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 September 30, 1995, 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 WEST CHESTER 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 ($1 par value per share)
of the Registrant as of October 1, 1995 was 1,713,000.


<PAGE>

                 FIRST WEST CHESTER CORPORATION AND SUBSIDIARY

                                     INDEX


                                                                            PAGE

Part I.  FINANCIAL INFORMATION

         
                  Consolidated Statements of Condition
                  September 30, 1995 and December 31, 1994                   3


                  Consolidated Statements of Income
                  Three Months and Nine Months Ended
                  September 30, 1995 and 1994                                4


                  Consolidated Statements of Stockholders' Equity            5


                  Consolidated Statements of Cash Flows
                  Nine Months Ended September 30, 1995 and 1994              6


                  Notes to Consolidated Financial Statements               7-9


                  Management's Discussion and Analysis of
                  Financial Condition and Results of Operations          10-23



Part II. OTHER INFORMATION

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

                  Signatures                                                26


<PAGE>

                 FIRST WEST CHESTER CORPORATION AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CONDITION

<TABLE>
<CAPTION>
(Dollars in thousands)                                                                    Unaudited  
                                                                                       September 30,               December 31,
                                                                                                1995                       1994    
<S>                                                                                   <C>                         <C>

ASSETS
    Cash and due from banks                                                             $     14,863               $     19,981  
    Federal funds sold                                                                        13,950                      2,000  
                                                                                              ------                      -----  

           Total cash and cash equivalents                                                    28,813                     21,981  

    Investment securities held-to-maturity (market value of $25,092
        and $28,528 at September 30, 1995 and December 31                                     25,053                     29,367  
        1994, respectively)

    Investment securities available-for-sale at market value                                  64,731                     49,022

    Loans                                                                                    240,579                    239,126
    Less allowance for possible loan losses                                                   (4,055)                   (3,303)
                                                                                              ------                    ------ 

           Net loans                                                                         236,524                    235,823

    Premises and equipment                                                                     5,345                      4,826   
    Other assets                                                                               6,731                      7,080   
                                                                                               -----                      -----   
    
           TOTAL ASSETS                                                                  $   367,197                $   348,099   
                                                                                         ===========                ===========   

LIABILITIES 
    Deposits
        Noninterest-bearing                                                             $     52,991               $     57,827   
        Interest-bearing                                                                     268,265                    247,638   
                                                                                             -------                    -------   

                Total deposits                                                               321,256                    305,465   

    Securities sold under repurchase agreements                                               10,951                     10,499   
    Other liabilities                                                                          5,136                      3,836   
                                                                                               -----                      -----   

                Total liabilities                                                            337,343                    319,800   
                                                                                             -------                    -------   

STOCKHOLDERS' EQUITY
    Common stock, par value $1-authorized, 5,000,000 shares;
        outstanding 1,713,000 and 1,200,000 at September 30, 1995 
        and December 31, 1994, respectively; excluding
        shares in treasury 87,000 at September 30, 1995 
        and 0 at December 31, 1994                                                             1,800                      1,200   
    Additional paid-in capital                                                                 3,300                      3,900   
    Retained earnings                                                                         26,978                     24,998   
    Net unrealized loss on securities available-for-sale                                        (338)                    (1,799)
    Treasury stock, at cost                                                                   (1,886)                             
                                                                                              ------                     ------  

                Total stockholders' equity                                                    29,854                     28,299
                                                                                              ------                     ------

                TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                               $   367,197                 $  348,099
                                                                                         ===========                 ==========

</TABLE>

The accompanying notes are an integral part of these statements.

<PAGE>

                 FIRST WEST CHESTER CORPORATION AND SUBSIDIARY

                       CONSOLIDATED STATEMENTS OF INCOME

                                  (UNAUDITED)
<TABLE>
<CAPTION>

(Dollars in thousands - except per share data)                              Three Months Ended              Nine  Months Ended 
                                                                               September 30,                   September 30,   
                                                                         1995               1994              1995         1994
<S>                                                                   <C>             <C>                <C>            <C>

INTEREST INCOME
    Loans, including fees                                              $   5,638        $   4,924          $ 17,059      $ 14,141
    Investment securities                                                  1,367            1,197             3,732         3,643
    Federal funds sold                                                       206               43               388           127
                                                                             ---               --               ---           ---
    
                Total interest income                                      7,211            6,164            21,179        17,911
                                                                           -----            -----            ------        ------

INTEREST EXPENSE
    Deposits                                                               2,917            2,183             8,120         6,134
    Securities sold under repurchase agreements                              119               65               313           191
    Other borrowings                                                          --               11                59            11
                                                                            ----            -----              ----          ----

                Total interest expense                                     3,036            2,259             8,492         6,336
                                                                           -----            -----             -----         -----

                Net interest income                                        4,175            3,905            12,687        11,575

    Provision for loan losses                                                400              345             1,184         1,245
                                                                           -----            -----             -----         -----

                Net interest income after
                   provision for possible loan losses                      3,775            3,560            11,503        10,330
                                                                           -----            -----            ------        ------

NON-INTEREST INCOME
    Financial Management Services                                            459              441             1,377         1,323
    Service charges on deposit accounts                                      225              237               678           664
    Other                                                                    150              143               427           449
                                                                             ---              ---               ---           ---
                Total non-interest income                                    834              821             2,482         2,436
                                                                             ---              ---             -----         -----

NON-INTEREST EXPENSE
    Salaries and employee benefits                                         1,781            1,680             5,306         4,813
    Net occupancy and  equipment                                             585              612             1,741         1,717
    FDIC deposit insurance                                                   (19)             174               318           517
    Bank shares tax                                                           75               68               222           203
    Other                                                                    604              603             1,911         1,862
                                                                             ---              ---             -----         -----

                Total non-interest expense                                 3,026            3,137             9,498         9,112
                                                                           -----            -----             -----         -----

                Income before income taxes                                 1,583            1,244             4,487         3,654

INCOME TAXES                                                                 498              371             1,399         1,093
                                                                             ---              ---             -----         -----

                NET INCOME                                             $   1,085        $     873        $    3,088    $    2,561
                                                                       =========        =========        ==========    ==========

PER SHARE DATA

    Net income                                                         $    0.63        $    0.49        $     1.75    $     1.42
                                                                       =========        =========        ==========    ==========

