SECURITIES AND EXCHANGE COMMISSION
                    WASHINGTON, D.C. 20549

                            FORM 10-K

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

           For the fiscal year ended December 31, 1997
                 Commission File Number 0-20142

                    BATH NATIONAL CORPORATION
     (Exact name of registrant as specified in its charter)

      New York                               16-1185097
  (State of Incorporation)                (I.R.S.  Employer
                                           Identification No.)
 44 Liberty Street
   Bath, New York                              14810
  (Address of principal                      (zip code)
   executive offices)
                          (607) 776-9661
      (Registrant's telephone number, including area code)

  Securities registered pursuant to Section 12 (b) of the Act:
                               None

  Securities registered pursuant to Section 12 (g) of the Act:
               Common Stock Par Value $5 per Share

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 such shorter period that
the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

          Yes    X                  No ______

Indicate by check mark 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 registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to the Form 10-K.

    The aggregate market value of the voting stock held by non-
affiliates of the registrant as of January 31, 1998 was $53,863,920.

    Indicate the number of shares outstanding of each of the
Registrant's classes of common stock as of March 1, 1998.

    1,339,913 shares, common stock, $5.00 par value.
    Documents incorporated by reference

    1)  Portions of Annual Report to Stockholders for the year ended
        December 31,1997 - Parts I & II
    2)  Portions of Proxy statement for 1998 Annual Meeting - Part III

<PAGE>



                           TABLE OF CONTENTS

            PART I


ITEM    1.  Business                                       1-25

ITEM    2.  Properties                                       25

ITEM    3.  Legal Proceedings                                25

ITEM    4.  Submission of Matters to a
            Vote of Security Holders                         26


            PART II

ITEM    5.  Market for the Registrant's Securities
            and Related Stockholder Matters               26-27

ITEM    6.  Selected Financial Data                       27-29

ITEM    7.  Management's Discussion and Analysis of
            Financial Condition and Results of
            Operations                                    29-33

ITEM    8.  Financial Statements and
            Supplementary Data                            33-57

ITEM    9.  Changes in and disagreements with Accountants
            on Accounting and Financial Disclosure           58


            PART III

ITEM   10.  Directors and Executive Officers
            of the Registrant                                58

ITEM   11.  Executive Compensation                           58

ITEM   12.  Security Ownership of Certain Beneficial
            Owners and Management                            58

ITEM   13.  Certain Relationships and Related
            Transactions                                     58


            PART IV

ITEM   14.  Exhibits, Financial Statement
            Schedules and Reports on Form 8-K                59

<PAGE>
PART I

ITEM 1.  Business

    Bath National Corporation (BNC or the "Company") is a one bank
holding company which was incorporated in 1982 and is registered under
the Bank Holding Company Act of 1956.  A separate subsidiary, BNC
Financial Services, was incorporated during 1997 to sell annuities,
life insurance and mutual funds.  It has transacted no business to
date.

The Company functions primarily as the holder of stock of BNB
(described below) and assists in the management of BNB as appropriate.
The Company is a legal entity separate and distinct from BNB.  The
right of the Company to participate in any distribution of the assets
or earnings of BNB is subject to the claims of creditors of BNB, except
to the extent that claims, if any, of the Company itself as a creditor
may be recognized.  BNC derives all of its income from dividends paid
to it by the Bank.

    Bath National Bank (BNB or "the Bank"), has approximately 148
employees.  BNB is a full service commercial bank with trust powers.
The Bank offers personal and business checking accounts, savings
accounts, money market checking accounts, various types of certificates
of deposit, commercial loans, consumer/installments loans, real estate
loans, safe deposit boxes and provides such services as banking by
mail, drive up teller service, night depository, money orders, bond
coupon redemptions, cashier and travelers checks, credit cards, direct
deposit of social security funds, wire transfers and automatic teller
services (ATM's).  The Bank also offers individual retirement accounts.
The Bank is a member of the Federal Deposit Insurance Corporation.

The following discussion of the business of the Company (primarily that
of BNB) contains certain statistical information concerning the
Company's operations.

Market Area and Competition:

The primary market areas of the Bank include Dundee, Hammondsport,
Erwin, Corning, Wayland, Hornell, Atlanta, Naples and Bath, New York
from which the Bank draws principally all of its business.  In
addition, a grocery store branch in Watkins Glen is scheduled to open
the first quarter of 1998.

The area has a well developed system of financial institutions,
including banks, savings and loan associations, and credit unions.
The Bank encounters aggressive competition for both deposit and loan
customers.  The Bank is required to compete with financial institutions
which are subsidiaries of larger bank holding companies.  The financial
institutions located in the Bank's market area offer all of the
services which the Bank offers.  Neither the Company nor the Bank has
any foreign operations.

<PAGE>



PART I, Continued

ITEM 1.  Business, Continued

Consolidated Average Balances

The following is a presentation of average assets, liabilities and
equity of the Company for the years ended December 31, 1997, 1996 and
1995 with respect to each major category of assets, liabilities and
equity.

                                     AVERAGE ASSETS
                                 (dollars in thousands)

                    Year Ended         Year Ended         Year Ended
                 December 31, 1997  December 31, 1996  December 31, 1995

Interest Earning
  Dep. with Banks    $  2,200         $  3,300           $  3,800
Taxable Invest. Sec.   58,200           51,400             36,000
Non-Tax. Inv. Sec.     33,700           27,400             22,600
Federal Funds Sold      2,900            1,500              3,500
Net Loans             159,300          152,000            142,900

Total Earning Assets  256,300          235,600            208,800

Other Assets           15,900           16,700             16,400

Total Assets         $272,200         $252,300           $225,200


                             AVERAGE LIABILITIES AND EQUITY
                                (dollars in thousands)

 Non-Int. Bearing
     Deposits        $ 29,400         $ 27,900           $ 26,300
 Interest Bear. Dep.
     Savings           43,700           45,700             48,100
     NOW Accounts      34,500           33,200             32,400
     Money Market Acct 10,900           12,100             13,000
     Time Deposits     98,000           87,400             72,000
 Federal Home Loan
   Bank Borrowings        600            2,500              1,400
 Securities Sold Under
   Agree. to Repurch.  21,500           11,400              3,100
 Other Liabilities      1,900            1,400              1,400
 Federal Funds Purch.     300            1,200                500

 Total Liabilities    240,800          222,800            198,200

 Common Stock           6,800            6,800              3,400
 Add. Paid in Capital   1,500            1,500              4,400
 Retained Earnings     23,100           21,200             19,200

 Total Equity          31,400           29,500             27,000

 Total Liabilities
    and Equity       $272,200         $252,300           $225,200


<PAGE>


PART I, Continued

ITEM 1.  Business, Continued

Analysis of Net Interest Earnings

The following is a presentation of an analysis of the net interest
earnings of the Company for years ended December 31, 1997, 1996 and
1995, respectively, with respect to each major category of interest-
earning assets and interest-bearing liabilities:

                                  Year Ended December 31, 1997
                                     (dollars in thousands)
                                             Interest
                               Average       Earned        Average
         Assets                 Amount       or Paid    Yield or Rate

Interest-Earning
 Deposits with Banks           $  2,200      $   127        5.77%
Taxable Investment Securities    58,200        4,118        7.08%
Non-Taxable Investment
 Securities <F1>                 33,700        1,629        7.34%
Federal Funds Sold                2,900          156        5.38%
Net Loans <F2><F3>              159,300       14,736        9.25%

     Total Earning Assets      $256,300      $20,766        8.44%


         Liabilities

Savings Deposits               $ 43,700      $ 1,207        2.76%
Now Deposits                     34,500          606        1.76%
Money Market Deposits            10,900          316        2.90%
Time Deposits                    98,000        5,331        5.44%
Federal Home Loan Bank
 Borrowings                         600           32        5.33%
Repurchase Agreements            21,500        1,372        6.38%
Federal Funds Purchased             300           19        6.33%

Total Interest-Bearing
     Liabilities               $209,500      $ 8,883        4.24%


Interest Income/Earning Assets                              8.44%

Interest Expense/Earning Assets                             3.47%

Net Yield                                                   4.97%

[FN]
<F1> Non-Taxable interest is stated on a tax-equivalent basis, using a
     marginal tax rate of 34%.

<F2> Net Loans includes non-accrual loans of $661,000.

<F3> Includes Loan Fees Totaling $60,000.

<PAGE>




PART I, Continued

ITEM 1.  Business, Continued

Analysis of Net Interest Earnings, Continued

                                  Year Ended December 31, 1996
                                     (dollars in thousands)
                                             Interest
                               Average       Earned        Average
         Assets                 Amount       or Paid    Yield or Rate

Interest-Earning
 Deposits with Banks             3,300           192        5.82%
Taxable Investment Securities   51,400         3,517        6.84%
Non-Taxable Investment
 Securities <F1>                27,400         2,043        7.46%
Federal Funds Sold               1,500            82        5.47%
Net Loans <F2><F3>             152,000        13,955        9.18%

     Total Earning Assets     $235,600       $19,789        8.40%


         Liabilities

Savings Deposits                45,700         1,292        2.83%
Now Deposits                    33,200           583        1.76%
Money Market Deposits           12,100           344        2.84%
Time Deposits                   87,400         4,671        5.34%
Federal Home Loan Bank
 Borrowings                      2,500           158        6.32%
Repurchase Agreements           11,400           718        6.30%
Federal Funds Purchased          1,200            76        6.33%

Total Interest-Bearing
     Liabilities              $193,500        $7,842        4.05%


Interest Income/Earning Assets                              8.40%

Interest Expense/Earning Assets                             3.32%

Net Yield                                                   5.08%
[FN]

<F1> Non-Taxable interest is stated on a tax-equivalent basis, using a
     marginal tax rate of 34%.

<F2> Net Loans includes non-accrual loans of $820,000.

<F3> Includes Loan Fees Totaling $62,000.

<PAGE>


PART I, Continued

ITEM 1.  Business, Continued

Analysis of Net Interest Earnings, Continued

The following is a presentation of an analysis of the net interest
earnings of the Company for years ended December 31, 1995
respectively, with respect to each major category of interest-earning
assets and interest-bearing liabilities:

                                  Year Ended December 31, 1995
                                     (dollars in thousands)
                                             Interest
                               Average       Earned        Average
         Assets                 Amount       or Paid    Yield or Rate

Interest-Earning
 Deposits with Banks           $  3,800      $    224       5.89%
Taxable Investment Securities    36,000         2,391       6.64%
Non-Taxable Investment
 Securities <F1>                 22,600         1,748       7.73%
Federal Funds Sold                3,500           214       6.11%
Net Loans <F1><F2><F3>          142,900        13,652       9.55%

     Total Earning Assets      $208,800      $ 18,229       8.73%


         Liabilities

Savings Deposits               $ 48,100      $  1,458       3.03%
Now Deposits                     32,400           567       1.75%
Money Market Deposits            13,000           400       3.07%
Time Deposits                    72,000         3,856       5.36%
Federal Home Loan Bank
 Borrowings                       1,400            70       5.00%
Repurchase Agreements             3,000           170       5.66%
 Federal Funds Purchased            500            30       6.00%

Total Interest-Bearing
     Liabilities                170,400         6,551       3.84%


Interest Income/Earning Assets                              8.73%

Interest Expense/Earning Assets                             3.14%

Net Yield                                                   5.59%
[FN]

<F1> Non-Taxable interest is stated on a tax-equivalent basis, using a
     marginal tax rate of 34%.

<F2> Net Loans includes non-accrual loans of $435,000.

<F3> Includes Loan Fees Totaling $65,000.

