     3,922,179      3,895,015
                                                            ===========    ===========
</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 1999 and the three-for-two  stock split effected
     in the form of dividend in December 1998.

     See accompanying notes to unaudited consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
                   CHESTER VALLEY BANCORP INC. AND SUBSIDIARY
                     STATEMENT OF OTHER COMPREHENSIVE INCOME
                             (Dollars in Thousands)

                                                                     (Unaudited)
                                                                  Three Months Ended
                                                                     September 30,
                                                                  ------------------
                                                                    1999       1998
                                                                  -------    -------
<S>                                                               <C>        <C>
OTHER  COMPREHENSIVE INCOME (LOSS), NET OF TAX:

  Net income                                                      $ 1,280    $ 1,099
  Net unrealized holding gains (losses) on securities available
     for sale during the period                                    (1,531)       106
  Less reclassification adjustment for gains (losses)
     included in net income                                             1        (12)
                                                                  -------    -------
COMPREHENSIVE (LOSS) INCOME                                       $  (252)   $ 1,217
                                                                  =======    =======
</TABLE>





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

                                                                               (Unaudited)
                                                                            Three Months Ended
                                                                               September 30,
                                                                           --------------------
                                                                             1999        1998
                                                                           --------    --------
<S>                                                                        <C>         <C>
Cash flows from (used in) operating activities:

Net income                                                                 $  1,280    $  1,099
Add (deduct) items not affecting cash flows from operating activities:
   Depreciation                                                                 226         202
   Provision for loan losses                                                    105          45
   Loss (gain) on trading account securities                                     12        (153)
   (Gain) on sale of loans  held for sale                                      --           (22)
   (Gain) on sale of securities available for sale                              (13)        (58)
   Proceeds from sale of loans held for sale                                   --         1,457
   Amortization of deferred loan fees, discounts and premiums                  (210)       (171)
   Decrease (increase) in trading account securities                            262      (2,700)
   (Increase) decrease in accrued interest receivable                          (577)       (166)
   (Increase) decrease in other assets                                       (1,212)      1,382
   (Decrease) increase in other liabilities                                    (329)      1,814
   (Decrease) increase in accrued interest payable                             (211)        271
                                                                           --------    --------
Net cash flows from (used in) operating activities                             (667)      1,543
                                                                           --------    --------
Cash flows from (used in) investment activities:

   Capital expenditures                                                         (90)       (422)
   Net increase in loans                                                    (13,716)       (721)
   Purchase of investment securities                                           (757)       --
   Proceeds from maturities, payments and calls of investment securities      1,096       4,040
   Purchase of securities available for sale                                (35,821)    (15,035)
   Proceeds from sales and calls of securities available for sale            21,526       7,297
                                                                           --------    --------
Net cash flows used in investment activities                                (27,762)     (3,384)
                                                                           --------    --------

<PAGE>
<CAPTION>
                                                                               (Unaudited)
                                                                            Three Months Ended
                                                                               September 30,
                                                                           --------------------
                                                                             1999        1998
                                                                           --------    --------
<S>                                                                        <C>         <C>
Cash flows from (used in) financing activities:

   Net  decrease in deposits before interest credited                       (17,188)     (7,369)
   Interest credited to deposits                                              3,843       2,527
   Increase in securities sold under agreements to repurchase                  --           291
   Proceeds from FHLB advances                                               38,400       8,599
   Repayments of FHLB advances                                                  (15)     (1,216)
   Decrease in advance payments by borrowers for taxes and insurance         (1,901)     (2,001)
   Net increase in other borrowings                                              58         114
   Cash dividends on common stock                                              (333)       (256)
   Repayments of principal on ESOP debt                                        --           (50)
   Common stock issued                                                          161         121
   Payment for fractional shares                                                 (7)        (11)
   Stock options exercised                                                       56          15
   Reduction of common stock acquired by ESOP                                  --            50
   Common stock repurchased as treasury stock                                  (191)       --
                                                                           --------    --------
Net cash flows from financing activities                                     22,883         814
                                                                           --------    --------
Net decrease in cash and cash equivalents                                    (5,546)     (1,027)

Cash and cash equivalents:

   Beginning of period                                                       18,603      15,905
                                                                           --------    --------
   End of period                                                           $ 13,057    $ 14,878
                                                                           ========    ========

Supplemental disclosures:
   Cash payments during the year for:

      Taxes                                                                $     54    $    315
      Interest                                                             $  4,582    $  3,500

Non-cash items:

   Stock dividend issued                                                   $  3,014    $  3,017
   Net unrealized (loss) gain on investment securities
       available for sale, net of tax                                      $ (1,532)   $    118
</TABLE>

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

Chester Valley Bancorp Inc. (the "Company") is a unitary thrift holding company,
incorporated in the Commonwealth of Pennsylvania in 1989. The Company is subject
to the regulations of certain  federal and state banking  agencies and undergoes
periodic  examinations  by those  regulatory  authorities.  The  business of the
Company and its subsidiaries  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.  All of the  branches are full  service and offer  commercial  and
retail  deposit and loan  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 extensive competition from other financial  institutions and other
companies that provide financial services. PCIS 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  and  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 small
corporate accounts.

Principles of Consolidation and Presentation

The accompanying  consolidated  financial statements include the accounts of the
Company and its  wholly-owned  subsidiaries,  the Bank and PCIS. 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 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.

The  accompanying  consolidated  financial  statements  have  been  prepared  in
accordance with instructions to Form 10-Q. 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-month  period ended September 30, 1999,
are not necessarily indicative of the results to be expected for the fiscal year
ending June 30, 2000. The  consolidated  financial  statements  presented herein
should be read in conjunction with the audited consolidated financial statements
and the notes thereto  included in the Company's  Annual Report to  Stockholders
for the fiscal year ended June 30, 1999.
<PAGE>
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 for the periods  presented herein
have been  adjusted  to reflect  the  effects of the 5% stock  dividend  paid in
September  1999 and the  three-for-two  stock  split  effected  in the form of a
dividend in December 1998.

The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
                                                           Three Months Ended
                                                              September 30,
                                                     ---------------------------
                                                         (Dollars in Thousands,
                                                       Except Per Share Amounts)

                                                        1999             1998
                                                     ----------       ----------
<S>                                                  <C>              <C>
Numerator:
   Net income                                        $    1,280       $    1,099
                                                     ==========       ==========

Denominator:
   Denominator for basic per share-
   weighted average
   shares                                             3,889,814        3,849,890

Effect of dilutive securities:
   Stock options                                         32,365           45,125
                                                     ----------       ----------

Denominator for diluted earnings
   per share-adjusted weighted
   average shares and assumed
   exercise                                           3,922,179        3,895,015
                                                     ==========       ==========

Basic earnings per share                             $      .33       $     0.29
                                                     ==========       ==========

Diluted earnings per share                           $      .33       $     0.28
                                                     ==========       ==========
</TABLE>
<PAGE>
NOTE 2 - LOANS RECEIVABLE

Loans receivable are summarized as follows:
<TABLE>
<CAPTION>
                                                 At September 30,     At June 30,
                                                      1999               1999
                                                    ---------         ---------
                                                       (Dollars in Thousands)
<S>                                                 <C>               <C>
First mortgage loans:
   Residential                                      $ 162,369         $ 157,342
   Construction-residential                            14,257            14,469
   Land acquisition and
      development                                       4,166             5,075
   Commercial                                          59,470            55,198
   Construction-commercial                             11,089             9,794
Commercial business                                    17,801            14,708
Consumer                                               55,801            51,416
                                                    ---------         ---------

Total loans                                           324,953           308,002
                                                    ---------         ---------

Less:
   Undisbursed loan proceeds:
      Construction-residential                         (8,590)           (8,712)
      Construction-commercial                          (5,922)           (2,681)
   Deferred loan fees - net                            (1,605)           (1,570)
   Allowance for loan losses                           (3,721)           (3,651)
                                                    ---------         ---------

Net loans                                           $ 305,115         $ 291,388
                                                    =========         =========

</TABLE>
<PAGE>
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 principal  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 three- month period ended  September 30, 1999, the
recorded investment in impaired loans was not material.