    Dividends declared                                                 $    0.23        $    0.19       $      0.63    $     0.55
                                                                       =========        =========       ===========    ==========

Weighted average shares outstanding                                    1,716,130        1,800,000         1,765,522     1,799,568
                                                                       =========        =========         =========     =========

</TABLE>

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

                 FIRST WEST CHESTER CORPORATION AND SUBSIDIARY
           CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

(Dollars in thousands)

<TABLE>
<CAPTION>
                                               
                                                                                                        1995         1994
<S>                                                                                                  <C>              <C>   

Balance at January 1,                                                                                 $ 28,299         $ 27,767
                                                        

    Change in accounting for investments on January 1, 1994                                                 --              236
    Net  income to date                                                                                  3,088            2,561
    Cash dividends declared                                                                             (1,108)            (996)
    Net unrealized gain (loss) on securities available-for-sale                                          1,461           (1,230)
    Treasury stock transactions                                                                         (1,886)               5
                                                                                                        ------            ------   

Balance at September 30,                                                                              $ 29,854         $ 28,343 
                     ===                                                                              ========         ======== 

</TABLE>











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

                 FIRST WEST CHESTER CORPORATION AND SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

(Dollars in thousands)                                                                            Nine Months Ended
                                                                                                       September 30,       
                                                                                                    1995   _           1994   

<S>                                                                                            <C>                 <C>

OPERATING ACTIVITIES
    Net Income                                                                                    $3,088               $2,561
    Adjustments to reconcile net income to net cash
           provided by operating activities:                                                                                 
        Depreciation                                                                                 455                  461
        Provision for loan losses                                                                  1,184                1,245
        Amortization of investment security premiums
           and accretion of discounts                                                                165                  328
        Amortization of deferred fees on loans                                                       103                   46
        Provision for deferred income taxes                                                           --                 (399)
        Increase in other assets                                                                    (404)              (1,713)
        Increase (decrease) in other liabilities                                                   1,296               (1,654)
                                                                                                   -----               ------ 

           Net cash provided by operating activities                                               5,887                  875
                                                                                                   -----                  ---

INVESTING ACTIVITIES
        Increase in loans                                                                         (1,988)             (12,510)
       Proceeds from maturities of investment securities available-for-sale                        7,428               10,520
       Proceeds from maturities of investment securities held-to-maturity                          5,262                9,369
       Purchases of investment securities available-for-sale                                     (21,037)              (7,380)
       Purchases of investment securities held-to-maturity                                          (999)              (7,713)
       Purchase of premises and equipment, net                                                      (974)                (807)
                                                                                                    ----                 ---- 
                                                                                                                             
           Net cash used in investing activities                                                 (12,308)              (8,521)
                                                                                                 -------               ------ 
                                                                                                                                    
FINANCING ACTIVITIES                                                                                                         
       Increase (decrease) in deposits                                                            15,791               (6,375)
        Increase in securities sold under repurchase agreements                                      452                2,069
       Cash dividends                                                                             (1,104)                (973)
       Treasury stock transactions                                                                (1,886)                   5 
                                                                                                  ------               ------    

           Net cash provided by (used in) financing activities                                    13,253               (5,274)
                                                                                                  ------               ------ 

              NET DECREASE IN CASH AND CASH EQUIVALENTS                                            6,832              (12,920)

Cash and cash equivalents at beginning of year                                                    21,981               31,264
                                                                                                  ------               ------

Cash and cash equivalents at end of year                                                         $28,813              $18,344
                                                                                                 =======              =======
                                                                                                                             
                                                                                                        


</TABLE>

                                                                            
The accompanying notes are an integral part of these statements.          


                                                                        
<PAGE>
                 FIRST WEST CHESTER CORPORATION AND SUBSIDIARY
                   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.  For further  information,  refer to the  consolidated
     financial  statements and footnotes  thereto included in First West Chester
     Corporation and Subsidiary's (the "Company") Annual Report on Form 10-K for
     the  year  ended  December  31,  1994.  The  Company's   primary  operating
     subsidiary is the First National Bank of West Chester (the "Bank").

2.   The results of operations for the three-month and nine-month  periods ended
     September 30, 1995 and 1994 are not  necessarily  indicative of the results
     to be expected for the full year.

3.   Per share data is based on the weighted  average number of shares of common
     stock outstanding during the period and includes adjustment for the 3-for-2
     stock split discussed in Note 6.

4.   On January 1, 1995, the Company adopted  Statement of Financial  Accounting
     Standards  (SFAS) No. 114,  "Accounting  for Creditors for  Impairment of a
     Loan," as amended by SFAS No. 118,  "Accounting by Creditors for Impairment
     of a Loan - Income Recognition and Disclosures." SFAS No. 114 requires loan
     impairment  to be measured  based on the present  value of expected  future
     cash flows discounted at the loan's effective interest rate, its observable
     market  price,  or  the  fair  value  of the  collateral  if  the  loan  is
     collateral-dependent. If it is probable that a creditor will foreclose on a
     property,  the creditor must measure  impairment based on the fair value of
     the collateral.  SFAS No. 118 allows  creditors to use existing methods for
     recognizing interest income on impaired loans.

     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. Retail loans and residential mortgages
     have been excluded from these calculations.

     Loan  impairment is measured by estimating  the expected  future cash flows
     and  discounting  them  at the  respective  effective  interest  rate or by
     valuing the underlying  collateral.  The recorded investment in these loans
     and the  valuation  for credit  losses  related to loan  impairment  are as
     follows:

<PAGE>
                 FIRST WEST CHESTER CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (CONTINUED)

                                  (UNAUDITED)

4.   (Continued)
           

     (Dollars in thousands)                                 1995          
                                                January 1     September 30
     Principal amount of impaired loans         $   2,819     $       798
     Less valuation allowance                         380             333
                                                      ---             ---
               
                                                $   2,439     $       465
                                                =========     ===========

     On January 1, 1995 a valuation for credit losses  related to impaired loans
     was established.  The activity in this allowance account for the three- and
     nine-month  periods ended  September  30, 1995 is as follows: 
<TABLE>
<CAPTION>

                                                        Three months ended  Nine months ended  
<S>                                                       <C>                 <C>

     Valuation allowance at beginning of period             $    303            $    380  
     Provision for loan impairment                                50                 280
     Direct charge-offs                                          (20)               (369)
     Recoveries                                                   --                  42 
                                                                                      -- 
     Valuation allowance at end of period                       $333                $333
                                                                ====                ====
</TABLE>

