QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
             OF THE SECURITIES EXCHANGE ACT OF 1934
                                
                          UNITED STATES
               SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C. 20549
                                
                           Form 10-QSB
                                
     [X]  Quarterly Report Pursuant to Section 13 or 15(d) of
               the Securities Exchange Act of 1934
               For the period ended June 30, 1998.
                                
                               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 number 001-13819
                                
                 MegaBank Financial Corporation
     (Exact name of registrant as specified in its charter)
                                
          Colorado                          84-0949755
         (State or other jurisdiction of   (I.R.S. Employer
          incorporation or                  Identification
          organization)                     Number)

    8100 E. Arapahoe Road, Suite 214, Englewood, Colorado 80112
    (Address of principal executive offices)         (Zip code)

                                
                         (303) 740-2265
                 (Registrant's telephone number)
                                
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.
[X] Yes [  ]No

At August 10, 1998, there were 213,578 shares of the registrant's
common stock, no par value, outstanding.

Transitional Small Business Disclosure Format
     [  ] Yes  [X] No

</PAGE>
<PAGE>
                 MEGABANK FINANCIAL CORPORATION
                                
                        TABLE OF CONTENTS


PART I.   FINANCIAL INFORMATION                    PAGE NO.

          Item 1.   Financial Statements                 3

          Item 2.   Management's Discussion and
                    Analysis of Financial Condition
                    And Results of Operations            8

PART II.  OTHER INFORMATION

          Item 6.   Exhibits and Reports on Form 8-K    14

          SIGNATURES                                    15
                 PART I.  FINANCIAL INFORMATION
                                
Item 1. Financial Statements

</PAGE>
<PAGE>
<TABLE>
         MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
                   CONSOLIDATED BALANCE SHEETS
                     (Dollars in thousands)

<CAPTION>                         
                                         June 30,      December 31,
                                           1998            1997
                                                       
                                       (Unaudited)
<S>                                    <C>             <C> 
ASSETS                                                        
   Cash and due from banks             $   10,540      $    9,910
   Interest-bearing deposits                  582           1,470
   Federal funds sold                      16,915           1,775
   Investment securities                               
    available for sale                     16,212          13,999
                                                       
   Loans                                  147,416         126,087
      Less allowance for loan losses       (2,306)         (2,083)
                                       ___________     ___________
                                          145,110         124,004
                                                       
   Bank premises, leasehold                            
    improvements and equipment, net         7,349           4,799
   Accrued interest receivable              1,043             898
   Deferred tax asset                         683             636
   Preferred securities issuance                       
    costs, net                                740             235
   Other                                      219             134
                                       ___________     ___________
               Total assets            $  199,393      $  157,880
                                       ===========     ===========
                                                       
LIABILITIES AND SHAREHOLDERS' EQUITY                   
   Liabilities                                         
      Deposits                                         
         Demand, non-interest                          
          bearing                      $   53,305      $   42,515
         Demand, interest bearing          71,641          56,339
      Savings                               5,477           4,562
      Time, $100,000 and over              10,078          10,141
      Other time                           31,233          28,321
                                       ___________     ___________
               Total deposits             171,734         141,878
                                                       
      Federal Home Loan Bank                           
       borrowings                               -           1,423
      Securities sold under                            
       agreement to repurchase              1,253               -
      Income taxes payable                    188             132
      Accrued interest payable                372             152
      Note payable                              -           2,000
      Other                                   532             717
                                       ___________     ___________
               Total liabilities          174,079         146,302
                                                       
      Company obligated manditorily                    
       redeemable preferred                            
       securities of subsidiary                        
       trust holding solely Junior                     
       Subordinated Debentures             12,000               -
                                                       
   Shareholders' equity                                
      Preferred stock; no par value,                   
       10,000,000 shares authorized,                   
       none issued                              -               -
                                                       
      Common stock; no par value,                      
       50,000,000 shares authorized,                   
       213,578 shares issues and                       
       outstanding                          1,961           1,961
                                                       
      Retained earnings                    11,293           9,578
      Accumulated other                                
       comprehensive income                    60              39
                                       ___________     ___________
      Total shareholders' equity           13,314          11,578
                                       ___________     ___________
      Total liabilities and                            
       shareholders' equity            $  199,393      $  157,880
                                       ===========     ===========
                                
