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 March 31, 2001

                                       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)                    4,121,569
    ------------------------------       ---------------------------------
       (Title of Each Class)               (Number of Shares Outstanding
                                                 as of May  1, 2001)

<PAGE>

                  CHESTER VALLEY BANCORP INC. AND SUBSIDIARIES

                                      INDEX
                                      -----

                                                                          Page
PART 1.  FINANCIAL INFORMATION                                           Number
------------------------------                                           ------

Item 1.  FINANCIAL STATEMENTS

         CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
           March 31, 2001 and June 30, 2000 (Unaudited)                      1

         CONSOLIDATED STATEMENTS OF OPERATIONS
           Three Months Ended March 31, 2001 and 2000 (Unaudited)            2

         CONSOLIDATED STATEMENTS OF OPERATIONS
           Nine Months Ended March 31, 2001 and 2000 (Unaudited)             3

         STATEMENTS OF OTHER COMPREHENSIVE INCOME
           Three Months Ended March 31, 2001 and 2000 (Unaudited)            4

         STATEMENTS OF OTHER COMPREHENSIVE INCOME
           Nine Months Ended March 31, 2001 and 2000 (Unaudited)             4

         CONSOLIDATED STATEMENTS OF CASH FLOWS
           Nine Months Ended March 31, 2001 and 2000 (Unaudited)             5

         NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS           6 - 13

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
           CONDITION AND RESULTS OF OPERATIONS                         14 - 18

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
              RISK                                                     19 - 21

PART 2.  OTHER INFORMATION
--------------------------

Item 1.  LEGAL PROCEEDINGS                                                  22

Item 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS                          22

Item 3.  DEFAULTS UPON SENIOR SECURITIES                                    22

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                22

Item 5.  OTHER INFORMATION                                                  22

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K                                   22

SIGNATURES                                                                  23
----------


<PAGE>


                  CHESTER VALLEY BANCORP INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                                   March 31,               June 30,
                                                                                     2001                   2000
                                                                                   ---------              ---------
                                                                                             (Unaudited)
ASSETS:
<S>                                                                                <C>                    <C>
Cash in banks                                                                      $   4,018              $   4,918
Interest-earning deposits                                                             15,488                  8,164
                                                                                   ---------              ---------
     Total cash and cash equivalents                                                  19,506                 13,082
Trading account securities                                                               332                 12,838
Investment securities available for sale                                             114,502                 92,468
Investment securities (fair value - March 31,
      $62,205; June 30, $39,020)                                                      61,792                 39,821
Loans receivable, less allowance for
      loan losses of $4,172 and $3,908                                               342,536                331,306
Accrued interest receivable                                                            4,054                  3,456
Property and equipment - net                                                           9,096                  8,768
Other assets                                                                           4,882                  5,411
                                                                                   ---------              ---------
     Total Assets                                                                  $ 556,700              $ 507,150
                                                                                   =========              =========

LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits                                                                           $ 431,668              $ 378,478
Advance payments by borrowers for taxes and insurance                                  2,086                  2,962
Federal Home Loan Bank advances                                                       80,811                 86,778
Other borrowings                                                                         557                    373
Accrued interest payable                                                               1,390                  1,648
Other liabilities                                                                        897                  1,409
                                                                                   ---------              ---------
     Total Liabilities                                                             $ 517,409                471,648
                                                                                   ---------              ---------

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;
     4,121,851 and 4,107,794 shares issued at March 31,
     and June 30, respectively                                                         4,122                  4,108
Additional paid-in capital                                                            24,072                 24,046
Retained earnings - partially restricted                                              12,239                 10,603
Treasury stock (282 shares at cost)                                                       (5)                    --
Accumulated other comprehensive loss                                                  (1,137)                (3,255)
                                                                                   ---------              ---------
     Total Stockholders' Equity                                                       39,291                 35,502
                                                                                   ---------              ---------
     Total Liabilities and Stockholders' Equity                                    $ 556,700              $ 507,150
                                                                                   =========              =========
</TABLE>


See accompanying notes to unaudited consolidated financial statements.


                                        1

<PAGE>

                  CHESTER VALLEY BANCORP INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATION
              (Dollars in Thousands, Except for Per Share Amounts)

