August 14, 2002
                                 VIA: EDGARLINK

OFIS Filer Support
SEC Operations Center
6432 General Green Way
Alexandria, VA  22312

                        FIRST CHESTER COUNTY CORPORATION

                         Commission File Number 0-12870

Gentlemen:

Pursuant to the reporting  requirements  of the  Securities  and Exchange Act of
1934, we are filing herewith the above listed  Registrant's  Quarterly Report on
Form 10-Q for the period ended June 30, 2002.



                                                Very truly yours,


                                                J. Duncan Smith, Treasurer
                                               (Principal Accounting
                                                and Financial Officer)
JDS/tbm
Enclosures

cc:  John  A.  Featherman,   III,  Esquire,  MacElree,  Harvey,  Gallagher,  and
     Featherman, Ltd., West Chester, PA

     Patricia A. Gritzan, Esquire, Saul Ewing LLP, Philadelphia, PA

     Barry M. Pelagatti, CPA, Grant Thornton LLP, Philadelphia, PA

     Joseph T. Mcgough, VP, First Union Bank, Philadelphia, PA

     James L. Bradshaw, VP, SunTrust Bank, Atlanta, GA

     James Shilling, VP, Kish Bank, Belleville, PA


<PAGE>



                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q
(Mark One)

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

For the quarterly period ended June 30, 2002, 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 CHESTER COUNTY 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)


                                 (484) 881-4000
                                 --------------
              (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 August
12, 2002 was 4,424,339.


<PAGE>
<TABLE>
<CAPTION>


                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

                                      INDEX
                                      -----


                                                                                                   PAGE
                                                                                                   ----
<S>                                                                                               <C>
Part I.  FINANCIAL INFORMATION

                  Item 1 -   Financial Statements
                             Consolidated Statements of Condition
                             June 30, 2002 and December 31, 2001                                     4


                             Consolidated Statements of Income
                             Three and Six-Months Ended June 30, 2002 and 2001                       5


                             Consolidated Statements of Cash Flows
                             Six-Months Ended June 30, 2002 and 2001                                 6


                             Notes to Consolidated Financial Statements                             7-8


                  Item 2 -   Management's Discussion and Analysis of
                             Financial Condition and Results of Operations                         9 - 24

                  Item 3 -   Quantitative  and  Qualitative  Disclosures  About
                             Market Risk 25



Part II. OTHER INFORMATION

                  Item 1 -   Legal Proceedings                                                      26
                  Item 2 -   Changes in Securities                                                  26
                  Item 3 -   Defaults upon Senior Securities                                        26
                  Item 4 -   Submission of Matters to a Vote of Security Holders                    26
                  Item 5 -   Other Information                                                      26
                  Item 6 -   Exhibits and Reports on Form 8-K                                     26 - 27

                  Signatures                                                                        28
</TABLE>
<PAGE>


                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CONDITION

<TABLE>
<CAPTION>
                                                                                       (Unaudited)
(Dollars in thousands)                                                                     June 30,           December 31,
                                                                                            2002                  2001
                                                                                       --------------      ------------------
<S>                                                                                 <C>                    <C>
ASSETS
    Cash and due from banks                                                            $     24,878         $     25,595
    Federal funds sold and other overnight investments                                       21,500               12,400
Interest Bearing Deposits in banks                                                              116                  238
                                                                                          ---------            ---------

                Total cash and cash equivalents                                              46,494               38,233
                                                                                          ---------            ---------
    Investment securities held-to-maturity (market value of $541 at
    June 30, 2002 and  $547 at December 31, 2001, respectively)                                 532                  531
                                                                                          ---------            ---------

    Investment securities available-for-sale, at market value                                94,773               80,210
                                                                                          ---------            ---------

    Loans                                                                                   439,625              448,110
    Less:  Allowance for loan losses                                                         (6,561)              (6,344)
                                                                                          ---------            ---------

                Net loans                                                                   433,064              441,766
                                                                                          ---------            ---------

    Premises and equipment                                                                   15,326               15,584
    Other assets                                                                              7,173                8,008
                                                                                          ---------            ---------

                Total assets                                                            $   597,362          $   584,332
                                                                                          =========            =========
LIABILITIES
    Deposits
        Noninterest-bearing                                                             $   100,801         $     95,107
        Interest-bearing (including certificates of deposit over $100
           of $24,452 and $28,463 - June 30, 2002 and
           December 31, 2001 respectively)                                                  426,536              403,718
                                                                                          ---------            ---------

        Total deposits                                                                      527,337              498,825

    Securities sold under repurchase agreements                                                 560                4,769
    Federal Home Loan Bank advances and other borrowings                                     18,472               31,751
    Other liabilities                                                                         4,775                5,148
                                                                                          ---------            ---------

        Total liabilities                                                                   551,144              540,493
                                                                                          ---------            ---------

STOCKHOLDERS' EQUITY
    Common stock, par value $1.00; authorized, 10,000,000 shares;
        outstanding, 4,799,666 at June 30, 2002 and December 31, 2001.                        4,800                4,800
    Additional paid-in capital                                                                  807                  773
    Retained earnings                                                                        45,039               43,367
    Accumulated other comprehensive income                                                      764                   84
    Treasury stock, at cost: 375,040 shares and 377,721 shares
        at June 30, 2002 and December 31, 2001, respectively.                                (5,192)              (5,185)
                                                                                          ---------            ---------

                Total stockholders' equity                                                   46,218               43,839
                                                                                          ---------            ---------

                Total liabilities and stockholders' equity                             $    597,362         $    584,332
                                                                                          =========            =========

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

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

(Dollars in thousands - except per share data)                               Three Months Ended              Six  Months Ended
                                                                                   June 30,                      June 30,
                                                                      ------------------------------     ------------------------
                                                                          2002             2001              2002          2001
                                                                          ----             ----              ----          ----
INTEREST INCOME
<S>                                                                   <C>              <C>              <C>           <C>
    Loans, including fees                                                $ 8,056          $ 8,478          $ 16,423      $ 17,086
    Investment securities                                                  1,179            1,324             2,211         2,748
    Federal funds sold and other overnight investments                       105               84               199           151
    Deposits in Banks                                                          1                1                 3             4
                                                                       ---------        ---------         ---------     ---------

                Total interest income                                      9,341            9,887            18,836        19,989
                                                                       ---------        ---------         ---------     ---------

INTEREST EXPENSE
    Deposits                                                               2,486            3,752             5,084         7,725
    Securities sold under repurchase agreements                                5               23                12            58
    Federal Home Loan Bank advances and other borrowings                     281              339               615           702
                                                                       ---------        ---------         ---------     ---------

                Total interest expense                                     2,772            4,114             5,711         8,485
                                                                       ---------        ---------         ---------     ---------

                Net interest income                                        6,569            5,773            13,125        11,504

    Provision for loan losses                                                310              135               780           370
                                                                       ---------        ---------         ---------     ---------

                Net interest income after provision
                for possible loan losses                                   6,259            5,638            12,345        11,134
                                                                       ---------        ---------         ---------     ---------

NON-INTEREST INCOME
    Financial management services                                            757              741             1,562         1,478
    Service charges on deposit accounts                                      437              295               869           569
    Investment securities gains, net                                         121               40               121            65
    Other                                                                    744              393             1,693           948
                                                                       ---------        ---------         ---------     ---------
                Total non-interest income                                  2,059            1,469             4,245         3,060
                                                                       ---------        ---------         ---------     ---------

NON-INTEREST EXPENSE
    Salaries and employee benefits                                         3,527            3,038             6,875         5,958
    Net occupancy and equipment                                            1,356            1,026             2,761         2,077
    FDIC deposit insurance                                                    21               22                43            43
    Bank shares tax                                                          126              119               228           244
    Professional Services                                                    455              257               714           585
    Other                                                                  1,041              849             1,997         1,645
                                                                       ---------        ---------         ---------     ---------
                Total non-interest expense                                 6,526            5,311            12,618        10,552
                                                                       ---------        ---------         ---------     ---------

                Income before income taxes
                                                                           1,792            1,796             3,972         3,642

INCOME TAXES                                                                 509              496             1,150           992
                                                                       ---------        ---------         ---------     ---------

                NET INCOME                                            $    1,283       $    1,300        $    2,822    $    2,650
                                                                       =========        =========         =========     =========

