FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

(Mark One)

(X)      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
         SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 1998, OR

(   )    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
         SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________.

Commission File No. 0-12870.


                         FIRST WEST CHESTER CORPORATION
             (Exact name of Registrant as specified in its charter)

    Pennsylvania                                              23-2288763
    (State or other jurisdiction of                         (IRS Employer
     incorporation or organization)                          Identification No.)


         9 North High Street, West Chester, Pennsylvania                 19380
                  (Address of principal executive office)             (Zip code)


                                 (610) 692-1423
              (Registrant's telephone number, including area code)

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

The number of shares  outstanding of Common Stock of the Registrant as of May 1,
1998 was 2,304,913.



<PAGE>


                 FIRST WEST CHESTER CORPORATION AND SUBSIDIARIES

                                      INDEX


                                                                            PAGE

Part I.  FINANCIAL INFORMATION

           Item 1 -   Financial Statements
                      Consolidated Statements of Condition
                      March 31, 1998 and December 31, 1997                     3


                      Consolidated Statements of Income
                      Three-Months Ended March 31, 1998 and 1997               4


                      Consolidated Statements of Stockholder's Equity          5


                      Consolidated Statements of Cash Flows
                      Three-Months Ended March 31, 1998 and 1997               6


                      Notes to Consolidated Financial Statements               7

            Item 2 -  Management's Discussion and Analysis of
                      Financial Condition and Results of Operations         8-19

            Item 3 -  Quantitative and Qualitative Disclosures 
                      About Market Risk                                       20

Part II. OTHER INFORMATION

            Item 1 - Legal Proceedings                                        21
            Item 2 - Changes in Securities                                    21
            Item 3 - Defaults upon Senior Securities                          21
            Item 4 - Submission of Matters to a Vote of Security Holders   21-22
            Item 5 - Other Information                                        22
            Item 6 - Exhibits and Reports on Form 8-K                         23


           Signatures                                                         24



<PAGE>


                 FIRST WEST CHESTER CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>

                                                                                         Unaudited
(Dollars in thousands)                                                                    March 31,          December 31,
                                                                                            1998                  1997
                                                                                            ----                  ----
<S>                                                                                     <C>                  <C>
ASSETS
    Cash and due from banks                                                              $   21,760           $   22,248
    Federal funds sold                                                                        7,700                4,200

                Total cash and cash equivalents                                              29,460               26,448
                                                                                          ---------            ---------

    Investment securities held-to-maturity (market value of $11,156 and
        $12,237 at March 31, 1998 and December 31, 1997, respectively)                       11,015               12,082

    Investment securities available-for-sale, at market value                                62,815               65,516

    Loans                                                                                   321,034              318,899
    Less:  Allowance for possible loan losses                                                (5,940)              (5,900)
                                                                                          ---------            ---------

                Net loans                                                                   315,094              312,999

    Premises and equipment                                                                    6,926                6,659
    Other assets                                                                              6,335                7,664
                                                                                          ---------            ---------

                Total assets                                                             $  431,645           $  431,368
                                                                                          =========            =========

LIABILITIES
    Deposits
        Noninterest-bearing                                                              $   66,904           $   63,287
        Interest-bearing                                                                    313,941              310,962
                                                                                          ---------            ---------

                Total deposits                                                              380,845              374,249

    Securities sold under repurchase agreements                                               4,727                7,625
    Federal Home Loan Bank Advances                                                           3,392                7,379
    Other liabilities                                                                         5,609                5,902
                                                                                          ---------            ---------

                Total liabilities                                                           394,573              395,155
                                                                                          ---------            ---------

STOCKHOLDERS' EQUITY
    Common stock, par value $1.00; authorized, 5,000,000 shares;
        outstanding, 2,399,833 at March 31, 1998 and December 31, 1997.                       2,400                2,400
    Additional paid-in capital                                                                2,746                2,729
    Retained earnings                                                                        33,500               32,803
    Net unrealized gain (loss) on securities available-for-sale                                  44                  (33)
    Treasury stock, at cost:  99,520 shares and 103,700 shares
        at March 31, 1998 and December 31, 1997, respectively.                               (1,618)              (1,686)
                                                                                          ---------            ---------

                Total stockholders' equity                                                   37,072               36,213
                                                                                          ---------            ---------

                Total liabilities and stockholders' equity                               $  431,645           $  431,368
                                                                                          =========            =========


The accompanying notes are an integral part of these statements.
</TABLE>
                                       3
<PAGE>




                 FIRST WEST CHESTER CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)
<TABLE>
<CAPTION>

(Dollars in thousands - except per share)                                                         Three Months Ended
                                                                                                        March 31,
                                                                                                        ---------


                                                                                               1998                1997
                                                                                            ---------            -------
<S>                                                                                        <C>                <C>   

INTEREST INCOME
    Loans, including fees                                                                   $   7,001          $   6,153
    Investment securities                                                                       1,170              1,475
    Federal funds sold                                                                             69                 24
    Deposits in banks                                                                              --                 12
                                                                                             --------           --------

                Total interest income                                                           8,240              7,664
                                                                                             --------           --------

INTEREST EXPENSE
    Deposits                                                                                    3,290              2,978
    Securities sold under repurchase agreements                                                    37                 64
    Other borrowings                                                                               97                 64
                                                                                             --------           --------

                Total interest expense                                                          3,424              3,106
                                                                                             --------           --------

                Net interest income                                                             4,816              4,558

    Provision for loan losses                                                                     224                210
                                                                                             --------           --------

                Net interest income after provision for possible loan losses                    4,592              4,348
                                                                                             --------           --------

NON-INTEREST INCOME
    Financial Management Services                                                                 561                500
    Service charges on deposit accounts                                                           253                231
    Investment securities gains (losses), net                                                      (3)                 5
    Other                                                                                         265                164
                                                                                             --------           --------

                Total non-interest income                                                       1,076                900
                                                                                             --------           --------

NON-INTEREST EXPENSE
    Salaries and employee benefits                                                              2,213              2,036
    Net occupancy and equipment                                                                   802                771
    FDIC Bank insurance fund assessments                                                           11                 10
    Bank shares tax                                                                                87                 85
    Other                                                                                         860                721
                                                                                             --------           --------

                Total non-interest expense                                                      3,973              3,623
                                                                                             --------           --------

                Income before income taxes                                                      1,695              1,625

INCOME TAXES                                                                                      516                525
                                                                                             --------           --------

                NET INCOME                                                                  $   1,179          $   1,100
                                                                                             ========           ========