<PAGE>




PART I, Continued

ITEM 1.  Business, Continued

Rate/Volume Analysis of Net Interest Income

The effect on interest income, interest expense, and net interest
income in the periods indicated, of changes in average balances
(volume) and changes in rate from the corresponding prior period is
shown in the tabulation on the following page.  The effect of a
change in average balance has been determined by applying the average
rate in the earlier period to the change in average balances.
Changes resulting from rate variance from the prior period have been
determined by applying the average volume in their earlier period to
the change in average rate from the earlier to the later period.
Changes in interest due to both rate and volume have been allocated
to changes due to volume and changes due to rate based on the
percentage relationship of such variances to each other.  The final
column entitled "Total Change" indicates the total change in the
gross interest income or expense over the prior year as indicated in
the later year's statement of income.

The Rate/Volume Analysis for the years ended December 31, 1997 and
1996, appear in their entirety on the following page.


<PAGE>





PART I, Continued

ITEM 1.  Business, Continued

          December 31, 1997 compared with December 31, 1996
                          (dollars in thousands)

                       Changes in net interest income as a result of:

                                                          Total
                                    Volume     Rate      Change
Interest earned on:
  Interest-earning
   deposits with banks             $  (64)    $   (1)   $   (65)
  Taxable Investment
   Securities                         465        136        601
  Non-Taxable
      Investment Securities           470        (38)       432
  Federal Funds Sold                   77         (3)        74
  Net Loans                           670        111        781
Total Interest Income               1,618        205      1,823

Interest paid on:
  Interest-bearing
      deposits                        648        393      1,041

Change in net interest
   income                          $  970     $ (188)    $  782



                  December 31, 1996 compared with December 1995
                            (dollars in thousands)

                       Changes in net interest income as a result of:

                                                        Total
                                    Volume     Rate    Change
Interest earned on:
  Interest-earning
   deposits with banks            $   (29)   $    (3)  $  (32)
  Taxable Investment
   Securities                       1,022        104    1,126
  Non-Taxable
      Investment Securities           371        (76)     295
  Federal Funds Sold                 (122)       (10)    (132)
  Net Loans                           869       (566)     303

Total Interest Income               2,111       (551)   1,560
Interest paid on
  Interest-bearing
      deposits                        887        404    1,291

Change in net interest
   income                         $ 1,224   $   (955) $   269
<PAGE>

PART I, Continued

ITEM 1.  Business, Continued

Investments

Investment securities comprised approximately 34% of the Bank's
assets at December 31, 1997, with loans comprising approximately 61%
of total assets.  The Bank invests primarily in obligations of the
United States or its agencies or obligations guaranteed as to
principal and interest by the United States or its agencies, tax
exempt municipal securities and certificates of deposit issued by
other financial institutions.  The Bank's policy is to invest in
highly rated bonds.  The Bank also enters into Federal Funds
transactions with its principal correspondent bank, and acts as a net
seller of such funds.  The sale of Federal Funds amounts to a short-
term loan from the Bank to another bank.

A tabulation of the Bank's investments is included in its entirety on
the following page.


<PAGE>


PART I, Continued

ITEM 1.  Business, Continued

Investments, Continued

The following tables present, at December 31, 1997, 1996, and 1995,
the book value and market values of both the available for sale (AFS)
and the held to maturity (HTM) categories of the Bank's investments.
The table also indicates the amount of investments due in (i) one
year or less, (ii) one to five years, (iii) five to ten years, and
(iv) over ten years.
                                  1997                1996
 Investment         Book     Market   Avg.   Book     Market   Avg.
  Category          Value    Value    Yield  Value    Value    Yield
                    (dollars in thousands)   (dollars in thousands)

Available-for-Sale Investments:

Obligations of U.S.
   Treasury and other U.S.
   Agencies and Corporations:


  0 - 1 year        $ 6,008  $ 5,990  4.75%  $10,511  $10,421  6.27%
  1 - 5 years         4,333    4,323  7.63%    5,336    5,354  6.54%
  5 - 10 years          987    1,001  7.09%       21       21  7.37%
  Over 10 years         -        -     -         -        -     -


Obligations of States and
   Political subdivisions


  0 - 1 year        $   982  $   986  5.99%  $ 1,036  $ 1,051  6.85%
  1 - 5 years        14,756   15,067  5.10%    9,849    9,942  4.56%
  5 - 10 years       18,932   19,666  5.28%   18,806   19,125  4.90%
  Over 10 years       1,367    1,433  5.70%    1,355    1,360  5.17%


Other Securities


  0 - 1 year        $   444  $   446  8.76%   10,534   10,181  9.45%
  1 - 5 years         7,445    7,436  6.83%    6,749    6,694  8.25%
  5 - 10 years        2,017    2,126  7.58%    3,198    3,348  9.23%
  Over 10 years      11,928   11,948  7.24%    3,628    3,631  7.94%

Total AFS Securit.  $69,199  $70,422         $71,023  $71,128

Held-to-Maturity Investments:

Agency

  1 - 5 years       $20,000  $20,539      %  $20,000  $20,329  7.69%

Total Securities    $89,199  $90,961         $91,023  $91,457

Certain amounts in 1996 have been restated to reflect correct
classification.

<PAGE>

PART I, Continued

ITEM 1.  Business, Continued

Investments, Continued

                                  1995
 Investment         Book     Market   Avg.
  Category          Value    Value    Yield
                    (rounded in thousands)


Obligations of U.S.
   Treasury and other U.S.
   Agencies and Corporations:


  0 - 1 year        $10,475  $10,423  6.83%
  1 - 5 years         7,387    7,431  6.26%
  5 - 10 years           21       22  6.09%
  Over 10 years


Obligations of States and
   Political subdivisions


  0 - 1 year        $ 2,313    2,351  6.49%
  1 - 5 years         5,803    5,897  4.92%
  5 - 10 years       15,558   15,768  4.73%
  Over 10 years         845      869  5.46%


Other Securities


  0 - 1 year          8,772    8,717  5.14%
  1 - 5 years         4,758    4,840  8.31%
  5 - 10 years        6,096    6,201  9.02%
  Over 10 years       2,430    2,418  7.94%

Total Securities    $64,458  $64,937


Yields are computed on a tax equivalent basis using a marginal tax
rate of 34%.

As of December 31, 1997, a total of $69,556,886 of investments were
pledged to secure public deposits.  There were no securities
classified as Held-To-Maturity in 1995.

<PAGE>
PART I, Continued

ITEM 1.  Business, Continued

Loan Portfolio:

The bank engages in a full complement of lending activities,
including commercial, consumer/instalment, real estate loans and
accounts receivable financing.  At December 31, 1997, loans secured
by real estate comprised 51% of the total loan portfolio.  At
December 31, 1997 none of the real estate loans were being held
specifically for resale in the secondary market.

Loans Outstanding:

The following table presents various categories of loans contained in
the Bank's loan portfolio on the dates indicated and the total amount
of all categories on these dates:

                                   Year Ended December 31,
                                   (dollars in thousands)


Loan Type                1997      1996      1995      1994      1993
Commercial, Financial
  Agricultural        $ 45,466  $ 38,224  $ 38,325  $ 31,520  $27,197

Real Estate Mortgage    83,872    84,131    78,666    82,217   71,969

Installment Loans       31,805    33,244    29,765    24,097   25,512
  to Individuals

All Other                3,516     2,492     3,247     3,945    2,809

  Sub-Total            164,659   158,091   150,003   141,779  127,487

Allowance for Loan
  Losses                 1,650     1,650     1,650     1,725    1,600


  Loans - Net         $163,009  $156,441  $148,353  $140,054 $125,887

<PAGE>


PART I, Continued

ITEM 1.  Business, Continued

Loans Outstanding, Continued

Maturity Distribution and Interest Sensitivity:

The following tabulation presents an analysis of maturities of
Commercial, Financial, and Agricultural loans as of December 31, 1997
stated in thousands of dollars:
                                      Years To Maturity

     Loan Type              1 or less   1 - 5    Over 5    Total

Commercial, Financial,
   and Agricultural         $ 8,968     $14,144  $22,354   $45,466



Demand loans, loans having no stated schedule of repayments and no
stated maturity are reported as due in one year or less.

The following is a presentation of an analysis of sensitivities of
commercial, financial and agricultural loans to changes in interest
rates as of December 31, 1997, stated in thousands of dollars:


Loans due after 1 year with predetermined         $10,538
     Interest Rates


Loans due after 1 year with floating
     Interest Rates                               $25,960

<PAGE>


PART I, Continued

ITEM 1.  Business, Continued

Non-Performing Loans and Leases:

The following table presents, for the period indicated, the aggregate
amount of non-accrual, past due and restructured loans:

Type of Loan      12/31/97   12/31/96   12/31/95   12/31/94  12/31/93

Loans accounted
 for on non-
 accrual basis    $661,000   $820,000   $435,000   $454,000  $189,000

Number of loans          9         13          9         17        10

Accruing Loans
 Past due 90 Days
 or more as to
 principal or
 interest payments 330,000    321,000    209,000    324,000   776,000

Number of loans         47         38         17         17        31

Loans not included
 above which
 are troubled debt
 restructuring <F1>   ----       ----       ----    290,000   355,000

Number of loans          0          0          0          2         3
[FN]
<F1> These are loans whose terms have been restructured to provide a
reduction or deferral of interest or principal because of a
deterioration in the financial position of the borrower.

Accrual of interest income is discontinued on loans when, in the
opinion of management, collection of such interest income becomes
doubtful.  When a loan is reclassified to non-accrual status, all
accrued interest is immediately charged against current income.
Accrual of interest on such loans is resumed only when, in
management's judgment, the collection of said loan is probable.  At
that time, any accrued interest previously written off is restored
through current income.  Payments received on non-accrual loans are
applied to principal.

Interest income for the year ended December 31, 1997 would have
included approximately $43,200 of interest income for the above non-
accrual loans if they had kept current in accordance with their
original terms.  No interest income was included in income for 1997
for the non-accrual loans.

The Bank maintains a problem loan report.  As of December 31, 1997,
there were no individual loans identified which would materially
impact the Bank.

The Bank has no foreign loans.

There are no concentrations of credit.