NOTE 3 - COMMITMENTS

Commitments to potential  mortgagors of the Bank amounted to $5.69 million as of
September  30, 1999,  of which $4.49 million was for  variable-rate  loans.  The
balance  of  the  commitments  represents  $1.20  million  of  fixed-rate  loans
(primarily consisting of single-family  residential  mortgages) bearing interest
rates of between 7.38% and 9.00%.  At September 30, 1999, the Company had $14.51
million of  undisbursed  construction  loan  funds as well as $16.77  million of
undisbursed remaining consumer and commercial line balances.

NOTE 4 - 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  September  30, 1999 and June 30, 1999 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
September  30, 1999 that  management  believes  have  changed the  institution's
category.
<PAGE>
The Bank's  regulatory  capital amounts and ratios are presented in the table as
follows (dollars in thousands):
<TABLE>
<CAPTION>
                                                                                                           To Be Well
                                                                                                         Capitalized
                                                                                Required                  Under Prompt
                                                                               For Capital               Corrective
                                                      Actual                Adequacy Purposes           Action Provisions
                                            -------------------------     ------------------------    ----------------------
                                              Amount         Ratio         Amount         Ratio        Amount       Ratio
                                              ------         -----         ------         -----        ------       -----
<S>                                            <C>            <C>           <C>             <C>        <C>           <C>
As of September 30, 1999:

   Total Capital
     (to Risk Weighted Assets)                 $35,376        12.95%        $21,853         8.00%      $27,316       10.00%

   Tier 1 Capital
     (to Risk Weighted Assets)                 $31,958        11.70%        $10,927         4.00%      $16,390        6.00%

   Tier 1 Capital
     (to Average Assets)                       $31,958         6.77%        $18,868         4.00%      $23,585        5.00%

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%
</TABLE>

NOTE 5 - 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  deposit 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.
<PAGE>
The following table highlights  income  statement and balance sheet  information
for each of the segments at or for September 30, 1999 and 1998:
<TABLE>
<CAPTION>
                                                   At and during the three months ended September 30,
                                                              (Dollars in Thousands)
                            -----------------------------------------------------------------------------------
                                             1999                                       1998
                            ----------------------------------------   ----------------------------------------
                               FFB           PCIS          Total           FFB           PCIS         Total
                            -----------    ---------    ------------   ------------    ---------    -----------
<S>                            <C>            <C>           <C>            <C>            <C>          <C>
Net interest
    income                      $3,848          $23          $3,871         $3,195          $24         $3,219
Other income                       498          760           1,258            644          742          1,386
Total Net income                 1,209           71           1,280          1,005           94          1,099
Total assets                   470,718        2,531         473,249        378,898        2,230        381,128
Total trading
    securities                   8,483          464           8,947         22,680          525         23,205
</TABLE>
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATION

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 the results or the
effect of future plans and strategy is inherently uncertain.  Factors that could
affect  results  include,   but  are  not  limited  to,  interest  rate  trends,
competition,  the general economic  climate in Chester County,  the mid-Atlantic
region and the United  States as a whole,  loan  delinquency  rates,  changes in
federal and state regulation,  Year 2000  uncertainties and other  uncertainties
described in the Company's filings with the Securities and Exchange  Commission.
These  factors  should  be  considered  in  evaluating   the  "forward   looking
statements", and undue reliance should not be placed on such statements.

                               FINANCIAL CONDITION

The Company's  total assets  increased to $473.25 million at September 30, 1999,
from  $451.16  million at June 30,  1999,  principally  due to a $13.73  million
increase in the loan portfolio  followed by a $12.26 million aggregate  increase
in trading  account  securities,  investment  securities  available for sale and
investment  securities to $138.88 million from $126.62 million at June 30, 1999.
Such  increases  were funded in large part by  increases  Federal Home Loan Bank
("FHLB")  advances from $50.38  million at June 30, 1999,  to $88.76  million at
September 30, 1999.

