UNITED STATES

                  SECURITIES AND EXCHANGE COMMISSION

                       Washington,  D.C.  20549

                               FORM 10Q

Quarterly Report Pursuant to Section 13 OR 15(d) of the Securities
Exchange Act of 1934

For the quarterly period ended March 31, 1999

Commission File Number: 2-88927

                      FIRST KEYSTONE CORPORATION
        (Exact name of registrant as specified in its charter)


            Pennsylvania                          23-2249083     
  (State or other jurisdiction of              (I.R.S. Employer 
  incorporation or organization)              identification No.)


111 West Front Street, Berwick, PA                 18603
(Address of principal executive offices)         (Zip Code)


Registrant's telephone number, including area code:  (570) 752-3671

   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 the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical date:

Common Stock, $2 Par Value, 2,877,993 shares as of March 31, 1999.


<PAGE>


                    PART I. - FINANCIAL INFORMATION

Item. 1  Financial Statements

<TABLE>

                      FIRST KEYSTONE CORPORATION
                            BALANCE SHEETS
                              (Unaudited)


<CAPTION>
(Amounts in thousands, except per share data)

                                                   March       December
                                                  1999           1998 
<S>                                          <C>            <C>
ASSETS
Cash and due from banks                             $  7,117       $  7,033
Interest bearing deposits with banks                  10,569             22
Available-for-sale securities carried
    at estimated fair value                          122,044        116,701
Investment securities, held to 
    maturity securities, estimated 
    fair value of $13,154 and $14,015                 13,145         13,985
Loans, net of unearned income                        170,666        161,533
Allowance for loan losses                              2,467          2,421
                                                    ________       ________
Net loans                                           $168,199       $159,112
Bank premises and equipment                            3,751          3,757
Interest receivable                                    2,291          2,133
Other assets                                             516            285
                                                    ________       ________
   Total Assets                                     $327,632       $303,028

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
   Non-interest bearing                             $ 19,637       $ 22,749
   Interest bearing                                  223,844        224,342
                                                    ________       ________
   Total deposits                                   $243,481       $247,091

Short-term borrowings                                 35,779          6,634
Long-term borrowings                                  13,000         13,000
Accrued expenses and other 
   liabilities                                         2,219          2,550
                                                    ________       ________
   Total Liabilities                                $294,479       $269,275
                                                    ________       ________

STOCKHOLDERS' EQUITY
Common stock, par value $2 
   per share                                        $  5,867       $  5,867
Surplus                                                9,761          9,761
Retained earnings                                     17,857         17,123
Accumulated other comprehensive 
   income                                              1,511          2,193
Less treasury stock at cost 55,734
   in 1999 and 35,134 shares in 1998                  (1,843)        (1,191)
                                                    ________       ________

    Total Stockholders' Equity                        33,153         33,753
                                                    ________       ________
    Total Liabilities and
      Stockholders' Equity                          $327,632       $303,028



See Accompanying Notes to Financial Statements

</TABLE>

                                  1


<PAGE>


<TABLE>
                      FIRST KEYSTONE CORPORATION
                         STATEMENTS OF INCOME
          FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
                              (Unaudited)

<CAPTION>
(Amounts in thousands except per share data)

                                                  1999          1998
<S>                                            <C>            <C>
INTEREST INCOME
Interest and fees on loans                            $3,437         $3,287
Interest and dividend income on 
  securities                                           1,946          1,561
Interest on deposits in banks                             52            104
                                                      ______         ______
  Total Interest Income                               $5,435         $4,952

INTEREST EXPENSE
Interest on deposits                                  $2,376         $2,233
Interest on short-term borrowings                        183             58
Interest on long-term borrowings                         186            155
                                                      ______         ______
  Total Interest Expense                              $2,745         $2,446

Net interest income                                   $2,690         $2,506
Provision for loan losses                                 75             50
                                                      ______         ______
Net Interest Income After
  Provision for Loan Losses                           $2,615         $2,456

OTHER INCOME
Service charges on deposit accounts                   $  196         $  159
Other non-interest income                                144            158
Investment securities gains
  (losses) net                                            24             35
                                                      ______         ______
  Total Other Income                                  $  364         $  352

