May 11, 2001

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

                                FIRST CHESTER COUNTY CORPORATION

                                Commission File Number 0-12870

Gentlemen:

Pursuant to the reporting  requirements  of the  Securities  and Exchange Act of
1934, we are filing herewith the above listed  Registrant's  Quarterly Report on
Form 10-Q for the period ended March 31, 2001.




                                Very truly yours,


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

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

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

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



<PAGE>



                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


(Mark One)

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

For the quarterly period ended March 31, 2001, 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 May 1,
2001 was 4,477,622.



<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
                           March 31, 2001 and December 31, 2000                                                         3


                           Consolidated Statements of Income
                           Three-Months Ended March 31, 2001 and 2000                                                   4

                           Consolidated Statements of Cash Flows
                           Three-Months Ended March 31, 2001 and 2000                                                   5


                           Consolidated Statements of Stockholder's Equity                                              6

                           Notes to Consolidated Financial Statements                                                   7


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

                  Item 3 - Quantitative and Qualitative Disclosures About Market Risk                                  20

Part II.          OTHER INFORMATION

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


                  Signatures                                                                                           24


</TABLE>

<PAGE>

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

                                                                                       (Unaudited)
(Dollars in thousands)                                                                  March 31,          December 31,
<S>                                                                                   <C>
                                                                                           2001               2000
                                                                                       ----------          ------------
ASSETS
  Cash and due from banks                                                              $   25,994           $   30,311
  Federal funds sold                                                                       15,000                7,500
  Interest Bearing Deposits in banks                                                          152                  162
                                                                                         --------             --------

               Total cash and cash equivalents                                             41,146               37,973
                                                                                         --------             --------

    Investment securities held-to-maturity (market value of $1,259 and
       at March 31, 2001 and $4,535 at December 31, 2000, respectively)                     1,162                1,183

    Investment securities available-for-sale, at market value                              88,164               93,012

    Loans                                                                                 405,879              406,889
    Less:  Allowance for loan losses                                                       (6,612)              (6,609)
                                                                                         --------             --------

               Net loans                                                                  399,267              400,280

    Premises and equipment                                                                 10,165                9,564
    Other assets                                                                            8,078                8,677
                                                                                         --------             --------

               Total assets                                                             $ 547,982            $ 550,689
                                                                                         ========             ========

LIABILITIES
  Deposits
    Noninterest-bearing                                                                 $  85,951            $  89,137
    Interest-bearing (including certificates of deposit over $100
      of $30,144 and $30,684 - March 31, 2001 and
      December 31, 2000 respectively)                                                     385,979              382,353
                                                                                         --------             --------

        Total deposits                                                                    471,930              471,490

    Securities sold under repurchase agreements                                             3,345                2,752
    Federal Home Loan Bank advances and other borrowings                                   22,322               27,157
       Other liabilities                                                                    5,928                6,278
                                                                                         --------             --------

        Total liabilities                                                                 503,525              507,677
                                                                                         --------             --------

STOCKHOLDERS' EQUITY
  Common stock, par value $1.00; authorized, 10,000,000 shares;
    outstanding, 4,799,666 at March 31, 2001 and December 31, 2000.                         4,800                4,800
  Additional paid-in capital                                                                  722                  610
  Retained earnings                                                                        43,118               42,353
  Accumulated other comprehensive income                                                        2                 (759)
  Treasury stock, at cost:  319,950 shares and 322,352 shares
    at March 31, 2001 and December 31, 2000, respectively.                                 (4,185)              (3,992)
                                                                                         --------            ---------

            Total stockholders' equity                                                     44,457               43,012
                                                                                         --------            ---------

            Total liabilities and stockholders' equity                                  $ 547,982            $ 550,689
                                                                                         ========             ========

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


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

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

                                                                                               2001              2000
<S>                                                                                       <C>                <C>
                                                                                          ---------         -----------
INTEREST INCOME
  Loans, including fees                                                                   $   8,608          $   7,645
  Investment securities                                                                       1,425              1,880
  Federal funds sold                                                                             67                 28
  Deposits in banks                                                                               2                  1
                                                                                            -------            -------

              Total interest income                                                          10,102              9,554
                                                                                            -------            -------

INTEREST EXPENSE
  Deposits                                                                                    3,973              3,557
  Securities sold under repurchase agreements                                                    35                 36
  Federal Home Loan Bank advances and other borrowings                                          363                335
                                                                                            -------            -------

            Total interest expense                                                            4,371              3,928
                                                                                            -------            -------

            Net interest income                                                               5,731              5,626

   Provision for loan losses                                                                    235                290
                                                                                            -------            -------

              Net interest income after provision for possible loan losses                    5,496              5,336
                                                                                            -------            -------

NON-INTEREST INCOME
  Financial Management Services                                                                 736                786
  Service charges on deposit accounts                                                           273                249
  Investment securities gains (losses), net                                                      25                (43)
  Income from the sale of assets                                                                 60                  -
  Other                                                                                         496                346
                                                                                            -------            -------

            Total non-interest income                                                         1,590              1,338
                                                                                            -------            -------

NON-INTEREST EXPENSE
  Salaries and employee benefits                                                              2,920              2,632
  Net occupancy, equipment and data processing                                                1,050                990
  FDIC Bank insurance fund assessments                                                           21                 22
  Bank shares tax                                                                               126                106
  Professional Services                                                                         327                269
  Other                                                                                         796                658
                                                                                            -------            -------

