SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON DC 20549

                                   FORM 10-QSB

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

                For the quarterly period ended September 30, 1997

                                       Or

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

             For the transition period from __________ to __________

                          Commission File No.: 0-18833

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


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


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

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

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

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

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

      Common Stock ($1.00 par value)                        2,162,520
      ------------------------------                       ----------
          (Title of Each Class)                    (Number of Shares Outstanding
                                                    as of November 1, 1997)

<PAGE>
                   CHESTER VALLEY BANCORP INC. AND SUBSIDIARY

                                      INDEX

                                                                               
                                                                               
PART 1.  FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS

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

         CONSOLIDATED STATEMENTS OF OPERATIONS
           Three Months Ended September 30, 1997 and 1996 (Unaudited)          

         CONSOLIDATED STATEMENTS OF CASH FLOWS
           Three Months Ended September 30, 1997 and 1996 (Unaudited)          

         NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS   

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


PART 2.  OTHER INFORMATION                                                     

Item 1.  LEGAL PROCEEDINGS                                                     

Item 2.  CHANGES IN SECURITIES                                                 

Item 3.  DEFAULTS UPON SENIOR SECURITIES                                       

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

Item 5.  OTHER INFORMATION                                                     

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K                                      

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

                                                                                  September 30,    June 30,
                                                                                      1997           1997
                                                                                   ---------      ---------
<S>                                                                                <C>            <C>  
ASSETS:
Cash in banks ................................................................     $   3,642      $   2,610
Interest-bearing deposits ....................................................         4,133          6,844
Investment securities available for sale .....................................        22,545         27,566
Investment securities (market value - September 30, $18,926; June 30, $19,393)        18,901         19,469
Accrued interest receivable ..................................................         1,886          2,108
Loans held for sale ..........................................................           175            106
Loans receivable, less allowance for possible loan losses of $2,976 and $2,855       262,641        257,040
Property and equipment .......................................................         4,908          4,724
Other assets .................................................................         3,490          3,206
                                                                                   ---------      ---------                      
     Total Assets.............................................................     $ 322,321      $ 323,673
                                                                                   =========      =========

LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposit accounts .............................................................     $ 262,049      $ 260,750
Securities sold under agreements to repurchase ...............................           167             12
Advance payments by borrowers for taxes and insurance ........................           984          2,999
Employee Stock Ownership Plan ("ESOP") debt ..................................           287            333
Federal Home Loan Bank advances ..............................................        28,580         30,198
Other borrowings .............................................................           309            249
Accrued interest payable .....................................................           871            788
Other liabilities ............................................................         1,157          1,279
                                                                                   ---------      ---------
                                                                                     294,404        296,608
     Total Liabilities .......................................................     ---------      --------- 
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                 CHESTER VALLEY BANCORP INC. AND SUBSIDIARY
                               CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                           (Dollars in Thousands)
                                                (continued)

                                                                                  September 30,    June 30,
                                                                                      1997           1997
                                                                                   ---------      ---------
<S>                                                                                <C>            <C>  
Stockholders' Equity:
Preferred stock - $1.00 par value; 5,000,000 shares authorized; none issued ..          --             --
Common stock - $1.00 par value; 15,625,000 shares authorized; 2,174,689 and
  2,072,083 shares issued at September 30 and June 30, respectively ..........         2,175          2,072
Additional paid-in capital ...................................................        14,854         12,772
Common stock acquired by ESOP ................................................          (287)          (333)
Retained earnings - partially restricted .....................................        11,213         12,750
Net unrealized gain on securities available for sale, net of taxes ...........           104              3
                                                                                   ---------      ---------
  Subtotal ...................................................................        28,059         27,264
Treasury stock, at cost (8,957 shares and 13,213 shares at September 30 and
  June 30, respectively) .....................................................          (142)          (199)
                                                                                   ---------      ---------
     Total Stockholders' Equity ..............................................        27,917         27,065
                                                                                   ---------      ---------

     Total Liabilities and Stockholders' Equity ..............................     $ 322,321      $ 323,673
                                                                                   =========      =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
                             CHESTER VALLEY BANCORP INC. AND SUBSIDIARY
                               CONSOLIDATED STATEMENTS OF OPERATIONS
                        (Dollars in Thousands, Except for Per Share Amounts)


                                                                           Three Months Ended
                                                                                 September,
                                                                       --------------------------- 
                                                                            1997            1996
                                                                       -----------     -----------
<S>                                                                    <C>             <C>
INTEREST INCOME:
  Loans ..........................................................     $     5,502     $     4,855
  Investment securities and interest-bearing deposits ............             793             524
                                                                       -----------     -----------
     Total interest income .......................................           6,295           5,379    
                                                                       -----------     -----------

INTEREST EXPENSE:
  Deposits .......................................................           2,841           2,464
  Securities sold under agreements to repurchase .................               1              27
  Short-term borrowings ..........................................             244              72
  Long-term borrowings ...........................................             182             182
                                                                       -----------     -----------
     Total interest expense ......................................           3,268           2,745
                                                                       -----------     -----------

NET INTEREST INCOME ..............................................           3,027           2,634
  Provision for possible loan losses .............................             120              96
                                                                       -----------     -----------
      Net interest income after provision for possible loan losses           2,907           2,538
                                                                       -----------     -----------

