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, 2000, OR
                               -------------

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

For the transition period from ____________ to ____________.

Commission File No. 0-12870.
                    -------


                        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)


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

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

The number of shares  outstanding  of Common Stock of the  Registrant as of July
31, 2000 was 4,503,418.


<PAGE>


                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

                                      INDEX

<TABLE>
<CAPTION>


                                                                                                                       PAGE
<S>                                                                                                                     <C>

Part I.  FINANCIAL INFORMATION

                  Item 1 - Financial Statements
                             Consolidated Statements of Condition
                             June 30, 2000 and December 31, 1999                                                          3


                             Consolidated Statements of Income
                             Three and Six-Months Ended June 30, 2000 and 1999                                            4


                             Consolidated Statements of Changes in Stockholder's
                             Equity                                                                                       5


                             Consolidated Statements of Cash Flows
                             Six-Months Ended June 30, 2000 and 1999                                                      6


                             Notes to Consolidated Financial Statements                                                   7


                  Item 2 -   Management's Discussion and Analysis of
                             Financial Condition and Results of Operations                                           8 - 22

                  Item 3 -   Quantitative and Qualitative Disclosures About
                             Market Risk                                                                                 23



Part II. OTHER INFORMATION

                  Item 1 -   Legal Proceedings
                  Item 2 -   Changes in Securities
                  Item 3 -   Defaults upon Senior Securities
                  Item 4 -   Submission of Matters to a Vote of Security Holders
                  Item 5 -   Other Information
                  Item 6 -   Exhibits and Reports on Form 8-K                                                       24 - 25

                  Signatures                                                                                             26
</TABLE>


<PAGE>





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

                                                                                         (Unaudited)
(Dollars in thousands)                                                                     June 30,         December 31,
                                                                                            2000                1999
                                                                                         -----------        ------------
<S>                                                                                     <C>                  <C>

ASSETS
    Cash and due from banks                                                              $   31,822           $   27,257
    Federal funds sold                                                                            -                5,000
    Interest Bearing Deposits in banks                                                          115                    -
                                                                                           --------             --------

                Total cash and cash equivalents                                              31,937               32,257
                                                                                           --------             --------

    Investment securities held-to-maturity (market value of $3,174 and $4,535 at
        June 30, 2000 and December 31, 1999,
         respectively)                                                                        3,080                4,402

    Investment securities available-for-sale, at market value                               105,276              108,638

    Loans                                                                                   378,389              354,338
    Less:  Allowance for loan losses                                                         (6,541)              (6,261)
                                                                                           --------             --------

                Net loans                                                                   371,848              348,077

    Premises and equipment                                                                   10,448               10,444
    Other assets                                                                              8,379                8,084
                                                                                           --------             --------

                Total assets                                                              $ 530,968            $ 511,902
                                                                                           ========             ========

LIABILITIES
    Deposits
        Noninterest-bearing                                                               $  82,036            $  82,734
        Interest-bearing (including certificates of deposit over $100
           of $28,594 and $28,377 - June 30, 2000 and
           December 31, 1999 respectively)                                                  379,260              365,699
                                                                                           --------             --------

        Total deposits                                                                      461,296              448,433

    Securities sold under repurchase agreements                                               2,531                3,365
    Federal Home Loan Bank advances and other borrowings                                     22,630               16,667
    Other liabilities                                                                         4,962                5,255
                                                                                           --------             --------

        Total liabilities                                                                   491,419              473,720
                                                                                           --------             --------

STOCKHOLDERS' EQUITY
    Common stock, par value $1.00; authorized, 10,000,000 shares;
        outstanding, 4,799,666 at June 30, 2000 and December 31, 1999.                        4,800                4,800
    Additional paid-in capital                                                                  610                  602
    Retained earnings                                                                        40,456               38,652
    Accumulated other comprehensive income (loss)                                            (2,854)              (2,893)
    Treasury stock, at cost:  284,248 shares and 254,509 shares
        at June 30, 2000 and December 31, 1999, respectively.                                (3,463)              (2,979)
                                                                                           --------             --------

                Total stockholders' equity                                                   39,549               38,182
                                                                                           --------             --------

                Total liabilities and stockholders' equity                                $ 530,968            $ 511,902
                                                                                           ========             ========

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,
                                                                         ------------------------          ----------------------
                                                                         2000             1999                2000         1999
                                                                         ----             ----                ----         ----
<S>                                                                   <C>                <C>              <C>            <C>

INTEREST INCOME
    Loans, including fees                                                $ 7,989           $6,808           $15,635       $13,445
    Investment securities                                                  1,791            1,817             3,670         3,476
    Federal funds sold                                                         9               34                37            95
    Deposits in Banks                                                          1                -                 2             -
                                                                          ------            -----            ------        ------

                Total interest income                                      9,790            8,659            19,344        17,016
                                                                          ------            -----            ------        ------

INTEREST EXPENSE
    Deposits                                                               3,711            3,444             7,267         6,855
    Securities sold under repurchase agreements                               29               22                65            53
    Federal Home Loan Bank advances and other borrowings                     362               91               698           176
                                                                          ------            -----            ------        ------

                Total interest expense                                     4,102            3,557             8,030         7,084
                                                                          ------            -----            ------        ------

                Net interest income                                        5,688            5,102            11,314         9,932

    Provision for loan losses                                                177              171               467           309
                                                                          ------            -----            ------        ------

                Net interest income after provision
                for possible loan losses                                   5,511            4,931            10,847         9,623
                                                                          ------            -----            ------        ------

NON-INTEREST INCOME
    Financial management services                                            786              629             1,571         1,258
    Service charges on deposit accounts                                      268              256               517           502
    Investment securities gains (losses), net                                  3              198               (40)          202
    Other                                                                    339              319               686           629
                                                                          ------            -----            ------        ------
                Total non-interest income                                  1,396            1,402             2,734         2,591
                                                                          ------            -----            ------        ------