              Total non-interest expense                                                      5,240              4,677
                                                                                            -------            -------

              Income before income taxes and cumulative effect
               of change in accounting for income taxes                                       1,846              1,997

INCOME TAXES                                                                                    497                566
                                                                                            -------            -------

NET INCOME                                                                                 $  1,349           $  1,431
                                                                                            =======            =======

PER SHARE DATA
  Basic earnings per common share                                                          $  0.300           $  0.320
                                                                                            =======            =======
  Diluted earnings per common share                                                        $  0.300           $  0.310
                                                                                            =======            =======
  Dividends declared                                                                       $  0.130           $  0.125
                                                                                            =======            =======
Basic weighted average shares outstanding                                                 4,467,094          4,537,464

Diluted weighted average shares outstanding                                               4,519,823          4,557,461

The accompanying notes are an integral part of these statements.
</TABLE>
                                       4
<PAGE>

                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


<TABLE>
<CAPTION>

                                                                                                            Three Months

(Dollars in thousands)                                                                               2001                 2000
<S>                                                                                                <C>                   <C>
                                                                                                     ----                -----

OPERATING ACTIVITIES
  Net Income                                                                                       $1,349                $1,431
  Adjustments to reconcile net income to net cash
        provided by operating activities:
  Depreciation 444 406
  Provision for loan losses                                                                           235                   290
  Amortization of investment security premiums
        and accretion of discounts                                                                     41                    33
  Amortization of deferred fees on loans                                                              (41)                   61
  Investment securities (gains) losses, net                                                          (125)                   43
  (Increase) Decrease in other assets                                                               1,315                  (904)
  Increase(decrease)in other liabilities                                                             (350)                  617
                                                                                                    -----                 -----
        Net cash provided by operating activities                                                  $2,968                $1,977
                                                                                                   ------                ------
INVESTING ACTIVITIES
  Increase in interest bearing deposits in banks                                                        -                   (76)
  Increase (decrease)in loan                                                                          740               (12,244)
  Proceeds from sales of investment securities available-for-sale                                   3,648                 2,013
  Proceeds from maturities of investment securities available-for-sale                             17,721                 4,462
  Purchases of investment securities available-for-sale                                           (16,393)               (6,106)
  Purchase of premises and equipment,                                                              (1,045)                 (484)
                                                                                                   ------               -------
        Net cash used in investing activities                                                     $ 4,671              ($12,435)
                                                                                                  -------              --------
FINANCING ACTIVITIES
  Increase (decrease) in Federal Home Loan Bank advance                                            (4,835)                5,630
  Increase in deposits                                                                                440                 1,167
  Decrease in securities sold under repurchase agreement                                              593                   241
  Cash dividends                                                                                     (583)                 (566)
  Treasury stock transactions                                                                         (81)                 (343)
                                                                                                   ------                ------
        Net cash provided by financing activities                                                  (4,466)               (6,129)
                                                                                                   ------                ------
        NET INCREASE (DECREASE) IN CASH AND CASH
           EQUIVALENTS                                                                              3,173                (4,329)

Cash and cash equivalents at beginning of year                                                     37,973                32,257

Cash and cash equivalents at end of period                                                        $41,146               $27,928
                                                                                                   ======                ======
The accompanying notes are an integral part of these statements.

</TABLE>
                                       5
<PAGE>


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

                                   (UNAUDITED)
<TABLE>
<CAPTION>

(Dollars in thousands)                                                                      2001                   2000
                                                                                        -----------            -----------

<S>                                                                                       <C>                    <C>
Balance at January 1,                                                                      $ 43,012              $ 38,182

  Net income to date                                                                          1,349                 1,431
  Cash dividends declared                                                                      (582)                 (566)
  Net unrealized gain (loss) on securities available-for-sale                                   761                     9
  Paid-in capital from treasury stock transactions                                              110                     -
  Treasury stock transactions                                                                  (193)                 (343)
                                                                                            -------               -------
Balance at March 31,                                                                       $ 44,457              $ 38,713
                                                                                            =======               =======
</TABLE>































The accompanying notes are an integral part of these statements.

                                       6
<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, 2000.

2.       The results of operations for the  three-month  period ended March 31,
         2001 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-month
         period ended March 31, 2001 was $761 thousand,  compared to $9 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-months ended March 31, 2001 was $2.1 million compared to $1.4
         million in the same period last year.
5.
         In 2000,  the Company  adopted  Statement  of  Financial  Accounting
         Standards  (SFAS) No. 133  "Accounting  for Derivative  Instruments and
         Hedging   Activities"  as  amended  in  June  1999  by  SFAS  No.  137,
         "Accounting  for  Derivative   Instruments  and  Hedging  Activities  -
         Deferral of the  Effective  Date of SFAS No. 133",  and in June 2000 by
         SFAS No.  138,  "Accounting  for  Certain  Derivative  Instruments  and
         Certain Hedging Activities", (collectively SFAS No. 133). No adjustment
         was required as a result of the adoption of SFAS No. 133.

6.       In 2000,  the Company  also adopted  SFAS No. 140,  "Accounting  for
         Transfers  and  Servicing of Financial  Assets and  Extinguishments  of
         Liabilities"  which  replaced  SFAS  No.  125.  The  adoption  of  this
         statement  had  no  impact  on  the  Company's  consolidated  financial
         statements.