OTHER INCOME:
  Service charges and fees .......................................             301             272
  Gain on sale of loans held for sale ............................               1               3
  Gain on sale of securities available for sale ..................              87              48
  Other ..........................................................              45              46
                                                                       -----------     -----------
     Total other income ..........................................             434             369
                                                                       -----------     -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                             CHESTER VALLEY BANCORP INC. AND SUBSIDIARY
                               CONSOLIDATED STATEMENTS OF OPERATIONS
                        (Dollars in Thousands, Except for Per Share Amounts)


                                                                           Three Months Ended
                                                                                 September,
                                                                       --------------------------- 
                                                                            1997            1996
                                                                       -----------     -----------
<S>                                                                    <C>             <C>
OPERATING EXPENSES:
  Salaries and employee benefits .................................           1,015             917
  Occupancy and equipment ........................................             424             359
  Data processing ................................................             166             150
  SAIF special assessment ........................................            --             1,387
  Deposit insurance premiums .....................................              38             130
  Other ..........................................................             486             392
                                                                       -----------     -----------
     Total operating expenses ....................................           2,129           3,335
                                                                       -----------     -----------

  Income (loss) before income taxes ..............................           1,212            (428)
  Income tax expense (benefit) ...................................             359            (227)
                                                                       -----------     -----------

NET INCOME (LOSS) ................................................     $       853     $      (201)
                                                                       ===========     ===========

EARNINGS PER SHARE (1):
  Primary ........................................................     $      0.39     $     (0.09)
                                                                       ===========     ===========
  Fully Diluted ..................................................     $      0.39     $     (0.09)
                                                                       ===========     ===========

DIVIDENDS PER SHARE PAID DURING PERIOD (1) .......................     $      0.10     $      0.08
                                                                       ===========     ===========

WEIGHTED AVERAGE SHARES OUTSTANDING (1):
  Primary ........................................................       2,189,381       2,163,096
                                                                       ===========     ===========
  Fully Diluted ..................................................       2,192,089       2,166,200
                                                                       ===========     ===========

</TABLE>

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

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

                                                                                Three Months Ended 
                                                                                    September 30,
                                                                             ---------------------- 
                                                                                 1997         1996
                                                                             --------      --------
<S>                                                                          <C>           <C>
Cash flows from operating activities:
Net income (loss) ......................................................     $    853      $   (201)
Add (deduct) items not affecting cash flows from operating activities:
   Depreciation ........................................................          161           140
   Provision for possible losses on loans ..............................          120            96
   Gain on sale of loans held for sale .................................           (1)           (3)
   Gain on sale of securities available for sale .......................          (87)          (48)
   Amortization of deferred loan fees, discounts and premiums ..........         (145)         (100)
   Decrease (increase) in accrued interest receivable ..................          222           (32)
   Increase in other assets ............................................         (284)         (417)
   Increase (decrease) in other liabilities ............................         (122)        1,452
   Increase in accrued interest payable ................................           83            74
                                                                             --------      --------
Net cash flows from operating activities ...............................          800           961
                                                                             --------      --------
Cash flows from (used in) investment activities:
   Capital expenditures ................................................         (345)         (185)
   Net increase in loans and loans held for sale .......................       (6,198)      (14,749)
   Proceeds from sale of loans held for sale ...........................          486          --
   Proceeds from maturities, payments and calls of investment securities          565         1,105
   Purchase of investment securities ...................................         --             (19)
   Purchase of securities available for sale ...........................      (51,634)      (12,147)
   Proceeds from sale of securities available for sale .................       56,914        13,132
                                                                             --------      --------
Net cash flows used in investment activities ...........................         (212)      (12,863)
                                                                             --------      --------
Cash flows from (used in) financing activities:
   Net increase (decrease) in deposits before interest credited ........       (1,090)        2,114
   Interest credited to deposits .......................................        2,389         2,059
   Proceeds under securities sold under agreements to repurchase .......          155         8,503
   Proceeds from FHLB advances .........................................       10,400          --
   Repayments of FHLB advances .........................................      (12,018)         (435)
   Decrease in advance payments by borrowers for taxes and insurance ...       (2,015)       (1,827)
   Proceeds from other borrowings ......................................           60          --
   Cash dividends on common stock ......................................         (226)         (172)
   Repayments of principal on ESOP debt ................................          (46)          (44)
   Sale of common stock under the dividend reinvestment plan ...........          112          --
   Payment for fractional shares .......................................           (8)          (10)
   Stock options exercised .............................................            7           216
   Reduction of common stock acquired by ESOP ..........................           46            44
   Stock repurchased as treasury stock .................................          (33)         (287)
                                                                             --------      --------
Net cash flows from (used in) financing activities .....................       (2,267)       10,161
                                                                             --------      --------
Decrease in cash and cash equivalents ..................................       (1,679)       (1,741)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                             CHESTER VALLEY BANCORP INC. AND SUBSIDIARY
                               CONSOLIDATED STATEMENTS OF CASH FLOWS
                                       (Dollars in Thousands)
                                            (continued)

                                                                                Three Months Ended 
                                                                                    September 30,
                                                                             ---------------------- 
                                                                                 1997         1996
                                                                             --------      --------
<S>                                                                          <C>           <C>
Cash and cash equivalents:
   Beginning of period .................................................        9,454        10,312
                                                                             ========      ========
   End of period .......................................................     $  7,775      $  8,571
                                                                             ========      ========

Supplemental disclosures:
   Cash payments during the year for:
      Taxes ............................................................     $    250      $    275
      Interest .........................................................     $  3,185      $  2,669



Non-cash items:
   Stock dividend issued ...............................................     $  2,155      $  1,516
   Net unrealized gain (loss) on investment securities
       available for sale ..............................................     $    165      $    (49)
   Tax effect on unrealized  gain (loss) on investment
       securities available for sale ...................................     $     64      $    (17)


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


NOTE 1 - BASIS OF PRESENTATION

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

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

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Principles of Consolidation

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

         Cash and Cash Equivalents

         For the purpose of the consolidated  statements of cash flows, cash and
         cash  equivalents  include cash and  interest-bearing  deposits with an
         original maturity of generally three months or less.

