FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

(Mark One)

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

For the quarterly period ended September 30, 2007, 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 a large  accelerated  filer, an
accelerated   filer,  or  a   non-accelerated   filer.  See  the  definition  of
"accelerated  filer and large  accelerated  filer" in Rule 12b-2 of the Exchange
Act.   (Check  one):   Large   accelerated   filer  ___   Accelerated   filer  X
Non-accelerated filer __

Indicate by check mark whether the  Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes ___ No X

The  number  of  shares  outstanding  of Common  Stock of the  Registrant  as of
November 9, 2007 was 5,162,618.



                                      INDEX
                                                                            PAGE
                                                                            ----

Part I. FINANCIAL INFORMATION

Item 1 - Financial Statements
          Consolidated Balance Sheet
          September 30, 2007 (unaudited) and December 31, 2006                 3

          Consolidated Statements of Income
          Three and Nine months Ended September 30, 2007 and 2006 (unaudited)  4

          Consolidated Statements of Cash Flows
          Nine Months Ended September 30, 2007 and 2006 (unaudited)            5

          Consolidated Statements of Stockholders' Equity
          Nine Months Ended September 30, 2007 and 2006 (unaudited)            6

          Notes to Consolidated Financial Statements                        7-10

Item 2 - Management's Discussion and Analysis of
          Financial Condition and Results of Operations                    11-26

Item 3 - Quantitative and Qualitative Disclosures about Market Risk           27

Item 4 - Controls & Procedures                                                27

Part II. OTHER INFORMATION

Item 1 - Legal Proceedings                                                    28

Item 1A - Risk Factors                                                        28

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds          28

Item 3 - Defaults Upon Senior Securities                                      29

Item 4 - Submission of Matters to a Vote of Security Holders                  29

Item 5 - Other Information                                                    29

Item 6 - Exhibits                                                             29

Signatures                                                                    30

Index to Exhibits                                                             31

Exhibits                                                                   32-37


                                       2
<PAGE>


                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

                          PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

                           CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>

(Dollars in thousands)                                                                September 30,   December 31,
                                                                                          2007            2006
                                                                                      -------------   ------------
                                                                                       (unaudited)
<S>                                                                                      <C>             <C>

ASSETS
   Cash and due from banks                                                               $  24,373       $  27,556
   Federal funds sold and other overnight investments                                       57,918          44,500
   Interest bearing deposits                                                                   570             285
                                                                                         ---------       ---------

                Total cash and cash equivalents                                             82,861          72,341
                                                                                         ---------       ---------

   Investment securities held-to-maturity (fair value of $0
       at September 30, 2007 and $5 at December 31, 2006, respectively)                          -               5

   Investment securities available-for-sale, at fair value                                  92,640          88,709

   Loans and leases                                                                        719,530         694,343
   Less:  allowance for loan and lease losses                                               (8,041)         (8,186)
                                                                                         ---------       ---------
                Net loans and leases                                                       711,489         686,157

   Premises and equipment, net                                                              17,139          13,988
   Other assets                                                                             19,708          10,894
                                                                                         ---------       ---------
                Total assets                                                             $ 923,837       $ 872,094
                                                                                         =========       =========
LIABILITIES
   Deposits
        Non-interest-bearing                                                             $ 114,640       $ 129,911
        Interest-bearing (including certificates of deposit over $100
           of $51,642 and $43,825 at September 30, 2007 and
           December 31, 2006, respectively)                                                628,581         594,757
                                                                                         ---------       ---------

        Total deposits                                                                     743,221         724,668

   Federal Home Loan Bank advances and other borrowings                                     85,400          61,596
   Subordinated debt                                                                        15,465          15,465
   Other liabilities                                                                        13,519           7,103
                                                                                         ---------       ---------

        Total liabilities                                                                $ 857,605       $ 808,832
                                                                                         ---------       ---------

STOCKHOLDERS' EQUITY
   Common stock, par value $1.00; authorized 10,000,000 shares;
       outstanding, 5,279,815 at September 30, 2007 and December 31, 2006                    5,280           5,280
   Additional paid-in capital                                                               10,990          11,939
   Retained earnings                                                                        54,330          50,486
   Accumulated other comprehensive loss                                                     (1,841)         (1,473)
   Treasury stock, at cost:  117,197 shares and 128,075 shares
       at June 30, 2007 and December 31, 2006, respectively                                 (2,527)         (2,970)
                                                                                         ---------       ---------

                   Total stockholders' equity                                               66,232          63,262
                                                                                         ---------       ---------

                   Total liabilities and stockholders' equity                            $ 923,837       $ 872,094
                                                                                         =========       =========

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

                                       3
<PAGE>

                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)
<TABLE>
<CAPTION>

(Dollars in thousands - except per share)                                  Three Months Ended             Nine Months Ended
                                                                               September 30,                 September 30,
                                                                  -------------------------------    --------------------------
                                                                          2007             2006              2007        2006
<S>                                                                 <C>                 <C>               <C>         <C>
                                                                          ----             ----              ----        ----
INTEREST INCOME
   Loans and leases, including fees                                 $     12,655        $  11,741         $  37,206   $  34,031
   Investment securities                                                   1,050            1,083             3,100       3,240
   Federal funds sold and deposits in banks                                  676              649             1,920       1,525
                                                                    ------------        ---------         ---------   ---------

                Total interest income                                     14,381           13,473            42,226      38,796
                                                                          ------           ------            ------      ------

INTEREST EXPENSE
   Deposits                                                                5,338            4,468            15,477      11,602
   Subordinated debt                                                         321              343             1,155         960
   Federal Home Loan Bank advances and other borrowings                      731              611             1,950       1,885
                                                                           -----        ---------            ------      ------

                Total interest expense                                     6,390            5,422            18,582      14,447
                                                                           -----            -----            ------      ------

                Net interest income                                        7,991            8,051            23,644      24,349

   Provision for loan and lease losses                                        -                 -                 -           3
                                                                           -----            -----            ------      ------

                Net interest income after provision
                for possible loan and lease losses                         7,991            8,051            23,644      24,346
                                                                           -----            -----            ------      ------

NON-INTEREST INCOME
   Wealth Management                                                         865              836             2,714       2,545
   Service charges on deposit accounts                                       595              530             1,703       1,489
   Investment securities gains (losses), net                                   -                -                 2         (80)
   Operating lease rental income                                             326              292               949         838
   Gains on the sales of fixed assets and Other Real Estate Owned          1,376                -             1,376          19
   Gains on the sales of loans                                               118               95               537         261
   Other                                                                     610              576             1,800       1,799
                                                                           -----            -----             -----       -----
                Total non-interest income                                  3,890            2,329             9,081       6,871
                                                                           -----            -----             -----       -----

NON-INTEREST EXPENSE
   Salaries and employee benefits                                          4,755            4,284            14,348      12,810
   Occupancy, equipment and data processing                                1,243            1,322             3,876       4,082
   Depreciation on operating leases                                          269              240               789         713
   Bank shares tax                                                           160              139               481         566
   Professional services                                                     429              515             1,425       1,418
   Marketing                                                                 178              222               707         593
   Other                                                                   1,040              980             2,879       2,880
                                                                           -----            -----            ------      ------
                Total non-interest expense                                 8,074            7,702            24,505      23,062
                                                                           -----            -----            ------      ------

                Income before income taxes                                 3,807            2,678             8,220       8,155

INCOME TAXES                                                               1,030              822             2,288       2,371
                                                                           -----            -----             -----       -----

NET INCOME                                                          $      2,777        $   1,856         $   5,932   $   5,784
                                                                    ============        =========         =========   =========

PER SHARE DATA
    Basic earnings per common share                                 $       0.54        $    0.36         $    1.15   $    1.12
                                                                    ============        =========         =========   =========
    Diluted earnings per common share                               $       0.53        $    0.35         $    1.14   $    1.10
                                                                    ============        =========         =========   =========
    Dividends declared                                              $     0.1350        $  0.1350         $  0.4050   $  0.4050
                                                                    ============        =========         =========   =========

Basic weighted average shares outstanding                              5,165,735        5,175,519         5,159,868     5,152,905
                                                                       =========        =========         =========     =========

Diluted weighted average shares outstanding                            5,221,167        5,263,900         5,221,959     5,244,369
                                                                       =========        =========         =========     =========

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

                                       4
<PAGE>

                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>

(Dollars in thousands)                                                        Nine Months Ended
                                                                                September 30,
                                                                         ------------------------
                                                                              2007         2006
                                                                              ----         ----
<S>                                                                      <C>            <C>