PER SHARE DATA
    Basic net income per common share                                 $     0.29       $     0.30        $     0.64    $     0.60
                                                                       =========        =========         =========     =========
    Diluted net income per common share                               $     0.29       $     0.30        $     0.63    $     0.60
                                                                       =========        =========         =========     =========
    Dividends declared                                                $     0.13       $     0.13        $     0.26    $     0.26
                                                                       =========        =========         =========     =========

Basic weighted average shares outstanding                              4,422,323        4,317,294         4,422,950     4,391,780
                                                                       =========        =========         =========     =========
Diluted weighted average shares outstanding                            4,466,067        4,365,638         4,459,403     4,435,693
                                                                       =========        =========         =========     =========

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


                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                                          (Unaudited)
                                                                                                       Six Months Ended
                                                                                                            June 30,
                                                                                                ------------------------------
(Dollars in thousands)                                                                              2002               2001
                                                                                                ------------       -----------

OPERATING ACTIVITIES
<S>                                                                                             <C>             <C>
    Net Income                                                                                      $2,822          $   2,650
    Adjustments to reconcile net income to net cash
           provided by operating activities:
        Depreciation                                                                                 1,271                870
           Provision for loan losses                                                                   780                370
    Amortization of investment security premiums
           and accretion of discounts                                                                  220                 70
    Amortization of deferred fees on loans                                                            (168)                67
    Investment securities (gains) losses, net                                                         (121)               (65)
    Decrease (Increase) in other assets                                                                835               (798)
    Decrease in other liabilities                                                                     (373)            (1,834)
                                                                                                 ---------          ---------

           Net cash provided by operating activities                                                 5,266              1,330
                                                                                                 ---------          ---------

INVESTING ACTIVITIES
    Decrease (Increase) in loans                                                                     8,426             (9,183)
    Proceeds from sales of investment securities available-for-sale                                 12,419              9,624
    Proceeds from maturities of securities available-for-sale                                        7,925             24,071
    Purchases of investment securities available-for-sale                                          (34,663)           (27,979)
    Purchase of premises and equipment, net                                                         (1,013)            (3,138)
                                                                                                 ---------          ---------

        Net cash used in investing activities                                                       (6,906)            (6,605)
                                                                                                 ---------          ---------

FINANCING ACTIVITIES
    Decrease in securities sold under repurchase agreements                                         (4,209)              (199)
    Increase in deposits                                                                            28,512              8,810
    (Decrease) Increase in Federal Home Loan Bank advances and other borrowings                    (13,279)            (6,313)
    Cash dividends                                                                                  (1,150)            (1,041)
    Treasury stock transactions                                                                         27               (441)
                                                                                                 ---------          ---------

           Net cash provided by financing activities                                                 9,901                816
                                                                                                 ---------          ---------
           NET INCREASE (DECREASE) IN CASH AND CASH
                 EQUIVALENTS                                                                         8,261             (4,459)

Cash and cash equivalents at beginning of period                                                    38,233             37,973
                                                                                                 ---------          ---------

Cash and cash equivalents at end of period                                                     $    46,494        $    33,514
                                                                                                 =========          =========




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


                FIRST CHESTER COUNTY 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.  These interim  financial  statements should be read in
     conjunction  with  the  consolidated  financial  statements  and  footnotes
     thereto  included  in our Annual  Report on Form 10-K for the  fiscal  year
     ended December 31, 2001.

2.   The results of operations  for the three- and six-month  periods ended June
     30, 2002 are not  necessarily  indicative of the results to be expected for
     the full year.

3.   Earnings  per share is based on the  weighted  average  number of shares of
     common stock  outstanding  during the period.  Diluted net income per share
     includes the effect of options granted.

4.   SFAS  No.  130,  Reporting  of  Comprehensive   Income,  which  establishes
     standards  for  reporting  and  display  of  comprehensive  income  and its
     components  (revenues,  expenses,  gains  and  losses)  in a  full  set  of
     financial statements.  This statement also requires that all items that are
     required to be  recognized  under  accounting  standards as  components  of
     year-end  comprehensive income be reported in a financial statement that is
     displayed with the same prominence as others  financial  statements.  Other
     comprehensive  income  (loss)  net of taxes for the  three-  and  six-month
     periods ended June 30, 2002 was $880 thousand and $680  thousand,  compared
     to $(431)  thousand and $329  thousand in the same period last year.  Total
     comprehensive   income   (which  is  the  sum  of  net   income  and  other
     comprehensive  income mentioned above) for the three- and six-month periods
     ended June 30, 2002 was $2.2 million and $3.5  million,  compared to $869
     thousand and $3.0 million in the same period last year.

5.   On July 20, 2001, the Financial  Accounting  Standards  Board (FASB) issued
     Statement  of  Financial  Accounting  Standards  (SFAS) No.  141,  Business
     Combinations,  and SFAS No. 142,  Goodwill  and  Intangible  Assets.  These
     statements are expected to result in significant  modifications relative to
     the Company's accounting for goodwill and other intangible assets. SFAS No.
     141 requires that all business  combinations  initiated after June 30, 2002
     must be accounted for under the purchase method of accounting. SFAS No. 141
     was effective upon  issuance.  SFAS No. 142 modifies the accounting for all
     purchased   goodwill  and   intangible   assets.   SFAS  No.  142  includes
     requirements to test goodwill and indefinite lived  intangibles  assets for
     impairment  rather than amortize  them.  SFAS No. 142 will be effective for
     fiscal years  beginning  after  December 31, 2000 and early adoption is not
     permitted  except for  business  combinations  entered  into after June 30,
     2000.  The Company is currently  evaluating the provisions of SFAS No. 142,
     but its  preliminary  assessment is that these  Statements  will not have a
     material  impact  on  the  Company's   financial  position  or  results  of
     operations.

6.   On July 20, 2001, FASB issued SFAS 141, and SFAS 142. SFAS 141 is effective
     for all business  combinations  completed  after June 30, 2001. SFAS 142 is
     effective  for fiscal years  beginning  after  December 15, 2001;  however,
     certain provisions of this Statement apply to goodwill and other intangible
     assets  acquired  between July 1, 2001 and the effective  date of SFAS 142.
     Major  provisions of these  Statements  and their  effective  dates for the
     Company is as follows: All business
<PAGE>
     combinations  initiated after June 30, 2001 must use the purchase method of
     accounting.  The pooling of interest  method of  accounting  is  prohibited
     except for transactions  initiated before July 1, 2001.  Intangible  assets
     acquired  in a  business  combination  must  be  recorded  separately  from
     goodwill  if they  arise  from  contractual  or other  legal  rights or are
     separable from the acquired entity and can be sold, transferred,  licensed,
     rented or exchanged,  either individually or as part of a related contract,
     asset or liability.  Goodwill, as well as intangible assets with indefinite
     lives,  acquired  after June 30,  2001,  will not be  amortized.  Effective
     January 1, 2002, all previously  recognized  goodwill and intangible assets
     with indefinite  lives will be tested for impairment  annually and whenever
     there is an impairment indicator. All acquired goodwill must be assigned to
     reporting units for purposes of impairment testing and segment reporting.

7.   In August 2001, the FASB issued SFAS 144, "Accounting for the Impairment or
     Disposal  of  Long-lived  Assets".   SFAS  No.  144  retains  the  existing
     requirements  to recognize and measure the impairment of long-lived  assets
     to be held and used or to be disposed of by sale.  However,  SFAS 144 makes
     changes  to the scope and  certain  measurement  requirements  of  existing
     accounting  guidance.  SFAS 144 also changes the  requirements  relating to
     reporting  the effects of a disposal or  discontinuation  of a segment of a
     business.  SFAS 144 is effective for financial statements issued for fiscal
     years  beginning  after December 15, 2001 and interim  periods within those
     fiscal  years.  The  adoption of this  statement  is not expected to have a
     significant  impact on the financial  condition or results of operations of
     the Company.