     The accompanying notes are an integral part of these statements.
</TABLE>
</PAGE>
<PAGE>
<TABLE>
         MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
   CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
       Six months ended June 30, 1998 and 1997 (Unaudited)
          (Dollars in thousands, except per share data)

<CAPTION>
                                     Three Months         Six Months
                                        Ended               Ended
                                       June 30,            June 30,
                                    1998      1997      1998      1997
                                  ________  ________  ________  ________
<S>                               <C>       <C>       <C>       <C>
Interest income                                                    
   Loans, including fees          $ 4,380   $ 3,321   $ 8,282   $ 6,406
   Taxable investment                  70        69       142       137
    securities
   Nontaxable investment                                        
    securities                        187       138       374       276
   Funds sold                         201       223       307       310
   Other interest                      53         7        88        16
                                  ________  ________  ________  ________
      Total interest income         4,891     3,758     9,193     7,145
                                                                
Interest expense                                                
   Deposits                         1,400     1,187     2,665     2,159
   Borrowed funds                      11        36        84        94
   Trust preferred securities         269         -       418         -
   Notes payable                        -        42        19        91
                                  ________  ________  ________  ________
   Total interest expense           1,680     1,265     3,186     2,344
                                  ________  ________  ________  ________
      Net interest income           3,211     2,493     6,007     4,801
Provision for loan losses             130       100       220       250
                                  ________  ________  ________  ________
      Net interest income after                                 
       provision for loan           3,081     2,393     5,787     4,551
       losses
                                                                
Other income                                                    
   Service charges on deposit                                   
    accounts                          221        84       249       169
   Gain on sale of investment                                   
    securities                          -         -        25         -
   Other income                        20        33       188       159
                                  ________  ________  ________  ________
      Total other income              241       117       462       328
                                                                
Other expenses                                                  
   Salaries and employee                                        
    benefits                        1,008       737     1,904     1,432
   Occupancy expenses of                                        
    premises                          202       161       387       318
   Furniture and equipment                                      
    expense                           114        65       229       128
   Other expenses                     481       437     1,180     1,090
                                  ________  ________  ________  ________
      Total other expenses          1,805     1,400     3,700     2,968
                                  ________  ________  ________  ________
                                                                
      Income before income                                      
       taxes                        1,517     1,110     2,549     1,911
Income tax expense                    485       373       834       653
                                  ________  ________  ________  ________
      Net income                    1,032       737     1,715     1,258
                                                                
Other comprehensive income, net                                 
 of tax
   Unrealized gains (losses) on                                 
    investment securities                                       
    available for sale                 24        15        21        (2)
                                  ________  ________  ________  ________
Comprehensive income                1,056       752     1,736     1,256
                                  ========  ========  ========  ========
Income per share                                                
      Basic earnings per share       4.83      3.45      8.03      5.89
                                  ========  ========  ========  ========
      Common shares outstanding   213,578   213,578   213,578   213,578
                                  ========  ========  ========  ========
                                
      The accompanying notes are an integral part of these statements.
</TABLE>
</PAGE>
<PAGE>
<TABLE>
         MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
              CONSOLIDATED STATEMENTS OF CASH FLOWS
       Six months ended June 30, 1998 and 1997 (Unaudited)
                     (Dollars in thousands)
<CAPTION>
                                                    Six months ended
                                                        June 30,
                                                     1998       1997
                                                 _________   _________
                                                      (Unaudited)
<S>                                              <C>         <C>
Cash flows from operating activities                            
   Net income                                    $  1,715    $  1,258
   Adjustments to reconcile net income to net                
    cash provided by operating activities
      Provision for loan losses                       220         250
      Depreciation and amortization of fixed                 
       assets                                         233         114
      Amortization of preferred securities                   
       issuance costs                                  10           -
      Net discount accretion on investment                   
       securities                                     (12)        (11)
      FHLB stock dividend                             (14)        (10)
      Gain on sale of investment securities                  
       available for sale                             (25)          -
      Deferred income taxes                           (65)        (64)
   Changes in deferrals and accruals                         
      Accrued interest receivable                    (145)       (129)
      Accrued interest payable                        220          44
      Other, net                                     (214)        226
                                                 _________   _________
         Net cash provided by operating                      
          activities                                1,923       1,678
                                                             