OTHER EXPENSES
Salaries and employee benefits                        $  800         $  721
Net occupancy and fixed asset expense                    247            228
Other non-interest expense                               444            402
                                                      ______         ______
  Total Other Expenses                                $1,491         $1,351

Income before income taxes                            $1,488         $1,457
Applicable income tax (benefit)                          265            316
                                                      ______         ______
Net Income                                            $1,223         $1,141

Net Income Per Weighted Share
  Outstanding                                         $  .42         $  .39


See Accompanying Notes to Financial Statements

</TABLE>

                                  2


<PAGE>


<TABLE>

                      FIRST KEYSTONE CORPORATION
                       STATEMENTS OF CASH FLOWS
          FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
                              (Unaudited)

<CAPTION>
(Amounts in thousands)
                                                  1999          1998
<S>                                          <C>            <C>
OPERATING ACTIVITIES
Net income                                          $  1,223       $  1,141
Adjustments to reconcile net income
  to net cash provided by 
  operating activities:
  Provision or loan losses                                75             50
  Provision for depreciation and
    amortization                                         100             79
  Premium amortization on investment
    securities                                            83             54
  Discount accretion on investment
    securities                                           (39)           (32)
  Gain on sale of mortgage loans                          (1)           (29)
  Proceeds from sale of mortgage loans                    31            931
  Originations of mortgage loans for
    resale                                            (2,040)        (1,248)
  (Gain) loss on sales of investment
    securities                                           (24)           (35)
  Deferred income tax (benefit)                           (8)             5
  (Increase) decrease in interest
    receivable and other assets                         (389)          (350)
  Increase (decrease) in interest
    payable, accrued expenses and
    other liabilities                                     33           (342)
                                                    ________       ________
  NET CASH PROVIDED BY OPERATING
    ACTIVITIES                                      $   (956)      $    224

INVESTING ACTIVITIES
  Purchases of investment securities
    available for sale                              $(25,585)      $(17,083)
  Proceeds from sales of investment
    securities available for sale                     14,705          2,040
  Proceeds from maturities and
    redemptions of investment
    securities available for sale                      4,501          2,224
  Purchase of investment securities
    held to maturity                                       0           (677)
  Proceeds from maturities and
    redemption of investment 
    securities held to maturity                          819          1,043
  Net (increase) decrease in loans                    (7,153)         2,249
  Purchase of premises and equipment                     (94)           (86)
                                                    ________       ________
  NET CASH USED BY INVESTING
    ACTIVITIES                                      $(12,807)      $(10,290)

FINANCING ACTIVITIES
  Net increase (decrease) in
    deposits                                        $ (3,610)      $  4,089
  Net increase (decrease) in
    short-term borrowings                             29,145            221
  Net increase (decrease)in
    long-term borrowings                                   0          3,000
  Acquisition of treasury stock                         (652)             0
  Cash dividends                                        (489)          (411)
                                                    ________       ________
  NET CASH PROVIDED BY FINANCING
    ACTIVITIES                                      $ 24,394       $  6,899

INCREASE (DECREASE) IN CASH AND
    CASH EQUIVALENT                                 $ 10,631       $ (3,167)
CASH AND CASH EQUIVALENTS, BEGINNING                   7,055         13,484
                                                    ________       ________
CASH AND CASH EQUIVALENTS, ENDING                   $ 17,686       $ 10,317
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
  INFORMATION
  Cash paid during period for
    Interest                                        $  2,743       $  2,453
    Income Taxes                                          19             29


See Accompanying Notes to Financial Statements

</TABLE>

                                  3


<PAGE>


                      FIRST KEYSTONE CORPORATION
              CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
                            March 31, 1999
                              (Unaudited)

Note 1.

     The accounting and reporting policies of First Keystone
Corporation and Subsidiaries conform to generally accepted accounting
principles and to general practices within the banking industry. 
These consolidated interim financial statements include the accounts
of First Keystone Corporation and its wholly owned subsidiary, The
First National Bank of Berwick.  All significant inter-company
balances have been eliminated.