OPERATING ACTIVITIES
    Net Income                                                           $    5,932     $   5,784
    Adjustments to reconcile net income to net cash
           provided by operating activities:
    Depreciation                                                              1,908         2,097
    Provision for loan and lease losses                                           -             3
    Amortization of investment security premiums
           and accretion of discounts, net                                      151           189
    Amortization of deferred loan fees                                           (7)           (2)
    Investment securities (gains) and losses, net                                (2)           80
    Gains from the sales of assets                                           (1,386)            -
    (Increase) in other assets                                               (3,476)         (700)
    Increase in other liabilities                                             3,686            36
                                                                         ----------       -------

           Net cash provided by operating activities                     $    6,806     $   7,487
                                                                         ----------     ---------

INVESTING ACTIVITIES
    Net increase in loans                                                   (25,325)      (15,073)
    Proceeds from sales of investment securities available-for-sale           4,583         4,003
    Proceeds from maturities of investment securities available-for-sale     12,619         5,804
    Proceeds from maturities of investment securities held-to-maturity            5             5
    Purchases of investment securities available-for-sale                   (21,840)      (14,104)
    Purchase of premises and equipment, net of sales                         (6,091)       (2,102)
                                                                         ----------       -------

           Net cash used in investing activities                         $  (36,049)    $ (21,467)
                                                                         ----------     ---------

FINANCING ACTIVITIES
    (Decrease) in Federal Home Loan Bank Advances
      and other short term borrowings                                        (5,266)       (2,805)
    Increase in Federal Home Loan Bank borrowings                            35,000             -
    Decrease in Federal Home Loan Bank borrowings                            (5,930)       (4,486)
    Net increase in deposits                                                 18,553        19,472
    Cash dividends paid                                                      (2,088)       (2,086)
    Proceeds from issuance of subordinated debt                               5,155             -
    Repayment of subordinated debt                                           (5,155)            -
    Net increase (decrease) in treasury stock transactions                     (506)          693
                                                                             ------        ------

           Net cash provided by financing activities                         39,763        10,788
                                                                             ------        ------

           NET INCREASE IN CASH AND CASH EQUIVALENTS                         10,520        (3,192)

Cash and cash equivalents at beginning of period                             72,341        68,943
                                                                             ------        ------

Cash and cash equivalents at end of period                                 $ 82,861     $  65,751
                                                                           ========     =========


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

                                       5
<PAGE>



                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>


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

Balance December 31, 2005          5,279,815  $   5,280  $     12,441 $ 46,503  $      (1,929) $ (3,618) $      58,677

Cumulative effect under
SAB No. 108 adjustments                                                   (565)                                   (565)

Balance January 1, 2006            5,279,815  $   5,280  $     12,441 $ 45,938  $      (1,929) $ (3,618) $      58,112

 Net income                                -          -             -    5,784              -         -          5,784 $       5,784
 Cash dividends declared                   -          -             -   (2,088)             -         -         (2,088)            -
 Other comprehensive income
 Net unrealized gains (losses) on
  investment securities
  available-for-sale                       -          -             -        -            349         -            349           349
 Treasury stock transactions               -          -          (584)       -              -     1,279            695             -
 Stock-based compensation
   tax benefit                                                    160                                              160
 Total Comprehensive Income                                                                                            $       6,133
                                                                                                                              ======

Balance September 30, 2006         5,279,815  $   5,280     $  12,017 $ 49,634  $      (1,580) $ (2,339) $      63,012
                                   =========  =========     ========= ========  =============  ========  =============


Balance January 1, 2007            5,279,815  $   5,280     $  11,939 $ 50,486  $      (1,473) $ (2,970) $     63,262

    Net income                          -             -             -    5,932              -         -         5,932  $       5,932
    Cash dividends declared             -             -             -   (2,088)             -         -        (2,088)
    Other Comprehensive Income
     Net unrealized gains (losses)
     on investment securities
     available-for-sale                 -             -             -        -           (368)        -          (368)         (368)
Treasury stock transactions             -             -          (949)       -              -       443          (506)             -
                                   ---------  ---------     --------- --------  -------------  --------  ------------- -------------
    Total Comprehensive Income                                                                                         $       5,564
                                                                                                                       =============

Balance September 30, 2007         5,279,815   $  5,280     $  10,990 $ 54,330  $      (1,841) $ (2,527) $     66,232
                                   =========   ========     ========= ========  =============  ========  ============

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


                                       6
<PAGE>


                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.   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 year ended December 31, 2006 (our "2006 Annual Report").

     The  results  of  operations  for the three and nine  month  periods  ended
     September  30,  2007 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 Part I, Item 1A of our 2006 Annual Report.

2.   ACCOUNTING FOR STOCK-BASED COMPENSATION PLANS
     ---------------------------------------------
     At September  30, 2007,  the  Corporation  had one  restricted  stock based
     compensation plan,  pursuant to which,  shares of the Corporation's  common
     stock could be issued. The plan, adopted in 2005, allows the Corporation to
     grant up to 150 thousand  shares of restricted  stock to employees.  During
     the nine months ended September 30, 2007 the Corporation  issued 7 thousand
     shares of restricted stock. These shares vest over a three year period that
     began on March 8, 2007.  For the three and nine months ended  September 30,
     2007 the Corporation recorded $38 thousand and $88 thousand,  respectively,
     of expense related to this restricted stock.

     The  Corporation's  ability  to issue  stock  options  under the 1995 Stock
     Option Plan has expired.  Outstanding  stock  options,  however,  remain in
     effect  according  to their terms.  Aggregated  information  regarding  the
     Corporation's Stock Option Plan as of September 30, 2007 is presented below

      (dollars in thousands, except per share data):

<TABLE>
<CAPTION>
                                                 Weighted-  Weighted-Average
                                                  Average       Remaining       Aggregate
                                                 Exercise      Contractual      Intrinsic
                   Options                Shares   Price       Term (years)       Value
                   -------                ------ --------   ----------------    ---------
<S>                                      <C>     <C>        <C>                 <C>

      Outstanding at January 1, 2007     294,855 $  14.80                  -    $   1,828
      Substitute options issued                -        -                  -            -
      Granted                                  -        -                  -            -
      Exercised                          (76,943)   13.98                  -            -
      Forfeited                           (8,284)   18.04                  -            -
      Expired                                  -        -                  -            -
      Outstanding at September 30, 2007  209,628 $  14.99               2.87    $     736
      Exercisable at September 30, 2007  209,628 $  14.99               2.87    $     736
</TABLE>

     There were no options  granted  during the nine months ended  September 30,
     2007.  The total  intrinsic  value  (market  value on date of exercise less
     grant  price) of  options  exercised  during the years  nine  months  ended
     September 30, 2007 was $736  thousand.  As of January 1, 2007 there were no
     unvested options under the one Corporation's Stock Option Plan.


                                       7
<PAGE>








                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

3.   EARNINGS PER SHARE
     ------------------
<TABLE>
<CAPTION>

        Three Months ended September 30, 2007
        -------------------------------------
                                                           Income
                                                        (in thousands)       Shares      Per Share
                                                          (numerator)    (denominator)     Amount
                                                         ------------     -----------    ---------
<S>                                                      <C>              <C>            <C>

        Basic earnings per share
           Net income available to common stockholders   $      2,777     5,165,735      $    0.54
        Effect of Dilutive Securities
           Options to purchase common stock                         -        55,432          (0.01)
                                                         ------------     ---------      ---------
        Diluted earnings per share
           Net income available to common stockholders   $      2,777     5,221,167      $    0.53
                                                         ============     =========      =========
</TABLE>

     11,987   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.

<TABLE>
<CAPTION>

        Nine Months ended September 30, 2007
        ------------------------------------
                                                            Income           Shares      Per Share
                                                          (numerator)    (denominator)     Amount
                                                           ---------      -----------    ---------
<S>                                                        <C>            <C>            <C>

        Basic earnings per share
           Net income available to common stockholders     $   5,932        5,159,868    $    1.15
        Effect of Dilutive Securities
           Options to purchase common stock                        -           62,091        (0.01)
                                                           ---------        ---------         ----
        Diluted earnings per share
           Net income available to common stockholders     $   5,932        5,221,959    $    1.14
                                                           =========        =========    =========
</TABLE>

     13,105   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.

<TABLE>
<CAPTION>

        Three Months ended September 30, 2006
        -------------------------------------
                                                            Income
                                                          (thousands)       Shares       Per Share
                                                          (numerator)    (denominator)     Amount
                                                           ---------      -----------    ---------
<S>                                                        <C>            <C>            <C>

        Basic earnings per share
           Net income available to common stockholders     $   1,856        5,175,519    $    0.36
        Effect of Dilutive Securities
           Options to purchase common stock                        -           88,381        (0.01)
                                                           ---------      -----------    ---------
        Diluted earnings per share
           Net income available to common stockholders     $   1,856        5,263,900    $    0.35
                                                           =========      ===========    =========
</TABLE>

     15,861   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.

