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

                                    FORM 10Q

(Mark One)

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

For the quarterly period ended September 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
November 1, 2000 was 4,490,693.


<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
                             September 30, 2000 and December 31, 1999                                                     3


                             Consolidated Statements of Income
                             Three- and Nine-Months Ended September 30, 2000 and 1999                                     4


                             Consolidated Statement of Changes in Stockholder's Equity                                    5


                             Consolidated Statements of Cash Flows
                             Nine-Months Ended September 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                                                                           24
                  Item 2 -   Changes in Securities                                                                       24
                  Item 3 -   Defaults upon Senior Securities                                                             24
                  Item 4 -   Submission of Matters to a Vote of Security Holders                                         24
                  Item 5 -   Other Information                                                                           24
                  Item 6 -   Exhibits and Reports on Form 8-K                                                            24

                  Signatures                                                                                             25

</TABLE>

<PAGE>




                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CONDITION

(Dollars in thousands - except per share data)
<TABLE>
<CAPTION>


                                                                                              (Unaudited)
                                                                                             September 30,         December 31,
                                                                                                  2000                 1999
                                                                                             -------------        --------------
<S>                                                                                           <C>                   <C>
ASSETS
    Cash and due from banks                                                                    $   25,409            $   27,257
    Federal funds sold                                                                                  -                 5,000
    Interest bearing deposits in banks                                                                126                     -
                                                                                                ---------             ---------

           Total cash and cash equivalents                                                         25,535                32,257
                                                                                                ---------             ---------

    Investment securities held-to-maturity (market value of $2,072 and $4,535 at
        September 30, 2000 and December 31,
        1999, respectively)                                                                         1,969                 4,402
    Investment securities available-for-sale at market value                                      100,581               108,638

    Loans                                                                                         392,070               354,338
    Less allowance for loan losses                                                                 (6,766)               (6,261)
                                                                                                ---------             ---------

           Net loans                                                                              385,304               348,077

    Premises and equipment, net                                                                    10,658                10,444
    Other assets                                                                                    9,422                 8,084
                                                                                                ---------             ---------
           TOTAL ASSETS                                                                        $  533,469            $  511,902
                                                                                                =========             =========

LIABILITIES
    Deposits
        Non-interest bearing                                                                   $   82,454            $   82,734
        Interest-bearing (including certificates of deposit over $100 of                          367,347               365,699
                                                                                                ---------             ---------
           $28,124 and $28,377 - September 30, 2000 and December 31, 1999,
           respectively)

           Total deposits                                                                         449,801               448,433

    Securities sold under repurchase agreements                                                     3,134                 3,365
    Federal Home Loan Bank advances and other borrowings                                           33,929                16,667
    Other liabilities                                                                               5,645                 5,255
                                                                                                ---------             ---------

           Total liabilities                                                                      492,509               473,720
                                                                                                ---------             ---------

STOCKHOLDERS' EQUITY
    Common stock, par value $1.00; authorized, 10,000,000 shares;                                   4,800                 4,800
        Outstanding, 4,799,666 shares at September 30, 2000 and
        December 31, 1999.
    Additional paid-in capital                                                                        610                   602
    Retained earnings                                                                              41,399                38,652
    Accumulated other Comprehensive Income (Loss)                                                  (2,064)               (2,893)
    Treasury stock, at cost: 307,478 shares at September 30, 2000 and
        254,509 shares at December 31, 1999.                                                       (3,785)               (2,979)
                                                                                                ---------             ---------

           Total stockholders' equity                                                              40,960                38,182
                                                                                                ---------             ---------

           Total liabilities and stockholders' equity                                          $  533,469             $ 511,902
                                                                                                =========              ========





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 data)
                                                                            Three Months Ended                Nine Months Ended
                                                                                September 30,                    September 30,
                                                                         ------------------------          ----------------------
                                                                          2000              1999              2000         1999
                                                                         -----              ----              ----         ----
<S>                                                                    <C>             <C>                <C>           <C>
INTEREST INCOME
    Loans, including fees                                               $  8,317        $   6,979          $ 23,952      $ 20,423
    Investment securities                                                  1,725            1,912             5,395         5,388
    Federal funds sold                                                         -               14                37           109
    Deposits in banks                                                          1                3                 4             3
                                                                         -------         --------           -------       -------

                Total interest income                                     10,043            8,908            29,388        25,923
                                                                         -------         --------           -------       -------

INTEREST EXPENSE
    Deposits                                                               3,964            3,495            11,232        10,350
    Securities sold under repurchase agreements                               35               28               100            80
    Federal Home Loan Bank advances and other borrowings                     423              119             1,120           295
                                                                         -------         --------           -------       -------

                Total interest expense                                     4,422            3,642            12,452        10,725
                                                                         -------         --------           -------       -------

                Net interest income                                        5,621            5,266            16,936        15,198

    Provision for loan losses                                                355              184               822           493
                                                                         -------         --------           -------       -------

                Net interest income after provision
                   for possible loan losses                                5,266            5,082            16,114        14,705
                                                                         -------         --------           -------       -------

NON-INTEREST INCOME
    Financial Management Services                                            718              650             2,290         1,907
    Service charges on deposit accounts                                      261              246               777           748
    Investment securities gains (losses), net                                  1               --               (40)          202
    Other                                                                    978              316             1,664           946
                                                                         -------         --------           -------       -------