Note 2.

    The accompanying consolidated interim financial statements are
unaudited.  In management's opinion, the consolidated interim
financial statements reflect a fair presentation of the consolidated
financial position of First Keystone Corporation and Subsidiary, and
the results of their operations and their cash flows for the interim
periods presented.  Further, the consolidated interim financial
statements reflect all adjustments, which are in the opinion of
management, necessary to present fairly the consolidated financial
condition and consolidated results of operations and cash flows for
the interim period presented and that all such adjustments to the
consolidated financial statements are of a normal recurring nature.


Note 3.

     The results of operations for the three-month period ended March
31, 1999, are not necessarily indicative of the results to be expected
for the full year.


Note 4.

     Statement of Financial Accounting Standards (SFAS) No. 128,
Earnings Per Share, requires dual presentation of basic and diluted
earnings per share.  Basic earnings per share is calculated by
dividing net income by the weighted average number of shares of common
stock outstanding at the end of each period.  Diluted earnings per
share is calculated by increasing the denominator for the assumed
conversion of all potentially dilutive securities.  The Corporation's
dilutive securities are limited to stock options which currently have
no effect on earnings per share.


Note 5.

LOANS
     Loans are stated at their outstanding principal balances, net of
any deferred fees or costs, unearned income, and the allowance for
loan losses.  Interest on installment loans is recognized as income
over the term of each loan, generally, by the "actuarial method". 
Interest on other loans is primarily recognized based upon the
principal amount outstanding.  Loan origination fees and certain
direct loan origination costs have been deferred and the net amount
amortized using the interest method over the contractual life of the
related loans as an interest yield adjustment. 

                                  4


<PAGE>


     Non-Accrual Loans - Generally, a loan (including a loan impaired
under Statement of Financial Accounting Standards No. 114) is
classified as non-accrual, and the accrual of interest on such a loan
is discontinued when the contractual payment of principal or interest
has become 90 days past due or management has serious doubts about
further collectibility of principal or interest, even though the loan
currently is performing.  A loan may remain on accrual status if it is
in the process of collection and is either guaranteed or well secured. 
When a loan is placed on non-accrual status, unpaid interest credited
to income in the current year is reversed and unpaid interest accrued
in prior years is charged against the allowance for credit losses. 
Potential problem loans are identified by management as a part of its
loan review process.

     Income recognition is in accordance with Statement of Financial
Accounting Standards No. 118.  Certain non-accrual loans may continue
to perform, that is, payments are still being received.  Generally,
the payments are applied to principal.  These loans remain under
constant scrutiny and if performance continues, interest income may be
recorded on a cash basis based on management's judgement as to
collectibility of principal.

     Allowance for Loan Losses - The allowance for loan losses is
established through provisions for loan losses charged against income. 
Loans deemed to be uncollectible are charged against the allowance for
loan losses, and subsequent recoveries, if any, are credited to the
allowance.

     The Corporation adheres to the principles provided by Statement
of Financial Accounting Standards No. 114, "Accounting by Creditors
for Impairment of a Loan as amended by Statement of Financial
Accounting Standards No. 118, "Accounting by creditors for Impairment
of a Loan - Income Recognition and Disclosure."  Under these
standards, the allowance for loan losses related to loans that are
identified for evaluation in accordance with Statement No. 114 is
based on discounted cash flows using the loan's initial effective
interest rate or the fair value of the collateral for certain
collateral dependent loans.  Statement No. 118 allows the continued
use of existing methods for income recognition on impaired loans and
amends disclosure requirements to require information about the
recorded investment in certain impaired loans and related income
recognition on those loans.  The allowance for loan losses is
maintained at a level by management to be adequate to absorb estimated
potential loan losses.  Management's periodic evaluation of the
adequacy of the allowance for loan losses is based on the
Corporation's past loan experience, known and inherent risks in the
portfolio, adverse situations that may affect the borrower's ability
to repay (including the timing of future payments), the estimated
value of any underlying collateral, composition of the loan portfolio,
current economic conditions, and other relevant factors.  this
evaluation is inherently subjective as it requires material estimates,
including the amounts and timing of future cash flows expected to be
received on impaired loans that may be susceptible to significant
change.

