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 March 31, 1998

                                       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)                     2,188,716
         ------------------------------                     ---------
              (Title of Each Class)                (Number of Shares Outstanding
                                                        as of May 1, 1998)
<PAGE>
                   CHESTER VALLEY BANCORP INC. AND SUBSIDIARY

                                      INDEX

                                                                                
                                                                                
PART 1.  FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS

         CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
           March 31, 1998 and June 30, 1997 (Unaudited)                         

         CONSOLIDATED STATEMENTS OF OPERATIONS
           Three Months Ended March 31, 1998 and 1997 (Unaudited)               

         CONSOLIDATED STATEMENTS OF OPERATIONS
           Nine Months Ended March 31, 1998 and 1997 (Unaudited)                

         CONSOLIDATED STATEMENTS OF CASH FLOWS
           Nine Months Ended March 31, 1998 and 1997 (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)

                                                                           March 31,      June 30,
                                                                             1998           1997
                                                                          ---------      ---------
<S>                                                                       <C>            <C>  
ASSETS:
Cash in banks .......................................................     $   4,432      $   2,610
Interest-bearing deposits ...........................................         6,172          6,844
Investment securities available for sale ............................        41,569         27,566
Investment securities (market value - March 31, $15,616;  June 30,
  $19,393)...........................................................        15,565         19,469
Accrued interest receivable .........................................         2,059          2,108
Loans held for sale .................................................           133            106
Loans receivable, less allowance for loan losses of $3,251 and $2,855       264,227        257,040
Property and equipment ..............................................         6,969          5,442
Other assets ........................................................         2,739          2,488
                                                                          ---------      ---------
     Total Assets ...................................................     $ 343,865      $ 323,673
                                                                          =========      =========

LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposit accounts ....................................................     $ 278,370      $ 260,750
Securities sold under agreements to repurchase ......................           197             12
Advance payments by borrowers for taxes and insurance ...............         2,267          2,999
Employee Stock Ownership Plan ("ESOP") debt .........................           195            333
Federal Home Loan Bank advances .....................................        30,667         30,198
Other borrowings ....................................................           303            249
Accrued interest payable ............................................           932            788
Other liabilities ...................................................         1,137          1,279
                                                                          ---------      ---------
     Total Liabilities ..............................................       314,068        296,608
                                                                          ---------      ---------
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;
  2,184,753 and 2,072,083 shares issued at March 31 and June 30,
  respectively ......................................................         2,185          2,072
Additional paid-in capital ..........................................        15,127         12,772
Common stock acquired by ESOP .......................................          (195)          (333)
Retained earnings - partially restricted ............................        12,363         12,750
Net unrealized gain on securities available for sale, net of taxes ..           317              3
                                                                          ---------      ---------
  Subtotal ..........................................................        29,797         27,264
Treasury stock, at cost (13,213 shares at June 30) ..................          --             (199)
                                                                          ---------      ---------
     Total Stockholders' Equity .....................................        29,797         27,065
                                                                          ---------      ---------

     Total Liabilities and Stockholders' Equity .....................     $ 343,865      $ 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)


                                                                  Three Months Ended
                                                                        March 31,
                                                              ----------------------------
                                                                 1998             1997
                                                              -----------     ------------
<S>                                                           <C>             <C>
INTEREST INCOME:
  Loans .................................................     $     5,557     $     5,029
  Investment securities and interest-bearing deposits....             836             541  
                                                              -----------     -----------
     Total interest income ..............................           6,393           5,570
                                                              -----------     -----------
INTEREST EXPENSE:
  Deposits ..............................................           2,794           2,572
  Securities sold under agreements to repurchase ........               3            --
  Short-term borrowings .................................             191              79
  Long-term borrowings ..................................             288             213
                                                              -----------     -----------
     Total interest expense .............................           3,276           2,864
                                                              -----------     -----------

