May 14, 2002


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

                        FIRST CHESTER COUNTY CORPORATION

                         Commission File Number 0-12870

Gentlemen:

Pursuant to the reporting  requirements  of the  Securities  and Exchange Act of
1934, we are filing herewith the above listed  Registrant's  Quarterly Report on
Form 10-Q for the period ended March 31, 2002.








                                                     Very truly yours,


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

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

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

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



<PAGE>



                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C.  20549


(Mark One)

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

For the quarterly period ended March 31, 2002, OR
                               --------------

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

For the transition period from ____________ to ____________.

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


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

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


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


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

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

The number of shares  outstanding of Common Stock of the Registrant as of May 1,
2002 was 4,424,300.

<PAGE>

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

                                                                                         (Unaudited)
(Dollars in thousands)                                                                    March 31,          December 31,
<S>                                                                                   <C>                  <C>
                                                                                            2002                  2001
                                                                                        -------------       -------------
ASSETS
    Cash and due from banks                                                              $   38,133           $   25,595
    Federal funds sold                                                                        5,000               12,400
    Interest Bearing Deposits in banks                                                          339                  238
                                                                                            --------            --------

                Total cash and cash equivalents                                              43,472               38,233
                                                                                           --------             --------

    Investment securities held-to-maturity (market value of $538 and
        at March 31, 2002 and $547 at December 31, 2001, respectively)                          525                  531

    Investment securities available-for-sale, at market value                                85,611               80,210

    Loans                                                                                   444,589              448,110
    Less:  Allowance for loan losses                                                         (6,746)              (6,344)
                                                                                           --------             --------

                Net loans                                                                   437,843              441,766

    Premises and equipment                                                                   15,281               15,584
    Other assets                                                                              7,567                8,008
                                                                                           --------             --------

                Total assets                                                              $ 590,299            $ 584,332
                                                                                           ========             ========

LIABILITIES
    Deposits
        Noninterest-bearing                                                              $   95,819            $  95,107
        Interest-bearing (including certificates of deposit over $100
           of $24,439 and $28,463 - March 31, 2002 and
           December 31, 2001 respectively)                                                  422,371              403,718
                                                                                           --------             --------

        Total deposits                                                                      518,190              498,825

    Securities sold under repurchase agreements                                               1,153                4,769
    Federal Home Loan Bank advances and other borrowings                                     21,364               31,751
        Other liabilities                                                                     4,941                5,148
                                                                                           --------             --------

        Total liabilities                                                               $   545,648              540,493
                                                                                           --------             --------

STOCKHOLDERS' EQUITY
    Common stock, par value $1.00; authorized, 10,000,000 shares;
        outstanding, 4,799,666 at March 31, 2002 and December 31, 2001.                       4,800                4,800
    Additional paid-in capital                                                                  795                  773
    Retained earnings                                                                        44,331               42,353
    Accumulated other comprehensive income                                                     (116)                  84
    Treasury stock, at cost: 373,573 shares and 377,721 shares
        at March 31, 2002 and December 31, 2001, respectively.                               (5,159)              (5,185)
                                                                                           --------             --------

                Total stockholders' equity                                                   44,651               43,839
                                                                                           --------             --------

                Total liabilities and stockholders' equity                                $ 590,299            $ 584,332
                                                                                           ========             ========

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




                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)
<TABLE>
<CAPTION>
(Dollars in thousands - except per share)                                                        Three Months Ended
                                                                                                      March 31,
                                                                                       ------------------------------------
                                                                                               2002               2001
                                                                                             --------           --------
<S>                                                                                       <C>                  <C>
INTEREST INCOME
    Loans, including fees                                                                    $  8,367           $  8,608
    Investment securities                                                                       1,032              1,425
    Federal funds sold                                                                             94                 67
    Deposits in banks                                                                               2                  2
                                                                                             --------           --------

                Total interest income                                                           9,495             10,102
                                                                                             --------           --------

INTEREST EXPENSE
    Deposits                                                                                    2,598              3,973
    Securities sold under repurchase agreements                                                     7                 35
    Federal Home Loan Bank advances and other borrowings                                          334                363
                                                                                             --------           --------

                Total interest expense                                                          2,939              4,371
                                                                                             --------           --------

                Net interest income                                                             6,556              5,731

    Provision for loan losses                                                                     470                235
                                                                                             --------           --------

                Net interest income after provision for possible loan losses                    6,086              5,496
                                                                                             --------           --------

NON-INTEREST INCOME
    Financial Management Services                                                                 805                736
    Service charges on deposit accounts                                                           433                273
    Investment securities gains (losses), net                                                      -                  25
    Gain on the sale of OREO                                                                      245                 60
    Other                                                                                         683                496
                                                                                             --------           --------

                Total non-interest income                                                       2,166              1,590
                                                                                             --------           --------

NON-INTEREST EXPENSE
    Salaries and employee benefits                                                              3,349              2,920
    Net occupancy, equipment and data processing                                                1,403              1,050
    Professional Services                                                                         250                327
    Other                                                                                       1,069                943
                                                                                             --------           --------

                Total non-interest expense                                                      6,071              5,240
                                                                                             --------           --------

                Income before income taxes and cumulative effect
                  of change in accounting for income taxes                                      2,181              1,846

INCOME TAXES                                                                                      641                497
                                                                                             --------           --------

NET INCOME                                                                                  $   1,540          $   1,349
                                                                                             ========           ========

PER SHARE DATA
    Basic earnings per common share                                                         $    0.35          $    0.30
                                                                                             ========           ========
    Diluted earnings per common share                                                       $    0.35          $    0.30
                                                                                             ========           ========
    Dividends declared                                                                      $    0.13          $    0.13
                                                                                             ========           ========