     The following table presents the changes in the allowance for
credit losses:

<TABLE>
<CAPTION>
(Amounts in thousands)
                                                 
<S>                                                   <C>
Balance at January 1, 1999                              $2,421
Provisions charged off                                      75
Loans charged off                                          (34)
Recoveries                                                   5
                                                        ______
Balance at March 31, 1999                               $2,467

</TABLE>


     At March 31, 1999, the recorded investment in loans that are
considered to be impaired under Statement No. 114 was $83,672.  No
additional charge to operations is required since the total allowance
for loan losses is estimated by management to be adequate to provide
for the loan loss allowance under Statement No. 114 as well as any
other potential loan losses.

                                  5


<PAGE>


Note 6.

<TABLE>
<CAPTION>
(Amounts in thousands, except common share data)


                                         Common          Common
                                         Shares         Stock        Surplus
<S>                                  <C>              <C>          <C>
Balance at January 1, 1999                2,933,727        $5,867       $9,761

Comprehensive Income:
 Net Income                                                                   
 Other comprehensive 
   income, net of tax:
 Unrealized gain (loss) on
   investment securities of
   ($666) net of 
   reclassification
   adjustment for gains
   included in net
   income of $16                                                              
 Total Comprehensive
   income                                                                     
Cash dividends - 
 $.20 per share                                                               
Purchase of 20,600 shares
 of Treasury Stock                        _________        ______       ______

Balance at March 31, 1999                 2,933,727        $5,867       $9,761




<CAPTION>
(Amounts in thousands, except common share data)

                                   Accumulated
                                     Compre-                       Other
                                     hensive       Retained   Comprehensive
                                     Income         Earnings      Income
<S>                               <C>           <C>            <C>
Balance at January 1, 1999                           $17,123        $2,193

Comprehensive Income:
 Net Income                            $1,223          1,223
 Other comprehensive 
   income, net of tax:
 Unrealized gain (loss)
   on investment
   securities of ($666)
   net of reclassification
   adjustment for gains
   included in net
   income of $16                         (682)                        (682)
                                       ______
 Total Comprehensive
   income                              $  541
Cash dividends -
 $.20 per share                                         (489)
Purchase of 20,600 shares
 of Treasury Stock
                                                     _______        ______
Balance at March 31, 1999                            $17,857        $1,511




<CAPTION>
(Amounts in thousands, except common share data)

                                                Treasury
                                                  Stock         Total
<S>                                           <C>           <C>
Balance at January 1, 1999                         (1,191)       $33,753

Comprehensive Income:
  Net Income                                                       1,223
  Other comprehensive 
     income, net of tax:
  Unrealized gain (loss)
     on investment
     securities of ($666)
     net of reclassification
     adjustment for gains
     included in net
     income of $16                                                  (682)
  Total Comprehensive
     income 
Cash dividends - 
   $.20 per share                                                   (489)
Purchase of 20,600 shares
   of Treasury Stock                                 (652)          (652)
                                                   ______        _______
Balance at March 31, 1999                          (1,843)       $33,153


</TABLE>


Note 7.

     As required on January 1, 1996, the Corporation adopted Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of."  The Statement requires that
long-lived assets and certain identifiable intangibles are classified
into two categories for the purpose of accounting for an impairment of
assets:  those to be held and used and those to be disposed of. 
Assets to be held and used must be reviewed whenever events or changes
in circumstances indicate that the carrying value may not be
recoverable.  An impairment loss is indicated if the sum of the
expected future cash flows, undiscounted and without interest charges,
is less than the carrying amount of the assets.  An impairment loss
must be recognized as the amount by which the carrying amount of the
asset exceeds the fair value of the asset so determined. 
Implementation of this Statement did not have any effect on the
consolidated financial condition or results of operations of the
Corporation.


Note 8.