NET INTEREST INCOME .....................................           3,117           2,706
  Provision for loan losses .............................             201              97
                                                              -----------     -----------
      Net interest income after provision for loan losses           2,916           2,609
                                                              -----------     -----------
OTHER INCOME:
  Service charges and fees ..............................             266             228
  Gain (loss) on sale of loans held for sale ............              10              (2)
  Gain on sale of securities available for sale .........             231              30
  Other .................................................              62              40
                                                              -----------     -----------
     Total other income .................................             569             296
                                                              -----------     -----------
OPERATING EXPENSES:
  Salaries and employee benefits ........................           1,043             978
  Occupancy and equipment ...............................             435             379
  Data processing .......................................             195             142
  Deposit insurance premiums ............................              41               9
  Advertising ...........................................              83              36
  Other .................................................             438             357
                                                              -----------     -----------
     Total operating expenses ...........................           2,235           1,901
                                                              -----------     -----------

  Income before income taxes ............................           1,250           1,004
  Income tax expense ....................................             346             275
                                                              -----------     -----------

NET INCOME ..............................................     $       904     $       729
                                                              ===========     ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                         CHESTER VALLEY BANCORP INC. AND SUBSIDIARY
                           CONSOLIDATED STATEMENTS OF OPERATIONS
                    (Dollars in Thousands, Except for Per Share Amounts)
                                        (continued)


                                                                  Three Months Ended
                                                                        March 31,
                                                              ----------------------------
                                                                 1998             1997
                                                              -----------     ------------
<S>                                                           <C>             <C>
EARNINGS PER SHARE (1):
  Basic .................................................     $      0.42     $      0.34
                                                              ===========     ===========
  Diluted ...............................................     $      0.41     $      0.34
                                                              ===========     ===========

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

WEIGHTED AVERAGE SHARES OUTSTANDING (1):
  Basic .................................................       2,178,362       2,151,374
                                                              ===========     ===========
  Diluted ...............................................       2,212,732       2,160,747
                                                              ===========     ===========
</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 SUBSIDIAR
                          CONSOLIDATED STATEMENTS OF OPERATIONS
                  (Dollars in Thousands, Except for Per Share Amounts)

                                                                  Nine Months Ended
                                                                       March 31,
                                                              ------------------------- 
                                                                 1998          1997
                                                              ----------     ---------- 
<S>                                                           <C>            <C>
INTEREST INCOME:
  Loans .................................................     $   16,628     $   15,022
  Investment securities and interest-bearing deposits ...          2,420          1,533
                                                              ----------     ----------
     Total interest income ..............................         19,048         16,555
                                                              ----------     ----------
INTEREST EXPENSE:
  Deposits ..............................................          8,518          7,584
  Securities sold under agreements to repurchase ........              6             51
  Short-term borrowings .................................            738            231
  Long-term borrowings ..................................            635            595
                                                              ----------     ----------
     Total interest expense .............................          9,897          8,461
                                                              ----------     ----------

NET INTEREST INCOME .....................................          9,151          8,094
  Provision for loan losses .............................            441            357
                                                              ----------     ----------
      Net interest income after provision for loan losses          8,710          7,737
                                                              ----------     ----------
OTHER INCOME:
  Service charges and fees ..............................            849            736
  Gain on sale of loans held for sale ...................              9              1
  Gain on sale of securities available for sale .........            397             98
  Other .................................................            147            137
                                                              ----------     ----------
     Total other income .................................          1,402            972
                                                              ----------     ----------
OPERATING EXPENSES:
  Salaries and employee benefits ........................          3,050          2,780
  Occupancy and equipment ...............................          1,286          1,117
  Data processing .......................................            538            450
  SAIF special assessment ...............................           --            1,387
  Deposit insurance premiums ............................            120            270
  Advertising ...........................................            202            169
  Other .................................................          1,285          1,026
                                                              ----------     ----------
     Total operating expenses ...........................          6,481          7,199
                                                              ----------     ----------

  Income before income taxes ............................          3,631          1,510
  Income tax expense ....................................          1,043            324
                                                              ----------     ----------

NET INCOME ..............................................     $    2,588     $    1,186
                                                              ==========     ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                        CHESTER VALLEY BANCORP INC. AND SUBSIDIAR
                          CONSOLIDATED STATEMENTS OF OPERATIONS
                  (Dollars in Thousands, Except for Per Share Amounts)
                                      (continued)

