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 December 31, 2000

                                       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)                  4,109,323
         ------------------------------                  ---------
            (Title of Each Class)              (Number of Shares Outstanding
                                                  as of February 1, 2001)

<PAGE>

                  CHESTER VALLEY BANCORP INC. AND SUBSIDIARIES
                                      INDEX

<TABLE>
<CAPTION>
                                                                                        Page
                                                                                       Number
                                                                                       ------
PART 1.  FINANCIAL INFORMATION
------------------------------
<S>                                                                                    <C>
Item 1.  FINANCIAL STATEMENTS

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

         CONSOLIDATED STATEMENTS OF OPERATIONS
           Three Months Ended December 31, 2000 and 1999 (Unaudited)                      2

         CONSOLIDATED STATEMENTS OF OPERATIONS
           Six Months Ended December 31, 2000 and 1999 (Unaudited)                        3

         STATEMENTS OF OTHER COMPREHENSIVE INCOME
           Three Months Ended December 31, 2000 and 1999 (Unaudited)                      4

         STATEMENTS OF OTHER COMPREHENSIVE INCOME
           Six Months Ended December 31, 2000 and 1999 (Unaudited)                        4

         CONSOLIDATED STATEMENTS OF CASH FLOWS
           Six Months Ended December 31, 2000 and 1999 (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
----------
</TABLE>

<PAGE>

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

<TABLE>
<CAPTION>
                                                                   December 31,     June 30,
                                                                      2000            2000
                                                                   ------------    -----------
                                                                            (Unaudited)
ASSETS:
<S>                                                                <C>             <C>
Cash in banks                                                      $    4,092      $    4,918
Interest-earning deposits                                              19,931           8,164
                                                                   -----------     -----------
     Total cash and cash equivalents                                   24,023          13,082
Trading account securities                                                434          12,838
Investment securities available for sale                               97,658          92,468
Investment securities (fair value - December 31,
      $43,505; June 30, $39,020)                                       43,584          39,821
Loans receivable, less allowance for
      loan losses of $4,082 and $3,908                                339,989         331,306
Accrued interest receivable                                             3,490           3,456
Property and equipment - net                                            8,253           8,768
Other assets                                                            6,626           5,411
                                                                   -----------     -----------
     Total Assets                                                  $  524,057      $  507,150
                                                                   ===========     ===========

LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits                                                           $  408,330      $  378,478
Advance payments by borrowers for taxes and insurance                   1,761           2,962
Federal Home Loan Bank advances                                        72,318          86,778
Other borrowings                                                          660             373
Accrued interest payable                                                1,780           1,648
Other liabilities                                                       1,053           1,409
                                                                   -----------     -----------
     Total Liabilities                                                485,902         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;
     4,109,323 and 4,107,794 shares issued at December 31,
     and June 30, respectively                                          4,109           4,108
Additional paid-in capital                                             24,023          24,046
Retained earnings - partially restricted                               11,430          10,603
Accumulated other comprehensive loss                                   (1,402)         (3,255)
                                                                   -----------     -----------
     Subtotal                                                          38,160          35,502
Treasury stock, at cost (282 shares at December 31)                        (5)             --
                                                                   -----------     -----------
     Total Stockholders' Equity                                        38,155          35,502
                                                                   -----------     -----------
     Total Liabilities and Stockholders' Equity                    $  524,057      $  507,150
                                                                   ===========     ===========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.