<TABLE>
<CAPTION>
        Nine Months ended September 30, 2006
        ------------------------------------
                                                            Income          Shares       Per Share
                                                          (numerator)    (denominator)     Amount
                                                           ---------      -----------    ---------
<S>                                                        <C>            <C>            <C>

        Basic earnings per share
           Net income available to common stockholders     $   5,784        5,152,905    $    1.12
        Effect of Dilutive Securities
           Options to purchase common stock                        -           91,464         (.02)
                                                           ---------        ---------    ---------
        Diluted earnings per share
           Net income available to common stockholders     $   5,784        5,244,369    $    1.10
                                                           =========        =========    =========
</TABLE>

     16,880   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.

                                       8
<PAGE>


                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

4.   COMPREHENSIVE INCOME
     --------------------
     Components of comprehensive income are presented in the following chart:

<TABLE>
<CAPTION>

                                                          Three Months Ended    Nine Months Ended
                                                             September 30,        September 30,
                                                          ------------------    -----------------
                                                            2007       2006       2007     2006
                                                          --------   --------   ------- ----------
<S>                                                       <C>        <C>        <C>     <C>

    Unrealized losses on securities:
       Unrealized losses arising in period                $    956   $  1,615   $  (560) $     608
Reclassification adjustment                                      0          0         2        (80)
                                                          --------   --------   -------  ---------
       Net unrealized losses                                   956      1,615      (558)       528
                                                               ---   --------   -------  ---------
    Other comprehensive income before taxes                    956      1,615      (558)       528
    Income tax benefit (expense)                              (325)      (549)      190       (179)
                                                          --------   --------   -------  ---------
    Other comprehensive loss                                   631      1,066      (368)       349
    Net income                                               2,777      1,856     5,932      5,784
                                                          --------   --------   -------  ---------
    Total comprehensive income                            $  3,408   $  2,922   $ 5,564  $   6,133
                                                          ========   ========   =======  =========
</TABLE>


5.   RECENT ACCOUNTING PRONOUNCEMENTS
     --------------------------------
     In February  2007,  FASB issued  Statement No. 159 ("SFAS 159"),  "The Fair
     Value Option for Financial Assets and Financial  Liabilities - Including an
     Amendment of FASB Statement No. 115".  This statement  permits  entities to
     choose to measure many  financial  instruments  and certain  other items at
     fair  value at  specified  election  dates.  The  statement  defines  items
     eligible  for the  measurement  option.  A  business  entity  shall  report
     unrealized  gains and losses on items for which the fair  value  option has
     been elected in earnings at each subsequent  reporting date. This statement
     is  effective  for fiscal years  beginning  after  November  15, 2007.  The
     Corporation  is currently  evaluating the impact that SFAS 159 will have on
     our consolidated financial statements.

     In September 2006, FASB issued Statement No. 157 ("SFAS 157"),  "Fair Value
     Measurements," which is effective for fiscal years beginning after November
     15, 2007 and for interim periods within those years. This Statement defines
     fair value,  establishes a framework  for measuring  fair value and expands
     the  related   disclosure   requirements.   The  Corporation  is  currently
     evaluating  the  impact  that the  adoption  of SFAS  157 will  have on our
     consolidated financial statements.

     In  June  2006,  FASB  issued  FASB   Interpretation  No.  48  ("FIN  48"),
     "Accounting  for  Uncertainty in Income Taxes - an  Interpretation  of FASB
     Statement  No. 109." FIN 48 clarifies the  accounting  for  uncertainty  in
     income  taxes  recognized  in  an  enterprise's   financial  statements  in
     accordance  with  SFAS  No.  109,  "Accounting  for  Income  Taxes.  FIN 48
     prescribes  a  recognition  threshold  and  measurement  attribute  for the
     financial statement  recognition and measurement of a tax position taken or
     expected  to be taken in a tax  return.  FIN 48 also  provides  guidance on
     de-recognition,  classification,  interest  and  penalties,  accounting  in
     interim periods,  disclosure,  and transition.  FIN 48 will apply to fiscal
     years ending after December 15, 2006. The Corporation  adopted FIN 48 as of
     January 1, 2007 and the  adoption of FIN 48 did not have a material  effect
     on our consolidated financial statements.

     In February  2006,  the FASB issued SFAS No. 155 ("SFAS 155"),  "Accounting
     for Certain Hybrid Financial  Instruments--an  Amendment of FASB Statements
     No. 133 and 140," to simplify and make more  consistent  the accounting for
     certain financial  instruments.  SFAS 155 amends SFAS No. 133,  "Accounting
     for Derivative Instruments and Hedging Activities" ("SFAS 133") and permits
     fair value  re-measurement  for any  hybrid  financial  instrument  with an
     embedded derivative that otherwise would require bifurcation, provided that
     the whole  instrument  is  accounted  for on a fair value  basis.  SFAS 155
     amends  SFAS 140 to allow a  qualifying  special-purpose  entity  to hold a
     derivative  financial  instrument  that  pertains to a beneficial  interest
     other than another derivative financial instrument. SFAS 155 applies to all
     financial instruments acquired or issued after the beginning of an entity's
     first  fiscal year that begins  after  September  15,  2006,  with  earlier
     application  allowed.  The Corporation adopted SFAS 155 and the adoption of
     this statement did not have a material impact on our consolidated financial
     statements.


                                       9
<PAGE>

                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

6.   SALE-LEASEBACK TRANSACTIONS
     ---------------------------
     In the  third  quarter  of 2007,  the Bank  sold an  administrative  office
     facility  known as the "Swope  Building."  The Bank  leased  back the Swope
     Building  for  a  period  of  one  year  from  the  September   sale  date.
     Accordingly, the Bank recognized a $1.39 million pre-tax gain in the income
     statement in the third quarter of 2007.  Also in the third quarter of 2007,
     the Bank  entered  into a  sale-leaseback  agreement  on an  administrative
     office facility known as the "Operations  Center." As disclosed in our Form
     8-K dated September 28, 2007, the lease agreement for the Operations Center
     was for fifteen  year with two  optional  five year  renewal  periods.  The
     resulting  $2.7  million  gain  was  deferred  and will be  amortized  into
     non-interest  income over the fifteen year lease term.  Rent expense on the
     lease will be recorded in the  non-interest  expense  section of the income
     statement.

     Future  minimum  payments  required  under the  leasebacks of the Swope and
     Operations Center are as follows:

                       During the year ending December 31:
                              2008            378
                              2009            268
                              2010            271
                              2011            273
                              2012            276
                           Thereafter       2,842
                                            -----

                              Total        $4,308


                                       10
<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,
     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  III,   (collectively,   the
     "Corporation").  It should  be read in  conjunction  with the  consolidated
     financial statements included in this report.

     In  addition  to  historical  information,  this  discussion  and  analysis
     contains  statements relating to future results of the Corporation that are
     considered  "forward-looking  statements" within the meaning of the Private
     Securities  Litigation  Reform Act of 1995.  These  statements can often be
     identified by the use of  forward-looking  terminology  such as "believes,"
     "expects,"  "intends,"  "may," "will," "should" "or anticipates" or similar
     terminology. These statements involve risks and uncertainties and are based
     on  various  assumptions.   Although  the  Corporation  believes  that  its
     expectations are based on reasonable assumptions, investors and prospective
     investors are cautioned that such statements are only projections, and that
     these risks and  uncertainties  are all  difficult  to predict and most are
     beyond the control of the Corporation's  Management.  Information about the
     most significant risks and uncertainties that 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 are included in Part I,
     Item 1A of our Annual  Report on Form 10-K for the year ended  December 31,
     2006 (our "2006 Annual  Report").  Material  changes to such "risk factors"
     may be reported in  subsequent  Quarterly  Reports on Form 10-Q in Part II,
     Item 1A.  There have been no such  changes to the risk factors set forth in
     our 2006 Annual Report.

     The Corporation  undertakes no obligation to publicly release any revisions
     to any forward-looking  statements to reflect events or circumstances after
     the date of this Report.

CRITICAL ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATES

     The accounting and reporting  policies of the Corporation  conform with the
     accounting  principles  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 and lease 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 would  adversely  impact  earnings  in future
     periods.

                                       11
<PAGE>


                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

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

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 months ended September 30, 2007 was $2.78 million,
     an  increase  of $921  thousand  or 49.6% from $1.86  million  for the same
     period in 2006.  Net income for the nine month period ended  September  30,
     2007 was $5.93  million,  an increase  of $148  thousand or 2.6% from $5.78
     million for the same  period in 2006.  Diluted  earnings  per share for the
     three and nine  months  ended  September  30,  2007 were  $0.53 and  $1.14,
     respectively,  compared  to $0.35 and $1.10 for the same  periods  in 2006.
     Cash dividends  declared for the three and nine months ended  September 30,
     2007 was  $0.135 and  $0.405  per share  compared  to $0.135 and $0.405 per
     share for the three and nine months ended September 30, 2006.