                                                                  Nine Months Ended
                                                                       March 31,
                                                              ------------------------- 
                                                                 1998          1997
                                                              ----------     ---------- 
<S>                                                           <C>            <C>
EARNINGS PER SHARE (1):
  Basic .................................................     $     1.19     $     0.55
                                                              ==========     ==========

  Diluted ...............................................     $     1.18     $     0.55
                                                              ==========     ==========

DIVIDENDS PER SHARE PAID DURING PERIOD (1) ..............     $     0.32     $     0.23
                                                              ==========     ==========

WEIGHTED AVERAGE SHARES OUTSTANDING (1):
  Basic .................................................      2,167,667      2,150,912
                                                              ==========     ==========

  Diluted ...............................................      2,199,719      2,160,870
                                                              ==========     ==========
</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)

                                                                                       Nine Months Ended March 31,
                                                                                       --------------------------- 
                                                                                            1998            1997
                                                                                         ---------      --------- 
<S>                                                                                      <C>            <C>
Cash flows from operating activities:
Net income .........................................................................     $   2,588      $   1,186
Add (deduct) items not affecting cash flows from operating activities:
   Depreciation
   Provision for losses on loans ...................................................           516            426
   Gain on sale of loans held for sale .............................................           441            357
   Gain on sale of securities available for sale ...................................            (9)            (1)
   Amortization of deferred loan fees, discounts and premiums ......................          (397)           (98)
   Decrease (increase) in accrued interest receivable ..............................          (422)          (392)
   Increase in other assets ........................................................            49           (224)
   Increase (decrease) in other liabilities ........................................          (251)          (618)
   Increase in accrued interest payable ............................................          (142)           536
                                                                                               144            133
                                                                                         ---------      --------- 
Net cash flows from operating activities ...........................................         2,517          1,305
                                                                                         ---------      --------- 

Cash flows from (used in) investment activities:
   Capital expenditures ............................................................        (2,043)          (510)
   Net increase in loans and loans held for sale ...................................       (11,532)       (21,672)
   Proceeds from sale of loans held for sale .......................................         4,099            905
   Proceeds from maturities, payments and calls of investment securities ...........         4,431          4,066
   Purchase of investment securities ...............................................          (533)          (221)
   Purchase of securities available for sale .......................................      (243,340)       (69,909)
   Proceeds from sale of securities available for sale .............................       230,263         50,776
   Proceeds from real estate owned .................................................          --               86
                                                                                         ---------      --------- 
Net cash flows used in investment activities .......................................       (18,655)       (36,479)
                                                                                         ---------      --------- 
Cash flows from (used in) financing activities:
   Net increase in deposits before interest credited ...............................        10,335          7,716
   Interest credited to deposits ...................................................         7,285          6,382
   Proceeds under securities sold under agreements to repurchase ...................           185            169
   Proceeds from FHLB advances .....................................................        21,275         18,914
   Repayments of FHLB advances .....................................................       (20,806)        (1,474)
   Decrease in advance payments by borrowers for taxes and insurance ...............          (732)          (806)
   Net increase in other borrowings ................................................            54            250
   Cash dividends on common stock ..................................................          (812)          (533)
   Repayments of principal on ESOP debt ............................................          (138)          (132)
   Sale of common stock under the dividend reinvestment plan .......................           408             (9)
   Payment for fractional shares ...................................................            (7)           (17)
   Stock options exercised .........................................................           268            290
   Reduction of common stock acquired by ESOP ......................................           138            132
   Stock repurchased as treasury stock .............................................          (165)          (324)
                                                                                         ---------      --------- 
Net cash flows from financing activities ...........................................        17,288         30,558
                                                                                         ---------      --------- 
Increase (decrease) in cash and cash equivalents ...................................         1,150         (4,616)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                    CHESTER VALLEY BANCORP INC. AND SUBSIDIARY
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                              (Dollars in Thousands)
                                                   (continued)

                                                                                       Nine Months Ended March 31,
                                                                                       --------------------------- 
                                                                                            1998            1997
                                                                                         ---------      --------- 
<S>                                                                                      <C>            <C>