<TABLE>
<CAPTION>
                                                                            Three Months Ended
                                                                                March 31,
                                                                      --------------------------------
                                                                         2001                  2000
                                                                      -----------          -----------
                                                                                 (Unaudited)
INTEREST INCOME:
<S>                                                                   <C>                  <C>
  Loans                                                               $     6,832          $     6,196
  Investment securities and interest-bearing deposits                       2,625                2,249
                                                                      -----------          -----------
     Total interest income                                                  9,457                8,445
                                                                      -----------          -----------
INTEREST EXPENSE:
  Deposits                                                                  4,492                3,281
  Short-term borrowings                                                       355                1,006
  Long-term borrowings                                                        707                  476
                                                                      -----------          -----------
     Total interest expense                                                 5,554                4,763
                                                                      -----------          -----------
NET INTEREST INCOME                                                         3,903                3,682
  Provision for loan losses                                                   105                  105
                                                                      -----------          -----------
      Net interest income after provision for loan losses                   3,798                3,577
                                                                      -----------          -----------
OTHER INCOME:
  Investment services income, net                                             910                1,064
  Service charges and fees                                                    402                  365
  Gain on sale of loans held for sale                                          18                   --
  Loss on trading account securities                                           --                 (131)
  Gain (loss) on sale of securities available for sale                         10                   (1)
  Other                                                                        39                   22
                                                                      -----------          -----------
     Total other income                                                     1,379                1,319
                                                                      -----------          -----------
OPERATING EXPENSES:
  Salaries and employee benefits                                            2,071                2,120
  Occupancy and equipment                                                     566                  572
  Data processing                                                             254                  210
  Deposit insurance premiums                                                   18                   18
  Advertising                                                                  54                   92
  Other                                                                       756                  624
                                                                      -----------          -----------
     Total operating expenses                                               3,719                3,636
                                                                      -----------          -----------
  Income before income taxes                                                1,458                1,260
  Income tax expense                                                          278                  241
                                                                      -----------          -----------
NET INCOME                                                            $     1,180          $     1,019
                                                                      ===========          ===========
EARNINGS PER SHARE (1)
  Basic                                                               $       .29          $       .25
                                                                      ===========          ===========
  Diluted                                                             $       .28          $       .25
                                                                      ===========          ===========
DIVIDENDS PER SHARE PAID DURING PERIOD (1)                            $       .09          $       .09
                                                                      ===========          ===========
WEIGHTED AVERAGE SHARES OUTSTANDING (1)
  Basic                                                                 4,116,633            4,086,711
                                                                      ===========          ===========
  Diluted                                                               4,169,157            4,109,376
                                                                      ===========          ===========
</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 2000.

See accompanying notes to unaudited consolidated financial statements.


                                        2

<PAGE>

                  CHESTER VALLEY BANCORP INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
              (Dollars in Thousands, Except for Per Share Amounts)

<TABLE>
<CAPTION>
                                                                                 Nine Months Ended
                                                                                     March 31,
                                                                          ---------------------------------
                                                                             2001                  2000
                                                                          -----------           -----------
                                                                                    (Unaudited)
INTEREST INCOME:
<S>                                                                       <C>                   <C>
  Loans                                                                   $    20,266           $    18,130
  Investment securities and interest-bearing deposits                           7,520                 6,942
                                                                          -----------           -----------
     Total interest income                                                     27,786                25,072
                                                                          -----------           -----------
INTEREST EXPENSE:
  Deposits                                                                     13,387                10,042
  Short-term borrowings                                                         1,343                 2,319
  Long-term borrowings                                                          2,111                 1,453
                                                                          -----------           -----------
     Total interest expense                                                    16,841                13,814
                                                                          -----------           -----------
NET INTEREST INCOME                                                            10,945                11,258
  Provision for loan losses                                                       315                   315
                                                                          -----------           -----------
      Net interest income after provision for loan losses                      10,630                10,943
                                                                          -----------           -----------
OTHER INCOME:
  Investment services income, net                                               2,844                 2,762
  Service charges and fees                                                      1,258                 1,247
  Gain (loss) on sale of loans                                                     21                    (3)
  Gain (loss) on trading account securities                                       245                   (93)
  Loss on sale of securities available for sale                                   (10)                 (168)
  Loss for impairment of securities                                              (291)                   --
  Other                                                                           108                   108
                                                                          -----------           -----------
     Total other income                                                         4,175                 3,853
                                                                          -----------           -----------
OPERATING EXPENSES:
  Salaries and employee benefits                                                6,203                 5,805
  Occupancy and equipment                                                       1,779                 1,673
  Data processing                                                                 726                   634
  Advertising                                                                     455                   329
  Deposit insurance premiums                                                       53                   119
  Other                                                                         2,557                 1,887
                                                                          -----------           -----------
     Total operating expenses                                                  11,773                10,447
                                                                          -----------           -----------
  Income before income taxes                                                    3,032                 4,349
  Income tax expense                                                              296                   895
                                                                          -----------           -----------
NET INCOME                                                                $     2,736           $     3,454
                                                                          ===========           ===========
EARNINGS PER SHARE (1)
  Basic                                                                   $       .67           $       .85
                                                                          ===========           ===========
  Diluted                                                                 $       .66           $       .84
                                                                          ===========           ===========
DIVIDENDS PER SHARE PAID DURING PERIOD (1)                                $       .27           $       .27
                                                                          ===========           ===========
WEIGHTED AVERAGE SHARES OUTSTANDING (1):
  Basic                                                                     4,109,212             4,082,889
                                                                          ===========           ===========
  Diluted                                                                   4,164,673             4,111,187
                                                                          ===========           ===========
</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 2000.


See accompanying notes to unaudited consolidated financial statements.