                                        1

<PAGE>

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

<TABLE>
<CAPTION>
                                                                      Three Months Ended
                                                                         December 31,
                                                                  ---------------------------
                                                                     2000            1999
                                                                  -----------     -----------
                                                                          (Unaudited)
INTEREST INCOME:
<S>                                                                <C>             <C>
  Loans                                                            $   6,802       $   6,033
  Investment securities and interest-bearing deposits                  2,505           2,352
                                                                  -----------     -----------
     Total interest income                                             9,307           8,385
                                                                  -----------     -----------
INTEREST EXPENSE:
  Deposits                                                             4,594           3,304
  Short-term borrowings                                                  375             925
  Long-term borrowings                                                   815             451
                                                                  -----------     -----------
     Total interest expense                                            5,784           4,680
                                                                  -----------     -----------
NET INTEREST INCOME                                                    3,523           3,705
  Provision for loan losses                                              105             105
                                                                  -----------     -----------
      Net interest income after provision for loan losses              3,418           3,600
                                                                  -----------     -----------
OTHER INCOME:
  Investment services income, net                                        999             886
  Service charges and fees                                               435             483
  Gain on trading account securities                                      57              50
  Loss on sale of assets available for sale                               (5)           (183)
  Loss for impairment of securities                                     (291)             --
  Other                                                                   39              40
                                                                  -----------     -----------
     Total other income                                                1,234           1,276
                                                                  -----------     -----------
OPERATING EXPENSES:
  Salaries and employee benefits                                       2,152           1,882
  Occupancy and equipment                                                617             561
  Data processing                                                        242             206
  Deposit insurance premiums                                              18              53
  Advertising                                                            184             105
  Other                                                                  999             682
                                                                  -----------     -----------
     Total operating expenses                                          4,212           3,489
                                                                  -----------     -----------
  Income before income taxes                                             440           1,387
  Income tax (benefit) expense                                          (121)            232
                                                                  -----------     -----------
NET INCOME                                                          $    561        $  1,155
                                                                  ===========     ===========
EARNINGS PER SHARE (1):
  Basic                                                             $    .14        $    .28
                                                                  ===========     ===========
  Diluted                                                           $    .14        $    .28
                                                                  ===========     ===========
DIVIDENDS PER SHARE PAID DURING PERIOD (1)                          $    .09        $    .09
                                                                  ===========     ===========
WEIGHTED AVERAGE SHARES OUTSTANDING (1):
  Basic                                                            4,105,463       4,077,695
                                                                  ===========     ===========
  Diluted                                                          4,147,645       4,107,349
                                                                  ===========     ===========
</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 SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                (Dollars in Thousands, Except Per Share Amounts)

<TABLE>
<CAPTION>
                                                                       Six Months Ended
                                                                          December 31,
                                                                  ---------------------------
                                                                     2000             1999
                                                                  -----------     -----------
                                                                          (Unaudited)
INTEREST INCOME:
<S>                                                                <C>             <C>
  Loans                                                            $  13,434       $  11,933
  Investment securities and interest-bearing deposits                  4,895           4,694
                                                                  -----------     -----------
     Total interest income                                            18,329          16,627
                                                                  -----------     -----------
INTEREST EXPENSE:
  Deposits                                                             8,895           6,761
  Short-term borrowings                                                  988           1,313
  Long-term borrowings                                                 1,404             977
                                                                  -----------     -----------
     Total interest expense                                           11,287           9,051
                                                                  -----------     -----------
NET INTEREST INCOME                                                    7,042           7,576
  Provision for loan losses                                              210             210
                                                                  -----------     -----------
      Net interest income after provision for loan losses              6,832           7,366
                                                                  -----------     -----------
OTHER INCOME:
  Investment services income, net                                      1,934           1,698
  Service charges and fees                                               856             882
  Gain on trading account securities                                     239              38
  Loss on sale of assets available for sale                              (13)           (170)
  Loss for impairment of securities                                     (291)             --
  Other                                                                   71              86
                                                                  -----------     -----------
     Total other income                                                2,796           2,534
                                                                  -----------     -----------
OPERATING EXPENSES:
  Salaries and employee benefits                                       4,132           3,685
  Occupancy and equipment                                              1,213           1,101
  Data processing                                                        472             424
  Deposit insurance premiums                                              35             101
  Advertising                                                            401             237
  Other                                                                1,801           1,263
                                                                  -----------     -----------
     Total operating expenses                                          8,054           6,811
                                                                  -----------     -----------
  Income before income taxes                                           1,574           3,089
  Income tax expense                                                      18             654
                                                                  -----------     -----------
NET INCOME                                                         $   1,556       $   2,435
                                                                  ===========     ===========
EARNINGS PER SHARE (1):
  Basic                                                            $     .38       $     .60
                                                                  ===========     ===========
  Diluted                                                          $     .37       $     .59
                                                                  ===========     ===========
DIVIDENDS PER SHARE PAID DURING PERIOD (1)                         $     .18       $     .18
                                                                  ===========     ===========
WEIGHTED AVERAGE SHARES OUTSTANDING (1):
  Basic                                                            4,105,583       4,081,000
                                                                  ===========     ===========
  Diluted                                                          4,153,478       4,112,822
                                                                  ===========     ===========
</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 SUBSIDIARY
                    STATEMENTS OF OTHER COMPREHENSIVE INCOME
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                          Three Months Ended
                                                                             December 31,
                                                                       ------------------------
                                                                          2000          1999
                                                                       ----------     ---------
                                                                              (Unaudited)
OTHER COMPREHENSIVE INCOME, NET OF TAX:
<S>                                                                     <C>            <C>
  Net income                                                            $    561       $ 1,155
  Net unrealized holding gains (losses) on securities available
     for sale during the period                                            1,122          (301)
  Reclassification adjustment for losses included
     in net income                                                             3           111
                                                                       ----------     ---------
COMPREHENSIVE INCOME                                                    $  1,686       $   965
                                                                       ==========     =========
<CAPTION>