Cash and cash equivalents:
   Beginning of period .............................................................         9,454         10,312
                                                                                         ---------      --------- 
   End of period ...................................................................     $  10,604      $   5,696
                                                                                         =========      =========

Supplemental disclosures:
   Cash payments during the year for:
      Taxes ........................................................................     $   1,081      $     617
      Interest......................................................................     $   9,753      $   8,328                 

Non-cash items:
   Acquisition of real estate in settlement of loans ...............................     $    --        $     448
   Stock dividend issued............................................................     $   2,155      $   1,516  
   Net unrealized gain (loss)on investment securities available for sale ...........     $     513      $    (240) 
   Tax effect on unrealized gain (loss) on investment securities available for sale.     $     199      $     (82) 
</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  nine-month
                  periods ended March 31, 1998, 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
<PAGE>
                  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.

                  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  as to  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,
<PAGE>
                  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  nine-month  period
                  ended March 31,  1998,  the  recorded  investment  in impaired
                  loans  was  not  material.   The  Company's   policy  for  the
                  recognition  of interest  income on impaired loans is the same
                  as for non-accrual  loans discussed below.  Impaired loans are
                  charged off when the Company  determines  that  foreclosure is
                  probable and the fair value of the collateral is less than the
                  recorded investment of the impaired loan.

                  Loans, Loan Origination Fees and Uncollected Interest

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

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

                  Loans Held for Sale

                  The Company periodically  identifies certain loans as held for
                  sale at the time of their  origination.  These  loans  consist
                  primarily of fixed-rate,  single-family  residential  mortgage
                  loans which meet the underwriting  characteristics  of certain
                  government-sponsored  enterprises  (conforming  loans).  Loans
                  held for sale are  carried at the lower of  aggregate  cost or
                  fair value,  with 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
<PAGE>
                  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.

                  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  EPS
                  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.  This statement requires
                  restatement  of  all  prior-period  EPS  data  presented.  The
                  Company  adopted  SFAS  No.  128  as  of  December  31,  1997.
                  Accordingly, 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             Nine Months Ended
                                     March 31,                      March 31,
                            -------------------------     -------------------------           
                                              (Dollars in Thousands)
Basic EPS Computation          1998           1997           1998            1997
                            ----------     ----------     ----------     ----------
<S>                         <C>            <C>            <C>            <C>
Numerator .............     $      904     $      729     $    2,588     $    1,186
Denominator:
   Weighted average
     common shares 
     outstanding.......      2,178,362      2,151,374      2,167,667      2,150,912

Basic EPS .............     $      .42     $      .34     $     1.19     $      .55
                            ==========     ==========     ==========     ==========

Diluted EPS Computation

Numerator .............     $      904     $      729     $    2,588     $    1,186
Denominator:
   Weighted average
     common shares 
     outstanding ......      2,178,362      2,151,374      2,167,667      2,150,912     
   Options outstanding          34,370          9,373         32,052          9,958
                            ----------     ----------     ----------     ----------
   Total shares .......      2,212,732      2,160,747      2,199,719      2,160,870
                            ==========     ==========     ==========     ==========

Diluted EPS ...........     $      .41     $      .34     $     1.18     $      .55
                            ==========     ==========     ==========     ==========
</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 March 31,       At June 30,
                                                     1998                1997
                                                   ---------          ---------
                                                       (Dollars in Thousands)
<S>                                                <C>                <C>
First mortgage loans:
   Residential ...........................         $ 156,259          $ 159,431
   Construction-residential ..............            10,722              9,873
   Land acquisition and
      development ........................             6,713              6,763
   Commercial ............................            35,482             33,981
   Construction-commercial ...............             7,669              6,271
Commercial business ......................            11,039              7,863
Consumer .................................            50,273             47,343
                                                   ---------          ---------

Total loans ..............................           278,157            271,525
                                                   ---------          ---------
Less:
   Undisbursed loan proceeds:
      Construction-residential ...........            (6,103)            (6,599)
      Construction-commercial ............            (3,044)            (3,494)
   Deferred loan fees - net ..............            (1,532)            (1,537)
   Allowance for loan losses .............            (3,251)            (2,855)
                                                   ---------          ---------

