UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K

Annual Report Pursuant to Section 13 or 15(d) of the  Securities
Exchange Act of 1934

For the fiscal year ended December 31, 1995

Commission file number 0-13775


                          KEYSTONE HERITAGE GROUP, INC.
                                  (Registrant)

           PENNSYLVANIA                                 23-2219740
     (State of incorporation)                       (I.R.S. Employer
                                                   Identification No.)

                 555 WILLOW STREET, LEBANON, PENNSYLVANIA 17046
                    (Address of principal executive offices)

Registrant's telephone number, including area code: (717) 274-6800

           Securities registered pursuant to Section 12(g) of the Act:

                         Common Shares, $5.00 Par Value
                                (Title of Class)

     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 and (2) has been  subject to such  filing
requirements for the past 90 days.      Yes __X__   No ____

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best  of  the  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K.       [ X ]

     The  aggregate  market value of the  registrant's  voting stock held by its
non-affiliates  on March 25, 1996 (based on the average bid and asked  prices on
that date) was approximately $94,926,950. Reference is made to page 6 herein for
a statement of the assumptions upon which this calculation is based.

     As of March 25, 1996, the  registrant had 4,071,683  common shares of $5.00
Par Value outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Certain portions of Parts I and II of this report are  incorporated  herein
by  reference  to the 1995  Keystone  Heritage  Group,  Inc.  Annual  Report  to
Stockholders;  certain  portions  of Part III of this  report  are  incorporated
herein by  reference to the  Keystone  Heritage  Group,  Inc.  definitive  Proxy
Statement dated March 7, 1996.

<PAGE>

                                     PART I

ITEM 1.   BUSINESS

     Keystone  Heritage  Group,  Inc. (the  "Company") is a bank holding company
organized  in 1982  under  the laws of  Pennsylvania  and  registered  under the
Federal Bank Holding  Company Act of 1956, as amended.  The Company's  principal
subsidiary is Lebanon Valley National Bank (the "Bank"),  which is the successor
to several banking institutions,  the oldest of which was chartered in 1831. The
Bank  engages in a general  commercial  and retail  banking  and trust  business
through its branch offices which are located in the  five-county  market area of
Lebanon, Lancaster, Dauphin, Schuylkill and Berks Counties. The Bank is a member
of the Federal  Reserve  System.  Its deposits are insured by the Bank Insurance
Fund (BIF) of the Federal Deposit  Insurance  Corporation to the extent provided
by law.

     At December 31, 1995, the Company had total  consolidated  assets of $577.8
million,  total deposits of $487.9 million,  total  outstanding  loans of $391.0
million,  and stockholders'  equity of $58.9 million.  At December 31, 1994, the
Company had total assets of $548.2  million,  total deposits of $468.7  million,
total  outstanding loans of $383.2 million,  and  stockholders'  equity of $52.1
million.

     The Bank conducts a general banking and trust business at its  headquarters
office in Lebanon,  Pennsylvania  and through 18 other branches,  eight of which
are located in Lebanon County,  six in Lancaster County,  one in Dauphin County,
two in Berks County and one in Schuylkill  County.  The Bank offers a wide range
of loan and deposit products to individual and business customers. The Bank also
provides  automated teller machine (ATM) access through sixteen automated teller
machines  owned and  operated  by the Bank which are part of the  MAC(R)  shared
automated  ATM network,  and the PLUS(R)  System ATM network.  Two of the Bank's
ATM's  are  stand-alone  facilities.  The Bank  offers a variety  of  fiduciary,
investment,  advisory, employee benefit, corporate agency and custodian services
to its trust  customers.  At December 31, 1995, total trust assets having a book
value of $210.3 million were under  management or  administration  by the Bank's
Trust Group.

     Keystone  Heritage  Life  Insurance  Company  is a  wholly  owned  non-bank
subsidiary  of the Company  that  reinsures  credit life and accident and health
policies written on consumer loans generated by Lebanon Valley National Bank. At
December 31, 1995 this subsidiary had total assets of $1.1 million.


                                        1

<PAGE>

Competition

     The Bank is subject to intense  competition  from other commercial banks as
well as from savings and loan  associations,  credit  unions,  brokerage  firms,
money market funds, consumer finance companies,  insurance companies, and others
who offer consumer and commercial  credit and investment  services.  Many of the
Bank's competitors have substantial  resources and operations which are national
in scope.