Basic weighted average shares outstanding                                                   4,423,584          4,467,094
                                                                                            =========          =========

Diluted weighted average shares outstanding                                                 4,468,480          4,519,285
                                                                                            =========          =========

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


                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                                 Three Months Ended

                                                                                                      March 31,
                                                                                       -------------------------------------------

(Dollars in thousands)                                                                         2002                2001
                                                                                             --------           --------
<S>                                                                                        <C>                 <C>
OPERATING ACTIVITIES
    Net Income                                                                               $  1,540           $  1,349
    Adjustments to reconcile net income to net cash
           provided by operating activities:
    Depreciation                                                                                  716                444
    Provision for loan losses                                                                     470                235
Amortization of investment security premiums
           and accretion of discounts                                                             133                 41
    Amortization of deferred fees on loans                                                        (52)
(41)    Investment securities (gains) losses, net                                                   -                (25)
    Gain on the sale of OREO                                                                      245                 60
Decrease in other assets                                                                           92              1,255
    Decrease in other liabilities                                                                (207)              (350)
                                                                                             --------           --------

           Net cash provided by operating activities                                          $ 2,937            $ 2,968
                                                                                             --------           --------

INVESTING ACTIVITIES
    Increase in loans                                                                           3,908                740
    Proceeds from sales of investment securities available-for-sale                                 -              3,648
    Proceeds from maturities of investment securities available-for-sale                        6,667             17,721
    Proceeds from maturities of investment securities held                                      1,005                  -
    Purchases of investment securities available-for-sale                                     (13,077)           (16,393)
    Purchase of premises and equipment,                                                        (1,036)            (1,045)
                                                                                             --------           --------
           Net cash (used in) provided by  investing activities                              $ (2,533)          $  4,671
                                                                                             --------           --------

FINANCING ACTIVITIES
    Decrease in Federal Home Loan Bank advances                                               (10,387)            (4,835)
    Increase in deposits                                                                       19,365                440
    (Decrease) increase in securities sold under repurchase agreement                          (3,616)               593
    Cash dividends                                                                               (575)              (583)
    Treasury stock transactions                                                                    48                (81)
                                                                                             --------           --------

           Net cash provided by (used in) financing activities                                  4,835             (4,466)
                                                                                             --------           --------

           NET INCREASE IN CASH AND CASH
                 EQUIVALENTS                                                                    5,239              3,173

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

Cash and cash equivalents at end of period                                                   $ 43,472           $ 41,146
                                                                                             ========           ========

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

<PAGE>



                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (UNAUDITED)

1.   The unaudited  financial  statements  have been prepared in accordance with
     generally accepted accounting principles for interim financial information.
     In the opinion of Management,  all adjustments  (consisting  only of normal
     recurring  adjustments)  necessary for a fair presentation of the financial
     position and the results of  operations  for the interim  period  presented
     have been included.  These interim  financial  statements should be read in
     conjunction  with  the  consolidated  financial  statements  and  footnotes
     thereto  included  in our Annual  Report on Form 10-K for the  fiscal  year
     ended December 31, 2001.

2.   The results of operations for the  three-month  period ended March 31, 2002
     are not  necessarily  indicative of the results to be expected for the full
     year.

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

4.   We have adopted the  provisions  of FASB issued SFAS No. 130,  Reporting of
     Comprehensive Income, which establishes standards for reporting and display
     of comprehensive income and its components (revenues,  expenses,  gains and
     losses) in a full set of financial statements. This statement also requires
     that  all  items  that  are  required  to be  recognized  under  accounting
     standards as components of year-end  comprehensive  income be reported in a
     financial  statement that is displayed  with the same  prominence as others
     financial  statements.  Other comprehensive  income (loss) net of taxes for
     the three-month  period ended March 31, 2002 was ($200) thousand,  compared
     to $738 thousand in the same period last year. Total  comprehensive  income
     (which is the sum of net income and other  comprehensive  income  mentioned
     above), for the three-months ended March 31, 2002 was $1.3 million compared
     to $2.1 million in the same period last year.

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

6.   On July 20, 2001, FASB issued SFAS 141, and SFAS 142. SFAS 141 is effective
     for all business  combinations  completed  after June 30, 2001. SFAS 142 is
     effective  for fiscal years  beginning  after  December 15, 2001;  however,
     certain provisions of this Statement apply to goodwill and other intangible
     assets  acquired  between July 1, 2001 and the effective  date of SFAS 142.
     Major  provisions of these  Statements  and their  effective  dates for the
     Company are as follows: All business combinations  initiated after June 30,
     2001 must use the purchase  method of  accounting.  The pooling of interest
     method of accounting is prohibited except for transactions initiated before
     July 1, 2001.
<PAGE>
     Intangible  assets  acquired  in a business  combination  must be  recorded
     separately  from  goodwill  if they arise from  contractual  or other legal
     rights  or are  separable  from  the  acquired  entity  and  can  be  sold,
     transferred,  licensed, rented or exchanged, either individually or as part
     of a related contract, asset or liability.  Goodwill, as well as intangible
     assets with  indefinite  lives,  acquired after June 30, 2001,  will not be
     amortized.  Effective January 1, 2002, all previously  recognized  goodwill
     and intangible  assets with  indefinite  lives will no longer be subject to
     amortization.  Effective  January 1, 2002,  goodwill and intangible  assets
     with indefinite  lives will be tested for impairment  annually and whenever
     there is an impairment indicator. All acquired goodwill must be assigned to
     reporting units for purposes of impairment testing and segment reporting.