                                                                          Six Months Ended
                                                                            December 31,
                                                                      -------------------------
                                                                         2000           1999
                                                                      ----------     ----------
                                                                             (Unaudited)
OTHER COMPREHENSIVE INCOME, NET OF TAX:
<S>                                                                    <C>            <C>
  Net income                                                           $  1,556       $  2,435
  Net unrealized holding gains (losses) on securities available
     for sale during the period                                           1,842         (1,832)
  Reclassification adjustment for losses included
     in net income                                                           11            110
                                                                      ----------     ----------
COMPREHENSIVE INCOME                                                   $  3,409       $    713
                                                                      ==========     ==========
</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>
                                                                                    Six Months Ended December 31,
                                                                                 ---------------------------------
                                                                                     2000                 1999
                                                                                 ------------         ------------
                                                                                            (Unaudited)
Cash flows (used in) from operating activities:
<S>                                                                              <C>                  <C>
Net income                                                                       $     1,556          $     2,435
Add (deduct) items not affecting cash flows from operating activities:
   Depreciation                                                                          495                  451
   Provision for loan losses                                                             210                  210
   Gain on trading account securities                                                   (239)                 (38)
   (Gain) loss on sale of loans  held for sale                                            (3)                   3
   Loss on sale of securities available for sale                                          16                  167
   Loss for impairment of securities                                                     291                    -
   Proceeds from sale of loans held for sale                                             568                  197
   Amortization of deferred loan fees, discounts and premiums                           (457)                (381)
   Decrease in trading account securities                                              6,112                2,368
   Increase in accrued interest receivable                                               (34)                (608)
   Increase in other assets                                                           (2,627)                (532)
   Decrease in other liabilities                                                        (356)              (1,673)
   Increase (decrease) in accrued interest payable                                       132                 (183)
------------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities                                               5,664                2,416
------------------------------------------------------------------------------------------------------------------
Cash flows from (used in) investment activities:
   Capital expenditures                                                                   20                 (299)
   Net increase in loans                                                              (9,258)             (21,450)
   Purchase of investment securities                                                  (9,555)             (32,966)
   Proceeds from maturities, payments and calls of investment securities                 220                4,838
   Purchase of securities available for sale                                          (2,040)             (38,069)
   Proceeds from sales and calls of securities available for sale                     12,168               50,287
------------------------------------------------------------------------------------------------------------------
Net cash flows used in investment activities                                          (8,445)             (37,659)
------------------------------------------------------------------------------------------------------------------
Cash flows from (used in) financing activities:
   Net increase (decrease) in deposits before interest credited                       21,340              (24,679)
   Interest credited to deposits                                                       8,512                7,122
   Proceeds from FHLB advances                                                        27,500               50,901
   Repayments of FHLB advances                                                       (41,960)                 (31)
   Decrease in advance payments by borrowers for taxes and insurance                  (1,201)              (1,308)
   Net increase in other borrowings                                                      287                   24
   Cash dividends on common stock                                                       (722)                (682)
   Repayments of principal on ESOP debt                                                   --                   --
   Common stock issued                                                                    --                  333
   Payment for fractional shares                                                          (7)                  (7)
   Stock options exercised                                                               193                   75
   Common stock repurchased                                                             (220)                (531)
------------------------------------------------------------------------------------------------------------------
Net cash flows from financing activities                                              13,722               31,217
------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                                  10,941               (4,026)