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






                                       7
<PAGE>


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

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

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

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

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

                          EARNINGS AND DIVIDEND SUMMARY

        Net income for the three months ended March 31, 2001 was $1.349 million,
a decrease of $82  thousand  or 5.7% from $1.431  million for the same period in
2000.  The decrease in net income was the direct result of increases in interest
and  non-interest  expense.  These increases were partially  offset by increased
income earned on income  interest-bearing assets and non-interest sources. Basic
earnings  per share for the three  months  ending  March 31,  2001 was $0.30 per
share,  a $0.02 or 6.3%  decrease over the same period in 2000.  Cash  dividends
declared  during the first quarter of 2001  increased  $0.005 per share,  a 4.0%
increase  compared  to $0.125 per share in the first  quarter of 2000.  Over the
past ten years,  the  Corporation's  practice  has been to pay a dividend  of at
least 35.0% of net income.

                                       8
<PAGE>
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                           March                                 December
                                                  -----------------------                     -------------
                                                   2001              2000                          2000
                                                   ----              ----                     -------------
       <S>                                       <C>               <C>                           <C>
       SELECTED RATIOS
       Return on average assets                    1.00%             1.12%                         1.15%
       Return on average equity                   12.58%            14.90%                        15.03%
       Earnings retained                          56.78%            60.38%                        61.63%
       Dividend payout ratio                      43.22%            39.62%                        38.37%
       Book value per share                       $9.92             $8.56                         $9.61
</TABLE>

The  table  of  "Consolidated  Average  Balance  Sheet  and  Taxable  Equivalent
Income/Expense  and Rates" on page 13 may assist  the reader in  following  this
discussion.

                               NET INTEREST INCOME

         Net  interest  income  is the  difference  between  interest  income on
interest-earning  assets and interest expense on  interest-bearing  liabilities.
Net interest income for the  three-month  periods ended March 31, 2001 and 2000,
on a tax equivalent basis, was $5.9 million and $5.7 million,  respectively. The
increase in tax equivalent  net interest  income is the result of an increase in
the average amount of  interest-earning  assets partially offset by increases in
average  interest-bearing  liabilities.  Tax equivalent net interest  income was
also offset by higher yields on interest bearing liabilities.

           Average interest-earning assets increased approximately $26.2 million
or 5.5% to $502.2 million during the  three-month  period ending March 31, 2001,
compared to $476.0  million  during the same period last year.  The  increase in
average interest earning assets was the result of increased loan activity during
the last three-quarters of 2000.

         The average net yield on  interest-earning  assets, on a tax equivalent
basis was 4.73% for the  three-month  period  ended March 31,  2001  compared to
4.78% for the same period in 2000.  The  Corporation  anticipates  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.  It is also  anticipated  that
the  falling  interest  rate  environment  of the  first  quarter  will also put
pressure on the net-yield.

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

                                                          Three-Months
                                                         Ended March 31,
                                                        ----------------
YIELD ON                                                2001       2000
--------                                                ----      -----
<S>                                                    <C>        <C>

Interest-Earning Assets                                 8.21%     8.08%
Interest Bearing Liabilities                            4.30%     4.03%
                                                        ----      ----
Net Interest Spread                                     3.91%     4.05%
Contribution of Interest-Free Funds                     0.82%     0.73%
                                                        ----      ----
Net Yield on Interest-Earning Assets                    4.73%     4.78%
                                                        ====      ====

</TABLE>
                                       9
<PAGE>
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS

                      INTEREST INCOME ON FEDERAL FUNDS SOLD

         Interest income on federal funds sold for the three-month  period ended
March 31, 2001 increased 139.3% to $67 thousand when compared to the same period
in 2000. This increase is primarily the result of an increase in average balance
of federal funds sold of $2.8 million or 133.2%,  from $2.1 million at March 31,
2000 to $5.0  million at March 31,  2001.  Additionally,  a 14 basis  point (one
basis point is equal  1/100 of a percent)  increase  in average  interest  rates
earned on federal funds sold  contributed to the increase in interest  income on
federal funds.

                    INTEREST INCOME ON INVESTMENT SECURITIES

         On a tax equivalent  basis,  interest  income on investment  securities
decreased 15.7% for the three-month period ended March 31, 2001 to approximately
$1.6  million  compared  to $1.9  million  during the same  period in 2000.  The
decrease was primarily  the result of a 19.1% or $21.8  million  decrease in the
average investment  security balance to $92.0 million on a tax equivalent basis,
partially  offset by a 29 basis point  increase on the  average  interest  rates
earned on  investment  securities.  Decreases  in  average  investment  security
balances  are the result of periodic  payments  (securities  pay downs),  normal
maturities, and sales of securities to support loan growth.

                            INTEREST INCOME ON LOANS

         Loan  interest  income,  on a tax  equivalent  basis,  generated by the
Corporation's loan portfolio increased 12.3% to $8.7 million for the three-month
period ended March 31, 2001 compared to $7.7 million for the same time period in
2000. The increase in interest income for the three-month period ended March 31,
2001 is the  direct  result of a 12.5%  increase  in  average  outstanding  loan
balances to $405.2 million,  offset by a 1 basis point or 0.1% decrease on rates
earned on the  portfolio.  The declining  interest rate  environment  during the
first  quarter  should have an impact on this  component  of interest  income in
future time periods.