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

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

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


<PAGE>


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

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

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

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

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

                          EARNINGS AND DIVIDEND SUMMARY

     Net income for the three months ended March 31, 2002 was $1.5  million,  an
increase  of $191  thousand  or 14.2% from $1.3  million  for the same period in
2001.  The increase in net income was the direct result of decreases in interest
expense as deposit  rates were  reduced in reaction to the prime  interest  rate
cuts  engineered by the Federal  Reserve during 2001. The increase in net income
was  partially  offset  by  reduced  income  on  interest-earning  assets.  Also
contributing  to this increase in net income was a $245  thousand  non-recurring
pre-tax gain on the sale of other real estate  owned.  Basic  earnings per share
for the three  months  ending  March 31,  2002 were $0.35 per share,  a $0.05 or
16.7% increase over the same period in 2001. Cash dividends declared during each
of the first  quarters of 2002 and 2001 were $0.13 per share.  Over the past ten
years, the  Corporation's  practice has been to pay a dividend of at least 35.0%
of net income.

<PAGE>
<TABLE>
<CAPTION>

                                                      March                         December
                                           ----------------------------             --------
                                              2002              2001                  2001
                                              ----              ----                  ----
<S>                                       <C>               <C>                   <C>
    SELECTED RATIOS
    Return on average assets                 1.05%             1.00%                 0.60%
    Return on average equity                13.71%            12.58%                 7.75%
    Earnings retained                       62.66%            56.78%                30.43%
    Dividend payout ratio                   37.34%            43.22%                69.57%
    Book value per share                   $10.09             $9.92                 $9.91
</TABLE>

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

                               NET INTEREST INCOME

     Net interest  income is the difference  between  interest  income earned on
interest-earning   assets  and  interest   expense   paid  on   interest-bearing
liabilities.  Net interest  income for the  three-month  periods ended March 31,
2002 and 2001, on a tax equivalent  basis,  increased 11.0% from $6.6 million to
$5.9 million,  respectively.  The increase in tax equivalent net-interest income
is the result of an increase in the  average net yield on earning  assets.  This
increase   was  caused  by  a  decrease   in  the   interest   paid  on  average
interest-bearing  liabilities and an increase in the average balance of interest
earning   assets,   partially   offset  by   decreases   in  average   yield  on
interest-earning  assets. The average yield on interest earning assets decreased
14.9% or 122 basis  points to  6.99%.  The  average  yield on  interest  bearing
liabilities decreased 38.4% or 165 basis points to 2.65% from 4.30%

     Average  interest-earning  assets increased  approximately $43.0 million or
8.6% to $545.1  million  during the  three-month  period  ending March 31, 2002,
compared to $502.2  million  during the same period last year.  The  increase in
average interest-earning assets was the result of increased loan activity during
2001.  Loan  growth for the  quarter  ended  March 31, 2002 has been slow but is
expected to pick up during the rest of the year.

     The average net yield on interest-earning assets, on a tax equivalent basis
was 4.83% for the three-month period ended March 31, 2002, compared to 4.72% for
the same period in 2001. The Corporation is experiencing  continued  pressure on
the net yield on  interest-earning  assets as competition  for new loan business
remains  strong and the cost of  incremental  deposit  growth and other  funding
sources becomes more expensive.

               AVERAGE INTEREST RATES (ON A TAX EQUIVALENT BASIS)
<TABLE>
<CAPTION>
                                                       Three-Months
                                                      Ended March 31,
                                                     ----------------
YIELD ON                                           2002           2001
--------                                           ----           ----
<S>                                               <C>           <C>
Interest-Earning Assets                            6.99%          8.21%
Interest Bearing Liabilities                       2.65%          4.30%
                                                   ----           ----
Net Interest Spread                                4.34%          3.91%
Contribution of Interest-Free Funds                0.49%          0.81%
                                                   ----           ----
Net Yield on Interest-Earning Assets               4.83%          4.72%
                                                   ====           ====
</TABLE>

<PAGE>


                      INTEREST INCOME ON FEDERAL FUNDS SOLD

     Interest  income on federal  funds sold for the  three-month  period  ended
March 31, 2002 increased  40.3% to $94 thousand when compared to the same period
in 2001.  This  increase is  primarily  the result of an increase in the average
balance of federal funds sold of $14.4  million or 290.5%,  from $5.0 million at
March 31, 2001 to $19.4  million at March 31, 2002.  This increase was partially
offset by a 346 basis  points  (one  basis  point is equal  1/100 of a  percent)
decrease in average interest rates earned on federal funds sold. The increase in
the average balance of federal funds sold can be attributed to the Corporation's
increased liquidity provided by the increase in deposit.

                    INTEREST INCOME ON INVESTMENT SECURITIES

     On a  tax  equivalent  basis,  interest  income  on  investment  securities
decreased 34.7% for the three-month period ended March 31, 2002 to approximately
$1.0  million  compared  to $1.6  million  during the same  period in 2001.  The
decrease was primarily  the result of a 11.4% or $10.5  million  decrease in the
average  balance of investment  securities to $81.5 million on a tax  equivalent
basis,  in addition to a 183 basis point decrease on the average  interest rates
earned on investment securities.  Decreases in the average balance of investment
securities are the result of periodic payments (pay downs on securities), normal
maturities, and sales of securities.