8.   On January 1, 2002, the Company  adopted  Statement of Position (SOP) 01-6,
     Accounting by Certain  Entities  That Lend to or Finance the  Activities of
     Others,   which  reconciles  and  conforms  existing   differences  in  the
     accounting  and  financial  reporting  guidance  in  the  AICPA  Audit  and
     Accounting Guides, Banks and Savings Institutions, Audits of Credit Unions,
     and  Audits  of  Finance  Companies.  It also  carries  forward  accounting
     guidance  for   practices   deemed  to  be  unique  to  certain   financial
     institutions.  The  adoption  of this SOP had no  impact  on the  Company's
     financial position or results of operations.







<PAGE>





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

     This  discussion  is  intended  to  further  your   understanding   of  the
consolidated  financial  condition  and results of  operations  of First Chester
County Corporation (the  "Corporation") and its wholly-owned  subsidiaries,  The
First  National Bank of Chester  County (the "Bank") and Turks Head  Properties,
Inc. It should be read in conjunction with the consolidated financial statements
included in this report.

     In  addition  to  historical  information,  this  discussion  and  analysis
contains  statements  relating  to future  results of the  Corporation  that are
considered  "forward-looking  statements"  within  the  meaning  of the  Private
Securities  Litigation  Reform  Act of  1995.  These  statements  can  often  be
identified  by the  use  of  forward-looking  terminology  such  as  "believes,"
"expects,"  "intends,"  "may," "will,"  "should," "or  "anticipates"  or similar
terminology.  These statements  involve risks and uncertainties and are based on
various assumptions. Investors and prospective investors are cautioned that such
statements are only projections.  The risks and uncertainties noted below, among
others, could cause the Corporation's actual future results to differ materially
from  those  described  in forward  looking  statements  made in this  report or
presented elsewhere by Management from time to time.

     These  risks  and  uncertainties  include,  but are  not  limited  to,  the
following:  (a) loan growth and/or loan margins may be less than expected due to
competitive  pressures in the banking  industry  and/or  changes in the interest
rate environment;  (b) general economic  conditions in the Corporation's  market
area may be less  favorable  than expected  resulting in, among other things,  a
deterioration  in credit quality  causing  increased loan losses;  (c) costs and
timing of the Corporation's planned training  initiatives,  product development,
branch expansion,  new technology and operating systems may exceed expectations;
(d)  volatility  in the  Corporation's  market area due to mergers of  competing
financial  institutions may have  unanticipated  consequences,  such as customer
turnover; (e) changes in the regulatory environment, securities markets, general
business conditions and inflation may be adverse; including the effects of trade
, monetary,  and fiscal policies of the government and interest rate policies of
the Federal Reserve system;  (f) impact of changes in interest rates on customer
behavior; (g) estimated changes in net interest income; (h) anticipated pressure
on net yields;  (i) the impact of changes in demographics  on branch  locations;
and (j) technological  changes.  These risks and uncertainties are all difficult
to predict and most are beyond the control of the Corporation's Management.

     Although  the  Corporation  believes  that its  expectations  are  based on
reasonable  assumptions,  readers are cautioned  that such  statements  are only
projections.  The Corporation  undertakes no obligation to publicly  release any
revisions to the  forward-looking  statements to reflect events or circumstances
after the date of this report.

                          EARNINGS AND DIVIDEND SUMMARY

     Net  income  for the  three-month  period  ended  June 30,  2002 was $1,283
million,  a decrease of 1.31% from  $1,300  million for the same period in 2001.
Net income for the six-month  period ended June 30, 2002 was $2,822 million,  an
increase of 6.49% from $2,650  million for the same period in 2001. The increase
in net income for the  six-month  period was the direct  result of  decreases in
interest expense as deposit rates were reduced in reaction to the prime interest
rate cuts  engineered  by the  Federal  Reserve  during  2001 as well as certain
non-recurring  gains  realized in the first quarter of 2002 off-set by reduction
in interest income as rates on  interest-earning  assets also  decreased.  Basic
earnings per share was $0.29 and $0.64 for the three-and six-month periods ended
June 30, 2002, respectively, compared to $0.30 and $0.60 for the same periods in
2001.  Cash dividends  declared during the second quarters of 2002 and 2001 were
$0.13 and $0.26 per share for the three- and  six-month  periods.  Over the past
ten years,  the  Corporation's  practice  has been to pay a dividend of at least
35.0% of net income.
<PAGE>

     The  Corporation  recently  preformed  a review of its  lending  functions,
resulting in several structural  changes which management  believes will enhance
asset quality,  underwriting practices, and productivity (see pages 14,15,21,&22
for more  details).  In July  2002,  the  Corporation  issued  $5.0  million  of
preferred capital securities structured as Tier I capital of the Corporation for
the purpose of raising  additional  capital for general corporate  purposes (see
page 23 for more  details).  The  Corporation  expects these elements to enhance
future earnings.

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

                                                                    Three Months Ended              Six Months Ended
                                                                         June 30,                        June 30,
                                                             ------------------------------    --------------------------
                                                                2002                2001           2002            2001
                                                             ------------------------------    --------------------------
          <S>                                               <C>                <C>               <C>            <C>
           SELECTED RATIOS
           Return on Average Assets                             0.87%              0.95%             0.96%         0.98%
           Return on Average Equity                            11.25%             11.63%            12.47%        11.97%
           Net Interest Margin                                  4.78%              4.57%             4.80%         4.59%
           Earnings Retained                                   55.19%             55.08%            59.25%        55.96%
           Dividend Payout Ratio                               44.81%             44.92%            40.75%        44.04%
           Book Value Per Share                               $10.45              $9.96            $10.45         $9.96
</TABLE>
The  "Consolidated  Average  Balance  Sheet" on pages 16 and 17 may  assist  the
reader in understanding the following 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- and six-month  periods ended June 30, 2002 on
a tax equivalent  basis,  was $6.6 million and $13.2  million,  compared to $5.8
million  and $11.6  million  for the same  periods  in 2001,  respectively.  The
increase in tax equivalent  net interest  income for both periods was the result
of an  increase  in the  average  interest-earning  assets and a decrease in the
average yield on interest bearing liabilities, partially offset by a decrease in
the average yield on  interest-earning  assets.  These changes have improved the
Corporation's net interest margin.  The average yield earned on interest earning
assets  decreased 5.6% or 103 basis points and 5.9% or 105 basis points to 6.78%
and 6.89% for the three- and six- month periods ended June 30, 2002. The average
yield paid on interest bearing  liabilities  decreased 32.6% or 156 basis points
and 32.7% or 160 basis points to 2.48% and 2.57%.  The average yield on interest
bearing  liabilities  decreased three times more than the interest earning asset
yield, thereby increasing net yield earned on interest earning assets increased.

     Average  interest-earning  assets increased  approximately $44.1 million to
$552.1 million during the second quarter of 2002 from $508.0 million in the same
period  last  year.   For  the  six  months   ended  June  30,   2002,   average
interest-earning  assets increased approximately $43.5 million to $548.7 million
from  $505.1  million in the same  period  last year.  The  increase  in average
interest-earning  assets for both periods three- and six- month,  ended June 30,
2002, was the direct result of an increase in the average loans  outstanding and
increases  in excess  funds  invested  in  Federal  funds  and  other  overnight
investments.  For the three- month  period,  the increase in average  investment
securities contributed to the increase in average  interest-earning  assets. For
the six- month  period,  the  increase  in average  interest-earning  assets was
partially offset by a decrease in investment securities.
<PAGE>
     Net-yields on  interest-earning  assets,  on a tax equivalent  basis,  were
4.78% and 4.80% for the  three-  and  six-month  periods  ended  June 30,  2002,
respectively,  compared to 4.57% and 4.59% for the three- and six-month  periods
ended June 30,  2001.  We had a decrease in both  yields on  interest  earned on
interest  earning  assets for the three- and six- month period but we had a more
substantial  decrease  in both  yields  on  interest  paid on  interest  bearing
liabilities  for the three-  and six- month  period  ended  June 30,  2002.  The
Corporation also  anticipates that strong  competition for new loan business and
the cost of incremental deposit growth will put pressure on net-yield. Yields on
interest-bearing  liabilities  decreased  primarily due to the lowering of rates
paid on deposit accounts as the Corporation reacted to external rate changes and
tried to off-set the decrease in asset yields.