     The  increase in net income for the three and nine months  ended  September
     30, 2007 compared to the same periods in 2006,  was primarily the result of
     an increase in non-interest  income,  partially offset by a decrease in net
     interest income combined with an increase in non-interest expense. Included
     in these  results  is the  impact  from  several  significant  events  that
     occurred  during the nine months ended  September  30,  2007.  In the third
     quarter  of  2007,  the  Bank  recorded  a  gain  related  to the  sale  of
     facilities.  In the second quarter, the Bank recorded a gain related to the
     sale of a loan that had been on  non-accrual  status and also  recognized a
     charge for accelerated  amortization of issuance costs related to the early
     redemption of debentures.

     In the  third  quarter  of 2007,  the Bank  sold an  administrative  office
     facility  known as the "Swope  Building."  The Bank  leased  back the Swope
     Building  for  a  period  of  one  year  from  the  September   sale  date.
     Accordingly, the Bank recognized a $1.39 million pre-tax gain in the income
     statement in the third quarter of 2007. The after-tax  impact to net income
     from this gain was $915  thousand.  Also in the third quarter of 2007,  the
     Bank entered into a sale-leaseback  agreement on an  administrative  office
     facility  known as the  "Operations  Center." As  disclosed in our Form 8-K
     dated September 28, 2007, the lease agreement for the Operations Center was
     for fifteen year with two optional five year renewal periods. The resulting
     $2.7 million gain was  deferred  and will be  amortized  into  non-interest
     income over the fifteen year lease term.  Rent expense on the lease will be
     recorded in the non-interest  expense section of the income statement.  The
     sale and lease back of the Swope Building and  Operations  Center fits into
     management's  overall facilities strategy and complements the purchase of 1
     North High Street,  which was completed in the second  quarter of 2007. The
     purchase  of the 1 North  High  Street  building  and the sale of the Swope
     Building and the Operations  Center were  structured as an IRS Code Section
     1031 reverse like-kind  exchange,  effectively rolling the tax basis of the
     Swope  Building and the  Operations  Center into the taxable basis of the 1
     North High Street  Building.  Accordingly,  the Bank was able to defer $772
     thousand of taxes  payable in the  current  year until such time that the 1
     North High Street building is sold.

                                       12
<PAGE>


                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

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

                                 SELECTED RATIOS

                                        Three Months Ended     Nine Months Ended
                                          September 30,          September 30,
                                         2007        2006       2007       2006
                                        ------------------     -----------------
Return on Average Assets                  1.23%       0.85%      0.89%     0.90%
Return on Average Equity                 17.18%      11.88%     12.38%    12.63%
Dividend Payout Ratio                    25.08%      37.72%     35.20%    36.07%
Book Value Per Share                    $12.83      $12.27     $12.83    $12.27

NET INTEREST INCOME

     Net interest  income is the difference  between  interest  income earned on
     interest-earning  assets  and  interest  expense  paid on  interest-bearing
     liabilities.  Net interest  income on a tax equivalent  basis for the three
     month period ended September 30, 2007 was $8.1 million,  a decrease of 0.6%
     from $8.2 million for the same period in 2006. Net interest income on a tax
     equivalent  basis for the nine month  period ended  September  30, 2007 was
     $24.0 million, a decrease of 2.9% from $24.7 million for the same period in
     2006. The decrease in tax equivalent net interest  income for the three and
     nine  months  ended  September  30,  2007 is due to an increase in interest
     expense that was partially offset by an increase in interest income.

     The net yield on  interest-earning  assets, on a tax-equivalent  basis, was
     6.71% for the three month period  ended  September  30,  2007,  compared to
     6.53% for the same  period in 2006,  an  increase  of 18 basis  points (one
     basis  point is equal to 1/100 of a  percent).  For the nine  month  period
     ended  September  30,  2007,  the net  yield  on  interest  earning  assets
     increased  30 basis  points to 6.71% from 6.41%  during the same  period in
     2006.

     A flattened  and  sometimes  inverted  yield curve,  increased  competitive
     pricing and stronger  consumer demand for higher  interest-bearing  deposit
     accounts put pressure on our net interest margin and adversely impacted net
     interest  income.  Additionally,  pressure  to raise  deposits to fund loan
     growth has caused the  Corporation to acquire other sources of funds,  such
     as brokered deposits,  Federal Home Loan Bank ("FHLB")  borrowings,  and to
     rely on products that retain  deposits  that were formerly  "swept" off the
     balance sheet.  Deposits  obtained in this manner are higher cost funds and
     contribute to the increased yield paid on interest-bearing  liabilities and
     reduce net interest income.

     Average  interest-earning  assets increased  approximately $32.0 million or
     3.9% to $857.6  million for the three months ended  September 30, 2007 from
     $825.7  million in the same  period last year.  For the nine  months  ended
     September 30, 2007, average interest-earning assets increased approximately
     $32.2  million or 3.9% to $848.6  million  from $816.4  million in the same
     period in 2006.  The  increase in average  interest-earning  assets for the
     three month  period  ended  September  30, 2007 was the result of a 5.1% or
     $35.1 million  increase in average total loans combined with a 5.4% or $2.6
     million  increase  in  average  federal  funds  sold and  interest  bearing
     deposits in banks balance.  These increases were partially offset by a $5.7
     million or 5.9%  decrease in average  investment  securities.  For the nine
     month period  ended  September  30, 2007,  the increase was the result of a
     4.4% or $29.7  million  increase in average  total loans,  combined with an
     18.8% or $7.7 million  increase in average  federal funds sold and interest
     bearing deposits in banks balance. These increases were partially offset by
     a $5.1 million or 5.4% decrease in average investment securities.

                                       13
<PAGE>

                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

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

     Average interest-bearing  liabilities increased approximately $35.5 million
     or 5.3% to $711.6  million for the three months ended  September  30, 2007,
     from $676.1  million in the same period in 2006.  For the nine months ended
     September 30, 2007, average  interest-bearing  liabilities  increased $37.5
     million or 5.7% to $700.2 million from $662.8 million in the same period in
     2006. The increase in average  interest-bearing  liabilities  for the three
     month period was  primarily  the result of a $22.6 million or 3.8% increase
     in interest-bearing  deposits and a $12.5 million or 20.3% increase in FHLB
     advances and other  borrowings.  The  increase in average  interest-bearing
     liabilities  for the nine month period was  primarily the result of a $35.2
     million or 6.0% increase in interest-bearing deposits and a $2.1 million or
     3.2% increase in FHLB advances and other borrowings.


                                       14
<PAGE>

                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

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

<TABLE>
<CAPTION>

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

(Dollars in thousands)                                2007                                2006
                                        ------------------------------      -----------------------------
                                          Average              Average        Average             Average
  ASSETS                                  Balance   Interest    Rate          Balance   Interest    Rate
                                          -------   --------   -------        -------   --------  -------
<S>                                     <C>         <C>        <C>          <C>        <C>        <C>

  Federal funds sold and interest
    bearing deposits in banks           $  50,956   $    676     5.26%      $  48,340  $     649    5.33%
  Investment securities:
    Taxable                                76,866        940     4.85%         81,443        980    4.77%
    Tax-exempt(1)                          13,540        157     4.60%         14,680        147    3.96%
                                        ---------   --------     -----      ---------  ---------  -------

    Total investment securities            90,406      1,097     4.82%         96,123      1,127    4.65%

  Loans and leases: (2)
    Taxable                               700,936     12,479     7.06%        667,076     11,587    6.89%
    Tax-exempt(1)                          15,307        256     6.62%         14,114        224    6.30%
                                          -------     ------     -----        -------     ------    -----

    Total loans and leases                716,243     12,735     7.05%        681,190     11,811    6.88%
                                          -------     ------     -----        -------     ------    -----

  Total interest-earning assets           857,605     14,508     6.71%        825,653     13,587    6.53%
  Non-interest earning assets:
    Allowance for loan
    and lease losses                       (8,053)                             (8,249)
    Cash and due from banks                26,736                              26,794
    Other assets                           29,895                              24,111
                                           ------                              ------

  Total assets                          $ 906,183                           $ 868,309
                                        =========                           =========

LIABILITIES AND STOCKHOLDERS' EQUITY

Savings, NOWS & money market deposits     380,324   $  2,462     2.57%      $ 371,275  $   2,016    2.15%
CD and other time deposits                241,300      2,876     4.73%        227,751      2,452    4.27%
                                          -------   --------     ----       ---------  ---------    -----

Total interest bearing deposits           621,624      5,338     3.41%        599,026      4,468    2.96%
Subordinated debentures                    15,913        321     8.00%         15,465        343    8.80%
Federal Home Loan Bank advances and
other borrowings                           74,094        731     3.92%         61,610        611    3.93%
                                          -------      -----     -----        -------      -----    -----

Total interest bearing liabilities        711,631      6,390     3.56%        676,101     5,422     3.18%
                                          -------      -----     -----        -------     -----     -----

Non-interest bearing liabilities:
  Non-interest bearing demand deposits    122,174                             123,155
  Other liabilities                         7,702                               6,580
                                          -------                             -------

Total liabilities                         841,507                             805,836
Stockholders' equity                       64,676                              62,473
                                         --------                             -------
Total liabilities
  and stockholders' equity              $ 906,183                           $ 868,309
                                        =========                           =========

Net interest income                                 $  8,118                           $  8,165
                                                    ========                           ========

Net yield on interest-earning assets                             3.76%                             3.92%
                                                                 =====                             =====
</TABLE>

(1) The indicated  income and annual rate are presented on a taxable  equivalent
basis using the federal marginal rate of 34% adjusted for the TEFRA 20% interest
expense disallowance for 2007 and 2006.