                            INTEREST INCOME ON LOANS

     Interest  income on loans,  on a tax  equivalent  basis,  generated  by the
Corporation's loan portfolio  decreased 2.9% to $8.4 million for the three-month
period  ended  March 31, 2002  compared  to $8.6  million for the same period in
2001. The decrease in interest income for the three-month period ended March 31,
2002 is the direct result of a 11.5% or 98 basis point  decrease on rates earned
on the  portfolio  partially  offset by a $225.0  thousand  recovery of past due
accrued  interest  and late  charges  as a result  of  restructuring  of a large
commercial  loan  relationship  and by a 9.6% or $38.9  million  increase in the
average  balance of outstanding  loans to $444.0 million at March 31, 2002. Most
of this loan growth occurred in the last three quarters of 2001, loan growth has
slowed during the first quarter ended March 31, 2002, but is expected to pick up
during the rest of the year.

                      INTEREST EXPENSE ON DEPOSIT ACCOUNTS

     Interest  expense on deposit  accounts  decreased 34.6% for the three-month
period  ended March 31, 2002 to  approximately  $2.6  million,  compared to $4.0
million for the same period in 2001.  The decrease is primarily  the result of a
39.7% or 166 basis  point  decrease on rates paid on  interest-bearing  deposits
compared to the same period in 2001.  This  decrease was  partially  offset by a
8.4% or $31.9  million  increase  in  average  interest  bearing  deposits  when
compared to the same period in 2001.

     Competition for deposits from non-banking institutions such as credit union
and mutual fund companies continues to be strong.  Despite the competition,  the
Corporation's  deposit base continues to grow and growth is expected to continue
as we continue to open new branches and attract new customers with new services.
Growth in 2001 can be  attributed to our three new branch  locations  located in
Lionville,  New Garden, and Hershey's Mill. Other new branch sites are currently
under review,  which , if opened,  should  continue to expand the  Corporation's
deposit base.


<PAGE>


         INTEREST EXPENSE ON SECURITIES SOLD UNDER REPURCHASE AGREEMENTS

     Interest expense on securities sold under repurchase  agreements  decreased
80.0% to $7 thousand for the three-month  period ended March 31, 2002,  compared
to the same  period in 2001.  The  decrease is  attributable  to a 53.6% or $1.5
million decrease in average securities sold under repurchase  agreements for the
comparable periods in addition to a 56.9% or 276 basis point decrease on average
rates paid on securities sold under repurchase agreements.

     INTEREST EXPENSE ON FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS

     Interest expense on borrowings  decreased $29 thousand to $334 thousand for
the three-month  period ended March 31, 2002 from $363 thousand when compared to
the same  period in 2001.  The need for  borrowing  decreased  during  the first
quarter of 2002 as a result of slower loan growth, increased deposits, and funds
obtained from sales of  investment  securities.  Average  Federal Home Loan Bank
("FHLB") and other  borrowings  increased to $30.9  million as of March 31, 2002
compared to $23.8 million during the same period in 2001.  Actual  borrowings at
March 31,  2002 were $21.4  million  compared to $31.8  million at December  31,
2001. This lower level of borrowings is expected to continue throughout the year
as the funding demand is currently  being met by deposit  growth.  Borrowings at
any time may consist of one or more of the  following:  FHLB  Overnight  or Term
Advances and advances under agreements with our correspondent banks.

                            PROVISION FOR LOAN LOSSES

     During the first quarter of 2002, the Corporation  recorded a $470 thousand
provision for loan losses compared to $235 thousand for the same period in 2001.
The  allowance  for loan losses as a  percentage  of total loans was 1.52% as of
March 31, 2002 and 1.63% as of March 31, 2001. See the section titled "Allowance
For Loan Losses" for additional discussion.

                               NON-INTEREST INCOME

     Total  non-interest  income  increased  36.2% to $2.2 million for the three
months  ended March 31, 2002,  compared to the same period in 2001.  The primary
component  of  non-interest  income  was  Financial  Management  Services  (FMS)
revenue,  which  increased  $69  thousand  or  9.4%  to  $805  thousand  for the
three-months  ended March 31, 2002  compared  with the same period in 2001.  The
market value of FMS assets under  management  and custody grew $51.8  million or
11.4% from $455.2 million at March 31, 2001 to $507.0 million at March 31, 2002.
FMS  income  is  based  primarily  on  the  market  value  of the  assets  under
management.

     Service charges on deposit accounts increased  approximately  58.6% to $433
thousand for the three-months ended March 31, 2002 compared to $273 thousand for
the same  period  in  2001.  The  increase  in  service  charge  revenue  can be
attributed  to a 9.8%  increase in total  deposits for the same time periods and
the introduction of "Bounce  Protection" a  deposit-related  service,  which was
introduced  in  mid-2001.  The  Corporation  also  experienced  an  increase  in
non-interest  income of $245 thousand  during the  three-months  ended March 31,
2002 as a result of a sale of OREO property.  Management  considers this gain to
be non-recurring and is not expected in the future time periods.
<PAGE>


     Other  non-interest  income  increased  37.7%  to  $683  thousand  for  the
three-months  ended March 31, 2002 compared to $496 thousand for the same period
in 2001. The increase in other non-interest  income can be attributed to several
factors.  Some of the items  contributing to the increase in other  non-interest
income from March 31, 2002 to March 31,  2001 is a $166.9  thousand  increase in
the amount of operating  lease income  earned and a $51.0  thousand  increase in
fees the sale of fixed rate residential mortgages.

                              NON-INTEREST EXPENSE

     Total non-interest expense for the first quarter of 2002 increased 15.9% to
$6.1  million  compared to the same period in 2001.  The various  components  of
non-interest expense are discussed below.