NON-INTEREST EXPENSE
    Salaries and employee benefits                                         2,691            2,401             5,322         4,747
    Net occupancy and  equipment                                             997              973             1,987         1,779
    FDIC deposit insurance                                                    23               12                45            24
    Bank shares tax                                                          106              117               213           217
    Other                                                                  1,040              827             1,967         1,881
                                                                          ------            -----            ------        ------
                Total non-interest expense                                 4,857            4,330             9,534         8,648
                                                                          ------            -----            ------        ------

                Income before income taxes and cumulative
                  effect of change in accounting for income taxes          2,050            2,003             4,047         3,566

INCOME TAXES                                                                 545              609             1,112         1,087
                                                                          ------            -----            ------        ------

                NET INCOME                                               $ 1,505           $1,394           $ 2,935       $ 2,479
                                                                          ======            =====            ======        ======

PER SHARE DATA
    Basic net income per common share                                  $   0.33           $  0.30          $  0.65        $  0.54
                                                                        =======            ======           ======         ======
    Diluted net income per common share                                $   0.33           $  0.30          $  0.64        $  0.53
                                                                        =======            ======           ======         ======
    Dividends declared                                                 $  0.125           $ 0.120          $ 0.250        $ 0.240
                                                                        =======            ======           ======         ======

Basic weighted average shares outstanding                              4,525,496        4,578,491         4,531,447     4,588,633
                                                                       =========        =========         =========     =========
Diluted weighted average shares outstanding                            4,543,329        4,631,111         4,551,945     4,648,016
                                                                       =========        =========         =========     =========


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


<PAGE>


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

                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                                         Six Months Ended
                                                                                                              June 30,
(Dollars in thousands)                                                                                  2000             1999
                                                                                                      --------         -------
<S>                                                                                                   <C>              <C>

Balance at January 1,                                                                                  $38,182          $39,723

    Net income to date                                                                                   2,935            2,479
    Cash dividends declared                                                                             (1,132)          (1,101)
    Net unrealized gain (loss) on securities available-for-sale                                             91             (479)
    Treasury stock transactions                                                                              1               60
    Paid in capital from treasury stock transactions                                                      (528)            (955)
                                                                                                        ------           ------

Balance at June 30,                                                                                    $39,549          $39,727
                                                                                                        ======           ======
</TABLE>





























The accompanying notes are an integral part of these statements.


<PAGE>


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

                                                                                                          (Unaudited)
                                                                                                       Six Months Ended
                                                                                                           June 30,
                                                                                                 --------------------=-------
(Dollars in thousands)                                                                              2000              1999
                                                                                                 ---------        -----------
<S>                                                                                             <C>               <C>

OPERATING ACTIVITIES
    Net Income                                                                                   $   2,935         $    2,479
    Adjustments to reconcile net income to net cash
           provided by operating activities:
        Depreciation                                                                                   802                285
    Provision for loan losses                                                                          467                309
    Amortization of investment security premiums
           and accretion of discounts                                                                   58                116
    Amortization of deferred fees on loans                                                             151                 16
    Investment securities (gains) losses, net                                                           40               (202)
    Increase in other assets                                                                        (248)            (2,271)
    (Decrease) increase in other liabilities                                                          (335)             1,237
                                                                                                  --------          ---------

           Net cash provided by operating activities                                                 3,870              1,969
                                                                                                  --------          ---------

INVESTING ACTIVITIES
    Increase in loans                                                                              (24,389)            (7,439)
    Increase in Interest bearing deposits                                                             (115)                 -
    Proceeds from sales of investment securities available-for-sale                                  4,644             12,338
    Proceeds from maturities of investment securities available-for-sale                             6,184             16,903
    Proceeds from maturities of investment securities held-to-maturity                                   -              2,375
    Purchases of investment securities available-for-sale                                           (6,127)           (39,314)
    Purchase of premises and equipment, net                                                           (771)              (170)
                                                                                                  --------          ---------

        Net cash used in investing activities                                                      (20,574)           (15,307)
                                                                                                  --------          ---------

FINANCING ACTIVITIES
    Decrease in securities sold under repurchase agreements                                           (834)              (185)
    Increase in deposits                                                                            12,863             10,821
    Increase (decrease) in Federal Home Loan Bank advances and other borrowings                      5,963               (717)
    Cash dividends                                                                                  (1,132)            (1,101)
    Treasury stock transactions                                                                       (476)              (895)
                                                                                                  --------          ---------

           Net cash provided by financing activities                                                16,384              7,923
                                                                                                  --------          ---------
           NET INCREASE (DECREASE) IN CASH AND CASH
                 EQUIVALENTS                                                                          (320)            (5,414)

Cash and cash equivalents at beginning of period                                                    32,257             30,681
                                                                                                  --------          ---------

Cash and cash equivalents at end of period                                                       $  31,937         $   25,266
                                                                                                  ========          =========

</TABLE>


The accompanying notes are an integral part of these statements.


<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,
           1999.

2.         The results of operations for the three- and six-month  periods ended
           June 30,  2000 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.         We have adopted the provisions of FASB issued 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,  2000 was $82  thousand  and $91
           thousand,  compared to $106 thousand and ($479)  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, 2000 was $1.6 million and $3.0
           million, compared to $1.5 million and $2.0 million in the same period
           last year.

5.         In June 1998, SFAS No. 133,  "Accounting  for Derivative  Instruments
           and Hedging Activities was issued. Subsequent to this statement, SFAS
           No. 137 was issued,  which amended the effective date of SFAS No. 133
           to be all fiscal  quarters of all fiscal years  beginning  after June
           15, 2000 and SFAS 138 was issued  which  amended the  accounting  for
           various  derivative  and hedging  activities as  previously  required
           under SFAS No. 133.  Based on our minimal use of  derivatives  at the
           current time, management does not anticipate the adoption of SFAS No.
           133, last amended by SFAS 138, will have a significant  impact on our
           earnings or financial  position.  However,  the impact from  adopting
           SFAS No. 133,  as amended by SFAS 138,  will depend on the nature and
           purpose of derivative instruments we may be using at that time.

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



<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.

         On February  17,  2000,  the Board of  Directors  of First West Chester
Corporation  voted to modify  the name of the banks  holding  company's  banking
subsidiary to First  National Bank of Chester County and changed the name of the
bank's parent corporation to First Chester County Corporation.