     The  business  of the Bank and the  Company is not  dependent  upon any one
customer  relationship,  and the  loss  of any one  customer  would  not  have a
material impact upon the financial  condition of either the Bank or the Company.
The Bank does not obtain any  material  portion  of its  deposits  from a single
individual,   one  particular   business,   or  from  local,  state  or  federal
governments.  The  majority  of the  Bank's  lending  activity,  as  well as its
deposits, are concentrated in southcentral Pennsylvania. There is no significant
risk  attendant  to  foreign  sources  and  application  of funds.  There is not
expected to be any material effect on the capital,  expenditures,  earnings,  or
competitive  position of the Bank due to compliance with any federal,  state, or
local  regulations  or  guidelines  which  have  been  adopted  relating  to the
protection of the environment.

Supervision and Regulation

     The Company is a  Pennsylvania  bank holding  company  registered  with the
Board of Governors of the Federal Reserve System ("Federal Reserve Board") under
the  Bank  Holding  Company  Act of 1956  and is  required  to  comply  with its
reporting and approval  requirements.  The Act requires that the Company  obtain
approval of the Federal  Reserve Board before it may acquire  direct or indirect
ownership  or control of more than 5% of the  voting  shares of any bank,  or to
merge or consolidate with any other bank holding company. The Act also prohibits
the Company,  with certain  exceptions,  from acquiring  ownership or control of
more than 5% of the voting  shares of  another  company  engaged in  non-banking
activities  and from  engaging in any business  other than  banking,  unless the
Federal Reserve Board, by order or regulation, has determined such activities to
be so closely related to banking or to managing or controlling  banks as to be a
proper incident thereto.

     The Bank is a national bank,  chartered under the National Banking Act, and
is subject to the primary  supervision of, and is examined by, the Office of the
Comptroller  of the  Currency.  The Bank is subject to provisions of the Federal
Reserve  Act,  which  (among other  things)  restricts  the ability of a bank to
extend  credit to its parent  holding  company  or to  certain  of the  parent's
subsidiaries,  or to invest in the Company's  common stock or to take such stock
as  collateral  for loans to any borrower.  The  operations of the Bank are also
subject to regulation by the FDIC.

     The  Company is also  subject to the  monetary  and credit  policies of the
Federal Reserve System. The Federal Reserve System regulates the national supply
of bank credit through open market  transactions in U.S.  Government  securities
and by controlling the discount rate charged for bank borrowings and the reserve
requirements on bank deposits.

                                        2
<PAGE>

     Federal Law allows  banks,  beginning  June 1, 1997, to expand across state
lines by  acquiring  existing  banks or merging  affiliated  banks into a single
interstate bank,  subject to the right of individual  states to opt in early (as
Pennsylvania  has done) or to opt out  entirely  by June 1,  1997,  The same law
allows banks to create de novo branches in another state if the law of the other
state permits,  as Pennsylvania's now does.  Finally,  federal law has permitted
since  September 1995  interstate  ownership by bank holding  companies  without
regard to state laws limiting interstate  ownership by bank holding companies or
imposing  conditions  such as  reciprocity.  Interstate  banking  and  branching
authority  is subject to  regulatory  approval  and to  certain  conditions  and
restrictions,  such as capital adequacy,  Community  Reinvestment Act compliance
and deposit  concentration.  The Company  does not  currently  have any plans to
expand its activities outside Pennsylvania.

     Although this legislation  should have the impact of quickening the pace of
consolidation  within the banking industry,  the Company does not anticipate any
immediate  impact upon its financial  condition or its operations as a result of
this new law.


Employees

     As of December 31, 1995, the Company  employed 274 full-time  employees and
49 part-time employees.


ITEM 2.   PROPERTIES

     The Company and the Bank own their principal  executive and  administrative
offices which are located at 555 Willow Street, Lebanon,  Pennsylvania, at which
address the Bank also owns and operates a branch banking  facility and an "ATM".
The Bank also owns its data  processing  operations  center  located at 421 East
Penn Avenue, Cleona,  Pennsylvania. A branch banking facility is also located at
this address. In addition,  the Bank owns eleven other branch banking buildings.
Five branch  offices are leased under lease  agreements  which expire at various
dates through 2013. The above  facilities are generally  believed to be adequate
for the Company's current needs.


ITEM 3.   LEGAL PROCEEDINGS

     Note 17 of the "Notes to Consolidated  Financial  Statements" on page 24 of
the 1995  Keystone  Heritage  Group,  Inc.  Annual  Report  to  Stockholders  is
incorporated herein by reference.


ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.


ADDITIONAL INFORMATION

     The following information is furnished in Part I of this report

                                        3

<PAGE>

pursuant to Instruction 3 to Item 401 (b) of Regulation S-K.


EXECUTIVE OFFICERS OF THE COMPANY AND THE BANK

     The following  sets forth as of March 25, 1996  information  concerning the
officers of the Company and the Bank and certain  other  officers of the Company
and its  subsidiaries.  Shown are the name, age, and position or office with the
Company and its  subsidiaries  held by each listed  person,  the date since that
position or office has been held, and principal  occupation during the last five
years,  if other than as an  employee  of the  Company or its  subsidiaries.  No
family  relationships exist between any of the officers or directors.  Except as
noted below,  all officers hold office at the pleasure of the Board of Directors
of the Company, and there are no arrangements or understandings between any such
officer and any other person which resulted in his selection as an officer.  The
Company's Board of Directors has determined that the only executive  officers of
the Company are Albert B. Murry, Kurt A. Phillips and Donald W. Lesher, Jr.



Executive Officers
of the Company           Age   Position & Office During the Last Five Years

Albert B. Murry (1)      55    President  and  Chief  Executive  Officer  of the
                               Company and the Bank.  He has served as President
                               and Chief Executive  Officer of the Company since
                               1983,  and  as  President  and  Chief   Executive
                               Officer of the Bank  since  1978.  Mr.  Murry has
                               been employed by the Bank since 1978.

Kurt A. Phillips(1)      39    Treasurer and Chief Financial Officer  (principal
                               financial and accounting  officer) of the Company
                               since 1984,  Executive Vice President of the Bank
                               since  1994 and Chief  Financial  Officer  of the
                               Bank since 1983.  Mr.  Phillips has been employed
                               by the Bank since 1978.

Donald W. Lesher, Jr.    51    Vice President of the Company and Chairman of the
                               Board of the Bank  (non-  compensated  positions)
                               since  July  1993.  Mr.  Lesher is  President  of
                               Lesher Mack Sales and Services, Inc. and has been
                               a director of the Company since 1983.


Other Officers

Calvin L. Cassel         40    Senior Vice  President  of the Bank's  Operations
                               Group since 1984. Mr. Cassel

                                        4

<PAGE>

                               began his employment with the Bank in 1981.

Larry H. Eberly          53    Senior  Vice   President   of  the  Bank's  Trust
                               Department   since  1984.  Mr.  Eberly  has  been
                               employed by the Bank since 1960.


Michael H. Firestine     45    Senior Vice  President of the Bank's  Agriculture
                               Banking Group since 1992. Mr.  Firestine has been
                               employed by the Bank since 1976.

Neal R. Hickle           53    Senior  Vice  President  of the Bank's  Corporate
                               Banking   Group  since  1992.   Mr.   Hickle  was
                               previously  employed  by  Hamilton  Bank  as Vice
                               President in the Commercial Banking Division from
                               1986 to 1992.

Timothy L. Sandoe        38    Senior Vice  President of the Retail Credit Group
                               since   1992.    Vice    President    of   Credit
                               Administration  from 1987 to 1992. Mr. Sandoe has
                               been employed by the Bank since 1983.

Ellen M. Whitmoyer       44    Senior Vice  President  of the  Consumer  Banking
                               Group  since  1992.   Mrs.   Whitmoyer  has  been
                               employed by the Bank since 1984.

Robert A. Talalai        63    Senior  Vice  President  of  the  Special  Assets
                               Group.  Mr. Talalai has been employed by the Bank
                               since 1991. Mr.  Talalai was previously  employed
                               by Mellon  Bank N.A. as a Vice  President  of the
                               Quality Control Division.

(1)  The Bank has  entered  into  agreements  with  Albert B.  Murry and Kurt A.
     Phillips  pursuant  to which  they are  employed  as  President  and  Chief
     Executive Officer,  Executive Vice President and Chief Financial Officer of
     the Bank,  respectively.  These  agreements  provide for Messrs.  Murry and
     Phillips  to be  paid  base  salaries  as  determined  by the  Compensation
     Committee of the Bank's Board of Directors,  plus  increases and bonuses as
     are consistent with those made available to other officers of the Bank. The
     Bank may terminate these  agreements upon three years' notice and 30 months
     notice,  respectively,  or the  death  or  disability  of Mr.  Murry or Mr.
     Phillips, respectively, or upon their conviction of a crime involving moral
     turpitude,  or upon being  charged with a criminal  offense  arising out of
     these employments.

