August 9, 2005
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                        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 June 30, 2005.



                                      Very truly yours,

                                      /s/ John E. Balzarini
                                      -------------------------
                                      John E. Balzarini, Chief Financial Officer






JEB/jmd
Enclosures

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

         David Burns, CPA, Grant Thornton, Philadelphia, PA




<PAGE>





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

                                    FORM 10-Q
(Mark One)

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

For the quarterly period ended June 30, 2005
                               -------------
                                       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)


                                 (484) 881-4000
              (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 __


Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act). Yes X No __

The number of shares outstanding of Common Stock of the Registrant as of July
31, 2005 was 5,108,048.

                                       2
<PAGE>


                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

                                      INDEX
                                      -----
<TABLE>
<CAPTION>
                                                                                                                       PAGE
                                                                                                                       ----
<S>              <C>                                                                                               <C>
Part I.  FINANCIAL INFORMATION

                  Item 1 -  Financial Statements

                             Consolidated Statements of Condition
                             June 30, 2005 (unaudited) and December 31, 2004                                              4


                             Consolidated Statements of Income
                             Three and Six-Months Ended June 30, 2005 and 2004 (unaudited)                                5


                             Consolidated Statements of Cash Flows
                             Six-Months Ended June 30, 2005 and 2004 (unaudited)                                          6


                             Consolidated Statements of Changes in Stockholders' Equity                                   7


                             Notes to Consolidated Financial Statements (unaudited)                                    8-12


                  Item 2 -   Management's Discussion and Analysis of
                             Financial Condition and Results of Operations                                          13 - 27

                  Item 3 -   Quantitative and Qualitative Disclosures About Market Risk                                  28

                  Item 4 -  Controls and Procedures                                                                28

Part II. OTHER INFORMATION

                  Item 1 -   Legal Proceedings                                                                           29
                  Item 2 -   Unregistered Sales of Equity Securities and Use of Proceeds                                 29
                  Item 3 -   Defaults upon Senior Securities                                                             29
                  Item 4 -   Submission of Matters to a Vote of Security Holders                                    29 - 30
                  Item 5 -   Other Information                                                                           30
                  Item 6 -   Exhibits                                                                                    31

                  Signatures                                                                                             32
                  Exhibit Index                                                                                          33
                  Exhibits                                                                                               34

</TABLE>
                                       3
<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
                                                                                          (Unaudited)
(Dollars in thousands)                                                                      June 30,         December 31,
                                                                                              2005               2004
                                                                                         -----------         ------------
<S>                                                                                     <C>                  <C>

ASSETS
    Cash and due from banks                                                              $   27,083           $   24,656
    Federal funds sold and other overnight investments                                       20,000                6,500
    Interest Bearing Deposits in banks                                                          454                  454
                                                                                           --------             --------

    Total cash and cash equivalents                                                          47,537               31,610
                                                                                           --------             --------
    Investment securities held-to-maturity (fair value of $10 at
    June 30, 2005 and $11 at December 31, 2004, respectively)                                    10                   10

    Investment securities available-for-sale, at market value                               100,854              140,019

    Loans                                                                                   657,283              618,005
    Less allowance for possible loan and lease losses                                        (8,004)              (7,213)
                                                                                           --------             --------
    Net loans                                                                               649,279              610,792

    Premises and equipment                                                                   13,956               14,137
    Other assets                                                                              8,708                8,907
                                                                                           --------             --------

    Total assets                                                                          $ 820,344            $ 805,475
                                                                                           ========             ========
LIABILITIES
    Deposits
    Noninterest-bearing                                                                   $ 132,547            $ 125,452
        Interest-bearing (including certificates of deposit over $100
           of $56,352 and $33,048 - June 30, 2005 and
             December 31, 2004 respectively)                                                545,315              537,566
                                                                                           --------             --------

    Total deposits                                                                          677,862              663,018
    Federal Home Loan Bank advances and other borrowings                                     66,487               66,464
    Subordinated debentures                                                                  15,465               15,465
        Other liabilities                                                                     4,516                5,126
                                                                                           --------             --------

    Total liabilities                                                                       764,330              750,073
                                                                                           --------             --------

STOCKHOLDERS' EQUITY
    Common stock, par value $1.00; authorized, 10,000,000 shares;
       Outstanding 5,279,633 at June 30, 2005 and 4,799,666 at December 31, 2004              5,280                4,800
    Additional paid-in capital                                                               12,682                2,053
    Retained earnings                                                                        43,436               53,747
    Accumulated other comprehensive loss                                                       (903)                 (77)
    Treasury stock, at cost: 298,710 shares and 261,185 shares
        at June 30, 2005 and 237,441 December 31, 2004, respectively.                        (4,481)              (5,121)
                                                                                           --------             --------

    Total stockholders' equity                                                               56,014               55,402
                                                                                           --------             --------

    Total liabilities and stockholders' equity                                            $ 820,344            $ 805,475
                                                                                           ========             ========

<FN>

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

                                       4
<PAGE>


                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME

                                   (UNAUDITED)
<TABLE>
<CAPTION>

(Dollars in thousands - except per share data)                             Three Months Ended                Six Months Ended
                                                                                 June 30,                          June 30,
                                                                       --------------------------         ------------------------
                                                                         2005             2004             2005          2004
                                                                         ----             ----             ----          ----
<S>                                                                   <C>              <C>               <C>           <C>
INTEREST INCOME
    Loans, including fees                                              $   9,637        $   7,696         $  18,555     $  15,027
    Investment securities                                                  1,041            1,348             2,278         2,635
    Federal funds sold                                                        47               10                75            29
    Deposits in Banks                                                          1                1                 3              2
                                                                        --------         --------          --------      ---------

                Total interest income                                     10,726            9,055            20,911        17,693
                                                                        --------         --------          --------      ---------

INTEREST EXPENSE
    Deposits                                                               2,216            1,197             3,968         2,376
    Interest on subordinated debentures                                      244              172               465           337
    Federal Home Loan Bank advances and other borrowings                     639              497             1,233           821
                                                                        --------         --------          --------      ---------
                Total interest expense                                     3,099            1,866             5,666         3,534
                                                                        --------         --------          --------      ---------
                Net interest income                                        7,627            7,189            15,245        14,159

    Provision for loan and lease losses                                      504               56             1,010           356
                                                                        --------         --------          --------      ---------

                Net interest income after provision
                for possible loan and lease losses                         7,123            7,133            14,235        13,803
                                                                        --------         --------          --------      ---------

NON-INTEREST INCOME
    Trust and Investment Services                                            715              875             1,584         1,822
    Service charges on deposit accounts                                      478              515               950         1,039
    Investment securities gains, net                                          (8)               -                60            53
    Operating lease rental income                                            243              191               471           384
    Gains on sale of premises and other real estate owned                     (7)              24                (7)           48
    Gains on the sale of residential mortgages                               113              100               194           190
    Gain on the sale of credit card portfolio                                  -                -                 -            34
    Other                                                                    618              616             1,183         1,137
                                                                        --------         --------          --------      ---------
                Total non-interest income                                  2,152            2,321             4,435         4,707
                                                                        --------         --------          --------      ---------

NON-INTEREST EXPENSE
    Salaries and employee benefits                                         4,089            3,985             8,181         7,860
    Net occupancy, equipment and data processing                           1,620            1,497             3,204         2,999
    Bank shares tax                                                          147              132               320           257
    Professional service                                                     565              286             1,361           620
    Other                                                                  1,353            1,398             2,675         2,475
                                                                        --------         --------          --------      ---------
                Total non-interest expense                                 7,774            7,298            15,741        14,211
                                                                        --------         --------          --------      ---------

                Income before income taxes                                 1,501            2,156             2,929         4,299

INCOME TAXES                                                                 429              647               839         1,289
                                                                        --------         --------          --------      ---------

NET INCOME                                                             $   1,072        $   1,509         $   2,090     $   3,010
                                                                        ========         ========          ========      ========

PER SHARE DATA
    Basic earnings per common share                                    $    0.21        $    0.30         $    0.41     $    0.60
                                                                        ========         ========          ========      ========
    Diluted earnings per common share                                  $    0.21        $    0.29         $    0.40     $    0.58
                                                                        ========         ========          ========      ========
    Dividends declared                                                 $  0.1300        $  0.1238         $  0.2725     $  0.2475
                                                                        ========         ========          ========      ========
Basic weighted average shares outstanding                              5,079,336        4,983,308         5,057,033     4,999,925
                                                                       =========        =========         =========     =========
Diluted weighted average shares outstanding                            5,230,216        5,197,802         5,222,183     5,197,802
                                                                       =========        =========         =========     =========
<FN>

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

                                       5
<PAGE>


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


                                                                                                        Six Months Ended
                                                                                                            June 30,
                                                                                                  ---------------------------

(Dollars in thousands)                                                                              2005               2004
                                                                                                    ----               ----
<S>                                                                                              <C>                <C>

OPERATING ACTIVITIES
    Net Income                                                                                    $  2,090           $  3,010
    Adjustments to reconcile net income to net cash
           provided by operating activities:
    Depreciation                                                                                     1,445              1,087
    Provision for loan losses                                                                        1,010                356
    Amortization of investment security premiums
           and accretion of discounts                                                                  432                432
    Amortization of deferred fees on loans                                                               2                172
    Investment securities gains, net                                                                   (60)               (53)
    Increase in other assets                                                                          (627)            (2,402)
    Increase (decrease) in other liabilities                                                          (610)               361
                                                                                                   -------            -------

           Net cash provided by operating activities                                              $  3,682           $  2,963
                                                                                                   -------            -------

INVESTING ACTIVITIES
    Increase in loans                                                                              (39,499)           (67,561)
    Proceeds from sales of investment securities available-for-sale                                 37,899             12,940
    Proceeds from maturities of investment securities available-for-sale                            53,465             26,050
    Purchases of investment securities available-for-sale                                          (52,571)           (48,566)
    Purchase of premises and equipment, net                                                         (1,264)            (1,024)
                                                                                                   -------            -------
      Net cash used in investing activities                                                       $ (1,970)          $(78,161)
                                                                                                   -------            -------

FINANCING ACTIVITIES
    Increase in Federal Home Loan Bank advances                                                         23             47,639
    Increase in deposits                                                                            14,845             22,106
    Cash dividends                                                                                  (1,311)            (1,255)
    Treasury stock transactions                                                                        658               (772)
                                                                                                   -------            -------

           Net cash provided by financing activities                                                14,215             67,718
                                                                                                   -------            -------

           NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                     15,927             (7,480)

Cash and cash equivalents at beginning of period                                                    31,610             31,383
                                                                                                   -------            -------