Stockholders'  equity  decreased to $33.29  million at  September  30, 1999 from
$33.85  million at June 30, 1999, as a result of the  recognition of an increase
in net  unrealized  losses on securities  available for sale,  net of taxes,  of
$1.53  million  and the  payment  during the period of cash  dividends  totaling
$333,000. The decrease in stockholders' equity was offset by net income of $1.28
million,  the sale of $161,000 of common stock in connection  with the Company's
dividend  reinvestment plan, and $56,000 received as a result of the exercise of
stock options.
<PAGE>
                              RESULTS OF OPERATIONS

Net interest income, on a fully tax equivalent  basis,  increased 22.7% to $4.11
million for the three-month  period ended September 30, 1999,  compared to $3.35
million  for the same  period in 1998.  Total  interest  income,  on a fully tax
equivalent  basis,  increased to $8.48 million for the three-month  period ended
September 30, 1999, from $7.12 million for the same period in 1998, primarily as
a result of the effect of an increase in the average balance of interest-earning
assets.

The average balance of interest-earning  assets increased to $442.99 million for
the  three-month  period ended  September 30, 1999, from $367.13 million for the
same period in 1998. The increase was primarily due to a $61.09 million increase
in the average  balance of all  investment  securities  during the same  period.
Partially  offsetting  the effect on  interest  income of the  increases  in the
average  balances  was the 10  basis-point  decrease  in the  yield  to 7.66% on
interest-earning  assets for the three-month period ended September 30, 1999, as
the result of declining general market rates of interest.

Total  interest  expense  increased  15.9% to $4.37 million for the  three-month
period ended  September  30, 1999,  compared to $3.77 million for same period in
1998.  This was  largely the result of the  increase  in the average  balance of
interest-bearing liabilities to $390.31 million for the three-month period ended
September 30, 1999, as compared to $314.68  million for the same period in 1998.
This increase was  principally  due to a $54.71 million  increase in the average
balance of deposits during the same period. Partially offsetting the increase in
interest  expense was a decrease in the average rate paid on such liabilities to
4.48% for the  three-month  period ended  September 30, 1999, from 4.79% for the
same period in 1998.  This was primarily the result of declining  general market
rates of interest and  management's  continued effort to focus its growth in the
areas of low-costing or no-cost deposits.

The tax equivalent  interest rate spread  increased to 3.18% from 2.97%, and the
average tax equivalent net yield on  interest-earning  assets increased to 3.71%
from  3.65%  for the  three-month  period  ended  September  30,  1999 and 1998,
respectively, due to the reasons discussed above.

Provision for Loan Losses

The Company  provided  $105,000 for loan losses  during the  three-month  period
ended  September  30, 1999,  as compared to $45,000 for the same period in 1998.
The increase is the result of the growth in the loan portfolio of $31.56 million
between  September 30, 1998 and September 30, 1999.  These  provisions have been
added  to the  Company's  allowance  for loan  losses  due to  current  economic
conditions  and  management's  assessment of the known and inherent risk of loss
existing in the loan  portfolio.  At September 30, 1999,  the allowance for loan
losses totaled $3.72 million or 1.20% of net loans (before allowance),  compared
to $3.65  million or 1.24% of net loans at June 30,  1999.  As a  percentage  of
non-performing  assets,  the allowance for loan losses was 384% at September 30,
1999  compared  to  391% at June  30,  1999,  and  further  compared  to 284% at
September 30, 1998.
<PAGE>

Other Income

Total other income  decreased to $1.26  million  during the  three-month  period
ended  September 30, 1999 as compared to $1.39 million during the same period in
1998.  Investment  services income increased 8.84% during the three-month period
ended  September 30, 1999,  compared to the same period in 1998 as the result of
PCIS'  increased  commission  income  due to an  increase  in  customer  trading
activity and an increase in money market fund fees resulting from an increase in
customer balances.  In addition,  PCIS' advisory fee income increased due to the
continued  implementation  of 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.  Investment  services  income also  increased as the
result of the  opening  of the Bank's  Investment  Services  and Trust  Division
("Trust  Division")  in the second  quarter of fiscal 1998.  The Trust  Division
offers both individual and corporate clients an array of money management, trust
and investment  services including portfolio  management,  estate and retirement
planning,  and self  directed  individual  retirement  accounts.  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 $39,000
in service  charges and fees during the  three-month  period ended September 30,
1999. The Company  recognized  gains on trading account  securities and sales of
assets  available  for  sale of  $1,000  during  the  three-month  period  ended
September 30, 1999 compared to $233,000 during the same period in 1998.