(2) Non-accruing loans are included in the average balance.

                                       15
<PAGE>

                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

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

<TABLE>
<CAPTION>

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

(Dollars in thousands)                                 2007                                2006
                                        ------------------------------      ----------------------------
                                          Average              Average       Average             Average
ASSETS                                    Balance    Interest    Rate        Balance    Interest  Rate
                                          -------    --------  -------       -------    -------- -------
<S>                                     <C>          <C>       <C>          <C>         <C>      <C>

Federal funds sold and interest
   bearing deposits in banks            $  48,452    $  1,920    5.30%      $  40,786   $  1,525   5.00%
Investment securities:
   Taxable                                 78,855       2,836    4.81%         80,634      2,931   4.86%
   Tax-exempt(1)                           11,336         376    4.43%         14,679        443   4.03%
                                        ---------    --------    -----      ---------     ------   -----

   Total investment securities             90,191       3,212    4.76%         95,313      3,374   4.73%

Loans and leases: (2)
  Taxable                                 695,654      36,703(3) 7.05%        665,827     33,566   6.74%
  Tax-exempt(1)                            14,337         731    6.82%         14,475        679   6.28%
                                          -------      ------    -----        -------     ------   -----

Total loans and leases                    709,991      37,434    7.05%        680,302     34,245   6.73%
                                          -------      ------    -----        -------     ------   -----

Total interest-earning assets             848,634      42,566    6.71%        816,401     39,144   6.41%
Non-interest earning assets:
  Allowance for loan
  and lease losses                         (8,106)                             (8,460)
  Cash and due from banks                  24,920                              24,657
  Other assets                             27,679                              23,841
                                        ---------                           ---------

Total assets                            $ 893,127                           $ 856,439
                                        =========                           =========

LIABILITIES AND STOCKHOLDERS' EQUITY

Savings, NOWS & money market deposits   $ 367,937    $ 6,741     2.45%      $ 372,170   $  5,316   1.91%
CD and other time deposits                249,291      8,736     4.69%        209,882      6,286   4.00%
                                        ---------    -------     -----      ---------   --------   -----

Total interest bearing deposits           617,228     15,477     3.35%        582,052     11,602   2.67%
Subordinated debentures                    15,654      1,155(4)  9.87%         15,465        960   8.30%
Federal Home Loan Bank advances and
other borrowings                           67,363      1,950     3.87%         65,275      1,885   3.86%
                                          -------     ------     -----        -------      -----   -----

Total interest bearing liabilities        700,245     18,582     3.55%        662,792     14,447   2.91%
                                          -------     ------     -----        -------     ------   -----

Non-interest bearing liabilities:
 Non-interest bearing demand deposits     121,632                            127,048
 Other liabilities                          7,368                              5,540
                                          -------                            -------

Total liabilities                         829,245                            795,380
Stockholders' equity                       63,882                             61,059
                                          -------                            -------

Total liabilities
 and stockholders' equity               $ 893,127                          $ 856,439
                                        ---------                          =========

Net interest income                                  $ 23,984                            $ 24,697
                                                     ========                            ========

Net yield on interest-earning assets                             3.78%                             4.04%
                                                                 =====                             =====
</TABLE>

(1) The indicated  income and annual rate are presented on a taxable  equivalent
basis using the federal marginal rate of 34% adjusted for the TEFRA 20% interest
expense disallowance for 2007 and 2006.
(2) Non-accruing loans are included in the average balance.

(3) Includes $282 thousand of past due interest income that was received and was
related to the sale of a $5.9 million loan that had been on non-accrual status.

(4) Includes $161 thousand of expense for  accelerated  amortization of issuance
costs related to early redemption of debentures.


                                       16
<PAGE>


                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

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

INTEREST INCOME

Interest  income on Federal Funds sold and other  overnight  investments for the
three and nine month  periods ended  September 30, 2007,  increased $27 thousand
and $395 thousand to $676 thousand and $1.9 million, respectively, when compared
to the same periods in 2006.  The increase in interest  income on Federal  Funds
sold and other  overnight  investments  for the three month period is the direct
result of a 5.4% or $2.6 million  increase in the average federal funds sold and
other overnight investments balance partially offset by a 7 basis point decrease
on the rates earned. The increase for the nine month period is the direct result
of an 18.8% increase or $7.7 million  increase in the average federal funds sold
and other  overnight  investments  balance and a 30 basis point  increase in the
rates earned.

On a tax equivalent basis,  interest income on investment  securities  decreased
2.7% or $30 thousand to $1.1 million for the three month period ended  September
30, 2007 when  compared to the same  period in 2006.  For the nine month  period
ended  September 30, 2007,  interest income on investment  securities  decreased
4.8% or $162  thousand to $3.2 million when compared to the same period in 2006.
The  decrease  for the  three  month  period  is due to a 5.9%  or $5.7  million
decrease of the average balance of investment securities, partially offset by an
17 basis point increase earned on these  investments.  The decrease for the nine
month  period ended  September  30, 2007 is the result of a 5.4% or $5.1 million
decrease of the average  balance of  investment  securities  and a increase of 3
basis points on the rate earned on these investments.

Interest  income  on  loans,  on  a  tax  equivalent  basis,  generated  by  the
Corporation's  loan  portfolio  increased $924 thousand or 7.8% to $12.7 million
for the three months ended  September  30, 2007,  compared to the same period in
2006.  Interest  income on loans increased $3.2 million or 9.3% to $37.4 million
for the nine months ended  September  30,  2007,  compared to the same period in
2006. The increase in interest income for the three month period ended September
30, 2007 is the direct result of a $35.1 million or 5.1% increase in the average
balance of loans and leases outstanding  combined with a 17 basis point increase
in the average  interest rate earned on the portfolio.  The increase in interest
income for the nine month period ended  September  30, 2007 is the direct result
of a $29.7 million or 4.4%  increase in the average  balance of loans and leases
outstanding combined with a 30 basis point increase in the average interest rate
earned on the portfolio. Interest income for the nine months ended September 30,
2007 also  includes  the  recognition  of $282  thousand of income in the second
quarter  of 2007  related  to the sale of a $5.9  million  loan that had been on
non-accrual status.


INTEREST EXPENSE

Interest  expense on deposit  accounts  increased $870 thousand or 19.5% to $5.3
million for the three  months  ended  September  30,  2007  compared to the same
period in 2006.  Interest expense on deposit accounts  increased $3.9 million or
33.4% to $15.5 million for the nine months ended  September 30, 2007 compared to
the same period in 2006.  This increase for the three months ended  Septmber 30,
2007  was  due  to  a  $22.6   million  or  3.8%   increase  in  average   total
interest-bearing deposits combined with a 45 basis point increase in the average
interest rates paid on these  deposits.  This increase for the nine months ended
September  30, 2007 was due to a $35.2 million or 6.0% increase in average total
interest-bearing  deposits  combined  with an 68  basis  point  increase  in the
average interest rates paid on these deposits.


                                       17
<PAGE>


                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

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

Market  interest  rate  increases,  increased  competitive  pricing and stronger
consumer demand for higher  interest-bearing  deposit accounts have put pressure
on the pricing of the Corporation's  deposit base and on the cost of raising new
deposits. Competition for deposits from other banks and non-banking institutions
such as credit unions and mutual fund companies  continues to be strong.  As the
Corporation  competes for deposit dollars to fund its growth,  this component of
net interest  income will continue to rise.  Additionally,  alternative  funding
sources continue to be explored. There can be no assurance that such alternative
sources will be acquired on terms and conditions  that are  satisfactory  to the
Corporation.