Net loans ................................         $ 264,227          $ 257,040
                                                   =========          =========
</TABLE>
NOTE 4 - COMMITMENTS

                  Commitments  to potential  mortgagors  of the Bank amounted to
                  $8.52 million as of March 31, 1998, of which  $895,000 was for
                  variable-rate loans. The balance of the commitments represents
                  $7.63 million of fixed-rate  loans bearing  interest  rates of
                  between 5.50% and 9.625%.  At March 31, 1998,  the Company had
                  $9.15 million of undisbursed  construction  loan funds as well
                  as  $15.26  million  of  undisbursed  remaining  consumer  and
                  commercial 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 March 31, 1998,  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>
                                               March 31, 1998                                      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        $   28,731      $    28,731     $      30,632      $    26,750       $   26,750     $     29,057
Minimum Required  Regulatory         6,870           13,740            16,746            4,855            9,710           15,689
                                ----------      -----------     -------------      -----------       ----------     ------------
Excess Regulatory Capital       $   21,861      $    14,991     $      13,886      $    21,895       $   17,040     $     13,368 
                                ==========      ===========     =============      ===========       ==========     ============
Regulatory Capital as a
  Percentage of Assets                8.36%            8.36%            14.63%            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             6.86%            5.36%             6.63%            6.76%             5.26%           6.82%  
                                ==========      ===========     =============      ===========       ==========     ============
</TABLE>

Neither  the  Company  nor the  Bank is  under  any  agreement  with  regulatory
authorities,  nor are they aware of any current  recommendations  by  regulatory
authorities which, if they were to be implemented,  would have a material effect
on the liquidity,  capital  resources or operations of the Company and the Bank,
taken as a whole.


NOTE 6 -          PENDING ACQUISITION

                  On December  10, 1997 the Company  entered  into a  definitive
                  agreement to acquire  Philadelphia  Corporation for Investment
                  Services  ("PCIS").  PCIS is a  securities  broker/dealer  and
                  investment  advisor  with  offices in Wayne and  Philadelphia,
                  Pennsylvania.  It is registered as a  broker/dealer  in all 50
                  states and the  District  of  Columbia,  and as an  investment
<PAGE>
                  advisor with the Securities and Exchange  Commission  ("SEC").
                  Under  the  terms of the  agreement,  PCIS  shareholders  will
                  receive  23.4239 shares of Chester Valley Bancorp common stock
                  for each PCIS share owned.  The transaction  will be accounted
                  for as a pooling-of-interest  and is subject to regulatory and
                  PCIS  shareholder  approvals.  As of March 31,  1998 the total
                  value of the transaction is approximately $4.71 million and is
                  subject to change based on the Company's  stock price prior to
                  finalization  of  the  acquisition.   When  consummated,   the
                  transaction will enhance both the Company's and PCIS's ability
                  to meet  customers'  complete  financial  services needs while
                  continuing  to provide the personal  service and  professional
                  trust which are so important in  fiduciary  relationships  and
                  which is a basic corporate  tenant of the Company's  operating
                  philosophy.
 


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


                               FINANCIAL CONDITION

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, but are not limited to, changes in
general  economic and market  conditions,  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  and other  factors
discussed in documents filed by the Company with the SEC periodically.

The Company's total assets  increased to $343.87 million at March 31, 1998, from
$323.67 million at June 30, 1997,  principally due to a $14.00 million  increase
in  investment  securities  available  for sale  accompanied  by a $7.19 million
increase in loans  receivable.  Such  increases  were funded in large part by an
increase in deposits  from $260.75  million to $278.37  million  during the same
period.