PER SHARE DATA
    Basic net income per common share                                                       $    0.51          $    0.48
                                                                                             ========           ========
    Diluted net income per common share                                                     $    0.50          $    0.48
                                                                                             ========           ========
    Dividends declared                                                                      $    0.21          $    0.19
                                                                                             ========           ========
Weighted average shares outstanding                                                         2,296,908          2,287,921
                                                                                            =========          =========

The accompanying notes are an integral part of these statements.
</TABLE>

                                       4

<PAGE>


                 FIRST WEST CHESTER CORPORATION AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

                                   (UNAUDITED)


<TABLE>
<CAPTION>

(Dollars in thousands)                                                                      1998                   1997
                                                                                        -----------            ----------
<S>                                                                                       <C>                   <C> 

Balance at January 1,                                                                      $ 36,213              $ 33,175

    Net  income to date                                                                       1,179                 1,100
    Cash dividends declared                                                                    (482)                 (429)
    Net unrealized gain (loss) on securities available-for-sale                                  77                  (516)
    Paid-in capital from treasury stock transactions                                             17                    --
    Treasury stock transactions                                                                  68                    --
                                                                                            -------               -------

Balance at March 31,                                                                       $ 37,072              $ 33,330
                                                                                            =======               =======






























The accompanying notes are an integral part of these statements.
</TABLE>

                                       5

<PAGE>


                 FIRST WEST CHESTER CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                                       March 31,
(Dollars in thousands)                                                                            1998             1997
                                                                                              ----------        ----------
<S>                                                                                          <C>               <C> 

OPERATING ACTIVITIES
    Net Income                                                                                 $  1,179          $  1,100
    Adjustments to reconcile net income to net cash
           provided by operating activities:
        Depreciation                                                                                265               246
        Provision for loan losses                                                                   224               210
        Amortization of investment security premiums
           and accretion of discounts                                                                34                10
        Amortization of deferred fees on loans                                                        9                29
        Investment securities (gains) losses, net                                                     3                (5)
        Decrease in other assets                                                                  1,289               714
        Increase (decrease) in other liabilities                                                   (293)              340
                                                                                                -------           -------

           Net cash provided by operating activities                                              2,710             2,644
                                                                                                -------           -------

INVESTING ACTIVITIES
    Decrease in interest bearing deposits in banks                                                   --             1,000
    Increase in loans                                                                            (2,327)          (25,588)
    Proceeds from sale of investment securities available-for-sale                                8,408            15,191
    Proceeds from maturities of investment securities available-for-sale                          5,082             4,088
    Proceeds from maturities of investment securities held-to-maturity                            1,077             1,186
    Purchases of investment securities available-for-sale                                       (10,720)           (8,247)
    Purchase of premises and equipment, net                                                        (532)             (326)
                                                                                                -------           -------

           Net cash provided by (used) in investing activities                                      988           (12,696)
                                                                                                -------           -------

FINANCING ACTIVITIES
    Increase (decrease) in Federal Home Loan Bank advances                                       (3,987)            6,450
    Increase in deposits                                                                          6,596             3,663
    Decrease in securities sold under repurchase agreements                                      (2,898)             (490)
    Cash dividends                                                                                 (482)             (429)
Treasury stock transactions                                                                          85                --
                                                                                                -------           -------

        Net cash provided by (used in) financing activities                                        (686)            9,194
                                                                                                -------           -------

           NET INCREASE (DECREASE) IN CASH AND CASH
              EQUIVALENTS                                                                         3,012              (858)

Cash and cash equivalents at beginning of year                                                   26,448            25,756
                                                                                                -------           -------

Cash and cash equivalents at end of period                                                     $ 29,460          $ 24,898
                                                                                                =======           =======

The accompanying notes are an integral part of these statements.
</TABLE>
                                       6

<PAGE>




                 FIRST WEST CHESTER CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (UNAUDITED)

1.         The unaudited  financial  statements have been prepared in accordance
           with generally accepted  accounting  principles for interim financial
           information.   In  the  opinion  of   Management,   all   adjustments
           (consisting  only of normal  recurring  adjustments)  necessary for a
           fair  presentation  of the  financial  position  and the  results  of
           operations for the interim period  presented have been included.  For
           further information,  refer to the consolidated  financial statements
           and footnotes thereto included in First West Chester  Corporation and
           Subsidiarie's (the "Corporation")  Annual Report on Form 10-K for the
           year ended December 31, 1997.

2.        The results of operations for the  three-month  period ended March 31,
          1998 are not necessarily  indicative of the results to be expected for
          the full year.

3.        Per share data is based on the  weighted  average  number of shares of
          common  stock  outstanding  during  the  period.  Diluted  net  income
          includes  the  effect of options  granted.  All per share data in this
          report has been restated to reflect the new  standards  imposed by the
          Financial  Accounting  Standards  Board  Statement  ("SFAS")  No. 128,
          "Earnings Per Share" which became  effective for financial  statements
          issued after December 15, 1997.

4.        The Corporation adopted SFAS No. 130, "Reporting Comprehensive Income"
          which became  effective  January 1, 1998.  This new standard  requires
          entities presenting a complete set of financial  statements to include
          details of comprehensive income.  Comprehensive income consists of net
          income or loss for the current period and income,  expenses, gains and
          losses that bypass the income statement and are reported directly in a
          separate component of equity.  Other  comprehensive  income/(loss) for
          the periods  ending March 31, 1998 and 1997 is $77 thousand and ($516)
          thousand, respectively.

5.        The Financial Accounting Standards Board ("FASB") issued SFAS No. 132,
          "Employers   Disclosures  About  Pensions  and  Other   Postretirement
          Benefits"  which  amends  FASB  statements  No.  87,  88 and 106.  The
          statement  revises  employers'  disclosures  about  pension  and other
          postretirement  benefit plans and does not change the  measurement  of
          recognition   of  these  plans.   It   standardizes   the   disclosure
          requirements   and   requires   additional   information   on  benefit
          obligations  and the fair value of plan  assets  that will  facilitate
          financial  analysis,  and eliminate  certain  disclosures  that are no
          longer useful.  The statement is effective for fiscal years  beginning
          after December 15, 1997.  Adoption of the new standard is not expected
          to have a material impact on the Corporation's financial statement.

6.        The  American  Institute  of Certified  Public  Accountants  ("AICPA")
          issued Statement of Option ("SOP") 98-1,  "Accounting for the Costs of
          Computer Software Developed or Obtained for Internal Use." The SOP was
          issued to provide authoritative  guidance on the subject of accounting
          for the costs  associated with the purchase or development of computer
          software.  The statement is effective for fiscal years beginning after
          December 15, 1998.  This  statement is not expected to have a material
          impact on the Corporation's financial statements.