         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 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  which  may  have  unanticipated  consequences,  such as
customer  turnover;  (e)  changes  in  the  regulatory  environment,  securities
markets, general business conditions and inflation may be adverse; (f) impact of
changes in interest  rates on customer  behavior;  (g) estimated  changes in net
interest  income;  (h)  anticipated  pressure  on net  yields;  and  (i)  branch
locations.  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,  2000 was $1.5
million,  an increase of 8.0% from $1.4 million for the same period in 1999. Net
income  for the  six-month  period  ended  June 30,  2000 was $2.9  million,  an
increase of 18.4% from $2.5  million for the same period in 1999.  Increases  in
net income are the direct result of increases in interest income earned from our
loan portfolio and  non-interest  income sources,  such as Financial  Management
Services Revenue, partially offset by increases in interest expense for deposits
and borrowings and increases in operating expenses.

         Cash dividends  declared during the second quarter of 2000 increased to
$0.125 per share,  a 4.2%  increase  compared  to $0.120 per share in the second
quarter of 1999. Over the past ten years, the Corporation's practice has been to
pay a dividend of at least 35.0% of net income.
<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                    Three Months Ended                Six Months Ended
                                                                         June 30,                         June 30,
                                                                 -------------------------         -----------------------
                                                                    2000             1999            2000            1999
                                                                    ----             ----            ----            ----
          <S>                                                     <C>             <C>               <C>           <C>

           SELECTED RATIOS
           ---------------
           Return on Average Assets                                 1.16%           1.15%             1.14%         1.04%
           Return on Average Equity                                15.46%          14.10%            15.21%        12.52%
           Earnings Retained                                       62.46%          60.62%            61.43%        55.59%
           Dividend Payout Ratio                                   37.54%          39.38%            38.57%        44.41%
           Book Value Per Share                                    $8.76           $8.69             $8.76         $8.69
</TABLE>

The  "Consolidated  Average  Balance  Sheet" on pages 14 and 15 may  assist  the
reader in following this discussion.

                               NET INTEREST INCOME

         Net  interest  income  is the  difference  between  interest  income on
interest-earning  assets and interest expense on  interest-bearing  liabilities.
Net interest income for the three- and six-month periods ended June 30, 2000, on
a tax equivalent  basis,  was $5.7 million and $11.4  million,  compared to $5.2
million  and $10.1  million  for the same  periods  in 1999,  respectively.  The
increase in net  interest  income for both  periods was the result of higher net
yields on  interest-earning  assets and an  increase  in the  average  amount of
interest-earning   assets,   partially   offset  by  an   increase   in  average
interest-bearing liabilities and higher average rates paid on these liabilities.

         Net yields on interest-earning  assets, on a tax equivalent basis, were
4.78% for the three- and six-month periods ended June 30, 2000 compared to 4.58%
for the three-months ended June 30, 1999 and 4.51% for the six-months ended June
30, 1999. The increase in the average net yield on  interest-earning  assets for
the three-and  six-month periods ended June 30, 2000 was primarily the result of
an increase in the average yield earned on  interest-earning  assets,  partially
offset by an increase in the average yield paid on interest bearing liabilities.
The increase in the average net yield earned on  interest-earning  assets can be
attributed to increases in the rates charged on the Corporation's loan portfolio
in the current  rising rate  environment,  partially  offset by increases in the
cost of deposits and borrowings.

         Average  interest-earning  assets increased approximately $26.0 million
to $481.0  million  during the second quarter of 2000 from $455.0 million in the
same  period  last  year.  For the six  months  ended  June  30,  2000,  average
interest-earning  assets increased approximately $32.6 million to $478.5 million
from  $445.9  million in the same  period  last year.  The  increase  in average
interest-earning  assets was  primarily the result of an increase in the average
loans outstanding due to increased loan originations.

         Despite the  increase in the  average net yield for both  periods,  the
Corporation  anticipates that there will be continued  pressure on the net yield
on  interest-earning  assets as competition for new loan business remains strong
and the cost of  incremental  deposit growth and other funding  sources  becomes
more expensive.
<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

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

                                                                Three Months                          Six Months
         Yield On:                                              Ended June 30,                      Ended June 30,
         ---------                                            ------------------                  -----------------
                                                              2000          1999                  2000         1999
                                                              ----          ----                  ----         ----
<S>                                                          <C>           <C>                   <C>          <C>    <C>    <C>

Interest Earning Assets                                       8.19%         7.70%                 8.14%        7.69%
Interest Bearing Liabilities                                  4.17%         4.05%                 4.10%        3.99%
                                                              ----          ----                  ----         ----
Net Interest Spread                                           4.02%         3.65%                 4.04%        3.70%
Contribution of Interest Free Funds                           0.76%         0.93%                 0.74%        0.81%
                                                              ----          ----                  ----         ----
Net Yield on Interest Earning Assets                          4.78%         4.58%                 4.78%        4.51%
                                                              ====          ====                  ====         ====
</TABLE>

                      INTEREST INCOME ON FEDERAL FUNDS SOLD

         Interest  income on federal  funds  sold for the  three- and  six-month
periods  ended June 30, 2000,  decreased  73.5% and 61.1% to $9 thousand and $37
thousand,  respectively, when compared to the same periods in 1999. The decrease
in interest  income on federal  funds is the direct  result of a 79.7% and 66.1%
decrease  in the average  balance of federal  funds sold for the three- and six-
month  periods  ended June 30,  2000,  respectively,  when  compared to the same
periods in 1999,  partially  offset by a 146 and 72 basis point (one basis point
is equal to one  hundredth  of one  percent)  increase  in the  rates  earned on
federal  funds sold,  for the three- and six- month  periods ended June 30, 2000
when compared to the same period in 1999. Funds which in prior periods were sold
in the federal funds market have been paid to support loan growth in the current
periods.