     First quarter 2002 salaries and employee  benefits  increased 14.7% to $3.3
million for the  three-month  period  ended March 31, 2002  compared to the same
period in 2001. Annual employee salary increases and a proportional  increase in
employee benefits is primarily  responsible for the increase. At March 31, 2002,
the  Corporation  employed 228 full time and 59 part time employees  compared to
206 full time and 44 part time employees at March 31, 2001.

     Net occupancy,  equipment and data  processing  expense  increased 33.6% to
$1.4 million for the  three-month  period  ended March 31, 2002  compared to the
same period last year. The increase is the direct result of the opening of three
full service  branches during 2001, a $254.3  thousand  increase in depreciation
expense for operating lease equipment, as well as increased computer and related
equipment  costs  associated  with the expansion,  upgrading and  maintenance of
personal computers and our networking infrastructure. See "Building Improvements
and Technology Projects" sections for more detail.

     Total other  non-interest  expense  increased 13.4% to $1.1 million for the
three  months  ended  March 31, 2002  compared to the same period in 2001.  This
increase  can be  primarily  attributed  to an  increase  in  the  Corporation's
marketing  efforts to attract new customers and new employees and to promote its
corporate image.

     Planning for additional branches continues.  The Corporation  believes that
the costs  associated with the opening of new branches will have a direct impact
on all the  components  of  non-interest  expense.  It is  anticipated  that the
increases in costs will be offset over time by increases in net interest and fee
income generated by business in the new marketing areas served by such branches.


<PAGE>
<TABLE>
<CAPTION>

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

(Dollars in thousands)                                             2002                               2001
                                                       ----------------------------    ------------------------------
                                                        Daily                           Daily
                                                        Average                         Average
ASSETS                                                  Balance    Interest   Rate      Balance    Interest    Rate
                                                        -------    --------   ----      -------    --------    ----
<S>                                                 <C>          <C>        <C>      <C>          <C>         <C>
    Federal funds sold                                $  19,397     $   94    1.94%     $  4,967     $   67     5.40%
    Interest bearing deposits in banks                      226          2    3.54%           91          2     8.79%
    Investment securities
        Taxable                                          79,699      1,010    5.07%       90,158      1,567     6.95%
        Tax-exempt(1)                                     1,782         33    7.30%        1,808         31     6.93%
                                                        -------    -------               -------    -------
           Total investment securities                   81,481      1,043    5.12%       91,966      1,598     6.95%
                                                        -------    -------               -------    -------
    Loans(2)
        Taxable                                         441,569      8,334    7.55%      401,153      8,545     8.52%
        Tax-exempt(1)                                     2,500         48    7.72%        4,021         91     9.05%
                                                        -------    -------               -------    -------
           Total loans                                  444,069      8,382    7.55%      405,174      8,636     8.53%
                                                        -------    -------               -------    -------
           Total interest-earning assets                545,173      9,521    6.99%      502,198     10,303     8.21%
    Non-interest earning assets
        Allowance for possible loan losses               (6,550)                          (6,609)
        Cash and due from banks                          22,688                           24,228
        Other assets                                     23,217                           18,713
                                                        -------                          -------
           Total assets                                $584,496                         $538,530
                                                        =======                          =======

LIABILITIES AND STOCKHOLDERS' EQUITY
    Savings, NOWS & money market deposits             $ 270,466      $ 959    1.42%     $232,579    $ 1,782     3.06%
    Certificates of deposits and other time             141,190      1,639    4.64%      147,190      2,191     5.95%
                                                        -------    -------               -------    -------
        Total interest bearing deposits                 411,656      2,598    2.52%      379,769      3,973     4.18%
    Securities sold under repurchase agreements           1,338          7    2.09%        2,886         35     4.85%
    Federal Home Loan Bank advances and
       other borrowings                                  30,879        334    4.33%       23,802        363     6.10%
                                                        -------    -------               -------    -------
        Total interest bearing liabilities              443,873      2,939    2.65%      406,457      4,371     4.30%
                                                        -------    -------               -------    -------
    Non-interest bearing liabilities
        Non-interest bearing demand deposits             90,512                           81,949
        Other liabilities                                 5,187                            6,271
                                                        -------                          -------
           Total liabilities                            539,572                          494,677
    Stockholders' equity                                 44,924                           43,853
                                                        -------                          -------
           Total liabilities and stockholders' equity  $584,496                         $538,530
                                                        =======                          =======
    Net interest income                                            $ 6,582                          $ 5,932
                                                                   =======                          =======
    Net yield on interest earning assets                                      4.83%                             4.72%
                                                                              ====                              ====


</TABLE>






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


<PAGE>


                                  INCOME TAXES

     Income tax expense for the three-month period ended March 31, 2002 was $641
thousand,  compared  to  $497  thousand  in the  same  period  last  year.  This
represents  an  effective  tax rate of 29.4% and 26.9% for the first  quarter of
2002 and 2001, respectively.