     The consolidated interim financial statements have been prepared
in accordance with requirements of Form 10-Q and therefore does not
include all the disclosures normally required by generally accepted
accounting principles, or those normally made in the Corporation's
annual 10-K filing.  The reader of these consolidated interim
financial statements may wish to refer to the Corporation's annual
report or Form 10-K for the period ended December 31, 1998, filed with
the Securities and Exchange Commission.

                                  6


<PAGE>


Item 2.  First Keystone Corporation Management's Discussion and
         Analysis of Financial Condition and Results of Operation
         as of March 31, 1999



RESULTS OF OPERATIONS

     First Keystone Corporation realized earnings for the first
quarter of 1999 of $1,223,000, an increase of $82,000, or 7.2% over
the first quarter of 1998.  The increase in net income for the first
quarter of 1999 was a result of an increase in net interest income and
an increase in total other income.  Other expenses, non-interest
expenses, increased 10.4% in the first quarter of 1999 over 1998
primarily because of expenses relating to our eighth full service
office opening in the fourth quarter of 1998.  On a per share basis,
net income per share increased to $.42 for the first three months of
1999 compared to $.39 for the first three months of 1998, while
dividends increased to $.17 per share up from $.14 in 1998, or an
increase of 21.4%.

     Year-to-date net income annualized amounts to a return on average
common equity of 14.34% and a return on assets of 1.57%.  For the
three months ended March 31, 1998, these measures were 14.17% and
1.70%, respectively on an annualized basis.


NET INTEREST INCOME

     The major source of operating income for the Corporation is net
interest income, defined as interest income less interest expense.  In
the first quarter of 1999, interest income has increased more than
interest expense resulting in improved net interest income.  In the
first quarter of 1999, interest income amounted to $5,435,000, an
increase of $483,000 or 9.8% over the first quarter of 1998, while
interest expense amounted to $2,745,000 in the first quarter of 1999,
an increase of $299,000, or 12.2% over the first quarter of 1998. 
Accordingly, net interest income was $2,690,000 in the first quarter
of 1999, an increase of $184,000, or 7.3% over the first quarter of
1998. 

     Our net interest margin for the quarter ended March 31, 1999, was
4.06% compared to 4.28% for the quarter ended March 31, 1998. 


PROVISION FOR LOAN LOSSES


     The provision for loan losses for the quarter ended March 31,
1999, was $75,000 compared to $50,000 for the first quarter of 1998. 
Net charge-offs totaled $29,000 for the three months ended March 31,
1999, as compared to $61,000 for the first three months of 1998.  The
allowance for loan losses as a percentage of loans, net of unearned
interest, was 1.45% as of March 31, 1999, as compared to 1.57% as of
March 31, 1998.



NON-INTEREST INCOME

     Total non-interest or other income was $364,000 for the quarter
ended March 31, 1999, as compared to $352,000 for the quarter ended
March 31, 1998, an increase of $12,000, or 3.4%.  Excluding investment
security gains and losses, non-interest income was $340,000 for the
first quarter of 1999, an increase of $23,000 over the first quarter
of 1998.   Increased fees generated by our trust department and an
increase in service charges on deposit accounts, were the primary
reasons for the increase in non-interest income.

                                  7


<PAGE>


NON-INTEREST EXPENSES

     Total non-interest, or other expenses, was $1,491,000 for the
quarter ended March 31, 1999, as compared to $1,351,000 for the
quarter ended March 31, 1998.  The increase of $140,000 is comprised
of salary and benefits increasing $79,000, occupancy expense
increasing $19,000, and other non-interest expense increasing $42,000. 
The increase in non-interest expenses was primarily the result of
increased personnel expenses and overhead expenses associated with the
opening in November 1998 of our eighth full service office.

     Expenses associated with employees (salaries and employee
benefits) continue to be the largest category of non-interest
expenses.  Salaries and benefits amount to 53.7% of total non-interest
expense for the three months ended March 31, 1999, as compared to
53.4% for the first three months of 1998.  Net occupancy expense
amounted to $247,000 for the three-months ended March 31, 1999, an
increase of $19,000, or 8.3% over 1998.  Other non-interest expenses
amounted to $444,000 for the three months ended March 31, 1999, an
increase of $42,000, or 10.4% over the first three months of 1998. 
Even though our non-interest expenses increased in the first quarter
somewhat more than historic averages, our overall non-interest expense
of less than 2% of average assets on an annualized basis, places us
among the leaders of our peer financial institutions at controlling
total non-interest expense.