Operating Expenses

Total operating  expenses  increased  $333,000 or 11.1% to $3.32 million for the
three-month  period ended September 30, 1999 as compared to the same time period
in 1998. The increase in operating expenses for the three-month period in fiscal
2000 was due to (i) normal salary increases combined with benefits expense; (ii)
the increased  number of staff  associated with the addition of the Bank's Trust
Division  combined with the expansion of the Bank's  Commercial Loan Department;
(iii) an increase in occupancy and  equipment  expenses  related to  renovations
required to provide  accommodations for the Bank's new Trust Division;  and (iv)
an  increase  in  occupancy  and  equipment  expenses  related to the  Company's
conversion of its data service  processing  system and its computer hardware and
software upgrades as the result of the Company's  strategic  technology plan and
the Year 2000 issues (see " Year 2000 Issues" herein).

Income Tax Expense

Income tax expense was $422,000 for the  three-month  period ended September 30,
1999,  compared to $472,000 for the same period in 1998.  The decrease in income
tax expense for the  three-month  period  ended  September  30, 1999 is due to a
higher portion of the Company's pre-tax earnings  comprised of tax-free interest
income as compared to the same period in 1998.
<PAGE>
                                  ASSET QUALITY

Non-performing  assets are  comprised of  non-accrual  loans and REO and totaled
$969,000  and  $933,000 at  September  30, 1999 and June 30, 1999  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  borrower's  ability to service the
debt. At September 30, 1999,  the Company did not have any loans greater than 90
days delinquent  which were accruing  interest.  Non-performing  assets to total
assets and non-performing  loans to total assets were .20% at September 30, 1999
compared  to  .21%  at  June  30,  1999,   and  .31%  at  September   30,  1998.
Non-performing  loans, which totaled $969,000 at September 30, 1999 consisted of
8   single-family   residential   mortgage   loans   aggregating   $690,000  and
non-performing consumer and commercial business loans totaling $279,000.

At September 30, 1999 the Company's classified assets, which consisted of assets
classified  as  substandard,  doubtful or loss,  as well as REO,  totaled  $1.14
million  compared to $1.24  million at June 30,  1999,  and further  compared to
$1.48 million at September 30, 1998.  Included in assets classified  substandard
at September  30, 1999 and 1998,  and at June 30,  1999,  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 Company  maintains a $4.21 million
investment  in a long-term  tax-free  revenue  bond which it has  classified  as
special  mention as a result of a  deterioration  in cash flow for debt service.
The investment has been performing since its origination. Company management has
met with the debtor and a plan was  presented  to  management  to improve  these
deficiencies.  The Company has  underwritten and is reporting $2 million of this
investment  as a loan in connection  with its due diligence  since the bonds are
not rated.  This project is being  closely  monitored by management on a monthly
basis.
<PAGE>
                         LIQUIDITY AND CAPITAL RESOURCES

Management  monitors  liquidity  daily and  maintains  funding  sources  to meet
unforseen 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 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.

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.  The Company  uses 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. At September 30, 1999, the Company
had $5.69 million in commitments to fund loan originations. In addition, at such
date the Company had  undisbursed  loans in process  for  construction  loans of
$14.51 million and $16.77 million in undisbursed lines of credit.  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.

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 August 18, 1999, the Board of Directors declared
a 5% stock  dividend and a quarterly  cash  dividend of $.09 per share,  both of
which were paid on September 17, 1999, to stockholders of record as of September
3, 1999.

The Bank 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 4% of its net  withdrawable  accounts  plus  short-term
borrowings.  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 September 30, 1999 was 16.06%.
<PAGE>
                                YEAR 2000 ISSUES

Year  2000  issues  result  from the  inability  of many  computer  programs  or
computerized  equipment to accurately  calculate,  store or use data as the year
2000 approaches.  Banking,  by its nature,  is a very data processing  intensive
industry.  These  potential  shortcomings  could  result in a system  failure or
miscalculations causing disruptions of operation,  including among other things,
a  temporary  inability  to  process  transactions,   track  important  customer
information,  provide convenient access to this information, or engage in normal
business  operations.  In order to be ready for the year 2000,  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.