Cash flows from investing activities                         
   Net (increase) in federal funds sold           (15,140)    (13,125)
   Net (increase) decrease in interest-bearing               
    deposits                                          888      (1,133)
   Purchase of securities available for sale       (3,479)       (534)
   Proceeds from maturities of investment                    
    securities available for sale                     750       2,000
   Proceeds from sales of securities available               
    for sale                                          606           -
   Net (increase) in loans                        (21,326)    (14,190)
   Expenditures for bank premises and equipment    (2,783)     (1,192)
                                                 _________   _________
         Net cash used in investing activities    (40,484)    (28,174)
                                                             
Cash flows from financing activities                         
   Net increase in deposits                        29,856      30,363
   Net (decrease) in advances from                               
    Federal Home Loan Bank                         (1,423)       (484)
   Net increase in securities sold                               
    under repurchase agreements                     1,253           -
   Proceeds from trust preferred securities        12,000           -
   Trust preferred securities issuance costs         (495)          -
   Principal payments on notes payable             (2,000)       (628)
                                                 _________   _________
         Net cash provided by financing                      
          activities                               39,191      29,251
                                                 _________   _________
                                                             
Net increase in cash and due from banks               630       2,755
Cash and due from banks at beginning of period      9,910       9,130
                                                 _________   _________
Cash and due from banks at end of period         $ 10,540    $ 11,885
                                                             
                                                 =========   =========
Supplemental disclosures of cash flow                        
information
   Cash paid year to date for:                               
      Interest expense                           $  2,955    $  2,301
      Income taxes                                    854         746
                                
      The accompanying notes are an integral part of these statements.
</TABLE>
</PAGE>
<PAGE>
         MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             Six months ended June 30, 1998 and 1997
                           (Unaudited)


1.   Unaudited Financial Statements

The accompanying unaudited interim financial statements have been
prepared in accordance with the instructions for Form 10-QSB  and
do  not include all of the information and footnotes required  by
generally  accepted accounting principles for complete  financial
statements.   All  adjustments  that  are,  in  the  opinion   of
management,  of  a normal recurring nature necessary  to  a  fair
statement of results for the interim periods presented have  been
made.  The results of operations for such interim periods are not
necessarily indicative of results of operations for a full  year.
The statements should be read in conjunction with the summary  of
significant   accounting  policies  and  notes  to   consolidated
financial  statements included in the prospectus of  the  Company
dated February 3, 1998, SEC File Nos. 333-42189 and 333-42191.

In   the   opinion  of  management,  the  accompanying  financial
statements  contain all adjustments necessary to  present  fairly
the  financial position of the Company at June 30, 1998, and  the
results  of operations and cash flows for the periods ended  June
30, 1998 and 1997.

The consolidated financial statements include the accounts of the
Company's  respective  subsidiaries.  All  material  intercompany
transactions have been eliminated.


2.   Nature of Operations

MegaBank  Financial Corporation (the "Company")  was  founded  in
1984  with the objective of building a banking franchise  in  the
Denver,  Colorado metropolitan area that would  deliver  a  broad
based  package  of  products  and  services  to  businesses   and
individuals.   The  Company's  banking  subsidiary,  MegaBank  of
Arapahoe  (the "Bank"), was organized in 1983.  Since the  advent
of  branch  banking in Colorado in 1993, the Bank has opened  six
additional  banking locations throughout the Denver  area.   Four
more branches are in the planning and construction phases; one of
which is scheduled to open in August 1998.


3.   Offering of Trust Preferred Securities by MB Capital I

On  February 9, 1998 the Company and its wholly-owned subsidiary,
MB  Capital I (the "Trust"), completed the sale of $12.0  million
of 8.75% Cumulative Trust Preferred Securities of the Trust.  Net
proceeds were approximately $11.2 million after payment of  sales
commissions and other offering costs, and were invested in Junior
Subordinated Debentures maturing February 9, 2028, issued by  the
Company  to  the  Trust in connection with the  public  offering.
Interest  on the Junior Subordinated Debentures will be  paid  by
the  Company to the Trust, will be the sole revenues of the Trust
</PAGE>
<PAGE>
and  the source for distributions by the Trust to the holders  of
the Trust Preferred Securities.