                    INTEREST INCOME ON INVESTMENT SECURITIES

         On a tax equivalent  basis,  interest  income on investment  securities
decreased 1.4% to $1.8 million for the  three-month  period ended June 30, 2000,
and increased 5.6% to $3.7 million for the six-month period ended June 30, 2000,
respectively,  when  compared to the same periods in 1999.  The decrease for the
three-month period is primarily due to a decrease in average investment security
balances of 7.7%,  partially offset by a 42 basis point increase on rates earned
on such  investments.  The increase for the six-month period ended June 30, 2000
is the result of a 8.9% or 54 basis point increase in the yield earned  compared
to the same  period  last  year,  partially  offset  by a $3.4  million  or 3.0%
decrease  in  average  investment   security  balances.   Decreases  in  average
investment  security  balances are the result of periodic  payments  (securities
paydowns)  and normal  maturities.  These  funds are being used to support  loan
growth.

                            INTEREST INCOME ON LOANS

         Loan  interest  income,  on a tax  equivalent  basis,  generated by the
Corporation's loan portfolio increased 16.4% and 16.2% to $8.0 million and $15.7
million for the three- and six-month  periods  ended June 30, 2000,  compared to
the same  periods in 1999,  respectively.  The  increase in interest  income for
these periods is the direct result of an 11.1% and 11.8% increase in the average
loans  outstanding  for the three- and  six-month  periods  ended June 30, 2000,
respectively.  For the three- and  six-month  period ended June 30,  2000,  loan
interest  income also  benefited  from 39 and 33 basis point  increases in rates
earned on the portfolio as compared to last year.
<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

                      INTEREST EXPENSE ON DEPOSIT ACCOUNTS

         Interest  expense on deposit  accounts  increased 7.1% and 6.0% for the
three- and  six-month  periods  ended  June 30,  2000 to $3.7  million  and $7.3
million,  compared to the same periods in 1999. The increase for the three-month
period   ended  June  30,   2000  is  the  result  of  an  increase  in  average
interest-bearing  deposits  of $24.4 and a 2 basis  point  increase in the rates
paid on interest-bearing  deposits.  The increase for the six-month period ended
June 30, 2000 is the result of an increase in average interest-bearing  deposits
of $19.1 million and a 2 basis point increase in rates paid on  interest-bearing
deposits.  The  Corporation's   effective  rate  on  interest-bearing   deposits
increased to 4.03% and 3.97% for the three- and six-month periods ended June 30,
2000 from 4.01% and 3.95% for the same periods, respectively, in 1999.

         The  recent  rising  interest  rate  environment  that  has  positively
impacted the interest income earned in the Corporation's loan portfolio has also
caused upward pressure on the  Corporation's  interest bearing  deposits.  While
interest rate increases  impact earnings on  floating-rate  loan portfolios in a
relatively  short time, the impact on deposit  interest expense is more gradual.
The  Corporation  anticipates  that the  current  rising rate  environment  will
continue to put upward pressure on deposit rates in future time periods.

         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 growth is expected to continue as we continue
to open new branches and attract new  customers  with new products and services.
Recent  growth  can be  attributed  primarily  to our four new  limited  service
retirement  community  branches  located in Chester and Delaware  counties.  New
branch sites are currently  under review.  New branch sites will help expand the
Corporation's deposit base.

         INTEREST EXPENSE ON SECURITIES SOLD UNDER REPURCHASE AGREEMENTS

         Interest  expense  on  securities  sold  under  repurchase   agreements
increased  31.8% and 22.6% to $29  thousand  and $65 thousand for the three- and
six-month  periods  ended  June 30,  2000,  respectively,  compared  to the same
periods in 1999.  The increases are primarily  attributable  to 28.4%,  or a 114
basis point increase, and 26.0%, or a 101 basis point increase, in rates paid on
such contracts,  compared to the rates paid in the three- and six-month  periods
ended June 30, 1999, respectively.

    INTEREST EXPENSE ON FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS

         Interest  expense  on  borrowings  increased  298.9% and 296.6% for the
three- and six-month periods ended June 30, 2000, respectively.  The increase is
a direct  result of a $17.5  million  or 296.1%  and a $17.0  million  or 304.7%
increase in borrowings for the three- and six-month periods ending June 30, 2000
when compared to the same periods last year. The increases in loans  outstanding
for the three- and six-month periods have outpaced our deposit growth during the
same  periods,  necessitating  that the  Corporation  obtain  funds  from  other
sources. Borrowings consist of overnight Fed Funds purchased,  Federal Home Loan
Bank  ("FHLB")  FlexLine,  FHLB term  advances  and FHLB Open Repo and Repo Plus
advances.
<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

                            PROVISION FOR LOAN LOSSES

         During the three-  and  six-month  periods  ended  June 30,  2000,  the
Corporation  recorded a $177  thousand and a $467  thousand  provision  for loan
losses  compared to a $171  thousand and a $309 thousand for the same periods in
1999.  The increase in the provision  expense is a result of an increase in loan
growth for the three- and six-month periods ended June 30, 2000, compared to the
same periods in 1999.  The  allowance  for loan losses as a percentage  of total
loans was 1.73% at June 30,  2000,  1.77% at December 31, 1999 and 1.81% at June
30, 1999,  respectively.  See the section titled "Allowance For Loan Losses" for
additional discussion.

                               NON-INTEREST INCOME

         Total non-interest income decreased 0.4% to $1.4 million for the three-
month period ended June 30, 2000 when  compared to the same period in 1999.  For
the six- month period ended June 30, 2000, total  non-interest  income increased
5.5% to $2.7  million  when  compared  to the same  period in 1999.  The primary
component of non-interest income is Financial Management Services revenue, which
increased  25.0% and 24.9% to $786  thousand and $1.6 million for the three- and
six-month  periods  ended  June 30,  2000,  respectively,  compared  to the same
periods in 1999.  The  increase  in  Financial  Management  Services  revenue is
primarily the result of an increase in assets under management and custody.  The
market value of  Financial  Management  Services  assets  under  management  and
custody  grew $18.6  million  or 4.5% from  $414.7  million at June 30,  1999 to
$433.3 million at June 30, 2000. The increase in Financial  Management  Services
revenue  and growth in assets  under  management  and custody is  primarily  the
result of market  appreciation  and new account  relationships  acquired through
strong marketing and business development efforts.