Cash and cash equivalents:
   Beginning of period                                                                13,082               18,603
                                                                                 ------------         ------------
   End of period                                                                 $    24,023          $    14,577
                                                                                 ============         ============

Supplemental disclosures:
   Cash payments during the year for:
      Taxes                                                                      $       287          $       579
      Interest                                                                   $    11,155          $     9,234

Non-cash items:
   Net unrealized (loss) gain on investment securities
     available for sale, net of tax                                              $     1,853          $    (1,722)
  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 six-month  periods ended  December
31, 2000, 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 the  computation of 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                Six Months Ended
                                                    December 31,                     December 31,
                                           ----------------------------      -----------------------------
                                                  (Dollars in Thousands, Except Per Share Amounts)

                                              2000             1999              2000             1999
                                           -----------     ------------      ------------     ------------
Numerator:
<S>                                        <C>             <C>               <C>              <C>
   Net income                              $      561      $     1,155       $     1,556      $     2,435
                                           ===========     ============      ============     ============

Denominator:
   Denominator for basic earnings per
   share-weighted average shares            4,105,463        4,077,695         4,105,583        4,081,000

Effect of dilutive securities:
   Stock options                               42,182           29,654            47,895           31,822
                                           -----------     ------------      ------------     ------------

Denominator for diluted earnings
   per share-adjusted weighted
   average shares and assumed
   exercise                                 4,147,645        4,107,349         4,153,478        4,112,822
                                           ===========     ============      ============     ============

Basic earnings per share                   $      .14      $       .28       $       .38      $       .60
                                           ===========     ============      ============     ============

Diluted earnings per share                 $      .14      $       .28       $       .37      $       .59
                                           ===========     ============      ============     ============
</TABLE>

The Company's  number of  antidilutive  stock options was 89,212 and 253,285 for
the three- and six-month periods ended December 31, 2000 and 1999, respectively.


                                        8

<PAGE>

NOTE 2 - LOANS RECEIVABLE

Loans receivable are summarized as follows:

<TABLE>
<CAPTION>
                                                December 31,        June 30,
                                                   2000               2000
                                                ------------     -------------
                                                    (Dollars in Thousands)
           First mortgage loans:
           <S>                                  <C>              <C>
              Residential                       $   160,551      $    167,451
              Construction-residential               17,830            18,146
              Land acquisition and
                 development                         12,687            10,960
              Commercial                             73,183            66,221
              Construction-commercial                17,700            13,266
           Commercial business                       21,234            19,358
           Consumer                                  65,481            62,433
                                                ------------     -------------

           Total loans                              368,666           357,835
                                                ------------     -------------

           Less:
              Undisbursed loan proceeds:
                 Construction-residential           (15,855)          (15,578)
                 Construction-commercial             (7,083)           (5,330)
              Deferred loan fees - net               (1,657)           (1,713)
              Allowance for loan losses              (4,082)           (3,908)
                                                ------------     -------------

           Net loans                            $   339,989      $    331,306
                                                ============     =============
</TABLE>

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  December 31, 2000,  the
recorded investment in impaired loans was not material.


                                        9

<PAGE>

NOTE 3 - COMMITMENTS

Commitments  to  potential  mortgagors  of the Bank  amounted  to $851,000 as of
December  31,  2000.  The  majority of the  commitments  represents  $851,000 of
fixed-rate loans (primarily consisting of single-family  residential  mortgages)
bearing  interest  rates of between 6.50% and 8.50%.  At December 31, 2000,  the
Company had $22.99  million of  undisbursed  construction  loan funds as well as
$21.08 million of undisbursed remaining consumer and commercial line balances.