<PAGE>



PART I, Continued

ITEM 1.  Business, Continued

Summary of Loan Loss Experience:

An analysis of the loan loss experience is furnished in the following
table for the periods indicated, as well as the allocation of the
allowance for loan losses.  Loans are presented net of unearned
income.
                                 Year Ended December 31,
                                 (dollars in thousands)

                      1997      1996      1995      1994      1993
Allowance balance
  at beginning
  of the year       $  1,650  $  1,650  $  1,725  $  1,600  $  1,650


Loans Charged Off:
  Real Estate              0         0         0         9         0
  Commercial,
   Financial &
   Agricultural          134       191       212        59       115
  Installment Loans
   to Individuals        166       111       146       180       118
  Credit Cards            81        47        31        28        38
         Total           381       349       389       276       271


Recoveries of Loans
 Previously Charged Off:
  Real Estate              0         0        17         0         0
  Commercial,
   Financial &
   Agricultural           34        14        96        40        82
  Installment Loans
   to Individuals         49        62        65       271       101
  Credit Cards             3         4         4        13         3
         Total            86        80       182       324       186

Additions charged to
      Operations         295       269       132        77        35

Allowance Balance at
 end of the year    $  1,650  $  1,650     1,650     1,725     1,600



Average loans       $160,200  $152,000   142,900   137,700   122,100

Ratio of net
 charge-offs during
 the period to
 average loans during
 the period             .18%      .18%      .15%     -.03%      .07%

<PAGE>




PART I, Continued

ITEM 1.  Business, Continued

Summary of Loan Loss Experience, Continued

At December 31, 1997, the allowance balance was allocated as follows:

                                                    % of loans
                                   Amount           in each type
        Loan Type              (in thousands)       to total loans

Commercial, Financial
   and Agricultural              $1,200               27.63%

Real Estate - Mortgage               45               50.94%

Installment loans to individuals    400               19.32%

All Other                             5                2.11%


               Total             $1,650              100.00%



At December 31, 1996, the allowance balance was allocated as follows:

                                                    % of loans
                                   Amount           in each type
        Loan Type              (in thousands)       to total loans

Commercial, Financial
   and Agricultural                $1,100               24.18%

Real Estate - Mortgage                 50               53.22%

Installment loans to individuals      500               21.03%

All Other                               0                1.57%


               Total               $1,650              100.00%
<PAGE>

PART I, Continued

ITEM 1.  Business, Continued

Summary of Loan Loss Experience, Continued

At December 31, 1995, the allowance balance was allocated as follows:

                                                    % of loans
                                   Amount           in each type
        Loan Type              (in thousands)       to total loans

Commercial, Financial
   and Agricultural              $1,100               25.53%

Real Estate - Mortgage               50               52.45%

Installment loans to individuals    500               19.85%

All Other                             0                2.17%


               Total             $1,650              100.00%


At December 31, 1994, the allowance balance was allocated as follows:

                                                    % of loans
                                   Amount           in each type
        Loan Type              (in thousands)       to total loans

Commercial, Financial
   and Agricultural                $1,175               22.24

Real Estate - Mortgage                 50               57.99%

Installment loans to individuals      500               17.00%

All Other                               0                2.77


               Total               $1,725              100.00%

At December 31, 1993, the allowance balance was allocated as follows:

                                                    % of loans
                                   Amount           in each type
        Loan Type              (in thousands)       to total loans

Commercial, Financial
   and Agricultural                $1,050               21.33%

Real Estate - Mortgage                 50               56.45%

Installment loans to individuals      500               20.01%

All Other                               0                2.21%


               Total               $1,600              100.00%
<PAGE>
PART I, Continued

ITEM 1.  Business, Continued

Loan Loss Reserve, Continued

In considering the adequacy of the Bank's allowance for possible loan
losses and, thus, the amount of additions to the allowance charged to
operating expense in 1997, management has focused on the fact that as
of December 31, 1997, 28% of outstanding loans are in the category of
commercial loans.  Commercial loans are generally considered by
management as having greater risk than other categories of loans in
the Bank's loan portfolio.

Management considers loans to finance 1-4 family, owner occupied
property to have minimal risk due to the fact that these loans
represent conventional residential real estate mortgages where the
amount of the original loan does not exceed 80% of the appraised
value of the collateral.

The Bank's Board of Directors monitors the loan portfolio monthly to
enable it to evaluate the adequacy of the allowance for loan losses
quarterly and to implement its policy of identification and isolation
of potential problem loans.  The loans are rated and the reserve
established based on an assigned rating.  The provision for loan
losses charged to operating expenses is based on this established
reserve.  Factors considered by the Board in rating the loans include
delinquent loans, underlying collateral value, payment history,
financial condition of the borrowers, and local and general economic
conditions affecting collectibility.

While no assurance can be given, management believes that losses
during 1998 will be no more than the losses during 1997.  Although
management of the Company believes that the allowance (as
supplemented by projected provisions and recoveries) is adequate to
absorb anticipated losses, there can be no assurance that the Company
will not sustain losses in any given period which could be
substantial in relation to the size of the allowance or in relation
to the estimates set forth above.

<PAGE>


PART I, Continued

ITEM 1.  Business, Continued

Deposits

The bank offers a wide range of commercial and consumer deposit
accounts, including non-interest bearing checking accounts, money
market checking accounts (consumer and commercial), individual
retirement accounts, time certificates of deposit and regular savings
accounts.  The sources of deposits are residents, businesses,
employees of businesses and local municipalities within the Bank's
market area.

The Bank pays competitive interest rates on time and savings
deposits.  In addition, the Bank utilizes a service charge fee
schedule competitive with other financial institutions in the bank's
market area, covering such matters as maintenance fees on checking
accounts, per item processing fees on checking accounts, returned
check charges and the like.

The following table presents, for the periods indicated, the average
amount of and average rate paid on each of the major deposit
categories:

                     Year Ended        Year Ended      Year Ended
                      12/31/97          12/31/96        12/31/95

                    Amount   Rate    Amount   Rate    Amount   Rate
Deposit Category                  (dollars in thousands)

Non-Interest Bearing
 Demand Deposits    $29,400  N/A     $27,900  N/A     $26,300  N/A

NOW Deposits         34,500  1.76%    33,200  1.75%    32,400  1.73%

Money Market Dep.    10,900  2.90%    12,100  2.84%    13,000  3.07%

Savings Deposits     43,700  2.77%    45,700  2.82%    48,100  3.04%

Time Deposits        98,000  5.44%    87,400  5.34%    72,000  5.36%
 (including
 Certificates of Dep.)

The following presents time certificates of deposit of $100,000 or
more and amounts of their maturities (amounts in thousands):

                                              Maturity

                                  3 Months                      Over
                                     or       3-6      6-12      12
                                    Less    Months    Months   Months

Time Certificates of Deposit      $12,100   $ 3,400   $ 4,100  $  800


<PAGE>

PART I, Continued

ITEM 1.  Business, Continued

Return on Equity and Assets

Returns on average consolidated assets and average consolidated
equity for the periods indicated and certain other data are as
follows:
                                       Year Ended
                                       December 31,

                                1997       1996       1995

Return on Average Assets <F1>   1.30%      1.37%      1.50%
Return on Average Equity <F2>  11.26%     11.69%     12.51%
Dividend Payout Ratio <F3>        76%        42%        48%
Equity to Assets Ratio <F4>
             (Average)         11.54%     11.69%     11.99%
[FN]
<F1> Net income divided by average assets
<F2> Net income divided by average equity
<F3> Dividends declared per share divided by net income per share
<F4> Average equity divided by average assets

Liquidity and Asset/Liability Management

Liquidity is the capacity of a banking enterprise to meet customer
loan demand, depositor withdrawals and other financial obligations.
The most immediate and efficient source of liquidity for the Bank is
a line of credit with the Federal Home Loan Bank of NY.
Based upon the current level of stock ownership, the Bank is
authorized to borrow up to $17.8 million.  In addition, the Bank has
a borrowing line with a correspondent bank in the amount of $2
million.  Other sources of liquidity include repayment of loans, sale
of loans and securities maturing within one year, although the
usefulness of such securities for liquidity purposes is limited to
the extent that such securities are pledged.  Day to day changes in
cash needs caused by flows of customer funds in and out of the Bank
are generally reflected in adjustments to the federal funds position.
Liquidity is managed on the liability side mainly by the Company's
ability to attract sources of funds (such as large denomination
certificates of deposit) to supplement maturing earning assets.

Closely related to the concept of liquidity is the management of the
Company's asset/liability mix and interest rate sensitivity.  The
Board of Directors of the Company has the overall responsibility for
the implementation, communication, coordination and control of the
asset/liability and interest rate sensitivity policies for the
Company and the Bank.  These policies are implemented by an
Asset/Liability Management Committee which is charged with the
responsibility of assuring balance sheet flexibility primarily with
respect to liquidity and interest rate sensitivity.  Current,
prospective and unanticipated liquidity requirements are provided for
by attempting to preserve the high quality of marketable assets, by
managing the maturity structure of those assets and by maintaining
discretionary access to short-term funding sources.  The management
of interest rate sensitive asset and liability differentials,
referred to as "gaps", has become increasingly important as a result

<PAGE>


PART I

ITEM 1.  Business, Continued

Liquidity and Asset/Liability Management, Continued

of the more volatile interest rate environment.  The continuing
deregulation of the banking industry has greatly increased the
interest rate sensitivity of the Company's deposit base and has made
the monitoring of the "gap" between interest rate sensitive assets
and liabilities critical to continued profitability.  It is
management's policy to seek to achieve a relatively balanced interest
rate sensitivity position, with a goal of achieving stability in
earnings performance, regardless of interest rate volatility.

The table on pages 29 and 30 under the caption "Interest Rate
Sensitivity Analysis" provides information on interest sensitive
assets and liabilities.

Correspondent Banking

Correspondent banking involves the provision of services by one bank
to another bank which cannot provide that service for itself from an
economic or practical standpoint.  The Bank is required to purchase
correspondent services offered by larger banks, including purchase of
federal funds, security safekeeping, investment services, and wire
transfer services.

Data Processing

The Bank's installation includes a full complement of hardware and
software to enable the Bank to provide total processing of its own
work on a daily basis with the exception of complete ATM processing.
The Bank utilizes a service center as its link to the ATM Networks.

Facilities

The Bank's main office is located in a freestanding building built on
property located in Bath, New York.  The Bank has a drive through
teller facility adjacent to its main office.  The Bank owns a branch
in Bath, which in addition to drive through teller facilities, houses
its Electronic Data Processing installation and Mortgage Department.

The Bank also operates branch offices in Dundee, Hammondsport,
Hornell, Atlanta, Naples, Wayland and Erwin, New York.  These
branches are equipped with both ATM's and teller stations.  All of
the offices, with the exception of our Atlanta, Hammondsport and Penn
Yan Offices, have drive-up teller facilities.

The Company's offices are located in the Bank's main office.

Employees

The Bank presently employs approximately 148 persons on a full-time
equivalent basis, including four senior officers.  It is anticipated
that the Bank will hire additional persons as needed on a full-time
basis, including additional tellers and customer service
representatives.

The bank offers certain fringe benefits to its qualified employees

<PAGE>

PART I, Continued

ITEM 1.  Business, Continued

Employees, Continued

including life insurance, health benefits and participation in a
profit sharing plan/401k plan.

Monetary Policies

The results of operations of the Bank are affected by credit policies
of monetary authorities, particularly the Federal Reserve Board.  The
instruments of monetary policy employed by the Federal Reserve Board
include open market operations in US Government securities, changes
in the discount rate on member bank borrowings and changes in reserve
requirements against member bank deposits.  In view of changing
conditions in the national economy and in the money markets, as well
as the effect of action by monetary and fiscal authorities, including
the Federal Reserve Board, no prediction can be made as to possible
future changes in interest rates, deposit levels, loan demand or the
business and earnings of the Bank.

Supervision and Regulation

The Company and the Bank operate in a highly regulated environment,
with their business activities governed by statutes, regulations and
administrative policies.  The business activities of the Company and
the Bank are closely supervised by a number of regulatory agencies,
including the Board of Governors of the Federal Reserve System
("Federal Reserve Board") in the case of the Company, and in the case
of the Bank, the Office of the Comptroller of the Currency
("Comptroller") and the Federal Deposit Insurance Corporation
("FDIC").

The Company is regulated by the Federal Reserve Board (Board) under
the Federal Bank Holding Company Act of 1956, as amended.