                Total non-interest income                                  1,958            1,212             4,691         3,803
                                                                         -------         --------           -------       -------

NON-INTEREST EXPENSE
    Salaries and employee benefits                                         2,827            2,457             8,149         7,172
    Net occupancy and equipment                                            1,004              915             2,991         2,846
    FDIC deposit insurance                                                    22               12                67            35
    Bank shares tax                                                          106              117               319           334
    Other                                                                  1,147              848             3,114         2,609
                                                                         -------         --------           -------       -------

                Total non-interest expense                                 5,106            4,349            14,640        12,996
                                                                         -------         --------           -------       -------

                Income before income taxes                                 2,118            1,945             6,165         5,512

INCOME TAXES                                                                 590              594             1,701         1,681
                                                                         -------         --------           -------       -------

                NET INCOME                                              $  1,528          $ 1,351          $  4,464      $  3,831
                                                                         =======           ======           =======       =======

PER SHARE DATA
    Basic earnings per common share                                     $  0.340          $ 0.300          $  0.980      $  0.840
                                                                         =======           ======           =======       =======
    Diluted earnings per common share                                   $  0.330          $ 0.290          $  0.980      $  0.830
                                                                         =======           ======           =======       =======
    Dividends declared                                                  $  0.130          $ 0.125          $  0.380      $  0.365
                                                                         =======           ======           =======       =======

Basic weighted average shares outstanding                              4,546,678        4,563,431         4,536,580     4,580,140
                                                                       =========        =========         =========     =========

Diluted weighted average shares outstanding                            4,563,990        4,586,577         4,556,024     4,625,196
                                                                       =========        =========         =========     =========


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




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

                                   (UNAUDITED)
<TABLE>
<CAPTION>

(Dollars in thousands)                                                                                   2000            1999
                                                                                                       -------          -------
<S>                                                                                                   <C>              <C>


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

    Net income to date                                                                                   4,464            3,831
    Cash dividends declared                                                                             (1,718)          (1,671)
    Net unrealized gain (loss) on securities available-for-sale                                            829           (2,257)
    Treasury stock transactions                                                                              1               60
    Paid in capital from treasury stock transactions                                                      (798)          (1,320)
                                                                                                        ------           ------

Balance at September 30,                                                                               $40,960          $38,366
                                                                                                        ======           ======
































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

                                       5
<PAGE>


                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                                      Nine Months Ended
                                                                                                         September 30,
                                                                                               ------------------------------
(Dollars in thousands)                                                                             2000               1999
                                                                                               ----------           ---------
<S>                                                                                            <C>                 <C>

OPERATING ACTIVITIES
    Net Income                                                                                  $  4,464             $  3,831
    Adjustments to reconcile net income to net cash
        provided by operating activities:
    Depreciation                                                                                   1,362                1,094
    Provision for loan losses                                                                        822                  493
    Amortization of investment security premiums
        and accretion of discounts                                                                    89                  287
    Amortization of deferred fees on loans                                                           145                   53
    Investment securities gains, net                                                                  40                 (202)
    Increase in other assets                                                                        (900)                (556)
    Increase in other liabilities                                                                    425                  968
                                                                                                 -------              -------
           Net cash provided by operating activities                                               6,447                5,968
                                                                                                 -------              -------

INVESTING ACTIVITIES
    Increase in loans                                                                            (38,193)             (14,074)
    Proceeds from sales of investment securities available-for-sale                                8,129               13,338
    Proceeds from maturities of investment securities available-for-sale                           8,269               22,692
    Proceeds from maturities of investment securities held-to-maturity                             1,468                2,874
    Purchases of investment securities available-for-sale                                         (7,505)             (51,674)
    Purchase of premises and equipment, net                                                       (1,220)                (668)
                                                                                                 -------              -------

           Net cash used in investing activities                                                 (29,052)             (27,512)
                                                                                                 -------              -------

FINANCING ACTIVITIES
    Increase (decrease) in securities sold under repurchase agreements                              (231)                 721
    Increase in deposits                                                                           1,368                9,874
    Increase in Federal Home Loan Bank advances and other borrowings                              17,262                3,340
    Cash dividends                                                                                (1,718)              (1,671)
    Treasury stock transactions                                                                     (798)              (1,260)
                                                                                                 -------              -------

           Net cash provided by financing activities                                              15,883               11,004
                                                                                                 -------              -------

              NET INCREASE (DECREASE) IN CASH AND CASH
                   EQUIVALENTS                                                                    (6,722)             (10,540)

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

Cash and cash equivalents at end of period                                                      $ 25,535             $ 20,141
                                                                                                 =======              =======






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

                                       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   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 nine-month  period ended
           September 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
           nine-month  periods  ended  September  30, 2000 was $738 thousand and
           $829 thousand, compared to $(2072) 106 thousand and ($2,257) 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  nine-month  periods ended  September 30, 2000 was
           ($2,266) thousand and ($5,213) thousand,  compared to ($721) thousand
           and ($1,574) thousand in the same period last year.

5.         We have  adopted  the  provisions  of SFAS No. 133,  "Accounting  for
           Derivative  Instruments and Hedging Activities" was issued as amended
           by SFAS 137 and SFAS 138.  Because we do not use  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.


                                       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,  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 change its name to First Chester County  Corporation and to
modify the name of its  banking  subsidiary  to First  National  Bank of Chester
County.