Please be advised that this portion of the  quarterly  report is designated as a
Year  2000  readiness  disclosure  pursuant  to the Year  2000  information  and
readiness disclosure act (Public Law 105-271,  October 19, 1998). It is intended
for  informational  purposes only and is not intended to be a representation  or
warranty.
<PAGE>
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  communications  between
the Bank's branches and its core  processor;  and 5) the software that processes
the backroom statement operations for the Bank's Trust Division. 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 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 September 30, 1999, the Company successfully
completed 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.
<PAGE>
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
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.  Installation
and testing of this  software has been  completed by PCIS.  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   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.
<PAGE>
Contingency Plans

The  Company's  Year  2000  Action  Plan  included  a  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.

Pursuant to FFIEC guidelines,  the Bank has adopted a liquidity contingency plan
to address the potential  liquidity issues that federal banking  regulators have
raised.  This plan includes  ordering extra currency,  utilizing lines of credit
and  holding  more  liquid  investments  in order to  provide  the Bank with the
ability  to  maintain  smooth  operations  in  the  event  of  abnormally  large
withdrawals of funds by consumers concerned with the effect of the advent of the
Year 2000.

Costs of Year 2000

The Company did not incur any costs associated with the Year 2000 project during
the first quarter and does not anticipate incurring any additional costs for the
Year 2000 project.
<PAGE>
                         RECENT ACCOUNTING ANNOUNCEMENTS

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 decided  whether to adopt the  statement
early or  determined  the  impact,  if any,  of this  statement,  including  its
provisions for the potential reclassifications of investments securities, on the
Company's operations, financial condition or equity.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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 52%
of its money market and NOW accounts are  sensitive to interest rate changes and
that  7% of its  savings  deposits  are  sensitive  to  interest  rate  changes.
Accordingly,   these  interest   sensitive  portions  of  such  liabilities  are
classified in the less than one year categories with the remainder placed 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. Although interest rate sensitivity gap
is a  useful  measurement  and  contributes  towards  effective  asset/liability
management,  it is  difficult to predict the effect of changing  interest  rates
solely on that measure. An alternative methodology is to estimate the changes in
the Company's portfolio equity over a range of interest rate scenarios.

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 September 30, 1999, the Company  serviced  $16.70
million of mortgage loans for others.  Sales of loans produce  future  servicing
income and provide funds for additional lending and other purposes.
<PAGE>
<TABLE>
<CAPTION>
                               Interest Rate Sensitivity Analysis at September 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
                                                        or Less    Six Months    One Year   Three Years    Five Years
                                                   ------------  ------------  ----------   -----------    ----------
<S>                                                <C>           <C>           <C>           <C>           <C>
INTEREST-EARNING ASSETS:
   Loans: (1)
        Real estate (2)                            $  20,271     $  15,573     $  35,097     $  81,881     $  44,501
        Commercial                                     9,852         1,541         2,046         3,401           700
        Consumer                                       8,093         1,996         4,262        13,982         9,144
   Securities and interest-bearing deposits           42,603         1,184         5,215        14,833        21,961
                                                   ---------     ---------     ---------     ---------     ---------

   Total interest-earning assets                   $  80,819     $  20,294     $  46,620     $ 114,097     $  76,306
                                                   ---------     ---------     ---------     ---------     ---------

INTEREST-BEARING LIABILITIES:
   Savings accounts                                $     501     $     500     $     999     $    --       $    --
   NOW accounts                                          450           450           900          --            --
   Money market accounts                              45,931          --            --            --            --
   Certificate accounts                               68,974        22,726        34,852        67,630         8,937
   Borrowings                                         57,442            18         4,114         8,324        13,055
                                                   ---------     ---------     ---------     ---------     ---------
   Total interest-bearing liabilities              $ 173,298     $  23,694     $  40,865     $  75,954     $  21,992
                                                   ---------     ---------     ---------     ---------     ---------