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

                                                               Three Months                Six Months
Yield On:                                                      Ended June 30,             Ended June 30,
---------                                                     ----------------           ----------------
                                                              2002       2001            2002        2001
                                                              ----       ----            ----        ----
<S>                                                         <C>        <C>             <C>         <C>
Interest Earning Assets                                       6.78%      7.81%           6.89%       7.94%
Interest Bearing Liabilities                                  2.48%      4.04%           2.57%       4.17%
                                                              -----      -----           -----       -----
Net Interest Spread                                           4.30%      3.77%           4.32%       3.77%
Contribution of Interest Free Funds                           0.47%      0.80%           0.48%       0.82%
                                                              -----      -----           -----       -----
Net Yield on Interest Earning Assets                          4.78%      4.57%           4.80%       4.59%
                                                              =====      =====           =====       =====
</TABLE>

      INTEREST INCOME ON FEDERAL FUNDS SOLD AND OTHER OVERNIGHT INVESTMENTS

     Interest income on Federal funds sold and other  overnight  investments for
the three- and six-month periods ended June 30, 2002,  increased 25.0% and 31.8%
to $105  thousand and $199  thousand,  respectively,  when  compared to the same
periods in 2001. The increase in interest income on Federal funds sold and other
overnight  investments  is the direct result of a 177.6% and 221.0%  increase in
the average  balance of federal funds sold and other  overnight  investments for
the three- and six- month  periods  ended June 30, 2002,  respectively.  Average
balance of federal funds sold and other overnight  investments has increased due
to deposit  growth  from our three new  branches,  while loan  growth  this year
increased more slowly.  The increase in interest  income earned on federal funds
sold was partially offset by a 234 and 277 basis point decrease (one basis point
is equal to 1/100 of a percent) for the three- and six- month periods ended June
30, 2002, respectively.

                    INTEREST INCOME ON INVESTMENT SECURITIES

     On a  tax  equivalent  basis,  interest  income  on  investment  securities
decreased 10.9% to $1.2 million for the three-month  period ended June 30, 2002,
and  decreased  19.4% to $2.2  million for the  six-month  period ended June 30,
2002, respectively,  when compared to the same periods in 2001. The decrease for
the three-month period is primarily due to a 72 basis point or 12.0% decrease on
interest rates on such  investments  partially  offset by a 1.1% or $1.0 million
increase  in the average  investment  security  balance.  The  decrease  for the
six-month  period  ended June 30,  2002 is the result of a 5.2% or $4.7  million
decrease in the average investment  security balance and 92 basis point or 15.0%
decrease in the yield earned compared to the same period last year. Increases in
the average  investment  security  balance for the three-  month  period are the
result  of the  Corporation's  increased  cash  position  due  to the  increased
deposits  generated by our new branch  locations.  Decreases  for the  six-month
period in  average  investment  security  balances  are the  result of  periodic
payments (securities  paydowns),  normal maturities and security sales. Proceeds
were being used to support loan growth during 2001.
<PAGE>

                            INTEREST INCOME ON LOANS

     Loan  interest  income,  on  a  tax  equivalent  basis,  generated  by  the
Corporation's  loan portfolio  decreased 5.0% and 4.0% to $8.1 million and $16.5
million for the three- and six-month  periods  ended June 30, 2002,  compared to
the same  periods in 2001,  respectively.  The  decrease in interest  income for
these periods is the direct  result of 93 and 96 basis point  decreases in rates
earned on the portfolio as compared to last year partially  offset by a past due
accrued  interest  recovery and late charges as a result of  restructuring  of a
large  commercial  loan  relationship  and by a 7.1%  and 8.3%  increase  in the
average balance of outstanding  loans for the three- and six-month periods ended
June 30, 2002, respectively. Most of this loan growth occurred in the last three
quarters of 2001.  Loan growth for the first and second quarter of 2002 has been
slow but is expected to pick-up during the rest of the year.

                      INTEREST EXPENSE ON DEPOSIT ACCOUNTS

     Interest  expense on  deposit  accounts  decreased  33.7% and 34.2% for the
three- and  six-month  periods  ended  June 30,  2002 to $2.5  million  and $5.1
million, compared to $3.8 million and $7.7 million for the same periods in 2001.
The decrease for the  three-month  period is primarily  the result of a 40.2% or
157 basis point decrease on rates paid on  interest-bearing  deposits  partially
offset by a 10.8% or $41.3  million  increase  in the average  interest  bearing
deposits balance.  The decrease for the six-month period is primarily the result
of a 40.0%  or 162  basis  point  decrease  on  rates  paid on  interest-bearing
deposits  partially  offset by a 9.6% or $36.6  million  increase in the average
interest  bearing  deposits  balance  compared to the same period last year. The
corporation's effective rate on interest-bearing deposits decreased to 2.34% for
the three-month period ended June 30, 2002 from 3.91% in 2001. The Corporation's
effective  rate on  interest  bearing  deposits  decreased  to  2.43%  from  the
six-month period ended June 30, 2002 from 4.05% in 2001.

     Competition  for deposits from local community banks as well as non-banking
institutions  such as credit union and mutual fund  companies  continues to be a
strong  factor.  Despite  this  competition,   the  Corporation's  deposit  base
continues to grow and is expected to continue to grow as we continue to open new
branches and attract new customers with new products and services. Recent growth
can be  attributed  primarily  to our  three new  branch  locations  located  in
Lionville,  New Garden,  and Hershey's Mill. Total deposits continued to grow in
these new  branches as well as our  existing  sites.  Other new branch sites are
currently  under  review,  which  if  opened,  should  continue  to  expand  the
Corporation's deposit base.

         INTEREST EXPENSE ON SECURITIES SOLD UNDER REPURCHASE AGREEMENTS

     Interest expense on securities sold under repurchase  agreements  decreased
78.3% and 79.3% to $5 thousand  and $12  thousand  for the three- and  six-month
periods ended June 30, 2002, respectively, compared to the same periods in 2001.
The decreases are primarily  attributable to a 76.6% or 2.2 million and 64.4% or
1.7  million  decrease  in  average  balance  and a 7.1%,  or a 26  basis  point
decrease,  and  42.0%,  or a 181  basis  point  decrease  on rates  paid on such
contracts,  compared to the rates paid in the three- and six-month periods ended
June 30, 2001, respectively. The decrease is also attributable to the popularity
of our  overnight  cash sweep and  tri-party  repo  programs  totaled were $57.2
million at June 30,  2002 and $53.8  million at June 30,  2001.  These  programs
represent  funds of our  customers  invested  overnight  with third  parties and
therefore do not appear on our balance  sheet.  The  Corporation  earns a fee of
approximately 25 basis points on these balances.

    INTEREST EXPENSE ON FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS

     Interest expense on borrowings  decreased $57 thousand to $281 thousand for
the  three-month  period ended June 30, 2002 from $338 thousand when compared to
the same period in 2001.  The  decrease is a direct  result of 15.1% or 95 basis
point  decrease in borrowings  for the  three-month  period ending June 30, 2002
<PAGE>
when  compared  to the same  period last year.  Interest  expense on  borrowings
decreased $86 thousand to $615 thousand for the six-month  period ended June 30,
2002 from $701 thousand  when compared to the same period in 2001.  The decrease
is a direct  result of 23.4% or a 145 basis  point  decrease  on rates  paid and
loans maturing this quarter.  The need for borrowing  decreased during the first
half of 2002 as a result of slower loan growth,  increased  deposits,  and funds
obtained from sales of investment securities.  This lower level of borrowings is
expected to continue  throughout  the year as the  funding  demand is  currently
being met by deposit  growth.  Borrowings at any time may consist of one or more
of the following:  FHLB Overnight or Term Advances and advances under agreements
with our correspondent banks.

                            PROVISION FOR LOAN LOSSES

     During  the  three-  and  six-month   periods  ended  June  30,  2002,  the
Corporation  recorded a $310  thousand and a $780  thousand  provision  for loan
losses  compared to a $135  thousand and a $370 thousand for the same periods in
2001.  The allowance for loan losses as a percentage of total loans was 1.49% at
June  30,  2002,  1.61%  at June  30,  2001 and  1.42%  at  December  31,  2001,
respectively.  See the section titled "Allowance For Loan Losses" for additional
discussion.

                               NON-INTEREST INCOME

     Total  non-interest  income  increased 40.2% to $2.1 million for the three-
month period ended June 30, 2002 when  compared to the same period in 2001.  For
the six- month period ended June 30, 2002, total  non-interest  income increased
38.7% to $4.2  million  when  compared to the same  period in 2001.