         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  September  30, 2000 was
$1.53  million,  an increase of 13.1% from $1.35  million for the same period in
1999.  Net income for the nine-month  period ended  September 30, 2000 was $4.46
million,  an increase  of 16.5% from $3.83  million for the same period in 1999.
The  increases in net income are the direct  result of increases in net interest
income,  gains on the sale of certain  fixed  assets,  and  increases in several
other non-interest income components  partially offset by increases in operating
expenses and in the provision for loan loss expense for both the three-month and
the nine-month periods.

                                       8
<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

         Cash dividends  declared  during the third quarter of 2000 increased to
$0.13 per share, a 4.0% increase compared to the third 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.

<TABLE>
<CAPTION>

                                                                       Three Months Ended             Nine Months Ended
                                                                          September 30,                   September 30,
                                                                    -----------------------         -----------------------
                                                                       2000          1999              2000           1999
                                                                       ----          ----              ----           ----
          <S>                                                        <C>           <C>                 <C>           <C>

           PERFORMANCE RATIOS
           Return on Average Assets                                    1.16%          1.11%              1.15%         1.06%
           Return on Average Equity                                   15.17%         13.90%             15.26%        13.07%
           Earnings Retained                                          62.89%         57.81%             61.51%        56.38%
           Dividend Payout Ratio                                      37.11%         42.19%             38.49%        43.62%
           Book Value Per Share                                       $9.12          $8.43              $9.12         $8.43
</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 nine-month  periods ended  September 30,
2000, on a tax equivalent basis, was $5.7 million and $17.1 million, compared to
$5.4 million and $15.3 million for the same periods in 1999,  respectively.  The
increase  in net  interest  income  for both  periods  was the  result of higher
interest rates earned on interest-earning  assets and an increase in the average
amount  of  interest-earning  assets,  partially  offset by an  increase  in the
average amount of interest-bearing liabilities and a higher average rate paid on
these liabilities.

         Average  net yields on  interest-earning  assets,  on a tax  equivalent
basis,  were  4.63%  and 4.72%  for the  three-  and  nine-month  periods  ended
September 30, 2000, respectively, compared to 4.76% and 4.56% for the three- and
nine-month periods ended September 30, 1999,  respectively.  The decrease in the
average net yield on  interest-earning  assets for the three-month  period ended
September  30,  2000 was  primarily  the result of an  increase  in the  average
interest  rate paid on  interest  bearing  liabilities,  partially  offset by an
increase in the average  interest rate earned on  interest-earning  assets.  The
increase  in the  average net yield  earned on  interest-earning  assets for the
nine-month  period ended September 30, 2000, can be attributed to an increase in
the average interest rate earned on interest-earning assets, partially offset by
an increase in the average interest rate paid on interest-bearing liabilities.

         Average  interest-earning  assets increased approximately $39.5 million
to $490.3  million  during the third quarter of 2000 from $450.7  million in the
same period last year.  For the nine months ended  September  30, 2000,  average
interest-earning  assets increased approximately $34.9 million to $482.4 million
from  $447.5  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 as we continue to experience modest loan demand.

         Despite the increase in the average net yield for the nine-months ended
September 30, 2000,  the  Corporation  anticipates  that there will be continued
pressure on the net yield on interest-earning assets as competition for new loan

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

business remains strong and especially as the cost of incremental deposit growth
increases and other funding sources  becomes more expensive.  This is evident by
the  decrease in the average net yield  experienced  in the  three-month  period
compared to the nine-month period ended September 30, 2000.

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

                                                                Three Months                         Nine Months
         Yield On:                                           Ended September 30,                 Ended September 30,
         ---------                                           -------------------                 -------------------
                                                              2000          1999                  2000         1999
                                                              ----          ----                  ----         ----
<S>                                                          <C>           <C>                   <C>          <C>

Interest Earning Assets                                       8.24%         7.99%                 8.13%        7.76%
Interest Bearing Liabilities                                  4.41%         3.97%                 4.21%        3.98%
                                                              ----          ----                  ----         ----
Net Interest Spread                                           3.83%         4.02%                 3.92%        3.78%
Contribution of Interest Free Funds                           0.80%         0.74%                 0.77%        0.78%
                                                              ----          ----                  ----         ----
Net Yield on Interest Earning Assets                          4.63%         4.76%                 4.69%        4.56%
                                                              ====          ====                  ====         ====
</TABLE>

                      INTEREST INCOME ON FEDERAL FUNDS SOLD

         Interest  income on federal  funds  sold for the three- and  nine-month
periods  ended   September   30,  2000,   decreased  to  $0  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 71.0% decrease in the
average balance of federal funds sold for the nine-month  period ended September
30, 2000,  when  compared to the same period in 1999,  partially  offset by a 80
basis point (one basis point is equal to one hundredth of one percent)  increase
in the rates earned on federal  funds sold.  Excess funds which in prior periods
were sold in the federal  funds  market have been used to support loan growth in
the current periods.