         Investment Securities

         The Company divides its securities  portfolio into three segments:  (a)
         held to maturity;  (b) available for sale; and (c) trading.  Securities
         in the held to maturity  category are accounted for at amortized  cost.
         Trading  securities,  if any, are accounted for at quoted market prices
         with  changes in market  values  being  recorded as gain or loss in the
         income  statement.  All other  securities are included in the available
         for sale category and are  accounted for at fair value with  unrealized
         gains or  losses,  net of taxes,  being  reflected  as  adjustments  to
         equity.
<PAGE>
         Investment securities held for investment are carried at cost, adjusted
         for  amortization of premiums and accretion of discounts using a method
         which  approximates  a level yield,  based on the Company's  intent and
         ability to hold the securities until maturity. At the time of purchase,
         the Company  makes a  determination  on whether or not it will hold the
         investment  securities  to maturity,  based upon an  evaluation  of the
         probability  of the  occurrence of certain  future  events.  Investment
         securities  which the Company believes may be involved in interest rate
         risk, liquidity,  or other  asset/liability  management decisions which
         might  reasonably  result  in such  securities  not  being  held  until
         maturity,   are   classified  as  available  for  sale.  If  investment
         securities  are  sold,  any  gain  or loss is  determined  by  specific
         identification and reflected in the operating results for the period in
         which such sale occurs.

         Allowance for Possible Loan Losses

         The  allowance  for possible  loan losses is maintained at a level that
         management  considers  adequate to provide for  potential  losses based
         upon an evaluation of known and inherent  risks in the loan  portfolio.
         Management's  evaluation  is based upon an analysis  of the  portfolio,
         past loss experience,  current  economic  conditions and other relevant
         factors.  While management uses the best information  available to make
         such evaluations,  such evaluations are highly  subjective,  and future
         adjustments  to the  allowance  may be necessary if  conditions  differ
         substantially  from the assumptions used in making the evaluations.  In
         addition,  various  regulatory  agencies,  as an integral part of their
         examination  process,  periodically  review the Company's allowance for
         losses on loans.  Such  agencies  may require the Company to  recognize
         additions to the allowance based on their  judgments about  information
         available to them at the time of their  examination.  The  allowance is
         increased by the provision for possible loan losses which is charged to
         operations.  Loan losses,  other than those  incurred on loans held for
         sale,  are charged  directly  against the allowance  and  recoveries on
         previously charged-off loans are generally added to the allowance.
          
         For purposes of applying the  measurement  criteria for impaired loans,
         the Company excludes large groups of smaller-balance homogeneous loans,
         primarily  consisting  of  residential  real estate  loans and consumer
         loans as well as commercial  business  loans with balances of less than
         $100,000.  For  applicable  loans,  the Company  evaluates the need for
         impairment  recognition when a loan becomes  non-accrual or earlier if,
         based  on   management's   assessment   of  the   relevant   facts  and
         circumstances,  it is  probable  that the  Company  will be  unable  to
         collect all proceeds due according to the contractual terms of the loan
         agreement.  At and during the  three-month  period ended  September 30,
         1997, the recorded  investment in impaired loans was not material.  The
         Company's  policy for the  recognition  of interest  income on impaired
         loans is the same as for non-accrual  loans discussed  below.  Impaired
         loans are charged off when the Company  determines that  foreclosure is
         probable and the fair value of the collateral is less than the recorded
         investment of the impaired loan.
<PAGE>
         Loans, Loan Origination Fees and Uncollected Interest

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

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

         Loans Held for Sale

         The Company  periodically  identifies certain loans as held for sale at
         the time of origination.  These loans consist  primarily of fixed-rate,
         single-family  residential  mortgage loans which meet the  underwriting
         characteristics   of   certain   government-    sponsored   enterprises
         (conforming  loans).  Loans  held for sale are  carried at the lower of
         aggregate cost or fair value,  with the resulting gain or loss included
         in other income for the period.  Realized  gains or losses are included
         in other income for the period.

         Real Estate Owned ("REO")

         Real  estate  acquired  through  foreclosure  or by  deed  in  lieu  of
         foreclosure  is  classified as REO. REO is carried at the lower of cost
         (lesser of carrying  value of the loan or fair value of the property at
         date of  acquisition)  or  fair  value  less  selling  expenses.  Costs
         relating  to  the  development  or  improvement  of  the  property  are
         capitalized; holding costs are charged to expense.