                                        5
<PAGE>

Assumptions Used in Calculating Market Value of Common Stock

     For the purposes of calculating the aggregate market value of the shares of
common stock of the Company held by  non-affiliates,  as shown on the cover page
of this report, it has been assumed that all the outstanding shares at March 25,
1996 were held by  non-affiliates  except for the shares held by  directors  and
officers  of the  Company  or the Bank.  However,  this  should not be deemed to
constitute  an admission  that all such  directors  and  officers  are, in fact,
affiliates of the Company, or that there are not other persons who may be deemed
to be affiliates of the Company. Further information concerning shareholdings of
officers,  directors and principal stockholders is included elsewhere herein and
in the  Company's  definitive  proxy  statement  filed with the  Securities  and
Exchange Commission.

                                     PART II


ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     "Stockholders   Information"   on  page  48  and   Footnote  18   "Dividend
Restrictions" on page 25 of the 1995 Keystone Heritage Group, Inc. Annual Report
to Stockholders are incorporated herein by reference.


ITEM 6. SELECTED FINANCIAL DATA

     "Summary  of  Selected  Financial  Data"  on page 31 of the  1995  Keystone
Heritage Group,  Inc.  Annual Report to  Stockholders is incorporated  herein by
reference.

ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

     "Management's Discussion and Analysis of Financial Condition and Results of
Operations"  on pages 32 through 47 of the 1995 Keystone  Heritage  Group,  Inc.
Annual Report to Stockholders is incorporated herein by reference.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The consolidated  financial  statements appearing on pages 10 through 13 of
the 1995 Keystone Heritage Group, Inc. Annual Report to Stockholders, along with
the accompanying notes to consolidated  financial statements on pages 14 through
29, and the Independent  Auditors' Report on page 30 are incorporated  herein by
reference.


ITEM 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE

     None.


                                        6
<PAGE>

                                    PART III

     The information  called for by Item 10 "Directors and Executive Officers of
the Registrant"  (other than the information  concerning  executive officers set
forth after Item 4 herein), Item 11 "Executive Compensation",  Item 12 "Security
Ownership  of Certain  Beneficial  Owners and  Management"  and Item 13 "Certain
Relationships and Related  Transactions" is incorporated  herein by reference to
the Company's  definitive proxy statement for its Annual Meeting of Stockholders
scheduled to be held April 16, 1996,  which definitive proxy statement was filed
with the Securities and Exchange Commission on March 7, 1996.


                                    PART IV


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  1. FINANCIAL STATEMENTS:

     The  following   consolidated  financial  statements  of  the  Company  are
incorporated  herein by  reference to the 1995  Keystone  Heritage  Group,  Inc.
Annual Report to Stockholders.

                                                                     Page Number
                                                                     (in Annual
                                                                       Report)


Consolidated Balance Sheets as of December 31, 1995 and 1994                 10

Consolidated Statements of Income for the years ended
December 31, 1995, 1994 and 1993                                             11

Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1995, 1994 and 1993                                 12

Consolidated Statements of Cash Flows
for the years ended December 31, 1995, 1994 and 1993                         13

Notes to Consolidated Financial Statements                              14 - 29

Independent Auditors' Report                                                 30

(a)  2.   FINANCIAL STATEMENT SCHEDULES:

     All schedules  applicable  to the  registrant  are shown in the  respective
financial statements or in the notes thereto.

                                        7

<PAGE>
(a)  3.   EXHIBITS:

     3.1  Articles of Incorporation of Keystone Heritage Group, Inc.

     3.2  Restated By-laws of Keystone Heritage Group, Inc., as amended.

     4    Miscellaneous  long term debt  instruments and credit facility or line
          of  credit  agreements  of  the  Company,  under  each  of  which  the
          underlying  authorized  debt is equal to or less than 10% of the total
          assets of the Company and its  subsidiaries  on a consolidated  basis,
          are not  filed as  exhibits  to this  report.  The  Company  agrees to
          furnish  to  the  Commission,   upon  request,   copies  of  any  such
          instruments.

     10.1 Employment  agreement  between Lebanon Valley National Bank and Albert
          B. Murry, President and Chief Executive Officer.

     10.2 Employment  agreement between Lebanon Valley National Bank and Kurt A.
          Phillips, Executive Vice President and Chief Financial Officer.