Interest  expense on  subordinated  debentures  decreased  $22  thousand to $321
thousand for the three month period ended  September 30, 2007 from $343 thousand
for the same  period  in  2006.  Interest  expense  on  subordinated  debentures
increased  $195  thousand  to $1.2  million  for the  nine  month  period  ended
September  30, 2007 from $960 thousand when compared to the same period in 2006.
The decrease for the three month period ended  September  30, 2007 was primarily
due to a decrease in the average  interest  rate paid on these  debentures.  The
increase for the nine month period ended September 30, 2007 was primarily due to
an increase in the average  interest rate paid on these debentures due to a $161
thousand charge to interest  expense recorded in the second quarter of 2007. The
charge was for  accelerated  amortization  of issuance costs related to the July
2007 early  redemption  of $5.2  million of  debentures  that were issued by the
First  Chester  County  Corporation.   The  redemption  of  the  debentures  was
coordinated  with a new $5.2 million issuance on June 29, 2007. The new issuance
bears an interest rate of 3 month LIBOR plus 140 basis points while the redeemed
issuance had an interest rate of 3 month LIBOR plus 365 basis points.  The lower
interest  rate on the new issuance as compared to the  redeemed  issuance is the
primary  driver of the decrease in the average  interest rate paid for the three
month period ended September 30, 2007 as compared to the same period in 2006.

Interest  expense on FHLB and other  borrowings  increased  by $120  thousand or
19.6% to $731 thousand for the three month period ended  September 30, 2007 from
$611  thousand  for the same period in 2006.  This  increase for the three month
period ended  September  30, 2007 is primarily  due to a $12.5  million or 20.3%
increase in the average balances of these funding  sources.  Interest expense on
FHLB and other borrowings  increased by $65 thousand or 3.4% to $1.9 million for
the nine month  period ended  September  30, 2007 from $1.9 million for the same
period in 2006. This increase for the nine month period ended September 30, 2007
is primarily due to a $2.1 million or 3.2%  increase in the average  balances of
these funding  sources.  FHLB  borrowing has been an  alternative to deposits to
support loan growth.

PROVISION FOR LOAN AND LEASE LOSSES

During  the  three  and  nine  month  periods  ended  September  30,  2007,  the
Corporation  recorded a $0 and a $0 thousand provision for loan and lease losses
compared  to $0  thousand  and $3  thousand  for the same  periods in 2006.  The
allowance for loan and lease losses is an amount that  Management  believes will
be adequate  to absorb  possible  loan losses on existing  loans that may become
uncollectible  and  is  established  based  on  Management's  evaluation  of the
collectability of loans.  These evaluations take into consideration such factors
as changes in the nature  and volume of the loan  portfolio,  overall  portfolio
quality,  adequacy of collateral,  review of specific problem loans, and current
economic conditions that may affect our borrowers' ability to pay.


                                       18
<PAGE>


                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

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

<TABLE>
<CAPTION>

                                                       Three Months                      Nine Months
                                                         Ended                             Ended
                                                       September 30,                    September 30,
                                                  ----------------------        --------------------------
(Dollars in thousands)                               2007           2006           2007             2006
                                                     ----           ----           ----             ----
<S>                                               <C>           <C>             <C>              <C>

Balance at beginning of period                    $  8,059      $   8,251       $   8,186        $  8,549
                                                  ---------     ---------       ----------       --------

Provision charged to operating expense                  --             --               --              3

  Recoveries of loans previously charged-off            30             24              111            316
  Loans charged-off                                    (84)           (71)            (324)          (141)
                                                  --------      ---------       ----------       --------
Net loan (charge-offs)/recoveries                      (54)           (47)            (213)           175

Allowance other adjustment (1)                          36            (30)              68           (553)
                                                  --------      ---------       ----------       --------

Balance at end of period                          $  8,041      $   8,174       $   8,041       $   8,174
                                                  ========      =========       =========       ==========
Period-end loans outstanding                      $719,530      $ 679,399       $ 719,530       $ 679,399
Average loans outstanding                         $716,243      $ 681,190       $ 709,991       $ 680,302
Allowance for loan and lease losses as a
 percentage of period-end loans outstanding          1.12%          1.20%           1.12%           1.20%

Net charge-offs to average loans
 outstanding                                         0.01%          0.01%           0.03%          (0.03%)

</TABLE>

(1) The  "Allowance  other  adjustment"  represents the  reclassification  of an
allowance  for  possible  losses on unfunded  loans and unused  lines of credit.
These loans and lines of credit,  although  unfunded,  have been committed to by
the Bank.

Non-performing  loans and leases include those 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 and leases to net realizable value based on
current  assessments  of the value of the  collateral  securing  such  loans and
leases.  Non-performing loans and leases are generally collateralized and are in
the  process  of  collection.   Non-performing   loans  and  leases  reduce  the
Corporation's  earnings because interest income is not earned on such assets. At
September 30, 2007,  there are nine  non-accrual  loans as compared to seventeen
non-accrual  loans at December 31, 2006. The non-accrual loan and lease balances
decreased  $6.3 million to $986 thousand at September 30, 2007 from $7.3 million
at December 31, 2006. The decline was mainly due to the sale of the $5.9 million
non-accrual loan previously  mentioned.  The loan had been on non-accrual status
since November  2004.  The  percentage of  non-accrual  loans to gross loans was
0.13% at September  30, 2007 as compared to 1.05% at December 31, 2006 and 1.26%
as of  September  30,  2006.  Management  continues  to  take  steps  to  reduce
non-accrual  loan and lease  levels and correct  and control  current and future
credit quality  issues.  The following  chart  represents  detailed  information
regarding non-performing loans and leases:

                                       19
<PAGE>


                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

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

(Dollars in thousands)                         September 30,        December 31,
                                          --------------------     -------------
                                            2007        2006           2006
                                           ------      ------      -------------

Past due over 90 days and still accruing  $   207      $   19      $         793
Non-accrual loans and leases (1)              986       8,559              7,289
                                          -------      ------      -------------
Total non-performing loans and leases       1,193       8,578              8,082

Other real estate owned                         -           -                  -
                                          -------      ------      -------------
Total non-performing assets               $ 1,193      $8,578      $       8,082
                                          =======      ======      =============

Non-performing loans and leases as a
percentage of total loans and leases        0.17%       1.26%              1.16%

Allowance for loan and lease losses as
a percentage of non-performing
loans and leases                          674.06%      95.29%            101.29%

Non-performing assets as a percentage of
total loans and other real estate owned     0.17%       1.26%              1.16%

Allowance for loan and lease losses as a
percentage of non-performing assets       674.06%      95.29%            101.29%

(1)  Generally,  the Bank  places a loan or lease  in  non-accrual  status  when
principal or interest has been in default for a period of 90 days or more unless
the loan is both well secured and in the process of collection.

Management  is not aware of any loans or leases  other  than those  included  in
these  tables  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.

The  Corporation  holds no other real estate owned  ("OREO") as of September 30,
2007.

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"  requires  the
Corporation  to  examine  commercial  and  non-residential   mortgage  loans  on
non-accrual  status  for  impairment.  The  balance of  impaired  loans was $986
thousand,  $7.3 million,  and $8.6 million at September  30, 2007,  December 31,
2006,  and  September  30, 2006,  respectively.  The  associated  allowance  for
impaired loans was $64 thousand,  $840 thousand,  and $877 thousand at September
30, 2007, December 31, 2006, and September 30, 2006, respectively.


                                       20
<PAGE>


                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

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

For the three and nine month periods ended  September 30, 2007,  activity in the
allowance  allocable to impaired loan  includes  additions of $3 thousand and $4
thousand,  respectively.  Charge-offs  for  the  three  and  nine  months  ended
September  30,  2007,  were  $0 and $1  thousand,  respectively.  There  were no
recoveries in either the three or nine month  periods ended  September 30, 2007.
Contractual  interest was $24 thousand for the three months ended  September 30,
2007 and $298 thousand for the nine months ended September 30, 2007.  Total cash
collected  on  non-accrual  loans  for the three and nine  month  periods  ended
September  30, 2007 was $194  thousand and $6.3  million,  respectively,  all of
which was applied to principal. Loans returned to performing for the three month
and nine month periods ended September 30, 2007 was $0 thousand and $0 thousand.

NON-INTEREST INCOME

Total  non-interest  income  increased 67.0% or $1.6 million to $3.9 million for
the three months ended  September 30, 2007,  when compared to the same period in
2006. Total non-interest  income increased 32.2% or $2.2 million to $9.1 million
for the nine month period ended  September  30, 2007,  when compared to the same
period in 2006.  The various  components  of  non-interest  income are discussed
below.

Wealth  Management  revenue  increased $29 thousand or 3.5% to $865 thousand for
the three month period ended  September 30, 2007 from $836  thousand  during the
same period in 2006. Wealth  Management  revenue increased $169 thousand or 6.6%
to $2.7  million for the nine month period  ended  September  30, 2007 from $2.5
million  during  the same  period in 2006.  Wealth  Management  revenue is based
primarily on the market value of assets  under  management.  The market value of
assets under  management  at September 30, 2007 was $594.9  million  compared to
$544.6 million at September 30, 2006.