                      INTEREST EXPENSE ON DEPOSIT ACCOUNTS

         Interest   expense  on  deposit   accounts   increased  11.7%  for  the
three-month period ended March 31, 2001 to approximately $4.0 million,  compared
to $3.6  million for the same period in 2000.  The  increase  is  primarily  the
result of an increase in average interest-bearing  deposits of $15.6 million and
a 27 basis  point  increase  in the rates  paid on  interest  bearing  deposits,
compared  to the  same  period  in 2000.  The  Corporation's  effective  rate on
interest-bearing  deposits  increased from 3.91% in the first quarter of 2000 to
4.18% for the first quarter of 2001.

         The recent falling  interest rate  environment has negatively  impacted
the interest income earned on the Corporation's  loan portfolio and has also put
downward  pressure  interest rates paid on the  Corporation's  interest  bearing
deposits.  While interest rate decreases 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 rate environment will
continue to put downward pressure on deposit rates in future time periods.

         Competition for deposits from non-banking  institutions  such as credit
union and mutual fund companies continues to be strong. Despite the 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
                                       10
<PAGE>
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS

products and services.  Growth can be attributed 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
decreased 2.8% to $35 thousand for the  three-month  period ended March 31, 2001
compared to the same time period in 2000. The decrease is attributable to a 5.4%
or $166 thousand decrease in average securities sold under repurchase agreements
for  the  comparable  periods  and a 2.8%  increase  on  average  rates  paid on
securities sold under repurchase agreements.

    INTEREST EXPENSE ON FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS

         Interest expense on borrowings  increased $28 thousand to $363 thousand
for the three-month period ended March 31, 2001 from $335 thousand when compared
to the same period in 2000. The need for borrowing increased in 2000 as a result
of steady loan demand that outpaced deposit growth and funds obtained from sales
of investment  securities.  As a result, average Federal Home Loan Bank ("FHLB")
and other borrowings increased to $23.8 million as of March 31, 2001 compared to
$22.6 million during the same period in 2000. Borrowings at any time may consist
of one or more of the  following:  FHLB  Overnight or Term Advances and advances
under line agreements with our correspondent banks.

                            PROVISION FOR LOAN LOSSES

         During  the first  quarter  of 2001,  the  Corporation  recorded a $235
thousand provision for loan losses compared to $290 thousand for the same period
in 2000. The decrease in the provision expense for the three-month  period ended
March  31,  2001 can be  attributed  to the  slower  loan  growth  over the last
quarter.  The allowance for loan losses as a percentage of total loans was 1.63%
as of March 31,  2001 and 1.75% as of March 31,  2000.  See the  section  titled
"Allowance For Loan Losses" for additional discussion.

                               NON-INTEREST INCOME

         Total non-interest income increased 18.8% to $1.6 million for the three
months  ended March 31, 2001,  compared to the same period in 2000.  The primary
component  of  non-interest  income  was  Financial  Management  Services  (FMS)
revenue,  which  decreased  $50.0  thousand  or 6.4% to  $736  thousand  for the
three-months  ended March 31, 2001  compared  with the same period in 2000.  The
market value of FMS assets under  management  and custody grew $25.2  million or
5.9% from $455.2  million at March 31, 2000 to $430.0 million at March 31, 2001.
While the overall  value of FMS assets  under  management  and custody grew from
period to  period,  much of this  growth  was  obtained  from a few new  account
relationships,  which  were  secured  late in this quarter.  FMS income is based
primarily  on the market  value of the assets  under  management.  Over the past
several months the downturn in the financial  markets devalued the portfolio and
led to a lower than expected amount of fee income.

        Service charges on deposit accounts increased approximately 9.6% to $273
thousand for the three-months ended March 31, 2001 compared to $249 thousand for
the same period in 2000. The increase in service charge revenue can be primarily
attributed  to a 5.0%  increase  in  average  total  deposits  for the same time
periods.
                                       11
<PAGE>
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS

        The Corporation also  experienced an increase in non-interest  income of
$60 thousand as a result of a sale of OREO property.  The proceeds from the sale
of this property offset expense written off in prior periods, including past due
principal and  interest,  and as of March 31, 2001 resulted in a net recovery of
approximately  $19.0  thousand.  More  expenses  related  to this  property  are
expected in future time periods.

        Other  non-interest  income  increased  43.4% to $496  thousand  for the
three-months  ended March 31, 2001 compared to $346 thousand for the same period
in 2000. The increase in other non-interest  income can be attributed to several
factors.  The material factors include a $34 thousand  increase in income earned
on the sale of mortgage loans and a $59 thousand increase in loan fee income.

                              NON-INTEREST EXPENSE

        Total non-interest expense for the first quarter of 2001 increased 12.0%
to $5.2 million  compared to the same period in 2000. The various  components of
non-interest expense are discussed below.

        First quarter 2001  salaries and employee  benefits  increased  10.9% to
$2.9 million for the  three-month  period  ended March 31, 2001  compared to the
same  period  in 2000.  Annual  employee  salary  increases  and a  proportional
increase in employee  benefits are primarily  responsible  for the increase.  At
March 31, 2001 the corporation employed 207 full time and 37 part time employees
compared to 206 full time and 22 part time employees at March 31, 2000.