INCOME TAXES

     Effective tax planning has helped produce favorable net income. 
The effective total income tax rate was 17.8% for the first quarter of
1999 as compared to 21.7% for the first quarter of 1998.   The
decrease in our effective tax rate in the first quarter of 1999 was
due primarily to increased purchases of municipal (tax-free
investments) securities at relatively attractive interest rates.


ANALYSIS OF FINANCIAL CONDITION

ASSETS

     Total assets increased to $327,632,000 as of March 31, 1999, an
increase of $24,604,000, or 8.1% over year-end 1998.  Total deposits
decreased slightly to $243,481,000 as of March 31, 1999, a decrease of
$3,610,000, or 1.5% over year-end 1998.

     The Corporation used borrowed funds to support asset growth not
funded by deposit growth.  Short-term borrowings increased by
$29,145,000 to $35,779,000 as of March 31, 1999, up from $6,634,000 at
December 31, 1998.  The increase in short-term borrowings was the
result of a large increase in securities sold under an agreement to
repurchase. 


EARNING ASSETS

     Our primary earning asset, loans, net of unearned income
increased to $170,666,000 as of March 31, 1999, up $9,133,000, or 5.7%
since year-end 1998.  The loan portfolio continues to be well
diversified and increases in the portfolio in 1999 have been primarily
from increased originations of real estate loans and commercial loans
secured by real estate.

     Our investment portfolio increased in size from December 31,
1998, to March 31, 1999.  Held-to-maturity securities amounted to
$13,145,000 as of March 31, 1999, a decrease of $840,000 from December
31, 1998.  However, available-for-sale securities amounted to
$122,044,000 as of March 31, 1999, an increase of $5,343,000, or 4.6%
from year-end 1998.  Interest bearing deposits with banks increased to
$10,569,000 as of March 31, 1999, compared to $22,000 as of December
31, 1998, as more funds were kept short-term for liquidity purposes.

                                  8


<PAGE>


ALLOWANCE FOR LOAN LOSSES

     Management performs a quarterly analysis to determine the
adequacy of the allowance for loan losses.  The methodology in
determining adequacy incorporates specific and general allocations
together with a risk/loss analysis on various segments of the
portfolio according to an internal loan review process.  Management
maintains its loan review and loan classification standards consistent
with those of its regulatory supervisory authority.  Management feels,
considering the conservative portfolio composition, which is largely
composed of small retail loans (mortgages and installments) with
minimal classified assets, low delinquencies, and favorable loss
history, that the allowance for loan loss is adequate to cover
foreseeable future losses.

     Any loans classified for regulatory purposes as loss, doubtful,
substandard, or special mention that have not been disclosed under
Industry Guide 3 do not (i) represent or result from trends or
uncertainties which management reasonably expects will materially
impact future operating results, liquidity, or capital resources, or
(ii) represent material credits about which management is aware of any
information which causes management to have serious doubts as to the
ability of such borrowers to comply with the loan repayment terms.  

     The Corporation was required to adopt Financial Accounting
Standards Board Statement No. 114, "Accounting by Creditors for
Impairment of a Loan" - Refer to Note 5 above for details.


NON-PERFORMING ASSETS

     Non-performing assets consist of non-accrual and restructured
loans, other real estate and foreclosed assets, together with loans
past-due 90 days or more and still accruing.  As of March 31, 1998,
total non-performing assets were $1,098,000 as compared to $881,000 on
December 31, 1998.  Non-performing assets to total loans and
foreclosed assets was .64% as of March 31, 1999, and .55% as of
December 31, 1998.