               LIQUIDITY MANAGEMENT AND INTEREST RATE SENSITIVITY

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

                            DEPOSIT ANALYSIS

(Dollars in thousands)                  March 31, 2002           December 31, 2001         Average       Balance
                                   -----------------------    ----------------------     --------------------------
                                   Average       Effective     Average     Effective       Dollar       Percentage
Deposit Type                       Balance         Yield       Balance       Yield        Variance       Variance
------------                       -------       ---------     -------     ---------      --------      ----------

<S>                              <C>             <C>        <C>            <C>         <C>            <C>
NOW Accounts                      $ 76,263         0.40%      $ 71,034       1.13%       $ 5,229          7.36%
Money Market                        25,213         1.49         22,490       2.37          2,723         12.11
Statement Savings                   50,426         1.55         47,077       2.53          3,349          7.11
Other Savings                        1,554         1.29          1,758       2.39           (204)       (11.60)
CD's Less than $100,000            113,671         4.79        117,282       5.73         (3,611)        (3.08)
                                   -------                     -------                   -------

Total Core Deposits                267,127         2.59        259,641       3.58          7,486          2.88

Non-Interest Bearing
    Demand Deposit Accounts         90,512           -          88,923         -           1,590          1.79
                                   -------                     -------                   -------

Total Core and Non-Interest
    Bearing Deposits               357,639         1.94        348,564       2.67          9,076          2.60
                                   -------                     -------                   -------

Tiered Savings                     117,010         2.01         97,641       3.38         19,369         19.84
CD's Greater than $100,000          27,519         4.06         29,734       5.36         (2,215)        (7.45)
                                   -------                     -------                   -------

Total Deposits                    $502,168         2.07%      $475,939       2.98%       $26,230          5.51%
                                   =======                     =======                   =======
</TABLE>
<PAGE>
     The Bank, as a member of the FHLB,  maintains a credit facility  secured by
the Bank's mortgage-related assets. As of March 31, 2002, the amount outstanding
under the Bank's  line of credit  with the FHLB was $0.  Additionally,  the FHLB
offers  several other credit  related  products which are available to the Bank.
During the first quarter of 2002, average FHLB advances were approximately $30.9
million and consisted of term advances with a variety of maturities. The average
interest rate on these advances was approximately 4.3%. The Bank currently has a
maximum borrowing capacity with the FHLB of approximately  $122.1 million.  FHLB
advances  are  collateralized  by a pledge on the  Bank's  entire  portfolio  of
unencumbered  investment  securities,  certain  mortgage loans and a lien on the
Bank's FHLB stock.

     The goal of interest rate  sensitivity  management is to avoid  fluctuating
net interest  margins,  and to enhance  consistent growth of net interest income
through periods of changing  interest rates. Such sensitivity is measured as the
difference  in the volume of assets and  liabilities  in the existing  portfolio
that are subject to  repricing in future time  periods.  The  Corporation's  net
interest rate  sensitivity  gap within one year is a negative  $212.1 million or
35.9% of total assets at March 31, 2002 compared with a negative  $149.3 million
or 27.2% of total assets at December 31, 2001. The Corporation's gap position is
one factor used to evaluate interest rate risk and the stability of net interest
margins.  Other factors include computer simulations of what might happen to net
interest income under various interest rate forecasts and scenarios.  Management
monitors  interest  rate  risk as a  regular  part of Bank  operations  with the
intention of maintaining a stable net interest margin.

<PAGE>

<TABLE>
<CAPTION>

                          INTEREST SENSITIVITY ANALYSIS
                              AS OF MARCH 31, 2002

                                                               One               Over
(Dollars in thousands)                         Within        through             five           Non-rate
                                              one year      five years           years         sensitive          Total
                                            ------------    ----------       ------------      ---------        ---------
<S>                                      <C>             <C>                <C>             <C>              <C>
ASSETS
    Federal funds sold                     $   5,000         $      --        $      --       $      --        $   5,000
    Investment securities                     24,382            41,265           20,489              --           86,136
    Interest bearing deposits in banks           339                --               --              --              339
    Loans and leases                         160,211           251,261           33,084          (6,746)         437,810
    Cash and cash equivalents                     --                --               --          38,133           38,133
    Premises and equipment                        --                --               --          15,281           15,281
    Other assets                                  12                --               --           7,588            7,600
                                            --------           -------          -------         -------          -------
    Total assets                           $ 189,944         $ 292,526        $  53,573       $  54,256         $590,299
                                            ========           =======          =======         =======          =======

LIABILITIES AND CAPITAL
    Non-interest bearing deposits          $      --         $      --         $     --       $  95,819        $  95,819
    Interest bearing deposits                388,048            34,323               --              --          422,371
    Repurchase agreements                      1,153                --               --              --            1,153
    FHLB advances and other
      borrowings                              12,748             1,170            7,446              --           21,364
    Other liabilities                             85                --               --           4,856            4,941
    Capital                                       --                --               --          44,651           44,651
                                            --------          --------          -------         -------          -------
    Total liabilities & capital            $ 402,034         $  35,493        $   7,446      $  145,326         $590,299
                                            ========          ========          =======         =======          =======

    Net interest rate
      sensitivity gap                      $(212,090)        $ 257,033        $  46,127       $ (91,070)
                                            ========          ========          =======         =======
    Cumulative interest rate
      sensitivity gap                      $(212,090)         $ 44,943        $  91,070       $      --
                                            ========          ========          =======         =======
    Cumulative interest rate
      sensitivity gap divided
      by total assets                         (35.9%)             7.6%            15.4%
                                            ========          ========          =======
</TABLE>

                            ALLOWANCE FOR LOAN LOSSES

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


<PAGE>


<TABLE>
<CAPTION>


            ANALYSIS OF CHANGES IN THE ALLOWANCE FOR POSSIBLE LOAN LOSSES
                       AND COMPARISON OF LOANS OUTSTANDING

     (Dollars in thousands)                                          March 31,                   December 31,
                                                          -----------------------------         -------------
                                                              2002              2001                 2001
                                                          -----------        ----------         -------------

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

Provision charged to operating expense                           470                235               2,929
                                                             -------            -------             -------

      Recoveries of loans previously charged-off                 266                 37                 198
      Loans charged-off                                         (344)              (269)             (3,392)
                                                             -------            -------             -------