7.        Certain  prior year amounts have been  reclassified  to conform to the
          current year presentations.
 
                                      7

<PAGE>


           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

                          EARNINGS AND DIVIDEND SUMMARY

         Net income for the three months ended March 31, 1998 was $1.18 million,
an  increase of $79  thousand or 7.2% from $1.10  million for the same period in
1997.  Increases  in net income are  primarily  the result of  increases  in net
interest and  non-interest  income,  partially  offset by increases in operating
expenses.  Basic  earnings per share for the three months  ending March 31, 1998
were $0.51 per share,  a $0.03 or 6.3%  increase  over the same  period in 1997.
Cash dividends  declared during the first quarter of 1998 increased to $0.21 per
share,  a 10.5%  increase  compared  to $0.19 per share in the first  quarter of
1997.  Over the past ten years,  the  Corporation's  practice  has been to pay a
dividend of at least 35.0% of net income.
<TABLE>
<CAPTION>

                                                            March                             December
                                                   ----------------------                     --------
                                                   1998              1997                       1997
                                                   ----              ----                     --------
      <S>                                      <C>                <C>                        <C> 

        SELECTED RATIOS
       Return on average assets                    1.11%             1.11%                       1.12%
       Return on average equity                   12.87%            13.17%                      13.36%
       Earnings retained                          59.12%            61.00%                      57.88%
       Dividend payout ratio                      40.88%            39.00%                      42.12%
       Book value per share                      $16.12            $14.57                      $15.77
</TABLE>

The  "Consolidated  Average  Balance  Sheet" on page 12 may assist the reader in
following this discussion.

                               NET INTEREST INCOME

         Net  interest  income  is the  difference  between  interest  income on
interest-earning  assets and interest expense on  interest-bearing  liabilities.
Net interest  income for the  three-month  period ended March 31, 1998, on a tax
equivalent basis, was $4.9 million, compared to $4.6 million for the same period
in 1997. Net yield on  interest-earning  assets,  on a tax equivalent  basis was
4.88% for the three-month  period ended March 31, 1998 compared to 4.99% for the
same period in 1997.  Average  interest-earning  assets increased  approximately
$28.7  million or 7.7% to $400.0  million  during the twelve month period ending
March 31, 1998 compared to $371.0  million during the same period last year. The
increase in average earning assets was a direct result of strong  commercial and
consumer loan demand  particularly in the Bank's third party automobile loan and
lease programs.  While the yield on interest-earning assets has remained stable,
the cost or yield of the  Bank's  interest  bearing  liabilities  has  increased
resulting in a decrease in the Bank's net yield on interest-earning  assets. The
increase in the Bank's average funding costs is the direct result of an increase
in the average rate being paid on deposits,  especially  time  deposits and high
rates being paid for borrowings.  The Corporation anticipates continued pressure
on net yields on interest  earning assets as  competition  for new loan business
remains very strong and incremental deposit growth is becoming more expensive.

                                       8
<PAGE>


           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

               AVERAGE INTEREST RATES (ON A TAX EQUIVALENT BASIS)
<TABLE>
<CAPTION>


                                                                            Three-Months
                                                                           Ended March 31,
                                                                       ----------------------
YIELD ON                                                                1998             1997
--------                                                               ------           -----
<S>                                                                    <C>              <C>  

Interest-Earning Assets                                                 8.31%            8.34%
Interest Bearing Liabilities                                            4.24%            4.11%
                                                                        ----             ----
Net Interest Spread                                                     4.07%            4.23%
Contribution of Interest-Free Funds                                     0.81%            0.76%
                                                                        ----             ----
Net Yield on Interest-Earning Assets                                    4.88%            4.99%
                                                                        ====             ====
</TABLE>

                      INTEREST INCOME ON FEDERAL FUNDS SOLD

         Interest income on federal funds sold for the three-month  period ended
March 31, 1998 increased 172.0% to $69 thousand when compared to the same period
in 1997. The increase in 1998's first quarter federal funds sold interest income
is  primarily  the result of a $3.2 million  increase in average  balances and a
30-basis  point (a basis point equals one hundredth of one percent)  increase in
rates compared to the same period in 1997.

                    INTEREST INCOME ON INVESTMENT SECURITIES

         On a tax equivalent  basis,  interest  income on investment  securities
decreased 20.8% for the three-month period ended March 31, 1998 to approximately
$1.2 million compared to the same period in 1997. The decrease was primarily the
result of a 18.2% decrease in average  balances and a 21-basis point decrease in
the yield earned. Proceeds from net investment securities,  sales and maturities
have been used to fund continued loan growth over the last 12 to 18 months.

                            INTEREST INCOME ON LOANS

         Loan  interest  income,  on a tax  equivalent  basis,  generated by the
Corporation's loan portfolio increased 13.8% to $7.0 million for the three-month
period ended March 31,  1998,  compared to $6.2 million for the same time period
in 1997. The increase in interest income for the three-month  period ended March
31, 1998 can be  attributed to a 15.5%  increase in average  loans  outstanding,
partially offset by a decrease in the rates earned of 15-basis points. This is a
direct  result  of  the  increased   competition   for  new  and  existing  loan
relationships  and volume increases in lower yielding  automobile  related loans
and leases.  Pricing and fee competition on large (over $500,000) loans (new and
renewals)  remains  strong.  It is anticipated  that this pricing  pressure will
continue to reduce overall loan yields and net interest margins.  Fee reductions
will affect non-interest income.

                      INTEREST EXPENSE ON DEPOSIT ACCOUNTS

         Interest   expense  on  deposit   accounts   increased  10.5%  for  the
three-month period ended March 31, 1998 to approximately $3.3 million,  compared
to the same period in 1997.  The increase is primarily the result of an increase
in average  interest-bearing  deposits  of $22.4  million  and a 10-basis  point
increase in the rates paid on interest  bearing  deposits,  compared to the same
period in 1997. 
                                       9

<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS


         The Corporation's effective rate on interest-bearing deposits increased
from 4.11% in the first  quarter of 1997 to 4.21% for the first quarter of 1998.
Competition  for deposits  from  non-banking  institutions  such as credit union
mutual  fund   companies   continues   to  grow.   The  slow  growth  rates  for
interest-bearing  and non-interest  bearing deposits is expected to continue for
future time  periods.  Construction  is underway  for the Bank's new Frazer area
branch.  This and other  future  branch  sites are expected to expand the Bank's
deposit base and attract additional low cost funds.