     Total cash  collected on impaired  loans  during the three- and  nine-month
     periods ended September 30, 1995 was $17 thousand and $1,432  thousand,  of
     which $17  thousand  and $1,260  thousand  was  credited  to the  principal
     balance  outstanding  on such loans and $0 and $172 thousand was recognized
     as interest income, respectively.  Interest that would have been accrued on
     impaired loans during the three- and nine-month periods ended September 30,
     1995 was $18  thousand  and $76  thousand,  respectively.  Interest  income
     recognized  during the three- and  nine-month  periods ended  September 30,
     1995 was $0 and $172 thousand,  respectively.  During the nine months ended
     September  30,  1995,  two  impaired  loans  totaling  $699  thousand  were
     transferred to Other Real Estate Owned.  Also during the nine-month  period
     ended, one impaired loan for $500 thousand was transferred to the Company's
     new subsidiary as an equity investment.

5.   The Company  adopted,  effective  January 1, 1995,  Statement  of Financial
     Accounting Standards (SFAS) No. 116, "Accounting for Contributions Received
     and Contributions  Made." SFAS No. 116 specifies that contributions made by
     the Company be  recognized  as expenses in the period made and as decreases
     of assets or increases of liabilities depending on the form of the benefits
     given.

     In accordance with SFAS No. 116, the Company accrued contribution  expenses
     of $117 thousand relating to long-term  commitments to area  not-for-profit
     organizations  during the first quarter of 1995. Financial statements prior
     to 1995  were not  restated.  Prior  to 1995,  the  Company  accounted  for
     contributions made on a cash-basis.


<PAGE>
                 FIRST WEST CHESTER CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (CONTINUED)

                                  (UNAUDITED)


6.   On September  18, 1995,  the Board of  Directors  declared a 3-for-2  stock
     split,  payable  October 16, 1995,  in the form of a 50% stock  dividend to
     stockholders  of record on October 3, 1995.  Par value  remained  at $1 per
     share. The stock split resulted in the issuance of 600 thousand  additional
     shares of common stock from authorized but unissued shares. The issuance of
     authorized  but unissued  shares  resulted in the transfer of $600 thousand
     from additional paid-in capital to common stock, representing the par value
     of the shares issued.  Accordingly,  earnings per share, cash dividends per
     share and weighted  average  shares of common stock  outstanding  have been
     restated to reflect the stock split.


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


                        EARNINGS SUMMARY AND HIGHLIGHTS

     Net income for the three month period ended  September  30, 1995 was $1,085
thousand,  an increase  of $212  thousand or 24.3% over the same period in 1994.
Earnings per share for the three month  period  ending  September  30, 1995 were
$0.63,  a $0.14 or 28.6%  increase over the same period in 1994.  Net income for
the nine month period ending September 30, 1995 was $3,088 thousand, an increase
of $527  thousand or 20.6% over the same period in 1994.  Earnings per share for
the first nine months of 1995 were  $1.75,  a $0.33 or 23.2%  increase  over the
same period in 1994.  These  increases are a result of improved  asset  quality,
strong net interest margins, and FDIC premium reductions.

     The Company's  main operating  subsidiary,  The First National Bank of West
Chester  (the  "Bank"),  opened a new  Exton  area  branch  in  August  1995 and
purchased the Commonwealth Savings Bank building at the Southwest corner of High
and Market  Streets.  The Company  repurchased  87,000  shares (on a  post-split
basis) of its common stock under a common stock repurchase  program announced on
June 30, 1995 and  authorized  a 3-for-2  stock split in the form of a 50% stock
dividend payable October 16, 1995.

     Performance  ratios for the three- and nine-month  periods ended  September
30, 1995 were  significantly  higher  than the same ratios for the same  periods
during 1994 as shown below. Cash dividends  declared during the third quarter of
1995 increased to $0.23 per share, a 21.1% increase  compared to $0.19 per share
in the third quarter of 1994. On a year-to-date  basis, cash dividends increased
to $0.63 per share,  a 14.6%  increase  compared  to $0.55 per share in the same
period of 1994. The Company has historically  maintained a dividend payout ratio
of at least 35.0%.
                                                                         
                                   Three Months Ended         Nine Months Ended
                                      September 30,             September 30,
                                  1995            1994       1995          1994
   PERFORMANCE RATIOS
   Return on Average Assets       1.20%            .99%      1.15%         1.01%
   Return on Average Equity      14.61%          12.16%     13.79%        12.37%
   Earnings Retained             64.24%          61.08%     64.12%        57.75%
   Dividend Payout Ratio         35.78%          38.92%     35.88%        42.25%
   Book Value Per Share         $17.43          $15.75     $17.43        $15.75



<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                                                  1995                                    1994                 
                                                       Daily                                  Daily
                                                       Average                                Average
ASSETS                                                 Balance      Interest     Rate         Balance      Interest    Rate
<S>                                                 <C>            <C>        <C>          <C>           <C>        <C>


Federal Funds Sold                                     $13,925         $206      5.92%         $3,780           $43   4.55%      
Investment Securities
    Taxable                                             85,395        1,323      6.20%         83,574         1,142   5.47%
    Tax Exempt                                           3,484           59      6.78%          4,062            76   7.44%
                                                         -----         -----                    -----          ---- 

        Total Investment Securities                     88,879        1,382      6.22%         87,636         1,218   5.56%
                                                        ------        -----                    ------         -----   
Loans
    Taxable                                            236,770        5,523      9.33%        222,096         4,802   8.65%
    Tax Exempt                                           6,531          158      9.67%          7,098           168   9.44%
                                                         -----          ---                     -----           ---  
        
        Total Loans                                    243,301        5,681      9.34%        229,194         4,970   8.67%
                                                       -------        -----                   -------         -----   

Total Interest Earning Assets                          346,105        7,269      8.40%        320,610         6,231   7.77%

Non-interest Earning Assets                                   
    Allowance for Possible Loan Losses                  (3,857)                               (3,018)
    Cash and Due From Banks                             16,697                                 19,420
    Other Assets                                        11,998                                  9,945
                                                        ------                                  -----

Total Assets                                          $370,943                               $346,957
                                                      ========                               ========