NOTE 4 - REGULATORY CAPITAL

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

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the Bank to maintain  minimum amounts and ratios (set forth in the table
below)  of  total  and  Tier  1  capital  (as  defined  in the  regulations)  to
risk-weighted  assets  (as  defined),  and of Tier 1  capital  (as  defined)  to
adjusted  assets (as  defined).  At December 31, 2000 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 which
have occurred since December 31, 2000 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 (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                               To Be Well
                                                                                               Capitalized
                                                                      Required                 Under Prompt
                                                                     For Capital                Corrective
                                            Actual                Adequacy Purposes          Action Provisions
                                   ----------------------       ----------------------    -----------------------
                                    Amount         Ratio         Amount         Ratio        Amount       Ratio
                                    ------         -----         ------         -----        ------       -----
As of December 31,  2000:
<S>                                 <C>            <C>           <C>            <C>          <C>          <C>
   Total Capital
     (to Risk Weighted Assets)      $39,745        12.61%        $25,222        8.00%        $31,528      10.00%

   Tier 1 Capital
     (to Risk Weighted Assets)      $35,802        11.36%        $12,611        4.00%        $18,917       6.00%

   Tier 1 Capital
     (to Average Assets)            $35,802         6.86%        $20,870        4.00%        $26,088       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 Average  Assets)           $34,894         6.88%        $20,276        4.00%        $25,345       5.00%
</TABLE>


NOTE 5 - SEGMENT REPORTING

The  Company  has two  reportable  segments:  First  Financial  and PCIS.  First
Financial 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 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 December 31, 2000 and 1999:

<TABLE>
<CAPTION>
                                                         For the three months ended December 31,
                            --------------------------------------------------------------------------------------------
                                               2000                                            1999
                            -------------------------------------------    ---------------------------------------------
                               Bank           PCIS            Total           Bank             PCIS            Total
                            -----------    -----------     ------------    ------------     ------------    ------------
                                                              (Dollars in Thousands)
<S>                         <C>              <C>            <C>             <C>                <C>           <C>
Net interest income         $  3,498         $   25         $  3,523        $  3,675           $   30        $  3,705
Other income                     300            934            1,234             438              838           1,276
Total net income                 446            115              561           1,070               85           1,155
Total assets                 522,112          1,945          524,057         479,236            1,996         481,232
Total trading securities         --             434              434           6,461              430           6,891

<CAPTION>

                                                          For the six months ended December 31,
                           ---------------------------------------------------------------------------------------------
                                              2000                                             1999
                           --------------------------------------------    ---------------------------------------------
                              Bank            PCIS           Total            Bank             PCIS            Total
                           ------------    -----------    -------------    ------------    -------------    ------------
                                                              (Dollars in Thousands)
<S>                        <C>               <C>            <C>              <C>              <C>             <C>
Net interest income        $  6,994          $   48         $  7,042         $ 7,523          $    53         $  7,576
Other income                    995           1,801            2,796             936            1,598            2,534
Total net income              1,345             211            1,556           2,279              156            2,435

</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.  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  will  be  expensed  in  the  period  in  which
ineffectiveness  is  determined.  The cap  purchased on  September  28, 2000 for
$114,000  has a FMV at December 31, 2000 of $16,000 and the  adjustment  in time
value was recorded as interest expense.

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",
expressed or implied,  concerning  the future  operations of the Company.  It is
management's  desire to take  advantage of the "safe  harbor"  provisions of the
Private  Securities  Litigation  Reform Act of 1995.  This  statement is for the
express  purpose of availing the Company of the  protections of such safe harbor
with respect to all "forward looking  statements"  contained in this Report. The
Company has used  "forward  looking  statements"  to describe  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 $524.06  million at December 31, 2000,
from  $507.15  million at June 30,  2000,  principally  due to a $11.77  million
aggregate  increase in  interest-bearing  deposits to $19.93  million from $8.16
million at June 30, 2000 and to a lesser  extent,  a $8.68  million  increase in
loans from $331.31  million at June 30, 2000 to $339.99  million at December 31,
2000.  Such increases were funded by a $29.85 million  increase in deposits from
$378.48  million at June 30, 2000,  to $408.33  million at December 31, 2000. In
addition,  the  deposit  increase  also  partially  funded  the  $14.46  million
reduction  in Federal  Home Loan Bank of  Pittsburgh  ("FHLB")  borrowings  from
$86.78 million at June 30, 2000 to $72.32 million at December 31, 2000.