         INTEREST EXPENSE ON SECURITIES SOLD UNDER REPURCHASE AGREEMENTS

         Interest  expense  on  securities  sold  under  repurchase   agreements
decreased 42.2% to $37 thousand for the three-month  period ended March 31, 1998
compared to the same time period in 1997. The decrease is attributable to a $3.3
million  decrease  in  average  securities  sold  under  repurchase   agreements
outstanding, and a 1-basis point decrease in rates paid on securities sold under
repurchase agreements.

                         INTEREST EXPENSE ON BORROWINGS

         Interest expense on borrowings  increased 51.6% to $97 thousand for the
three-month  period  ended  March 31,  1998  compared to the same time period in
1997. The need for borrowings continues as a result of strong loan demand, which
is outpacing  the  increases in deposits.  Borrowings  consists of overnight Fed
Funds purchased,  Federal Home Loan Bank ("FHLB") Flex Line, FHLB Term Advances,
FHLB Open Repo and Open Repo Plus Advances.

                       PROVISION FOR POSSIBLE LOAN LOSSES

         During  the first  quarter  of 1998,  the  Corporation  recorded a $224
thousand  provision for possible  loan losses  compared to $210 thousand for the
same period in 1997.  The  allowance for possible loan losses as a percentage of
total  loans was 1.85% as of March 31,  1998  compared  to 1.86% as of March 31,
1997. See the section titled "Allowance For Possible Loan Losses" for additional
discussion.

                               NON-INTEREST INCOME

         Total non-interest income increased 19.6% to $1.1 million for the three
months  ended March 31, 1998,  compared to the same period in 1997.  The primary
component of non-interest income is Financial Management Services revenue, which
increased  $61  thousand or 12.2% to $561  thousand for the  three-months  ended
March 31, 1998 compared with the same period in 1997.  Market value of Financial
Management  Services  assets under  Management grew $100.7 million or 35.4% from
$284.5  million  at March 31,  1997 to $385.2  million  at March 31,  1998.  The
increase in  Financial  Management  Services  revenue and growth in assets under
Management  is  primarily  the  result of market  appreciation  and new  account
relationships acquired through strong marketing efforts.

         Service charges on deposit accounts increased 9.5% to $253 thousand for
the  three-months  ended March 31, 1998  compared to $231  thousand for the same
period in 1997. This increase relates to more effective enforcement of policies.
Other non-interest  income increased 61.6% to $265 thousand for the three-months
ended March 31, 1998 compared to $164 thousand for the same period in 1997.  The
increase is directly related to income from the sale of residential mortgages to
the secondary market during the first quarter of 1998.
                                       10
<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

                              NON-INTEREST EXPENSE

         Total non-interest expense for the first quarter of 1998 increased 9.7%
to $3.97 million compared to the same period in 1997. The various  components of
non-interest expense changes are discussed below.

         First quarter 1998  salaries and employee  benefits  increased  8.7% to
$2.2 million for the  three-month  period  ended March 31, 1998  compared to the
same period in 1997.  Annual  employee  raises,  promotions  and a  proportional
increase in employee benefits are primarily responsible for the increase.

         Net occupancy,  equipment and data processing expense increased 4.0% to
$802  thousand for the  three-month  period ended March 31, 1998 compared to the
same period last year.  The  increase  in the first  quarter  1998 is the direct
result of increased  personal  computer and related  equipment costs which are a
necessary part of the Corporation's  Core System  conversion.  The conversion is
scheduled to occur during the fourth quarter of this year.

         Total  non-interest  expense  increased  19.3% to $860 thousand for the
three  months  ended  March 31, 1998  compared to the same period in 1997.  This
increase  can be  attributed  to an  increase in the Bank's  marketing  and loan
related legal expenses as well as additional  operating expenses associated with
the increases in staff and premises.

         Construction  on the Bank's new Frazer area  branch is underway  and is
expected to be  completed  in June of this year.  Preliminary  plans for another
branch in early 1999 are being pursued.  The Corporation believes that the costs
associated with the opening of new branch sites will have a direct impact on all
the components of non-interest  expense. It is anticipated that the increases in
costs will be offset  over time by an increase  in net  interest  and fee income
generated by business in the new marketing areas.

                                       11

<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

                       CONSOLIDATED AVERAGE BALANCE SHEET
             AND TAXABLE EQUIVALENT INCOME/EXPENSE AND RATES FOR THE
                          THREE MONTHS ENDED MARCH 31,
<TABLE>
<CAPTION>

(Dollars in thousands)                                               1998                                 1997    
                                                      -------------------------------    --------------------------------
                                                        Daily                                 Daily
                                                       Average                              Average
ASSETS                                                 Balance   Interest       Rate        Balance   Interest       Rate
                                                      --------   --------      ------       -------   --------       ----
<S>                                                  <C>        <C>           <C>         <C>         <C>           <C>

    Federal funds sold                                $  5,022    $    69       5.50%      $  1,846    $    24       5.20%
    Interest bearing deposits in banks                      --         --         --            800         12       6.00%
    Investment securities
        Taxable                                         73,460      1,150       6.26%        89,120      1,443       6.48%
        Tax-exempt(1)                                    1,479         29       7.76%         2,500         46       7.33%
                                                       -------      -----                   -------      -----
           Total investment securities                  74,939      1,179       6.29%        91,620      1,489       6.50%
                                                       -------      -----                   -------      -----
    Loans(2)
        Taxable                                        312,797      6,879       8.80%       268,537      6,027       8.98%
        Tax-exempt(1)                                    6,947        177      10.21%         8,206        184       8.96%
                                                       -------      -----                   -------      -----
           Total loans                                 319,744      7,056       8.83%       276,743      6,211       8.98%
                                                       -------      -----                   -------      -----
           Total interest-earning assets               399,705      8,304       8.31%       371,009      7,736       8.34%
    Non-interest earning assets
        Allowance for possible loan losses              (5,920)                              (5,275)
        Cash and due from banks                         19,115                               17,611
        Other assets                                    13,678                               13,709
                                                      --------                             --------
           Total assets                               $426,578                             $397,054
                                                       =======                              =======