Liabilities And Stockholders' Equity
Savings, NOWS & Money Market Deposits                 $162,774       $1,364      3.35%       $186,973        $1,444  3.09%
Certificates of Deposits and Other Time                107,879        1,553      5.76%         64,724           739  4.57%
                                                       -------        -----                    ------           ---  

Total Interest Bearing Deposits                        270,653        2,917      4.31%        251,697         2,183  3.47%

Securities Sold under Repurchase Agreements             14,435          119      3.30%         12,300            75  2.44%
Other Borrowings                                            --           --         --             98             1  4.08%
                                                                                                   --             -  ---- 

Total Interest Bearing Liabilities                     285,088        3,036      4.26%        264,095         2,259  3.42%
                                                       -------        -----                   -------         -----  

Non-interest Bearing Liabilities
    Non-interest Bearing Demand Deposits                51,106                                 51,381
    Other Liabilities                                    5,040                                  3,311
                                                         -----                                  -----

Total Liabilities                                      341,234                                318,787

Stockholders' Equity                                    29,709                                 28,170
                                                        ------                                 ------

Total Liabilities and Stockholders' Equity            $370,943                                346,957
                                                      ========                                =======

Net Interest Income                                                  $4,233                                  $3,972
                                                                     ======                                  ======

Net Yield on Interest Earning Assets                                             4.89%                               4.96%
                                                                                 ====                                ==== 

<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 20% interest
     expense disallowance for 1995 and 1994.
(2)  Non-accruing loans are included in the average balance.

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

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

Dollars in Thousands                                                  1995                            1994                     
                                                       Daily                               Daily
                                                       Average                             Average
ASSETS                                                 Balance     Interest      Rate      Balance          Interest       Rate
<S>                                                <C>          <C>            <C>       <C>              <C>            <C>
Federal Funds Sold                                    $  8,725     $    388      5.93%      $4,547              $127       3.72%
Investment Securities
    Taxable                                             78,622        3,592      6.09%      86,439             3,474       5.36%
    Tax Exempt                                           3,690          192      6.95%       4,141               232       7.47%
                                                         -----          ---                  -----               ---       

        Total Investment Securities                     82,312        3,784      6.13%      90,580             3,706       5.46%
                                                        ------        -----                 ------             -----       
Loans
    Taxable                                            238,137       16,711      9.36%     217,950           13,761        8.42%
    Tax Exempt                                           6,676          478      9.55%       7,368              522        9.45%
                                                         -----          ---                  -----              ---        
        
        Total Loans                                    244,813       17,189      9.36%     225,318           14,283        8.45%
                                                       -------       ------      ----      -------           ------        ---- 

Total Interest Earning Assets                          335,850       21,361      8.48%     320,445           18,116        7.54%

Non-interest Earning Assets                                   
    Allowance for Possible Loan Losses                  (3,654)                            (3,100)
    Cash and Due From Banks                             16,122                              17,809
    Other Assets                                        12,026                               9,384
                                                        ------                               -----

Total Assets                                          $360,344                            $344,538
                                                      ========                            ========

Liabilities And Stockholders' Equity
Savings, NOWS & Money Market Deposits                 $162,669       $4,073      3.34%    $192,789          $4,119        2.85%
Certificates of Deposits and Other Time                 97,920        4,047      5.51%      58,420           2,015        4.60%
                                                        ------        -----                 ------           -----        

Total Interest Bearing Deposits                        260,589        8,120      4.15%     251,209           6,134        3.26%

Securities Sold under Repurchase Agreements             12,846          313      3.25%      10,472             191        2.43%
Other Borrowings                                         1,269           59      6.20%         335              11        4.38%
                                                         -----           --                    ---              --        

Total Interest Bearing Liabilities                     274,704        8,492      4.12%     262,016           6,336        3.22%
                                                       -------        -----                -------           -----        

Non-interest Bearing Liabilities
    Non-interest Bearing Demand Deposits                51,349                              50,025
    Other Liabilities                                    4,440                               4,441
                                                         -----                               -----

Total Liabilities                                      330,493                             316,482

Stockholders' Equity                                    29,851                              28,056
                                                        ------                              ------

Total Liabilities and Stockholders' Equity            $360,344                            $344,538
                                                      ========                            ========

Net Interest Income                                                 $12,869                                $11,780
                                                                    =======                                =======

Net Yield on Interest Earning Assets                                             5.11%                                    4.90%
                                                                                 ====                                     ==== 
<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 20% interest
     expense disallowance for 1995 and 1994.
(2)  Non-accruing loans are included in the average balance.
</FN>
</TABLE>


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

                              NET INTEREST INCOME

     Net interest  income is the difference  between  interest income on earning
assets and interest expense on interest-bearing liabilities. Net interest income
for the three-  and  nine-month  periods  ended  September  30,  1995,  on a tax
equivalent basis, was $4,233 thousand and $12,869  thousand,  compared to $3,972
thousand and $11,780  thousand for the same periods in 1994,  respectively.  Net
interest  margin,  on a tax equivalent  basis was 4.89% and 5.11% for the three-
and nine-month  periods ended September 30, 1995 compared to 4.95% and 4.90% for
the  same  periods  in  1994,  respectively.  Average  interest  earning  assets
increased approximately $25.5 million to $346.1 million during the third quarter
of 1995 compared to $320.6 million in the same period last year. The increase in
average  earnings assets was a direct result of net deposit growth in the second
quarter of 1995. This inflow of funds has been  temporarily  invested in federal
funds sold and short term investments.


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

                                               Three-Months                 Nine-Months
         Yield On:                          Ended September 30,         Ended September 30,
                                          1995          1994             1995        1994
<S>                                     <C>           <C>             <C>          <C>   

Interest Earning Assets                   8.40%         7.77%            8.48%       7.54
Interest Bearing Liabilit                 4.26%         3.42%            4.12%       3.22%
                                          ----          ----             ----        ---- 
Net Interest Spread                       4.14%         4.35%            4.36%       4.32%
Contribution of Interest Free Funds       0.75%         0.61%            0.75%       0.58%
                                          ----          ----             ----        ---- 
Net Yield on Interest Earning Assets      4.89%         4.96%            5.11%       4.90%
                                          ====          ====             ====        ==== 
</TABLE>

     The Company anticipates  declines in the net interest margin as competition
for new loan business  remains very strong and while  maturing  certificates  of
deposit are renewing at higher rates.