                                        3
<PAGE>

                  CHESTER VALLEY BANCORP INC. AND SUBSIDIARIES
                    STATEMENTS OF OTHER COMPREHENSIVE INCOME
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                          Three Months Ended
                                                                              March 31,
                                                                 -------------------------------------
                                                                      2001                 2000
                                                                 ----------------     ----------------
                                                                             (Unaudited)
OTHER COMPREHENSIVE INCOME, NET OF TAX:
<S>                                                                     <C>                  <C>
  Net income                                                            $  1,180             $  1,019
  Net unrealized gains on securities available
     for sale during the period                                              272                   19
  Reclassification adjustment for losses (gains) included
     in net income                                                           (7)                    1

                                                                 ----------------     ----------------
COMPREHENSIVE INCOME                                                    $  1,445             $  1,039
                                                                 ================     ================

<CAPTION>

                                                                          Nine Months Ended
                                                                              March 31,
                                                                 -------------------------------------
                                                                      2001                 2000
                                                                 ----------------     ----------------
                                                                             (Unaudited)
OTHER COMPREHENSIVE INCOME, NET OF TAX:
<S>                                                                     <C>                  <C>
  Net income                                                            $  2,736             $  3,454
  Net unrealized gain (losses) on securities available
     for sale during the period                                            1,922              (1,813)
  Reclassification adjustment for losses included
     in net income                                                           196                  111

                                                                 ----------------     ----------------
COMPREHENSIVE INCOME                                                    $  4,854             $  1,752
                                                                 ================     ================
</TABLE>


See accompanying notes to unaudited consolidated financial statements.

                                        4

<PAGE>

                  CHESTER VALLEY BANCORP INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                                          Nine Months Ended March 31,
                                                                                     ---------------------------------------
                                                                                           2001                  2000
                                                                                     ------------------    -----------------
                                                                                                   (Unaudited)

Cash flows (used in) from operating activities:
<S>                                                                                        <C>                    <C>
Net income                                                                                 $     2,736            $   3,454
Add (deduct) items not affecting cash flows from operating activities:
   Depreciation                                                                                    747                  680
   Provision for loan losses                                                                       315                  315
   (Gain) loss on trading account securities                                                     (245)                   93
   (Gain) loss on sale of loans held for sale                                                     (21)                    3
   Loss on sale of securities available for sale                                                    10                  168
   Loss for impairment of securities                                                               291                   --
   Proceeds from sale of loans held for sale                                                     2,227                  197
   Amortization of deferred loan fees, discounts and premiums                                    (696)                (513)
   Decrease in trading account securities                                                        6,433                2,269
   Increase in accrued interest receivable                                                       (598)                (603)
   Increase in other assets                                                                    (1,305)                (160)
   Decrease in other liabilities                                                                 (512)                (894)
   Decrease in accrued interest payable                                                          (258)                (416)
----------------------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities                                                         9,124                4,593
----------------------------------------------------------------------------------------------------------------------------
Cash flows from (used in) investment activities:
   Capital expenditures                                                                        (1,075)                (677)
   Net increase in loans                                                                      (13,430)             (32,272)
   Purchase of investment securities                                                          (40,529)             (33,064)
   Proceeds from maturities, payments and calls of investment securities                        13,138                5,648
   Purchase of securities available for sale                                                  (39,282)             (40,569)
   Proceeds from sales and calls of securities available for sale                               33,012               53,554
----------------------------------------------------------------------------------------------------------------------------
Net cash flows used in investment activities                                                  (48,166)             (47,380)
----------------------------------------------------------------------------------------------------------------------------
Cash flows from (used in) financing activities:
   Net increase (decrease) in deposits before interest credited                                 40,746             (27,305)
   Interest credited to deposits                                                                12,444               10,677
   Proceeds from FHLB advances                                                                  37,500               55,050
   Repayments of FHLB advances                                                                (43,467)                 (48)
   Decrease in advance payments by borrowers for taxes and insurance                             (876)              (1,055)
   Net increase in other borrowings                                                                184                   41
   Cash dividends on common stock                                                              (1,093)              (1,032)
   Common stock issued                                                                               7                  463
   Payment for fractional shares                                                                   (7)                  (7)
   Stock options exercised                                                                         254                   75
   Common stock repurchased                                                                      (226)                (531)
----------------------------------------------------------------------------------------------------------------------------
Net cash flows from financing activities                                                        45,466               36,328
----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                                             6,424              (6,459)
Cash and cash equivalents:
   Beginning of period                                                                          13,082               18,603
                                                                                     ------------------    -----------------
   End of period                                                                           $    19,506           $   12,144
                                                                                     ==================    =================

Supplemental disclosures:
   Cash payments during the year for:
      Taxes                                                                                $       496           $      858
      Interest                                                                             $    17,099           $   14,230

Non-cash items:
   Net unrealized gain (loss) on investment securities available for sale, net of tax      $     2,118           $   (1,702)
   Transfer of investment securities from held to maturity to available for sale due
     to the adoption of FAS 133.                                                           $     5,319           $       --
   Transfer of investment securities from trading account to available for sale            $     6,596           $       --
</TABLE>

See accompanying notes to unaudited consolidated financial statements.