A bank holding company must obtain Board approval before acquiring,
directly or indirectly, ownership or control of any voting shares of
a bank or bank holding company if, after such acquisition, it would
own or control 5% or more of such shares (unless it already owns or
controls a majority of such shares).  Board approval must also be
obtained before any bank or bank holding company merges or
consolidates with another bank holding company.  Furthermore, any
acquisition by a bank holding company of 5 percent or more of the
voting shares, or of all or substantially all of the assets, of a
bank located in another state is subject to approval provided in the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994.
A bank holding company and its subsidiaries are prohibited from
engaging in certain tie-in arrangements in connection with the
extension of credit or the lease or the sale of any property or the
furnishing of services.  The subsidiary bank of a bank holding
company is also subject to certain restrictions imposed by the
Federal Reserve Act on any extensions of credit to the bank holding
company or any of its subsidiaries, thereof, and on the taking of
such stocks or securities as collateral for loans.  The Board
possesses cease and desist powers over bank holding companies if
their actions represent unsafe or unsound practices or violations of
law.
<PAGE>

PART I, Continued

ITEM 1.  Business, Continued

Supervision and Regulation, Continued

A bank holding company is generally prohibited from acquiring more
than five percent of any class of voting securities of any company
which is not a bank and from engaging in any business other than the
business of banking or managing and controlling banks.  However,
there are certain activities which have been identified by the Board
to be so closely related to banking as to be a proper incident
thereto and thus permissible for bank holding companies provided that
the Federal Reserve Board has notice of or has consented to the
acquisition.

In addition to the traditional activities of banks such as lending
and accepting deposit functions, the Bank is permitted to engage in,
by way of example, the following types of activities: acting as
investment or financial advisor to subsidiaries and certain outside
companies; leasing personal and real property or acting as a broker
with respect thereto; providing management consulting advice to non-
affiliated banks and non-bank depository institutions; providing
consumer financial counseling services; operating collection agencies
and credit bureaus; providing data processing and data transmission
services; acting as an insurance agent or underwriter with respect to
limited types of insurance; performing real estate appraisals;
arranging commercial real estate equity financing; providing
securities brokerage services; providing certain types of courier
services; and underwriting and dealing in obligations of the United
States, the states and their political subdivisions.

The Company and the Bank are subject to regulatory capital
requirements imposed by the Federal Reserve Board and the
Comptroller, respectively, which generally parallel each other.  In
1989, the Federal Reserve Board issued new risk-based capital
guidelines for bank holding companies which make regulatory capital
requirements more sensitive to differences in risk profiles of
various banking organizations.  These capital adequacy guidelines
issued by the Federal Reserve Board are applied to bank holding
companies on a consolidated basis with the banks owned by the holding
company.  These new requirements were phased in over a three year
period.  The new guidelines provided that by the end of 1990, banking
organizations must have had capital (as defined in the new rules)
equivalent to 7.25% of weighted risk assets.  By the end of 1992,
when the guidelines became fully effective, banking organizations
were required to have capital equivalent to 8% of risk assets.  The
risk weights assigned to assets are based primarily on credit risk.
Depending upon the riskiness of a particular asset, it is assigned to
a risk category.  For example, securities with an unconditional
guarantee by the United States Government are assigned to the lowest
risk category, whereas a risk weight of 50% is assigned to loans
secured by owner-occupied, one to four family residential mortgages.
The aggregate amount of assets assigned to each risk category is
multiplied by the risk weight assigned to that category to determine
the weight values, which are added together to determine total risk-
weighted assets.

The Federal Reserve Board and the Comptroller have each issued
minimum capital leverage ratios to be used in tandem with the risk-

<PAGE>


PART I, Continued

ITEM 1.  Business, Continued

Supervision and Regulation, Continued

based guidelines in assessing the overall capital rules.  Bank
holding companies and national banks are required to maintain a ratio
of 3% "Tier 1" capital to total assets (net of goodwill).  "Tier 1"
capital includes common stockholder's equity, non-cumulative
perpetual preferred stock and minority interests in the equity
accounts of consolidated subsidiaries.

Both the risk-based capital guidelines and the leverage ratios are
minimum requirements, applicable only to top-rated banking
institutions.  Institutions operating at or near these levels are
expected to have well-diversified risk, excellent asset quality, high
liquidity, good earnings and in general, have to be considered strong
banking organizations, rating composite 1 under the OCC's CAMELS
rating system for banks or the BOPEC rating system for bank holding
companies.  Institutions with a lower rating and institutions with
high levels of risk or experiencing or anticipating significant
growth would be expected to maintain ratios 100 to 200 basis points
above the stated minimums.

The Company's ratio of capital to assets, as defined by the
regulations, as of the end of each of its last three fiscal years has
been as follows:
                            TIER I                  TOTAL RISK
                        LEVERAGE RATIO          BASED CAPITAL RATIO

                       Required    Company     Required     Company
                       Minimum      Ratio      Minimum       Ratio
For year ended
   December 31, 1997    3.00%      11.12%       8.00%       21.31%
For year ended
   December 31, 1996    3.00%      11.56%       8.00%       22.27%
For year ended
   December 31, 1995    3.00%      11.96%       8.00%       22.57%

The scope of regulation and permissible activities of the Company and
the Bank is subject to change by future federal and state
legislation.

The Bank is subject to supervision by the Comptroller and the Federal
Deposit Insurance Corporation.  Various federal and state laws and
regulations apply to many aspects of the operations of the Bank,
including capital adequacy, reserves on deposits, loans, investments,
mergers and acquisitions, and the establishment of branch offices and
facilities.  Restrictions on rates of interest payable by banks on
deposits have been essentially eliminated.  The capital adequacy
guidelines of the Comptroller are substantially the same as those of
the Federal Reserve Board.

All of the revenue of the Company available for the payment of
dividends on the Common Stock results from amounts paid to the
Company by the Bank.  The Bank is required by Federal law to obtain
governmental approval for the payment of dividends to the Company if
the total of all dividends declared by the Bank in any year will
exceed the total of the Bank's net profits (as defined and

<PAGE>
PART I, Continued

ITEM 1.  Business, Continued

Supervision and Regulation, Continued

interpreted by regulation) for that year and the retained net profits
(as defined) for the preceding two years less any required transfers
to surplus.  As of January 1, 1998, the Bank could have declared
aggregate dividends of approximately $4.6 million without the
approval of regulatory authorities.

The Comptroller has authority to prohibit a national bank from
engaging in conduct which, in his opinion, constitutes an unsafe or
unsound practice in conducting its business.  Thus, depending upon
the financial condition of the bank in question and other factors,
the Comptroller may assert that the payment of dividends or other
funds from a subsidiary bank to a bank holding company could
constitute, under certain circumstances, an unsafe or unsound banking
practice.  In addition, the capital guidelines of the Federal Reserve
Board, the Comptroller and FDIC could limit the amount of dividends
which the Company may pay in the future.  Furthermore, regulatory
pressures to reclassify and charge off loans and to establish
additional loan loss reserves can have the effect of reducing current
operating earnings and thus impairing an institution's ability to pay
dividends.

If at any time, the Federal Reserve Board believes that an activity
of the Company constitutes a serious risk to the financial safety,
soundness, or stability of the Bank or the Company, and is
inconsistent with sound banking principles or the purposes of the
Bank Holding Company Act, the Federal Reserve Board may require the
Company to terminate the activity or to terminate control over the
Bank.

On December 19, 1991, the Federal Deposit Insurance Corporation
Improvement Act of 1991 (FDICIA) was enacted.  Among other things,
FDICIA requires FDIC to establish a risk-based assessment system for
FDIC deposit insurance.  FDICIA also contains provisions limiting
certain activities and business methods of depository institutions,
including limiting the acceptance of brokered deposits by certain
depository institutions; placing restrictions on the terms of bank
investment contracts that may be offered by depository institutions.
Finally, FDICIA provides for expanded regulation of depository
institutions and their affiliates, including parent holding
companies, by such institutions' appropriate Federal banking
regulator, and requires the appropriate Federal banking regulator to
take "prompt corrective action" with respect to a depository
institution if such institution does not meet certain capital
adequacy standards.

Governmental Policies and Legislation

The policies of regulatory authorities, including the Federal Reserve
Board and the FDIC, have had a significant effect on the operating
results of commercial banks in the past and are expected to do so in
the future.  An important function of the Federal Reserve System is
to regulate aggregate bank credit and money through such means as
open market dealing in securities, establishment of the discount rate
on member bank borrowings, and changes in reserve requirements

<PAGE>


PART I, Continued

ITEM 1.  Business, Continued

Governmental Policies and Legislation, Continued

against member bank deposits.  Policies at these agencies may be
influenced by many factors, including inflation, unemployment, short-
term changes in the international trade balance, and fiscal policies
of the United States Government.

The United States Congress has periodically considered and adopted
legislation which has resulted in, and could result in, further
deregulation of both banks and financial institutions.  Such
legislation could modify or eliminate geographic restrictions on
banks and bank holding companies and could modify or eliminate
current prohibitions against the Company's engaging in one or more
non-banking activities.  Such legislative changes could place the
Company in more direct competition with other financial institutions,
including mutual funds, securities brokerage firms, insurance
companies and investment banking firms.  No assurance can be given as
to whether any additional legislation will be adopted and as to the
effect of such legislation on the business of the Company.

Significant Accounting Policies

The significant accounting policies of the Bank are documented in Note 1
of the finacial statements.


ITEM 2.  Properties

BNC occupies space at the main banking office of BNB.  No real
properties are owned or leased by BNC.

The Bank's operations are conducted from ten full service facilities
located in Bath, Hammondsport, Atlanta, Naples, Wayland, Dundee, Penn
Yan, Hornell and Erwin, New York.  In addition, the Bank also
operates one seasonal office.  The seasonal office is located in the
Wayland-Cohocton Central School.  The main office is located at 44
Liberty Street, Bath, New York.  All administrative functions of the
Bank are conducted at the main office.  There is a drive-up facility
adjacent to the main bank at 44 Liberty Street.  There is another
drive-up, walk-up facility at West Washington Street, Bath.  The bank
leases the building for our Penn Yan and Erwin Offices.

The carrying value of property for BNC on a consolidated basis as of
December 31, 1997 and 1996 is included on page 49 of this 10-K
document.

ITEM 3.  Legal Proceedings

There are no material legal proceedings pending, or to the knowledge
of management, threatened against the Company or the Bank.

<PAGE>

ITEM 4.  Submission Matters to a Vote of Security Holders
                            None

                            PART II

ITEM 5.  Market for Registrant's Common Equity and Related
         Stockholder Matters

     A.  Market Information

During the period covered by this report and as of the date hereof,
there is no established public trading market for the Company's
common stock.

The range of high and low bid information (in dollars) for each full
quarterly period for 1997 and 1996, restated to reflect a two for one
stock split on April 24, 1996, follows:

                         1997                     1996
                 1Q    2Q   3Q   4Q        1Q   2Q   3Q   4Q

High             38    39   39   40        30   32   35   37

Low              37    38   38   39        30   32   35   34


The high and low bid information represent the price paid for shares
of stock of the Company by investors purchasing through the Company's
market makers, First Albany Corporation and Sandler O'Neill &
Partners, and trades between holders of Common Stock to the extent
the company is aware of such trades.

     B. Holders of Common Stock

As of January 29, 1998, the approximate number of holders of record
of the Company's common stock was 644.

     C. Dividends

For 1997 and 1996 the Company paid quarterly cash dividends,
amounting to a total for the year of $2.00 and $1.05 per share respectively.
These dividends have been restated to reflect a two for one stock
split on April 24, 1996.

The Bank is restricted in its ability to pay dividends to the Company.

<PAGE>



PART II, Continued

ITEM 5.  Market for Registrant's Common Equity and Related
         Stockholder Matters, Continued

     C. Dividends, Continued

(its only source of income) by banking regulations. Generally,
dividends may be declared and paid in cash or property only out of
the retained earnings of the Bank.  Dividends may not be declared or
paid at any time that a bank does not have the paid in capital and
appropriate retained earnings as required by law.  Dividends may not
be paid without prior approval of the regulator in excess of
specified amounts as may be fixed by banking regulations to ensure
that banks maintain an adequate capital structure.