        Net occupancy,  equipment and data processing  expense increased 6.1% to
$1.1 million for the  three-month  period  ended March 31, 2001  compared to the
same period last year.  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 the increase.  See "Building
Improvements and Technology Projects" sections for more detail.

        FDIC insurance  expense  decreased 4.6% or $1 thousand from $22 thousand
at March 31,  2000 to $21  thousand at March 31,  2001.  Bank shares tax expense
increased  18.9% or $20  thousand  from $106  thousand at March 31, 2000 to $126
thousand  at  March  31,  2001.  Professional  services  increased  21.6% or $58
thousand  from $269  thousand  at March 31,  2000 to $326  thousand at March 31,
2001.

        Total other  non-interest  expense  increased 21.0% to $796 thousand for
the three months ended March 31, 2001 compared to the same period in 2000.  This
increase  can be  partially  attributed  to an  increase  in  the  Corporation's
marketing  efforts to attract new customers and new employees and to promote its
corporate image.

        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  increases  in net
interest and fee income generated by business in the new marketing areas.

        The  Corporation is currently  working on four new branch sites.  Two of
these sites, Lionville (Route 113 and Sheree Boulevard) and New Garden (Business
Route 1, south of Kennett  Square),  are  expected  to be  completed  and opened
during the second and third quarters of 2001, respectively.

                                       12
<PAGE>

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

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

(Dollars in thousands)
                                                                 2001                              2000
                                                       -------------------------        ---------------------------
                                                       Daily                            Daily
                                                       Average                          Average
ASSETS                                                 Balance   Interest   Rate        Balance     Interest   Rate
                                                       -------   --------   ----        -------     --------   ----
<S>                                                 <C>            <C>     <C>        <C>           <C>       <C>

Federal funds sold                                    $  4,967    $    67   5.40%      $  2,130      $    28   5.26%
  Interest bearing deposits in banks                        91          2   8.79%            75            1   5.33%
  Investment securities
     Taxable                                            90,158      1,567   6.95%       111,465        1,853   6.65%
     Tax-exempt(1)                                       1,808         31   6.93%         2,265           42   7.34%
                                                       -------     ------               -------        -----
        Total investment securities                     91,966      1,598   6.95%       113,730        1,895   6.66%
                                                       -------     ------               -------        -----
    Loans(2)
      Taxable                                          401,153      8,545   8.52%       353,894        7,547   8.53%
        Tax-exempt(1)                                    4,021         91   9.05%         6,194          141   9.08%
                                                       -------     ------               -------        -----
           Total loans                                 405,174      8,636   8.53%       360,088        7,688   8.54%
                                                       -------     ------               -------        -----
           Total interest-earning assets               502,198     10,303   8.21%       476,023        9,612   8.08%
    Non-interest earning assets
      Allowance for possible loan losses                (6,609)                          (6,315)
      Cash and due from banks                           24,228                           20,630
      Other assets                                      18,713                           19,309
                                                       -------                          -------
           Total assets                               $538,530                         $509,647
                                                       =======                          =======

LIABILITIES AND STOCKHOLDERS' EQUITY
  Savings, NOWS & money market deposits               $232,579    $ 1,782   3.06%      $224,869       $1,708   3.04%
  Certificates of deposits and other time              147,190      2,191   5.95%       139,346        1,849   5.31%
                                                       -------     ------   ----        -------        -----
     Total interest bearing deposits                   379,769      3,973   4.18%       364,215        3,557   3.91%
  Securities sold under repurchase agreements            2,886         35   4.85%         3,052           36   4.72%
  Federal Home Loan Bank advances and
   other borrowings                                     23,802        363   6.10%        22,585          335   5.93%
                                                       -------     ------   ----        -------        -----
    Total interest bearing liabilities                 406,457      4,371   4.30%       389,852        3,928   4.03%
                                                       -------     ------               -------        -----
    Non-interest bearing liabilities
      Non-interest bearing demand deposits              81,949                           75,615
      Other liabilities                                  6,271                            5,673
                                                       -------                          -------
         Total liabilities                             494,677                          471,140
    Stockholders' equity                                43,853                           38,507
                                                       -------                          -------
         Total liabilities and stockholders' equity$   538,530                         $509,647
                                                       =======                          =======
    Net interest income                                           $ 5,932                             $5,684
                                                                   ======                              =====
    Net yield on interest earning assets                                    4.73%                              4.78%
                                                                            ====                               ====
</TABLE>

(1) The indicated  income and annual rate are presented on a taxable  equivalent
    basis  using the federal  marginal  rate of 34%  adjusted  for the TEFRA 20%
    interest expense disallowance for 2001 and 2000.
(2) Non-accruing loans are included in the average balance.

                                       13
<PAGE>
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS

                                  INCOME TAXES

        Income tax expense for the  three-month  period ended March 31, 2001 was
$497  thousand,  compared to $566  thousand  in the same period last year.  This
represents  an  effective  tax rate of 26.9% and 28.4% for the first  quarter of
2001  and  2000,   respectively.   This   decrease  can  be  attributed  to  the
Corporation's  increased investments local community housing development project
which earn the Corporation tax credits.