LIABILITIES AND STOCKHOLDERS' EQUITY
    Savings, NOWS & money market deposits             $180,607     $1,409       3.12%      $171,588     $1,324       3.09%
    Certificates of deposits and other time            131,631      1,881       5.72%       118,281      1,654       5.59%
                                                       -------      -----                   -------      -----
        Total interest bearing deposits                312,238      3,290       4.21%       289,869      2,978       4.11%
    Securities sold under repurchase agreements          4,575         37       3.23%         7,911         64       3.24%
    Federal Home Loan Bank advances                      6,093         97       6.37%         4,451         64       5.75%
                                                       -------      -----                   -------      -----
        Total interest bearing liabilities             322,906      3,424       4.24%       302,231      3,106       4.11%
                                                       -------      -----                   -------      -----
    Non-interest bearing liabilities
        Non-interest bearing demand deposits            60,195                               55,483
        Other liabilities                                6,834                                5,927
                                                       -------                              -------
           Total liabilities                           389,935                              363,641
    Stockholders' equity                                36,643                               33,413
                                                       -------                              -------
           Total liabilities and stockholders' equity $426,578                             $397,054
                                                       =======                              =======
    Net interest income                                            $4,880                               $4,630
                                                                    =====                                =====
    Net yield on interest earning assets                                        4.88%                                4.99%
                                                                                ====                                 ====














(1) The indicated  income and annual rate are presented on a taxable  equivalent
    basis using  the effective tax  rate of 32% adjusted  for  the  20% interest 
    expense disallowance for 1998 and 1997.
(2) Non-accruing loans are included in the average balance.
</TABLE>
                                       12
<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

                                  INCOME TAXES

         Income tax expense for the three-month  period ended March 31, 1998 was
$516  thousand,  compared to $525  thousand  in the same period last year.  This
represents  an effective  tax rate of 30.4% and 32.3% for both the first quarter
of 1998 and 1997, respectively.  The reduction in the effective tax rate for the
first  quarter of 1998 is primarily  the result of tax credits  stemming  from a
1997 investment the Bank made in a community development project.  These credits
will be realized  over a ten year period  starting  with this tax year.  Average
tax-exempt  assets as a percentage of total average assets were 2.0% and 2.7% at
March 31, 1998 and 1997, respectively.

               LIQUIDITY MANAGEMENT AND INTEREST RATE SENSITIVITY

         The objective of liquidity  Management is to ensure the availability of
sufficient  cash flows to meet all  financial  commitments  and to capitalize on
opportunities  for  business  expansion.   Liquidity  Management  addresses  the
Corporation's  ability  to meet  deposit  withdrawals  either  on  demand  or at
contractual  maturity,  to repay borrowings as they mature and to make new loans
and investments as  opportunities  arise.  Liquidity is managed on a daily basis
enabling  Senior  Management to effectively  monitor changes in liquidity and to
react  accordingly to fluctuations in market  conditions.  The primary source of
liquidity  for the  Corporation  is its  available-for-sale  portfolio of liquid
investment grade securities. Funding sources include NOW, money-market,  savings
and smaller  denomination  certificates  of deposit  accounts.  The  Corporation
considers funds from such sources to comprise its "core" deposit base because of
the historical  stability of such sources of funds.  Additional  liquidity comes
from the Corporation's  non-interest  bearing demand deposit accounts and credit
facilities.  Other deposit  sources  include a three-tiered  savings product and
certificates  of  deposit  in  excess of  $100,000.  Details  of core  deposits,
non-interest  bearing  demand  deposit  accounts and other  deposit  sources are
highlighted in the following table:

                                       13
<PAGE>

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>

                                DEPOSIT ANALYSIS

(Dollars in thousands)                          March 31, 1998           December 31, 1997         Average     Balance
                                            -------------------     ------------------------      ----------------------
                                            Average  Effective      Average       Effective       Dollar      Percentage
Deposit Type                                Balance      Yield      Balance          Yield        Variance     Variance
------------                                -------  ----------     --------      ----------      --------    ----------
<S>                                       <C>          <C>         <C>             <C>           <C>         <C>

NOW Accounts                               $ 55,467     2.19%       $ 52,758        2.19%         $ 2,709        5.13%
Money Market                                 28,336     3.11          28,433        3.15              (97)      -0.34
Statement Savings                            47,086     3.26          48,381        3.31           (1,295)      -2.68
Other Savings                                 2,406     2.66           2,996        2.74             (590)     -19.69
CD's Less than $100,000                     111,960     5.66         108,022        5.80            3,938        3.65
                                            -------                  -------                       ------

Total Core Deposits                         245,255     4.09         240,590        4.16            4,665        1.94

Non-Interest Bearing
    Demand Deposit Accounts                  60,195        -          57,659         -              2,536        4.40
                                            -------                  -------                       ------

Total Core and Non-Interest
    Bearing Deposits                        305,450     3.28         298,249        3.35            7,201        2.41
                                            -------                  -------                       ------

Tiered Savings                               47,313     4.09          41,184        4.14            6,129       14.88
CD's Greater than $100,000                   19,670     5.88          17,415        5.54            2,255       12.95
                                            -------                  -------                        -----

Total Deposits                             $372,433     3.52        $356,848        3.55          $15,585       4.37
                                            =======                  =======                       ======
</TABLE>

         The Bank, as a member of the FHLB,  maintains a line of credit  secured
by the Bank's mortgage-related assets. As of March 31, 1998, this line of credit
was  approximately  $10.0 million.  As of March 31, 1998 the amount  outstanding
under this line of credit was $0. In  addition  to the line of credit,  the Bank
has additional  borrowing  capacity of approximately  $98.0 million.  During the
first quarter of 1998, average FHLB advances were approximately $6.1 million and
consisted of term advances representing a combination of maturities. The average
interest  rate on  this  advance  was  approximately  6.4%.  FHLB  advances  are
collateralized  by a pledge  on the  Bank's  entire  portfolio  of  unencumbered
investment  securities,  certain  mortgage  loans and a lien on the Bank's  FHLB
stock.

         The  goal  of  interest  rate   sensitivity   Management  is  to  avoid
fluctuating  net  interest  margins,  and to  enhance  consistent  growth of net
interest income through periods of changing  interest rates. Such sensitivity is
measured  as the  difference  in the  volume of assets  and  liabilities  in the
existing  portfolio  that are subject to repricing in a future time period.  The
Corporation's  net interest rate  sensitivity  gap within one year is a negative
$119.3  million  or 27.6% of total  assets at March  31,  1998  compared  with a
negative  $116.9  million or 28.7% of total  assets at December  31,  1997.  The
Corporation's gap position is one factor used to evaluate interest rate risk and
the  stability  of  net  interest   margins.   Other  factors  include  computer
simulations of what might happen to net interest  income under various  interest
rate  forecasts  and  scenarios.  Management  monitors  interest  rate risk as a
regular part of bank  operations  with the intention of maintaining a stable net
interest margin.