For  financial  reporting purposes, the Trust  is  treated  as  a
subsidiary of the Company, and accordingly, the accounts  of  the
Trust  are  included in the consolidated financial statements  of
the  Company.  The Trust Preferred Securities are presented as  a
separate  line item in the consolidated balance sheet  under  the
caption   "Company  obligated  mandatorily  redeemable  preferred
securities of subsidiary trust holding solely Junior Subordinated
Debentures."   For  financial  reporting  purposes,  the  Company
records  distributions payable on the Trust Preferred  Securities
as interest expense in the consolidated statements of income.

The  Junior Subordinated Debentures are unsecured and rank junior
and  are  subordinate  to  all senior debt  of  the  Company  and
constitute  a  full and unconditional guarantee on a subordinated
basis  by  the Company of the obligations of the Trust under  the
Preferred Securities.


4.   Accounting Changes

Comprehensive Income

The   Company   adopted  Financial  Accounting  Standards   Board
Statement  No.  130, "Reporting Comprehensive Income"  (SFAS  No.
130),  effective  January  1, 1998.   SFAS  No.  130  establishes
standards  for reporting comprehensive income and its  components
(revenues,   expenses,   gains  and   losses).    Components   of
comprehensive  income  are net income  and  all  other  non-owner
changes in equity.  The Statement requires that an enterprise (a)
classify items of other comprehensive income by their nature in a
financial  statement and (b) display the accumulated  balance  of
other comprehensive income separately from retained earnings  and
additional  paid-in capital in the equity section of a  statement
of  financial position.  Reclassification of financial statements
for   earlier  periods  provided  for  comparative  purposes   is
required.  Amounts formerly presented in Shareholders' Equity  as
"Unrealized  gains  on  securities available  for  sale,  net  of
taxes",  are  now  reflected as "Accumulated other  comprehensive
income".


Operating Segments

The   Company   adopted  Financial  Accounting  Standards   Board
Statement  No.  131, Disclosures About Segments of an  Enterprise
and  Related  Information, (SFAS No. 131)  effective  January  1,
1998.    This  statement  established  standards  for   reporting
information  about  segments  in  annual  and  interim  financial
statements.   SFAS  No. 131 introduces a new  model  for  segment
reporting  called  the  "management  approach."   The  management
approach  is  based on the way the chief operating decision-maker
organizes  segments  within  the  company  for  making  operating
decisions  and  assessing performance.  Reportable  segments  are
based  on  products  and  services, geography,  legal  structure,
management   structure  and  any  other   in   which   management
disaggregates  a  company.   Based on the  "management  approach"
model,  the Company has determined that its business is comprised
of a single operating segment and that SFAS No. 131 therefore has
no impact on its financial statements.
</PAGE>
<PAGE>

Item 2. Management's Discussion and Analysis of Financial
        Condition and Results of Operations


Overview

It is presumed that readers of these interim financial statements
have  read  or  have  access to the Management's  Discussion  and
Analysis of Financial Condition and Results of Operations for the
year   ended  December  31,  1996,  included  in  the   Company's
Prospectus  dated February 3, 1998, SEC File Nos.  333-42189  and
333-42191.   The following discussion of the financial  condition
and  results  of  operation  of the Company  should  be  read  in
conjunction with the unaudited consolidated financial  statements
of the Company included elsewhere herein.


Results of Operations

Net  interest  income was $5.8 million for the six  months  ended
June 30, 1998, an increase of $1.2 million from $4.6 million  for
the  same  period  in 1997.  Net interest income  for  the  three
months  ended  June 30, 1998 and 1997 was $3.1 million  and  $2.4
million, respectively.  Interest income for the six months  ended
June  30,  1998  and  1997  was $9.2 million  and  $7.1  million,
respectively, and $4.9 million compared to $3.8 million  for  the
three  month  period ended June 30, 1998 and 1997,  respectively.
The  increase  was  due to higher balances  of  interest  earning
assets.  Interest expense for the same six month period was  $3.2
million  in 1998 compared to $2.3 million in 1997 and  the  three
month period ended June 30, was $1.7 million in 1998 compared  to
$1.3  million  in  1997.   Additional interest  bearing  deposits
contributed to the increase in interest expense, as well  as  the
additional  interest  expense of the Trust  Preferred  Securities
offering  discussed elsewhere herein.  Other income generated  in
the  first  two  quarters  of  1998  increased  to  approximately
$462,000  as  compared to $328,000 for the first two quarters  of
1997,  and $241,000 and $117,000 for the three months ended  June
30,  1998  and  1997,  respectively.  This  overall  increase  is
attributable primarily to additional fee income, and to a  lesser
extent,  to a one-time gain on sale of equity securities.   Other
expenses  in the first half of 1998 were $3.7 million as compared
to  $3.0  million for the same period the previous  year.   Other
expenses  in  the  three months ended June  30,  1998  were  $1.8
million  as  compared to $1.4 million for the three months  ended
June 30, 1997.  An increase in other expenses is primarily due to
additional  employee  and occupancy expense  required  by  branch
expansion and internal growth.