               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:

                                                         DEPOSIT ANALYSIS
<TABLE>
<CAPTION>

(Dollars in thousands)                          March 31, 2001           December 31, 2000         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                               $ 69,572      1.58%      $67,923            1.71%       $ 1,649         2.43%
Money Market                                 23,702      2.89        25,934            2.93         (2,232)       (8.61)
Statement Savings                            45,886      3.02        48,514            3.04         (2,628)       (5.42)
Other Savings                                 1,785      2.69         2,092            2.72           (307)      (14.67)
CD's Less than $100,000                     116,803      5.96       112,287            5.69          4,516         4.02
                                            -------                 -------                         ------

Total Core Deposits                         257,748      3.95       256,750            3.84            998         0.39

Non-Interest Bearing
  Demand Deposit Accounts                    81,949         -        80,415               -          1,534         1.91
                                            -------                 -------                         ------

Total Core and Non-Interest
  Bearing Deposits                          339,697      3.00       337,165            2.92          2,532         0.75
                                            -------                 -------                         ------

Tiered Savings                               91,634      4.27        85,841            4.50          5,793         6.75
CD's Greater than $100,000                   30,387      5.92        27,457            5.80          2,930        10.67
                                            -------                 -------                         ------

Total Deposits                             $461,718      3.44%     $450,463            3.40%        11,255         2.50%
                                            =======                 =======                         ======
</TABLE>
                                       14
<PAGE>
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS

       The Bank, as a member of the FHLB, maintains a credit facility secured by
the Bank's mortgage-related assets. As of March 31, 2001, the amount outstanding
under the Bank's  line of credit  with the FHLB was $0.  Additionally,  the FHLB
offers  several other credit  related  products which are available to the Bank.
During the first quarter of 2001, average FHLB advances were approximately $23.8
million and consisted of term advances representing a combination of maturities.
The average  interest rate on these  advances was  approximately  6.1%. The Bank
currently has a maximum borrowing capacity with the FHLB of approximately $156.1
million.  FHLB  advances  are  collateralized  by a pledge on the Bank's  entire
portfolio of unencumbered  investment  securities,  certain mortgage loans and a
lien on the Bank's FHLB stock.

       The goal of interest rate sensitivity  management is to avoid fluctuating
net interest  margins,  and to enhance  consistent growth of net interest income
through periods of changing  interest rates. Such sensitivity is measured as the
difference  in the volume of assets and  liabilities  in the existing  portfolio
that are subject to  repricing in future time  periods.  The  Corporation's  net
interest rate  sensitivity  gap within one year is a negative  $149.3 million or
27.2% of total assets at March 31, 2001 compared with a negative  $154.7 million
or 28.1% of total assets at December 31, 2000. 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.

                                       15
<PAGE>
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS

                          INTEREST SENSITIVITY ANALYSIS
                              AS OF MARCH 31, 2001

<TABLE>
<CAPTION>
                                                             One                Over
(Dollars in thousands)                     Within            through            five          Non-rate
                                           one year          five years         years         sensitive          Total
                                          ---------         -----------     ------------      ---------         ---------
<S>                                     <C>              <C>              <C>  <C>           <C>              <C>
ASSETS
  Federal funds sold                       $  15,000          $      --         $     --       $      --        $  15,000
  Investment securities                       16,443             27,107           45,776              --           89,326
  Interest bearing deposits in banks              --                 --               --             152              152
  Loans and leases                           157,432            185,355           63,092          (6,612)         399,267
  Cash and cash equivalents                       --                 --               --          25,994           25,994
  Premises and equipment                          --                 --               --          10,165           10,165
  Other assets                                     7                 --               --           8,071            8,078
                                            --------            -------          -------        --------          -------
  Total assets                             $ 188,882           $212,462         $108,868       $  37,770         $547,982
                                            ========            =======          =======        ========          =======

LIABILITIES AND CAPITAL
  Non-interest bearing deposits            $      --           $     --         $     --       $  85,951        $  85,951
  Interest bearing deposits                  328,191             53,136            4,652              --          385,979
  Repurchase agreements                        3,345                 --               --              --            3,345
  FHLB advances and other
   borrowings                                  6,653             10,821            4,848              --           22,322
  Other liabilities                               --                 --               --           5,928            5,928
  Capital                                         --                 --               --          44,457           44,457
                                            --------           --------          -------         -------          -------
  Total liabilities & capital              $ 338,189          $  63,957         $  9,500        $136,336         $547,982
                                            ========           ========          =======         =======          =======

  Net interest rate
   sensitivity gap                         $(149,307)         $ 148,505         $ 99,368        $(98,566)
                                            ========           ========           ======         =======
  Cumulative interest rate
   sensitivity gap                         $(149,307)         $    (802)        $ 98,566        $     --
                                            ========           ========           ======         =======
  Cumulative interest rate
   sensitivity gap divided
   by total assets                            (27.2%)             (0.1%)           18.0%
                                            ========           ========           ======
</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  on  evaluations  of  the  collectibility  of  loans.  The
evaluations  take into  consideration  such factors as changes in the nature and
volume of the loan portfolio, overall portfolio quality, adequacy of collateral,
review of specific  problem  loans,  and current  economic  conditions  that may
affect the borrower's ability to pay.
                                       16
<PAGE>
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS

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

     (Dollars in thousands)                                                      March 31,                  December 31,
                                                                      --------------------------           -------------
                                                                          2001             2000                 2000
                                                                      -----------      ---------            ------------
<S>                                                                     <C>           <C>                       <C>