ITEM 6.  Selected Financial Data

The data appearing on the following page represent selected
consolidated financial data of the Company for the years ended
December 31, 1997, 1996, 1995, 1994 and 1993 and are derived from the
Company's consolidated financial statements.  These data should be
read in conjunction with the Company's consolidated financial
statements and the notes thereto and Management's Discussion and
Analysis of Financial Condition and Results of Operations included
elsewhere herein and are qualified in their entirety thereby and by
other detailed information elsewhere in this Form 10K.

<PAGE>


PART II, Continued
ITEM 6.  Selected Financial Data, Continued

                       1997      1996      1995       1994       1993
Condensed Statements
of Income (in
thousands, except per
share data)
Interest Income <F1> $ 21,680  $ 19,982  $ 18,431  $ 16,351  $ 15,451

Interest Expense
  Deposits              7,447     6,891     6,280     4,506     4,669
Interest Expense
  Borrowings            1,436       952       271        61         4

  Net Interest Income  12,797    12,139    11,880    11,784    10,778

Loan Loss Provision       295       269       132        77        35

Net Interest Income
  After Loan Loss
  Provision            12,502    11,870    11,748    11,707    10,743

Other Operating
  Income <F3>           1,108       993       898       856       974

Other Operating
  Expenses              7,762     7,140     6,973     6,738     6,248
Income Before
  Income Tax            5,848     5,723     5,673     5,825     5,469

Tax Equivalent
  Adjustment              930       779       668       590       505

Income Taxes            1,384     1,496     1,627     1,815     1,658

Net Income           $  3,534  $  3,448  $  3,378  $  3,420  $  3,306

Per Share Data <F2>

Book Value              23.12     22.23     20.90     18.69     18.90
Cash Dividends           2.00      1.05      1.20      2.51      1.00
Net Income               2.61      2.52      2.49      2.66      2.64
Weighted Average
  Common Shares     1,354,869 1,365,832 1,354,492 1,285,762 1,251,662

Balance Sheet Data
(in thousands, except
number of outstanding
shares) at
December 31

Assets               $271,734  $269,238  $235,165  $209,158  $199,202
Securities (Book Val.) 89,198    91,022    64,937    43,878    51,840
Loans, Net            163,009   156,441   148,353   140,054   125,887
Deposits              212,042   208,473   197,760   180,866   170,235
Equity               $ 31,137  $ 30,363  $ 28,554  $ 25,181  $ 24,125
Common Shares
  Outstanding       1,365,801 1,365,801 1,366,234 1,346,780 1,276,960
Treasury Stock         19,203      -         -         -         -
<PAGE>

PART II, Continued

ITEM 6. Selected Financial Date, Continued
[FN]
<F1> Presented on a tax equivalent basis utilizing a marginal tax rate
     of 34%.
<F2> All per share data has been restated to reflect a two-for-one
     stock split on April 24, 1996.
<F3> Discount Revenue was reclassified from Other Operating Income to
     Interest for the years 1996 through 1993.

ITEM 7.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations.

The purpose of this section is to focus on relevant business events
and information provided in this Annual Report.  For a full
understanding of this discussion, reference should be made to the
Consolidated Financial Statements and Notes, thereto, and the
Consolidated Financial Highlights herein and statistical data
included under Item 1 of this form 10K.

Liquidity and Capital Resources:

Management has not identified any trends, demands, commitments,
events or uncertainties that will result in or are reasonably likely
to result in any material decreases or increases in the Company's
liquidity.

Liquidity is an important factor in the financial condition of the
Company and affects its ability to meet the borrowing needs and
deposit withdrawal requirements of its customers.  Assets, consisting
principally of loans and investment securities, are funded by
customer deposits.

The investment portfolio is one of the Company's primary sources of
liquidity.  The Company's primary sources of liquidity are federal
funds sold and purchased.  Other resources of liquidity include
repayment of loans and sale of loans.  Maturities of securities and
principal payments on mortgage backed securities provide a constant
flow of funds which are available for cash needs.  High quality
securities are readily marketable and provide another level of
liquidity.  Maturities in the loan portfolio also provide a steady
flow of funds.  At December 31, 1997 loans with an aggregate balance
of $31.9 million and securities of $7.4 million were due to mature
in one year or less.  Additional funds flow from payments on
instalment and revolving credit loans and from a historically high
level of net operating earnings.  The Company's liquidity also
continues to be enhanced by a relatively stable deposit base.  At
December 31, 1997, the loan to deposit ratio was 78% and the ratio of
loans to core deposits (excluding certificates of deposit of $100,000
or more) was 86%.

In addition to the sources of liquidity above, the Bank may borrow
from the Federal Reserve Bank in the event of a short term liquidity
deficiency.  The Bank also has an agreement with its correspondent
bank to borrow overnight federal funds.  During 1997, the Bank had an
average daily net federal funds sold of $2.5 million.  The Bank is
also a member of, and has a line of credit with, the Federal Home
Loan Bank of New York, and based upon the current level of stock
ownership, the Bank is authorized to borrow up to $17.8 million under
this line.  The Bank borrowed an average of $.9 million during 1997

<PAGE>

PART II, Continued

ITEM 7.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations, Continued

Liquidity and Capital Resources, Continued

against this line of credit.

At December 31, 1997, banking regulations required conformity with a
minimum risk based capital standard of 8%.  The Bank's risk based
capital level as of December 31, 1997 is approximately 20%.  Neither
the Company nor the Bank had any material commitments for capital
expenditures as of December 31, 1997.  The adequacy of the Bank's
capital is reviewed on an ongoing basis with reference to the size,
composition and quality of the Bank's resources.  An adequate capital
base is important for continued growth, expansion and added
protection against unexpected losses.

The banking industry is particularly concerned about the upcoming
millennium and the computer glitches associated with the year 2000.
The bank has addressed the issue by creating a task force charged
with identifying and addressing the issues associated with year 2000.
Management does not anticipate that year 2000 will have a material
effect upon bank operations.  The bank feels that the total cost of
the year 2000 issue will not exceed $75,000.

The Company has repurchased 19,203 shares of stock at a price equal
to the then current market value at the time of acquisition.  The
shares are being recorded on the cost basis and have not yet been
retired.  The Board of Directors believes the repurchase of this
stock was an excellent investment opportunity for the company and
its shareholders in light of the Company's strong capital position.

Results of Operations

Fiscal 1997 Compared with Fiscal 1996

Total Bank assets continued to grow from $269.2 million at year end
1996 to $271.7 million at year end 1997.  Loan demand increased from
$156.4 million to $163.1 million or 4.3%.  Deposits increased from
$208.5 million to $212.0 million.

Net income increased from $2.52 per share in 1996 to $2.61 per share
in 1997.  Although the net yield on earnings assets continues to
decline (from 5.05% in 1996 to 4.96% in 1997), increased loan
activity is expected to provide a basis for improvement in 1998.

Net loan losses were higher than anticipated for 1997.  Bankruptcy
losses continue to plague the banking industry in general.

Salaries and employee benefits expense increased significantly in
1997 compared to 1996.  This increase is primarily due to the
duplication of positions resulting from the impending retirement of
four officers of the bank.  While management expects salaries to
remain approximately the same in 1998, additional employees have been
hired to staff the Erwin and Watkins Glen offices.

For detailed information concerning changes in operating income and
operating assets refer to Item 1, which includes statistical data.

<PAGE>

PART II, Continued

ITEM 7.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations, Continued

Fiscal 1996 Compared with Fiscal 1995

Total Bank assets grew from $235.1 million at year end 1995 to $269.2
million at year end 1996, an increase of 14.5%.  Approximately $18.5
million of this growth in assets is attributable to a growth strategy
employed which leverages the bank's capital.  Bath National Bank
entered into a securities sold with an agreement to repurchase "repo"
transaction with Salomon Brothers which had the effect of increasing
both assets and liabilities by $18.5 million.

Loan demand continues to increase with net loans increasing from
$148.3 million in 1995 to $156.4 million in 1996 or 5.4%.

Deposits also continued to grow, realizing an increase of 5.4%, from
$197.7 million in 1995 to $208.5 million at year end 1996.

Net income increased from $2.49 per share in 1995 to $2.52 per share
in 1996.  Net interest income grew only modestly due to interest
"spread" pressures.  Since most of the growth in deposits during 1996
were in the time deposits area, the average cost of funds increased
at a greater rate than did the average earnings rate.  The provision
for loan losses increased by $136,000 from 1995 to 1996.  Bank
Management expects the loan losses in 1997 will be significantly
less.

Interest Sensitivity Analysis

The following table sets forth the maturity distribution of the
Company's interest-earning assets and interest bearing liabilities as
of December 31, 1997, the Company's interest rate sensitivity gap
(i.e. interest rate sensitive assets less interest rate sensitive
liabilities), the Company's cumulative interest rate sensitivity gap,
the Company's interest rate sensitivity ratio (i.e. interest rate
sensitive assets divided by interest rate sensitive liabilities) and
the Company's cumulative interest rate sensitivity ratio.  The
following assumptions were used in preparation of this table:
variable rate loans are included in the period in which their next
scheduled rate adjustment is expected to take place; fixed rate loans
are assumed to be repaid in accordance with their contractual terms;
no prepayments are advanced on any loans; and securities are included
in the period in which they mature, or in the case of variable rate
securities, the period in which the next rate change is anticipated.

<PAGE>
PART II, Continued

ITEM 7.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations, Continued

Interest Sensitivity Analysis, Continued

                                Interest Rate Sensitivity Analysis
                                     (dollars in thousands)

                         0-30   31-90  91-180 181-365  1 - 5   Over 5
As of
December 31, 1997:

Earning Assets:
 Federal Funds Sold       400
 Loans                 46,700   4,700   8,600  15,400  53,500  35,900
 Securities            14,300   6,400     700   2,700  43,300  24,500
 Total Earning Assets  61,400  11,100   9,300  18,100  96,800  60,400
Interest Bearing Liab.
 Money Market Demand   10,600
 Interest Bearing
  Deposits             33,000
 Certificates of Deposit
  Under $100,000        6,600  11,800  15,800  27,500  14,200
  $100,000 and over     7,600   4,300   2,400   4,800     500
 Savings Accounts      41,800
Securities Sold
 Agreement to Repurch.  5,100             300          18,500
FHLB Borrowings
 Federal Funds Purch.
                      104,700  16,100  18,500  32,300  33,200
Total Int. Bear. Liab.
Incremental Gap <F1>  (43,300) (5,000) (9,200)(14,200) 63,600
Cumulative Gap  <F2>  (43,300)(48,300)(57,500)(71,700) (8,100)
Sensitivity Gap <F3>      .59     .69     .50     .56    2.91
Cumulative Sensit. <F4>   .59     .60     .59     .58     .96

[FN]

<F1> Total earning assets less total interest bearing liabilities for
     each period.
<F2> Total earning assets less total interest bearing liabilities,
     cumulative for periods.
<F3> Total earning assets divided by total interest bearing
     liabilities.
<F4> Total earning assets divided by total interest bearing
     liabilities cumulative for periods.

Typically, a banking institution which is "liability sensitive" will
be expected to benefit from a decrease in interest rates and be
adversely impacted by an increase in interest rates.  However,
because (as noted above) the repricing of assets and liabilities is
frequently subject to management discretion, the correlation between
an institution's interest sensitivity position and a change in the
interest rate environment is rarely precise.  Although the Company
currently is "liability sensitive", within one year after December
31, 1997 a decline in interest rates would adversely impact the
Company to the extent that the Company determines not to make a
corresponding adjustment to the rates paid on NOW and money market
deposit accounts.