                                       14
<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

                          INTEREST SENSITIVITY ANALYSIS
                              AS OF MARCH 31, 1998
<TABLE>
<CAPTION>

                                                               One               Over
(Dollars in thousands)                     Within             through            five          Non-rate
                                          one year          five years           years         sensitive          Total
                                          --------          ----------           -----         ---------          -----
ASSETS
<S>                                      <C>                 <C>               <C>            <C>             <C>  
    Federal funds sold                     $   7,700          $      --         $     --       $      --       $    7,700
    Investment securities                      9,787             27,843           36,200              --           73,830
    Interest bearing deposits in banks            --                 --               --              --               --
    Loans and leases                         131,917            170,461           18,656          (5,940)         315,094
    Cash and cash equivalents                     --                 --               --          21,760           21,760
    Premises and equipment                        --                 --               --           6,926            6,926
    Other assets                                  --                 --               --           6,335            6,335
                                            --------           --------          -------        --------        ---------
    Total assets                           $ 149,404          $ 198,304         $ 54,856       $  29,081       $  431,645
                                            ========           ========          =======        ========        =========

LIABILITIES AND CAPITAL
    Interest bearing deposits              $ 263,746          $  49,089         $  1,107       $      --       $  313,942
    Non-interest bearing deposits                 --                 --               --          66,904           66,904
    Borrowed funds                             4,727                 --               --              --            4,727
    FHLB Advances                                192              1,302            1,897              --            3,391
    Other liabilities                             --                 --               --           5,609            5,609
    Capital                                       --                 --               --          37,072           37,072
                                            --------           --------         --------        --------        ---------
    Total liabilities & capital            $ 268,665          $  50,391         $  3,004       $ 109,585       $  431,645
                                            ========           ========          =======        ========        =========

    Net interest rate
      sensitivity gap                      $(119,261)         $ 147,913         $ 51,852       $ (80,504)      $      --
                                            ========           ========          =======        ========        =========
    Cumulative interest rate
      sensitivity gap                      $(119,261)         $  28,652         $ 80,504       $     --        $      --
                                            ========           ========          =======        ========        =========
    Cumulative interest rate
      sensitivity gap divided
      by total assets                        (27.6%)               6.6%            18.7%
                                            =======            ========          =======
</TABLE>

                       ALLOWANCE FOR POSSIBLE LOAN LOSSES

         The  allowance  for possible  loan losses is an amount that  Management
believes will be adequate to absorb  possible loan losses on existing loans that
may become  uncollectible  based on evaluations of the  collectibility of loans.
The evaluations  take into  consideration  such factors as changes in the nature
and  volume  of the loan  portfolio,  overall  portfolio  quality,  adequacy  of
collateral,  review of specific problem loans,  and current economic  conditions
that may affect the borrower's ability to pay.

                                       15

<PAGE>

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

          ANALYSIS OF CHANGES IN THE ALLOWANCE FOR POSSIBLE LOAN LOSSES
                       AND COMPARISON OF LOANS OUTSTANDING
<TABLE>
<CAPTION>

     (Dollars in thousands)                                                      March 31,                  December 31,
                                                                      --------------------------            ------------
                                                                          1998           1997                   1997
                                                                       ----------     ----------             -----------
<S>                                                                   <C>            <C>                    <C> 

     Balance at beginning of period                                    $    5,900     $    5,218             $     5,218
                                                                        ---------      ---------              ----------

     Provision charged to operating expense                                   224            210                   1,135
                                                                        ---------      ---------              ----------

        Recoveries of loans previously charged-off                              7             26                      83
        Loans charged-off                                                    (191)           (67)                   (536)
                                                                        ---------      ---------              ----------

     Net loans charged-off                                                   (184)           (41)                   (453)
                                                                        ---------      ---------              ----------

     Balance at end of period                                          $    5,940     $    5,387             $     5,900
                                                                        =========      =========              ==========

     Period-end loans outstanding                                      $  321,034     $  290,100             $   318,899

     Average loans outstanding                                         $  319,744     $  276,743             $   299,737

     Allowance for possible loan losses as a
        percentage of period-end loans outstanding                          1.85%          1.86%                   1.85%

     Ratio of net charge-offs to average loans  
        Outstanding (annualized)                                            0.23%          0.06%                   0.15%
</TABLE>

         Non-performing loans include loans on non-accrual status and loans past
due 90 days or more and still  accruing.  The Bank's policy is to write down all
non-performing  loans  to net  realizable  value  based on  updated  appraisals.
Non-performing loans are generally  collateralized by real estate and are in the
process of  collection.  Management  is not aware of any loans  other than those
included in the following table that would be considered potential problem loans
and cause Management to have doubts as to the borrower's  ability to comply with
loan repayment terms.

                                       16

<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

                         NON-PERFORMING LOANS AND ASSETS
<TABLE>
<CAPTION>

(Dollars in thousands)                                                March 31,                    December 31,
                                                             ---------------------------         --------------
                                                                 1998            1997                  1997
                                                                -----            ----                  ----
<S>                                                          <C>             <C>                   <C>   

Past due over 90 days and still accruing                      $   389         $   536               $   466

Non-accrual loans                                               1,763             997                 1,443
                                                                -----          ------                ------

Total non-performing loans                                      2,152           1,533                 1,909

Other real estate owned                                         1,600             851                 1,651
                                                                -----          ------                ------

Total non-performing assets                                   $ 3,752          $2,384               $ 3,560
                                                               ======           =====                ======

Non-performing loans as a percentage
     of total loans                                             0.67%           0.53%                 0.60%

Allowance for possible loan losses as a
   percentage of non-performing loans                         276.07%         351.40%               309.10%

Non-performing assets as a percentage of
   total loans and other real estate owned                      1.16%           0.82%                 1.11%

Allowance for possible loan losses as a
  percentage of non-performing assets                         158.32%         225.96%               165.70%
</TABLE>

         The   allowance   for  possible   loan  losses  as  a   percentage   of
non-performing  loans  indicates  that the allowance for possible loan losses is
sufficient to cover the principal of all non-performing loans at March 31, 1998.
Other real estate owned ("OREO")  represents  residential  and  commercial  real
estate written down to realizable value (net of estimated  disposal costs) based
on  professional  appraisals.  Management  intends to liquidate OREO in the most
expedient and cost-effective  manner.  This process could take up to twenty-four
months, although swifter disposition is anticipated.