Cumulative excess of interest-earning assets
   to interest-bearing liabilities                 ($ 92,479)    ($ 95,879)    ($ 90,124)    ($ 51,981)    $   2,333
                                                   =========     =========     =========     =========     =========
Cumulative ratio of interest rate-sensitive
   assets to interest rate-sensitive liabilities        46.6%         51.3%         62.1%         83.4%        100.7%
                                                   =========     =========     =========     =========     =========
Cumulative difference as a percentage of
   total assets                                        (19.5%)       (20.3%)       (19.0%)       (11.0%)         0.5%
                                                   =========     =========     =========     =========     =========
<PAGE>
<CAPTION>


                                                    More Than
                                                   Five Years        Total
                                                   ----------   ----------
<S>                                                <C>          <C>
INTEREST-EARNING ASSETS:
   Loans: (1)
        Real estate (2)                            $  38,762    $ 236,085
        Commercial                                        40       17,580
        Consumer                                      14,730       52,207
   Securities and interest-bearing deposits           63,290      149,086
                                                   ---------    ---------

   Total interest-earning assets                   $ 116,822    $ 454,958
                                                   ---------    ---------

INTEREST-BEARING LIABILITIES:
   Savings accounts                                $  25,002    $  27,002
   NOW accounts                                       34,726       36,526
   Money market accounts                                --         45,931
   Certificate accounts                                2,484      205,603
   Borrowings                                         13,477       96,430
                                                   ---------    ---------
   Total interest-bearing liabilities              $  75,689    $ 411,492
                                                   ---------    ---------

Cumulative excess of interest-earning assets
   to interest-bearing liabilities                 $  43,466    $  43,466
                                                   =========    =========
Cumulative ratio of interest rate-sensitive
   assets to interest rate-sensitive liabilities       110.6%       110.6%
                                                   =========    =========
Cumulative difference as a percentage of
   total assets                                          9.2%         9.2%
                                                   =========    =========
</TABLE>

(1)  Net of undisbursed loan proceeds.
(2)  Includes commercial mortgage loans.

Certain  shortcomings  are  inherent in the method of analysis  presented in the
table above.  For example,  although  certain  assets and  liabilities  may have
similar maturities or periods to repricing,  they may react in different degrees
to changes in market interest  rates.  Also, the interest rates on certain types
of assets and liabilities may fluctuate in advance of changes in market interest
rates,  while  interest  rates on other  types may lag behind  changes in market
rates.  Additionally,  certain  assets,  such  as  adjustable-rate  loans,  have
features which restrict changes in interest rates both on a short-term basis and
over the life of the asset.  Further, in the event of changes in interest rates,
prepayment and early withdrawal levels would likely deviate  significantly  from
those assumed in calculating the table.  Finally,  the ability of many borrowers
to service their  adjustable-rate loans may decrease in the event of an interest
rate increase.
<PAGE>
Part II. Other Information

         Item 1.  Legal Proceedings

                  None

         Item 2.  Changes in Securities and Use of Proceeds

                  None

         Item 3.  Defaults Upon Senior Securities

                  Not Applicable.

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

                  The  Company's  annual  meeting  of  stockholders  was held on
                  October 27, 1999.  The  following  matters were  presented for
                  stockholder action at such meeting:

                  (1)  To elect  three  directors  for a term of three  years or
                       until their successors have been elected and qualified:

                  Name                          Votes For        Votes Withheld
                  ----                          ---------        --------------
                  Gerard F. Griesser            3,328,179             3,352
                  Richard L. Radcliff           3,325,925             5,606
                  Emory S. Todd, Jr.            3,328,179             3,352

                  (2)  To ratify the  appointment  of KPMG LLP as the  Company's
                       independent  auditors for the fiscal year ending June 30,
                       2000:

                  Votes For            Votes Against             Votes Abstained
                  ---------            -------------             ---------------
                  3,325,246               2,003                       4,278

         Item 5. Other Information

                 None

         Item 6. Exhibits and Reports on Form 8-K

                 Exhibit 27 Financial Data Schedule
<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         11-12-99                    /s/Ellen Ann Roberts
     ------------------------            ------------------------------------
                                         Ellen Ann Roberts
                                         Chairman and Chief Executive Officer

Date          11-12-99                   /s/Anthony J. Biondi
     ------------------------            ------------------------------------
                                         Anthony J. Biondi
                                         President and Chief Operating Officer