         Property and Equipment

         Property  and   equipment   are  stated  at  cost,   less   accumulated
         depreciation.  Depreciation is computed using the straight-line  method
         over the estimated useful lives of the assets.  When assets are retired
         or otherwise disposed of, the cost and related accumulated depreciation
         are removed from the accounts.  The cost of maintenance  and repairs is
         charged  to  expense as  incurred  and  renewals  and  betterments  are
         capitalized.
<PAGE>
         Deferred Income Taxes

         The Company  accounts  for income  taxes under the asset and  liability
         method.  Deferred tax assets and  liabilities  are  recognized  for the
         future  tax  consequences   attributable  to  differences  between  the
         financial statement carrying amounts of existing assets and liabilities
         and  their  respective  tax  bases and  operating  loss and tax  credit
         carryforwards.  Deferred tax assets and  liabilities are measured using
         enacted tax rates  expected to apply to taxable  income in the years in
         which those  temporary  differences  are  expected to be  recovered  or
         settled.  The effect on deferred tax assets and liabilities of a change
         in tax rates is  recognized  in income in the period that  includes the
         enactment date.

         Earnings Per Common Share and Common Equivalent Share

         Earnings per share have been calculated  based on the weighted  average
         number of common  and  common  equivalent  shares  outstanding  for the
         respective   periods.   Stock  options  are  considered   common  stock
         equivalents  and are  included  in the  computation  of the  number  of
         outstanding  shares  using  the  treasury  stock  method.  See  "Recent
         Accounting Pronouncements" on page 17.
          
         Earnings per share and weighted  average shares  outstanding  have been
         adjusted  to  reflect  the  effects  of the 5% stock  dividend  paid in
         September 1997 and the March 1997 five-for-four stock split effected in
         the form of a dividend.

NOTE 3 - LOANS RECEIVABLE

                  Loans receivable are summarized as follows:
<TABLE>
<CAPTION>
                                          At September 30,    At June 30,
                                                1997              1997
                                             ---------         ---------
                                                (Dollars in Thousands)
<S>                                          <C>               <C>
       First mortgage loans:
          Residential ...............        $ 160,150         $ 159,431
          Construction-residential ..           11,338             9,873
          Land acquisition and
             development ............            7,840             6,763
          Commercial ................           33,813            33,981
          Construction-commercial ...            8,190             6,271
       Commercial business ..........            9,888             7,863
       Consumer .....................           48,211            47,343
                                             ---------         ---------
       Total loans ..................          279,430           271,525
                                             ---------         ---------
       Less:
          Undisbursed loan proceeds:
             Construction-residential           (7,712)           (6,599)
             Construction-commercial            (4,537)           (3,494)
          Deferred loan fees - net ..           (1,564)           (1,537)
          Allowance for loan losses .           (2,976)           (2,855)
                                             ---------         ---------
       Net loans ....................        $ 262,641         $ 257,040
                                             =========         =========
</TABLE>
<PAGE>
NOTE 4 - COMMITMENTS

         Commitments  to  potential  mortgagors  of the Bank  amounted  to $4.57
         million as of  September  30,  1997,  of which  $2.16  million  was for
         variable-rate  loans.  The balance of the commitments  represents $2.41
         million of fixed-rate loans bearing interest rates of between 6.50% and
         7.575%.  At  September  30,  1997,  the Company  had $12.25  million of
         undisbursed  construction  loan  funds  as well as  $14.37  million  of
         undisbursed remaining credit line balances.
                                                      
NOTE 5 - REGULATORY CAPITAL

                  The Bank is  required by  regulations  of the Office of Thrift
                  Supervision  ("OTS") to maintain  minimum levels of capital as
                  measured by three ratios.  Savings  institutions are currently
                  required to  maintain a minimum  regulatory  tangible  capital
                  equal to 1.5% of total  assets,  minimum core capital of 3% of
                  total  assets,  and  risk-based  capital  equal to 8% of total
                  risk-weighted  assets.  At September  30,  1997,  and June 30,
                  1997, the Bank exceeded all regulatory  capital  requirements.
                  The  following  sets  forth the  reconciliation  of the Bank's
                  compliance  with each of the regulatory  capital  requirements
                  (dollars in thousands):
<TABLE>
<CAPTION>
                                             September 30, 1997                                    June 30, 1997
                                ---------------------------------------------       -------------------------------------------- 
                                  Tangible         Core            Risk-based          Tangible        Core           Risk-based
                                  Capital          Capital           Capital           Capital         Capital          Capital
                                -------------    -------------     ----------       -------------    ------------      --------- 
<S>                             <C>             <C>              <C>                <C>              <C>             <C>
Total Regulatory Capital        $   27,653      $    27,653      $     29,966       $    26,750      $   26,750      $    29,057
Minimum Required  Regulatory   
   Capital                           4,832            9,663            16,229             4,855           9,710           15,689  
                                ----------      -----------      ------------       -----------      ----------      ----------- 
Excess Regulatory Capital       $   22,821      $    17,990      $     13,737       $    21,895      $   17,040      $    13,363
                                ==========      ===========      ============       ===========      ==========      ===========
                              
Regulatory Capital as a
  Percentage of Assets               8.59%            8.59%            14.77%             8.26%           8.26%           14.82%
Minimum Capital  Required as
  a Percentage of Assets             1.50             3.00              8.00              1.50            3.00             8.00
                                ----------      -----------      ------------       -----------      ----------      -----------   
Excess  Regulatory   Capital
  as a Percentage of Assets          7.09%            5.59%             6.77%             6.76%            5.26%           6.82%
                                ==========      ===========      ============       ===========      ==========      ===========
  