Cash and cash equivalents at end of period                                                        $ 47,537           $ 23,903
                                                                                                   =======            =======

<FN>

The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
                                       6

<PAGE>


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

            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>


                                                                                   Accumulated
                                                             Additional               Other                               Total
                                            Common Stock       Paid-in   Retained Comprehensive Treasury Comprehensive Stockholders'
(Dollars in thousands)                  Shares     Par Value   Capital   Earnings  Income(Loss)  Stock      Income        Equity
----------------------                  ------     --------- ----------  -------- ------------- -------- ------------- -------------
<S>                                    <C>        <C>       <C>         <C>          <C>        <C>        <C>           <C>

Balance at January 1, 2004              4,799,666  $  4,800$ $  1,877    $ 50,117     $    306   $(5,350)   $     -       $ 51,750

    Net income                                  -         -         -       3,010            -         -      3,010          3,010
    Cash dividends declared                     -         -         -      (1,255)           -         -          -         (1,255)
    Other comprehensive income
       Net unrealized gain (loss) on
       investment securities
       available-for-sale                       -         -         -           -       (1,434)        -     (1,434)        (1,434)
    Treasury stock transactions                 -         -       353           -            -    (1,126)         -           (773)
                                        ---------   -------   -------     -------      -------    ------     ------        -------
    Comprehensive income                                                              $  1,576
                                                                                       =======

Balance at June 30, 2004                4,799,666  $  4,800$    2,230    $ 51,872     $ (1,128)   (6,476)                 $ 51,298

Balance at January 1, 2005              4,799,666  $  4,800$    2,052    $ 53,749     $    (78)   (5,121)                 $ 55,402

    Net income                                  -         -         -       2,090            -         -      2,090          2,090
    Cash dividends declared                     -         -         -      (1,311)           -         -          -         (1,311)
    Issuance of common stock              480,149       480    10,612     (11,091)           -         -          -              -
    Other comprehensive income
       Net unrealized (losses) gains on
       investment securities
       available-for-sale                       -         -         -           -         (825)        -       (825)          (825)
    Treasury stock transactions                 -         -        18           -            -       640          -            658
                                        ---------   -------   -------     -------      -------    ------      ------       -------
    Comprehensive income                                                              $  1,264
                                                                                       =======

Balance at June 30, 2005                5,279,815  $  5,280  $ 12,682    $ 43,167     $   (903)  $(4,480)                 $ 56,014
                                        =========   =======   =======     =======      =======    ======                   =======
</TABLE>

                                       7

<PAGE>
                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (UNAUDITED)

1.   BASIS OF PRESENTATION

     The  foregoing  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, 2004.

     The results of operations  for the three and  six-month  periods ended June
30, 2005 are not  necessarily  indicative  of the results to be expected for the
full year. Information regarding risks and uncertainties that could cause actual
results  to  vary  materially  from  our  prior  performance  may  be  found  in
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations in Part I, Item 2 of our Quarterly Report on Form 10-Q for the period
ending June 30, 2005.

2.   EARNINGS PER SHARE
<TABLE>
<CAPTION>

Three Months ended June 30, 2005
--------------------------------
                                                                       Income               Shares                 Per Share
                                                                     (numerator)        (denominator)                Amount
                                                                     -----------        -------------              ---------
<S>                                                                    <C>                <C>                        <C>

Basic earnings per share
       Net income available to common stockholders                      $1,072              5,079,336                 $0.21
Effect of Dilutive Securities
       Options to purchase common stock                                     --                150,880                    --
Diluted earnings per share
       Net income available to common stockholders                      $1,072              5,230,216                 $0.21
                                                                         =====              =========                  ====
<FN>

17,866 anti-dilutive weighted shares have been excluded from this computation
because the option exercise price was greater than the average market price of
the common shares.
</FN>
</TABLE>

Year to Date June 30, 2005
--------------------------
<TABLE>
<CAPTION>
                                                                       Income                Shares                 Per Share
                                                                     (numerator)          (denominator)               Amount
                                                                     -----------          -------------             ---------
<S>                                                                    <C>                 <C>                       <C>
Basic earnings per share
       Net income available to common stockholders                      $2,090              5,057,033                 $0.41
Effect of Dilutive Securities
       Options to purchase common stock                                     --                165,150                 (0.01)
Diluted earnings per share
       Net income available to common stockholders                      $2,090              5,222,183                 $0.40
                                                                         =====              =========                  ====
<FN>

17,688 anti-dilutive weighted shares have been excluded from this computation
because the option exercise price was greater than the average market price of
the common shares.
</FN>
</TABLE>
                                       8
<PAGE>
                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued

                                   (UNAUDITED)

Three Months ended June 30, 2004
--------------------------------
<TABLE>
<CAPTION>

                                                                       Income                Shares                 Per Share
                                                                     (numerator)         (denominator)                Amount
                                                                     -----------         -------------              ---------
<S>                                                                    <C>                 <C>                       <C>

Basic earnings per share
       Net income available to common stockholders                      $1,509              4,983,308                 $0.30
Effect of Dilutive Securities
       Options to purchase common stock                                     --                181,059                 (0.01)
Diluted earnings per share
       Net income available to common stockholders                      $1,509              5,164,367                 $0.29
                                                                         =====              =========                  ====
<FN>

There were no anti-dilutive weighted shares excluded from this computation
because the average market price of common shares was greater than the option
exercise price.
</FN>
</TABLE>

Year to Date June 30, 2004
--------------------------
<TABLE>
<CAPTION>
                                                                       Income               Shares                 Per Share
                                                                     (numerator)         (denominator)               Amount
                                                                     -----------         -------------             ---------
<S>                                                                    <C>                 <C>                       <C>

Basic earnings per share
       Net income available to common stockholders                      $3,010              4,999,925                 $0.60
Effect of Dilutive Securities
       Options to purchase common stock                                     --                197,877                 (0.02)
Diluted earnings per share
       Net income available to common stockholders                      $3,010              5,197,877                 $0.58
                                                                         =====              =========                  ====
<FN>

There were no anti-dilutive weighted shares excluded from this computation
because the average market price of common shares was greater than the option
exercise price.
</FN>
</TABLE>

3.       COMPREHENSIVE INCOME

         Components of comprehensive income are presented in the following
chart:
<TABLE>
<CAPTION>

                                                                      Three Months Ended               Six Months Ended
                                                                           June 30,                         June 30,
                                                                --------------------------          ----------------------
                                                                   2005             2004               2005          2004
                                                                ---------         --------           -------       -------
<S>                                                            <C>               <C>                <C>           <C>
Unrealized gains on securities:
       Unrealized gains (losses) arising in period              $   (726)         $(2,781)           $ 1,047       $(1,975)
       Reclassification adjustment                                    60               --                 60            53
                                                                 -------           ------             ------        ------
       Net unrealized gains (losses)                                (666)          (2,781)             1,107        (1,922)
                                                                 -------           ------             ------        ------
Other comprehensive income before taxes                             (666)          (2,781)             1,107        (1,922)
Income tax benefit (expense)                                         169              706               (281)          488
                                                                 -------           ------             ------        ------
Other comprehensive income                                          (497)          (2,075)               826        (1,434)
                                                                 -------           ------             ------        ------
Comprehensive income (losses)                                   $    575            ($566)           $ 2,916       $ 1,576
                                                                 =======           ======             ======        ======
</TABLE>

4.   SUBORDINATED DEBENTURES

     Management  has  determined  that First Chester County Capital Trust I & II
qualify as variable interest entities under FASB  Interpretation  Number ("FIN")
46(R),  as revised.  During 2002 and 2003  respectively,  First  Chester  County
Capital  Trust I & II issued  mandatorily  redeemable  preferred  securities  to
investors and loaned the proceeds

                                       9
<PAGE>

                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

                                   (UNAUDITED)

to the  Corporation.  First Chester  County Capital Trust I & II are included in
the Corporation's  consolidated balance sheet and statements of income as of and
for the year ended December 31, 2003, in accordance  with FIN 46.  Subsequent to
the   issuance  of  FIN  46  in  January   2003,   the  FASB  issued  a  revised
interpretation,  FIN 46(R)  "Consolidation of Variable  Interest  Entities," the
provisions  of which were  required to be applied to certain  variable  interest
entities by March 31, 2004. The  Corporation  adopted the  provisions  under the
revised  interpretation  in the  first  quarter  of  2004.  The  deconsolidation
resulted  in the  Corporation's  investment  in the common  securities  of First
Chester  County  Capital  Trust I & II  being  included  in other  assets  and a
corresponding  increase in outstanding debt of $465 thousand.  In addition,  the
income received on the Corporation's common securities investment is included in
other  income.  The adoption of FIN 46(R) did not have a material  impact on the
Corporation's  financial  position or results of operations.  In March 2005, the
Federal  Reserve  Board  adopted a final rule that would  continue  to allow the
inclusion of trust  preferred  securities  in Tier 1 capital,  but with stricter
quantitative  limits  in some  circumstances.  Under  the  final  rule,  after a
five-year  transition period, the aggregate amount of trust preferred securities
and certain  other  capital  elements  would be limited to 25% of Tier 1 capital
elements,  net of goodwill for  non-internationally  active banks. The amount of
trust  preferred  securities  and certain other  elements in excess of the limit
could be included in Tier 2 capital, subject to restrictions. Based on the final
rule,  the  Company  expects  that all of its $15.5  million in trust  preferred
securities will continue to be included in Tier 1 capital as it presently is.

5.   STOCK-BASED COMPENSATION

     At June 30, 2005, the Corporation had one stock-based employee compensation
plan as that term is  defined  in APB 25, the  Corporation's  1997 Stock  Option
Plan.  The  Corporation  accounts  for  that  plan  under  the  recognition  and
measurement principles of APB 25, "Accounting for Stock Issued to Employees" and
related interpretations.  No stock-based employee compensation cost is reflected
in net income, as all options granted under the plan had an exercise price equal
to the market value of the underlying common stock on the date of grant.

     The  following  table  provides the  disclosures  required by SFAS No. 148,
"Accounting   for  Stock-Based   Compensation-Transition   and  Disclosure"  and
illustrates  the effect on net income and earnings per share if the  Corporation
had applied the fair value recognition  provisions of SFAS No. 123,  "Accounting
for Stock-Based Compensation" to stock-based employee compensation.