Service  charges on deposit  accounts  increased  $65  thousand or 12.3% to $595
thousand for the three month period ended  September  30, 2007  compared to $530
thousand for the same period in 2006. For the nine month period ended  September
30, 2007,  service charges on deposit accounts  increased $214 thousand or 14.4%
to 1.7  million  compared  to $1.5  million  for the same  period  in 2006.  The
increase in service charges is primarily due to an increase in charges on retail
and commercial demand deposit accounts.

The  corporation  recognized  a net gain of $2 thousand  on sales of  investment
securities during the nine month period ended September 30, 2007 compared with a
net loss of $80  thousand  during the same  period in 2006.  These net gains and
losses were taken as a result of normal portfolio management.

The Corporation has operating lease agreements with one customer.  The income on
these leases is classified as "Rental Income".  Rental Income on operating lease
agreements  increased  $34  thousand or 11.7% to $326  thousand  for the for the
three  months ended  September  30, 2007 as compared to the same period in 2006.
Rental Income on operating lease agreements  increased $111 thousand or 13.3% to
$949  thousand for the for the nine months ended  September 30, 2007 as compared
to the same period in 2006.

                                     21
<PAGE>


                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

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

Gains on the sale of fixed  assets and Other Real Estate  Owned was $1.4 million
for the three and nine month periods ended  September 30, 2007 as compared to $0
and $19 thousand  for the same periods in 2006.  The increase is due to the $1.4
million  gain  recorded  in the third  quarter  of 2007,  related to the sale of
facilities as discussed in the Earnings and Dividends Summary section.

Gain on the sale of loans  increased  $23 thousand or 24.2% for the three months
ended  September  30, 2007 and  increased  $276  thousand or 105.7% for the nine
months  ended  September  30,  2007  compared to the same  periods in 2006.  The
increase  for the three  months ended  September  30, 2007 is  primarily  due to
higher volume of  originations  and sales of  residential  mortgages  during the
three  months ended  September  30, 2007 as compared to the same period in 2006.
The nine months ended  September 30, 2007 includes a $225 thousand gain recorded
in the second  quarter of 2007  related to the sale of the $5.9  million loan as
previously mentioned.  Excluding this event, gain on the sale of loans increased
$51  thousand or 19.5% from $261  thousand to $312  thousand for the nine months
ended  September 30, 2007 compared to the same period in 2006.  This increase is
primarily  due to  higher  volume  of  originations  and  sales  of  residential
mortgages  during the nine months  ended  September  30, 2007 as compared to the
same period in 2006.

Other  non-interest  income  increased $34 thousand or 5.9% to $610 thousand for
the three months ended September 30, 2007 compared to same period in 2006. Other
non-interest income remained unchanged at $1.8 million for the nine months ended
September 30, 2007 compared to same period in 2006.  Other  non-interest  income
includes ATM surcharge revenue,  STAR/Visa Check Card revenue,  safe deposit box
income,  merchant services income,  loan fee income,  miscellaneous loan income,
rental income and other miscellaneous income.

NON-INTEREST EXPENSE

Total  non-interest  expense increased $372 thousand or 4.8% to $8.1 million for
the three months ended  September 30, 2007,  when compared to the same period in
2006. Total non-interest expense increased $1.4 million or 6.3% to $24.5 million
for the nine months ended  September 30, 2007,  when compared to the same period
in 2006. The various components of non-interest expense are discussed below.

Salaries and employee benefits  increased $471 thousand or 11.0% to $4.8 million
for the three month  ended  September  30,  2007  compared to the same period in
2006.  Salaries and employee  benefits  increased $1.5 million or 12.0% to $14.3
million for the nine month ended  September 30, 2007 compared to the same period
in 2006.  The higher  salary and benefits  expense for the three and nine months
ended  September  30,  2007  was  primarily  due to a  higher  average  employee
headcount; specifically,  staffing for new branches as well as new key employees
in the Wealth  Management  Division,  commercial  lending and leasing areas. The
Bank continues to invest in the revenue  generating  areas of retail  branching,
commercial lending and leasing, and wealth management.

Net occupancy,  equipment and data processing  expense decreased $79 thousand or
6.0% to $1.2  million  during the three  months  ended  September  30, 2007 when
compared  to the  same  period  in  2006.  Net  occupancy,  equipment  and  data
processing  expense  decreased  $206 thousand or 5.0% to $3.9 million during the
nine months ended  September  30, 2007 when compared to the same period in 2006.
The decrease for the three and nine month  periods  ended  September 30, 2007 is
mainly due to past capital expenditures which became fully depreciated in 2007.

                                       22
<PAGE>

                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

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

Depreciation  on  operating  leases  increased  $29  thousand  or  12.1% to $269
thousand for the three months ended September 30, 2007 when compared to the same
period in 2006. Depreciation on operating leases increased $76 thousand or 10.7%
to $789  thousand for the nine months ended  September 30, 2007 when compared to
the same period in 2006.  This  depreciation  expense is the result of operating
lease  agreements  the  Corporation  has with one of our  customers.  The income
associated with these operating leases is classified as Rental Income.

Expenses  for  professional  services  decreased  $86  thousand or 16.7% to $429
thousand for the three months ended September 30, 2007 when compared to the same
period in 2006.  Professional  services expense increased $7 thousand or 0.5% to
$1.4 thousand for the nine months ended  September 30, 2007 when compared to the
same period in 2006.

Marketing  expense  decreased  $44  thousand,  or 19.8% to $178 thousand for the
three months ended  September 30, 2007 when compared to the same period in 2006.
Marketing  expense  increased $114  thousand,  or 19.2% to $707 thousand for the
nine months ended  September  30, 2007 when compared to the same period in 2006.
The increase was  primarily  attributable  to higher  expense from our continued
investment  in  heightened  brand  awareness in new  markets,  efforts to deepen
relationships  with existing  clients and  attracting  new consumer and business
clients.

Total other non-interest  expense increased $60 thousand or 6.1% to $1.0 million
for the three months  ended  September  30, 2007  compared to the same period in
2006. Total other  non-interest  expense  decreased $1 thousand or 0.03% to $2.9
million for the nine months ended September 30, 2007 compared to the same period
in 2006. Other non-interest  expense includes annual meeting and reports,  trust
processing,  postage,  directors' costs, telephone, travel and entertainment and
operating supplies.

INCOME TAXES

Income tax expense for the three and nine month periods ended September 30, 2007
was $1.0 million and $2.3  million,  compared to $822  thousand and $2.4 million
for the same periods in 2006. This represents an effective tax rate of 27.1% and
27.8% for the three and nine month  periods  ended  September  30, 2007 compared
with 30.7% and 29.1% for the same periods in 2006.

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

                                       23
<PAGE>

                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

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

Corporation are funding available from deposit growth, FHLB Borrowings, 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 NOW,  money  market,  savings and  certificates  less than
$100,000 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:

                               For the Nine Months Ended     For the year ended
(Dollars in thousands)             September 30, 2007         December 31, 2006
                               --------------------------  ---------------------
                               Average      Effective       Average    Effective
DEPOSIT TYPE                   Balance        Yield         Balance      Yield
------------                  ---------     ---------      ---------  ----------

NOW Accounts                  $ 159,022          2.29%      $ 134,076      1.76%
Money Market                     95,656          4.20%         80,009      3.84%
Statement Savings                44,486          0.80%         49,699      0.80%
Other Savings                     1,160          1.44%            636      0.56%
Tiered Savings                   67,613          1.46%        104,334      1.49%
                              ---------                     ---------
Total NOW Savings,              367,937          2.45%        368,754      2.00%
  and Money Market

CDs less than $100,000          198,148          4.72%        169,630      4.16%
CDs greater than $100,000        51,143          4.54%         44,795      3.99%
                                -------                     ---------
Total CDs                       249,291          4.69%        214,425      4.13%

Total Interest Bearing Deposits 617,228          3.35%        583,179      2.78%

Non-Interest Bearing
  Demand Deposits               121,632                       126,461
                                -------                     ---------

Total Deposits                $ 738,860          2.80%      $ 709,640      2.29%
                              ---------                     --------

The Bank, as a member of FHLB,  maintains several credit facilities.  During the
three and nine month  periods ended  September  30, 2007,  average FHLB advances
were $74.1  million  and $67.4  million,  respectively,  and  consisted  of term
advances  with a variety  of  maturities.  The  average  interest  rate on these
advances  was 3.9% and  3.9%,  respectively.  The Bank  currently  has a maximum
borrowing capacity with FHLB of approximately $257.0 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.  The
Bank also has a $15.0 million letter of credit outstanding with FHLB that serves
as collateral for governmental deposits.

To supplement  the  Corporation's  sources of liquidity,  the  Corporation  uses
alternative  funding sources such as brokered  deposits,  FHLB  borrowings,  and
bringing  off-balance  sheet  "swept"  funds onto the balance sheet as deposits.
Management  has set limits for these funding  sources and will manage the impact
that such sources may have on liquidity and interest rate sensitivity.