In  the six months ended June 30, 1998, the Company generated net
income  after provisions for income tax of $1.7 million  compared
to  $1.3  million for the same period last year and $1.0  million
compared to $0.7 million for the three months ended June 30, 1998
and  1997, respectively.  This improvement is attributable to the
overall  growth  of the Bank.  Total assets of the  Company  were
approximately $199 million and $149 million at June 30, 1998  and
1997, respectively.

On  February 9, 1998 the Company and its wholly-owned subsidiary,
MB  Capital I (the "Trust"), completed the sale of $12.0  million
of 8.75% Cumulative Trust Preferred Securities of the Trust.  Net
</PAGE>
<PAGE>
proceeds were approximately $11.2 million after payment of  sales
commissions and other offering costs, and were invested in Junior
Subordinated  Debentures issued by the Company to  the  Trust  in
connection  with  the public offering.  Interest  on  the  Junior
Subordinated Debentures will be paid by the Company to the Trust,
will  be  the  sole  revenues of the Trust  and  the  source  for
distributions by the Trust to the holders of the Trust  Preferred
Securities.

Net  increases  in  loans were $21.3 million  and  $14.2  million
during  the six months ended June 30, 1998 and 1997, respectively
and  $17.8  million and $5.8 million for the three  months  ended
June  30, 1998 and 1997, respectively.   It is important to  note
that  this  was a net increase.  Actual origination of new  loans
was approximately $143.8 million for the first six months of 1998
as compared to $88.4 million during the same period in 1997.

Net  increases  in  deposits remained the same  at  approximately
$30.0  million for the six months ended June 30, 1998  and  1997.
Although the net increase remained the same as the previous year,
total deposits were approximately $171.7 million at June 30, 1998
as compared to $135.0 million at June 30, 1997.


Analysis  of  Allowance for Loan Losses. The allowance  for  loan
losses  represents  management's  recognition  of  the  risks  of
extending  credit and its evaluation of the quality of  the  loan
portfolio.   The  allowance is maintained at a  level  considered
adequate  to  provide  for  anticipated  loan  losses  based   on
management's  assessment of various factors  affecting  the  loan
portfolio.   The allowance is increased by additional charges  to
operating  income  and  reduced by  loans  charged  off,  net  of
recoveries.

The  following table sets forth information regarding changes  in
the  allowance  for  loan losses of the Company  for  the  period
indicated.
<TABLE>
<CAPTION>
                                      For The Six Months Ended
                                           June 30, 1998
                                       (Dollars in thousands)

<S>                                            <C>
Average total loans                            $134,100
Total loans at end of period                   $147,416
Allowance at beginning of period                 $2,083
Charge-offs:
     Construction                                     -
     Commercial and industrial                       (2)
     Installment                                      -
     Mortgage                                         -
     Other                                           (1)

          Total charge-offs                          (3)
</TABLE>
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
                                          Six Months Ended
                                             June 30, 1998
                                      (Dollars in thousands)
<S>                                          <C>                                    
Recoveries:
     Construction                                     -
     Commercial and industrial                        3
     Installment                                      3
     Mortgage                                         -
     Other                                            -

          Total recoveries                            6

Net (charge-offs) recoveries                          3
Provisions for loan losses                          220

Allowance at end of period                   $    2,306

<S>                                             <C>
Ratio of net (charge-offs) recoveries
     to average loans                           0.002%
Allowance to total loans at end of period       1.56%
Allowance to nonperforming loans              168.24%
</TABLE>

The  Company's  lending personnel are responsible for  continuous
monitoring  of  the  quality  of  loan  portfolios.    The   loan
portfolios  are also monitored and examined by the  Company  loan
review  personnel.   The  allowance  for  loan  losses  is  based
primarily on management's estimates of possible loan losses  from
the   foregoing  processes  and  historical  experience.    These
estimates involve ongoing judgments and may be adjusted over time
depending   on   economic  conditions  and  changing   historical
experience.