     13   1995 Keystone  Heritage  Group,  Inc.  Annual Report to  Stockholders,
          filed herewith. Such report, except for the portions thereof which are
          expressly  incorporated by reference into this Form 10-K, is furnished
          solely for the  information  of the Commission and is not to be deemed
          "filed" as part of the filing.

     21   Subsidiaries of Keystone Heritage Group, Inc.

     23   Consent of Independent Auditors.

     27   Financial Data Schedule.


(b)  No reports on Form 8-K were filed during the three  months  ended  December
     31, 1995.


                                        8

<PAGE>

                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) 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.

                                   KEYSTONE HERITAGE GROUP, INC.
                                   (Registrant)


                                   by   /s/ Albert B. Murry
                                        ---------------------------------------
                                        Albert B. Murry
                                        President and Chief Executive Officer
                                        March 25, 1996


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report has been signed below by the following  persons in the  capacities and on
the dates indicated.


Signature                               Title                         Date


/s/ Raymond M. Dorsch, Jr.                                        March 25, 1996
----------------------------
Raymond M. Dorsch, Jr.                  Director


/s/ Lance M. Frehafer                                             March 25, 1996
----------------------------
Lance M. Frehafer                       Secretary and Director


/s/ Harry J. Gensemer                                             March 25, 1996
----------------------------
Harry J. Gensemer                       Director


/s/ Charles V. Henry III                                          March 25, 1996
----------------------------
Charles V. Henry III                    Director


s/s Wendie DiMatteo Holsinger                                     March 25, 1996
-----------------------------
Wendie DiMatteo Holsinger


/s/ Bruce A. Johnson                                              March 25, 1996
----------------------------
Bruce A. Johnson                        Director


/s/ Donald W. Lesher, Jr.                                         March 25, 1996
----------------------------
Donald W. Lesher, Jr.                   Vice President and 
                                        Director


/s/ Thomas I. Siegel                                              March 25, 1996
----------------------------
Thomas I. Siegel                        Director

                                        9

<PAGE>

/s/ Brett H. Tennis                                               March 25, 1996
----------------------------
Brett H. Tennis                         Director


/s/ Mark Randolph Tice                                            March 25, 1996
----------------------------
Mark Randolph Tice                      Director


/s/ John E. Wengert                                               March 25, 1996
----------------------------
John E. Wengert                         Director


/s/ Earnest D. Williams, Jr.                                      March 25, 1996
----------------------------
Earnest D. Williams, Jr.                Director


/s/ Albert B. Murry                                               March 25, 1996
----------------------------
Albert B. Murry                         President and Director
                                        (Principal Executive 
                                        Officer)

/s/ Kurt A. Phillips                                              March 25, 1996
----------------------------
Kurt A. Phillips                        Treasurer (Principal 
                                        Financial and
                                        Accounting Officer)

                                       10
<PAGE>
                                  EXHIBIT INDEX


                                                                           Page
                                                                          Number

3.1  Articles of Incorporation of Keystone Heritage Group, Inc.

3.2  Restated By-laws of Keystone Heritage Group, Inc.

4    Miscellaneous  long-term debt instruments and line of credit  agreements of
     the Company, under each of which the underlying authorized debt is equal to
     or less than 10% of the total assets of the Company and its subsidiaries on
     a consolidated basis, are not filed as exhibits of this report. The Company
     agrees to  furnish  to the  Commission,  upon  request,  copies of any such
     instruments.

10.1 Employment  agreement  between  Lebanon Valley  National Bank and Albert B.
     Murry, President and Chief Executive Officer.

10.2 Employment  agreement  between  Lebanon  Valley  National  Bank and Kurt A.
     Phillips, Executive Vice President and Chief Financial Officer.

13   1995 Keystone  Heritage Group,  Inc. Annual Report to  Stockholders,  filed
     herewith.  Such report, except for the portions thereof which are expressly
     incorporated by reference into this Form 10-K, are furnished solely for the
     information  of the  Commission  and is not to be deemed "filed" as part of
     the filing.

21   Subsidiaries of Keystone Heritage Group, Inc.

23   Consent of Independent Auditors.

27   Financial Data Schedule.


     Copies of any exhibits  will be furnished to any  stockholder  upon written
request directed to Secretary, Keystone Heritage Group, Inc., 555 Willow Street,
P. O. Box 1285, Lebanon, Pennsylvania 17042-1285.