<TABLE>
<CAPTION>

                                                                             Three Months Ended               Six Months Ended
                                                                                  June  30,                        June 30,
                                                                            --------------------             --------------------
                                                                             2005           2004              2005         2004
                                                                             ----           ----              ----         ----
        <S>                                                                <C>            <C>               <C>          <C>

         Net income (in thousands)      As reported                         $1,072         $1,509            $2,090       $3,010
         Stock-based compensation costs determined
           under fair value method for all awards                               --            (17)               --          (34)
                                                                             -----          -----            ------        -----
                 Pro forma net income                                       $1,072         $1,492            $2,090       $2,976

         Earnings per share (Basic)      As reported                        $0.21          $ 0.30            $ 0.41       $ 0.60
                                            Pro forma                       $0.21          $ 0.30            $ 0.41       $ 0.59
         Earnings per share (Diluted)   As reported                         $0.21          $ 0.29            $ 0.40       $ 0.58
                                            Pro forma                       $0.21          $ 0.29            $ 0.40       $ 0.57
</TABLE>

     FASB Statement No. 123 (revised  2004),  Share-Based  Payment  ("(Statement
123(R)") addresses the accounting for share-based payment  transactions in which
an enterprise  receives employee services in exchange for (a) equity instruments
of the  enterprise  or (b)  liabilities  that are based on the fair value of the
enterprise's  equity  instruments or that may be settled by the issuance of such
equity  instruments.  Statement  123(R)  requires  an  entity to  recognize  the
grant-date  fair-value  of stock  options  and other  equity-based  compensation
issued

                                       10
<PAGE>


                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

                                   (UNAUDITED)

to employees in the income statement.  Statement 123(R) generally  requires that
an entity account for those transactions using the  fair-value-based  method and
eliminates  an  entity's   ability   toaccount  for   share-based   compensation
transactions  using the intrinsic  value method of accounting in APB Opinion No.
25,  Accounting  for  Stock  Issued to  Employees,  which  was  permitted  under
Statement  123 as  originally  issued.  Statement  123(R)  requires  entities to
disclose  information about the nature of the share-based  payment  transactions
and the effects of those  transactions  on the financial  statements.  Statement
123(R) is effective for the Company  beginning January 1, 2006. The Company must
use either the modified  prospective  or the modified  retrospective  transition
method.  Early  adoption of Statement  123(R) for interim or annual  periods for
which financial statements or interim reports have not been issued is permitted.
Management is evaluating  Statement  123(R) and has not yet  determined its full
impact on the consolidated financial statements of the Company.

6.   EARNINGS PER SHARE AND STOCKHOLDERS' EQUITY

     Earnings  per  share  are  calculated  using the  weighted  average  shares
outstanding  during the year. On April 19, 2005, the Board of Directors declared
a 10% stock dividend to stockholders  of record on May 2, 2005,  payable May 19,
2005. Par value remained at $1.00 per share. The stock dividend  resulted in the
issuance  of  458,579  additional  shares of common  stock from  authorized  but
unissued shares. Accordingly,  earnings per share, cash dividends per share, and
weighted  average  shares of common  stock  outstanding  have been  restated  to
reflect the stock dividend.

                         NEW ACCOUNTING PRONOUNCEMENTS

7.   OTHER-THAN-TEMPORARY IMPAIRMENT

     FASB recently  issued FSP FAS 115-1,  "The Meaning of  Other-Than-Temporary
Impairment and Its application to Certain Investments," that will supersede EITF
03-1,  "The Meaning of  Other-Than-Temporary  Impairment and Its  Application to
Certain Investments," and EITF Topic D-44,  "Recognition of Other-Than-Temporary
Impairment  upon the Planned Sale of a Security  Whose Cost Exceeds Fair Value."
The final FSP will replace the guidance in paragraphs  10-18 of EITF Issue 03-1"
(which had been deferred by FSP EITF 03-1-1, "Effective Date of Paragraphs 10-20
of EITF Issue No. 03-1, 'The Meaning of Other-Than-Temporary  Impairment and Its
Application   to   Certain    Investments")    with   references   to   existing
other-than-temporary  impairment guidance, such as Statement 115, Accounting for
Certain Investments in Debt and Equity Securities, Staff Accounting Bulletin 59,
Accounting  for Noncurrent  Marketable  Equity  Securities,  and Opinion 18, The
Equity Method of Accounting for Investments in Common Stock.  FSP FAS 115-1 will
codify the  guidance  set forth in EITF Topic D-44 and clarify  that an investor
should  recognize  an  impairment  loss no later  than  when the  impairment  is
considered  other than temporary,  even if a decision to sell has not been made.
FSP FAS 115-1 will be effective  for  other-than-temporary  impairment  analyses
conducted in periods  beginning  after  September  15, 2005.  FASB  approved the
proposed FSP subject to a vote on the final draft.  The Corporation is currently
evaluating the possible impact of FSP FAS 115-1.

8.)  ACCOUNTING CHANGES AND ERROR CORRECTIONS

     FASB  recently  issued  Statement  154,   "Accounting   Changes  and  Error
Corrections-a  replacement  of APB Opinion No. 20 and FASB  Statement No. 3", as
part of its short-term  convergence  project with the  International  Accounting
Standards Board. Statement 154 requires that all voluntary changes in accounting
principles and changes  required by a new accounting  pronouncement  that do not
include  specific  transition  provisions  be applied  retrospectively  to prior
periods' financial statements,  unless it is impracticable to do so. Opinion 20,
"Accounting

                                       11
<PAGE>

                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

                                   (UNAUDITED)

Changes,"  required  that most  voluntary  changes in  accounting  principle  be
recognized by including the cumulative  effect of changing to the new accounting
principle  as a component  of net income in the period of the  change.  If it is
impracticable to determine the  period-specific  effects of an accounting change
on one or more individual prior periods presented,  but the cumulative effect to
all prior periods can be  determined,  the new  accounting  principle  should be
applied to assets and  liabilities  balances as of the beginning of the earliest
period for which  retrospective  application  is  practicable.  In  addition,  a
corresponding  adjustment  should be made to the  opening  balance  of  retained
earnings for that period rather than being reported in an income  statement.  If
it is impracticable  to determine the cumulative  effect of applying a change in
accounting principle to any prior period, the new accounting principle should be
applied as if it were adopted  prospectively from the earliest date practicable.
Statement  154  also  differentiates   between  retrospective   application  and
restatement.  Retrospective  application  is  defined  as the  application  of a
different  accounting principle to prior accounting periods as if that principle
had  always  been  used or as the  adjustment  of  previously  issued  financial
statements to reflect a change in the reporting entity. In contrast, restatement
is defined as the revision of previously issued financial  statements to reflect
the  correction  of an  error.  Statement  154 is  effective  prospectively  for
accounting  changes and  corrections  of errors made in fiscal  years  beginning
after December 15, 2005. Earlier application is permitted for accounting changes
and  corrections  of errors made in fiscal  years  beginning  after the date the
Statement was issued (May 2005).  Statement  154 does not change the  transition
provisions of any existing accounting  pronouncements,  including those that are
in a transition phase as of the effective date of the Statement. The Corporation
is currently evaluating the possible impact of this statement.

                                       12

<PAGE>
                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

ITEM 2.  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 and its direct and indirect  wholly-owned  subsidiaries,  The
First  National Bank of Chester  County (the "Bank"),  FNB Property  Management,
LLC, First National Insurance Services, LLC, Turks Head Properties,  Inc., Turks
Head II, LLC,  First Chester  County  Capital  Trust I and First Chester  County
Capital  Trust  II,  (collectively,  the  "Corporation").  It  should be read in
conjunction with the consolidated financial statements included in this report.

                             RISKS AND UNCERTAINTIES

     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," "should" "or anticipates" or similar  terminology.
These  statements  involve  risks and  uncertainties  and are  based on  various
assumptions.  Although the Corporation  believes that its expectations are based
on reasonable  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  our  historic  results  or the  results  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:

     o  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;

     o  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;

     o  costs of the Corporation's  training  initiatives,  product development,
        investment  in building  its  Management  team,  initiatives  to improve
        efficiency  and  accessibility  to  customers,   branch  expansion,  new
        technology, new marketing initiatives,  and operating systems may exceed
        expectations;

     o  competition  among  financial  and  non-financial  institutions  in  the
        Corporation's market area that may result in customer turnover and lower
        interest rate margins;

     o  changes  in the  regulatory  environment,  securities  markets,  general
        business  conditions  and inflation  may  adversely  affect loan demand,
        credit  quality,  consumer  spending and saving  habits,  interest  rate
        margins, and operating expenses;

     o  changes in interest  rates may affect  customer  loan demand and payment
        habits;

     o  changes in demographics may affect the benefits of branch locations;

     o  changes in the value of securities  and  investments  managed for others
        may affect the growth level of the Corporation's non-interest income;

     o  changes  in  the  credit-worthiness  of  our  borrowers,  the  value  of
        collateral  securing  our loans and  leases or other  aspects  of credit
        quality,  may affect the amount we need to  provide  for  possible  loan
        losses; and

     o  our ability to manage the risks involved in the foregoing.

     These risks and  uncertainties  are all  difficult  to predict and most are
beyond the control of the Corporation's Management.

     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.

                                       13
<PAGE>
                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

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

              CRITICAL ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATES

     The accounting  and reporting  policies of the  Corporation  conform to the
accounting  principals  generally  accepted in the United  States of America and
general practices within the financial services industry. The preparation of the
financial statements in conformity with accounting principles generally accepted
in the United  States of  America  requires  management  to make  estimates  and
assumptions that affect the amounts reported in the financial statements and the
accompanying notes. Actual results could differ from those estimates.

                       ALLOWANCE FOR LOAN AND LEASE LOSSES

     The Corporation  considers that the determination of the allowance for loan
and lease losses  involves a higher degree of judgment and  complexity  than its
other  significant  accounting  policies.  The balance in the allowance for loan
losses is determined  based on  Management's  review and  evaluation of the loan
portfolio in relation to past loss  experience,  the size and composition of the
portfolio,  current economic events and conditions, and other pertinent factors,
including  Management's  assumptions as to future delinquencies,  recoveries and
losses.  All of these factors may be susceptible to significant  change.  To the
extent actual outcomes differ from Management's estimates, additional provisions
for loan and lease losses may be required that could  adversely  impact earnings
in future periods.

                                  INCOME TAXES

     Under the  liability  method,  deferred  tax  assets  and  liabilities  are
determined based on the difference between the financial statement and tax bases
of assets and  liabilities.  Deferred  tax assets  are  subject to  Management's
judgment  based upon available  evidence that future  realization is more likely
than not. If Management determines that the Corporation may be unable to realize
all or part of the net  deferred  tax assets in the future,  a direct  charge to
income tax  expense  may be  required  to reduce the  recorded  value of the net
deferred tax asset to the expected realizable amount.