                                        5

<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 branch banks 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,  including trust services and money management,  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.


                                        6

<PAGE>

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- and nine-month  periods ended March 31,
2001,  are not  necessarily  indicative  of the results to be  expected  for the
fiscal  year  ending  June  30,  2001.  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, 2000.

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 2000.


                                        7

<PAGE>

The following table sets forth the computation of basic and diluted earnings per
share:

<TABLE>
<CAPTION>
                                                       Three Months Ended                     Nine Months Ended
                                                            March 31,                             March 31,
                                                  -----------------------------         -----------------------------
                                                     2001               2000               2001               2000
                                                  ----------         ----------         ----------         ----------
                                                        (Dollars in Thousands, Except for Per Share Amounts)
Numerator:
<S>                                               <C>                <C>                <C>                <C>
   Net income                                     $    1,180         $    1,019         $    2,736         $    3,454
                                                  ==========         ==========         ==========         ==========

Denominator:
   Denominator for basic earnings per
   share-weighted average shares                   4,116,633          4,086,711          4,109,212          4,082,889

Effect of dilutive securities:
   Stock options                                      52,524             22,665             55,460             28,298
                                                  ----------         ----------         ----------         ----------

Denominator for diluted earnings
   per share-adjusted weighted
   average shares and assumed
   exercise                                        4,169,157          4,109,376          4,164,673          4,111,187
                                                  ==========         ==========         ==========         ==========

Basic earnings per share                          $      .29         $      .25         $      .67         $      .85
                                                  ==========         ==========         ==========         ==========

Diluted earnings per share                        $      .28         $      .25         $      .66         $      .84
                                                  ==========         ==========         ==========         ==========
</TABLE>


                                        8

<PAGE>

NOTE 2 - LOANS RECEIVABLE

Loans receivable are summarized as follows:

                                          At March 31,          At June 30,
                                             2000                 2000
                                           ---------            ---------
                                               (Dollars in Thousands)
First mortgage loans:
   Residential                             $ 155,485            $ 167,451
   Construction-residential                   17,821               18,146
   Land acquisition and
      development                             12,822               10,960
   Commercial                                 79,421               66,221
   Construction-commercial                    13,998               13,266
Commercial business                           24,380               19,358
Consumer                                      66,374               62,433
                                           ---------            ---------

Total loans                                  370,301              357,835
                                           ---------            ---------

Less:
   Undisbursed loan proceeds:
      Construction-residential               (15,691)             (15,578)
      Construction-commercial                 (6,313)              (5,330)
   Deferred loan fees - net                   (1,589)              (1,713)
   Allowance for loan losses                  (4,172)              (3,908)
                                           ---------            ---------

Net loans                                  $ 342,536            $ 331,306
                                           =========            =========

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  March 31,  2001,  the
recorded investment in impaired loans was not material.


                                        9

<PAGE>

NOTE 3 - COMMITMENTS

Commitments to potential  mortgagors of the Bank amounted to $4.32 million as of
March 31, 2001, of which $226,750 was for  variable-rate  loans.  The balance of
the  commitments  consists  of $4.09  million  of  fixed-rate  loans  (primarily
consisting of  single-family  residential  mortgages)  bearing interest rates of
between 5.75% and 7.25%.  At March 31, 2001,  the Company had $22.00  million of
undisbursed  construction  loan funds as well as $22.19  million of  undisbursed
remaining consumer and commercial line commitments.

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
result  in  the  initiation  of  certain   mandatory  and  possibly   additional
discretionary  actions by regulators  that, if implemented,  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 March  31,  2001  and  June 30,  2000 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
March 31, 2001 that management believes have changed the institution's category.


                                       10

<PAGE>

The Bank's  regulatory  capital amounts and ratios are presented in the table as
follows:

<TABLE>
<CAPTION>
                                                                                                          To Be Well
                                                                                                          Capitalized
                                                                                Required                  Under Prompt
                                                                               For Capital                 Corrective
                                                      Actual                Adequacy Purposes           Action Provisions
                                            -------------------------     ------------------------    -----------------------
                                              Amount         Ratio         Amount         Ratio        Amount         Ratio
                                              ------         -----         ------         -----        ------         -----
                                                                          (Dollars in Thousands)
As of March 31, 2001
<S>                                            <C>            <C>           <C>             <C>        <C>           <C>
   Total Capital
     (to Risk-Weighted Assets)                 $40,450        12.68%        $25,515         8.00%      $31,893       10.00%

   Tier 1 Capital
     (to Risk-Weighted Assets)                 $36,461        11.43%        $12,757         4.00%      $19,136        6.00%

   Tier 1 Capital
     (to Adjusted Total Assets)                $36,461         6.58%        $22,170         4.00%      $27,712        5.00%