Stockholders'  equity increased to $29.80 million at March 31, 1998, from $27.07
million at June 30, 1997,  primarily as a result of net income of $2.59 million,
the recognition of an increase in net unrealized  gains on securities  available
for sale,  net of taxes,  of  $314,000,  the sale of $408,000 of common stock in
connection with the Company's dividend reinvestment plan, $268,000 received as a
result of the exercise of stock  options,  and the  reduction  in the  principal
balance of the ESOP debt by $138,000.  The increase in stockholders'  equity was
partially  offset by the payment  during the period of cash  dividends  totaling
$812,000  combined with the repurchase of $165,000 of the Company's common stock
during the nine month period ended March 31, 1998.
<PAGE>
                              RESULTS OF OPERATIONS

Net interest income, on a fully tax equivalent  basis,  increased 15.8% to $3.22
million for the  three-month  period  ended March 31,  1998,  and 14.2% to $9.48
million  for the  nine-month  period  ended  March 31,  1998,  compared to $2.78
million and $8.30  million,  respectively,  for the same periods in 1997.  Total
interest income, on a fully tax equivalent basis, increased to $6.50 million and
$19.38 million for the three- and nine- month periods ended March 31, 1998, from
$5.64  million and $16.76  million for the same periods in 1997,  primarily as a
result of the combined  effects of both an increase in both the average  balance
of interest-earning assets as well as the average yield earned on such assets.

The average balance of interest-earning  assets increased to $318.47 million and
$315.11  million for the three- and  nine-month  periods  ended March 31,  1998,
respectively,  from $283.16 million and $276.30 million,  respectively,  for the
same periods in 1997. In addition, the average yield on interest-earning  assets
increased to 8.16% and 8.20% for the three- and  nine-month  periods ended March
31, 1998, from 7.97% and 8.09% for the same periods in 1997.

Loan originations of $69.88 million during the nine months ended March 31, 1998,
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 49% of the loan
originations  during the nine months ended March 31, 1998, 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.

Total interest  expense  increased to $3.28 million and $9.90 million from $2.86
million and $8.46 million for the respective  three- and  nine-month  periods in
1998 and 1997,  largely as a result of the  increase in the  average  balance of
interest-bearing  liabilities  to $275.86  million and  $272.43  million for the
three and nine months ended March 31, 1998, respectively, as compared to $245.93
million and $238.79 million for the same periods in 1997.  Also  contributing to
the  increase  in interest  expense was an increase in the average  rate paid on
such  liabilities  to 4.76% and 4.85% for the  respective  three- and nine-month
periods ended March 31, 1998, from 4.65% and 4.72% for the same periods in 1997,
respectively.

The tax equivalent  interest rate spread  decreased to 3.36% from 3.37%, and the
average net yield on interest-earning  assets remained the same at 4.01% for the
nine-month  periods  ended  March 31,  1998 and 1997,  respectively,  due to the
reasons discussed above.

Provision for Loan Losses

The Company provided $201,000 and $441,000 for loan losses during the three- and
nine-month  periods ended March 31, 1998,  respectively,  as compared to $97,000
and $357,000,  respectively, for the same periods in 1997. These provisions have
been added to the Company's  allowance  for loan losses due to current  economic
conditions and management's  assessment of the inherent risk of loss existing in
the loan  portfolio.  At March 31, 1998,  the allowance for loan losses  totaled
$3.25  million  or 1.22% of net  loans  (before  allowance),  compared  to $2.86
<PAGE>
million  or 1.10% of net loans and $2.71  million  or 1.10% of net loans at June
30, 1997, and March 31, 1997,  respectively.  As a percentage of  non-performing
assets,  the  allowance  for  possible  loan losses was 390% at March 31,  1998,
compared to 220% at June 30,  1997,  and  further  compared to 187% at March 31,
1997.

Other Income

Total other income increased to $569,000 and $1.40 million during the three- and
nine-month periods ended March 31, 1998,  respectively,  as compared to $296,000
and $972,000 during the same periods in 1997 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 $849,000 from $736,000 during the nine-month periods ended
March 31, 1998 and 1997, respectively. Gains on sales of securities increased to
$397,000  for the nine months  ended March 31,  1998,  from $98,000 for the same
period in 1997.

Operating Expenses

Total  operating  expenses  for the  three-month  period  ended March 31,  1998,
increased to $2.24 million from $1.90 million for the same three-month period in
1997. Total operating  expenses for the nine-month  period ended March 31, 1998,
decreased  to $6.48  million  from $7.20  million  for the same  period in 1997.
Operating  expenses  for the nine months  ended March 31,  1997  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 quarter ending December 31, 1996.