                    INTEREST INCOME ON INVESTMENT SECURITIES

         On a tax equivalent  basis,  interest  income on investment  securities
decreased 9.7% to $1.7 million for the  three-month  period ended  September 30,
2000,  and  increased  1.2% to $5.4  million  for the  nine-month  period  ended
September 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 securities of 10.9%,  partially offset by a 9 basis point increase on
rates earned on such  investments.  The increase for the nine-month period ended
September  30,  2000 is the result of a 7.3% or 45 basis  point  increase in the
yield earned compared to the same period last year,  partially  offset by a $6.6
million or 5.7% decrease in average investment  security balances.  Decreases in
average  investment  securities 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 18.3% and 16.5%,  respectively,  to $8.4
million and $24.0 million for the three- and nine-month  periods ended September
30, 2000,  compared to the same periods in 1999. The increase in interest income
for these  periods  is the  direct  result of 16.3% and 13.3%  increases  in the
average loans outstanding for the three- and nine-month  periods ended September
30, 2000,  respectively.  For the three- and nine-month  periods ended September
30,  2000,  loan  interest  income  also  benefited  from 14 and 23 basis  point
increases in rates earned on the  portfolio as compared to the same periods last
year.

                                       10
<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

                      INTEREST EXPENSE ON DEPOSIT ACCOUNTS

         Interest expense on deposit  accounts  increased 13.4% and 8.5% for the
three- and nine-month periods ended September 30, 2000 to $4.0 million and $11.2
million,  compared to the same periods in 1999. The increase for the three-month
period  ended  September  30,  2000 is the  result  of an  increase  in  average
interest-bearing deposits of 4.9% or $17.5 million and a 32 basis point increase
in the rates paid on interest-bearing  deposits. The increase for the nine-month
period  ended  September  30,  2000 is the  result  of an  increase  in  average
interest-bearing deposits of 5.3% or $18.6 million and a 12 basis point increase
in rates paid on interest-bearing  deposits. The Corporation's effective rate on
interest-bearing  deposits  increased  to 4.25%  and 4.06%  for the  three-  and
nine-month  periods  ended  September 30, 2000 from 3.93% and 3.94% for the same
periods, respectively, in 1999.

         The  recent  rising  interest  rate  environment  that  has  positively
impacted the interest income earned on 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 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 in expanding
areas of our county are being researched.  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  25.0% and 25.0% to $35 thousand and $100  thousand for the three- and
nine-month periods ended September 30, 2000, respectively,  compared to the same
periods in 1999.  The increases are primarily  attributable  to 29.4%,  or a 120
basis point increase, and 27.3%, or a 108 basis point increase, in rates paid on
such contracts,  compared to the rates paid in the three- and nine-month periods
ended September 30, 1999, respectively.

    INTEREST EXPENSE ON FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS

         Interest  expense  on  borrowings  increased  255.5% and 246.1% for the
three- and  nine-month  periods  ended  September  30, 2000,  respectively.  The
increase is a direct  result of a $16.7 million or 196.7% and a $16.9 million or
257.7%  increase in average  borrowings  for the three- and  nine-month  periods
ending  September  30, 2000 when  compared to the same  periods  last year.  The
increases  in loans for the three- and  nine-month  periods  have  outpaced  our
deposit  growth  during the same  periods,  necessitating  that the  Corporation
obtain funds from other  sources.  Borrowings may consist of overnight Fed Funds
purchased,  FHLB  term  advances  and FHLB  Open  Repo and Repo  Plus  overnight
advances.

                                       11
<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

                            PROVISION FOR LOAN LOSSES

         During the three- and nine-month  periods ended September 30, 2000, the
Corporation recorded a $355 thousand and a $822 thousand provision for loan loss
compared to $184 thousand and a $493 thousand for the same periods in 1999.  The
increase in the provision  for loan losses is a result of increased  loan growth
for the three- and nine-month periods ended September 30, 2000,  compared to the
same periods in 1999,  and is not indicative of a  deterioration  in the overall
credit quality of the Bank's loan portfolio.  The allowance for loan losses as a
percentage of total loans was 1.73% at September 30, 2000, 1.77% at December 31,
1999 and 1.81% at  September  30,  1999,  respectively.  See the section  titled
"Allowance For Loan Losses" for additional discussion.

                               NON-INTEREST INCOME

         Total  non-interest  income  increased  61.6% to $2.0  million  for the
three- month period ended September 30, 2000 when compared to the same period in
1999. For the nine- month period ended  September 30, 2000,  total  non-interest
income increased 23.4% to $4.7 million when compared to the same period in 1999.
The primary recurring component of non-interest  income is Financial  Management
Services  revenue,  which  increased  10.5% and 20.1% to $718  thousand and $2.3
million  for the  three-  and  nine-month  periods  ended  September  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 $43.6  million or 10.8% from $403.0
million at  September  30, 1999 to $446.6  million at September  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  marketing  and  business  development
efforts. Additionally,  during the quarter the Financial Management Services Fee
structure  changed in an effort to cover rising costs.  This change will produce
additional fee revenue.  Although the fees were increased they still remain very
competitive in the market place and Management  does not anticipate any negative
impact on growth in these revenues.