         Service charges on deposit  accounts  increased  approximately  4.7% to
$268 thousand for the three-months ended June 30, 2000 compared to $256 thousand
for the same  period in 1999.  For the  six-month  period  ended June 30,  2000,
service charges on deposit accounts  increased 3.0% to $517 thousand compared to
$502  thousand for the same period in 1999.  This  increase can be attributed to
the growth in the number and volume of deposit  accounts for the current periods
when  compared  with the same  periods  last  year.  Other  non-interest  income
increased  6.3% to $339  thousand  for the  three-months  ended  June  30,  2000
compared to $319 thousand for the same period in 1999. For the six-month  period
ended June 30, 2000, other  non-interest  income increased 9.1% to $686 thousand
compared to $629  thousand for the same period in 1999.  The  increases in other
non-interest  income can be  partially  attributed  to fees related to Community
Development Corporation ("CDC") activities.

         Investment  securities gains (losses) also contributed to the change in
non-interest income. For the three-month period ended June 30, 2000,  investment
security gains  (losses)  decreased $195 thousand or 98.5% from $198 thousand to
$3 thousand,  when compared to the same period in 1999. For the six-month period
ended June 30, 2000,  investment security gains (losses) decreased $242 thousand
or 119.8% from $202 thousand to $(40) thousand, when compared to the same period
in 1999.  During the first and second quarters of 1999, the Corporation realized
gains on the sale of certain early securities.

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

                              NON-INTEREST EXPENSE

         Total  non-interest  expense for the three- and six-month periods ended
June 30,  2000  increased  12.2% to $4.9  million  and  $10.3% to $9.5  million,
compared to the same periods in 1999.  The various  components  of  non-interest
expense changes are discussed below.

         Employee  salaries  and  benefits  increased  12.1% to $2.7 million and
12.1% to $5.3 million for the three-month  and six-month  periods ended June 30,
2000  compared to the same periods in 1999.  Increased  staff,  annual  employee
raises,  and  a  proportional   increase  in  employee  benefits  are  primarily
responsible  for the increase.  At June 30, 2000, the  Corporation  employed 218
full time and 40 part time employees  compared to 189 full time and 39 part time
employees  at June 30,  1999.  The hiring of  additional  staff for the  Matlack
Street  and  Retirement  Community  branches  during  the  second  half  of 1999
also contributed to the increase.

         Net occupancy,  equipment,  and data processing  expense increased 2.5%
and 11.7% to $1.0 million and $2.0 million for the three- and six-month  periods
ended June 30, 2000, compared to the same periods last year,  respectively.  The
increase is the direct result of increased  computer and related equipment costs
associated with the expansion,  upgrading and maintenance of personal  computers
and our networking  infrastructure.  Increases in the  Corporation's  facilities
also  contributed  to the increase.  See "Building  Improvements  and Technology
Project" section for more detail.

        Total  other  non-interest  expense  increased  25.8%  and  4.6% to $1.0
million and $2.0 million for the  three-month  and six-month  periods ended June
30, 2000 compared to the same periods in 1999. These increases can be attributed
to increased  advertising and marketing  efforts to attract new customers and to
promote  our  corporate  image and an  increase  in the  amount of  professional
consulting services utilized by the Corporation.

       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.

         The  Corporation is currently  working on four new branch sites.  These
branch sites,  which are in various  stages of  development,  are expected to be
completed and opened within the next six to twelve months.


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

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

(Dollars in thousands)                                              2000                                      1999
                                                     ---------------------------------         --------------------------------
                                                      Daily                                    Daily
                                                      Average                                  Average
                                                      Balance       Interest     Rate          Balance      Interest       Rate
                                                      -------       --------     ----          -------      --------       ----
<S>                                                  <C>            <C>         <C>           <C>            <C>        <C>

ASSETS
Federal funds sold                                    $    571       $    9      6.30%         $  2,809       $   34     4.84%
Interest bearing deposits in banks                         169            2      4.73%                -            -         -
Investment securities
    Taxable                                            106,973        1,761      6.58%          116,051        1,787     6.16%
    Tax-exempt (1)                                       2,279           43      7.55%            2,312           43     7.39%
                                                       -------        -----                     -------        -----
        Total investment securities                    109,252        1,804      6.60%          118,363        1,830     6.18%
                                                       -------        -----                     -------        -----
Loans (2)
    Taxable                                            364,795        7,894      8.66%          327,926        6,742     8.22%
    Tax-exempt (1)                                       6,175          139      8.99%            5,876          157    10.68%
                                                       -------        -----                     -------        -----
        Total loans                                    370,970        8,033      8.66%          333,802        6,899     8.27%
                                                       -------        -----                     -------        -----
        Total interest-earning assets                  480,962        9,848      8.19%          454,974        8,763     7.70%
Non-interest earning assets
    Allowance for loan losses                           (6,490)                                  (5,961)
    Cash and due from banks                             23,285                                   21,923
    Other assets                                        19,651                                   15,997
                                                       -------                                  -------
        Total assets                                  $517,408                                 $486,933
                                                       =======                                  =======

LIABILITIES AND STOCKHOLDERS' EQUITY
Savings, NOWS & money market deposits                 $231,599       $1,823      3.15%         $195,551       $1,477     3.02%
Certificates of deposits and other time                136,380        1,888      5.54%          147,988        1,967     5.32%
                                                       -------        -----                     -------        -----
   Total interest bearing deposits                     367,979        3,711      4.03%          343,539        3,444     4.01%
Securities sold under repurchase agreements              2,252           29      5.15%            2,194           22     4.01%
Federal Home Loan Bank advances and
      other borrowings                                  23,388          363      6.21%            5,904           91     6.17%
                                                       -------        -----                     -------        -----
   Total interest bearing liabilities                  393,619        4,103      4.17%          351,637        3,557     4.05%
                                                       -------        -----                     -------        -----
Non-interest bearing liabilities
    Non-interest bearing demand deposits                80,094                                   72,213
    Other liabilities                                    4,763                                   12,454
                                                       -------                                  -------
        Total liabilities                              478,476                                  436,304
Stockholders' equity                                    38,932                                   50,629
                                                       -------                                  -------
        Total liabilities and stockholders' equity    $517,408                                 $486,933
                                                       =======                                  =======
Net interest income                                                  $5,745                                   $5,206
                                                                      =====                                    =====
Net yield on interest earning assets                                             4.78%                                   4.58%
                                                                                 ====                                    ====