<PAGE>

PART II, Continued

ITEM 7.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations, Continued

Inflation:

Inflation may effect financial institutions through impaired asset
growth, reduced earnings and substandard capital adequacy ratios.
Since the majority of assets and liabilities are monetary in nature,
variations in economic policies issued by the Federal Reserve Board
to control interest rates have a greater impact on the profitability
of a financial institution.  The investment committee continually
monitors the rate sensitivity of its earning assets and interest
bearing liabilities to minimize any adverse effects on future
earnings.

Future Outlook:

The profitability of the Company, like all financial institutions, is
subject to the volatility of interest rates throughout the year.  The
composition of the Company's statement of financial condition and the repricing
frequency of its interest bearing assets and liabilities have a
direct impact on the interest margin, a key indicator of
profitability.  Since there will always be economic events and trends
that will influence the decision making of management, a main goal of
the Bank is controlling interest rate risk through managing the
interest sensitivity gap and by controlling the quality of assets
through credit policies and diversification.  At this time,
management believes that the Company's balance sheet does not include
significant concentrations of assets or liabilities that would have a
material adverse affect on earnings.

ITEM 8.   Financial Statements and Supplementary Data

This section contains the consolidated financial statements and
report of independent auditors.
<PAGE>

















                      BATH NATIONAL CORPORATION
                           AND SUBSIDIARY

                    CONSOLIDATED FINANCIAL REPORT

                          December 31, 1997


<PAGE>


                             Bath National Corporation and Subsidiary

                                                             Contents




Independent Auditor's Report                                    35


Financial Statements

   Consolidated statements of financial condition               36
   Consolidated statements of income . . . . . . . . . . . . .  37
   Consolidated statements of stockholders' equity . . . . . .  38
   Consolidated statements of cash flows                        39
   Notes to consolidated financial statements                40-57














































Independent Auditor's Report


To the Board of Directors and Stockholders
Bath National Corporation

We have audited the accompanying consolidated statements of
financial condition of Bath National Corporation and subsidiary
as of December 31, 1997 and 1996, and the related consolidated
statements of income, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1997.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Bath National Corporation and subsidiary as of
December 31, 1997 and 1996, and the results of their operations
and their cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted
accounting principles.




                                        URBACH KAHN & WERLIN PC






Albany, New York
February 20, 1998

<PAGE>




                                            Bath National Corporation

                       Consolidated Statements of Financial Condition
                                           December 31, 1997 and 1996


                                             1997        1996

Assets
Cash and due from banks                  $  7,453,597 $  9,859,230
Interest bearing deposits in other banks    1,477,829    2,956,541
Securities                                 89,030,914   90,060,159
Loans, net                                163,009,225  156,440,628
Premises and equipment, net                 5,625,903    5,060,702
Accrued interest receivable                 2,310,129    2,389,093
Other                                       2,826,444    2,471,400

                                         $271,734,041 $269,237,753

Liabilities and Stockholders' Equity
Liabilities
   Deposits:
     Demand                              $ 31,218,815 $ 29,137,046
     Savings                               41,781,937   43,491,468
     NOW accounts                          33,030,029   31,556,534
     Money market accounts                 10,572,735   10,467,440
     Time deposits ($100,000 or more)      19,620,007   27,563,196
     Other time accounts                   75,818,040   66,257,286
                                          212,041,563  208,472,970
   Federal funds purchased                  -            3,825,000
   Securities  sold under agreements  to
    repurchase                             23,840,977   21,928,937
   Borrowed funds                           -            2,000,000
   Other                                    4,714,097    2,648,253

                                          240,596,637  238,875,160

Commitments and Contingencies

Stockholders' Equity
   Preferred   stock,  $10  par   value,
   300,000 shares authorized; none issued  -             -
   Common    stock,   $5   par    value,
   1,500,000 shares authorized, 1,365,801
   shares issued in 1997, and issued and
   outstanding in 1996                      6,829,005    6,829,005
   Additional paid in capital               1,494,678    1,494,678
   Undivided profits                       22,816,135   21,980,350
   Unrealized appreciation on available-
   for-sale securties, net                    736,902       58,560

   Treasury  stock  (19,203 shares in
   1997)                                     (739,316)      -

                                           31,137,404   30,362,593

                                         $271,734,041 $269,237,753

                      See Notes to Consolidated Financial Statements.
<PAGE>

                                                  Bath National Corporation

                                          Consolidated Statements of Income
                               Years Ended December 31, 1997, 1996 and 1995


                                              1997        1996        1995

Interest income:
 Loans                                    $14,720,856 $14,066,916 $13,784,990
 Securities
   Held-to-maturity
     U.S. Government and agency
       obligations                          1,538,000     730,550        -
     State and municipal obligations             -           -        956,712
   Available-for-sale
     U.S. Government and agency
       Obligations                          2,355,672   2,725,582   2,330,407
     State and municipal obligations        1,784,057   1,343,952     192,448
 Federal funds sold                           156,219      81,539     213,699
 Deposits in other banks and stocks           195,583     254,709     284,974

        Total interest income              20,750,387  19,203,248  17,763,230

Interest expense:
 Deposits                                   7,447,411   6,891,164   6,280,052
 Borrowings                                 1,436,903     952,038     270,513

        Total interest expense              8,884,314   7,843,202   6,550,565

        Net interest income                11,866,073  11,360,046  11,212,665
Provision for loan losses                     295,468     268,793     132,484

        Net interest income after
          provision for loan losses        11,570,605  11,091,253  11,080,181

Noninterest income:
  Service charges                             784,299     762,002     652,036
  Net  realized gains (losses) on sale of
    available-for-sale securities              33,218     (21,653)     20,894
  Other                                       292,161     252,930     225,040
        Total other income                  1,109,678     993,279     897,970
Noninterest expenses:
  Salaries and employee benefits            4,400,690   3,806,366   3,751,460
  Occupancy                                 1,092,288   1,058,539     975,644
  Other                                     2,269,957   2,275,164   2,245,485

        Total other expenses                7,762,935   7,140,069   6,972,589

Income before income taxes                  4,917,348   4,944,463   5,005,562
Income taxes                                1,383,784   1,496,384   1,627,000

        Net Income                         $3,533,564  $3,448,079  $3,378,562

Net Income per Common Share                     $2.61       $2.52       $2.49

                            See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>

                                                       Bath National Corporation

                                 Consolidated Statements of Stockholders' Equity
                                    Years Ended December 31, 1997, 1996 and 1995


                             [---------- COMMON STOCK ----------]                     Net Unrealized
<CAPTION>                                                                       Net Unrealized
                                                                                Appreciation
                                                                                (Depreciation) on                   Total
                                  Number of              Add.        Undivided  Available-for-Sale Treasury   Stockholders
                                  Shares     Amount      Paid in Cap.Profits    Securities         Stock       Equity

<S>                                <C>       <C>         <C>         <C>          <C>              <C>       <C>
Balance, January 1, 1995           673,390   $3,366,950  $4,416,515  $18,216,168  $  (817,774)     $    -    $25,181,859

Change in unrealized appreciation
  on available-for sale securities, -          -          -             -           1,066,074           -      1,066,074
  net of taxes of $774,880


Net income - 1995                   -          -          -           3,378,562             -           -      3,378,562

Cash dividends declared             -          -          -          (1,628,343)            -           -     (1,628,343)
($1.20 per common share)

Dividends reinvested                9,727       48,635     506,975      -                   -           -        555,610

Balance, December 31, 1995        683,117    3,415,585   4,923,49 0  19,966,387        248,300          -     28,553,762

2-for-1 stock split               683,117    3,415,585  (3,415,585)     -                   -           -            -


Fractional shares                    (433)      (2,165)    (13,227)     -                   -           -        (15,392)
repurchased

Changes in unrealized
appreciation on available          -           -          -             -            (189,740) -       (189,740)
for-sale securities, net of
taxes of $181,310

Net income - 1996                  -           -          -          3,448,079              -           -      3,448,079

Cash dividends declared
($1.05 per common share)           -           -          -         (1,434,116)             -           -     (1,434,116)

Balance, December 31, 1996     1,365,801    6,829,005   1,494,678   21,980,350         58,560           -     30,362,593

Purchase of treasury stock         -           -          -                 -               -       (739,316)   (739,316)
(19,203 shares)

Changes in unrealized
appreciation on available-         -           -          -                 -         678,342           -        678,342
for-sale securities, net of
taxes of $437,286

Net income - 1997                  -           -          -          3,533,564              -           -      3,533,564

Cash dividends declared            -           -          -         (2,697,779)             -           -     (2,697,779)
($2.00 per common share)

Balance, December 31, 1997    1,365,801   $6,829,005  $1,494,678   $22,816,135     $  736,902      $(739,316) 31,137,404
</TABLE>
                              See Notes to Consolidated Financial Statements.
<PAGE>
                                                  Bath National Corporation

                                      Consolidated Statements of Cash Flows
                               Years Ended December 31, 1997, 1996 and 1995


                                              1997        1996        1995

Cash Flows From Operating Activities
Net income                                 $3,533,564 $ 3,448,079 $ 3,378,562
Adjustments to reconcile net income to net
  cash provided by operating activities:
    Depreciation and amortization             437,578     409,581     451,943
    Provision for loan losses                 295,468     268,793     132,484
    Deferred taxes                            388,092      19,481       -
    Loan origination costs deferred           (69,465)    (72,635)      3,917
    Bond premium amortized and discount
      Accreted                                140,080     175,703     218,043
    Losses (gains) on sale of investments     (33,218)     21,653     (20,894)
    Loss on disposed assets                     -           -          35,216
    Changes in:
      Interest receivable                      78,964    (613,958)   (291,364)
      Other assets                             19,050    (459,293)   (104,138)
      Other liabilities                      (645,534)    180,474    (581,394)

        Net cash provided by operating
          Activities                        4,144,579   3,377,878   3,222,375

Cash Flows From Investing Activities
  Proceeds from calls and maturities of         -           -          75,000
    held-to-maturity securities
  Proceeds from sales and maturities of
    available-for-sale securities           9,949,448  13,926,729   9,644,906
  Purchases of held-to-maturity securities      -     (20,000,000)   (333,346)
  Purchases of available-for-sale
    securities                             (7,911,437)(20,424,362)(27,996,216)

  Federal funds purchased/sold             (4,225,000)  1,675,000   4,650,000
  Net (increase) decrease in interest
    bearing deposits in other banks         1,478,712     578,797    (114,053)

  Increase in loans, net                   (6,794,600) (8,283,737) (8,435,384)
  Capital expenditures                       (976,873)   (329,947)   (883,947)

        Net cash used in investing
          Activities                       (8,479,750)(32,857,520)(23,393,040)

Cash Flows From Financing Activities
  Proceeds from Federal Home Loan Bank
    borrowings                                  -           -       3,000,000
 Repayments of Federal Home Loan Bank
    borrowings                             (2,000,000) (1,000,000)       -
 Net increase in securities sold under
    repurchase agreements                   1,912,040  20,858,081   1,070,856
 Purchase of treasury stock                  (739,316)      -            -
 Increase in deposits                       3,568,593  10,711,651  16,782,676
 Dividends paid, net of reinvestments in
   1995                                      (811,779) (1,449,508) (1,072,733)

       Net cash provided by financing
         Activities                         1,929,538  29,120,224  19,780,799

Net decrease in cash and due from banks    (2,405,633)   (359,418)   (389,866)
Cash and due from banks:
  Beginning of year                         9,859,230  10,218,648  10,608,514

  End of year                              $7,453,597 $ 9,859,230 $10,218,648


Supplemental Disclosures of Cash Flow
  Information

  Interest paid                            $9,023,686  $7,415,700 $ 6,471,600

 Income taxes paid                         $1,531,283  $1,698,800 $ 1,761,700

 Dividends payable (included in other
   liabilities)                             1,886,000     615,000     681,000

 Shares of common stock issued under the
   dividend reinvestment program in lieu
   of cash dividends of $555,610 in 1995        -           -           9,727

                                 See Notes to Consolidated Financial Statements.