         Service charges on deposit  accounts  increased  approximately  6.1% to
$261  thousand for the  three-months  ended  September 30, 2000 compared to $246
thousand for the same period in 1999. For the nine-month  period ended September
30, 2000,  service charges on deposit  accounts  increased 3.9% to $777 thousand
compared to $748  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 209.5% to $978 thousand for the three-months ended
September 30, 2000  compared to $316  thousand for the same period in 1999.  For
the  nine-month  period ended  September  30, 2000,  other  non-interest  income
increased 75.9% to $1.7 million compared to $946 thousand for the same period in
1999. These increases in other non-interest income can be attributed to the sale
of two fixed  assets.  On August  31,  2000,  the  Corporation  sold a  property
adjacent to its Kennett Square branch which resulted in a gain of  approximately
$69 thousand.  The former Westtown  branch/Training Center was sold on September
29, 2000, which resulted in a gain of approximately  $560 thousand.  Total other
non-interest  income also benefited  from 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 September 30, 2000, gains
on investment securities increased $1 thousand to $1 thousand,  when compared to
the same period in 1999.  For the  nine-month  period ended  September 30, 2000,

                                       12
<PAGE>

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

investment security gains (losses) decreased $242 thousand or 119.8% from a gain
of $202 thousand to a loss of $40 thousand,  when compared to the same period in
1999.  The  loss  in  2000  reflects   Management's  decision  to  sell  certain
low-yielding  investment  securities at a loss in order to reinvest the proceeds
in investments  that will  contribute  higher  interest income in future periods
than the investments sold.

                              NON-INTEREST EXPENSE

         Total non-interest  expense for the three- and nine-month periods ended
September 30, 2000 increased  17.4% to $5.1 million and $12.7% to $14.6 million,
compared to the same periods in 1999.  The various  components  of  non-interest
expense changes are discussed below.

         Employee  salaries  and  benefits  increased  15.1% to $2.8 million and
13.6% to $8.1 million for the three-month and nine-month periods ended September
30,  2000  compared  to the same  periods  in 1999.  Increased  staff due to the
opening of our four new retirement home branches, annual employee raises, and an
increase in the cost of employee  benefits  are  primarily  responsible  for the
increase.  At September 30, 2000, the Corporation  employed 200 full time and 41
part time  employees  compared  to 199 full time and 31 part time  employees  at
September 30, 1999.

         Net occupancy,  equipment,  and data processing  expense increased 9.7%
and 5.1% to $1.0 million and $3.0 million for the three- and nine-month  periods
ended September 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  35.3%  and 19.4% to $1.1
million and $3.1  million  for the  three-month  and  nine-month  periods  ended
September 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.

       The  planning  for  additional  branch  sites  continues  and our list of
products is growing. The Corporation believes that the costs associated with the
opening of new branch sites and expanding  services and  operations  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. We have
already broken ground on two of these sites, Lionville and Kennett Square. These
two sites are expected to be completed  and opened  during the first  quarter of
2001.  The other  branch  sites are in various  stages of  development,  and are
expected to be completed and opened within the next six to twelve months.

                                       13

<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 SEPTEMBER 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                                    $      -      $     -         -          $  1,319      $    14     4.25%
Interest bearing deposits in banks                         213            1      1.88%              130            3     9.23%
Investment securities
    Taxable                                            104,078        1,696      6.52%          117,274        1,885     6.43%
    Tax-exempt (1)                                       2,292           41      7.22%            2,154           39     7.23%
                                                       -------       ------                     -------       ------
        Total investment securities                    106,370        1,737      6.53%          119,428        1,924     6.44%
                                                       -------       ------                     -------       ------
Loans (2)
    Taxable                                            377,614        8,224      8.71%          324,031        6,925     8.55%
    Tax-exempt (1)                                       6,077          136      8.93%            5,980          144     9.62%
                                                       -------       ------                     -------       ------
        Total loans                                    383,691        8,360      8.71%          330,011        7,069     8.57%
                                                       -------       ------                     -------       ------
        Total interest earning assets                  490,274       10,098      8.24%          450,758        9,007     7.99%
Non-interest earning assets
    Allowance for possible loan losses                  (6,612)                                  (5,999)
    Cash and due from banks                             25,693                                   22,466
    Other assets                                        19,301                                   17,864
                                                       -------                                  -------
        Total assets                                  $528,656                                 $485,089
                                                       =======                                  =======

LIABILITIES AND STOCKHOLDERS' EQUITY
Savings, NOWS & money market deposits                 $233,431      $ 1,895      3.25%         $210,273        1,556     2.96%
Certificates of deposits and other time                140,138        2,069      5.91%          145,767        1,939     5.32%
                                                       -------       ------                     -------        -----
   Total interest bearing deposits                     373,569        3,964      4.25%          356,040        3,495     3.93%
Securities sold under repurchase agreements              2,652           35      5.28%            2,645           28     4.08%
Federal Home Loan Bank advances and
   other borrowings                                     25,154          423      6.73%            8,477          119     5.62%
                                                       -------       ------                     -------        -----
   Total interest bearing liabilities                  401,375        4,423      4.41%          367,162        3,642     3.97%
                                                       -------       ------                     -------        -----
Non-interest bearing liabilities
    Non-interest bearing demand deposits                81,348                                   72,910
    Other liabilities                                    5,647                                    6,114
                                                       -------                                  -------
        Total liabilities                              488,370                                  446,186
Stockholders' equity                                    40,286                                   38,903
                                                       -------                                  -------

        Total liabilities and stockholders' equity    $528,656                                 $485,089
                                                       =======                                  =======

Net interest income                                                 $ 5,675                                   $5,365
                                                                     ======                                    =====

Net yield on interest earning assets                                             4.63%                                   4.76%
                                                                                 ====                                    ====