     Interest income received on non-performing loans as of March 31,
1999, was $1,286 compared to $5,610 as of December 31, 1998.  Interest
income, which would have been recorded on these loans under the
original terms as of March 31, 1999, and December 31, 1998, were
$24,452 and $96,425, respectively.  As of March 31, 1999 and December
31, 1998, there was no outstanding commitments to advance additional
funds with respect to these non-performing loans.

DEPOSITS AND OTHER BORROWED FUNDS

     As indicated previously, total deposits decreased $3,610,000 as
non-interest bearing deposits decreased by $3,112,000 and interest
bearing deposits decreased by $498,000 as of March 31, 1999, from
year-end 1998.  Long-term borrowings remained unchanged at
$13,000,000, while short-term borrowings (reflecting an increase in
repurchase agreements) increased $29,145,000 from year-end 1998.

CAPITAL STRENGTH

     Normal increases in capital are generated by net income, less
cash dividends paid out.  Also, net unrealized gains on investment
securities available-for-sale increased shareholders' equity, or
capital by $1,511,000 as of March 31, 1999, and $2,193,000 as of
December 31, 1998.  Our stock repurchase plan had repurchased 55,734
shares and 35,134 shares as of March 31, 1999 and December 31, 1998,
respectively.  This had an effect of our reducing our total
stockholders' equity by $1,843,000 and $1,191,000 as of March 31, 1999
and December 31, 1998, respectively.

                                  9


<PAGE>


     Leverage ratio and risk based capital ratios remain very strong. 
As of March 31, 1999, our leverage ratio was 10.15% as compared to
10.50% as of December 31, 1998.  In addition, Tier 1 risk based
capital and total risk based capital ratio as of March 31, 1999, were
17.38% and 18.85%, respectively.  The same ratios as of December 31,
1998, were 18.62% and 20.11%, respectively.


LIQUIDITY

     The liquidity position of the Corporation remains adequate to
meet customer loan demand and deposit fluctuation.  Managing liquidity
remains an important segment of asset liability management.  Our
overall liquidity position is maintained by an active asset liability
management committee.

     Management feels its current liquidity position is satisfactorily
given a very stable core deposit base which has increased annually. 
Secondly, our loan payments and principal paydowns on our mortgage
backed securities provide a steady source of funds.  Also, short-term
investments and maturing investment securities represent additional
sources of liquidity.  Finally, short-term borrowings are readily
accessible at the Federal Reserve Bank, Atlantic Central Bankers Bank,
or the Federal Home Loan Bank.


YEAR 2000 COMPLIANCE

     Management has completed its assessment of all business processes
that could be affected by the Year 2000 issue.  Each business process
assessment included a review of the information systems used in that
process, including related hardware and software, the involvement of
any third parties, and any affected operating equipment.  The mission
critical systems determined to be critical for supporting the core
services offered by First Keystone Corporation have been remediated,
unit tested, and returned to production. Management expects to
complete the remediation and testing of all affected systems within
the critical business processes by the end of the second quarter of
1999.

     The Corporation anticipates that its total Year 2000 project cost
will not exceed $100,000. This estimated project cost is based upon
currently available information and includes expenses paid to date.
The expenses for maintenance or modification of software associated
with the Year 2000 will be expensed as incurred. The costs of new
software will be capitalized and amortized over the software's useful
life. The aforementioned Year 2000 project cost estimate also may
change as the Corporation progresses in its Year 2000 program and
obtains additional information associated with and conducts further
testing concerning third parties. At this time, no significant
projects have been delayed as a result of the Corporation's Year 2000
effort.

     Management believes it has an effective plan in place to resolve
the Year 2000 issue in a timely manner and, thus far, activities have
tracked in accordance with the original plan. Management is in the
process of modifying its existing business continuity plans and is
also developing contingency plans to address potential risks in the
event of Year 2000 failures, including non-compliance by third
parties. Despite First Keystone Corporation's efforts to date to
remediate affected systems and develop contingency plans for potential
risks, management has not yet completed all activities associated with
resolving its Year 2000 issues. In addition, non-compliance by third
parties (including loan customers) and disruptions to the economy in
general resulting from Year 2000 issues could also have a negative
impact of undeterminable magnitude on First Keystone Corporation.