As  of June 30, 2000:

   Total Capital
     (to Risk- Weighted Assets)                $38,662        12.80%        $24,104         8.00%      $30,130       10.00%

   Tier 1 Capital
    (to Risk-Weighted Assets)                  $34,894        11.58%        $12,052         4.00%      $18,078        6.00%

   Tier 1 Capital
     (to Adjusted Total Assets)                $34,894         6.88%        $20,276         4.00%      $25,345        5.00%
</TABLE>


NOTE 5 - SEGMENT REPORTING

The Company has two reportable segments:  the Bank and PCIS. The Bank operates a
branch bank network with eight full-service banking offices and provides deposit
and loan services to customers.  Additionally, the Bank offers trust services at
its  Downingtown,  Pennsylvania  headquarters.  PCIS  operates  a  full  service
investment  advisory and  securities  brokerage  firm through two offices.  Both
segments operate primarily 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 that segment.


                                       11

<PAGE>

The following table highlights  income  statement and balance sheet  information
for each of the segments at or for the periods ending March 31, 2001 and 2000:

<TABLE>
<CAPTION>
                                                      At and for the three months ended March 31,
                            --------------------------------------------------------------------------------------------
                                               2001                                            2000
                            -------------------------------------------    ---------------------------------------------
                               Bank           PCIS            Total           Bank             PCIS            Total
                            -----------    -----------     ------------    ------------     ------------    ------------
                                                              (Dollars in Thousands)
<S>                          <C>              <C>            <C>              <C>               <C>            <C>
Net interest income          $   3,880        $    23        $   3,903        $  3,659          $    23        $  3,682
Other income                       482            897            1,379             305            1,014           1,319
Total net income                 1,081             99            1,180             913              106           1,019
Total assets                   554,638          2,062          556,700         486,158            1,769         487,927
Total trading securities     $      --        $   332        $     332        $  6,409          $   450        $  6,859

<CAPTION>

                                                         For the nine months ended March 31,
                           ---------------------------------------------------------------------------------------------
                                              2001                                             2000
                           --------------------------------------------    ---------------------------------------------
                              Bank            PCIS           Total            Bank             PCIS            Total
                           ------------    -----------    -------------    ------------    -------------    ------------
                                                              (Dollars in Thousands)
<S>                          <C>              <C>            <C>              <C>               <C>            <C>
Net interest income          $  10,874        $    71        $  10,945        $ 11,182          $    76        $ 11,258
Other income                     1,477          2,698            4,175           1,242            2,611           3,853
Total net income             $   2,426        $   310        $   2,736        $  3,192          $   262        $  3,454
</TABLE>


NOTE 6 - ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

On July 1, 2000, the Company adopted Statement of Financial Accounting Standards
No.  133  (SFAS  133),   "Accounting  for  Derivative  Instruments  and  Hedging
Activities",  as amended.  This statement  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
derivatives depends on 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.


                                       12

<PAGE>

The Corporation's  only derivative that requires separate  accounting under SFAS
133 is an  interest-rate  cap with a  notional  amount of $30.0  million,  which
limits  3-month  London Inter Bank Offering  Rate  ("LIBOR") to 7% for two years
ending  September  30, 2002.  This strategy was put into place during the rising
rate  environment to cap our cost of funds at 7% on $30.0  million.  The cap was
recorded at the date of purchase on September 28, 2000,  in other  assets,  at a
cost of $114,000.  The fair market value ("FMV"), which at inception is equal to
the cost, is broken into two components:  the intrinsic value and the time value
of the cap.  The cap is  marked-to-market  quarterly,  with  changes in the time
value of the cap  included  in interest  expense as required  under SFAS 133. In
addition,  the ineffective portion, if any, of the cap is expensed in the period
in which  ineffectiveness is determined.  The cap was written down approximately
$98,000 during the second  quarter  ending  December 31, 2000. No adjustment was
required during the three month period ending March 31, 2001.

An  additional  provision  of SFAS 133 affords  the  opportunity  to  reclassify
investment securities between  held-to-maturity,  available-for-sale and trading
at the date of adoption.  Accordingly, the Company reclassified $5.32 million in
investment securities from held-to-maturity to available-for-sale.


                                       13

<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 may have used
expressed or implied "forward  looking  statements" to describe the future plans
and strategies 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 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,  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 $556.70 million at March 31, 2001, from
$507.15  million at June 30, 2000,  due to an $11.23  million  increase in loans
from $331.31  million at June 30, 2000 to $342.54 million at March 31, 2001, and
to a $31.50  million  aggregate  increase in securities to $176.63  million from
$145.13  million at June 30, 2000.  Such  increases were funded in large part by
increases in deposits of $53.19 million from $378.48 million at June 30, 2000 to
$431.67 million at March 31, 2001.