</TABLE>
The Bank is not under any agreement with the regulatory  authorities,  nor is it
aware of any current  recommendations  by the regulatory  authorities  which, if
they were to be  implemented,  would  have a material  effect on the  liquidity,
capital resources or operations of the Company.
<PAGE>
Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATION

                               FINANCIAL CONDITION

The Company's  total assets  decreased to $322.32 million at September 30, 1997,
from $323.67 million at June 30, 1997,  largely as the result of the decrease in
investment  securities  available  for sale to $22.55  million at September  30,
1997,  from $27.57  million at June 30,  1997.  Deposit  accounts  increased  to
$262.05 million and Federal Home Loan Bank advances  decreased to $28.58 million
at September 30, 1997, from $260.75 million and $30.20 million at June 30, 1997,
respectively.

Stockholders'  equity  increased to $27.92  million at September 30, 1997,  from
$27.07  million at June 30, 1997,  primarily a result of net income of $853,000,
the recognition of net unrealized gains on securities available for sale, net of
taxes, of $101,000,  the sale of $112,000 of common stock in connection with the
Company's dividend reinvestment plan, and the reduction in the principal balance
of the ESOP debt by $46,000. The increase in stockholders' equity was offset, in
large  part,  by the  payment  of  cash  dividends  totaling  $226,500,  and the
repurchase  of  $33,000 of common  stock  during the  three-month  period  ended
September 30, 1997.

                              RESULTS OF OPERATIONS

Net interest income, on a fully tax equivalent  basis,  increased 15.9% to $3.13
million for the three-month  period ended September 30, 1997,  compared to $2.70
million  for the same  period in 1996.  Total  interest  income,  on a fully tax
equivalent basis, increased to $6.40 million during the three-month period ended
September 30, 1997, a $.96 million or 17.7% increase over the  comparable  prior
period.  This  increase was primarily  due to a $42.13  million  increase in the
average  balance  of  interest-earning  assets  coupled  with a 14  basis  point
increase  in the yield  earned on the assets.  The  increase in the yield is the
result  of  the  Company's  continual  effort  to  focus  its  loan  origination
activities on higher-yielding loan products, in particular commercial loans.

Total  interest  expense  increased to $3.27  million from $2.75 million for the
three-month  periods  ended  September  30,  1997 and 1996,  respectively.  This
increase was primarily due to a $38.43 million  increase in the average  balance
of  interest-bearing  liabilities to $269.86  million  combined with an 11 basis
point  increase  in the  average  rate  paid on such  liabilities  to  4.85%  at
September 30, 1997.

Provision for Possible Loan Losses

The Company  provided  $120,000 and $96,000 for possible  loan losses during the
three-month  periods ended September 30, 1997,  respectively.  These  provisions
were  added to the  Company's  allowance  for  possible  loan  losses due to the
current economic conditions and management's  assessment of the inherent risk of
loss existing in the loan  portfolio.  At September 30, 1997,  the allowance for
possible loan losses  totaled  $2.98 million or 1.13% of net loans,  compared to
$2.86  million or 1.10% of net loans and $2.75  million or 1.15% of net loans at
June 30,  1997,  and  September  30,  1996,  respectively.  As a  percentage  of
non-performing  loans,  the  allowance  for  possible  loan losses was 173.1% at
September 30, 1997, compared to 381.7% at June 30, 1997, and further compared to
134.8% at September 30, 1996.
<PAGE>
Provisions  for  possible  loan  losses  which  are added to the  allowance  for
possible loan losses are based upon, among other things, delinquency trends, the
volume of non-performing loans, prior loss experience of the portfolio,  current
economic conditions, and other relevant factors. Although management believes it
has used the best information  available to it in making such determinations and
that the  present  allowance  for  possible  loan  losses  is  adequate,  future
adjustments  to the allowance may be necessary,  and net income may be adversely
affected if  circumstances  differ  substantially  from the assumptions  used in
determining  the  level  of  the  allowance.  In  addition,  various  regulatory
agencies, as an integral part of their examination process,  periodically review
the Company's  allowance for possible losses on loans. Such agencies may require
the Company to recognize  additions to the  allowance  based on their  judgments
about information available to them at the time of their examination.

Other Income

Total other income  increased 17.6% to $434,000  during the  three-month  period
ended  September  30,  1997,  as compared to $369,000  during the same period in
1996. Service charges and fees increased to $301,000 from $272,000 for the three
months ended  September  30, 1997 and 1996,  respectively,  as the result of the
fees earned on an increased  number of checking  accounts and the fees earned on
the Bank's debit card. In addition,  other income included a gain on the sale of
securities  available for sale of $87,000  compared to a gain of $48,000  during
the three months ended September 30, 1997 and 1996, respectively.

Operating Expenses

Total  operating  expenses  were $2.13  million and $3.34  million for the three
months ended September 30, 1997 and 1996,  respectively.  Operating expenses for
the three months ended September 30, 1996,  included $1.39 million  attributable
to the payment of the one-time  Savings  Institutions  Insurance  Fund  ("SAIF")
special  assessment.  The one-time assessment was part of legislation adopted to
recapitalize  the SAIF and required the Bank to pay 65.7 cents for every $100 of
deposits as of March 31, 1995. As a result of the special assessment, the Bank's
federal  insurance  premiums  decreased from $0.23 per $100 of deposits to $0.06
per $100 of deposits beginning in the third fiscal quarter of 1997.