     Balance at beginning of period                                    $    6,609     $    6,261              $    6,261
                                                                        ---------      ---------               ---------

     Provision charged to operating expense                                   235            290                     876
                                                                        ---------      ---------               ---------

        Recoveries of loans previously charged-off                             37             43                     134
        Loans charged-off                                                    (269)          (182)                   (662)
                                                                        ---------      ---------               ---------

     Net loans charged-off                                                   (232)          (139)                   (528)
                                                                        ---------      ---------               ---------

     Balance at end of period                                          $    6,612     $    6,412              $    6,609
                                                                        =========      =========               =========

     Period-end loans outstanding                                      $  405,879     $  366,383              $  406,889

     Average loans outstanding                                         $  405,174     $  360,088              $  378,211

     Allowance for loan losses as a
        percentage of period-end loans outstanding                           1.63%          1.75%                   1.62%

     Ratio of net charge-offs to average loans
        Outstanding (annualized)                                             0.23%          0.15%                   0.14%
</TABLE>

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

                                       17
<PAGE>
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS

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

(Dollars in thousands)                                                March 31,                    December 31,
                                                             ---------------------------         ----------------
                                                                  2001            2000                    2000
                                                                 -----            ----                    ----
<S>                                                           <C>              <C>                      <C>

Past due over 90 days and still accruing                       $ 4,016          $    338               $    134

Non-accrual loans                                                1,645             1,038                  1,364
                                                                ------            ------                 ------

Total non-performing loans                                       5,661             1,376                  1,498

Other real estate owned                                            593               470                    803
                                                                ------            ------                 ------

Total non-performing assets                                    $ 6,254           $ 1,846                $ 2,301
                                                                ======            ======                 ======

Non-performing loans as a percentage
  of total loans                                                  1.39%             0.38%                  0.37%

Allowance for loan losses as a
  percentage of non-performing loans                            116.80%           465.99%                 441.2%

Non-performing assets as a percentage of
  total loans and other real estate owned                         1.54%             0.50%                  0.60%

Allowance for loan losses as a
  percentage of non-performing assets                           105.72%           347.35%                 287.2%

</TABLE>

         The allowance for loan losses as a percentage of  non-performing  loans
indicates  that the  allowance  for  loan  losses  is  sufficient  to cover  the
principal of all non-performing loans at March 31, 2001. Other real estate owned
("OREO")  represents  residential  and  commercial  real estate  written down to
realizable  value  (net of  estimated  disposal  costs)  based  on  professional
appraisals.  The increase in the total non-performing loans is the result of one
loan which has become 90 days past due. The amount of this loan is approximately
$3.5 million and is currently being restructured.

                                 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 totals below are included in the non-performing loans
and assets table above.

         The balance of impaired loans was $1.3 million, $943 thousand, and $678
thousand at March 31, 2001, December 31, 2000, and March 31, 2000, respectively.
The associated allowance for impaired loans was $215 thousand, $242 thousand and
$300  thousand  at March 31,  2001,  December  31,  2000,  and  March 31,  2000,
respectively.

         For the three months ended March 31,  2001,  activity in the  allowance
for impaired  loan losses  include a provision of $0, write offs of $27 thousand
and  recoveries of $0.  Interest  income of $0 was recorded for the period while
                                       18
<PAGE>
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS

contractual  interest amounted to $26 thousand.  Cash collected on loans for the
period was $5 thousand all of which was applied to principal.

         For  the  twelve  months  ended  December  31,  2000,  activity  in the
allowance for impaired loan losses  include a provision of $0, write offs of $91
thousand and  recoveries  of $28 thousand.  Interest  income of $17 thousand was
recorded for the period while  contractual  interest  amounted to $76  thousand.
Cash  collected  on loans  for the  period  was $350  thousand  all of which was
applied to principal.

         For the three months ended March 31,  2000,  activity in the  allowance
for  impaired  loan losses  include a provision of $0, write offs of $5 thousand
and  recoveries of $0.  Interest  income of $0 was recorded for the period while
contractual  interest amounted to $17 thousand.  Cash collected on loans for the
period was $35 thousand all of which was applied to principal.

                  BUILDING IMPROVEMENTS AND TECHNOLOGY PROJECTS

         The  Corporation  is currently  working on plans for several new branch
sites.  Two of these sites,  Lionville  (Route 13 and Sheree  Boulevard) and New
Garden (business Route 1 south of Kennett Square),  are expected to be completed
and opened during the second and third quarters of 2001, respectively.

                                CAPITAL ADEQUACY

         The Corporation is subject to Risk-Based  Capital Guidelines adopted by
the Federal Reserve Board for bank holding  companies.  The Bank is also subject
to similar capital  requirements adopted by the Office of the Comptroller of the
Currency.  Under these  requirements,  the regulatory  agencies have set minimum
thresholds for Tier I Capital,  Total Capital, and Leverage ratios. At March 31,
2001,  both the  Corporation's  and the  Bank's  capital  exceeded  all  minimum
regulatory  requirements,  and were considered "well  capitalized" as defined in
the  regulations  issued  pursuant  to the FDIC  Improvement  Act of  1992.  The
Corporation's  Risk-Based  Capital  Ratios,  shown below,  have been computed in
accordance with regulatory accounting policies.
<TABLE>
<CAPTION>