         Management is not aware of any loans other than those included in these
tables  and  mentioned  in this  paragraph  that would be  considered  potential
problem loans and cause  Management to have doubts as to the borrower's  ability
to comply with loan repayment terms. During 1997, the Bank increased third party
automobile  loans $23 million to $24 million.  During the first  quarter of 1998
these loans grew $2 million to $26 million.  These loans are  unseasoned and may
potentially   increase   nonperforming  loan  numbers.  As  of  March  31,  1998
approximately  5.67% of this portfolio was past due. In addition,  approximately
$148 thousand in repossessed vehicles is included in other assets. Management is
closely   monitoring   these  loans  and  has  tightened  credit  standards  and
significantly  reduced  planned  growth in this new  product.  At March 31, 1998
there were no concentrations of loans exceeding 10% of total loans which are not
otherwise disclosed.

                                       17

<PAGE>

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

                                 LOAN IMPAIRMENT

         In  accordance  with SFAS 114,  the Bank  identifies a loan as impaired
when it is probable that interest and principal will not be collected  according
to the  contractual  terms of the loan  agreement.  The  accrual of  interest is
discontinued  in such  loans  and no  income is  recognized  until all  recorded
amounts of  interest  and  principal  are  recovered  in full.  These  loans are
included in the non-accrual loans total in the above analysis

         Loan  impairment  is measured by  estimating  the expected  future cash
flows and  discounting  them at the  respective  effective  interest  rate or by
valuing the underlying  collateral.  The recorded  investment in these loans and
the valuation for credit losses related to loan impairment are as follows:
<TABLE>
<CAPTION>

(Dollars in thousands)                      March 31, 1998    March 31, 1997    December 31, 1997
                                            --------------    --------------    -----------------
<S>                                             <C>              <C>                 <C>    <C>    <C>    <C>

Principal amount of impaired loans               $1,377           $ 725               $1,121
Less valuation allowance                            274             454                  306
                                                  -----            ----                -----
                                                 $1,103           $ 271               $  815
                                                  =====            ====                =====
</TABLE>

The activity in the valuation allowance for the quarters ending March 31, are as
follows:
<TABLE>
<CAPTION>

                                                                            1998                        1997
                                                                           -----                       -----
<S>                                                                       <C>                         <C>

Valuation allowance at beginning of period                                 $ 306                       $ 419
Provision for loan impairment                                                 50                          50
Direct charge-offs                                                           (82)                        (15)
Recoveries                                                                     -                           -   
                                                                            ----                        ----
Valuation allowance at end of period                                       $ 274                       $ 454
                                                                            ====                        ====
</TABLE>

         Total cash  collected on impaired  loans during the quarter ended March
31, 1998 was $10 thousand,  all of which was credited to the  principal  balance
outstanding  on such loans and $0 was  recognized as interest  income.  Interest
that would have been accrued on impaired  loans  during the quarter  ended March
31, 1998 was $28 thousand.  There was no interest income  recognized  during the
quarter ended March 31, 1998.

         Total cash  collected on impaired  loans during the quarter ended March
31, 1997 was $206 thousand, $170 thousand of which was credited to the principal
balance  outstanding  on such loans and $36 thousand was  recognized as interest
income.  Interest  that would have been  accrued on  impaired  loans  during the
quarter ended March 31, 1997 was $10 thousand. Interest income recognized during
the quarter ended March 31, 1997 was $36 thousand.

         BUILDING IMPROVEMENTS, TECHNOLOGY PROJECTS AND YEAR 2000 ISSUES

         In the third quarter of 1997,  the Bank entered into a contract for the
purpose of  constructing  a 2,750 square foot branch  office in the Frazer area.
The Frazer branch office is expected to open in June of this year.

                                       18

<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

         In December of 1997,  the Bank  entered into an agreement to purchase a
25,000 square foot office  building  adjacent to the Bank's  existing  Operation
Center in West Chester for approximately  $1.7 million.  The Bank is expected to
take possession of the property in the fourth quarter of 1998.

         During  1997,  Management  completed  an in  depth  review  of its core
processing  system  and  concluded  that  a  new  core  system  was  needed  for
competitive,  functional and Year 2000 reasons.  After extensive  research,  the
Corporation selected Jack Henry and Associates ("Jack Henry") to provide the new
core  processing  system.  Jack  Henry and  Associates  is a major  provider  of
Community  Bank Core  Processing  Systems.  Specifically,  the  Corporation  has
contracted  to  purchase  Jack  Henry's  Silverlake  System,  related  hardware,
installation and training  services.  First year contract costs are estimated to
be $1.2 million.  The conversion is expected to take place in the fourth quarter
of this year.

         Management  is  addressing  Year 2000  issues on several  levels.  Jack
Henry's  Silverlake  software is Year 2000  compliant,  which  addresses a major
component of the  Corporation's  Year 2000 Compliance  Action Plan (the "Plan").
The Plan  requires a review of the  remainder of the  Corporation's  systems for
compliance  or  replacement.   The  Plan  also  calls  for  communication   with
significant customers, critical vendors and service providers.

                                CAPITAL ADEQUACY

         The Corporation is subject to Risk-Based  Capital Guidelines adopted by
the Federal Reserve Board for bank holding  companies.  The Bank is also subject
to similar capital  requirements adopted by the Office of the Comptroller of the
Currency.  Under these  requirements,  the regulatory  agencies have set minimum
thresholds for Tier I Capital,  Total Capital, and Leverage ratios. At March 31,
1998,  both the  Corporation's  and the  Bank's  capital  exceeded  all  minimum
regulatory  requirements,  and were considered "well  capitalized" as defined in
the  regulations  issued  pursuant  to the FDIC  Improvement  Act of  1992.  The
Corporation's  Risk-Based  Capital  Ratios,  shown below,  have been computed in
accordance with regulatory accounting policies.
<TABLE>
<CAPTION>

RISK-BASED                                        March 31,                 December 31,           "Well Capitalized"
CAPITAL RATIOS                              1998             1997               1997                  Requirements
--------------                              ----             ----           ------------            ----------------
   Corporation
   -----------
<S>                                      <C>               <C>                  <C>                     <C> 

Leverage Ratio                              8.68%            8.57%                8.57%                   5.00%
Tier I Capital Ratio                       11.33%           11.57%               11.22%                   6.00%
Total Risk-Based Capital Ratio             12.59%           12.82%               12.48%                  10.00%
     Bank
     ----
Leverage Ratio                              8.42%            8.42%                8.30%                   5.00%
Tier I Capital Ratio                       11.01%           11.36%               10.89%                   6.00%
Total Risk-Based Capital Ratio             12.27%           12.62%               12.14%                  10.00%
</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  affect on  liquidity,
capital resources or operations of the Corporation.  The internal capital growth
for the  Corporation  was 9.98% and 1.87% for the three  months  ended March 31,
1998 and 1997,  respectively.  The growth rate is computed  by  annualizing  the
change in equity  during the last period and dividing it by total  stockholder's
equity at March 31, 1998 and 1997, respectively.