Excluding the $1.39 million one-time SAIF assessment,  the increase in operating
expenses for the  three-month  period ended  September 30, 1997,  was due to (i)
normal salary  increases  combined with benefits expense and increased number of
staff,  (ii) an increase in data  processing  expenses  related to an  increased
number of accounts and usage,  and (iii) an increase in occupancy  and equipment
expenses related to the  refurbishment of the Bank's  operations  center and the
purchase of imaging equipment used for the processing of customer statements.

Income Tax Expense

Income tax expense was $359,000 for the  three-month  period ended September 30,
1997 as  compared  to a benefit of  $201,000  for the same  period in 1996.  The
income tax benefit for the three-month  period ended September 30, 1996, was the
result of the  $1.39  million  one-time  SAIF  assessment  which  resulted  in a
$428,000 pre-tax loss for the period.
<PAGE>
                                  ASSET QUALITY

Non-performing  assets are comprised of non-performing loans and REO and totaled
$1.72  million  and $  748,000  at  September  30,  1997,  and  June  30,  1997,
respectively.  Non-accrual  loans are loans on which the accrual of interest has
ceased because the collection of principal or interest payments is determined to
be doubtful by management.  It is the policy of the Company to  discontinue  the
accrual of interest when  principal or interest  payments are delinquent 90 days
or more (unless the loan  principal and interest are determined by management to
be fully secured and in the process of collection), or earlier, if the financial
condition of the borrower raises significant  concern with regard to the ability
of the borrower to service the debt in  accordance  with the current loan terms.
Interest income is not accrued until the financial  condition and payment record
of the  borrower  once again  demonstrate  the ability to service  the debt.  At
September  30,  1997,  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 .53% at  September  30,  1997,
compared to .23% at June 30, 1997, and .76% and .72%, respectively, at September
30, 1996.  Non-performing  loans,  which  totaled $1.72 million at September 30,
1997,  consisted of seven residential mortgage loans aggregating  $492,000,  one
construction loan totaling $55,000,  one commercial  mortgage totaling $958,000,
and $214,000 in consumer and commercial  business loans. The commercial mortgage
is paying in accordance  with the current loan terms but  management  has deemed
the loan  nonperforming  due to management's  concern with the borrower's future
ability to continue to pay in accordance with the current loan terms.

At September  30, 1997,  the Company's  classified  assets,  which  consisted of
assets classified as substandard, doubtful, loss, and REO, totaled $1.56 million
compared  to $1.40  million at June 30,  1997,  and  further  compared  to $2.16
million at September 30, 1996. Included in the assets classified  substandard at
September 30, 1997 and 1996,  and at June 30, 1997,  were all loans 90 days past
due and loans which are 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  a  well-defined  weakness  which  may  jeopardize  the
liquidation of the debt.

                         LIQUIDITY AND CAPITAL RESOURCES

The Company's primary sources of funds have historically  consisted of deposits,
regular principal  payments and prepayments of outstanding loans, and borrowings
from the Federal  Home Loan Bank of  Pittsburgh  and other  sources.  During the
first  three  months of fiscal  1998,  the Company  used its  capital  resources
primarily to meet its ongoing commitments to fund maturing savings  certificates
and savings  withdrawals,  fund existing and continuing  loan  commitments,  and
maintain its liquidity.  At September 30, 1997,  the total of approved  mortgage
loan  commitments  amounted  to $4.57  million.  In  addition,  at such date the
Company had $12.25  million of  undisbursed  construction  loan funds and $14.37
million of undisbursed  remaining credit line balances.  Certificates of deposit
totaling  $108.58 million are scheduled to mature during the remainder of fiscal
1998,  the  majority  of  which  the  Company  believes,  on the  basis of prior
experience, will be reinvested with the Company.
<PAGE>
The Company's current dividend policy is to declare a regular quarterly dividend
with the intent  that the level of the  dividend  per share be  reviewed  by the
Board of Directors on a quarterly  basis.  Dividends will be in the form of cash
and/or  stock  after  giving  consideration  to all  aspects  of  the  Company's
performance for the quarter. On August 20, 1997, the Board of Directors declared
a 5% stock  dividend and a quarterly  cash  dividend of $.11 per share,  both of
which were paid on September 18, 1997, to stockholders of record as of September
4, 1997.

The Bank, which is the Company's  wholly-owned  subsidiary,  is required,  under
applicable  federal   regulations,   to  maintain  specified  levels  of  liquid
investments and qualifying types of United States  Treasury,  federal agency and
other investments having maturities of five years or less. Regulations currently
in effect  require the Bank to maintain a liquid asset ratio of not less than 5%
of its net withdrawable accounts plus short-term borrowings, of which short-term
liquid  assets must amount to not less than 1%.  These  levels are changed  from
time to  time  by the OTS to  reflect  economic  conditions.  First  Financial's
average  regulatory  liquidity  ratio for the month ended September 30, 1997 was
9.34%.