                        INTEREST INCOME ON FEDERAL FUNDS

     Interest income on federal funds sold for the three- and nine-month periods
ended  September  30, 1995,  increased  $163  thousand and $261 thousand to $206
thousand and $388 thousand,  respectively,  when compared to the same periods in
1994.  The  increase  in  federal  funds  interest  income  for the  three-  and
nine-month  periods ended  September 30, 1995 is due to a $10.1 million and $4.2
million  increase in average  balances and a 137 basis point and 221 basis point
increase in rates compared to the same periods in 1994, respectively.



<PAGE>
                    INTEREST INCOME ON INVESTMENT SECURITIES

     On a  tax  equivalent  basis,  interest  income  on  investment  securities
increased $164 thousand and $78 thousand for the three- and  nine-month  periods
ended September 30, 1995 to $1,382 thousand and $3,784  thousand,  respectively,
when  compared to the same  periods in 1994.  The  increase for the three- month
period is due to an increase in average  balances of $1.2 million and a 66 basis
point  increase  in the yield  earned on  securities  when  compared to the same
period last year.  The increase for the  nine-month  period is due to a 67 basis
point  increase in the yield earned on  securities,  partially  offset by a $8.3
million decrease in average balances when compared to the same period last year.
Proceeds from investment  maturities and paydowns in 1994 were used to fund loan
growth.

                            INTEREST INCOME ON LOANS

     Loan interest income, on a tax equivalent basis, generated by the Company's
loan portfolio  increased $711 thousand and $2,906  thousand to $5,681  thousand
and $17,189  thousand for the three- and nine-month  periods ended September 30,
1995,  compared  to the same  periods in 1994,  respectively.  The  increase  in
interest income for the three- and nine-month period ended September 30, 1995 is
attributable  to a $14.1  million and $19.5  million  increases in average loans
outstanding  and 67 basis point and 91 basis point  increases  in rates  earned,
respectively.  The increase in the loan portfolio yield is a result of increased
new loan demand and several  increases  in lending  rates,  partially  offset by
increased  competition on existing loans. Month end loan portfolio totals peaked
during the second quarter of 1995 at $249 million.

                      INTEREST EXPENSE ON DEPOSIT ACCOUNTS

     Interest  expense on deposit  accounts  increased  $734 thousand and $1,986
thousand  for the three- and  nine-month  periods  ended  September  30, 1995 to
$2,917 thousand and $8,120  thousand,  compared to the same periods in 1994. The
increases for the three- and  nine-month  periods  ended  September 30, 1995 are
results  of 84 basis  point and 89 basis  point  increases  in the rates paid on
interest-bearing  deposits and increases in average interest-bearing deposits of
$19.0  million  and  $9.4  million   compared  to  the  same  periods  in  1994,
respectively.  Interest rates offered on deposit accounts dropped throughout the
first half of 1994 before rising at the end of 1994.

     Total average interest-bearing deposits increased $18.9 million or 7.53% in
the three-month period ended September 30, 1995,  compared to the same period in
1994.  During that time period,  average savings,  NOW and money market deposits
declined $24.2 million or 12.9%, while average certificates of deposit and other
time deposits increased $43.2 million or 66.7%. The increases in certificates of
deposit were used to reduce short term borrowings and fund loan growth.

     The Company's  effective rate on  interest-bearing  deposits increased from
3.16%, 3.14%, 3.47% and 3.69% in the first, second, third and fourth quarters of
1994,  respectively,  to 3.89%, 4.25% and 4.31% in the first,  second, and third
quarters of 1995. Although offering rates on certificates of deposit leveled off
at the end of 1995's third quarter,  the Company  anticipates an increase in the
effective rate on deposits due to the rollover of lower yielding certificates of
deposits at today's higher rates.


<PAGE>

        INTEREST EXPENSE ON SECURITIES SOLD UNDER REPURCHASE AGREEMENTS

     Interest expense on securities sold under repurchase  agreements  increased
$44 thousand and $122 thousand to $119 thousand and $313 thousand for the three-
and  nine-month  periods  ended  September 30, 1995 compared to $75 thousand and
$191 thousand for the three- and  nine-month  periods ended  September 30, 1994,
respectively.  The increases are  attributable  to $2.1 million and $2.4 million
increases in average  outstandings  and 86 and 82 basis point increases in rates
paid  compared to the three- and  nine-month  periods ended  September  30,1994,
respectively.

                      INTEREST EXPENSE ON OTHER BORROWINGS

     Interest  expense on other  borrowings  was $59 thousand for the nine-month
period ended September 30, 1995 compared with $11 thousand in the same period in
1994.  This  increase  is  attributable  to a $0.9  million  increase in average
outstandings  and a 182 basis point increase in rates paid during the nine-month
period ended  September 30, 1995.  There were no  borrowings in the  three-month
period ended September 30, 1995.

                       PROVISION FOR POSSIBLE LOAN LOSSES

     During the three- and  nine-month  periods ended  September  30, 1995,  the
Company  recorded  $400  thousand and $1,184  thousand as provision for possible
loan losses  compared to $345 thousand and $1,245  thousand for the same periods
in 1994.  The  allowance for possible loan losses as a percentage of total loans
was 1.69% as of September  30, 1995  compared to 1.37% as of September 30, 1994.
The  Company  continues  to deal with  non-performing  loans by  building up the
allowance for possible loan losses and  aggressively  charging-off  loans deemed
uncollectible.  See the section titled  "Allowance For Possible Loan Losses" for
additional discussion.

                              NON-INTEREST INCOME

     Non-interest  income  increased  $13  thousand  and  $46  thousand  to $834
thousand  and  $2,482  thousand  for the three- and nine-  month  periods  ended
September 30, 1995,  compared to $821 thousand and $2,436  thousand for the same
periods in 1994.

     The  primary  component  of  non-interest  income is  Financial  Management
Services  revenue,  which  increased  $18 thousand  and $54  thousand  from $441
thousand  and  $1,323  thousand  for the  three- and  nine-month  periods  ended
September 30, 1994 to $459 thousand and $1,377  thousand for the same periods in
1995.  Financial  Management  Services'  assets grew $18.3  million  from $257.6
million at  September  30, 1994 to $275.9  million at September  30,  1995.  The
growth in  Financial  Management  Services,  in both  assets  and  revenues,  is
primarily  the  result of  business  development  efforts,  particularly  in the
investment  management,  trust,  and  estate  areas  and the  impact  of  market
performance.