<FN>

(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 2000 and 1999.
(2) Non-accruing loans are included in the average balance.
</FN>
</TABLE>


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

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

(Dollars in thousands)                                             2000                                       1999
----------------------                                -------------------------------          --------------------------------
                                                        Daily                                   Daily
                                                       Average                                  Average
                                                       Balance     Interest      Rate           Balance     Interest       Rate
                                                       -------     --------      ----           -------     --------       ----
<S>                                                  <C>          <C>           <C>           <C>           <C>         <C>

ASSETS
Federal funds sold                                    $  1,351     $     37      5.48%         $  3,989      $    95     4.76%
Interest bearing deposits in banks                         109            2      3.67%                -            -         -
Investment securities
Taxable                                                109,219        3,614      6.62%          112,755        3,421     6.07%
    Tax-exempt (1)                                       2,272           86      7.56%            2,126           83     7.80%
                                                       -------      -------                     -------       ------
        Total investment securities                    111,491        3,700      6.64%          114,881        3,504     6.10%
                                                       -------      -------                     -------       ------
Loans (2)
    Taxable                                            359,343       15,441      8.59%          321,077       13,247     8.25%
    Tax-exempt (1)                                       6,186          293      9.46%            5,926          298    10.04%
                                                       -------      -------                     -------       ------
        Total loans                                    365,529       15,734      8.61%          327,003       13,545     8.28%
                                                       -------      -------                     -------       ------
        Total interest-earning assets                  478,480       19,473      8.14%          445,873       17,144     7.69%
Non-interest earning assets
    Allowance for loan losses                           (6,403)                                  (5,878)
    Cash and due from banks                             21,958                                   21,301
    Other assets                                        19,492                                   15,846
                                                       -------                                  -------
        Total assets                                  $513,527                                 $477,142
                                                       =======                                  =======

LIABILITIES AND STOCKHOLDERS' EQUITY
Savings, NOWS & money market deposits                 $228,233     $  3,531      3.09%         $198,244      $ 2,870     2.90%
Certificates of deposits and other time                137,864        3,736      5.42%          148,754        3,985     5.36%
                                                       -------      -------                     -------       ------
Total interest bearing deposits                        366,097        7,267      3.97%          346,998        6,855     3.95%
Securities sold under repurchase agreements              2,652           65      4.90%            2,725           53     3.89%
Federal Home Loan Bank advances and
     other borrowings                                   22,633          698      6.17%            5,592          176     6.29%
                                                       -------      -------                     -------       ------
   Total interest bearing liabilities                  391,382        8,030      4.10%          355,315        7,084     3.99%
                                                       -------      -------                     -------       ------
Non-interest bearing liabilities
    Non-interest bearing demand deposits                77,854                                   70,777
    Other liabilities                                    5,572                                    5,926
                                                       -------                                  -------
        Total liabilities                              474,808                                  432,018
Stockholders' equity                                    38,719                                   45,124
                                                       -------                                  -------
        Total liabilities and stockholders' equity    $513,527                                 $477,142
                                                       =======                                  =======
Net interest income                                                $ 11,443                                  $10,060
                                                                    =======                                   ======
Net yield on interest earning assets                                             4.78%                                   4.51%
                                                                                 ====                                    ====









<FN>

(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 2000 and 1999.
(2) Non-accruing loans are included in the average balance.
</FN>
</TABLE>

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

                                  INCOME TAXES

         Income tax expense for the three- and six-month  periods ended June 30,
2000 was $545  thousand  and $1.1  million,  compared to $609  thousand and $1.1
million in the same periods last year.  This  represents  effective tax rates of
26.6% and 27.5% for the  three-  and  six-month  periods  ended  June 30,  2000,
respectively.  The effective tax rate for the three- and six-month periods ended
June 30,1999 were 30.4% and 30.5%, respectively.  This decrease in the effective
tax  rate  can be  attributed  to  tax  planning  strategies  put  in  place  by
management.

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

                                DEPOSIT ANALYSIS
<TABLE>
<CAPTION>

(Dollars in thousands)                         June 30, 2000              December 31, 1999              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                         $ 65,522            1.71%          $ 58,356          1.71%       $ 7,166        12.28
Money Market                           27,441            2.90             27,139          2.90            302         1.11
Statement Savings                      49,736            3.00             49,144          3.00            592         1.20
Other Savings                           2,151            2.79              2,280          2.76           (129)       (5.66)
CD's Less than $100,000               111,816            5.42            118,228          5.38         (6,412)       (5.42)
                                      -------                            -------                       ------

Total Core Deposits                   256,666            3.71            255,147          3.79          1,519         0.60

Non-Interest Bearing
  Demand Deposit Accounts              77,854               -             72,493             -          5,361         7.40
                                      -------                            -------                       ------

Total Core and Non-Interest
  Bearing Deposits                    334,520            2.85            327,640          2.95          6,880         2.10
                                      -------                            -------                       ------

Tiered Savings                         83,383            4.31             68,067          3.97         15,316        22.50
CD's Greater than $100,000             26,048            5.43             28,863          5.19         (2,815)       (9.75)
                                      -------                            -------                       ------

Total Deposits                       $443,951            3.27           $424,570          3.27        $19,381         4.56
                                      =======                            =======                       ======
</TABLE>

         The Bank, as a member of the FHLB, maintains several credit facilities.
As of June 30, 2000 the amount  outstanding under the Bank's line of credit with
the FHLB was $22.4 million.  The Bank currently has a maximum borrowing capacity
with the FHLB of approximately  $117.6 million.  During the three- and six-month
periods  ending June 30, 2000,  average FHLB advances were  approximately  $23.3
million  and  $22.6  million,  respectively,  and  consisted  of  term  advances
representing  a combination of maturities in each period.  The average  interest
rate on these  advances was  approximately  6.21% and 6.17%  respectively.  FHLB
advances are  collateralized by a pledge on the Bank's portfolio of unencumbered
investment  securities,  certain  mortgage  loans and a lien on the Bank's  FHLB
stock.