Excluding the $1.39 million  one-time SAIF assessment,  the Company's  operating
expenses  would have  increased  during the nine months ended March 31, 1998, as
compared to the same period in 1997. The increase in operating  expenses for the
three-  and nine-  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
nine-month  period of fiscal  1998 as  opposed to only the  six-month  period in
fiscal 1997.

Income Tax Expense

Income tax expense was $346,000 and $1.04 million for the three- and  nine-month
periods ended March 31, 1998, respectively, as compared to $275,000 and $324,000
for the same periods in 1997,  reflecting  the  increased  profitability  of the
Company in the 1998 periods.
<PAGE>
                                  ASSET QUALITY

Non-performing  assets are  comprised of  non-accrual  loans and REO and totaled
$833,000  and  $748,000  at March 31,  1998,  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 March
31, 1998,  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 .24% at March 31,  1998,  compared to
 .23% at June 30,  1997,  and .47% and .32%,  respectively,  at March  31,  1997.
Non-performing  loans,  which totaled  $833,000 at March 31, 1998,  consisted of
eight  residential  mortgage loans aggregating  $584,000,  one construction loan
totaling $55,000, and $194,000 in consumer loans.

At March 31, 1998, the Company's  classified  assets,  which consisted of assets
classified  as  substandard,  doubtful or loss,  as well as REO,  totaled  $1.24
million  compared to $1.40  million at June 30,  1997,  and further  compared to
$1.87 million at March 31, 1997.  Included in the assets classified  substandard
at March 31, 1998 and 1997,  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 $409,000 of classified  assets which were not
considered  non-performing at March 31, 1998, were comprised  primarily of three
loans to one borrower totaling $254,000.  Such loans 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  nine  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  March  31,  1998,  the  total  of  approved  mortgage  loan
commitments amounted to $8.52 million. In addition, at such date the Company had
$9.15  million of  undisbursed  construction  loan  funds and $15.26  million of
undisbursed  remaining  consumer and commercial  line balances.  Certificates of
deposit  totaling $53.02 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 February  18,  1998,  the Board of  Directors
declared a quarterly  cash  dividend of $.11 per share,  which was paid on March
19, 1998, to stockholders of record as of March 5, 1998.
<PAGE>
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 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 March 31,
1998 was 13.38%.

                         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 March  31,  1998,  $125.38  million,  or  37.7%  of the  Company's
interest-sensitive   assets  and  $156.79  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 9.1%. The table on
page 23  summarizes  the  contractual  maturities  or  repricing  periods of the
Company's  interest-earning assets and interest-bearing  liabilities as of March
31, 1998.  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 23 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.
<PAGE>
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 March 31, 1998, the Company serviced $27.13 million
of mortgage loans for others. Sales of loans produce future servicing income and
provide funds for additional lending and other purposes.


                        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 or  periods  set forth in that  financial
statement.  SFAS No. 130 is effective for fiscal years  beginning after December
15, 1997. The  disclosures  contained in this Form 10-QSB are in compliance with
SFAS No.130.

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>
In February 1998, the FASB issued SFAS No. 132,  "Employer's  Disclosures  about
Pensions and other Post Retirement  Benefits." This statement revises employer's
disclosures  about pension and other  postretirement  benefit plans. It does not
change the  measurement  or  recognition  of those plans.  It  standardizes  the
disclosure  requirements for pensions and other  postretirement  benefits to the
extent practicable,  requires  additional  information on changes in the benefit
obligations  and fair  values  of plan  assets  that will  facilitate  financial
analysis,  and eliminates  certain  disclosures  that are no longer as useful as
they were when FASB Statements No. 87, "Employers' Accounting for Pensions," No.
88,  "Employers"  Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits," and No. 106, "Employers' Accounting
for Other Than  Pensions,"  were issued.  This  statement,  requires  changes in
disclosures  and would not effect the financial  condition of the Company.  This
Statement is effective for fiscal years beginning after December 15, 1997.
<PAGE>
<TABLE>
<CAPTION>
                                     Interest Rate Sensitivity Analysis at March 31, 1998
                                                    (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)     $ 23,128       $ 14,915       $ 23,356       $ 20,644       $  6,832
       Balloon and fixed-rate mortgages (2) ......        4,661          3,630         10,861         23,172         26,585
       Consumer (2) (3) ..........................        7,677          1,223          2,523         11,173          8,977
       Commercial business .......................        5,708            264            522          2,035          1,954
   Securities and interest-bearing deposits (4) ..       13,329          8,322          5,264          6,484          6,063
                                                       --------       --------       --------       --------       --------