     The  primary  component  of  non-interest  income is  Financial  Management
Services  ("FMS")  revenue,  which  increased 2.2% and 5.7% to $757 thousand and
$1.6  million  for the  three-  and  six-month  periods  ended  June  30,  2002,
respectively,  compared  to the same  periods in 2001.  The market  value of FMS
assets under management  custody grew $56.7 million or 12.4% from $456.5 million
at June 30, 2001 to $513.2 million at June 30, 2002.  While the overall value of
FMS assets under management and custody grew from period to period, much of this
growth was  obtained  from a few new account  relationships,  which were secured
late in the first quarter and income from these assets may not be fully realized
until future  periods.  FMS income is based primarily on the market value of the
assets  under  management.  Over the past  several  months the  downturn  in the
financial markets devalued the portfolio and led to a lower than expected amount
of fee income.

     Service charges on deposit accounts increased  approximately  48.1% to $437
thousand for the three-months  ended June 30, 2002 compared to $295 thousand for
the same period in 2001. For the six-month  period ended June 30, 2002,  service
charges on deposit  accounts  increased 52.7% to $869 thousand  compared to $569
thousand for the same period in 2001.  This  increase can be  attributed  to the
growth in the  number and volume of deposit  accounts  and the  introduction  of
"Bounce  Protection" a  deposit-related  service,  which was  introduced in July
2001.  Management  expects this component of non-interest  income to continue to
grow as deposits grow.

     Investment   securities   gains  also   contributed   to  the  increase  in
non-interest income. For the three-month period ended June 30, 2002,  investment
security gains  increased $81 thousand from $40 thousand to $121 thousand,  when
compared to the same period in 2001.  For the  six-month  period  ended June 30,
2002, investment security gains increased $56 thousand from $65 thousand to $121
thousand, when compared to the same period in 2001. These gains were realized as
a result of normal portfolio realignment.

     Other  non-interest  income  increased  89.3%  to  $744  thousand  for  the
three-months  ended June 30, 2002  compared to $393 thousand for the same period
in 2001. For the six-month period ended June 30, 2002, other non-interest income
<PAGE>
increased 78.6% to $1.7 million compared to $948 thousand for the same period in
2001. This increase is primarily the result of a gain of $245 thousand  realized
on the  sale of a piece of OREO  property  during  the  first  quarter  of 2002.
Management  considers this gain to be  non-recurring  and is not expected in the
future time  periods.  Additionally,  increases  in rental  income on  operating
leases and fees earned on residential  mortgage sales contributed to the change.
Rental income earned on operating leases increased $333.7 thousand for the first
six-months  ended June 30, 2002  compared  to the same  period in 2001.  Fees on
residential  mortgage sales increased $86 thousand or 83.4% to $190 thousand for
the first six-months ended June 30, 2002 compared to the same period in 2001.

                              NON-INTEREST EXPENSE

     Total non-interest  expense for the three- and six-month periods ended June
30, 2002 increased 22.9% to $6.5 million and 19.6% to $12.6 million, compared to
the same periods in 2001. The various components of non-interest expense changes
are discussed below.

     Employee salaries and benefits increased 16.1% to $3.5 million and 15.4% to
$6.9  million for the  three-month  and  six-month  periods  ended June 30, 2002
compared to the same periods in 2001.  Increased staff,  annual employee raises,
promotions  and a  proportional  increase in  employee  benefits  are  primarily
responsible  for the increase.  At June 30, 2002, the  Corporation  employed 233
full time and 53 part time employees  compared to 219 full time and 48 part time
employees at June 30,  2001.  This  represents a 6.4%  increase in full time and
10.4% increase in part time employees.

     In April 2002,  the  Corporation  announced the promotion of Kevin Quinn to
Chief  Operating  Officer and the  creation of two new  divisions.  The Personal
Banking  Division,  managed by Peter J.  D'Angelo,  will focus its effort of the
branch system, consumer lending,  residential mortgage,  credit cards, and small
business lending.  The Business Banking  Division,  managed by David W. Glarner,
will focus its attention on commercial  mortgage,  commercial lending,  leasing,
loan  administration,  and  credit  administration.  The  creation  of these two
Divisions   will  provide  an   environment  to  focus  on  the  total  customer
relationship  as well as facilitate the  improvement of officer  supervision and
management.  This will have an impact on this component of non-interest  expense
but it is  expected  that  these  changes  will  have a  positive  effect on the
efficiency of the lending  department and over time reduce the cost of putting a
loan on the books.  In  addition,  Linda Hicks was  promoted to  Executive  Vice
President  of  Financial  Management  Services  to assume Mr.  Quinn's  previous
duties.

     Net occupancy,  equipment,  and data processing expense increased 32.2% and
32.9% to $1.4  million  and $2.8  million for the three- and  six-month  periods
ended June 30, 2002, compared to the same periods last year,  respectively.  The
increase  is the direct  result of the  opening of three full  service  branches
during 2001. An increase of 46.3% in building  depreciation as well as increased
computer and related  equipment costs  associated with the expansion,  upgrading
and maintenance of personnel computers and our networking infrastructure.

     Professional  Services  increased 77.0% and 22.0% to $455 thousand and $714
thousand for the three- and  six-month  periods  ended June 30, 2002 compared to
the same  periods in 2001.  The  increase  is the result of an increase in audit
accounting and consultant fees and legal fees related to one loan relationship.

     Recently the Corporation  established a Credit  Administration  department.
The Corporation  believes that the  establishment of this Credit  Administration
area as well as other procedural and policy
<PAGE>
changes will allow the Corporation to improve its performance,  productivity and
reduce  risk.  This  area  will  be  headed  by  Richard  W.  Kauffman,   Senior
Vice-President.  These  changes  are  anticipated  to  have  an  impact  on this
component  of the  Corporation's  Income  Statement.  Management  believes  that
overtime the efficiences  created by this department  should reduce the overhead
cost of loan overwriting.

     Total other non-interest expense increased 22.6% and 21.4 % to $1.0 million
and $2.0 million for the three-month  and six-month  periods ended June 30, 2002
compared  to the same  periods in 2001.  The  increase  of the  three-month  and
six-month  period is the  result of an  increase  in  deposit  costs,  purchased
services  and  general  operating  expenses  due to the opening of our three new
branches.

     Planning for additional  branch sites continues.  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.



<PAGE>


                       CONSOLIDATED AVERAGE BALANCE SHEET
             AND TAXABLE EQUIVALENT INCOME/EXPENSE AND RATES FOR THE
                           THREE MONTHS ENDED JUNE 30,
<TABLE>
<CAPTION>

(Dollars in thousands)                                              2002                                      2001
                                                     --------------------------------          -------------------------------
                                                        Daily                                    Daily
                                                       Average                                  Average
                                                       Balance     Interest     Rate            Balance     Interest     Rate
                                                       -------     --------     ----            -------     --------     ----
ASSETS
<S>                                                <C>            <C>          <C>           <C>            <C>         <C>
Federal funds sold and other overnight investments  $   21,877     $    105     1.92%         $   7,880      $    84     4.26%
Interest bearing deposits in banks                         182            1     2.20%               156            1     2.56%
Investment securities