<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>
                                       14
<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
                         NINE MONTHS ENDED SEPTEMBER 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                                    $    897      $    37      5.50%         $  3,089     $    109     4.70%
Interest bearing deposits in banks                         144            4      3.70%                -            3     2.88%
Investment securities
    Taxable                                            107,492        5,309      6.59%          114,278        5,255     6.13%
    Tax-exempt (1)                                       2,279          130      7.58%            2,136          120     7.47%
                                                       -------       ------                     -------      -------
        Total investment securities                    109,771        5,439      6.61%          116,414        5,375     6.16%
                                                       -------       ------                     -------       ------
Loans (2)
    Taxable                                            365,480       23,518      8.58%          322,079       20,128     8.33%
    Tax-exempt (1)                                       6,147          434      9.42%            5,937          429     9.63%
                                                       -------       ------                     -------      -------
        Total loans                                    371,627       23,952      8.59%          328,016       20,557     8.36%
                                                       -------       ------                     -------       ------
Total Interest Earning Assets                          482,439       29,431      8.13%          447,519       26,040     7.76%
Non-interest earning assets
    Allowance for possible loan losses                  (6,261)                                  (5,878)
    Cash and due from banks                             19,672                                   21,599
    Other assets                                        22,757                                   16,581
                                                       -------                                  -------
        Total assets                                  $518,607                                 $479,821
                                                       =======                                  =======

LIABILITIES AND STOCKHOLDERS' EQUITY
Savings, NOWS & money market deposits                 $229,978      $ 5,426      3.15%         $202,297      $ 4,426     2.92%
Certificates of deposits and other time                138,628        5,806      5.58%          147,748        5,924     5.35%
                                                       -------       ------                     -------       ------
   Total interest bearing deposits                     368,606       11,232      4.06%          350,045       10,350     3.94%
Securities sold under repurchase agreements              2,652          100      5.03%            2,698           80     3.95%
Federal Home Loan Bank advances and
   other borrowings                                     23,480        1,120      6.36%            6,564          295     5.99%
                                                       -------       ------                     -------       ------
   Total interest bearing liabilities                  394,738       12,452      4.21%          359,307       10,725     3.98%
                                                       -------       ------                     -------       ------
Non-interest bearing liabilities
    Non-interest bearing demand deposits                79,027                                   71,496
    Other liabilities                                    5,597                                    5,990
                                                     ---------                                  -------
        Total liabilities                              479,362                                  436,793
Stockholders' equity                                    39,245                                   43,028
                                                      --------                                  -------
        Total liabilities and stockholders' equity    $518,607                                 $479,821
                                                       =======                                  =======
Net interest income                                                 $16,979                                  $15,315
                                                                     ======                                   ======
Net yield on interest earning assets                                             4.69%                                   4.56%
                                                                                 ====                                    ====





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

                                  INCOME TAXES

         Income  tax  expense  for  the  three-  and  nine-month  periods  ended
September 30, 2000 was $590 thousand and $1.7 million, compared to $594 thousand
and $1.7 million in the same periods last year.  This  represents  effective tax
rates of 27.9% and 27.6% for the three- and nine-month  periods ended  September
30, 2000,  respectively.  The effective  tax rate for the three- and  nine-month
periods  ended  September  30,  1999 was 30.5%  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:

                                DEPOSIT ANALYSIS
<TABLE>
<CAPTION>

                                                     (Annualized)
(Dollars in thousands)                           September 30, 2000          December 31, 1999               Average Balance
                                               ---------------------       ---------------------        -----------------------
                                               Average     Effective       Average     Effective         Dollar      Percentage
                                               Balance       Yield         Balance       Yield          Variance      Variance
                                               -------     ---------       --------    ---------        --------     ----------
<S>                                          <C>            <C>           <C>            <C>            <C>           <C>

NOW Accounts                                  $ 67,358       1.71%         $ 58,356       1.71%          $ 9,002        15.43%
Money Market                                    26,524       2.93            27,139       2.90              (615)       (2.27)
Statement Savings                               49,255       3.03            49,144       3.00               111         0.23
Other Savings                                    2,230       2.75             2,280       2.76               (50)        2.19
CD's Less than $100,000                        111,741       5.57           118,228       5.38            (6,487)       (5.49)
                                               -------                      -------                       ------

Total Core Deposits                            257,108       3.77           255,147       3.79             1,961         0.77

Non-Interest bearing
  Demand Deposit Accounts                       79,027         --            72,493         --             6,534         9.01
                                               -------                      -------                       ------

Total Core and Non-Interest
  Bearing Deposits                             336,135       2.89           327,640       2.95             8,495         2.59
                                               -------                      -------                       ------

Tiered Savings                                  84,611       4.44            68,067       3.97            16,544        24.31
CD's Greater than $100,000                      26,887       5.65            28,863       5.19             1,976        (6.85)
                                               -------                      -------                       ------

Total Deposits                                $447,633       3.35          $424,570       3.27           $23,063         5.43
                                               =======                      =======                       ======
</TABLE>
                                       16
<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

         The Bank, as a member of the FHLB, maintains several credit facilities.
As of September 30, 2000 the amount  outstanding under the Bank's line of credit
with the FHLB was $33.4  million.  The Bank  currently  has a maximum  borrowing
capacity with the FHLB of  approximately  $124.8 million.  During the three- and
nine-month  periods  ending  September  30,  2000,  average FHLB  advances  were
approximately  $25.2 million and $23.5 million,  respectively,  and consisted of
term advances with a variety of maturities.  The average  interest rate on these
advances  was  approximately  6.73% and 5.80%  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
$180.6  million or 33.8% of total assets at September  30, 2000,  compared  with
negative  $210.1  million or 43.4% at  September  30, 1999,  respectively.  This
negative  position  indicates that more liabilities than assets will be repriced
within the next twelve months which, in a rising interest rate environment,  may
result in increased interest expense that would not be offset by correspondingly
repriced assets. The data in this analysis is static and represents the position
at a specific  point in time and may not be  indicative of actual  results.  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.