Net loans charged-off                                            (68)              (232)             (3,194)
                                                             -------            -------             -------

Balance at end of period                                  $    6,746          $   6,612           $   6,344
                                                             =======            =======             =======

Period-end loans outstanding                              $  444,589          $ 405,879           $ 448,110

Average loans outstanding                                 $  444,069          $ 405,174           $ 419,894

Allowance for loan losses as a
   percentage of period-end loans outstanding                   1.52%              1.63%               1.42%

Ratio of net charge-offs to average loans
   Outstanding (annualized)                                     0.06%              0.23%               0.76%
</TABLE>

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


<PAGE>
<TABLE>
<CAPTION>


                         NON-PERFORMING LOANS AND ASSETS

(Dollars in thousands)                                                March 31,                    December 31,
                                                             ---------------------------         ----------------
                                                                 2002            2001                   2001
                                                                -----            ----                   ----

<S>                                                        <C>              <C>                    <C>                      <C>
Past due over 90 days and still accruing                     $    173        $  4,016                 $   174

Non-accrual loans                                               7,137           1,645                   7,630
                                                              -------         -------                 -------

Total non-performing loans                                      7,310           5,661                   7,804

Other real estate owned                                           366             593                     831
                                                              -------         -------                 -------

Total non-performing assets                                  $  7,676        $  6,254                $ 8,635
                                                              =======         =======                 ======

Non-performing loans as a percentage
     of total loans                                             1.64%           1.39%                  1.74%

Allowance for loan losses as a
   percentage of non-performing loans                          92.28%         116.80%                 81.29%

Non-performing assets as a percentage of
   total loans and other real estate owned                      1.73%           1.54%                  1.92%

Allowance for loan losses as a
  percentage of non-performing assets                          87.88%         105.72%                  73.5%
</TABLE>

     The  allowance  for loan losses as a  percentage  of  non-performing  loans
indicates  that the  allowance  for  loan  losses  is  sufficient  to cover  the
principal of all non-performing loans at March 31, 2002. Other real estate owned
("OREO")  represents  residential  and  commercial  real estate  written down to
realizable  value  (net of  estimated  disposal  costs)  based  on  professional
appraisals.  The  increase  from March 31,  2001 to March 31,  2002 in the total
non-performing  loans is primarily  the result of one loan in the amount of $3.5
million which is currently being restructured.

                                 LOAN IMPAIRMENT

     The Bank  identifies a loan as impaired  when it is probable  that interest
and principal will not be collected  according to the  contractual  terms of the
loan agreement. The accrual of interest is discontinued on impaired loans and no
income is  recognized  until all recorded  amounts of interest and principal are
recovered in full. The totals below are included in the non-performing loans and
assets table above.

     The balance of impaired  loans was $7.0  million,  $7.4  million,  and $1.3
million at March 31, 2002, December 31, 2001, and March 31, 2001,  respectively.
The associated allowance for impaired loans was $824 thousand, $820 thousand and
$215  thousand  at March 31,  2002,  December  31,  2001,  and  March 31,  2001,
respectively.

     For the three months ended March 31, 2002,  activity in the  allowance  for
impaired  loan losses  included a provision of $0, write offs of $7 thousand and
recoveries of $0. Interest income of $0 was
<PAGE>

recorded for the period while  contractual  interest  amounted to $139 thousand.
Cash collected on loans for the period was $15 thousand all of which was applied
to principal.

     For the twelve  months ended  December 31, 2001,  activity in the allowance
for  impaired  loan  losses  included a  provision  of $772,  write offs of $209
thousand and recoveries of $0 thousand.  Interest  income of $0 was recorded for
the period while contractual interest amounted to $308 thousand.  Cash collected
on loans for the period was $119 thousand all of which was applied to principal.

     For the three months ended March 31, 2001,  activity in the  allowance  for
impaired loan losses  included a provision of $0, write offs of $27 thousand and
recoveries  of $0.  Interest  income of $0 was  recorded  for the  period  while
contractual  interest amounted to $26 thousand.  Cash collected on loans for the
period was $5 thousand all of which was applied to principal.

                  BUILDING IMPROVEMENTS AND TECHNOLOGY PROJECTS

     The Bank is  planning to open a new branch in the  Coatesville  area during
the  fourth  quarter  of 2002 or first  quarter  of 2003.  The Bank  continually
explores new branch opportunities and has several additional sites under review.

     The Bank is currently installing a new check imaging system, which it plans
to place into service in the second quarter of 2002. In addition, the Bank plans
to introduce a new  integrated  branch  platform  system in the third quarter of
2002.
                                 CAPITAL ADEQUACY

     The Corporation is subject to Risk-Based  Capital Guidelines adopted by the
Federal  Reserve Board for bank holding  companies.  The Bank is also subject to
similar  capital  requirements  adopted by the Office of the  Comptroller of the
Currency.  Under these  requirements,  the regulatory  agencies have set minimum
thresholds for Tier I Capital,  Total Capital, and Leverage ratios. At March 31,
2002,  both the  Corporation's  and the  Bank's  capital  exceeded  all  minimum
regulatory  requirements,  and were considered "well  capitalized" as defined in
the  regulations  issued  pursuant  to the FDIC  Improvement  Act of  1992.  The
Corporation's  Risk-Based Capital Ratios, shown below, have decreased from March
31,  2001 due to lower than  expected  earnings in 2001,  have been  computed in
accordance with regulatory accounting policies.
<TABLE>
<CAPTION>