                          EARNINGS AND DIVIDEND SUMMARY

     Net  income  for the  three-month  period  ended  June 30,  2005 was  $1.07
million,  a decrease of $437  thousand or 29.0% from $1.51  million for the same
period in 2004.  Net income for the  six-month  period  ended June 30,  2005 was
$2.09  million,  a decrease of $920 thousand or 30.6% from $3.01 million for the
same period in 2004. Basic earnings per share were $0.21 and $0.41 for the three
and six-month periods ended June 30, 2005,  respectively,  compared to $0.30 and
$0.60 for the same periods in 2004.  Cash  dividends  declared for the three and
six-month  periods of 2005 were $0.130 and $0.2725 per share compared to $0.1238
per share and $0.2475 per share for the three- and six-month  periods ended June
30, 2004.

     The decrease in net income for the three- and six-month  periods ended June
30,  2005  can  be  attributed  to  decreased  non-interest  income,   increased
non-interest expense, and an increase in the provision for loan and lease losses
when compared to the same periods last year,  partially offset by an increase in
net interest  income.  The  increased  non-interest  expenses can be  attributed
primarily  to  increased  costs  of  staffing  and  benefits,  professional  and
consulting fees, and costs related to the Corporation's new imaging and branding
rollout. The decreased  non-interest income is primarily attributed to decreased
Trust and Investment  Services  revenue as well as decreased  service charges on
deposit  accounts.  Net interest income  benefited from both increases in volume
and increases in rates on the adjustable rate portion of the Corporation's  loan
portfolio, partially offset by increased rates on interest-bearing liabilities.

                                       14
<PAGE>
                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS - Continued
<TABLE>
<CAPTION>

                                                                    Three Months Ended                Six Months Ended
                                                                          June 30,                         June 30,
                                                                 ------------------------           ---------------------
                                                                  2005             2004              2005           2004
                                                                  ----             ----              ----           ----
          <S>                                                  <C>                <C>              <C>           <C>

           SELECTED RATIOS
           Return on Average Assets                              0.53%              0.82%             0.52%         0.84%
           Return on Average Equity                              7.65%             11.48%             7.47%        11.44%
           Net Interest Margin                                   4.06%              4.21%             4.08%         4.28%
           Earnings Retained                                    39.18%             58.65%            37.27%        58.36%
           Dividend Payout Ratio                                60.82%             41.35%            62.73%        41.64%
           Book Value Per Share                                $10.99             $11.40            $10.99       $11.40
</TABLE>

     The "Consolidated  Average Balance Sheet" on pages 20 and 21 may assist the
reader in understanding the following discussion.

                               NET INTEREST INCOME

     Net  interest  income  is  the  difference   between   interest  income  on
interest-earning  assets and interest expense on  interest-bearing  liabilities.
Net interest income for the three-months ended June 30, 2005 on a tax equivalent
basis,  increased 6.1% to $7.8 million from $7.3 million in the same period last
year. For the six-months ended June 30, 2005, net interest income increased 7.7%
to $15.5 million from $14.4  million in the same period last year.  The increase
in tax  equivalent  net interest  income for both  periods is  primarily  due to
increases in average interest-earning assets and higher average yields earned on
these assets,  partially  offset by increases in the average balance of interest
bearing  liabilities  and higher  average  yields paid on those  securities,  as
discussed more fully below.

     Average  interest-earning  assets increased  approximately $70.1 million or
10.1% to $765.1  million  for the  three-months  ended June 30, 2005 from $695.0
million in the same period last year.  For the six months  ended June 30,  2005,
average  interest-earning  assets increased approximately $87.6 million or 13.0%
to $762.3 million from $674.7 million in the same period last year. The increase
in average  interest-earning  assets for the  three-month  period ended June 30,
2005 was the result of an 18.6% or $102.7  million  increase  in  average  total
loans,  partially  offset  by a 25.2%  or  $35.1  million  decrease  in  average
investment  securities.  For the  six-month  period  ended  June 30,  2005,  the
increase was the result of a 19.7% or $105.3  million  increase in average total
loans,  partially  offset  by a 13.2% or $17.7  million  in  average  investment
securities.

     Average interest-bearing  liabilities increased approximately $65.0 million
or 11.7% to $619.5 million for the three-months ended June 30, 2005, from $554.5
million in the same period last year.  For the  six-month  ended June 30,  2005,
average interest-bearing liabilities increased $80.6 thousand or 15.0% to $619.1
million  from  $538.5  million in the same  period  last year.  The  increase in
average  interest-bearing  liabilities for the three-month period was the result
of a $66.0 million or 14.1%  increase in  interest-bearing  deposits,  partially
off-set  by a $918  thousand  or  1.3%  decrease  in  FHLB  advances  and  other
borrowings.  The  increase  in  average  interest-bearing  liabilities  for  the
six-month  period  was the  result  of a $66.9  million  or  14.4%  increase  in
interest-bearing  deposits and $13.7 million or 24.0%  increase in FHLB advances
and other borrowings.

     The average net yield, on a tax equivalent basis for the three-months ended
June 30,  2005  decreased  3.6% or 15 basis  points (one basis point is equal to
1/100 of a percent) to 4.06% from 4.21% in the same  period  last year.  For the
six-month  period  ended June 30,  2005,  net yield on interest  earning  assets
decreased  4.7% or 20 basis  points to 4.08%  from  4.28% in the same  period in
2004. The average yield on  interest-earning  assets for the three-month  period
ended June 30, 2005 increased 7.6% or 40 basis points to 5.68% from 5.28% in the
same period last year.  For the  six-month  period ended June 30, 2005,  average
yield on  interest-earning  assets  increased  4.3% or 23 basis  points to 5.56%
compared  to 5.33%  for the same  period  in 2004.  The  average  yield  paid on
interest-bearing

                                       15
<PAGE>
                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

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

liabilities for the three-month period ended June 30, 2005 increased 48.2% or 65
basis  points to 2.00%  compared to 1.35% for the same  period in 2004.  For the
six-month  period ended June 30, 2005,  average  yield paid on  interest-bearing
liabilities  increased  39.7% or 52 basis points to 1.83%  compared to 1.31% for
the same period in 2004.  The increase is due to higher  interest  rates paid on
deposit accounts. Increasing interest rates and pricing competition may continue
to  put  pressure  on  our  net-interest   margin,   and  may  adversely  impact
net-interest income, in future time periods.

               AVERAGE INTEREST RATES (ON A TAX EQUIVALENT BASIS)
<TABLE>
<CAPTION>
                                                                     Three Months Ended                Six Months Ended
                                                                           June 30,                        June 30,
                                                                 -------------------------           --------------------
                                                                 2005               2004              2005          2004
                                                                 ----               ----              ----          ----
          <S>                                                   <C>                <C>               <C>           <C>

           YIELD ON
           Interest-Earning Assets                               5.68%              5.28%             5.56%         5.33%
           Interest Bearing Liabilities                          2.00%              1.35%             1.83%         1.31%
                                                                 ----               ----              ----          ----
           Net Interest Spread                                   3.68%              3.93%             3.73%         4.02%
           Contribution of Interest-Free Funds                   0.38%              0.28%             0.35%         0.26%
                                                                 ----               ----              ----          ----
           Net Yield on Interest-Earning Assets                  4.06%              4.21%             4.08%         4.28%
                                                                 ====               ====              ====          ====
</TABLE>

      INTEREST INCOME ON FEDERAL FUNDS SOLD AND OTHER OVERNIGHT INVESTMENTS

     Interest income on Federal Funds sold and other  overnight  investments for
the three and six-month periods ended June 30, 2005,  increased $37 thousand and
$46 thousand to $47 thousand and $75  thousand,  respectively,  when compared to
the same periods in 2004. The increase in interest  income on Federal Funds sold
and other overnight  investments for the three-month period is the direct result
of a 62.4% or $2.5  million  increase  in average  federal  funds sold and other
overnight  investments  and a 191% or 191  basis  point  increase  on the  rates
earned.  The increase for the six-month period is the direct result of a 163% or
163 basis point increase in the rates earned,  partially offset by a 1.2% or $67
thousand decrease in federal funds sold and other overnight investments.

                    INTEREST INCOME ON INVESTMENT SECURITIES

     On a  tax  equivalent  basis,  interest  income  on  investment  securities
decreased  23.3% or $334  thousand  to $1.1  million  from $1.4  million for the
three-month period ended June 30, 2005 when compared to the same period in 2004.
For the  six-month  period ended June 30, 2005,  interest  income on  investment
securities  decreased  13.7% or $386  thousand to $2.4 million from $2.8 million
when  compared  to the same period in 2004.  The  decrease  for the  three-month
period is  primarily  due to a 25.2% or $35.1  million  decrease  of the average
balance of investment  securities,  partially offset by a 2.4% or 10 basis point
increase earned on such investments. The decrease for the six-month period ended
June 30, 2005 is the result of an 13.2% or $17.7 million decrease of the average
balance of investment  securities as well as a 0.5% or 2 basis point decrease on
interest earned on such investments.

                       INTEREST INCOME ON LOANS AND LEASES

     Interest income on loans and leases, on a tax equivalent  basis,  generated
by the  Corporation's  loan portfolio  increased 25.5% and 23.7% to $9.7 million
and $18.7  million for the three- and  six-month  periods  ended June 30,  2005,
compared to the same  periods in 2004,  respectively.  The  increase in interest
income for these periods is the direct  result of a $102.7  million or 18.6% and
$105.3  million or 19.7%  increase  in the  average  balance of loans and leases
outstanding compared to the same period in 2004 and a 5.9% or 33 basis point and
3.2% or 18 basis point  increase in rates earned on the portfolio as compared to
last year.

                                       16
<PAGE>
                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

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

                      INTEREST EXPENSE ON DEPOSIT ACCOUNTS

     Interest  expense on  deposit  accounts  increased  85.1% and 66.9% for the
three- and  six-month  periods  ended  June 30,  2005 to $2.2  million  and $4.0
million, compared to $1.2 million and $2.4 million for the same periods in 2004.
The increase in the three-month  period is primarily the result of a 61.2% or 63
basis point  increase  in the rates paid on such  deposits as well as a 14.1% or
$66.0 million increase in the average balance of interest-bearing deposits, when
compared to the same period last year.  The increase in the six-month  period is
primarily the result of a 46.1% or 47 basis point  increase in the rates paid on
such  deposits  as well as a 14.4%  or $66.9  million  increase  in the  average
balance of  interest-bearing  deposits,  when  compared  to the same period last
year. The  Corporation's  average  effective rate on  interest-bearing  deposits
increased to 1.66% for the three-month  period ended June 30, 2005 from 1.03% in
2004. The  Corporation's  average  effective rate on  interest-bearing  deposits
increased  to 1.49% for the  six-month  period ended June 30, 2005 from 1.02% in
2004.  The  recent  Federal  Funds rate  increases  and  competition  from other
financial  institutions may continue to put upward pressure on this component of
interest expense.