                                       17
<PAGE>

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

                          INTEREST SENSITIVITY ANALYSIS
                            AS OF SEPTEMBER 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                      $     20,945     $    53,586       $    28,019      $        --    $   102,550
    Interest bearing deposits in banks                   --              --                --              126            126
    Loans and leases                                131,891         225,887            34,292           (6,766)       385,304
    Cash and cash equivalents                            --              --                --           25,409         25,409
    Premises & equipment                                 --              --                --           10,658         10,658
    Other assets                                         12              --                --            9,410          9,422
                                                -----------      ----------        ----------       ----------     ----------
       Total assets                            $    152,848     $   279,473       $    62,311      $    38,837    $   533,469
                                                ===========      ==========        ==========       ==========     ==========

LIABILITIES AND CAPITAL
    Non-interest bearing deposit               $         --     $        --       $        --      $    82,454    $    82,454
    Interest bearing deposits                       302,150          63,068             2,129               --        367,347
    Borrowed funds                                    3,134              --                --               --          3,134
    FHLB Term Advance                                28,142           1,064             4,723               --         33,929
    Other liabilities                                    --              --                --            5,645          5,645
    Capital                                              --              --                --           40,960         40,960
                                                -----------      ----------        ----------       ----------     ----------
       Total liabilities & capital             $    333,426     $    64,132       $     6,852      $   129,059    $   533,469
                                                ===========      ==========        ==========       ==========     ==========
    Net interest rate
      sensitivity gap                          $  (180,578)     $   215,341       $    55,459      $  (90,222)    $        --
                                                ==========       ==========        ==========       =========      ==========
    Cumulative interest rate
      sensitivity gap                          $  (180,578)     $    34,763       $    90,222      $        --    $        --
                                                ==========       ==========        ==========       ==========     ==========
    Cumulative interest rate
      sensitivity gap divided
      by total assets                               (33.8%)          (6.5%)             16.9%
                                                ===========      ==========        ==========
</TABLE>

                            ALLOWANCE FOR LOAN LOSSES

         The  allowance  for possible  loan losses is an amount that  Management
believes will be adequate to absorb  possible loan losses on existing loans that
may become uncollectible and is established based on management's evaluations of
the  collectibility  of  loans  in the  portfolio.  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 our borrowers
ability to pay.

                                       18

<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>

                                                                          Three Months                        Nine Months
                                                                             Ended                               Ended
                                                                          September 30,                       September 30,
                                                                    ------------------------           -------------------------
(Dollars in thousands)                                                2000            1999                2000            1999
                                                                      ----            ----                ----            ----
<S>                                                                <C>             <C>                <C>              <C>

Balance at beginning of period                                      $  6,541        $  5,922           $  6,261         $  5,877
                                                                     -------         -------            -------
Provision charged to operating expense                                   355             184                822              493
                                                                     -------         -------            -------          -------
    Recoveries of loans previously charged-off                            25              11                100               86
    Loans charged-off                                                   (155)            (80)              (417)            (419)
                                                                     -------         -------            -------          -------
Net loans charged-off                                                   (130)            (69)              (317)            (333)
                                                                     -------         -------            -------          -------
Balance at end of period                                            $  6,766        $  6,037           $  6,766         $  6,037
                                                                     =======         =======            =======          =======

Period-end loans outstanding                                        $392,070        $334,084           $392,070         $334,084

Average loans outstanding                                           $383,691        $330,011           $371,627         $328,016

Allowance for possible loan losses as a
    percentage of period-end loans outstanding                         1.73%           1.81%              1.73%            1.81%

Ratio of net charge-offs to average loans
    outstanding (annualized)                                           0.03%           0.02%              0.09%            0.10%
</TABLE>

                         NON-PERFORMING LOANS AND ASSETS

         Non-performing loans include loans on non-accrual status and loans past
due 90 days or more and still  accruing.  The  Corporation's  policy is to 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.  The  following  chart  represents  detailed
information regarding non-performing loans:

                                       19
<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

<TABLE>
<CAPTION>

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

Past due over 90 days and still accruing        $    346      $    407                 $    175

Non-accrual loans                                  1,784         1,402                    1,207
                                                 -------       -------                  -------
Total non-performing loans                         2,130         1,809                    1,382

Other real estate owned                              385           192                      470
                                                 -------       -------                  -------

Total non-performing assets                     $  2,515      $  2,001                 $  1,852
                                                 =======       =======                  =======

Non-performing loans as a percentage
     of total loans                                0.54%         0.54%                    0.39%

Allowance for possible loan losses as a
   percentage of non-performing loans            317.65%       333.72%                  453.04%

Non-performing assets as a percentage
   of total loans and other real estate owned      0.64%         0.60%                    0.52%

Allowance for possible loan losses as a
  percentage of non-performing assets            269.03%       301.70%                  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 September 30, 2000. Other Real Estate
Owned ("OREO")  represents  residential  and commercial real estate owned by the
Bank  following  default by borrowers  and has been  written down to  realizable
value (net of estimated disposal costs) based on professional appraisals.