RISK-BASED                                      March 31,                         December 31,         "Well Capitalized"
                                     ----------------------------                -------------
CAPITAL RATIOS                           2002             2001                        2001                Requirements
--------------                           ----             ----                        ----             ------------------
<S>                                  <C>              <C>                         <C>                    <C>
   Corporation
Leverage Ratio                           7.66%            8.25%                       7.65%                   5.00%
Tier I Capital Ratio                     9.58%           11.07%                       9.50%                   6.00%
Total Risk-Based Capital Ratio          10.83%           12.34%                      10.75%                  10.00%
     Bank
Leverage Ratio                           7.44%            8.09%                       7.42%                   5.00%
Tier I Capital Ratio                     9.30%           10.73%                       9.22%                   6.00%
Total Risk-Based Capital Ratio          10.55%           11.99%                      10.47%                  10.00%
</TABLE>

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


<PAGE>
             SUBSEQUENT EVENTS - PROMOTIONS AND RESTRUCTURING

     To better serve the Company's  growing customer base and to position itself
for the future,  the Company announced the following  promotions in early May of
2002. Mr. Kevin C. Quinn was promoted to Chief Operating Officer. Mr. Quinn will
be responsible for day-to-day operations of the Bank and will continue to report
to Charles E. Swope,  President,  CEO and Chairman of the Board.  To replace Mr.
Quinn as the head of the Financial  Management  Service Division the Corporation
has selected Linda M. Hicks, who has been promoted to Executive  Vice-President.
A Personal  Banking  Division was created to catering to the  financial  service
needs of the retail and small business  customer.  Peter J. D'Angelo,  Executive
Vice-President  has been  selected to manage this  division.  Additionally,  the
Company  established  a Business  Banking  Division  to focus on a full range of
services to commercial and government banking clients.  Mr. David W. Glarner has
been  chosen to lead the  Business  Banking  Division  and has been  promoted to
Executive  Vice-President.  Mr.  William D.  Wagenmann was also promoted in this
restructuring and is now Executive Vice-President of Administrative services.


           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     There have been no material changes in the Corporation's  assessment of its
sensitivity  to market risk since its  presentation  in the 2001 Annual  Report,
filed with the SEC via EDGAR as an exhibit to its Form 10-K for the fiscal  year
ended  December  31,  2001.  Please refer to the  "Management's  Discussion  and
Analysis"  section on pages 24-38 of the  Corporation's  Annual  Report for more
information.


<PAGE>



                                PART II - OTHER INFORMATION

Item 1.           Legal Proceedings

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

Item 2.        Changes in Securities

               None

Item 3.        Defaults upon Senior Securities

               None

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

               The Annual Meeting of Shareholders of the Corporation was held on
               March 12, 2002 (the "Meeting").  Notice of the Meeting was mailed
               to shareholders of record on or about February 15, 2001, together
               with proxy  solicitation  materials  prepared in accordance  with
               Section 14(a) of the Securities Exchange Act of 1934, as amended,
               and the regulations promulgated thereunder.

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

               1.   The election of three Class III directors;

               2.   The  ratification of the appointment of Grant Thornton,  LLP
                    as the Corporation's  independent public accountants for the
                    year ending December 31, 2002; and

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



<PAGE>


                     PART II - OTHER INFORMATION - CONTINUED
<TABLE>
<CAPTION>

                                                                                        Abstentions and
                  Nominee                            For               Withheld         Broker Non-Votes
        <S>                                         <C>              <C>                   <C>
                  John A. Feathermen III             3,255,775         525,581                 0
                  John S. Halsted                    3,245,521         535,835                 0

                  J. Carol Hanson                    3,220,692         560,664                 0
</TABLE>
               The  names  of the  other  directors  whose  terms of  office  as
               directors continued after the Meeting are as follows:  Charles E.
               Swope,   David  L.  Peirce,   John  J.  Ciccarone,   Clifford  E.
               DeBaptiste, M. Robert Clarke, and John B. Waldron.

               The proposal to ratify the appointment of Grant Thornton,  LLP as
               the  Corporation's  independent  public  accountants for the year
               ending  December 31, 2002 was ratified.  The number of votes cast
               for or against as well as the  number of  abstentions  and broker
               non-votes for the ratification were as follows:
<TABLE>
<CAPTION>
                       For                   Against               Abstentions          Broker Non-votes
         <S>       <C>                      <C>                   <C>                     <C>

                    3,257,150                 1,023                  523,183                  0
</TABLE>
               There was no other  business  that came  before  the  Meeting  or
               matters incident to the conduct of the Meeting.

Item 5.        Other Information

               None



<PAGE>


                         PART II - OTHER INFORMATION - CONTINUED

Item 6.           Exhibits and Reports on Form 8-K


                  (a) Exhibits

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

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

         10.      Material contracts.
                  ------------------

     (a) Copy of the Corporation's  Amended and Restated 1995 Stock Option Plan,
is incorporated  herein by reference to the appendix to the Corporation's  Proxy
Statement for the 2001 Annual Meeting of Shareholders as filed with the SEC.

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

     (b) Reports on Form 8-K

               A Form 8-K was filed with the SEC on January 31, 2002  pertaining
               to a press release announcing 2001 earnings.

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

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

               A Form 8-K was filed with the SEC on May 10, 2002 pertaining to a
               press  release   announcing   additional   executive   management
               promotions.


<PAGE>


                                   SIGNATURES


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



                                     FIRST CHESTER COUNTY CORPORATION


                                     Charles E. Swope



                                     ----------------
DATE:  May 14, 2002                  Charles E. Swope
                                    President



                                   Kevin Quinn



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



                                     J. Duncan Smith



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