             INTEREST EXPENSE ON FHLB ADVANCES AND OTHER BORROWINGS

     Borrowings consist primarily of Federal Home Loan Bank ("FHLB") borrowings.
Interest expense on borrowings  increased $143 thousand to $640 thousand for the
three-month  period ended June 30, 2005 from $497  thousand when compared to the
same period in 2004.  For the  three-month  period,  the  increase is the direct
result  of a 30.4%  or 84  basis  point  increase  on the  rates  paid on  these
borrowings,  offset by a 1.3% or 918 thousand decrease in the average balance of
such borrowings.  Interest expense on borrowings increased $412 thousand to $1.2
million for the  six-month  period ended June 30, 2005 from $821  thousand  when
compared to the same period in 2004.  The increase is a direct result of a $13.7
million or 24.0% increase in the average balance of borrowings and a 21.2% or 61
basis point increase on rates paid on borrowings for the six-month  period ended
June 30,  2005.  The  increase  in the  level of  borrowings  for the  three and
six-month periods is the direct result of the strong loan growth the Corporation
has  experienced  over that period.  The borrowings are being used to supplement
the growth in deposits to fund loans.  As a long term solution,  the Corporation
is pursuing  several  initiatives  to increase  its  deposit  base.  Initiatives
include researching and opening new branch sites, utilizing brokered certificate
of deposits,  introducing new deposit products and targeted marketing campaigns.
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.

                   INTEREST EXPENSE ON SUBORDINATED DEBENTURES

     Interest expense on subordinated  debentures increased $72 thousand to $244
thousand for the  three-month  period ended June 30, 2005 from $172 thousand for
the same  period  last year.  For the  six-month  period  ended  June 30,  2005,
interest  expense on  subordinated  debentures  increased  $128 thousand to $465
thousand  from $337  thousand  when  compared to the same period last year.  The
increase in the three-month  period is the direct result of a 41.8% or 186 basis
point increase in rates paid on the subordinated debentures. The increase in the
six-month  period is the direct result of a 37.8% or 165 basis point increase in
the rates paid on the subordinated debentures.

                       PROVISION FOR LOAN AND LEASE LOSSES

     During the three and six-month periods ended June 30, 2005, the Corporation
recorded  a  $504  thousand  and  a  $1.0  million  provision  for  loan  losses
respectively,  compared  to a $56  thousand  and a $356  thousand  for the  same
periods in 2004.  The  allowance  for loan losses as a percentage of total loans
was 1.22% at June 30,  2005,  1.17% at  December  31, 2004 and 1.14% at June 30,
2004, respectively. See the section titled "Allowance For Loan and Lease Losses"
on page 24 for additional discussion.

                                       17
<PAGE>
                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

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

                               NON-INTEREST INCOME

     Total  non-interest  income decreased 7.3% or $169 thousand to $2.2 million
for the three- month period ended June 30, 2005 when compared to the same period
in 2004. For the six-month period ended June 30, 2004, total non-interest income
decreased 5.8% or $272 thousand to $4.4 million when compared to the same period
in 2004. The various components of non-interest income are discussed below.

     The  largest  component  of  non-interest  income is Trust  and  Investment
Services  revenue,  which  decreased  18.3% and 13.1% to $715  thousand and $1.6
million for the three- and six-month periods ended June 30, 2005,  respectively,
compared  to the same  periods in 2004.  The decline is  primarily  due to lower
estate fee income earned in 2005 as compared to 2004.

     Service charges on deposit accounts  decreased  approximately  7.2% to $478
thousand for the three-months  ended June 30, 2005 compared to $515 thousand for
the same period in 2004. For the six-month  period ended June 30, 2005,  service
charges on deposit  accounts  decreased 8.6% to $950 thousand  compared to $1.04
million for the same period in 2004. The decline in service  charges is a result
of a reduced amount of overdraft charges on retail and commercial demand deposit
accounts  and a decrease in the service  charges for these  accounts.  To remain
competitive  and increase our core deposit base,  the  Corporation  introduced a
"Free Checking"  product during the first quarter of this year which contributed
to  the  decrease  in  service   charges  and  will  impact  this  component  of
non-interest income as some current accounts may move to this new product.

     For the three- and six-month  periods ended June 30, 2005, the  Corporation
realized  an $8  thousand  loss on the sale of  investment  securities.  For the
three- and six-month periods ended June 30, 2004, the Corporation realized a $60
thousand  gain and a $53  thousand  gain on the sale of  investment  securities,
respectively.  The  losses/gains  in 2005 and 2004 were  realized as a result of
normal portfolio management.

     The  Corporation  has  operating  lease  agreements  with  several  of  our
customers;  the income on these leases is classified as "Rental Income".  Rental
income on operating  lease  agreements for the three and six-month  period ended
June 30, 2005 increased  27.2% and 22.7% to $243 thousand and $471 thousand from
$191 thousand and $384 thousand when compared to the same periods in 2004. Total
operating  leases increased 31.1% or $1.1 million from June 30, 2004 to June 30,
2005. See related  depreciation  expense in the non-interest expense section for
more details.

     Gains and losses on sale of premises  and OREO were a $7 thousand  loss for
the three and six-month  periods ended June 30, 2005.  Gains on sale of premises
and OREO were $24 thousand and $48 thousand for the three and six-month  periods
ended June 30, 2004.

     Gains  generated  on the sale of  residential  mortgages  for the three and
six-month period ended June 30, 2005 increased $13 thousand and $4 thousand from
$100 thousand and $190  thousand to $113 thousand and $194 thousand  compared to
the same period last year,  respectively.  The  increases  are  primarily due to
higher volumes of originations and sales of residential  mortgages when compared
to the same periods last year.

     Other  non-interest  income  increased $2 thousand or 0.3% to $618 thousand
for the three-months  ended June 30, 2005 compared to $616 thousand for the same
period in 2004. For the six-month period ended June 30, 2005, other non-interest
income  increased $46 thousand or 4.1% when compared to the same period in 2004.
Other non-interest income includes ATM surcharge revenue,  merchant income, safe
deposit box income,  loan fee income,  wealth  advisory  income,  rental income,
management fees, notary fee income, and other miscellaneous income.

                              NON-INTEREST EXPENSE

     Total  non-interest  expense for the three and six-month periods ended June
30, 2005 increased 6.5% to $7.8 million and 10.8% to $15.7 million,  compared to
the same periods in 2004.  The various  components of  non-interest  expense are
discussed below.

                                       18
<PAGE>
                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

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

     Employee  salaries and benefits  increased 2.6% to $4.1 million and 4.1% to
$8.2  million for the  three-month  and  six-month  periods  ended June 30, 2005
compared to the same periods in 2004, respectively. Higher employment and annual
employee salary  increases and proportional  increases in employee  benefits are
primarily  responsible for the three- and six-month  increase.  The salaries and
benefit expense increase also includes the costs  associated with  strengthening
our  Management  team  and  our   repositioning   initiatives.   In  June  2005,
approximately  5% of our work force was  reduced.  The  severance  packages  and
career transitioning  services we provided decreased earnings for the quarter by
approximately   $188   thousand.   We  expect  to  achieve   annual  savings  of
approximately $646 thousand as a result of this action.

     Net occupancy,  equipment,  and data processing  expense increased 8.2% and
6.8%,  to $1.6  million and $3.2  million for the three- and  six-month  periods
ended June 30, 2005, compared to the same periods last year,  respectively.  The
increase  can be  attributed  to the  expense  for  the new  Corporate  branding
initiative  including  signage and displays as well as increased  infrastructure
needed for branch sites.

     Professional  services expense  increased 97.6% and 119.5% to $565 thousand
and $1.4  million  for the  three- and  six-month  periods  ended June 30,  2005
compared to the same periods in 2004, respectively. The increases are the result
of increased  consultant,  accounting,  and legal fees,  largely  related to the
Corporation's  efforts to comply  with  provisions  of  Sarbanes-Oxley  that the
Corporation  became  subject to for the year ended  December  31,  2004.  Direct
expenses  incurred  during  the first six  months of 2005  related  to audit and
attestation  services for our 2004 financial  statements were approximately $235
thousand.  The  remaining  portion  of the  increase  from  quarter  to  quarter
represents other consulting fees for real estate  management,  benefit plans and
management planning.

     Other  non-interest   expense  decreased  3.3%  to  $1.3  million  for  the
three-month  period  ended June 30, 2005  compared to the same period last year.
For the  six-month  period  ended  June  30,  2005  other  non-interest  expense
increased 8.1% to $2.6 million when compared to the same period last year. Other
non-interest   expense  includes  marketing  expenses,   costs  related  to  the
Corporation's  new imaging and  branding  rollout,  annual  meeting and reports,
trust  processing,   postage,   directors'  costs,  bank  telephone,   dues  and
subscriptions, travel and mileage, operating supplies and adjusted loan costs.