     Service charges on deposit accounts decreased $12 thousand to $225 thousand
for the  three-month  period ended September 30, 1995 from $237 thousand for the
same period in 1994. This decrease  relates to increases in the earnings credits
offered to business customers. Service charges on deposit accounts increased $14
thousand to $678  thousand for the  nine-month  period ended  September 30, 1995
from $664  thousand  for the same  period in 1994.  This  growth  relates  to an
internal  review of  unprofitable  accounts  and  changes  in  service  charges,
partially  offset by  increases  in the  earnings  credits  offered to  business
customers.
<PAGE>

     Other  non-interest  income  increased $7 thousand to $150 thousand for the
three-month  period ended  September  30, 1995 compared to $143 thousand for the
same period in 1994.  This  increase  relates to an increase in revenue from the
sale of  residential  mortgage  loans and  increases in rental income during the
third quarter of 1995. Other non-interest  income decreased $22 thousand to $427
thousand for the nine-month period ended September 30, 1995 compared to $449 for
the  nine-month  period ended  September  30,  1994.  This  decrease  relates to
decreases in revenue from the sale of residential mortgage loans and credit card
income, partially offset by increases in rental income.

                              NON-INTEREST EXPENSE

     Total  non-interest  expense for the three-month period ended September 30,
1995  decreased  $111 thousand to $3,026  thousand from $3,137  thousand for the
same period in 1994. Total non-interest  expense for the nine-month period ended
September 30, 1995 was $9,498 thousand, an increase of $386 thousand from $9,112
thousand for the same period in 1994. The change in non-interest expense reflect
the expense incurred to service the Company's  expanding customer base including
costs of non-performing assets, offset by reductions in FDIC insurance premiums.
The various components of non-interest expense changes are discussed below.

     Salaries and employee  benefits  increased  $101 thousand and $493 thousand
for the  three-  and  nine-month  periods  ended  September  30,  1995 to $1,781
thousand and $5,306 compared to $1,680 thousand and $4,813 thousand for the same
periods in 1994.  Annual employee raises and a staff increase from 173 full-time
equivalents  (FTE's)  employees in the third quarter of 1994 to 176 FTE's in the
third quarter of 1995 are responsible for the increases.

     Net occupancy, equipment, and data processing expense was $585 thousand for
the three-  month period  ended  September  30, 1995, a decrease of $27 thousand
over the same period last year.  The decrease is primarily a result of decreased
costs associated with  maintenance  contracts on Bank equipment and decreases in
computer  software  purchases,  partially  offset  by  increases  in MAC  system
transaction  volume and personal  computer  acquisition  costs.  Net  occupancy,
equipment and data  processing  expense was $1,741  thousand for the nine- month
period  ended  September  30, 1995,  an increase of $24  thousand  over the same
period last year. The increase is the result of increased costs  associated with
the opening of the new Exton branch,  increases in MAC system transaction volume
and personal  computer  acquisition  costs,  partially offset by decreased costs
associated  with  maintenance  contracts  on Bank  equipment  and  decreases  in
computer software purchases.

     The Federal  Deposit  Insurance  Corporation  (FDIC)  administers  the Bank
Insurance  Fund (BIF) and the Savings  Association  Insurance  Fund (SAIF).  BIF
insurance  expense  was $(19)  thousand  and $318  thousand  for the  three- and
nine-month periods ended September 30, 1995, decreases of $193 thousand and $199
thousand over the same periods last year. BIF insurance  premiums are calculated
on  quarter-end  deposits  and  assessed  quarterly.  On August 8, 1995 the FDIC
approved a final rule  reducing  BIF deposit  insurance  premiums for the second
half of 1995 to 4 cents  from 23 cents per year per $1,000 in  deposits  for the
best-rated banks.  Premiums for the SAIF will remain at current levels.  The new
premium  rate was applied  retroactively  to June 1, 1995.  The Bank  received a
refund of $189 thousand during the third quarter of 1995, reducing third quarter
FDIC expense to $(19) thousand.
<PAGE>

     Bank  shares  tax was $75  thousand  and $222  thousand  for the three- and
nine-month  periods ended September 30, 1995, an increase of $7 thousand and $19
thousand over the same periods last year.  The  Pennsylvania  Bank Shares Tax is
calculated on year-end Bank stockholders' equity and paid annually.

     Other  non-interest  expense increased $1 thousand and $49 thousand to $604
thousand  and  $1,911  thousand  for the three- and nine-  month  periods  ended
September 30, 1995  compared to $603  thousand and $1,862  thousand for the same
periods in 1994. The $1 thousand three month change  includes  decreases in loan
related professional fees offset by increases in operating supplies and business
development expenses.  The $49 thousand nine month increase is the result of the
adoption  of  SFAS  No.  116,   "Accounting  for   Contributions   Received  and
Contributions  Made" on  January 1, 1995  offset by  decreases  in loan  related
professional fees and loan collection expenses.

                          PURCHASE OF OFFICE BUILDING

     On July 24, 1995, the Bank  purchased the building on the southeast  corner
of High and Market Streets in the Borough of West Chester.  This historic corner
across from the Court House was owned by William Penn in 1702.  Definitive plans
for its use have not been finalized.

               DISTRIBUTION OF FUNDS FROM QUALIFIED PENSION PLAN

     On October 21, 1994, the Board of Directors approved the termination of the
Company's Qualified Defined Benefit Retirement Plan effective December 31, 1994.
Distributions  of  participants'  vested  benefits  are  expected  in the fourth
quarter of this year upon receipt of appropriate regulatory approvals.

                                  INCOME TAXES

     Income tax expense for the three- and  nine-month  periods ended  September
30, 1995 was $498  thousand and $1,399  thousand,  compared to $371 thousand and
$1,093  thousand in the same periods last year.  This  represents  effective tax
rates of 31.5% and 31.2% for the three- and nine-month  periods ended  September
30,  1995,  compared  with  29.8%  and  29.9%  for the  same  periods  in  1994,
respectively. The primary reason for the increase in the effective tax rate is a
decrease in tax-exempt  instruments  as a percentage  of total  assets.  Average
tax-exempt  assets as a percentage of total average assets were 2.9% and 3.3% at
September 30, 1995 and 1994, respectively.