         The  goal  of  interest  rate   sensitivity   management  is  to  avoid
fluctuating  net  interest  margins,  and to  enhance  consistent  growth of net
interest income through periods of changing  interest rates. Such sensitivity is
measured  as the  difference  in the  volume of assets  and  liabilities  in the
existing  portfolio  that are subject to repricing in a future time period.  The
Corporation's  net interest rate  sensitivity  gap within one year is a negative
$179.2  million  or 33.7% of total  assets  at June  30,  2000  compared  with a
negative  $181.5  million  or 37.7%  of  total  assets  at June  30,  1999.  The
Corporation's gap position is one factor used to evaluate interest rate risk and
the  stability  of  net  interest   margins.   Other  factors  include  computer
simulations of what might happen to net interest  income under various  interest
rate  forecasts  and  scenarios.  Management  monitors  interest  rate risk as a
regular part of bank  operations  with the intention of maintaining a stable net
interest margin.


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

                          INTEREST SENSITIVITY ANALYSIS
                               AS OF JUNE 30, 2000
<TABLE>
<CAPTION>

(Dollars in thousands)
                                                                    One              Over
                                                   Within        through              five          Non-rate
                                                  one year      five years            years         sensitive        Total
                                                ------------    ----------        ------------      ---------       --------
<S>                                           <C>              <C>               <C>              <C>            <C>

ASSETS
    Investment securities                      $     23,808     $    57,982       $    26,566      $        --    $   108,356
    Interest bearing deposits in banks                   --              --                --              115            115
    Loans and leases                                127,182         213,910            37,297           (6,541)       371,848
    Cash and cash equivalents                            --              --                --           31,822         31,822
    Premises & equipment                                 --              --                --           10,448         10,448
    Other assets                                      4,155              --                --            4,224          8,379
                                                -----------      ----------        ----------       ----------     ----------
       Total assets                            $    155,145     $   271,892       $    63,863      $    40,068    $   530,968
                                                ===========      ==========        ==========       ==========     ==========

LIABILITIES AND CAPITAL
    Interest bearing deposits                  $    324,858     $    52,157       $     2,245      $        --    $   379,260
    Non-interest bearing deposit                         --              --                --           82,036         82,036
    Repurchase Agreements                             2,531              --                --               --          2,531
    FHLB advances and other
       borrowings                                     7,017          11,710             3,903               --         22,630
    Other liabilities                                    --              --                --            4,962          4,962
    Capital                                             --               --                --           39,549         39,549
                                                -----------      ----------        ----------       ----------     ----------
       Total liabilities & capital             $    334,406     $    63,867       $     6,148      $   126,547    $   530,968
                                                ===========      ==========        ==========       ==========     ==========
    Net interest rate
      sensitivity gap                          $  (179,261)     $   208,025       $    57,715      $  (86,479)    $        --
                                                ==========       ==========        ==========       =========      ==========
    Cumulative interest rate
      sensitivity gap                          $  (179,261)     $    28,764       $    86,479      $        --    $        --
                                                ==========       ==========        ==========       ==========     ==========
    Cumulative interest rate
      sensitivity gap divided
      by total assets                                (33.8%)           5.4%             16.3%
                                                 ==========      ==========         =========
</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>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

              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)                                                2000            1999              2000            1999
                                                                      ----            ----              ----            ----
<S>                                                                <C>             <C>              <C>             <C>

Balance at beginning of period                                      $  6,412        $  5,937         $  6,261        $  5,877
                                                                     -------         -------          -------         -------

Provision charged to operating expense                                   177             171              467             309
                                                                     -------         -------          -------         -------
    Recoveries of loans previously charged-off                            32              27               75              75
    Loans charged-off                                                    (80)           (213)            (262)           (339)
                                                                     -------         -------          -------         -------

Net loans charged-off                                                    (48)           (186)            (187)           (264)
                                                                     -------         -------          -------         -------

Balance at end of period                                            $  6,541        $  5,922         $  6,541        $  5,922
                                                                     =======         =======          =======         =======
Period-end loans outstanding                                        $378,389        $327,554         $378,389        $327,554
Average loans outstanding                                           $370,970        $333,802         $365,529        $327,003
Allowance for loan losses as a
  Percentage of period-end loans outstanding                           1.73%           1.81%            1.73%           1.81%

Net charge-offs to average loans
    Outstanding                                                        0.01%           0.06%            0.05%           0.08%
</TABLE>

         Non-performing loans include loans on non-accrual status and loans past
due 90 days or more and still  accruing.  The Bank's policy is to 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.  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.



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

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

                                                        June 30,                December 31,
                                               -------------------------        ------------
(Dollars in thousands)                          2000               1999             1999
                                                ----               ----             ----
<S>                                           <C>                <C>              <C>

Past due over 90 days and still accruing       $  426             $  176           $  175

Non-accrual loans                               1,659              1,443            1,207
                                                -----              -----            -----
Total non-performing loans                      2,085              1,619            1,382

Other real estate owned                           447                192              470
                                                -----              -----            -----

Total non-performing assets                    $2,532             $1,811           $1,852
                                                =====              =====            =====

Non-performing loans as a percentage
   of total loans (gross)                       0.55%              0.49%            0.39%

Allowance for loan losses as a
   percentage of non-performing loans         313.72%            365.78%          453.04%

Allowance for loan losses as a
   percentage of total loans and other real
   estate owned                                 0.67%              0.55%            0.52%

Allowance for loan losses as a
   percentage of non-performing assets        258.33%            327.00%          338.07%
</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, 2000. Other Real Estate Owned
("OREO") represents residential and commercial real estate that has been written
down to realizable value (net of estimated disposal costs) based on professional
appraisals  acquired by the bank as a result of foreclosures on defaulted loans.
The increase in the current levels of  non-performing  assets from year end 1999
levels can be primarily  attributed  to two items:  In June an asset was brought
into OREO (other real estate  owned);  and a $297  thousand  loan  classified as
non-performing in April.