Stockholders' equity increased $3.79 million to $39.29 million at March 31, 2001
from $33.50  million at June 30,  2000.  The  increase in  stockholders'  equity
resulted  from net  income of $2.74  million,  $254,000  from the sale of common
stock  in  connection  with the  Company's  dividend  reinvestment  plan and the
exercise of stock options,  the decrease in net unrealized  losses on securities
available  for sale of $2.12  million,  partially  offset by the payment of cash
dividends  totaling $1.09 million,  the repurchase of shares of common stock for
an aggregate cost of $226,000 and the payment for fractional shares of $7,000.


                                       14

<PAGE>


                              RESULTS OF OPERATIONS

Net interest income,  on a fully tax equivalent  basis,  increased 6.4% to $4.15
million for the three-month  period ended March 31, 2001, and decreased 1.56% to
$11.77 million for the nine-month period ended March 31, 2001, compared to $3.90
million and $11.95 million,  respectively,  for the same periods in 2000.  Total
interest income, on a fully tax equivalent basis, increased to $9.71 million and
$28.61 million for the three- and nine-month  periods ended March 31, 2001, from
$8.67  million and $25.77  million for the same periods in 2000,  primarily as a
result of increases in the average balance of interest-earning assets.

The average balance of interest-earning  assets increased to $513.66 million and
$498.08  million for the three- and  nine-month  periods  ended March 31,  2001,
respectively,  from $461.87 million and $453.05 million,  respectively,  for the
same periods in 2000.  The increases  were  primarily due to $14.83  million and
$7.17 million  increases in the average balance of investment  securities and to
$27.29 million and $33.84 million  increases in the average balance of net loans
during the three- and nine-month periods in 2001, respectively.  Interest income
was adversely affected by the 10 basis-point and 8 basis-point  decreases in the
yield  on  interest-earning  assets  to  7.60%  and  7.66%  for the  three-  and
nine-month periods ended March 31, 2001, respectively,  as the result of a minor
decline in rates of interest experienced during the period.

Total interest expense  increased to $5.55 million and $16.84 million from $4.76
million and $13.81 million for the respective  three- and nine-month  periods in
2001 and 2000,  largely as the result of the increase in the average  balance of
interest-bearing  liabilities  to $487.54  million and  $474.32  million for the
three- and nine-month periods ended March 31, 2001, respectively, as compared to
$410.40  million  and  $401.71  million  for the same  periods  in  2000.  These
increases  were due to $108.38  million  and  $86.01  million  increases  in the
average balance of deposits  partially offset by decreases of $31.23 million and
$13.40  million  in the  average  balance  of  borrowings  during  the three and
nine-month periods,  respectively. The increase in interest expense was slightly
offset  because of a decrease in the average  rate paid on such  liabilities  to
4.62% and 4.73% for the three- and  nine-month  periods  ended  March 31,  2001,
respectively,  from 4.64% and 4.58% for the same periods in 2000,  as the result
primarily of  decreasing  rates of interest on borrowings  and deposits  despite
management's  continued  efforts to focus in the areas of low-costing or no-cost
deposits.

The tax equivalent  interest rate spread  decreased to 2.93% from 3.00%, and the
average tax equivalent net yield on  interest-earning  assets decreased to 3.15%
from  3.52%  for  the  nine-month   periods  ended  March  31,  2001  and  2000,
respectively, due to the reasons discussed above.


                                       15

<PAGE>

Provision for Loan Losses

The Company provided $105,000 and $315,000 for loan losses during the three- and
nine-month periods ended March 31, 2001 and 2000, respectively. These provisions
have been added to the Company's allowance for loan losses based on management's
assessment of the inherent risk of loss existing in the loan  portfolio in light
of current economic conditions. At March 31, 2001, the allowance for loan losses
totaled  $4.17  million or 1.20% of net loans  (before  allowance),  compared to
$3.91  million or 1.17% of net loans and $3.83  million or 1.17% of net loans at
June  30,  2000,  and  March  31,  2001,   respectively.   As  a  percentage  of
non-performing assets, the allowance for loan losses was 440% at March 31, 2001,
compared to 414% at June 30,  2000,  and  further  compared to 412% at March 31,
2000.

Other Income

Total other  income  increased  to $1.38  million and $4.18  million  during the
three- and nine-month periods ended March 31, 2001, respectively, as compared to
$1.32  million and $3.85  million  during the same periods in 2000.  The $60,000
increase for the three-month period ended March 31, 2001 resulted primarily from
the decrease in losses on trading account  securities of $131,000 plus increases
in service charges and fees of $37,000, which were partially offset by decreases
in  investment  services  income of  $154,000.  The increase of $322,000 for the
nine-month  period  ended  March 31,  2001  compared  to the same period in 2000
resulted  primarily from  increases in gains on trading  account  securities,  a
decrease  in  losses  on the sale of  investments  somewhat  offset by a loss of
$291,000 on the impairment of an investment.