                                       19

<PAGE>
                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

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

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

<TABLE>
<CAPTION>
(Dollars in thousands)                                             2005                                     2004
                                                     --------------------------------         ---------------------------------
                                                      Daily                                    Daily
                                                     Average                                   Average
                                                     Balance         Interest   Rate           Balance       Interest     Rate
                                                     -------         --------   ----           -------       --------     ----
<S>                                                 <C>            <C>         <C>           <C>            <C>         <C>

ASSETS
Federal funds sold and other overnight investments   $   6,465      $    47     2.91%         $   3,982      $    10     1.00%
Interest bearing deposits in banks                         719            1     0.56%               766            1     0.52%
Investment securities
Taxable                                                 85,542          909     4.25%           114,626        1,164     4.06%
    Tax-exempt (1)                                      18,425          191     4.14%            24,409          270     4.43%
                                                      --------       ------                    --------       ------
        Total investment securities                    103,967        1,100     4.23%           139,035        1,434     4.13%
                                                      --------       ------                    --------       ------
Loans (2)
    Taxable                                            638,485        9,479     5.94%           542,573        7,613     5.61%
    Tax-exempt (1)                                      15,468          231     5.98%             8,688          123     6.65%
                                                      --------       ------                    --------       ------
        Total loans                                    653,953        9,710     5.94%           551,261        7,736     5.61%
                                                      --------       ------                    --------       ------
        Total interest-earning assets                  765,104       10,858     5.68%           695,044        9,181     5.28%
Non-interest earning assets
    Allowance for possible loan losses                  (7,220)                                  (6,159)
    Cash and due from banks                             23,920                                   22,380
    Other assets                                        22,571                                   22,993
                                                      --------                                 --------
        Total assets                                 $ 804,375                                $ 734,258
                                                      ========                                 ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Savings, NOW & money market deposits                 $ 385,608      $ 1,123     1.16%         $ 355,647      $   518     0.58%
Certificates of deposits and other time                147,273        1,093     2.97%           111,283          679     2.44%
                                                      --------       ------                    --------       ------
    Total interest bearing deposits                    532,881        2,216     1.66%           466,930        1,197     1.03%
Subordinated debentures                                 15,465          244     6.31%            15,465          172     4.45%
Federal Home Loan Bank advances and
    other borrowings                                    71,178          640     3.60%            72,096          497     2.76%
                                                      --------       ------                    --------       ------

        Total interest bearing liabilities             619,524        3,100     2.00%           554,491        1,866     1.35%
                                                      --------                                 --------       ------
Non-interest bearing liabilities
    Non-interest bearing demand deposits               124,324                                  123,801
    Other liabilities                                    4,508                                    3,385
                                                      --------                                 --------
        Total liabilities                              759,344                                  681,677
Stockholders' equity                                    56,019                                   52,581
                                                      --------                                 --------
        Total liabilities and stockholders' equity   $ 804,375                                $ 734,258
                                                      ========                                 ========
Net interest income                                                 $ 7,758                                  $ 7,315
                                                                     ======                                   ======
Net yield on interest earning assets                                            4.06%                                    4.21%
                                                                                ====                                     ====
<FN>

(1) The indicated income and annual rate are presented on a taxable equivalent
    basis using the Federal marginal rate of 34% adjusted for the TEFRA penalty
    for 2005 and 2004
(2) Non-accruing loans are included in the average balance.

</FN>
</TABLE>
                                       20
<PAGE>
                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

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


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

(Dollars in thousands)                                             2005                                    2004
                                                      -------------------------------        ----------------------------------

                                                        Daily                                   Daily
                                                       Average                                  Average
                                                       Balance     Interest      Rate           Balance     Interest       Rate
                                                       -------     --------      ----           -------     --------       ----
<S>                                                 <C>            <C>          <C>          <C>           <C>          <C>

ASSETS
Federal funds sold and other overnight investments   $   5,713      $    75      2.63%        $   5,780     $     29     1.00%
Interest bearing deposits in banks                         683            3      0.88%              569            2     0.70%
Investment securities
Taxable                                                 95,218        1,971      4.14%          109,410        2,268     4.15%
    Tax-exempt (1)                                      21,101          465      4.40%           24,618          554     4.50%
                                                      --------       ------                    --------      -------
        Total investment securities                    116,319        2,436      4.19%          134,028        2,822     4.21%
                                                      --------       ------                    --------      -------
Loans (2)
    Taxable                                            626,167       18,283      5.84%          525,530       14,860     5.66%
    Tax-exempt (1)                                      13,445          408      6.07%            8,811          254     5.76%
                                                      --------       ------                    --------      -------
        Total loans                                    639,612       18,691      5.84%          534,341       15,114     5.66%
                                                      --------       ------                    --------      -------
        Total interest-earning assets                  762,327       21,205      5.56%          674,718       17,967     5.33%
Non-interest earning assets
    Allowance for possible loan losses                  (7,218)                                  (6,059)
    Cash and due from banks                             24,150                                   22,164
    Other assets                                        22,865                                   22,779
                                                      --------                                 --------
        Total assets                                 $ 802,124                                $ 713,602
                                                      ========                                 ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Savings, NOWS & money market deposits                $ 402,672      $ 2,178      1.08%        $ 355,139     $  1,015     0.57%
Certificates of deposits and other time                130,228        1,790      2.75%          110,877        1,362     2.46%
                                                      --------       ------                    --------      -------
Total interest bearing deposits                        532,900        3,968      1.49%          466,016        2,377     1.02%
Subordinated debentures                                 15,465          465      6.01%           15,465          337     4.36%
Federal Home Loan Bank advances and
     other borrowings                                   70,700        1,233      3.49%           57,013          821     2.88%
                                                      --------       ------                    --------      -------
   Total interest bearing liabilities                  619,065        5,666      1.83%          538,464        3,535     1.31%
                                                      --------       ------                    --------      -------
Non-interest bearing liabilities
    Non-interest bearing demand deposits               122,268                                  118,604
    Other liabilities                                    4,817                                    3,842
                                                      --------                                 --------
        Total liabilities                              746,150                                  660,910
Stockholders' equity                                    55,974                                   52,692
                                                      --------                                 --------
        Total liabilities and stockholders' equity   $ 802,124                                $ 713,602
                                                      ========                                 ========
Net interest income                                                 $15,539                                 $ 14,432
                                                                     ======                                  =======
Net yield on interest earning assets                                             4.08%                                   4.28%
                                                                                 ====                                    ====

<FN>

(1) The indicated income and annual rate are presented on a taxable equivalent
    basis using the Federal marginal rate of 34% adjusted for the TEFRA penalty
    for 2005 and 2004.

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

</TABLE>

                                       21

<PAGE>
                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

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

                                  INCOME TAXES

     Income tax expense for the three and six-month  periods ended June 30, 2005
was $429 thousand and $839  thousand  compared to $647 thousand and $1.3 million
in the same periods last year. This represents  effective tax rates of 28.6% for
both  periods  ended June 30,  2005.  The  effective  tax rate for the three and
six-month periods ended June 30, 2004 was 30.0%.

               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  Management to monitor changes in liquidity and to react accordingly to
fluctuations  in market  conditions.  The primary  sources of liquidity  for the
Corporation are funding available from deposit growth, FHLB borrowings, brokered
certificates of deposits and cash flow from the investment and loan  portfolios.
Deposits consist of NOW, money-market,  savings, tiered savings, large and small
dollar certificates of deposit and non-interest bearing demand deposit accounts.
The  Corporation  considers  funds from demand,  NOW, money market,  savings and
certificates  less  than  $100  thousand  as  "core"  deposits  because  of  the
historical  stability  of such  sources  of  funds.  Details  of core  deposits,
non-interest  bearing  demand  deposit  accounts and other  deposit  sources are
highlighted in the following table:

                                DEPOSIT ANALYSIS
<TABLE>
<CAPTION>


(Dollars in thousands)                      June 30, 2005                  December 31, 2004                 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                        $ 159,470            0.99%          $129,569         0.51%          $ 29,901      23.08%
Money Market                           25,721            0.91%            26,255         0.51%              (534)     (2.03%)
Statement Savings                      63,594            0.71%            65,682         0.56%            (2,088)     (3.18%)
Other Savings                           1,275            0.47%             1,370         0.51%               (95)     (6.93%)
CD's Less than $100,000                92,290            2.71%            85,873         2.46%             6,417      (7.47%)
                                      -------                            -------                         -------

Total Core Deposits                   342,350            1.39%           308,749         1.06%            33,601      10.88%

Non-Interest Bearing
Demand Deposit Accounts               115,702              --            125,074           --             (9,372)     (7.49%)
                                      -------                            -------                         -------

Total Core and Non-Interest
  Bearing Deposits                    458,052            1.04%           433,823         0.75%            24,229       5.58%
                                      -------                            -------                         -------

Tiered Savings                        152,612            1.37%           168,180         0.86%           (15,568)     (9.26%)
CD's Greater than $100,000             37,938            2.86%            25,966         2.28%            11,972      46.11%
                                      -------                            -------                         ------

Total Deposits                       $648,602            1.22%          $627,969         0.84%          $ 20,633       3.29%
                                      -------                            -------                         ------
</TABLE>
                                       22
<PAGE>
                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

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

     The Bank, as a member of the FHLB,  maintains  several  credit  facilities.
During the three and  six-month  periods  ending  June 30,  2005,  average  FHLB
advances were approximately $71.2 million and $70.7 million,  respectively,  and
consisted of term  advances  representing  a  combination  of maturities in each
period.  The average interest rate on these advances was approximately  3.6% and
3.5%,  respectively.  As of June 30,  2005,  the Bank  had a  maximum  borrowing
capacity  with the FHLB of  approximately  $162.4  million.  FHLB  advances  are
collateralized  by a pledge on the Bank's  portfolio of unencumbered  investment
securities,  certain  mortgage  loans and a lien on the Bank's FHLB stock.  FHLB
advances increased  significantly during the first and second quarter of 2005 as
they were used to supplement deposit growth to support strong loan growth.

     The goal of interest rate  sensitivity  management is to avoid  fluctuating
net interest  margins,  and to enhance  consistent growth of net interest income
through periods of changing  interest rates. Such sensitivity is measured as the
difference  in the volume of assets and  liabilities  in the existing  portfolio
that are subject to  repricing in a future time period.  The  Corporation's  net
interest rate  sensitivity  gap within one year is a negative  $205.7 million or
2.5% of total assets at June 30, 2005 compared with a negative $222.4 million or
29.3% of total assets at June 30, 2004.  The  Corporation's  gap position is one
tool used to  evaluate  interest  rate risk and the  stability  of net  interest
margins.  Another tool that management uses to evaluate  interest rate risk is a
computer  simulation model that assesses the impact of changes in interest rates
on net interest  income,  net-income  under various  interest rate forecasts and
scenarios.  Management  has set  acceptable  limits  of risk  within  its  Asset
Liability  Committee ("ALCO") policy and monitors the results of the simulations
against  these limits  quarterly.  Management  monitors  interest rate risk as a
regular part of corporate  operations with the intention of maintaining a stable
net interest margin.