Stockholders'  equity  increased $2.66 million to $38.16 million at December 31,
2000 from $35.50  million at June 30, 2000, as a result of the  recognition of a
decrease in net  unrealized  losses on  securities  available  for sale,  net of
taxes, of $1.85 million,  net income of $1.56 million,  the sale of common stock
in connection with the Company's dividend  reinvestment plan and the exercise of
stock  options with an  aggregate  exercise  price of $192,702.  The increase in
stockholders'  equity was offset by the payment of cash  dividends  of $721,737,
the payment of $7,410 for  fractional  shares  related to the Stock  dividend in
September 2000 and the purchase of treasury stock of $218,867.


                                       14

<PAGE>

                              RESULTS OF OPERATIONS

Net interest income, on a fully tax equivalent  basis,  decreased 3.30% to $3.81
million for the  three-month  period ended December 31, 2000, and 5.47% to $7.61
million for the  six-month  period ended  December  31, 2000,  compared to $3.94
million and $8.05  million,  respectively,  for the same periods in 1999.  Total
interest income, on a fully tax equivalent basis, increased to $9.59 million and
$18.90  million for the three- and six-month  periods  ended  December 31, 2000,
from $8.62 million and $17.10 million for the same periods in 1999, primarily as
a result of the effect of an increase in the average balance of interest-earning
assets.

The average balance of interest-earning  assets increased to $496.48 million and
$487.42  million for the three- and six-month  periods ended  December 31, 2000,
respectively,  from $454.59 million and $448.73 million,  respectively,  for the
same periods in 1999.  The increase was  primarily  due to a $31.93  million and
$34.70 million  increase in the average balance of loans and loans held for sale
during the three- and six-month periods in 2000,  respectively.  The increase in
interest income also resulted from a 11 basis-point and 8 basis-point  increases
in the yield to 7.56% and 7.59% on  interest-earning  assets  for the three- and
six-month  periods  ended  December  31,  2000,  respectively,  as the result of
increasing general market rates of interest experienced during the period.

Total interest expense  increased to $5.78 million and $11.29 million from $4.68
million and $9.05 million for the  respective  three- and  six-month  periods in
2000 and 1999,  largely as the result of the increase in the average  balance of
interest-bearing  liabilities  to $473.40  million and  $467.90  million for the
three- and six-month periods ended December 31, 2000, respectively,  as compared
to $406.73  million and  $397.74  million  for the same  periods in 1999.  These
increases were due to $56.66 million and $41.86 million increases in the average
balance of deposits  which was partially  offset by decreases of $24.05  million
and $5.31  million in the  average  balance of  borrowings  during the three and
six-month periods,  respectively.  Also contributing to the increase in interest
expense was an increase in the average  rate paid on such  liabilities  to 4.85%
and  4.79% for the  three-  and  six-month  periods  ended  December  31,  2000,
respectively,  from 4.60% and 4.55% for the same periods in 1999,  as the result
primarily of the continued increases in the market rates of interest experienced
throughout  much of 2000.  In  addition,  interest  expense  for the  three- and
six-month  periods ended December 31, 2000,  respectively,  includes $96,000 for
the loss in the time  value of an  interest  rate  cap.  (See Note 6 of Notes to
Unaudited Consolidated Financial Statements)

The tax equivalent  interest rate spread  decreased to 2.80% from 3.07%, and the
average tax equivalent net yield on  interest-earning  assets decreased to 3.12%
from  3.59%  for the  six-month  periods  ended  December  31,  2000  and  1999,
respectively, due to the reasons discussed above.


                                       15

<PAGE>

Provision for Loan Losses

The Company provided $105,000 and $210,000 for loan losses during the three- and
six-month  periods  ended  December  31,  2000  and  1999,  respectively.  These
provisions  have been added to the  Company's  allowance  for loan losses due to
economic  conditions  and  management's  assessment of the inherent risk of loss
existing in the loan  portfolio.  At December 31, 2000,  the  allowance for loan
losses totaled $4.08 million or 1.19% of net loans (before allowance),  compared
to $3.91  million or 1.17% of net loans at June 30,  2000.  As a  percentage  of
non-performing  assets,  the  allowance for loan losses was 426% at December 31,
2000,  compared  to 414% at June  30,  2000,  and  further  compared  to 321% at
December 31, 1999.