<PAGE>


               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
Company'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 effectively  monitor changes in liquidity and to
react accordingly to fluctuations in market conditions.

     The primary source of liquidity for the Company is derived from its ability
to generate and maintain NOW,  money-market,  savings,  and smaller denomination
certificates of deposit accounts.  The Company 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 Company's  non-interest
bearing demand deposit  accounts.  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)                September 30, 1995         December 31, 1994        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                        $ 42,764       2.30%       $ 41,985      2.30%          $779         1.86% 

Money Market                          29,723       3.22          32,962      2.68         (3,239)       (9.83)

Statement Savings                     46,656       3.64          51,468      3.06         (4,812)       (9.35)

Other Savings                          4,775       2.68           5,571      2.60           (796)      (14.29)

CD's Less than $100,000               86,825       5.58          64,551      4.57         22,274        34.51
               --------               ------                     ------                   ------        

Total Core Deposits                  210,743       4.09         196,537      3.31         14,206         7.23

Non-Interest Bearing
  Demand Deposit Accounts             51,349       -             50,872      -               477         0.94
                                      ------                     ------                      ---        

Total Core and Non-Interest
  Bearing Deposits                   262,092       -            247,409      -             14,68        35.93

Tiered Savings                        38,751       4.29          45,427      3.33         (6,676)      (14.70)

CD's Greater than $100,000            11,095       4.98           8,688      4.66          2,407        27.70
                  --------            ------                      -----                    -----        
Total Deposits                      $311,938       -           $301,524      -           $10,414         3.45
                                    ========                   ========                  =======         

</TABLE>


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

     The  Company  also  holds   marketable   securities  and  other  short-term
investments that can be readily converted to cash. The Company's subsidiary, The
First National Bank of West Chester,  as a member of the FHLB,  maintains a line
of credit secured by the Banks'  mortgage  related  assets.  As of September 30,
1995, this line of credit was  approximately  $34 million.  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  Company's  net  interest  rate  sensitivity  gap  within one year is a
negative  $60.9  million  or  16.6% of  total  assets  at  September  30,  1995.
Management  is  aware of this  negative  gap  position  and is  taking  steps to
maintain  net  interest  margins at  acceptable  levels.  Over $12.7  million in
certificates of deposit with a maturity of 30 months were added during the first
nine months of 1995.

<TABLE>
<CAPTION>

                                                        INTEREST SENSITIVITY ANALYSIS
                                                          AS OF SEPTEMBER 30, 1995


(Dollars in thousands)
                                                                         One              Over
                                                       Within          through            five            Non-rate
                                                     one year         five years          years           sensitive            Total
<S>                                           <C>              <C>               <C>              <C>               <C>   
ASSETS
Federal funds sold                               $      13,950    $           --    $          --    $           --    $      13,950
Investment securities                                   41,938            30,495           17,351                --           89,784
Loans and leases                                       121,718            98,555           20,306           (4,055)          236,524
Cash and cash equivalents                                   --                --               --            14,863           14,863
Other assets                                                --                --               --            12,076           12,076
                                                       -------            ------           ------            ------          -------

Total assets                                     $     177,606    $      129,050    $      37,657    $       22,884    $     367,197
                                                 =============    ==============    =============    ==============    =============


LIABILITIES AND CAPITAL
Non-interest bearing deposit                     $          --    $           --    $          --    $       52,991    $      52,991
Interest bearing deposits                              227,511            38,204            2,550                --          268,265
Borrowed funds                                          10,951                --               --                --           10,951
Other liabilities                                           --                --               --             5,136           5,1361
Capital                                                     --                --               --            29,854           29,854
                                                       -------            ------           ------            ------           ------

Total liabilities & capital                      $     238,462    $       38,204            2,550            87,981    $     367,197
                                                 =============    ==============            =====            ======    =============

Net interest rate 
  sensitivity rate                               $     (60,856)   $       90,846    $      35,107    $      (65,097)   $          --
                                                 =============    ==============    =============    ==============    ===========  

Cumulative interest rate 
  sensitivity gap                                $     (60,856)   $       29,990    $      65,097    $          --     $          --
                                                 =============    ==============    =============    ===========       ===========  
                                                                   
Cumulative interest rate
 sensitivity gap divided
 by total assets                                        (16.6%)             8.2%            18.4%    
                                                        =====               ===             ====     

</TABLE>

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

                       ALLOWANCE FOR POSSIBLE 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,  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. The allowance for possible loan
losses as a percentage of quarter-end  loans  outstanding shows an increase from
1.37% at September 30, 1994 to 1.69% at September 30, 1995.

     Non-performing loans include loans on non-accrual status and loans past due
90 days or more and still accruing.  It is the Company's policy to writedown all
non-performing  loans to net realizable value based on updated  appraisals.  The
Company's  non-performing loans are generally  collateralized by real estate and
are in the  process of  collection.  The Company is not aware of any loans other
than those  included in the following  table that would be considered  potential
problem  loans that would cause  management  to have doubts as to the ability of
such borrower to comply with the present loan repayment  terms.  As mentioned in
Note 4 to the Consolidated  Financial  Statements,  the Company adopted SFAS No.
114, as amended by SFAS No. 118, on January 1, 1995.

     The allowance  for possible  loan losses as a percentage of  non-performing
loans  increased  to 360.44% at  September  30, 1995 from 99.50% at December 31,
1994.  This ratio  indicates  that the  allowance  for  possible  loan losses is
sufficient to cover the principal of all non-performing loans and to cover other
potential losses that might exist in the Company's loan portfolio.  In February,
1995,  approximately  $1.2 million of non-accrual loans were paid off or brought
current resulting in full recovery of principal,  approximately $170 thousand in
past-due  interest  and $18  thousand  in legal  fees.  As a result of the above
mentioned loan  recoveries,  sales of other real estate owned  ("OREO"),  and an
intercompany sale, the Company has reduced non-performing assets by $2.5 million
or 50.8% to $2.4 million at September 30, 1995 from $4.9 million at December 31,
1994.

     OREO  represents  residential  and  commercial  real  estate  that has been
written  down to  realizable  value (net of  estimated  disposal  cost) based on
professional  appraisals.  Management  intends  to  liquidate  OREO in the  most
expedient and cost-effective  manner.  This process could take up to twenty-four
months, although swifter disposition is anticipated.