RISK-BASED                                        March 31,               December 31,         "Well Capitalized"
                                          ------------------------        ------------            Requirements
CAPITAL RATIOS                              2001             2000             2000
--------------                              ----             ----             ----             ------------------
<S>                                       <C>              <C>              <C>                     <C>
Corporation
Leverage Ratio                              8.25%            8.16%            8.19%                   5.00%
Tier I Capital Ratio                       11.07%           10.87%           10.63%                   6.00%
Total Risk-Based Capital Ratio             12.34%           12.13%           11.88%                  10.00%
     Bank
Leverage Ratio                              8.09%            8.08%            8.23%                   5.00%
Tier I Capital Ratio                       10.73%           10.72%           10.68%                   6.00%
Total Risk-Based Capital Ratio             11.99%           11.98%           11.94%                  10.00%
</TABLE>

         The Bank is not under any agreement with the regulatory authorities nor
is it aware of any current  recommendations by the regulatory authorities which,
if they were to be  implemented,  would  have a  material  affect on  liquidity,
capital resources or operations of the Corporation.  The internal capital growth
for the  Corporation  was 2.83% and 0.44% for the three  months  ended March 31,
2001 and 2000,  respectively.  The growth rate is computed  by  annualizing  the
change in equity  during the last period and dividing it by total  stockholder's
equity at March 31, 2001 and 2000, respectively.

                                       19
<PAGE>



           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         There have been no material changes in the Corporation's  assessment of
its sensitivity to market risk since its presentation in the 2000 Annual Report,
filed as an exhibit to its Form 10-K for the fiscal year ended December 31, 2000
with  the SEC via  EDGAR.  Please  refer  to the  "Management's  Discussion  and
Analysis"  section on pages 24-38 of the  Corporation's  Annual  Report for more
information.

                                       20
<PAGE>



                           PART II - OTHER INFORMATION

Item 1.           Legal Proceedings
                  -----------------

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

Item 2.           Changes in Securities
                  ---------------------

                  None

Item 3.           Defaults upon Senior Securities
                  -------------------------------

                  None

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

                  The Annual Meeting of Shareholders of the Corporation was held
                  on March 14, 2001 (the  "Meeting").  Notice of the Meeting was
                  mailed to  shareholders  of record  on or about  February  15,
                  2001,  together with proxy solicitation  materials prepared in
                  accordance  with Section 14(a) of the Securities  Exchange Act
                  of  1934,  as  amended,   and  the   regulations   promulgated
                  thereunder.

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

    1.   The election of three Class II directors;

    2.   The  approval of certain  amendments  to the  Corporation's  1995 Stock
         Option  Plan to modify the  formula  by which  options  are  awarded to
         non-employee directors of the Corporation;

    3.   The  ratification  of the  appointment  of Grant  Thornton,  LLP as the
         Corporation's  independent  public  accountants  for  the  year  ending
         December 31, 2001; and

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


                                       21
<PAGE>


                     PART II - OTHER INFORMATION - CONTINUED

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


                  M. Robert Clarke                   3,255,775         525,581                 0

                  David L. Peirce                    3,245,521         535,835                 0

                  Charles E. Swope                   3,220,692         560,664                 0
</TABLE>

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

                  The proposal to make certain  amendments to the  Corporation's
                  1995 Stock Option Plan was approved.  The number of votes cast
                  for or against as well as the number of abstentions and broker
                  non-votes for the proposal were as follows:
<TABLE>
<CAPTION>
                           For                   Against      Abstentions       Broker non-votes
                           ---                   -------      -----------       ----------------
<S>                    <C>                      <C>            <C>                      <C>

                        2,871,476                143,660        766,220                  0

                  The proposal to ratify the appointment of Grant Thornton,  LLP
                  as the Corporation's  independent  public  accountants for the
                  year  ending  December  31, 2001 was  ratified.  The number of
                  votes cast for or against as well as the number of abstentions
                  and broker non-votes for the ratification were as follows:

                           For                   Against      Abstentions       Broker non-votes
                           ---                   -------      -----------       ----------------

                        3,257,150                 1,023         523,183                0
</TABLE>

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

Item 5.           Other Information
                  -----------------

                  None


                                       22
<PAGE>


                     PART II - OTHER INFORMATION - CONTINUED

Item 6.           Exhibits and Reports on Form 8-K
                  --------------------------------

                  (a) Exhibits
                      --------
         3(i).   Certificate  of   Incorporation.   Copy  of  the  Corporation's
                 -------------------------------
Certificate 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 2001 Annual Meeting of Shareholders as filed with the SEC.

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

                  (b) Reports on Form 8-K
                      -------------------

                      A Form 8-K was  filed  with the SEC on  January  26,  2001
                      pertaining to a press release announcing 2000 earnings.

                      A Form 8-K was filed  with the SEC on  February  16,  2001
                      pertaining  to a press release  announcing  the 2001 first
                      quarter dividend.

                      A Form  8-K  was  filed  with  the  SEC  on  May  1,  2001
                      pertaining  to a press release  announcing  the 2001 first
                      quarter earnings.



                                       23
<PAGE>


                                   SIGNATURES


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



                          FIRST CHESTER COUNTY CORPORATION


                          Charles E. Swope




                          ----------------
DATE:  May 11, 2001       Charles E. Swope
                          President


                          J. Duncan Smith



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
























                                       24
<PAGE>