Other Income

Total other income  decreased to $1.23  million and  increased to $2.80  million
during the three- and six-month periods ended December 31, 2000 respectively, as
compared to $1.28 million and $2.53 million during the same periods in 1999. The
Company's other income was adversaly affected in both periods by a $291,000 loss
for impairment of securities and a decrease in service charges and other fees of
$48,000 and $26,000  for the three- and  six-months  ended  December  31,  2000,
respectively.  Offsetting such declines were $113,000 and $236,000  increases in
investment  service income,  net gains of $7,000 and $201,000 on trading account
securities  and  $178,000  and  $154,000  declines in the loss on sale of assets
available for sale for the three- and six-months ended December 31, 2000.

Operating Expenses

Total  operating  expenses  increased  $723,000  or 20.72% and $1.24  million or
18.25% to $4.21  million  and $8.05  million,  respectively,  for the three- and
six-month  periods ended  December 31, 2000 as compared to the same time periods
in 1999. The increase in operating expenses for the three- and six-month periods
in fiscal  2001  except for the  decrease  in deposit  insurance  of $35,000 and
$66,000  respectively  were as  follows:  (i)  salaries  and  employee  benefits
increased $270,000 or 14.35% and $447,000 or 12.13% 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
$56,000 or 9.98% and $112,000 or 10.17% resulting from increased operating costs
including  depreciation on  improvements  and additional  equipment.  (iii) data
processing  cost  increased  $36,000 or 17.48% and  $48,000 or 11.32%  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 $79,000 or 75.24% and $164,000 or
69.20%  resulting  primarily from a bank image campaign and the marketing of our
new electronic internet banking products; (v) other costs and expenses increased
$317,000 or 46.48% and  $538,000 or 42.60%  primarily  from  increases in legal,
accounting, consulting, printing and donations.


                                       16

<PAGE>

Income Tax Expense

The Company  received a $121,000  benefit and incurred a $18,000 expense for the
three- and six-month periods ended December 31, 2000, respectively,  as compared
to expense of $232,000 and  $654,000 for the same periods in 1999.  The decrease
in income tax expense for the three- and six-month  periods  ended  December 31,
2000 is due to lower pre-tax income,  a higher portion of the Company's  pre-tax
income being comprised of tax-free interest income and an increase in low income
housing credits as compared to the same period in 1999.

                                  ASSET QUALITY

Non-performing  assets are comprised of non-accrual  loans totaled  $959,000 and
$943,000 at December 31,  2000,  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 December 31, 2000,  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 .18% at December 31,
2000,  compared  to .19% at June  30,  2000,  and  .27% at  December  31,  1999.
Non-performing  loans, which totaled $959,000 at December 31, 2000, consisted of
ten  single-family   residential   mortgage  loans   aggregating   $781,000  and
ten non-performing consumer loans totaling $178,000.

At December 31, 2000, the Company's classified assets, which consisted of assets
classified  as  substandard,  doubtful or loss,  as well as real  estate  owned,
totaled  $6.74 million  compared to $1.49 million at June 30, 2000,  and further
compared to $1.42  million at December 31, 1999.  Included in assets  classified
substandard at December 31, 2000 and 1999, 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. At December 31, 2000, the
Company  recognized a $291,000 loss for the  impairment  of long-term,  tax free
revenue bonds  resulting in a remaining  carrying value of $3.95  million.

                                       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 December 31, 2000, the Company
had $851,000 in commitments to fund loan originations. In addition, at such date
the Company had undisbursed  loans in process for  construction  loans of $22.99
million and $21.08  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  approved  by the
Board of Directors on a quarterly  basis.  Dividends will be in the form of cash
and/or  stock  after  giving  consideration  to all  aspects  of  the  Company's
performance  for the  quarter.  On November  15,  2000,  the Board of  Directors
declared a quarterly cash dividend of $.09 per share, which was paid on December
15, 2000, to stockholders of record as of December 1, 2000.