   Total interest-earning assets .................     $ 54,503       $ 28,354       $ 42,526       $ 63,508       $ 50,411
                                                       --------       --------       --------       --------       --------

INTEREST-BEARING LIABILITIES:
   Savings accounts (5) ..........................     $    500       $    498       $  1,002           --             --   
   NOW accounts (5) ..............................          450            450            900           --             --   
   Money market accounts (5) .....................       31,040           --             --             --             --   
   Certificate accounts ..........................       53,519         21,651         35,461         38,416         11,803
   Securities sold under agreements to
      repurchase .................................          197           --             --             --             --   
   Borrowings ....................................        8,909          1,270            939          7,191          9,728
                                                       --------       --------       --------       --------       --------
   Total interest-bearing liabilities ............     $ 94,615       $ 23,869       $ 38,302       $ 45,607       $ 21,531
                                                       --------       --------       --------       --------       --------

Cumulative excess of interest-earning assets
   to interest-bearing liabilities ...............     ($40,112)      ($35,627)      ($31,403)      ($13,502)      $ 15,378
                                                       ========       ========       ========       ========       ========
Cumulative ratio of interest rate-sensitive
   assets to interest rate-sensitive liabilities .         57.6%          69.9%          80.0%          93.3%         106.9%
                                                       ========       ========       ========       ========       ========
Cumulative difference as a percentage of
   total assets ..................................        (11.7%)        (10.4%)         (9.1%)         (3.9%)          4.5%
                                                       ========       ========       ========       ========       ========

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
              Interest Rate Sensitivity Analysis at March 31, 1998
                             (Dollars in thousands)

 
                                                       More Than                                      
                                                      Five Years      Total   
                                                       --------      --------                 
<S>                                                    <C>           <C>   
INTEREST-EARNING ASSETS:
   Loans (1):
       Adjustable- and floating-rate mortgages (2)     $    916      $ 89,792
       Balloon and fixed-rate mortgages (2) ......       48,998       117,906
       Consumer (2) (3) ..........................       18,700        50,273
       Commercial business .......................          556        11,039
   Securities and interest-bearing deposits (4) ..       23,844        63,306
                                                       --------      --------

   Total interest-earning assets .................     $ 93,014      $332,316
                                                       --------      --------

INTEREST-BEARING LIABILITIES:
   Savings accounts (5) ..........................     $ 24,867      $ 26,867
   NOW accounts (5) ..............................       28,382        30,182
   Money market accounts (5) .....................         --          31,040
   Certificate accounts ..........................        2,867       163,717
   Securities sold under agreements to
      repurchase .................................         --             197
   Borrowings ....................................        3,128        31,165
                                                       --------      --------
   Total interest-bearing liabilities ............     $ 59,244      $283,168
                                                       --------      --------

Cumulative excess of interest-earning assets
   to interest-bearing liabilities ...............     $ 49,148      $ 49,148
                                                       ========      ========
Cumulative ratio of interest rate-sensitive
   assets to interest rate-sensitive liabilities .        117.4%          117%
                                                       ========      ========
Cumulative difference as a percentage of
   total assets ..................................         14.3%         14.3%
                                                       ========      ========
</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

                           Exhibit 27 Financial Data Schedules

<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          5-12-98                      /s/Ellen Ann Roberts
                                           --------------------
                                           Ellen Ann Roberts
                                           Chairman and Chief Executive Officer



Date         5-12-98                       /s/Christine N. Dullinger
                                           -------------------------
                                           Christine N. Dullinger
                                           Treasurer and Chief Financial Officer