                         ASSET AND LIABILITY MANAGEMENT


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

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

The Company's asset and liability  management strategy currently is to emphasize
the origination of adjustable-rate mortgages, short-term consumer and commercial
business loans, and floating-rate  construction loans and commercial real estate
loans.  As of September  30, 1997,  $121.75  million,  or 38.9% of the Company's
interest-sensitive  assets were scheduled to reprice  within a one-year  period,
and the Company's  cumulative one-year interest rate GAP was negative 11.9%. The
table on page 18 summarizes the contractual maturities or replacement periods of
the Company's  interest-earning  assets and  interest-bearing  liabilities as of
September 30, 1997.  Adjustable-  and  floating-rate  assets are included in the
period in which interest rates are next scheduled to adjust,  rather than in the
period for which they are  contractually  due.  Fixed-rate loans are included in
the periods in which they are anticipated to be repaid.  The analysis on page 18
takes  into  consideration  the timing of the  repricing  but does not take into
consideration   any   restrictions   on   the   magnitude   of   the   repricing
interest-sensitive assets.
<PAGE>
Rates of interest paid on deposits are priced to be sufficiently  competitive in
the Company's  primary  market area to meet its asset and  liability  management
objectives and requirements.  The Company generally  maintains a pricing program
for its  certificate  accounts  which entails paying higher rates of interest on
longer-term  certificates  to encourage  customers to invest in  certificates of
deposit  for longer  maturities.  This  strategy  has  assisted  the  Company in
controlling  its cost of funds and  supported its goal of extending the maturity
of its liabilities.

The Company  periodically  identifies certain loans as held for sale at the time
of  origination.  These loans  consist  primarily of  fixed-rate,  single-family
residential  mortgage  loans  which  meet the  underwriting  characteristics  of
certain   government-sponsored   enterprises  (conforming  loans).  The  Company
regularly  re-evaluates  its policy  and  revises  it as deemed  necessary.  The
majority of loans sold to date have  consisted  of sales to Freddie Mac of whole
loans and 95% participation  interests in long-term,  fixed-rate,  single-family
residential  mortgage  loans in  furtherance  of the  Company's  goal of  better
matching  the  maturities  and  interest-rate  sensitivity  of  its  assets  and
liabilities. When selling loans, the Company has generally retained servicing in
order to increase its  non-interest  income.  At September 30, 1997, the Company
serviced  $25.18  million of mortgage  loans for others.  Sales of loans produce
future  servicing  income and  provide  funds for  additional  lending and other
purposes.

                        RECENT ACCOUNTING PRONOUNCEMENTS

In February 1997 the Financial  Accounting  Standards Board ("FASB") issued SFAS
No.  128,  "Earnings  Per  Share."  This  statement  establishes  standards  for
computing and  presenting  earnings per share (EPS) and applies to entities with
publicly held common stock or potential common stock. This statement  simplifies
the standards for computing  earnings per share  previously found in APB Opinion
No. 15,  Earnings per Share,  and makes them  comparable  to  international  EPS
standards.  It replaces the  presentation  of primary EPS with a presentation of
basic EPS. It also  requires dual  presentation  of basic and diluted EPS on the
face of the income  statement for all entities with complex  capital  structures
and requires a reconciliation  of the numerator and denominator of the basic EPS
computation  to the numerator and  denominator  of the diluted EPS  computation.
This statement is effective for financial  statements  issued for periods ending
after December 15, 1997,  including interim periods;  earlier application is not
permitted.  This statement  requires  restatement of all  prior-period  EPS data
presented.  Had the Company  adopted SFAS No. 128 as of September 30, 1997,  pro
forma  basic and  diluted  earnings  (loss) per share  would have been $0.39 and
$(.09) for the three months ended September 30, 1997 and 1996, respectively.

In June 1997 the FASB  issued SFAS No. 130,  "Reporting  Comprehensive  Income."
This  statement   establishes   standards  for  the  reporting  and  display  of
comprehensive  income  and  its  components  in a full  set  of  general-purpose
financial statements.  SFAS No. 130 requires that all items that are required to
be recognized as components of  comprehensive  income be reported in a financial
statement  that is  displayed  with  the  same  prominence  as  other  financial
statements.  The statement does not require a specific format for that financial
statement but requires that an enterprise  display an amount  representing total
comprehensive income for the period in that financial statement. SFAS No. 130 is
effective for fiscal years beginning after December 15, 1997. Management has not
yet determined the impact, if any, of this statement on the Company.
<PAGE>
In June 1997 the FASB  issued SFAS No. 131,  "Disclosures  About  Segments of an
Enterprise and Related  Information." SFAS No. 131 establishes standards for the
way that public business enterprises report information about operating segments
in annual  financial  statements  and  requires  that those  enterprises  report
selected  information  about  operating  segments in interim  financial  reports
issued to shareholders.  It also establishes  standards for related  disclosures
about products and services, geographic areas, and major customers. SFAS No. 131
is effective for financial  statements for periods  beginning after December 15,
1997. Management has not yet determined the impact, if any, of this statement on
the Company.
<TABLE>
<CAPTION>
            Interest Rate Sensitivity Analysis at September 30, 1997
                             (Dollars in thousands)

                                                                        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  
                                                         -------       ----------       --------      -----------  
<S>                                                     <C>             <C>             <C>             <C>   
INTEREST-EARNING ASSETS:
   Loans (1)
       Adjustable- and floating-rate mortgages (2)      $ 32,475        $ 14,853        $ 27,051        $ 18,738
       Balloon and fixed-rate mortgages (2) ......         6,055           3,225           6,360          28,019
       Consumer (2) (3) ..........................         7,649           1,133           2,337          10,361
       Commercial business .......................         5,459             188             374           1,456
   Securities and interest-bearing deposits (4) ..         9,720           1,623           3,252           8,789
                                                        --------        --------        --------        --------