                                       23
<PAGE>
                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

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

                          INTEREST SENSITIVITY ANALYSIS
                               AS OF JUNE 30, 2005
<TABLE>
<CAPTION>

(Dollars in thousands)
                                                                    One              Over
                                                   Within        through              five          Non-rate
                                                  one year      five years            years         sensitive         Total
                                                -----------     -----------       -----------       ---------        -------
<S>                                           <C>              <C>               <C>              <C>            <C>
ASSETS
    Federal funds sold                         $     20,000     $        --       $        --      $        --    $    20,000
    Investment securities                            18,398          55,756            26,710               --        100,864
    Interest bearing deposits in banks                  454              --                --               --            454
    Loans and leases                                257,503         288,311           111,469           (8,004)       649,279
    Cash and cash equivalents                            --              --                --           27,083         27,083
    Premises & equipment                                 --              --                --           13,956         13,956
    Other assets                                         --              --                --            8,708          8,708
                                                -----------     -----------        ----------        ---------     ----------
       Total assets                            $    296,355    $    344,067       $   138,179      $    41,743    $   820,344
                                                ===========     ===========        ==========       ==========     ==========

LIABILITIES AND CAPITAL
    Interest bearing deposits                  $    476,439    $     56,105       $    12,771      $        --    $   545,315
    Non-interest bearing deposit                         --              --                --          132,547        132,547
    FHLB advances and other
       borrowings                                     9,996          49,025             7,466               --         66,487
    Subordinated Debt                                15,465              --                --               --         15,465
    Other liabilities                                   177              --             4,339               --          4,516
    Capital                                             --               --                --          56,014          56,014
                                                -----------     -----------        ----------       --------=      ----------
       Total liabilities & capital             $    502,077    $    105,130       $    24,576      $  188,561     $   820,344
                                                ===========     ===========        ==========       ==========     ==========
    Net interest rate
      sensitivity gap                          $   (205,722)   $    238,937       $   113,603      $ (146,818)    $        --
                                                ===========     ===========        ==========       =========      ==========
    Cumulative interest rate
      sensitivity gap                          $   (205,722)   $     33,215       $   146,818      $        --    $        --
                                                ===========     ===========        ==========       ==========     ==========
    Cumulative interest rate
      sensitivity gap divided
      by total assets                                (25.1%)           4.0%             17.9%
                                                ===========     ===========        ==========
</TABLE>

                       ALLOWANCE FOR LOAN AND LEASE LOSSES

     The  allowance  for loan and  lease  losses is an  amount  that  Management
believes  will be adequate  to absorb  loan  losses on  existing  loans that may
become  uncollectible  based  upon  Management's  periodic  evaluations  of  the
collectibility of loans. The evaluations take into consideration such factors as
changes  in the  nature  and  volume of the loan  portfolio,  overall  portfolio
quality,  adequacy of collateral,  review of specific problem loans, and current
economic  conditions  that may affect our borrower's  ability to pay. During the
three and six-month periods ended June 30, 2005, the Corporation recorded a $504
thousand and a $1.0 million provision for loan losses respectively,  compared to
a $56  thousand  and a $356  thousand  provision  for loan  losses  for the same
periods in 2004. Net loans  charged-off  (recovered) for the three and six-month
periods ended June 30, 2005 were ($53) thousand and $219 thousand, respectively,
compared  to $570  thousand  and $406  thousand  for the same  periods  in 2004.
Accordingly,  the  allowance  for loan and lease losses as a percentage of loans
for the period  ending June 30, 2005 was 1.22%  compared to 1.14% for the period
ending June 20, 2004. The increase in the allowance for loan and lease losses as
a  percentage  of loans is the  result of  Management's  evaluation  of its loan
portfolio in accordance  with regulatory  guidelines and the policies  described
more fully in our Annual Report on Form 10-K for 2004.

                                       24
<PAGE>
                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

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

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

                                                                         Three Months                      Six Months
                                                                            Ended                             Ended
                                                                           June 30,                           June 30,
                                                                  --------------------------       --------------------------
(Dollars in thousands)                                                2005           2004             2005             2004
                                                                      ----           ----             ----             ----
<S>                                                              <C>             <C>              <C>             <C>

Balance at beginning of period                                    $    7,447      $    6,000       $    7,213      $    5,864
                                                                   ---------       ---------        ---------       ---------

Provision charged to operating expense                                   504              56            1,010             356
                                                                   ---------       ---------        ---------       ---------

    Recoveries of loans previously charged-off                           100             857              172             897
    Loans charged-off                                                    (47)           (287)            (391)           (491)
                                                                   ---------       ---------        ---------       ---------

Net recoveries (loans charged-off)                                        53             573             (219)            406
                                                                   ---------       ---------        ---------       ---------

Balance at end of period                                          $    8,004      $    6,626       $    8,004       $   6,626
                                                                   =========       =========        =========        =========
Period-end loans outstanding                                      $  657,283      $  579,806       $  657,283       $ 579,806
Average loans outstanding                                         $  653,953      $  551,261       $  639,612       $ 534,341
Allowance for loan losses as a
  Percentage of period-end loans outstanding                           1.22%           1.14%            1.22%           1.14%

Net charge-offs to average loans
    Outstanding                                                       (0.01%)         (0.10%)           0.03%          (0.08%)
</TABLE>

     Non-performing  assets include loans on  non-accrual  status and loans past
due 90 days or more and still  accruing.  The  Corporation's  policy is to write
down  all  non-performing  loans  to  net  realizable  value  based  on  current
assessments  of  the  value  of  collateral  securing  such  loans  and  leases.
Non-performing assets are primarily collateralized by real estate and are in the
process of collection.  Non-performing  assets were $9.8 million,  $8.6 million,
and $3.5  million as of June 30, 2005,  December  31,  2004,  and June 30, 2004,
respectively.  The non-accrual  loans as of June 30, 2005,  primarily consist of
three loan relationships.  Management is actively working to collect these loans
and does not anticipate a loss of principal.

     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.  Non-performing  loans and  leases  reduce  the  Corporation's
earnings  because  interest  income is not earned on such assets.  The following
chart represents detailed information regarding non-performing loans and leases.

                                       25

<PAGE>
                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

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

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

                                                                       June 30,                  December 31,
                                                             --------------------------          ------------
(Dollars in thousands)                                          2005              2004                2004
                                                                -----             ----                ----
<S>                                                         <C>              <C>                   <C>


Past due over 90 days and still accruing                     $     168        $      16             $      --

Non-accrual loans                                                9,646            1,947                 7,877
                                                              --------         --------              --------

Total non-performing loans                                       9,814            1,963                 7,877

Other real estate owned                                             --            1,523                   757
                                                              --------         --------              --------

Total non-performing assets                                  $   9,814        $   3,486             $   8,634
                                                              ========         ========              ========

Non-performing loans as a percentage of total loans (gross)      1.49%            0.34%                 1.27%

Allowance for loan losses as a
   percentage of non-performing loans                           81.56%          337.54%                91.57%

Allowance for loan losses as a
   percentage of total loans and other real estate owned         1.22%            1.14%                 1.40%

Allowance for loan losses as a percentage of
   non-performing assets                                        81.56%          190.07%                83.54%
</TABLE>

     The allowance for loan losses as a percentage of non-performing loans ratio
indicates  that the  allowance  for  loan  losses  is  sufficient  to cover  the
principal of all non-performing  loans at June 30, 2005. Other real estate owned
("OREO")  represents  residential  and  commercial  real estate that had secured
non-performing  loans that the Corporation acquired through foreclosure or other
collection efforts and that is held for sale. The value of OREO has been written
down to realizable value (net of estimated disposal costs) based on professional
appraisals.

                                 LOAN IMPAIRMENT

     The  Corporation  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.

     FASB 114  "Accounting  by  Creditors  for  Impairment  of  Loans"  examines
commercial  and  non-residential   mortgage  loans  on  non-accrual  status  for
impairment.  The balance of impaired loans was $9.6 million,  $2.3 million,  and
$7.9  million  at  June  30,  2005,   December  31,  2004,  and  June  30,  2004
respectively. The associated allowance for impaired loans was $1.0 million, $231
thousand  and $191  thousand at June 30,  2005,  December  31, 2004 and June 30,
2004, respectively.

         For the three and six-month periods ended June 30, 2005, activity in
the allowance for impaired loan losses include a provision of $133 thousand and
$337 thousand, charge offs of $6 thousand and $119 thousand. There were no
recoveries in either the three or six-month periods ended June 30, 2005.
Contractual interest amounted to $168 thousand for the three-months ended June
30, 2005 and $316 thousand for the six-months ended June 30, 2005. Cash
collected on loans for the three-month and six-month period ended June 30, 2005
was $4 thousand and $416 thousand, respectively, all of which was applied to
principal.

     For the three and  six-month  period ended June 30,  2004,  activity in the
allowance for impaired  loan losses  include a provision of $24 thousand and $43
thousand,  charge  offs of $17  thousand  and  $25  thousand,  recoveries  of $3
thousand and $3 thousand,  respectively.  Contractual  interest  amounted to $41
thousand for the three-months

                                       26

<PAGE>
                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

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

ended June 30, 2004 and $93  thousand  for the  six-months  ended June 30, 2005.
Cash collected on loans for the three-month and six-month  period ended June 30,
2004 was $414 thousand and $863  thousand,  respectively.  The amount applied to
principal  was $410  thousand  and $836  thousand  for the three and six-  month
period,  respectively,  of which $4  thousand  and $27  thousand  was applied to
interest for the three and six-month period ended June 30, 2004, respectively.

                                CAPITAL ADEQUACY

     The Corporation is subject to Risk-Based  Capital Guidelines adopted by the
Federal  Reserve Board ("FRB") for bank holding  companies.  The  Corporation is
also  subject  to  similar  capital  requirements  adopted  by the Office of the
Comptroller of the Currency.  Under these requirements,  the regulatory agencies
have set minimum  thresholds  for Tier I Capital,  Total  Capital,  and Leverage
ratios. At June 30, 2005, both the Corporation's and the Bank's capital exceeded
all  minimum  regulatory  requirements,   and  the  Bank  was  considered  "well
capitalized"  as  defined  in  the  regulations  issued  pursuant  to  the  FDIC
Improvement Act of 1992. The  Corporation's  Risk-Based  Capital  Ratios,  shown
below, have been computed in accordance with regulatory accounting policies.

<TABLE>
<CAPTION>

RISK-BASED                                             June 30,               December 31,
CAPITAL RATIOS                            -------------------------------     ------------            "Well Capitalized"
--------------                             2005               2004                  2004                  Requirements
                                           ----               ----                  ----              -----------------
<S>                                      <C>                <C>                   <C>                       <C>

    Corporation
    -----------
Leverage Ratio                             8.91%              9.18%                 8.62%                     N/A
Tier I Capital Ratio                      10.50%             10.94%                10.80%                     N/A
Total Risk-Based Capital Ratio            11.67%             12.02%                11.91%                     N/A

       Bank
       ----
Leverage Ratio                             8.19%              8.57%                 8.11%                    5.00%
Tier I Capital Ratio                       9.61%             10.19%                10.16%                    6.00%
Total Risk-Based Capital Ratio            10.78%             11.26%                11.26%                   10.00%

</TABLE>

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

                                       27
<PAGE>
                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

ITEM 3.  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 2004 Annual  Report,
filed with the SEC via EDGAR as an exhibit to its Form 10-K for the fiscal  year
ended  December  31,  2004.  Please refer to the  "Management's  Discussion  and
Analysis"  section on pages 23-44 of the  Corporation's  Annual  Report for more
information.