                                 LOAN IMPAIRMENT

         The  bank  identifies  a loan  as  impaired  when it is  probable  that
interest and principal will not be collected  according to the contractual terms
of the loan agreement. The accrual of interest is discontinued 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 $659 thousand,  $678  thousand,  and
$1,027  thousand  at June 30,  2000,  December  31,  1999,  and  June  30,  1999
respectively.  The  associated  allowance for impaired  loans was $301 thousand,
$305  thousand and $296 thousand at June 30, 2000,  December 31, 1999,  and June
30, 1999, respectively.
<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

         For the three-month and six-month period ended June 30, 2000,  activity
in the  allowance  for  impaired  loan losses  include a provision of $0 and $0,
write offs of $2 thousand and $7 thousand,  respectively,  and  recoveries of $3
thousand and $3 thousand,  respectively.  Interest income of $0 was recorded for
both  periods  while  contractual  interest  amounted  to $15  thousand  for the
three-months  ended June 30, 2000 and $32 thousand for the six-months ended June
30, 2000. Cash collected on loans for the three-month and six-month period ended
June 30, 2000 was $29 thousand and $64 thousand,  respectively, all of which was
applied to principal.

         For the three-month and six-month period ended June 30, 1999,  activity
in the allowance  for impaired  loan losses  include a provision of $10 thousand
and $60 thousand,  respectively, write offs of $0 and $3 thousand, respectively,
and recoveries of $0 in each period. Interest income of $0 was recorded for both
periods while contractual interest amounted to $25 thousand for the three-months
ended June 30, 1999 and $48  thousand  for the  six-months  ended June 30, 1999.
Cash collected on loans for the three-month and six-month  period ended June 30,
1999 was $51 thousand and $76 thousand,  respectively,  all of which was applied
to principal.

                  BUILDING IMPROVEMENTS AND TECHNOLOGY PROJECTS

         The  Corporation  acquired and opened  limited  access  branch  banking
facilities  in four  local  retirement  communities  in  December  of 1999.  The
locations include Granite Farms Estates, Lima Estates, and Kendal and Crosslands
Communities.  These branch  locations  will serve the residents and employees of
their  communities  and bring the total number of branches in the  Corporation's
network to twelve.

         The  Corporation  has  accepted  an offer to sell its  vacant  property
located on route 202 in Westtown, Pennsylvania, formerly known as the "Corporate
Center."  Final closing on this  property is expected to be in late August.  The
Company expects to realize a gain from this transaction, however, this gain will
not be calculated until settlement occurs and all costs are realized.

         In October of 1999,  the Bank  launched a full line of retail  Internet
banking  services,  "Net Teller" and  "BillPay".  These new  products  allow our
retail  customers the convenience to access their accounts and pay bills on-line
twenty-four  hours a day from home. Since it's release over 1,000 customers have
signed up for "Net  Teller".  A  commercial  version of "Net  Teller"  "Net Cash
Manager" was released in March of 2000. Other  technology  products include "FNB
Portfolio Link",  which gives our Financial  Management  Services  customers the
ability to access their  accounts over the Internet,  and the banks new web site
at www.fnbchestercounty.com.

         The  Corporation is currently  working on four new branch sites.  These
branch sites,  which are in various  stages of  development,  are expected to be
completed and opened within the next six to twelve months.
<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

                                YEAR 2000 ISSUES

         To date,  our efforts to be  prepared  for the Year 2000 appear to have
been successful,  but if problems were to develop with our systems or with those
of our  suppliers  and  other  vendors,  we might be  unable to engage in normal
business  activities for a period of time or times.  Any such  disruption  could
cause our business to suffer. The Corporation  incurred direct Y2K project costs
of $134 thousand and indirect Y2K project  costs of $219  thousand  through June
30, 2000.

                                CAPITAL ADEQUACY

         The Corporation is subject to Risk-Based  Capital Guidelines adopted by
the Federal Reserve Board ("FRB") for bank holding  companies.  The Bank is also
subject to similar capital requirements adopted by the Office of the Comptroller
of the Currency.  Under these  requirements,  the  regulatory  agencies have set
minimum  thresholds for Tier I Capital,  Total Capital,  and Leverage ratios. At
June 30,  2000,  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                            ---------------------------         ------------               Requirements
--------------                             2000               1999                1999                ----------------
                                           ----               ----                ----
<S>                                      <C>                <C>                   <C>                      <C>

    Corporation
    -----------
Leverage Ratio                             8.20%              8.20%                 8.48%                    5.00%
Tier I Capital Ratio                      10.82%             11.44%                10.73%                    6.00%
Total Risk-Based Capital Ratio            12.08%             11.69%                11.98%                   10.00%

       Bank
       ----
Leverage Ratio                             8.13%              7.96%                 8.05%                    5.00%
Tier I Capital Ratio                      10.72%             11.09%                10.47%                    6.00%
Total Risk-Based Capital Ratio            11.98%             12.33%                11.73%                   10.00%
</TABLE>

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


<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 1999 Annual Report
of the  Corporation,  filed as an exhibit  to its Form 10-K for the fiscal  year
ended  December  31,  1999  with  the  SEC  via  EDGAR.   Please  refer  to  the
"Management's   Discussion   and  Analysis"   section  on  pages  27-28  of  the
Corporation's 1999 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
         --------------------------------
                  None

                  (a) Exhibits
                      --------
         3(i).    Articles 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.
                  ------------------

(a) Copy of the  Corporation's  Amended and Restated  1995 Stock Option Plan, is
incorporated  herein by  reference to the  appendix to the  Corporation's  Proxy
Statement for the 2000 Annual Meeting of Shareholders as filed with the SEC.
<PAGE>

                       PART II - OTHER INFORMATION (cont.)

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

         (b)      Reports on Form 8-K

                  A Form 8-K was filed with the SEC on June 2, 2000,  reporting,
under Item 5, the issuance of a press release  regarding a change in it's market
ticker symbol.

                  A Form 8-K was filed with the SEC on April 14, 2000 reporting,
under Item 5, the  issuance  of a press  release  announcing  the first  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, 2000


                                                     J. Duncan Smith


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