Operating Expenses

Total operating  expenses increased $83,000 or 2.28% and $1.33 million or 12.69%
to $3.72 million and $11.77 million, respectively, for the three- and nine-month
periods  ended March 31, 2001 as compared to the same  periods in 2000.  The net
increase in operating  expenses for the  three-month  period  resulted  from the
increase in other  expenses of $132,000 or 21.15% and data  processing  costs of
$44,000 or 20.95%  which were  offset by  decreases  in  salaries  and  employee
benefits of $49,000 and  advertising  of $38,000  respectively.  The increase in
operating  expenses for the  nine-month  period in fiscal  2001,  except for the
decrease in deposit  insurance  of $66,000,  were as follows:  (i)  salaries and
employee  benefits  increased  $398,000 or 6.86%  resulting  from normal  salary
adjustments  effective July 1, 2000,  additional staff, and the general increase
in employee  benefit  costs;  (ii)  occupancy  and equipment  expense  increased
$106,000  or  6.34%   resulting  from  increased   operating   costs   including
depreciation on  improvements  and additional  equipment.  (iii) data processing
cost increased $92,000 or 14.51% resulting  principally from the introduction of
our new E Services  Products (E Bank for internet  banking,  E Voice for 24 hour
telephone  banking and E Corp for business  banking);  (iv) advertising  expense
increased $126,000 or 38.30% resulting  primarily from a bank image campaign and
the marketing of our new electronic  internet banking products;  (v) other costs
and expenses  increased  $670,000 or 51.51%  primarily  from increases in legal,
accounting, consulting, printing, relocation costs and donations.


                                       16

<PAGE>

Income Tax Expense

Income tax expense  was  $278,000  and  $296,000  for the three- and  nine-month
periods ended March 31, 2001, respectively, as compared to $241,000 and $895,000
for the same  periods  in 2000.  The  increase  in income  tax  expense  for the
three-month  period ended March 31, 2001 is due to a higher pre-tax income.  The
decrease in income tax expense for the nine-month period ended March 31, 2001 is
due to lower  pre-tax  income  and a higher  portion  of the  Company's  pre-tax
earnings comprised of tax-free interest income as compared to the same period in
2000.

                                  ASSET QUALITY

Non-performing  assets are comprised of non-accrual  loans and real estate owned
("REO") and totaled  $948,000  and $943,000 at March 31, 2001 and June 30, 2000,
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 March 31, 2001, 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 both  .17% at March 31,  2001,
compared to .19% at June 30, 2000,  and .15% at March 31,  2000.  Non-performing
loans,  which totaled  $948,000 at March 31, 2001 consisted of 12  single-family
residential mortgage loans aggregating $753,000, and 16 non-performing  consumer
and commercial business loans totaling $195,000.

At March 31, 2001, the Company's  classified  assets,  which consisted of assets
classified  as  substandard,  doubtful or loss,  as well as REO,  totaled  $2.80
million  compared to $1.49  million at June 30,  2000,  and further  compared to
$5.50  million at March 31,  2000.  The decrease in  classified  assets to $2.80
million from $5.50  million at March 31, 2000 was primarily due to the sale of a
$4.19  million  investment  in a  long-term  tax-free  revenue  bond,  which was
classified  as  substandard  at March 31,  2000.  Included in assets  classified
substandard at March 31, 2001 and 2000, and at June 30, 2000,  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.


                                       17

<PAGE>


                         LIQUIDITY AND CAPITAL RESOURCES

Management  monitors  liquidity  daily and  maintains  funding  sources  to meet
unforeseen changes in cash requirements.  The Company's primary sources of funds
are deposits, borrowings,  repayments, prepayments and maturities of outstanding
loans  and  mortgage-backed  securities,  sales of  assets  available  for sale,
maturities of investment securities and other short-term investments,  and funds
provided from operations.  While scheduled loan and  mortgage-backed  securities
repayments and maturing  investment  securities and short-term  investments  are
relatively  predictable 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 March 31, 2001, the Company had
$4.32 million in commitments  to fund loan  originations.  In addition,  at such
date the Company had  undisbursed  loans in process  for  construction  loans of
$22.00 million and $22.19 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 February  21,  2001,  the Board of  Directors
declared a quarterly  cash  dividend of $.09 per share,  which was paid on March
15, 2001, to stockholders of record as of March 1, 2001.

In the past,  the Bank was 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 required the Bank to maintain a liquid asset ratio of
not less than 4% of its net withdrawable accounts plus short-term borrowings. In
the first quarter of 2001,  the Office of Thrift  Supervision  ("OTS") issued an
interim rule that removes the requirement that savings associations  maintain an
average daily  balance of 4% of its net  withdrawable  accounts plus  short-term
borrowings.  The OTS proposes to maintain  the  liquidity  requirement  that all
savings associations and service  corporations  maintain sufficient liquidity to
ensure  its safe and sound  operations.  First  Financial's  average  regulatory
liquidity ratio for the month ended March 31, 2001 was 10.01%.