                                 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 $1,167 thousand,  $678 thousand,  and
$984 thousand at September 30, 2000,  December 31, 1999,  and September 30, 1999
respectively.  The  associated  allowance for impaired  loans was $287 thousand,
$286  thousand  $365  thousand at  September  30, 2000,  December 31, 1999,  and
September 30, 1999, respectively.

         For the  three-month  and nine-month  period ended  September 30, 2000,
activity in the allowance  for impaired  loan losses  include a provision of $0,
write off's of $15 thousand and $22 thousand, respectively, and recoveries of $1
and $4  thousand,  respectively.  Contractual  interest  amounted to $22 for the
three-months ended September 30, 2000 and $54 thousand for the nine-months ended
September 30, 2000.  Cash collected on loans for the  three-month and nine-month
period ended September 30, 2000 was $17 and $81 thousand,  respectively,  all of
which $13 thousand and $77 thousand was applied to principal and interest income
of $4 was recorded.

                                       20
<PAGE>

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

         For the  three-month  and nine-month  period ended  September 30, 1999,
activity in the allowance  for impaired  loan losses  include a provision of $25
thousand  and $85  thousand,  respectively,  write  offs of $4  thousand  and $7
thousand,  respectively, and recoveries of $0 for both time periods. Contractual
interest amounted to $23 thousand for the three-months  ended September 30, 1999
and $71 thousand for the nine-months ended September 30, 1999. While no interest
income  was  recorded  for  both  periods,  cash  collected  on  loans  for  the
three-month  and nine-month  period ended September 30, 1999 was $9 thousand and
$85 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 serve the residents and employees of their
communities and bring the total number of branches in the Corporation's  network
to twelve.

         Total  non-interest  income also  benefited  from the sale of two fixed
assets.  On August 31, 2000,  the  Corporation  sold a property  adjacent to its
Kennett Square branch,  which resulted in a gain of $68.5  thousand.  The former
Westtown  branch was sold on  September  29, 2000,  which  resulted in a gain of
$560.7 thousand.

         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 1,400 customers have
signed up for "Net  Teller".  A  commercial  version of "Net  Teller"  "Net Cash
Manager" was released in March of 2000.  Currently  there are over 500 customers
signed  up for "Net  Cash  Manager".  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 Bank's new web site
at www.fnbchestercounty.com.

         The Corporation is currently  working on four new branch sites. We have
already broken ground on two of these sites, Lionville and Kennett Square. These
two sites are expected to be completed  and opened  during the first  quarter of
2001.  The other  branch  sites are in various  stages of  development,  and are
expected to be completed and opened within the next six to twelve months.

                                CAPITAL ADEQUACY

         The Corporation is subject to Risk-Based  Capital Guidelines adopted by
the Federal Reserve Board ("FRB") for bank holding companies. The Corporation is
also subject to similar  capital  requirements  adopted by the OCC.  Under these
requirements,  the  regulatory  agencies have set minimum  thresholds for Tier I
Capital,  Total Capital,  and Leverage  ratios.  At September 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.

                                       21
<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

<TABLE>
<CAPTION>


RISK-BASED                                      September 30,                December 31,                  "Well Capitalized"
CAPITAL RATIOS                            ------------------------           ------------
--------------                             2000               1999               1999                         Requirements
                                           ----               ----               ----                     --------------------
<S>                                      <C>                <C>                <C>
Corporation
-----------
Leverage Ratio                             8.14%              8.31%              8.48%                         5.00%
Tier I Capital Ratio                      10.75%             11.21%             10.73%                         6.00%
Total Risk-Based Capital Ratio            12.00%             12.47%             11.98%                        10.00%

Bank
----
Leverage Ratio                             8.13%              8.12%              8.05%                         5.00%
Tier I Capital Ratio                      10.72%             10.94%             10.47%                         6.00%
Total Risk-Based Capital Ratio            11.98%             12.19%             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.  The internal capital growth
rate for the  Corporation  was 3.81% and a  negative  7.49% for the nine  months
ended September 30, 2000 and 1999, respectively.  The growth rate is computed by
annualizing the change in equity during the last period and dividing it by total
stockholders equity at September 30, 2000 and 1999, respectively.

                                       22
<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 this assessment.


                                       23
<PAGE>



                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

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

Item 2.  Changes in Securities

                  None

Item 3.  Defaults upon Senior Securities

                  None

Item 4.  Submission of Matters to Vote of Security Holders

                  None

Item 5.  Other Information

                  None

Item 6.  Exhibits and Reports on Form 8-K

                  (a)       Exhibits

                            The following is a list of exhibits  incorporated by
reference into this report:

         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, 1999.

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

                  (b)       Reports on Form 8-K

                  A Form 8-K was filed with the SEC on July 13, 2000, under Item
5, the issuance of a press release announcing second quarter earnings.


                                       24
<PAGE>


                                   SIGNATURES


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



                        FIRST CHESTER COUNTY CORPORATION


                                Charles E. Swope


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


DATE: November 14, 2000


                              J. Duncan Smith


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



                                       25