<PAGE>
Note 1. Summary of Significant Accounting Policies

      General

        Bath National Corporation (the "Company"), a bank
        holding company, and its wholly owned subsidiary, Bath
        National Bank (the "Bank"), a federal-chartered
        financial institution, are incorporated under the laws
        of New York State. The accounting and financial
        reporting policies of the entities are in accordance
        with generally accepted accounting principles and
        general practices within the banking industry.

      Consolidation

        The consolidated financial statements include the
        accounts of the Company and its wholly owned subsidiary.
        All material intercompany accounts and transactions have
        been eliminated in consolidation.

      Securities

        The Bank has investments in debt and other securities.
        Debt securities consist primarily of obligations of the
        U.S. government, its agencies and corporations, and
        state and municipal governments. Management determines
        the appropriate classification of securities at the time
        of purchase.

      Trading

        Trading account assets are held for resale in
        anticipation of short-term market movements. Trading
        account assets, consisting of debt and money market
        instruments, are stated at fair value. Gains and
        losses, both realized and unrealized, are included in
        other income. The Bank did not hold any trading
        account assets at December 31, 1997 and 1996.

      Held-to-Maturity

        Securities for which the Bank has the positive intent
        and ability to hold to maturity are reported at cost,
        adjusted for premiums and discounts that are
        recognized in interest income over the period to
        maturity.

      Available-for-Sale

        Available-for-sale securities consist of bonds, notes,
        debentures, and certain equity securities not
        classified as trading or as held-to-maturity
        securities.

        Unrealized holding gains and losses, net of tax, on
        available-for-sale securities are reported as a net
        amount in a separate component of stockholders' equity
        until realized.
<PAGE>
Note 1. Summary of Significant Accounting Policies, Continued

      Securities, Continued

      Available-for-Sale, Continued

        Gains and losses on the sale of available-for-sale
        securities are determined using the specific
        identification method.

        Premiums and discounts are recognized in interest
        income over the period to maturity.

      Loans and Allowance for Loan Losses

        Loans are stated at the amount of unpaid principal,
        adjusted for net deferred loan origination costs,
        unearned fees and discounts, and an allowance for loan
        losses. Certain direct loan origination costs are
        deferred and recognized as an adjustment to interest
        income over the estimated life of the loans. Interest on
        loans is recognized over the term of the loan and is
        calculated using the simple interest method on principal
        amounts outstanding.

        The allowance for loan losses is maintained at a level
        which, in management's judgment, is adequate to absorb
        potential losses inherent in the loan portfolio. The
        amount of the allowance is based on management's
        evaluation of the collectibility of the loan portfolio,
        including the nature of the portfolio, credit
        concentrations, trends in historical loss experience,
        specific impaired loans, and economic conditions.
        Allowances for impaired loans are generally determined
        based on collateral values or the present value of
        estimated cash flows. The allowance is increased by a
        provision for loan losses, which is charged to expense
        and reduced by charge-offs, net of recoveries. Changes
        in the allowance relating to impaired loans are charged
        or credited to the provision for loan losses. Because of
        uncertainties inherent in the estimation process,
        management's estimate of credit losses inherent in the
        loan portfolio and the related allowance may change in
        the near term. However, the amount of the change that is
        reasonably possible cannot be estimated. In addition,
        various regulatory agencies, as an integral part of
        their examination process, periodically review the
        Company's allowance for losses on loans. Such agencies
        may require the Company to recognize additions to the
        allowances based on their judgments of information
        available to them at the time of their examination.

        Accounting for loan impairments is governed by Statement
        of Financial Accounting Standards No. 114, "Accounting
        by Creditors for Impairment of a Loan" (SFAS 114) and
        SFAS 118, "Accounting by Creditors for Impairment of a
        Loan - Income Recognition and Disclosure," which amended
        SFAS 114.  These Statements prescribe recognition
        criteria for loan impairment, generally related to
        commercial type loans, and measurement methods for
        certain impaired loans and all loans whose terms are
        modified in troubled debt restructurings subsequent to
        the adoption of these statements. A loan is considered
        impaired when it is probable that the borrower will not
        repay the loan according to the original contractual
        terms of the loan agreement. On January 1, 1995, the
        Bank adopted the provisions of SFAS 114 and SFAS 118.
        The effect of adoption of these Statements was not
        material to the financial statements.

<PAGE>
Note 1. Summary of Significant Accounting Policies, Continued

      Loans and Allowance for Loan Losses, Continued

        As a matter of policy, the Bank generally places
        impaired loans on nonaccrual status and recognizes
        interest income on such loans only on a cash basis upon
        receipt of interest payments from the borrower. Accrual
        of interest is discontinued on a loan when management
        believes, after considering economics, business
        conditions and collection efforts, that the borrower's
        financial condition is such that collection of interest
        is doubtful, or after three months of nonpayment,
        whichever is earlier. Uncollectible interest previously
        accrued is charged off. Income is subsequently
        recognized only to the extent cash payments are received
        until, in management's judgment, the borrower's ability
        to make periodic interest and principal payments is back
        to normal, in which case the loan is returned to accrual
        status.

      Premises and Equipment, Net

        Premises and equipment are stated at cost less
        accumulated depreciation. Depreciation is provided over
        the estimated useful lives using straight line and
        accelerated methods.

      Other Real Estate Owned

        Real estate properties acquired through, or in lieu of,
        loan foreclosure are to be sold and are initially
        recorded at fair value at the date of foreclosure
        establishing a new cost basis. After foreclosure,
        valuations are periodically performed by management and
        the real estate is carried at the lower of carrying
        amount or fair value less cost to sell. Revenue and
        expenses from operations and changes in the valuation
        allowances are included in noninterest expense.

        Real estate properties formally acquired in settlement
        of loans were not material in 1997 and 1996.

      Income Taxes

        Income taxes are provided for the tax effects of the
        transactions reported in the financial statements and
        consist of taxes currently due and deferred taxes, which
        relate primarily to differences between the basis of
        available-for-sale securities; allowance for loan
        losses; accumulated depreciation; and employee benefits
        for financial and income tax reporting. Deferred tax
        assets and liabilities represent the future tax return
        consequences of those differences, which will either be
        taxable or deductible when the assets and liabilities
        are recovered or settled. Deferred tax assets and
        liabilities are reflected at income tax rates applicable
        to the period in which the deferred tax assets or
        liabilities are expected to be realized or settled. As
        changes in tax laws or rates are enacted, deferred tax
        assets and liabilities are adjusted through a provision
        for income taxes.
<PAGE>

Note 1. Summary of Significant Accounting Policies, Continued

      Employee Benefit Plans

        Retirement Benefits:  The Bank has a defined
        contribution pension plan and a profit sharing plan,
        with a salary deferral feature, for those employees who
        meet the eligibility requirements set forth in the
        plans. Contributions to the defined contribution plan
        are based on a formula while contributions to the profit
        sharing plan are at the discretion of the board of
        directors.

        Postretirement Benefits:  The Bank provides certain
        health care benefits for all retired employees that meet
        certain eligibility requirements. The Bank's share of
        the estimated costs that will be paid after retirement
        is generally being accrued by charges to expense over
        the employees' active service periods to the dates they
        are fully eligible for benefits, except that the Bank's
        unfunded cost that existed prior to the adoption of the
        plan is being accrued primarily in a straight line
        manner.

      Stock Split and Net Income Per Common Share

        On March 21, 1996, the Board of Directors approved a two-
        for-one common stock split, distributable on April 24,
        1996 to stockholders of record at the close of business
        on that date. All per share amounts and numbers of
        shares in the consolidated financial statements have
        been restated to reflect this split. In addition, an
        amount equal to the $5 par value of the split shares has
        been transferred from additional paid in capital to
        common stock.

        Net income per common share is computed on the weighted
        average number of shares outstanding during each year.
        The weighted average number of shares outstanding were
        1,354,869, 1,365,832, and 1,354,492 in 1997, 1996, and
        1995, respectively.

      Use of Estimates

        The preparation of the Company's financial statements in
        conformity with generally accepted accounting principles
        requires management to make estimates and assumptions
        that affect the reported amounts of assets and
        liabilities and disclosure  of contingent assets and
        liabilities at the date of the financial statements and
        reported amounts of revenues and expenses during the
        reporting period. Actual results could differ from those
        estimates.

      Reclassifications

        Certain items have been reclassified in the 1996 and
        1995 financial statements to conform with the 1997
        presentation.


Note 2. Cash and Due From Banks

       The Bank is required to maintain reserve cash balances
       with the Federal Reserve Bank. The total of those reserve
       cash balances was approximately $2,938,000 and $4,397,000
       at December 31, 1997 and 1996, respectively.
<PAGE>
Note 3. Securities

       The amortized cost and fair values of available-for-sale
       securities as of December 31, 1997 are summarized as
       follows:


                                       [-----Gross Unrealized -----]
                            Amortized
                               Cost       Gains       Losses      Fair Value

      U.S. Government and
        agency securities  $11,327,853 $   66,558    $ 80,270    $11,314,141
      State and municipal
        securities          36,036,771  1,115,839       1,290    $37,151,320
      Mortgage-backed and
        related securities  19,059,605    139,891     123,490     19,076,006
      Other                  1,384,109    105,338       -          1,489,447

                           $67,808,338 $1,427,626    $205,050    $69,030,914


      The amortized cost and fair value of available-for-sale
      securities as of December 31, 1997 by contractual maturity
      are shown below. For purposes of the maturity table,
      mortgage-backed securities, which are not due at a single
      maturity date, have been allocated over maturity groupings
      based on the weighted-average contractual maturities of
      underlying collateral. The mortgage-backed securities may
      mature earlier than their weighted-average contractual
      maturities because of principal prepayments.


                                    Amortized          Fair
                                      Cost            Value

      Due in one year or less     $   7,433,678     7,421,825
      Due after one year
        through five years           26,533,877    26,825,357
      Due after five years
        Through ten years            21,935,923    22,792,461
      Due after ten years            11,904,860    11,991,271

                                    $67,808,338   $69,030,914

      The amortized cost and fair values of held-to-maturity
      securities as of December 31, 1997 are summarized as
      follows:


                                       [-----Gross Unrealized -----]
                             Amortized
                               Cost         Gains        Losses       Fair Value

      U.S. Government and
        agency securities   $20,000,000    $539,200          -       $20,539,200
<PAGE>
      The amortized cost and fair value of securities being held-
      to-maturity as of December 31, 1997 by contractual
      maturity are shown below.


                                    Amortized          Fair
                                      Cost            Value

      Due after one year
        Through five years         $20,000,000     $20,539,200

Note 3. Securities, Continued

      The amortized cost and fair values of available-for-sale
      securities as of December 31, 1996 are summarized as
      follows:


                                       [-----Gross Unrealized -----]
                             Amortized
                                Cost        Gains        Losses       Fair Value

      U.S. Government and
        agency securities  $15,847,517    $ 57,084      $128,067     $15,776,534
      State and municipal
        Securities          31,047,869     485,831        56,996      31,476,704
      Mortgage-backed and
        related securities  21,264,901      81,180       495,503      20,850,578
      Other                  1,792,924     165,942         2,523       1,956,343

                           $69,953,211    $790,037      $683,089     $70,060,159

      The amortized cost and fair values of held-to-maturity
      securities as of December 31, 1996 are summarized as
      follows:


                                       [-----Gross Unrealized -----]
                             Amortized
                                Cost        Gains        Losses       Fair Value

      U.S. Government and
        agency securities   $20,000,000    $329,400     $  -         $20,329,400

      Proceeds from sales of securities during 1997, 1996 and
      1995, which were principally attributable to those
      available-for-sale, were $5,599,231, $6,867,918 and
      $5,728,507, respectively, with gross gains of $58,983,
      $23,080 and $23,839 and gross losses of $25,765, $44,733
      and $2,945 realized on those sales.