State  and  federal regulatory agencies, as an integral  part  of
their  examination process, review the Company's  loans  and  its
allowance  for  loan  losses.   Management  believes   that   the
Company's  allowance  for  loan  losses  is  adequate  to   cover
anticipated  losses.   There can be no assurance,  however,  that
management  will not determine a need to increase  the  allowance
for  loan losses or that regulators, when reviewing the Company's
loan  portfolios in the future, will not require the  Company  to
increase  such allowance, either of which could adversely  affect
the  Company's earnings.  Further, there can be no assurance that
the  Company's  actual loan losses will not exceed its  allowance
for loan losses.

Nonperforming  loans.  Nonperforming loans consist  of  loans  90
days  or  more delinquent and still accruing interest, nonaccrual
loans   and   restructured  loans.   When,  in  the  opinion   of
management, a reasonable doubt exists as to the collectibility of
interest,  regardless of the delinquency status of  a  loan,  the
accrual  of interest income is discontinued and interest  accrued
during  the current year is reversed through a charge to  current
</PAGE>
<PAGE>
year's  earnings.   While  the  loan  is  on  nonaccrual  status,
interest income is recognized only upon receipt and then only if,
in the judgment of management, there is no reasonable doubt as to
the  collectibility of the principal balance.  Loans 90  days  or
more delinquent generally are changed to nonaccrual status unless
the   loan  is  in  the  process  of  collection  and  management
determines that full collection of principal and accrued interest
is probable.

Restructured loans are those for which concessions, including the
reduction  of interest rates below a rate otherwise available  to
the  borrower or the deferral of interest or principal, have been
granted  due  to  the  borrower's weakened  financial  condition.
Interest  on  restructured loans is accrued at  the  restructured
rates  when it is anticipated that no loss of original  principal
will  occur.  The Company did not have any restructured loans  as
of June 30, 1998.

The   following  table  sets  forth  information  concerning  the
nonperforming assets of the Company at the dates indicated:

<TABLE>
<CAPTION>
                                         June 30,   December 31,
                                          1998          1997
<S>                                      <C>             <C>
Nonaccrual loans                         $1,371          $1,604
Other loans 90 days past due                  -               -
Other real estate                             -               -

Total nonperforming loans                $1,371          $1,604

<S>                                      <C>             <C>
Ratio of nonaccrual and other loans
   90 days past due to total loans       0.96%           1.27%
Ratio of nonperforming assets to
   total loans plus other real estate    0.96            1.27
Ratio of nonperforming assets to
   total assets                          0.69            1.02

Of   the  amount  of  nonaccrual  loans  as  of  June  30,  1998,
approximately  $1.3  million is the Bank's portion  of  the  five
related  loans  totaling  approximately  $4.0  million  that  are
subject  to  a Chapter 11 bankruptcy proceeding.  The loans  were
originated  by  the  Bank and were made at various  times  during
1994,  1995 and 1996 in connection with a real estate development
on  which  the  developer has constructed a residential  building
assembly   plant.   The  loans  are  secured  by   real   estate,
certificates of deposit, as well as two personal guarantees  from
the  owners of the developer and a guarantee by a related limited
partnership,  all  three  of which have  substantial  net  worth.
Management believes that the Company is adequately collateralized
on these loans.

As  of June 30, 1998, there were no significant balances of loans
excluded  from nonperforming loans set forth above,  where  known
information  about possible credit problems of  borrowers  caused
management  to  have  serious doubts as to the  ability  of  such
borrowers  to  comply with the present loan repayment  terms  and
which may result in such loans becoming nonperforming. Management
is  not aware of any adverse trend relating to the Company's loan
portfolio.
</PAGE>
<PAGE>
Liquidity and Capital Resources

The Company has two basic sources of liquidity.  The first is its
retail deposit market served by its banking offices.  The Company
has  increased  core  deposits through  growth  of  its  existing
deposits   and  through  promotions  directed  at  existing   and
potential  customers.  Deposits increased to  $171.7  million  at
June 30, 1998 as compared to $135.0 million at June 30, 1997.