                                       18

<PAGE>

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss from adverse changes in market prices and rates.
The Company's  market risk arises primarily from the interest rate risk inherent
in its lending and deposit taking activities.  To that end,  management actively
monitors and manages its interest  rate risk  exposure.  At March 31, 2001,  the
Company's   management   believes  that  the  interest  rate  exposure  has  not
significantly changed since disclosed at June 30, 2000.

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.

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 money
market,  NOW and  savings  deposits  are  sensitive  to interest  rate  changes.
Accordingly,  some of the 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.


                                       19

<PAGE>

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 March 31, 2001, the Company serviced $15.32 million
of mortgage loans for others. Sales of loans produce future servicing income and
provide funds for additional lending and other purposes.

The following is an interest rate sensitivity analysis for the Bank at March 31,
2001.


                                       20

<PAGE>

              Interest Rate Sensitivity Analysis at March 31, 2001
                             (Dollars in thousands)


<TABLE>
<CAPTION>
                                                                             More Than            More Than          More Than
                                                                          Three Months           Six Months           One Year
                                                       Three Months            Through              Through            Through
                                                            or Less         Six Months             One Year        Three Years
                                                   ----------------------------------------------------------------------------
INTEREST-EARNING ASSETS:
<S>                                                     <C>                 <C>                 <C>                <C>
   Loans (1)
        Real estate (2)                                     $26,583            $21,119              $33,545            $91,796
        Commercial                                           15,392                905                2,074              4,532
        Consumer                                              7,359              2,522                5,022             18,291
   Securities and interest-bearing deposits                 102,043             18,533                9,720              7,346
                                                   ----------------------------------------------------------------------------

   Total interest-earning assets                           $151,377            $43,079              $50,361           $121,965
                                                   ----------------------------------------------------------------------------

INTEREST-BEARING LIABILITIES:
   Savings accounts                                            $501               $501               $1,158                 --
   NOW accounts                                                 450                450                  740                 --
   Money market accounts                                     62,698                 --                   --                 --
   Certificate accounts                                     102,292             36,149               71,537             41,325
   Borrowings                                                   592                 24                1,862              8,258
                                                   ----------------------------------------------------------------------------
   Total interest-bearing liabilities                      $166,533            $37,124              $75,297            $49,583
                                                   ----------------------------------------------------------------------------

Cumulative excess (deficit) of
   interest-earning assets to interest-bearing
   liabilities                                            ($15,156)           ($9,201)            ($34,137)            $38,245
                                                          =========           ========            =========            =======

Cumulative ratio of interest rate-sensitive
   assets to interest rate-sensitive liabilities              90.9%              95.5%                87.8%             111.6%
                                                              =====              =====                =====             ======
Cumulative difference as a percentage of
   total assets                                              (2.7%)             (1.7%)               (6.2%)               6.9%
                                                             ======             ======               ======               ====

<CAPTION>

                                                       More Than
                                                     Three Years
                                                         Through         More Than
                                                      Five Years        Five Years             Total
                                                   ---------------------------------------------------
INTEREST-EARNING ASSETS:
<S>                                                  <C>                 <C>               <C>
   Loans (1)
        Real estate (2)                                  $42,552           $41,979          $257,574
        Commercial                                         1,327               150            24,380
        Consumer                                          13,322            19,585            66,101
   Securities and interest-bearing deposits               14,793            36,431           188,866
                                                   ---------------------------------------------------

   Total interest-earning assets                         $71,994           $98,145          $536,921
                                                   ---------------------------------------------------

INTEREST-BEARING LIABILITIES:
   Savings accounts                                           --           $23,383           $25,543
   NOW accounts                                               --            43,625            45,265
   Money market accounts                                      --                --            62,698
   Certificate accounts                                    5,538             3,405           260,246
   Borrowings                                              2,082            67,993            80,811
                                                   ---------------------------------------------------
   Total interest-bearing liabilities                     $7,620          $138,406          $474,563
                                                   ---------------------------------------------------

Cumulative excess (deficit) of
   interest-earning assets to interest-bearing
   liabilities                                          $102,619           $62,358           $62,358
                                                        ========           =======           =======

Cumulative ratio of interest rate-sensitive
   assets to interest rate-sensitive liabilities          130.5%            113.1%            113.1%
                                                          ======            ======            ======
Cumulative difference as a percentage of
   total assets                                            18.6%             11.3%             11.3%
                                                           =====             =====             =====
</TABLE>


(1)  Net of  undisbursed  loan proceeds  related to commercial  and  residential
     construction loans.

(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.


                                       21

<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

                   None

         Item 5.   Other Information

                   None

         Item 6.   Exhibits and Reports on Form 8-K

                   (a)  Exhibits

                   (b)  Reports on Form 8-K

                        None



                                       22

<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         5/11/01                 /s/ Donna M. Coughey
    -----------------------          -------------------------------------
                                     Donna M. Coughey
                                     President and Chief Executive Officer



Date         5/11/01                 /s/ Albert S. Randa, CPA
    ----------------------           -------------------------------------
                                     Albert S. Randa
                                     Chief Financial Officer and Treasurer



                                       23