                                       19
<PAGE>


           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         There have been no material changes in the Corporation's  assessment of
its sensitivity to market risk since its presentation in the 1997 Annual Report,
filed as an exhibit to its Form 10-K for the fiscal year ended December 31, 1997
with  the SEC via  EDGAR.  Please  refer  to the  "Management's  Discussion  and
Analysis"  section on pages 22-23 of the  Corporation's  Annual  Report for more
information.

                                       20
<PAGE>



                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings
         -----------------
                  Various actions and proceedings are presently pending to which
                  the  Corporation  is a party.  These  actions and  proceedings
                  arise out of routine operations and, in Management's  opinion,
                  will not,  either  individually  or in the  aggregate,  have a
                  material adverse effect on the consolidated financial position
                  of the Corporation and its subsidiaries.

Item 2.  Changes in Securities
         ---------------------
                  None

Item 3.  Defaults upon Senior Securities
         -------------------------------
                  None

Item 4.  Submission of Matters to a Vote of Security Holders
         ---------------------------------------------------
                  The Annual Meeting of Shareholders of the Corporation was held
                  on March 17, 1998 (the  "Meeting").  Notice of the Meeting was
                  mailed to shareholders of record on or about February 3, 1998,
                  together  with  proxy   solicitation   materials  prepared  in
                  accordance  with Section 14(a) of the Securities  Exchange Act
                  of  1934,  as  amended,   and  the   regulations   promulgated
                  thereunder.

                  The matters submitted to a vote of shareholders at the meeting
                  were the following:

                           1.       The  election  of four  Class II  directors,
                                    with each  director  to serve until the 2001
                                    Annual Meeting of Shareholders and until the
                                    election and qualification of his respective
                                    successor;

                           2.       The approval of certain  amendments  to the 
                                    Corporation's 1995 Stock Option Plan; and

                           3.       The ratification of the appointment of Grant
                                    Thornton,    LLP   as   the    Corporation's
                                    independent  public accountants for the year
                                    ending December 31, 1998.

                  There was no solicitation in opposition to the nominees of the
                  Board of Directors  for election to the Board of Directors and
                  all such nominees  were elected.  The number of votes cast for
                  or  withheld as well as the number of  abstentions  and broker
                  non-votes  for each of the  nominees for election to the Board
                  of Directors were as follows:

                                       21

<PAGE>


                     PART II - OTHER INFORMATION - CONTINUED

<TABLE>
<CAPTION>
                                                                                   Abstentions and
                      Nominee                  For                   Withheld      Broker Non-Votes
                      -------                  ---                   --------      -----------------
<S>              <C>                       <C>                        <C>              <C>

                  M. Robert Clarke          1,774,904                  268,792          0

                  Edward J. Cotter          1,772,098                  270,819          0

                  David L. Peirce           1,773,113                  269,804          0

                  Charles E. Swope          1,772,059                  270,858          0
</TABLE>

                  The  names of the  other  directors  whose  terms of office as
                  directors continued after the Meeting are as follows:  John J.
                  Ciccarone, Clifford E. DeBaptiste, John A. Featherman, John S.
                  Halsted, J. Carol Hanson, Devere Kauffman and John B. Waldron.

                  The   proposal   to   approve   certain   amendments   to  the
                  Corporation's 1995 Stock Option Plan was ratified.  The number
                  of  votes  cast  for or  against  as  well  as the  number  of
                  abstentions  and broker  non-votes  for the  proposal  were as
                  follows:
<TABLE>
<CAPTION>

                          For                   Against               Abstentions               Broker non-votes
                          ---                   -------               -----------               ----------------
                       <S>                      <C>                      <C>                          <C> 

                        1,936,867                32,243                   73,807                       0
</TABLE>

                  The proposal to ratify the appointment of Grant Thornton,  LLP
                  as the Corporation's  independent  public  accountants for the
                  year  ending  December  31, 1998 was  ratified.  The number of
                  votes cast for or against as well as the number of abstentions
                  and broker non-votes for the ratification were as follows:
<TABLE>

                           For                   Against               Abstentions               Broker non-votes
                           ---                   -------               -----------               ----------------
                       <S>                       <C>                     <C>                            <C>  

                        1,987,610                 2,629                   52,678                         0
</TABLE>

                  There was no other  business  that came  before the Meeting or
                  matters incident to the conduct of the Meeting.

Item 5.  Other Information
         -----------------
                  None

                                       22

<PAGE>


                     PART II - OTHER INFORMATION - CONTINUED

Item 6.  Exhibits and Reports on Form 8-K
         --------------------------------
                  None

                  (a) Exhibits
                      --------
         3(i).   Certificate  of   Incorporation.   Copy  of  the  Corporation's
Certificate of Incorporation,  as amended, is incorporated herin by reference to
Exhibit 3(i) to the Corporation's  Annual Report on Form 10-K for the year ended
December 31, 1997.

         3(ii). Bylaws of the Corporation, as amended. Copy of the Corporation's
Bylaws, as amended,  is incorporated  herin by reference to Exhibit 3(ii) to the
Corporation's Annual Report on Form 10-K for the year ended December 31, 1997.

         10.      Material contracts.
                  ------------------
              (a) Copy of the  Corporation's  Amended  and  Restated  1995 Stock
Option  Plan,  is  incorporated  herin  by  reference  to  the  appendix  to the
Corporation's  Proxy  Statement for the 1998 Annual Meeting of  Shareholders  as
filed with the SEC via EDGAR (File No. 000-12870).

         27.      Financial Data Schedule.
                  -----------------------
                  (b) Reports on Form 8-K
                      -------------------
                      None

                                       23
<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.



                         FIRST WEST CHESTER CORPORATION


                                   Charles E. Swope




DATE:  May 15, 1998                Charles E. Swope
                                   President



                                   J. Duncan Smith

                                   
                    
                                   J. Duncan Smith
                                   Treasurer
                                   (Principal Accounting
                                    and Financial Officer)



                                       24