    Taxable                                             87,810        1,156     5.27%            86,763        1,302     6.00%
    Tax-exempt (1)                                       1,784           32     7.21%             1,815           31     6.93%
                                                      --------     --------                    --------     --------
        Total investment securities                     89,594        1,188     5.30%            88,578        1,333     6.02%
                                                      --------     --------                    --------     --------
Loans (2)
    Taxable                                            438,170        8,028     7.33%           408,944        8,437     8.25%
    Tax-exempt (1)                                       2,279           41     7.24%             2,480           60     9.60%
                                                      --------     --------                    --------     --------
        Total loans                                    440,449        8,069     7.33%           411,424        8,497     8.26%
                                                      --------     --------                    --------     --------
        Total interest-earning assets                  552,102        9,363     6.78%           508,038        9,915     7.81%
Non-interest earning assets
    Allowance for loan losses                           (6,668)                                  (6,653)
    Cash and due from banks                             23,563                                   24,740
    Other assets                                        22,863                                   19,312
                                                      --------                                 --------
        Total assets                                 $ 591,860                                $ 545,437
                                                      ========                                 ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Savings, NOWS & money market deposits                 $277,114     $  1,020     1.47%          $236,297       $1,600     2.71%
Certificates of deposits and other time                147,943        1,466     3.96%           147,426        2,152     5.84%
                                                      --------     --------                    --------     --------
   Total interest bearing deposits                     425,057        2,486     2.34%           383,723        3,752     3.91%
Securities sold under repurchase agreements                584            5     3.42%             2,501           23     3.68%
Federal Home Loan Bank advances and                     21,011          281     5.37%            21,455          338     6.30%
                                                      --------     --------                    --------     --------
      other borrowings
   Total interest bearing liabilities                  446,652        2,772     2.48%           407,679        4,113     4.04%
                                                      --------     --------                    --------     --------
Non-interest bearing liabilities
    Non-interest bearing demand deposits                94,514                                   87,279
    Other liabilities                                    5,090                                    5,775
                                                      --------                                 --------
        Total liabilities                              546,256                                  500,733
Stockholders' equity                                    45,604                                   44,704
                                                      --------                                 --------
        Total liabilities and stockholders' equity   $ 591,860                                $ 545,437
                                                      ========                                 ========
Net interest income                                                 $ 6,591                                  $ 5,802
                                                                      =====                                    =====
Net yield on interest earning assets                                            4.78%                                    4.57%
                                                                                =====                                    =====
</TABLE>











(1) The indicated income and annual rate are presented on a taxable equivalent
    basis using the Federal marginal rate of 34% adjusted for the TEFRA 20%
    interest expense disallowance for 2002 and 2001.
(2) Non-accruing loans are included in the average balance.

<PAGE>


                       CONSOLIDATED AVERAGE BALANCE SHEET
             AND TAXABLE EQUIVALENT INCOME/EXPENSE AND RATES FOR THE
                            SIX MONTHS ENDED JUNE 30,
<TABLE>
<CAPTION>

(Dollars in thousands)                                              2002                                      2001
                                                     -----------------------------------   -------------------------------------
                                                        Daily                                   Daily
                                                       Average                                  Average
                                                       Balance     Interest      Rate           Balance     Interest     Rate
                                                       -------     --------      ----           -------     --------     ----
ASSETS
<S>                                                 <C>          <C>            <C>         <C>            <C>         <C>
Federal funds sold and other overnight investments   $  20,644    $     199      1.93%       $    6,431     $    151     4.70%
Interest bearing deposits in banks                         203            3      2.96%              123            3     4.88%
Investment securities
Taxable                                                 83,777        2,168      5.18%           88,450        2,703     6.11%
    Tax-exempt (1)                                       1,783           65      7.29%            1,812           68     7.48%
                                                      --------     --------                    --------     --------
        Total investment securities                     85,560        2,233      5.22%           90,262        2,771     6.14%
                                                      --------     --------                    --------     --------
Loans (2)
    Taxable                                            439,856       16,362      7.44%          405,068       16,979     8.38%
    Tax-exempt (1)                                       2,393           92      7.70%            3,248          161     9.94%
                                                      --------     --------                    --------     --------
        Total loans                                    442,249       16,454      7.44%          408,316       17,140     8.40%
                                                      --------     --------                    --------     --------
Total interest-earning assets                          548,656       18,889      6.89%          505,132       20,065     7.94%
Non-interest earning assets
    Allowance for loan losses                           (6,626)                                  (6,629)
    Cash and due from banks                             23,128                                   24,486
    Other assets                                        23,041                                   19,013
                                                      --------                                 --------
        Total assets                                 $ 588,199                                $ 542,002
                                                      ========                                 ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Savings, NOWS & money market deposits                 $278,739     $  1,980      1.42%         $234,448     $  3,382     2.89%
Certificates of deposits and other time                139,654        3,104      4.45%          147,309        4,343     5.90%
                                                      --------     --------                    --------     --------
Total interest bearing deposits                        418,393        5,084      2.43%          381,757        7,725     4.05%
Securities sold under repurchase agreements                959           12      2.50%            2,693           58     4.31%
Federal Home Loan Bank advances and                     25,918          615      4.75%           22,621          701     6.20%
                                                      --------     --------                    --------     --------
     other borrowings
   Total interest bearing liabilities                  445,270        5,711      2.57%          407,071        8,484     4.17%
                                                      --------     --------                    --------     --------
Non-interest bearing liabilities
    Non-interest bearing demand deposits                92,525                                   84,629
    Other liabilities                                    5,138                                    6,022
                                                      --------                                 --------
        Total liabilities                              542,933                                  497,722
Stockholders' equity                                    45,266                                   44,280
                                                      --------                                 --------
        Total liabilities and stockholders' equity   $ 588,199                                $ 542,002
                                                      ========                                 ========
Net interest income                                                 $13,178                                  $11,581
                                                                     ======                                   ======
Net yield on interest earning assets                                             4.80%                                   4.59%
                                                                                 =====                                   =====
</TABLE>












(1)  The indicated income and annual rate are presented on a taxable  equivalent
     basis using the Federal  marginal  rate of 34%  adjusted  for the TEFRA 20%
     interest expense disallowance for 2002 and 2001.
(2)  Non-accruing loans are included in the average balance.

<PAGE>


                                  INCOME TAXES

     Income tax expense for the three- and six-month periods ended June 30, 2002
was $509 thousand and $1.2 million,  compared to $496 thousand and $992 thousand
in the same periods last year. This represents  effective tax rates of 28.4% and
29.0% for the three- and six-month  periods  ended June 30, 2002,  respectively.
The effective tax rate for the three- and six-month  periods ended June 30, 2001
were 27.6% and 27.2%, 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  monitor  changes  in  liquidity  and to  react
accordingly  to  fluctuations  in  market  conditions.  The  primary  source  of
liquidity  for the  Corporation  is  funding  available  from the FHLB,  deposit
growth, and cash flow from the investment and loan portfolios.  In addition, new
deposits to NOW, money-market, savings, and smaller denomination certificates of
deposit accounts provide additional  liquidity.  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:


<PAGE>


                                DEPOSIT ANALYSIS
<TABLE>
<CAPTION>

(Dollars in thousands)                        June 30, 2002                December 31, 2001                 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                        $  77,006           0.41%        $  71,034           1.13%         $  5,972          8.41%
Money Market                           25,346           1.48%           22,490           2.37%            2,856         12.70%
Statement Savings                      51,983           1.53%           47,077           2.53%            4,906         10.42%
Other Savings                           1,583           1.39%            1,758           2.39%             (175)        (9.95%)
CD's Less than $100,000               112,854           4.58%          117,282           5.73%           (4,428)        (3.78%)
                                     --------                         --------                         --------

Total Core Deposits                   268,772           2.49%          259,641           3.58%            9,131          3.52%

Non-Interest Bearing
Demand Deposit Accounts                92,525              -            88,923             -              3,602          4.05%
                                     --------                         --------

Total Core and Non-Interest
  Bearing Deposits                    361,297           1.85%          348,564           2.67%           12,733          3.65%
                                     --------                         --------                         --------

Tiered Savings                        122,821           1.99%           97,641           3.38%           25,180         25.79%
CD's Greater than $100,000             26,800           3.87%           29,734           5.36%           (2,934)        (9.87%)
                                     --------                         --------                         --------

Total Deposits                        510,918           1.99%          475,939           2.98%           34,979          7.35%
                                     --------                         --------                         --------
</TABLE>
     The  Corporation,  as a  member  of  the  FHLB,  maintains  several  credit
facilities.  As of June 30, 2002 the amount  outstanding under the Corporation's
line of credit with the FHLB was $0. Additionally, the FHLB offers several other
credit related products which are available to the Corporation.  The Corporation
currently has a maximum borrowing capacity with the FHLB of approximately $126.2
million.  During the three- and six-month periods ending June 30, 2002,  average
FHLB advances were approximately $21.0 million and $25.9 million,  respectively,
and consisted of term advances  representing a combination of maturities in each
period. The average interest rate on these advances was approximately  5.37% and
4.75%  respectively.  FHLB  advances  are  collateralized  by a  pledge  on  the
Corporation's portfolio of unencumbered investment securities,  certain mortgage
loans and a lien on the Corporation'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  $190.8 million or
31.9% of total assets at June 30, 2002 compared with a negative  $165.2  million
or 29.9% of total assets at June 30, 2001.  The change in the  corporations  gap
position  is the  result of an  analysis  performed  on.  The  Corporations  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
Corporation  operations  with the intention of maintaining a stable net interest
margin.