The second source of the Company's liquidity is Federal Home Loan
Bank  ("FHLB")  advances  and  Company  lines  of  credit.   FHLB
advances are used regularly in the cash management function  both
to fund a portion of the lending portfolio and to manage the day-
to-day   fluctuations  in  liquidity  resulting  from  needs   of
depositors  and  borrowers.  At June 30, 1998,  the  Company  had
available $7.0 million of unused borrowing capacity from the FHLB
and $9.5 million from its other lenders.  The Company anticipates
that  it  will continue to rely primarily upon customer deposits,
FHLB  borrowings,  other lending sources, loan  repayments,  loan
sales  and retained earnings to provide liquidity, and  will  use
funds provided primarily to make loans and to purchase investment
securities.

The Trust Preferred Securities were structured to qualify as Tier
1  capital  for  the  Company  for regulatory  capital  purposes.
However, they cannot be used to constitute more than 25%  of  the
Company's  total Tier 1 capital.  Any future increases  in  other
elements  of  the  Company's Tier 1 capital,  including  retained
earnings,  should permit the Company to include greater  portions
of the trust preferred securities proceeds in Tier 1 capital.

Based  on  risk-based capital guidelines of the  Federal  Reserve
Bank,  a  bank holding company is required to maintain a  Tier  1
capital  to risk-adjusted assets ratio of 4% and a total  capital
to  risk-adjusted  assets ratio of 8%.  At  June  30,  1998,  the
Company  had a Tier 1 capital ratio of 10.69% and a total capital
ratio of 16.53%.


Year 2000 Considerations

A  significant issue has emerged in the banking industry and  for
the  economy overall regarding how existing application  software
programs and operating systems can accommodate the date value for
the  year 2000.  Implementation of the Company's plan to test in-
house  and out-sourced software has been underway since the first
quarter  of  1998.   Testing  of applications  considered  to  be
"mission critical" are scheduled for completion by first  quarter
of  1999.   Total  compliance for all systems is expected  to  be
complete  by the third quarter of 1999.  The financial impact  to
the Company to ensure year 2000 compliance is not anticipated  by
management  to be material to the financial position, results  of
operations or cash flow of the Company. The team for the plan  is
responsible  for  the  implementation of the  plan  and  progress
reports to the Board on a quarterly basis until October 1998, and
on a monthly basis thereafter until the plan is completed.


Proposed Charter Conversion

The  Company  has  applied to the Office of  Thrift  Supervision
("OTS"),Department  of  Treasury, to change its status to a  savings 
and loan  holding company within the meaning of the Home Owners' Loan
</PAGE>
<PAGE>
Act  of  1933  ("HOLA"),  as amended.  Under  the  proposal,  the
Company  will  be  registered with the OTS  and  subject  to  OTS
regulations,    examinations,    supervision    and     reporting
requirements.  Conversely, the Company will no longer be  a  bank
holding company registered under the Bank Holding Company Act  of
1956  and,  therefore, the Company will no longer be  subject  to
regulation  by  the  Board of Governors of  the  Federal  Reserve
System.   In addition, the Bank has applied to the OTS to convert
the  Bank's charter from a state-chartered commercial bank  to  a
federal stock savings bank.  Management believes that the  Bank's
balance  sheet  is currently more reflective of a thrift  than  a
commercial bank because of the Bank's residential lending  focus,
and  that  the  flexibilities  and opportunities  with  a  thrift
charter  are more in line with the long range plans of  the  Bank
than  those  that are available under its present  charter.   The
Company  has  been informed by the OTS that the applications  are
deemed complete and will be automatically approved on August  22,
1998  absent further action by the OTS.  The Company  intends  to
effect both of the conversions on or about September 1, 1998.
</PAGE>
<PAGE>
                   PART II.  OTHER INFORMATION
      
Item 6.   Exhibits and Reports on Form 8-K
      a.   Exhibits.
          Exhibit 27 - Financial Data Schedule (filed
          electronically only).
      b.   Reports on Form 8-K.
          None.

</PAGE>
<PAGE>
                           SIGNATURES
                                
                                
                                
                                

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

                                
                                
                               MEGABANK FINANCIAL CORPORATION
                               (Registrant )

                               /s/ Hiram J. Welton
Date:  August 10, 1998          Hiram J. Welton
                               Treasurer
                               Chief Accounting Officer

                                
                                
                                

                                
</PAGE>

</TABLE>