                                       24
<PAGE>


                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

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

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 re-pricing in a future time period.  The  Corporation's  net
interest rate  sensitivity  gap within one year is a negative  $289.8 million or
31.4% of total  assets at September  30, 2007  compared  with a negative  $241.1
million or 27.6% of total  assets at December 31, 2006.  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.  As of the most  recent  quarter-end,  all results are
within  policy  limits and indicate an  acceptable  level of interest rate risk.
Management monitors interest rate risk as a regular part of corporate operations
with the intention of  maintaining a stable net interest  margin.  The following
table presents our interest sensitivity analysis as of September 30, 2007:

<TABLE>
<CAPTION>

                                                                Two              Over
(Dollars in thousands)                      Within            through            five          Non-rate
                                           one year         five years           years         sensitive        Total
                                          -----------       ----------       ------------     ----------     ---------
<S>                                       <C>               <C>              <C>              <C>            <C>

ASSETS
 Federal funds sold                        $  57,918         $       0        $       0       $        0     $  57,918
 Investment securities                        25,819            45,752           21,069                0        92,640
 Interest bearing deposits in banks              570                 0                0                0           570
 Net loans and leases                        262,810           356,248          100,472           (8,041)      711,489
 Cash and due from banks                           0                 0                0           24,373        24,373
 Premises and equipment                            0                 0                0           17,139        17,139
 Other assets                                      0                 0                0           19,708        19,708
                                          ----------         ---------        ---------       ----------     ---------
 Total assets                              $ 347,117         $ 402,000        $ 121,541       $   53,179     $ 923,837
                                           =========         =========        =========       ==========     =========

LIABILITIES AND CAPITAL
 Non-interest bearing deposits             $       0         $       0        $       0       $  114,640     $ 114,640
 Interest bearing deposits                   607,590            16,053            4,938                0       628,581
 FHLB advances and other                      13,815            69,238            2,347                0        85,400
 Junior subordinated debentures               15,465                 0                0                0        15,465
 Other liabilities                                 0                 0           13,519                0        13,519
 Capital                                           0                 0                0           66,232        66,232
                                           ---------         ---------        ---------       ----------     ---------
 Total liabilities & capital               $ 636,870         $  85,291        $  20,804       $  180,872     $ 923,837
                                           =========         =========        =========       ==========     =========

 Net interest rate
   sensitivity gap                         $(289,753)        $ 316,709        $ 100,737       $ (127,693)
                                           =========         =========        =========       ==========
 Cumulative interest rate
   sensitivity gap                         $(289,753)        $  26,956        $ 127,693       $        0
                                           =========         =========        =========       ==========
 Cumulative interest rate
   sensitivity gap divided
   by total assets                            (31.4%)             2.9%            13.8%
                                               =====              ====            =====
</TABLE>


                                       25
<PAGE>


                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

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

BRANCHING, TECHNOLOGY AND CAPITAL PROJECTS

The Corporation  intends to open new branches throughout Chester County over the
next several years.  A new  customer-focused  branch design was introduced  when
construction  was  finished on the branch  building in Oxford,  Pennsylvania  in
2005.  The new  "signature  look" will be rolled out to new and certain  current
locations.  We are currently  constructing a new branch in Kennett  Square,  PA.
Technological   improvements,   including   enhanced   security   over  customer
information,  a  more  proactive  disaster  recovery  system,  and  an  improved
infrastructure  to support more internet  banking  products are also expected in
the future.

CAPITAL ADEQUACY

The  Corporation  is subject to  Risk-Based  Capital  Guidelines  adopted by the
Federal  Reserve  Board 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
September 30, 2007, 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.

<TABLE>
<CAPTION>

                                           As of September 30,   As of December 31,
                                           -------------------   ------------------    "Well Capitalized"
                                            2007         2006           2006              Requirements
                                           ------       ------         ------          ------------------
<S>                                        <C>          <C>            <C>             <C>

  Corporation
  -----------
Leverage Ratio                              9.13%        9.23%           9.34%                 N/A
Tier I Capital Ratio                       10.84%       11.43%          11.26%                 N/A
Total Risk-Based Capital Ratio             11.95%       12.60%          12.49%                 N/A
  Bank
  ----
Leverage Ratio                              8.47%        8.47%           8.58%                5.00%
Tier I Capital Ratio                       10.06%       10.46%          10.31%                6.00%
Total Risk-Based Capital Ratio             11.19%       11.67%          11.53%               10.00%

</TABLE>

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

                                       26
<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 2006 Annual  Report.
Please refer to the  "Management's  Discussion  and  Analysis"  section on pages
18-38 of the Corporation's 2006 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   certifications   (the  "Section  302
Certifications"),  one by each of our Chief  Executive  Officer,  President  and
Chief  Financial  Officer (our  principal  executive,  operating  and  financial
officers,  respectively,  and,  collectively,  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 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.

Management's Report on Disclosure  Controls and Procedures.  As required by Rule
13a-15(b), under the Exchange Act, 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,  as of September  30,  2007,  at the
reasonable  assurance level, to ensure that information required to be disclosed
by us in the  reports  we file or submit  under the  Exchange  Act is  recorded,
processed  and reported  within the time periods  specified in the SEC rules and
regulations.

Changes in internal  control over financial  reporting.  In connection  with the
ongoing review of the  Corporation's  internal control over financial  reporting
(as defined in Rule 13a-15(d),  under the Exchange Act),  Management,  including
the Principal  Officers,  regularly  assesses the adequacy 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 third quarter of 2007, there were
no such changes.

                                       27
<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 1A.  Risk Factors
          ------------
Information  regarding  risk  factors  appears  in Part 1, Item 1A of our Annual
Report on Form 10-K for the year ended  December  31,  2006.  There have been no
material changes from the risk factors as disclosed in that report.

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds
          -----------------------------------------------------------

                    ISSUER PURCHASES OF EQUITY SECURITIES (1)

<TABLE>
<CAPTION>

                                           (a)           (b)              (c)                       (d)
                                       ----------    ----------    ----------------      ------------------------
                                          Total        Average      Total Number of         Maximum Number (or
                                       Number of     Price Paid    Shares (or Units)     Approximate Dollar Value)
Period                                 Shares (or     per Share    Purchased as Part     of Shares (or Units)that
                                          Units)      (or Unit)       of Publicly          May Yet Be Purchased
                                        Purchased                   Announced Plans          Under the Plans or
                                                                    or Programs (1)            Programs (1)
                                       ----------    ----------    ----------------      ------------------------
<S>                                    <C>           <C>           <C>                   <C>

July 1 to July 31, 2007                        --            --                  --      $              7,902,483


August 1 to August 31, 2007               34,500 (2) $    18.38              34,500 (2)  $              7,268,233


September 1 to September 30, 2007              --            --                  --      $              7,268,233

                                       ----------    ----------     ---------------      ------------------------
Total                                     34,500 (2) $    18.38              34,500 (2)  $              7,268,233

</TABLE>

(1) The Corporation announced on November 15, 2005 a program to repurchase up to
$10.0  million  of the  Corporation's  Common  Stock.  This  program  replaced a
previous program that expired in October 2005.

(2) All shares described above were acquired in block  transactions  intended to
comply with Rule 10b-18 under the Securities Exchange Act of 1934, as amended.

                                       28
<PAGE>



                FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES

                     PART II - OTHER INFORMATION - CONTINUED

Item 3.   Defaults upon Senior Securities
          -------------------------------
          None

Item 4.   Submission of Matters to a Vote of Security Holders
          ---------------------------------------------------
          None

Item 5.   Other Information
          -----------------
          None

Item 6.   Exhibits
          --------

          Exhibits  marked as "(cp)" are  management  contracts or  compensatory
          plans,  contracts  or  arrangements  in which a director or  executive
          officer  participates  or may  participate.  Exhibits  marked  with an
          asterisk are filed with this report.

          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 Sale  Agreement,  dated as of September  28, 2007, by and between
          First National Bank of Chester County and FTN Ramp, LLC.*

          10.2 Lease  Agreement,  dated as of September 28, 2007, by and between
          First National Bank of Chester County and FI Properties Pool I LP.*

          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 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 Chief Financial Officer*

                                       29
<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





                                     /s/ John A. Featherman
                                     ----------------------
November 9, 2007                     John A. Featherman, III
                                     Chief Executive Officer




                                     /s/ John E. Balzarini
                                     ---------------------
November 9, 2007                     John E. Balzarini
                                     Chief Financial Officer
                                    (Principal Financial and Accounting Officer)


                                       30
<PAGE>



                                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 Sale  Agreement,  dated as of  September  28,  2007,  by and between  First
National Bank of Chester County and FTN Ramp, LLC.*

10.2 Lease  Agreement,  dated as of  September  28, 2007,  by and between  First
National Bank of Chester County and FI Properties Pool I LP.*

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 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 Chief Financial Officer*

                                       31
<PAGE>