<PAGE>


                          INTEREST SENSITIVITY ANALYSIS
                               AS OF JUNE 30, 2002
<TABLE>
<CAPTION>

(Dollars in thousands)
                                                                    One               Over
                                                   Within        through              five           Non-rate
                                                  one year      five years            years         sensitive        Total
                                                ------------    ----------        ------------      ---------       -------
ASSETS
<S>                                          <C>              <C>               <C>               <C>            <C>
    Federal funds sold and other
       overnight investments                   $     21,500     $        --       $        --      $        --    $    21,500
    Investment securities                            17,397          43,886            34,022               --         95,305
    Interest bearing deposits in banks                  116              --                --               --            116
    Loans and leases                                166,734         239,665            33,226           (6,561)       433,064
    Cash and cash equivalents                            --              --                --           24,878         24,878
    Premises & equipment                                 --              --                --           15,326         15,326
    Other assets                                         --              --                --            7,173          7,173
                                                 ----------      ----------        ----------       ----------     ----------
       Total assets                            $    205,747     $   283,551       $    67,248      $    40,816    $   597,362
                                                 ==========      ==========        ==========       ==========     ==========

LIABILITIES AND CAPITAL
    Interest bearing deposits                  $         --     $        --       $        --      $   100,801    $   100,801
    Non-interest bearing deposit                    385,662          40,874                --               --        426,536
    Repurchase Agreements                               560              --                --               --            560
    FHLB advances and other
       borrowings                                    10,253           1,077             7,142               --         18,472
    Other liabilities                                    --              --                --            4,775          4,775
    Capital                                              --              --                --           46,218         46,218
                                                 ----------      ----------        ----------       ----------     ----------
       Total liabilities & capital             $    396,475     $    41,951       $     7,142      $   151,794    $   597,362
                                                 ==========      ==========        ==========       ==========     ==========
    Net interest rate
      sensitivity gap                          $  (190,728)     $   241,600       $    60,106      $ (110,978)    $        --
                                                ==========       ==========        ==========       =========      ==========
    Cumulative interest rate
      sensitivity gap                          $  (190,728)     $    50,872       $   110,978      $        --    $        --
                                                ==========       ==========        ==========       ==========     ==========
    Cumulative interest rate
      sensitivity gap divided
      by total assets                               (31.9%)            8.5%             18.6%
                                                ==========       ==========        ==========
</TABLE>

                            ALLOWANCE FOR LOAN LOSSES

     The allowance for loan losses is an amount that Management believes will be
adequate to absorb loan losses on existing  loans that may become  uncollectible
based upon  Management's  periodic  evaluations of the  collectibility of loans.
These periodic  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.


<PAGE>


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

                                                                          Three Months                      Six Months
                                                                             Ended                            Ended
                                                                            June 30,                         June 30,
                                                                            --------                         --------
(Dollars in thousands)                                                2002            2001             2002            2001
                                                                      ----            ----             ----            ----

<S>                                                              <C>             <C>              <C>             <C>
Balance at beginning of period                                    $    6,746      $    6,612       $    6,344      $    6,609
                                                                   ---------       ---------        ---------       ---------

Provision charged to operating expense                                   310             135              780             370
                                                                   ---------       ---------        ---------       ---------

    Recoveries of loans previously charged-off                            15              92              281             129
    Loans charged-off                                                   (510)           (135)            (844)           (404)
                                                                   ---------       ---------        ---------       ---------

Net loans charged-off                                                   (495)            (43)            (563)           (275)
                                                                   ---------       ---------        ---------       ---------

Balance at end of period                                          $    6,561      $    6,704       $    6,561      $    6,704
                                                                   =========       =========        =========       =========
Period-end loans outstanding                                      $  439,625      $  415,931       $  439,625      $  415,931
Average loans outstanding                                         $  440,449      $  411,424       $  442,249      $  408,316
Allowance for loan losses as a
  Percentage of period-end loans outstanding                           1.49%           1.61%            1.49%           1.61%

Net charge-offs to average loans
    Outstanding                                                        0.11%           0.01%            0.13%           0.07%
</TABLE>

     Non-performing loans include loans on non-accrual status and loans past due
90 days or more and still accruing.  The  Corporation's  policy is to charge-off
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.  Through the six-month period the increase in charge-offs
is principally due to management's  decision to write-down additional amounts on
a loan previously  recongnized as a non-performing loan. 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. The newly formed Credit
Administration  area should assist in improving the  components of the allowance
of loans and lease losses such as provision expense, recoveries, and charged-off
loans.


<PAGE>


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

                                                                       June 30,                   December 31,
(Dollars in thousands)                                           2002            2001                 2001
                                                                ------          ------               ------

<S>                                                         <C>              <C>                  <C>
Past due over 90 days and still accruing                      $    143         $  3,902             $    174

Non-accrual loans                                                2,771            1,869                7,630
                                                              --------         --------             --------

Total non-performing loans                                       2,914            5,771                7,804

Other real estate owned                                            368              727                  831
                                                              --------         --------             --------

Total non-performing assets                                   $  3,282         $  6,498             $  8,635
                                                              ========         ========             ========

Non-performing loans as a percentage
   of total loans (gross)                                        0.66%            1.39%                1.74%

Allowance for loan losses as a
   percentage of non-performing loans                          225.19%          116.17%               81.29%

Allowance for loan losses as a
   percentage of total loans and other real
   estate owned                                                  1.49%            1.56%                1.92%

Allowance for loan losses as a
   percentage of non-performing assets                         199.94%          103.17%               73.47%
</TABLE>

     The allowance for loan losses as a percentage of non-performing loans ratio
indicates  that the  allowance  for  loan  losses  is  sufficient  to cover  the
principal of all non-performing  loans at June 30, 2002. 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.  The  newly  formed  Credit  Administration  area  should  assist in
improving loans past due over 90 days and still accruing,  non-accrual loans, as
well as other real estate owned.


                                 LOAN IMPAIRMENT

     The  Corporation  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 on impaired loans
and no income is recognized until all recorded amounts of interest and principal
are recovered in full.

     The balance of impaired  loans was $3.2  million,  $7.4  million,  and $1.4
million at June 30, 2002, December 31, 2001, and June 30, 2001 respectively. The
associated  allowance for impaired  loans was $733  thousand,  $820 thousand and
$215  thousand  at  June  30,  2002,   December  31,  2001  and  June  30,  2001
respectively.
<PAGE>
     For the three-month and six-month  period ended June 30, 2002,  activity in
the allowance for impaired loan losses  include a provision of $0, write offs of
$80 and $87  thousand,  respectively,  and  recoveries  of $0 for both  periods.
Contractual  interest amounted to $102 thousand for the three-months  ended June
30,  2002 and $241  thousand  for the  six-months  ended  June  30,  2002.  Cash
collected on loans for the three-month and six-month  period ended June 30, 2002
was $445  thousand  and $460  thousand,  respectively.  The  amount  applied  to
principal  was $220  thousand  and $235  thousand  for the three- and six- month
period, respectively, of which $225 thousand was applied to interest.

     For the three-month and six-month  period ended June 30, 2001,  activity in
the allowance for impaired loan losses  include a provision of $0, write offs of
$0  and  $27  thousand,   respectively,   and  recoveries  of  $6  thousand  $0,
respectively. No interest income was recorded for both periods while contractual
interest  amounted to $29 thousand for the three- months ended June 30, 2001 and
$55 thousand for the six-months ended June 30, 2001. Cash collected on loans for
the three-month and six-month  period ended June 30, 2001 was $3 thousand and $8
thousand, respectively, all of which was applied to principal.