                                 10


<PAGE>


                      PART II - OTHER INFORMATION

     Item 1.   Legal Proceedings

               None.


     Item 2.   Changes in Securities

               None.


     Item 3.   Defaults Upon Senior Securities

               None.


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

               Annual Meeting of Shareholders of First Keystone
               Corporation held on Tuesday, April 20, 1999, at 
               10:00 a.m.

<TABLE>
<CAPTION>

                                                     Votes
Directors Elected                  Votes For        Against

<S>                            <C>              <C>
John L. Coates                 2,378,426        34,118
Dudley P. Cooley               2,385,107        27,437
Stanley E. Oberrender          2,385,207        27,337


<CAPTION>

                                    Votes                       Broker
Directors Elected                   Withheld    Abstentions    Non-Votes

<S>                               <C>            <C>            <C>
John L. Coates                        0             0              0
Dudley P. Cooley                      0             0              0
Stanley E. Oberrender                  0             0              0

</TABLE>


Directors Continuing:

John E. Arndt, term expires in 2001
J. Gerald Bazewicz, term expires in 2001
Budd L. Beyer, term expires in 2000
Robert E. Bull, term expires in 2001
Frederick E. Crispin, term expires in 2000
Jerome F. Fabian, term expires in 2000
Robert E. Wise, term expires in 2000

Matters Voted Upon:

Selection of J. H. Williams & Co. LLP, as auditors for the
Corporation.      Votes For        -  2,387,481
                  Votes Against    -  798
                  Votes Withheld   -  0
                  Abstentions      -  24,265
                  Broker Non-Votes -  0


     Item 5.   Other Information

               None.

                                 11


<PAGE>


     Item 6.   Exhibits and Reports on Form 8-K

               (a)  Exhibits required by Item 601 Regulation S-K


Exhibit Number         Description of Exhibit

    3(i)               Articles of Incorporation, as amended
                       (Incorporated by reference to Exhibit 3(i) to
                       Registrant's Annual Report of Form 10-KSB for
                       the year ended December 31, 1996.)

    3(ii)              Bylaws, as amended (Incorporated by reference
                       to Exhibit 3(ii) to Registrant's Annual Report
                       on Form 10-KSB for the year ended 
                       December 31, 1996.)

    10                 Material Contracts (Incorporated by reference
                       to Exhibit 10 to Registrant's Form 10Q for the
                       quarter ended June 30, 1997.)

    11                 Statement RE:  Computation of Earnings
                       Per Share.

    27                        Financial Data Schedule.


               (b)  The Registrant has filed no reports on Form 8-K
for this quarter.

                                 12

<PAGE>


                      FIRST KEYSTONE CORPORATION

                              SIGNATURES


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


                                FIRST KEYSTONE CORPORATION
                                Registrant


May 12, 1999                    /s/ J. Gerald Bazewicz
                                J. Gerald Bazewicz
                                President and 
                                Chief Executive Officer
                              (Principal Executive Officer)



May 12, 1999                     /s/ David R. Saracino
                                 David R. Saracino
                                 Treasurer/Assistant Secretary
                                 (Principal Accounting Officer)

                                  13


<PAGE>


                           INDEX TO EXHIBITS

Exhibit             Description

  10                Material Contracts
                     Profit Sharing Plan Summary (Incorporated
                     by reference to Exhibit 10 (Page 16) to 
                     Registrant's Form 10Q for the quarter
                       ended June 30, 1997)           
                       Deferred Compensation (Incorporated
                       by reference to Exhibit 10 (Page 17) to
                       Registrant's Form 10Q for the quarter
                       ended June 30, 1997)
                         Other Executive Benefits
                           (Incorporated by reference to
                           Exhibit 99 (Page 9) of the Corporation's
                           Annual Report on Form 10-KSB
                           for the year ended December 31, 1996)
                       Management Incentive Compensation Plan
                         (Incorporated by reference to Exhibit 10
                         (Page 18) to Registrant's Form 10Q for
                         the quarter ended June 30, 1997)

  11                Compensation of Earning Per Share

  27                Financial Data Schedule            

                                 14