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

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

Dollars in thousands
                                                     September 30,              Dec 31,
                                                1995            1994             1994  

<S>                                       <C>              <C>             <C>   

Past due over 90 days and still accruing        $200            $157           $323

Non-accrual loans                                925           4,805            2,997
                                                 ---           -----            -----

Total non-performing loans                     1,125           4,962            3,320

Other real estate owned                        1,278             860            1,565
                                               -----             ---            -----

Total non-performing assets                   $2,403          $5,822           $4,885
                                              ======          ======           ======

Non-performing loans as a percentage 
     of total loans                            0.47%           2.13%            1.39%

Allowance for possible loan losses as a
   percentage of non-performing loans        360.44%          64.39%            99.50%                 

Non-performing assets as a percentage of
   total loans and other real estate owned     0.99%           2.49%            2.03%

Allowance for possible loan losses as a 
  percentage of non-performing assets        168.75%          54.88%            67.60%


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

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

<TABLE>
<CAPTION>

Dollars in thousands                                                      Three Months                        Nine Months
                                                                             Ended                               Ended
                                                                          September 30,                      September 30,  
                                                                      1995           1994                1995           1994

<S>                                                            <C>                <C>            <C>               <C>    
Balance at beginning of period                                   $     3,712        $   2,894     $     3,303         $    2,839

Provision charged to operating expense                                   400             345            1,184              1,245

    Recoveries of loans previously charged-off                            21               3               74                 11
    Loans charged-off                                                   (78)            (47)            (506)              (900)
                                                                        ---             ---             ----               ---- 

Net loans charged-off                                                   (57)            (44)            (432)              (889)
                                                                        ---             ---             ----               ---- 

Balance at end of period                                          $    4,055        $  3,195      $     4,055         $    3,195
                                                                  ==========        ========      ===========         ==========

Period-end loans outstanding                                      $  240,579        $233,008      $   240,579         $  233,008

Average loans outstanding                                         $  243,301        $229,194      $   244,813         $  225,318

Allowance for possible loan losses as a
    percentage of period-end loans outstanding                         1.69%           1.37%            1.69%              1.37%

Ratio of net charge-offs to average loans                              0.02%           0.02%            0.18%              0.39%
    outstanding
</TABLE>

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

                                CAPITAL ADEQUACY

     The  Company is subject to  Risk-Based  Capital  Guidelines  adopted by the
Federal  Reserve  Board  ("FRB") for bank  holding  companies.  The Bank is also
subject to similar capital requirements adopted by the Office of the Comptroller
of the Currency.  Under these  requirements,  the  regulatory  agencies have set
minimum  thresholds for Tier I Capital,  Total Capital,  and Leverage ratios. At
September  30, 1995,  both the  Company'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 Company's  Risk-Based  Capital  Ratios,  shown below,  have been computed in
accordance with regulatory  accounting policies,  which exclude any SFAS No. 115
adjustments.

<TABLE>
<CAPTION>

RISK-BASED                          September 30,                   December 31,    "Well Capitalized"
CAPITAL RATIOS                      1995              1994             1994          Requirements   

<S>                               <C>             <C>              <C>            <C>   

Leverage Ratio                      8.31%            8.35%            8.53%          5.00%
Tier I Capital Ratio               11.46%           10.91%           11.09%          6.00%
Total Risk-Based Capital Ratio     12.71%           12.11%           12.32%         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 Company.

                            COMMON STOCK REPURCHASE

     In the second quarter of 1995, the Board of Directors of First West Chester
Corporation  authorized  the repurchase of up to 105,000 shares of the Company's
outstanding   Common  Stock   through   open  market  or  privately   negotiated
transactions.  The  repurchased  shares will be used for the Company's  employee
benefit plan and other general corporate  purposes.  Through September 30, 1995,
the Company has repurchased 87,000 shares.


                         NEW SUBSIDIARY OF THE COMPANY

     In the first quarter of 1995, First West Chester Corporation  established a
Pennsylvania corporation,  323 East Gay Street Corp ("EGSC"), for the purpose of
holding an  interest  in WCP  Partnership.  WCP  Partnership  is a  Pennsylvania
partnership  established  in 1995 to own and  operate a  commercial  real estate
property.  WCP  Partnership  is  owned  61.7%  by the  Company  and  38.3% by an
affiliate of another financial institution.  EGSC's interest in this partnership
of  approximately  $500 thousand is  considered  an investment  under the equity
method  and is  included  in other  assets on the  Statement  of  Condition  and
excluded  from the table of  non-performing  loans and assets at  September  30,
1995.

<PAGE>

                          PART II - OTHER INFORMATION



Item 1.   Legal Proceedings

          Various  actions and  proceedings  are presently  pending to which the
          Company or its subsidiaries are 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 Company 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

          In a press release dated September 18, 1995, the Board of Directors of
          the Company  announced  a  "3-for-2"  stock split in the form of a 50%
          stock  dividend  payable  October 16, 1995 to  shareholders  of record
          October 3, 1995.

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.

                         (1.) Copy of the Company's  Articles of  Incorporation,
                         filed on March 9, 1984 is  incorporated by reference to
                         Exhibit 3 (a)(iii) to the  Company's  Annual  Report on
                         Form 10-K for the year ended December 31, 1988.

                         (2.) Copy of the Company's  Certificate of Amendment to
                         the Articles of Incorporation  filed with the Secretary
                         of the Commonwealth of Pennsylvania on April 2, 1986 is
                         incorporated  by  reference  to Exhibit 3 (a)(i) to the
                         Company's Annual Report on Form 10-K for the year ended
                         December 31, 1988.
<PAGE>
                         (3.) Copy of the Company's  Certificate of Amendment to
                         the Articles of  Incorporation  filed with Secretary of
                         the  Commonwealth  of Pennsylvania on March 23, 1984 is
                         incorporated  by reference  to Exhibit  3(a)(II) to the
                         Company's Annual Report on Form 10-K for the year ended
                         December 31, 1988.

                      (3)(ii)  Bylaws of the  Company,  as amended.  Copy of the
                      Company's Bylaws, as amended, is incorporated by reference
                      to Exhibit 3 (b) to the  Company's  Annual  Report on Form
                      10-K for the year ended December 31, 1988.

               (b)  Reports on Form 8-K

                    None


<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 WEST CHESTER CORPORATION

                                        
                                            /s/ Charles E. Swope
                                            President

DATE: November 13, 1995


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