                        BRANCHING AND TECHNOLOGY PROJECTS

     The  Corporation is planning to open a new branch in the  Coatesville  area
during the next 12  months.  The  Corporation  continually  explores  new branch
opportunities  and has several  additional sites under review. In June 2002, the
Corporation installed a new check imaging system that is integrated into the one
banking  system that enables our  customers to see images of their checks online
through the banks Net Teller and Net Cash Manager  online banking  services.  In
addition,  the Corporation  plans to introduce a new integrated  branch platform
system in the third  quarter  of 2002  which  should  "streamline"  the  account
opening process for our customers and improve back office efficiencies.

                                CAPITAL ADEQUACY

     The Corporation is subject to Risk-Based  Capital Guidelines adopted by the
Federal  Reserve Board ("FRB") for bank holding  companies.  The  Corporation 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 June 30, 2001, 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 1991.
The Corporation's  Risk-Based Capital Ratios, shown below, have been computed in
accordance with regulatory accounting policies.
<TABLE>
<CAPTION>

RISK-BASED                                          June 30,            December 31,     "Well Capitalized"
                                          -------------------------     ------------
CAPITAL RATIOS                             2002               2001          2001            Requirements
--------------                             ----               ----          ----         ------------------
<S>                                     <C>                <C>           <C>                  <C>
    Corporation
Leverage Ratio                             7.68%              8.29%         7.65%                5.00%
Tier I Capital Ratio                       9.65%             10.77%         9.50%                6.00%
Total Risk-Based Capital Ratio            10.90%             12.03%        10.75%               10.00%

       Bank
Leverage Ratio                             7.43%              8.01%         7.42%                5.00%
Tier I Capital Ratio                       9.33%             10.40%         9.22%                6.00%
Total Risk-Based Capital Ratio            10.57%             11.66%        10.47%               10.00%
</TABLE>

     In addition,  Subsequent to June 30, 2002, The Corporation issued preferred
trust  securities,  as described in the following  section  titled "Post Balance
Sheet Events" a portion of which are counted as Tier 1 Capital.

<PAGE>

     The Corporation is not under any agreement with the regulatory  authorities
nor is it aware of any current  recommendations  by the  regulatory  authorities
that, if they were to be implemented, would have a material affect on liquidity,
capital resources or operations of the Corporation.


                            POST BALANCE SHEET EVENTS

     On July 11, 2002,  the  Corporation  issued $5.0  million (net  proceeds of
$4.82  million)  of  preferred  capital  securities  for the  purpose of raising
additional capital for general corporate purposes.  These securities were issued
through First Chester County Capital Trust I (the  "Trust"),  a  special-purpose
statutory  trust  created  expressly  for the issuance of these  securities  and
investing the proceeds in junior subordinated debentures of the Corporation. The
securities provide for quarterly cash  distributions  calculated at a rate based
on the three-month  London  Inter-bank  Offering Rate ("LIBOR") plus 3.65%.  The
capital  securities will be redeemed on October 7, 2032; however the Corporation
does have the option to shorten the  maturity  date to a date not  earlier  than
October 7, 2007.  These  securities have been structured so that they qualify as
Tier 1 Capital of the Corporation.  Because this transaction did not occur until
July of 2002,  these  numbers are not  reflected in the June 30, 2002  financial
statements nor the notes thereof.



<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 2001 Annual Report of
the Corporation,  filed as an exhibit to its Form 10-K for the fiscal year ended
December  31,  2001 with the SEC via EDGAR.  Please  refer to the  "Management's
Discussion and Analysis" section on pages 24-38 of the Corporation's 2001 Annual
Report for additional information.


<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 Vote of Security Holders

               None

Item 5.  Other Information

               None

Item 6.  Exhibits and Reports on Form 8-K


               (a) Exhibits

     3(i).  Certificate of Incorporation.  Copy of the Corporation's Articles of
            -----------------------------
Incorporation,  as amended,  is incorporated herein by reference to Exhibit 3(i)
to the Corporation's  Annual Report on Form 10-K for the year ended December 31,
1999.

     3(ii).  Bylaws of the Corporation,  as amended.  Copy of the  Corporation's
Bylaws, as amended,  is incorporated herein 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.
        --------------------

<PAGE>


                       PART II - OTHER INFORMATION (cont.)

27.      Financial Data Schedule.
--------------------------------

         99.1 Certification of President and Chief Executive Officer

         99.2 Certification of Chief Operating Officer

         99.3 Certification of Treasurer and Principal Accounting and Financial
               Officer

         99.4 Certification of Assistant Treasurer/Controller

         (b)      Reports on Form 8-K

     A Form  11-K was  filed  with the SEC on June 28,  2002  pertaining  to the
issuance of annual report of employee stock purchase.

     A Form 8-K was filed  with the SEC on April 7, 2002  pertaining  to a press
release announcing the 2002 first quarter earnings.

     A Form 8-K was filed with the SEC on April 29, 2002  pertaining  to a press
release announcing executive management promotions.

     A Form 8-K was filed with the SEC on July 23,  2002  pertaining  to a press
release announcing second quarter earnings.




<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 CHESTER COUNTY CORPORATION


                                                      Charles E. Swope


                                                     /s/ Charles E. Swope
                                                     --------------------
                                                     President


DATE:  August 14, 2002


                                                     Kevin C. Quinn


                                                     /s/ Kevin C. Quinn
                                                     ------------------
                                                     Chief Operating Officer



                                                     J. Duncan Smith


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











<PAGE>





                                  EXHIBIT 99.1

                        FIRST CHESTER COUNTY CORPORATION


                            CERTIFICATION PURSUANT TO
                               18 U.S.C. ss. 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Quarterly Report of First Chester County Corporation (the
"Company")  on Form 10-Q for the period  ending  June 30, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Charles
E.  Swope,  President  and Chief  Executive  Officer  of the  Company,  certify,
pursuant  to 18 U.S.C.  ss.  1350,  as adopted  pursuant  to Section  906 of the
Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and

(2) The  information  contained in the Report fairly  presents,  in all material
respects, the financial condition and result of operations of the Company.



Date:__________, 2002                  ___________________________________
                                       Charles E. Swope
                                       President and Chief Executive Officer





<PAGE>



                                  EXHIBIT 99.2

                        FIRST CHESTER COUNTY CORPORATION


                            CERTIFICATION PURSUANT TO
                               18 U.S.C. ss. 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Quarterly Report of First Chester County Corporation (the
"Company")  on Form 10-Q for the period  ending  June 30, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Charles
E.  Swope,  President  and Chief  Operating  Officer  of the  Company,  certify,
pursuant  to 18 U.S.C.  ss.  1350,  as adopted  pursuant  to Section  906 of the
Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and

(2) The  information  contained in the Report fairly  presents,  in all material
respects, the financial condition and result of operations of the Company.



Date:__________, 2002                   ___________________________________
                                        Kevin Quinn
                                        Chief Operating Officer






<PAGE>



                                  EXHIBIT 99.3

                        FIRST CHESTER COUNTY CORPORATION


                            CERTIFICATION PURSUANT TO
                               18 U.S.C. ss. 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Quarterly Report of First Chester County Corporation (the
"Company")  on Form 10-Q for the period  ending  June 30, 2002 as filed with the
Securities  and Exchange  Commission  on the date hereof (the  "Report"),  I, J.
Duncan Smith,  Treasurer  (Principal  Accounting  and Financial  Officer) of the
Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and

(2) The  information  contained in the Report fairly  presents,  in all material
respects, the financial condition and result of operations of the Company.



Date:__________, 2002                   ___________________________________
                                        J. Duncan Smith
                                        Treasurer (Principal Accounting
                                        and Financial Officer)

















<PAGE>







                                  EXHIBIT 99.4

                        FIRST CHESTER COUNTY CORPORATION


                            CERTIFICATION PURSUANT TO
                               18 U.S.C. ss. 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Quarterly Report of First Chester County Corporation (the
"Company")  on Form 10-Q for the period  ending  June 30, 2002 as filed with the
Securities  and Exchange  Commission  on the date hereof (the  "Report"),  I, T.
Benjamin  Marsho,  Assistant   Treasurer/Controller  of  the  Company,  certify,
pursuant  to 18 U.S.C.  ss.  1350,  as adopted  pursuant  to Section  906 of the
Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and

(2) The  information  contained in the Report fairly  presents,  in all material
respects, the financial condition and result of operations of the Company.



Date:__________, 2002                   ___________________________________
                                        T. Benjamin Marsho
                                        Assistant Treasurer/Controller