   Total interest-earning assets .................      $ 61,357        $ 21,022        $ 39,374        $ 67,363
                                                       --------        --------        --------        ---------

INTEREST-BEARING LIABILITIES:
   Savings accounts (5) ..........................      $    999        $    999        $  2,002            --   
   NOW accounts (5) ..............................           900             900           1,800            --   
   Money market accounts (5) .....................        26,631            --              --              --   
   Certificate accounts ..........................        50,252          26,897          30,504          34,881
   Securities sold under agreements to repurchase            167            --              --              --   
   Borrowings ....................................        15,946             396           1,769           4,595
                                                       --------        --------        --------        --------
   Total interest-bearing liabilities ............      $ 94,895        $ 29,192        $ 36,075        $ 39,476
                                                       --------        --------        --------        --------

Cumulative excess of interest-earning assets
   to interest-bearing liabilities ...............      ($33,538)       ($41,708)       ($38,409)       ($10,522)
                                                        ========        ========        ========        ========
Cumulative ratio of interest rate-sensitive
   assets to interest rate-sensitive liabilities .            65%             66%             76%             95%
                                                        ========        ========        ========        ========
Cumulative difference as a percentage of
   total assets ..................................         (10.4%)         (12.9%)         (11.9%)          (3.3%)
                                                        ========        ========        ========        ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                         More Than                                              
                                                       Three Years                                             
                                                         Through      More Than                           
                                                        Five Years    Five Years       Total        
                                                        ----------    ----------       -----        

<S>                                                     <C>            <C>            <C>
INTEREST-EARNING ASSETS:
   Loans (1)
       Adjustable- and floating-rate mortgages (2)      $  6,375       $    746       $100,237     
       Balloon and fixed-rate mortgages (2) ......        21,518         43,669        108,845
       Consumer (2) (3) ..........................         8,661         18,070         48,211
       Commercial business .......................         1,398          1,013          9,888
   Securities and interest-bearing deposits (4) ..         3,147         19,048         45,579
                                                        --------       --------       --------   
   Total interest-earning assets .................      $ 41,098       $ 82,546       $312,760
                                                        --------       --------       --------  
INTEREST-BEARING LIABILITIES:
   Savings accounts (5) ..........................          --         $ 21,085       $ 25,085
   NOW accounts (5) ..............................          --           24,419         28,019
   Money market accounts (5) .....................          --             --           26,631
   Certificate accounts ..........................        14,154          3,694        160,382
   Securities sold under agreements to repurchase           --             --              167
   Borrowings ....................................         4,470          2,000         29,176
                                                        --------       --------       --------  
   Total interest-bearing liabilities ............      $ 18,624       $ 51,198       $269,460

                                                 
Cumulative excess of interest-earning assets
   to interest-bearing liabilities ...............      $ 11,952       $ 43,300       $ 43,300
                                                        ========       ========       ========
Cumulative ratio of interest rate-sensitive
   assets to interest rate-sensitive liabilities .           105%           116%           116%
                                                        ========       ========       ========
Cumulative difference as a percentage of
   total assets ..................................           3.7%          13.4%          13.4%
                                                        ========       ========       ========
</TABLE>
(1)  Net of undisbursed loan proceeds.
(2)  Assumes market prepayment rates.
(3)  Includes  home  improvement,  home equity,  automobile  and other  consumer
     loans.
(4)  Includes   investment    securities,    mortgage-backed    securities   and
     interest-bearing deposits.
(5)  Balances  distributed  among the various  repricing time intervals based on
     historical and anticipated repricing patterns.

<PAGE>
Part II.    Other Information

            Item 1.  Legal Proceedings

                     None

            Item 2.  Changes in Securities

                     None

            Item 3.  Defaults Upon Senior Securities

                     Not Applicable.

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

                     The Company's annual meeting of shareholders
                     was held on October 22, 1997.  The following
                     matters  were   presented  for   shareholder
                     action at such meeting:

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

                         Name                   Votes For        Votes Withheld
                         ----                   ---------        --------------

                     Robert J. Bradbury         1,793,981         10,833
                     James E. McErlane          1,802,539          2,270

                     (2)  To approve the Company's 1997 Stock Option Plan:

                                                                    Broker Votes
                     Votes For    Votes Against   Votes Abstained     Withheld
                     ---------    -------------   ---------------     --------

                     1,493,157       31,419           19,188          261,050

                     (3)  To ratify the  appointment  of KPMG Peat Marwick
                          LLP as the  Company's  independent  auditors for
                          the fiscal year ending June 30, 1998:

                          Votes For       Votes Against         Votes Abstained

                           1,798,714         1,219                  4,588

                                  
            Item 5.  Other Information

                     None

            Item 6.  Exhibits and Reports on Form 8-K

                     None
<PAGE>
                                   SIGNATURES


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

                                         Chester Valley Bancorp Inc.



Date          11-12-97                   /s/Ellen Ann Roberts 
                                         --------------------
                                         Ellen Ann Roberts
                                         Chairman and Chief Executive Officer



Date         11-12-97                    /s/Christine N. Dullinger
                                         -------------------------
                                         Christine N. Dullinger
                                         Treasurer and Chief Financial Officer