The Bank is required under applicable federal regulations, to maintain specified
levels of liquid  investments  and qualifying  types of United States  Treasury,
federal agency and other  investments  having  maturities of five years or less.
Regulations  currently  in effect  require the Bank to  maintain a liquid  asset
ratio of not  less  than 4% of its net  withdrawable  accounts  plus  short-term
borrowings.  These  levels are  changed  from time to time by the OTS to reflect
economic  conditions.  First Financial's average regulatory  liquidity ratio for
the month ended December 31, 2000 was 11.75%.

                                       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 December 31, 2000, 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 December 31, 2000,  the Company  serviced  $15.15
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 December
31, 2000.


                                       20

<PAGE>

             Interest Rate Sensitivity Analysis at December 31, 2000
                             (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)                                    $ 29,862           $ 15,831             $ 37,745           $ 86,431
        Commercial                                           12,741              1,358                1,551              4,000
         Consumer                                             7,498              2,440                4,846             17,828
   Securities and interest-bearing deposits                  58,544              3,542               12,801             16,241
                                                   ------------------------------------------------------------------------------
   Total interest-earning assets                           $108,645           $ 23,171             $ 56,943           $124,500
                                                   ------------------------------------------------------------------------------

INTEREST-BEARING LIABILITIES:
   Savings accounts                                        $    501           $    501             $  1,088                 --
   NOW accounts                                                 450                450                  811                 --
   Money market accounts                                     52,655                 --                   --                 --
   Certificate accounts                                      79,246             35,744               70,614             51,999
   Borrowings                                                 1,533                584                1,862              8,251
                                                   ------------------------------------------------------------------------------
   Total interest-bearing liabilities                      $134,385           $ 37,279             $ 74,375           $ 60,250
                                                   ------------------------------------------------------------------------------

Cumulative excess of interest-earning assets
   to interest-bearing liabilities                        ($25,740)          ($39,848)            ($57,280)           $  6,970
                                                          =========          =========            =========           ========
Cumulative ratio of interest rate-sensitive
   assets to interest rate-sensitive liabilities              80.8%              76.8%                76.7%             102.3%
                                                              =====              =====                =====             ======
Cumulative difference as a percentage of
   total assets                                              (4.9%)             (7.7%)              (11.0%)               1.3%
                                                             ======             ======              =======               ====

<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)                                   $46,452          $ 42,696          $259,017
        Commercial                                          1,414               170            21,234
         Consumer                                          12,453            20,389            65,454
   Securities and interest-bearing deposits                14,581            52,849           158,558
                                                  ----------------------------------------------------
   Total interest-earning assets                          $74,900          $116,104          $504,263
                                                  ----------------------------------------------------

INTEREST-BEARING LIABILITIES:
   Savings accounts                                            --          $ 22,518          $ 24,608
   NOW accounts                                                --            42,811            44,522
   Money market accounts                                       --                --            52,655
   Certificate accounts                                     6,364             3,286           247,253
   Borrowings                                               2,075            58,013            72,318
                                                  ----------------------------------------------------
   Total interest-bearing liabilities                     $ 8,439          $126,628          $441,356
                                                  ----------------------------------------------------

Cumulative excess of interest-earning assets
   to interest-bearing liabilities                        $73,431          $ 62,907          $ 62,907
                                                          =======          ========          ========
Cumulative ratio of interest rate-sensitive
   assets to interest rate-sensitive liabilities           123.3%            114.3%            114.3%
                                                           ======            ======            ======
Cumulative difference as a percentage of
   total assets                                             14.1%             12.1%             12.1%
                                                            =====             =====             =====
</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

                   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         2-14-01                     /s/ Donna M. Coughey
    ------------------------            ----------------------------------------
                                        Donna M. Coughey
                                        President and Chief Executive Officer


Date         2-14-01                     /s/ Albert S. Randa
    ------------------------            ----------------------------------------
                                        Albert S. Randa, CPA
                                        Chief Financial Officer and Treasurer

                                      23