ITEM 4.  CONTROLS AND PROCEDURES

Disclosure  Controls and  Procedures.  Included  with this  Quarterly  Report as
Exhibits  31.1,  31.2,  and 31.3 are  three  certifications  (the  "Section  302
Certifications"),  one by each of our Chief Executive  Officer (CEO),  President
and our Chief Financial Officer,  our principal executive and financial officers
(the  "Principal  Officers").  This  section of the  Quarterly  Report  contains
information concerning the evaluations of our disclosure controls and procedures
and  internal  control  over  financial  reporting  that are  referred to in the
Section 302 Certifications.  This information should be read in conjunction with
the Section 302 Certifications  for a more complete  understanding of the topics
presented.

The Securities and Exchange Commission (the "SEC") requires that as of the end
of the quarter covered by this Report, our CEO and CFO evaluate the
effectiveness of the design and operation of our disclosure controls and
procedures and report on the effectiveness of the design and operation of our
disclosure controls and procedures.

"Disclosure controls and procedures" mean the controls and other procedures that
are designed  with the  objective of ensuring  that  information  required to be
disclosed in our reports  filed under the  Securities  Exchange Act of 1934 (the
"Exchange  Act"),  such  as  this  Quarterly  Report,  is  recorded,  processed,
summarized and reported within the time periods specified in the rules and forms
promulgated  by the SEC.  Disclosure  controls and  procedures are also designed
with the  objective  of  ensuring  that  such  information  is  accumulated  and
communicated  to  our   management,   including  the  Principal   Officers,   as
appropriate, to allow timely decisions regarding required disclosure.

As required by Rule  13a-15(b),  the  Corporation's  management,  including  our
Principal Officers,  conducted an evaluation as of the end of the period covered
by this report, of the effectiveness of the  Corporation's  disclosure  controls
and procedures.  Based on that evaluation, the Principal Officers concluded that
our  disclosure  controls and procedures  were  effective to provide  reasonable
assurance that the disclosure controls and procedures met their objectives as of
the end of the period covered by this Report..

Changes in  internal  control  over  financial  reporting.  As  required by Rule
13a-15(d),  the  Corporation's  management,  including  the  Principal  Officers
conducted an evaluation of the  Corporation's  internal  control over  financial
reporting to determine whether any changes occurred during the period covered by
this  report  that  have  materially  affected,  or  are  reasonably  likely  to
materially affect, the Corporation's  internal control over financial reporting.
During the second quarter of 2005, there were no such changes.

                                       28

<PAGE>
                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

                           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.      Unregistered Sales of Equity Securities and Use of Proceeds

                      ISSUER PURCHASES OF EQUITY SECURITIES

<TABLE>
<CAPTION>

                                          Total Number     Average     Total Number of Shares      Maximum Number (or Approximate
            Period                         of Shares      Price Paid  (or Units) Purchased as     Dollar Value) of Shares (or Units)
                                           (or units)     per Share  Part of Publicly Announced      that May Yet Be Purchased
                                             Purchased    (or Unit)      Plans or Programs          Under the Plans or Programs
                                          ------------    ---------  --------------------------   ----------------------------------
     <S>                                   <C>             <C>                <C>                        <C>

      April 1 to April 30, 2005              -0-             -0-                -0-                       $6,715,573

      May 1 to May 31, 2005                 18,000          $23.15             18,000                     $6,298,873

      June 1 to June 30, 2005                -0-              $0                -0-                       $6,298,873

      Total                                 18,000          $23.15             18,000                     $6,298,873
<FN>

Note: All of the foregoing shares were purchased pursuant to the Corporation's
program to repurchase up to $10.0 million of the Corporation's common stock that
was publicly announced on October 16, 2004.
</FN>
</TABLE>

Item 3.      Defaults upon Senior Securities

                  None

Item 4.      Submission of Matters to Vote of Security Holders

             The Annual Meeting of Shareholders of the Corporation was held on
             April 19, 2005 (the "Meeting"). Notice of the Meeting was mailed to
             shareholders of record on or about March 17, 2005, 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 there under.

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

1.                The election of four Class III directors, with each director
                  to serve until the 2008 Annual Meeting of Shareholders and
                  until the election and qualification of his or her respective
                  successor;
                                       29
<PAGE>
                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

                     PART II - OTHER INFORMATION - CONTINUED

            2. The approval of the Corporation's Restricted Stock Plan;

            3. The ratification of the appointment of Grant Thornton, LLP as the
            Corporation's  independent  public  accountants  for the year ending
            December 31, 2005; and

            4. The  transaction  of such other  business  as may  properly  come
            before the Annual Meeting and any adjournment  thereof,  and matters
            incident to the conduct of the Annual Meeting.

            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:

                  Nominee                             For              Withheld
                  -------                             ---              --------

                  John A. Featherman, III          3,393,764           198,661

                  John Halsted                     3,334,114           258,311

                  J. Carol Hanson                  3,387,833           204,592

                  Edward A. Leo                    3,394,995           197,430

            The names of the other  directors whose terms of office as directors
            continued after the Meeting are as follows:  John J.  Ciccarone,  M.
            Robert Clarke,  Clifford E.  DeBaptiste,  David L. Peirce,  Kevin C.
            Quinn and John B. Waldron.

            The proposal to ratify the  Corporation's  Restricted Stock Plan was
            ratified.  The  numbers  of votes cast for or against as well as the
            number of abstentions and broker non-votes for the ratification were
            as follows:

            For            Against       Abstentions            Broker Non-votes
            ---            -------       -----------            ----------------

            3,443,585      93,829          55,011                     0

            The proposal to ratify the appointment of Grant Thornton, LLP as the
            Corporation's  independent  public  accountants  for the year ending
            December  31,  2005 was  ratified.  The numbers of votes cast for or
            against as well as the number of  abstentions  and broker  non-votes
            for the ratification were as follows:

            For            Against       Abstentions            Broker Non-votes
            ---            -------       -----------            ----------------

            3,571,315      3,140           17,970                     0

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

Item 5.     Other Information

                  None

                                       30
<PAGE>
                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

                     PART II - OTHER INFORMATION - Continued


Item 6.      Exhibits

(a)      Exhibits

                  3(i).*   Certificate   of    Incorporation.    Copy   of   the
                           Corporation's Articles of Incorporation,  as amended,
                           is ------------------------------ incorporated herein
                           by  reference  to Exhibit  3(i) to the  Corporation's
                           Quarterly  Report on Form 10-Q for the quarter  ended
                           March 31, 2004.

                  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, 2000.

                  10.1     Letter of  Employment  to Susan  Bergen-Painter  (cp)
                           10.2 Change of Control Agreement between the Bank and
                           Susan Bergen-Painter dated April 25, 2005 (cp)

                  10.3     Letter of Employment to Karen Walter (cp)

                  10.4     Change  of  Control  Agreement  between  the Bank and
                           Karen Walter dated May 6, 2005 (cp)

                  10.5     Letter  of  Employment  to John  Balzarini  (cp) 10.6
                           Change of Control Agreement between the Bank and John
                           Balzarini dated June 3, 2005 (cp)

                  10.7     Change  of  Control  Agreement  between  the Bank and
                           Linda Hicks dated May 23, 2005 (cp)

                  10.8     Change  of  Control  Agreement  between  the Bank and
                           Michelle Venema dated June 10, 2005 (cp)

                  10.9     Change  of  Control  Agreement  between  the Bank and
                           Anthony Poluch dated May 25, 2005 (cp)

                  10.10    2005   Restricted   Stock  Plan  is  incorporated  by
                           reference  to  Appendix A to the  Corporation's  2005
                           Proxy  Statement  filed March 17, 2005 (cp) 31.1 Rule
                           13a-14(a)  Certification  of Chief Executive  Officer
                           31.2 Rule 13a-14(a)  Certification  of President 31.3
                           Rule 13a-14(a)  Certification  of Treasurer and Chief
                           Financial  Officer 32.1 Section 906  Certification of
                           the  Chief   Executive   Officer   32.2  Section  906
                           Certification  of  the  President  32.3  Section  906
                           Certification  of the Treasurer  and Chief  Financial
                           Officer

* Indicates document previously filed.

(cp)     Indicates management contracts or compensatory plans, contracts or
         arrangements in which a director or executive officer participates or
         may participate.

                                       31

<PAGE>
                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

                                   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


                                           John A. Featherman III


August 9, 2005                             /s/ John A Featherman III
                                           -------------------------
                                           John A. Featherman III
                                           Chief Executive Officer



                                           John E. Balzarini


     August 9, 2005                        /s/ John E. Balzarini
                                           ---------------------
                                           John E. Balzarini
                                           Treasurer and Chief Financial Officer

                                       32

<PAGE>
                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

                                INDEX TO EXHIBITS
                                -----------------

     The  following is a list of the exhibits  filed with,  or  incorporated  by
reference  into,  this Report (those  exhibits marked with an asterisk are filed
herewith and those marked "(cp)" are management contracts or compensatory plans,
contracts or arrangements in which a director or executive officer  participates
or may participate):

     3(i).* Certificate of Incorporation.  Copy of the Corporation's Articles of
Incorporation,  as amended,  is incorporated herein by reference to Exhibit 3(i)
to the  Corporation's  Quarterly Report on Form 10-Q for the quarter ended March
31, 2004.

     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, 2000.

     10.1 Letter of Employment to Susan Bergen-Painter (cp)

     10.2 Change of Control Agreement between the Bank and Susan  Bergen-Painter
          dated April 25, 2005 (cp)

     10.3 Letter of Employment to Karen Walter (cp)

     10.4 Change of Control  Agreement  between the Bank and Karen  Walter dated
          May 6, 2005 (cp)

     10.5 Letter of Employment to John Balzarini (cp)

     10.6 Change of Control  Agreement between the Bank and John Balzarini dated
          June 3, 2005 (cp)

     10.7 Change of Control Agreement between the Bank and Linda Hicks dated May
          23, 2005 (cp)

     10.8 Change of Control Agreement between the Bank and Michelle Venema dated
          June 10, 2005 (cp)

     10.9 Change of Control  Agreement between the Bank and Anthony Poluch dated
          May 25, 2005 (cp)

     10.10 2005 Restricted Stock Plan is incorporated by reference to Appendix A
          to the Corporation's 2005 Proxy Statement filed March 17, 2005 (cp)

     31.1 Rule 13a-14(a) Certification of Chief Executive Officer

     31.2 Rule 13a-14(a) Certification of President

     31.3 Rule 13a-14(a) Certification of Treasurer and Chief Financial Officer

     32.1 Section 906 Certification of the Chief Executive Officer

     32.2 Section 906 Certification of the President

     32.3 Section 906 Certification of the Treasurer and Chief Financial Officer

                                       33