      Securities with a carrying value of $68,621,401 and
      $66,136,796 and market values of $69,556,886 and
      $65,875,690 at December 31, 1997 and 1996, respectively,
      were pledged to secure public deposits, securities sold
      under agreements to repurchase, and for other purposes as
      required or permitted by law.
<PAGE>
Note 4. Loans, Net

      The components of loans at December 31, 1997 and 1996 were
      as follows:


                                        1997           1996

      Commercial                     $71,582,995       67,078,298
      Installment                     19,002,523       20,145,787
      Real estate mortgage            41,788,215       41,587,646
      Home equity loans               21,697,621       19,150,743
      Student                          7,932,328        7,488,854
      Credit card loans                1,886,019        1,939,241
      Net deferred loan
        origination costs and
        unearned discounts               769,524          700,059
                                     164,659,225      158,090,628
      Less allowance for loan losses   1,650,000        1,650,000
      Loans, net                    $163,009,225     $156,440,628

      Real estate mortgage and home equity loans consist of:


      Mortgages with fixed rates              $19,799,578
      Mortgages with variable rates            21,988,637
      Home equity loans with fixed rates       16,661,386
      Home equity loans with variable rates     5,036,235
         Total real estate loans              $63,485,836

      Changes in the allowance for loan losses for the years
      ended December 31, 1997, 1996 and 1995 were as follows:


                                              1997           1996        1995

      Balance, beginning of year          $1,650,000     $1,650,000  $1,725,000
      Provision for loan losses              295,469        268,793     132,484
      Recoveries credited to the allowance    86,306         80,752     181,180
      Losses charged to the allowance       (381,775)      (349,545)   (388,664)
      Balance, end of year                $1,650,000     $1,650,000  $1,650,000

      The Bank has, and may be expected to have in the future,
      banking transactions with directors, principal officers,
      their immediate families and affiliated companies in which
      they are principal stockholders (commonly referred to as
      related parties). The aggregate amount of loans to related
      parties was $675,000 and $589,000 at December 31, 1997 and
      1996, respectively.
<PAGE>
Note 4. Loans, Net, Continued

      The activity with respect to loans to related parties for
      the year ending December 31, 1997 follows:


      Aggregate amount beginning of period             $589,000
      New loans                                         280,000
      Repayments                                       (194,000)

      Aggregate amount end of period                   $675,000


Note 5. Premises and Equipment

      At December 31, 1997 and 1996, premises and equipment
      consist of:


                                          1997         1996

      Land                             $  502,389   $  502,389
      Buildings and improvements        6,161,265    5,879,475
      Furniture                         3,315,991    2,628,736
        Total                           9,979,645    9,010,600
      Less accumulated depreciation     4,353,742    3,949,898
      Premises and equipment, net      $5,625,903   $5,060,702

      Depreciation expense was $411,672, $379,401 and $393,354
      for the years ended December 31, 1997, 1996 and 1995,
      respectively.


Note 6. Deposits

      A summary of deposit accounts at December 31, by maturity,
      is as follows:


                                                        1997          1996

      No contractual maturity                       $116,625,042  $114,661,724
      Maturity within one year                        80,899,368    77,592,337
      Maturity after one year through five years      14,517,153    16,218,909
                                                    $212,041,563  $208,472,970


Note 7. Securities Sold Under Agreements to Repurchase

      Substantially all securities sold under repurchase
      agreements were delivered to the broker-dealers who
      arranged the transactions. The broker-dealers may have
      sold, loaned, or otherwise disposed of such securities to
      other parties in the normal course of their operations,
      and have agreed to resell to the Bank substantially
      identical securities at the maturities of the agreements.
      Agreements approximating $18,500,000 mature in July 1999.
      The balance of the agreements mature in less than four
      months.
<PAGE>
Note 7. Securities Sold Under Agreements to Repurchase, Continued

      Information concerning securities sold under agreements to
      repurchase is summarized as follows:


                                                      1997           1996

      Average balance during the year             $21,533,500    $11,374,200

      Average interest rate during the year              6.2%           6.3%

      Maximum month-end balance
        during the year                           $23,841,000    $22,372,100

      Securities underlying the agreements at year-end:


      Carrying value
                                 $28,086,000      $25,967,300

      Estimated fair value
                                 $28,136,500      $25,287,700


Note 8. Borrowed Funds

      Borrowed funds represent advances from the Federal Home
      Loan Bank. There were no advances at December 31, 1997.
      Advances at December 31, 1996 are summarized as follows:


              1996

                 Advance         Interest            Maturity
                 Amount          Rate                Date

               $1,000,000         5.95%           January 1997
                1,000,000         5.99%            July 1997
               $2,000,000
<PAGE>
Note 9. Income Taxes

      A summary of the components of income taxes is as follows:


               [--------------- Years Ended December 31, ---------------]
                                         1997             1996          1995

      Current Tax
        Federal                     $   653,011       $1,097,485    $1,180,000
        State                           342,681          379,418       447,000
          Total current tax expense     995,692        1,476,903     1,627,000
      Deferred tax
        Federal and State               388,092           19,481          -
          Total provision for income
            taxes                    $1,383,784       $1,496,384    $1,627,000

      A reconciliation of the expected income tax expense,
      computed at the federal statutory rate of 34%, to the
      income tax expense included in the consolidated statements
      of income is as follows:


                    [--------------- Years Ended December 31, ---------------]
                                        1997             1996          1995

      Statutory provision            $1,671,898       $1,681,117    $1,701,891
      Tax exempt interest              (608,027)        (508,980)     (436,560)
      State income tax, net of
        federal benefit                 226,169          250,416       295,020
      Non deductible interest            80,956           57,800        49,310
      interest
      Other                              12,788           16,031        17,339
           Total                     $1,383,784       $1,496,384    $1,627,000

      Net deferred tax liabilities (classified as other
      liabilities) consist of the following at December 31, 1997
      and 1996:


                                                    1997            1996

      Deferred tax liabilities:
        Depreciation                            $  467,495        $550,670
        Deferred loan fees                         307,810         336,029
        Unrealized gain on available-for-sale
          securities                               489,030          50,400
                                                 1,264,335         937,099
      Deferred tax assets:
        Provision for loan losses                  502,464         548,153
        Employee benefits                          322,724         337,891

                                                   825,188         886,044
        Less valuation allowance                     -               -
                                                   825,188         886,044

      Net deferred tax liability                $  439,147        $ 51,055
<PAGE>
Note 10.Employee Benefit Plans and Postretirement Benefits

      Employee Benefit Plans:

        The Bank has a defined contribution pension plan for
        those employees who meet the eligibility requirements
        set forth in the plan. Substantially all of the Bank's
        full time employees are covered by the plan.
        Contributions to the plan are based on a formula
        computation relating to length of service and salary
        level. The Bank's defined contribution pension plan
        expense was $268,000, $214,300 and $139,200 for 1997,
        1996 and 1995, respectively.

        The Bank also has a profit sharing plan, with a salary
        deferral feature, for those employees who meet the
        eligibility requirements set forth in the plan.
        Contributions to the plan are at the discretion of the
        Board of Directors. Substantially all of the Bank's full
        time employees are covered by the plan. The Bank's
        profit sharing plan expense was $208,700, $198,800, and
        $232,400 for 1997, 1996, and 1995, respectively.

        The Bank has severance compensation agreements with two
        of its Bank officers which do not become effective
        unless there has been a change in control of the Bank as
        defined and the Bank terminates the officers'
        employment. Under those conditions the Bank will pay, as
        severance, a lump sum payment equal to five times the
        aggregate annual compensation paid to the executive
        officers during the calendar year immediately preceding
        the change in control.

      Postretirement Benefits:

        The Bank provides health care benefits to retired
        employees who meet specified age and service
        requirements through a postretirement health care plan
        in which both the bank and retiree share the cost. The
        plan provides for substantially the same medical
        insurance coverage as for active employees until their
        death and is integrated with Medicare for those retirees
        aged 65 or older.

        Postretirement benefit expense was $124,180, $131,287
        and $127,706 for 1997, 1996 and 1995, respectively.

        The components of the postretirement benefit cost are as
        follows:


                                                       1997      1996     1995

        Service cost for benefits earned during the
          year                                       $ 26,798    26,690   29,586
        Interest cost on accumulated post-retirement
        benefit obligation                             68,154    70,005   64,117
        Amortization of transition obligation          26,514    26,514   26,514
        Amortization of net loss                        2,714     8,078    7,489
           Net annual postretirement benefit cost    $124,180  $131,287 $127,706

        The accumulated postretirement benefit obligation was
        determined using a weighted average discount rate of
        8.0%, and a health care cost trend rate of 6.0%.
<PAGE>

Note 10.Employee Benefit Plans and Postretirement Benefits,
        Continued

      Postretirement Benefits, Continued:

        Increasing the assumed health care cost trend rates by
        one percentage point in each year and holding all other
        assumptions constant, would increase the accumulated
        postretirement benefit obligation as of December 31,
        1997 by approximately $147,200 and increase the
        aggregate of the service and interest cost components of
        the net periodic postretirement benefit cost for 1997 by
        approximately $21,800.

        The following table sets forth the plan's funded status
        reconciled with the amount shown on the Bank's balance
        sheet at December 31, 1997 and 1996:

        Accumulated postretirement benefit obligation:


                                                       1997            1996

        Retirees                                     $462,156        $489,213
        Fully eligible active plan participants       124,808          99,721
        Other active plan participants                337,364         360,236

        Accumulative postretirement benefit
          obligation in excess of plan assets         924,328         949,170
        Unrecognized transition obligation           (397,725)       (424,239)
        Unrecognized net loss due to changes
          in assumptions                             (125,437)       (202,852)

            Accrued postretirement benefit cost
              (classified as other liabilities)      $401,166        $322,079


Note 11.  Regulatory Matters

      The Bank is subject to various regulatory capital
      requirements administered by the federal banking agencies.
      Failure to meet minimum regulatory capital requirements
      can initiate certain mandatory-and possibly additional
      discretionary-actions by regulators that, if undertaken,
      could have a direct material effect on the Bank's
      financial statements. Under the regulatory capital
      adequacy guidelines and the regulatory framework for
      prompt corrective action, the Bank must meet specific
      capital guidelines that involve quantitative measures of
      the Bank's assets, liabilities, and certain off-balance-
      sheet items as calculated under regulatory accounting
      practices. The Bank's capital amounts and classifications
      are also subject to qualitative judgments by the
      regulators about components, risk weightings and other
      factors.

      Quantitative measures established by regulation to ensure
      capital adequacy require the Bank to maintain minimum
      amounts and ratios (set forth in the table below) of total
      risk-based capital and Tier I capital (as defined in the
      regulations) to risk-weighted assets (as defined), and of
      Tier I capital to adjusted total assets (as defined).
      Management believes, as of December 31, 1997, that the
      Bank meets all capital adequacy requirements to which it
      is subject.
<PAGE>
Note 11.  Regulatory Matters, Continued

      As of December 31, 1997, the most recent notification from
      the Office of Controller of the Currency categorized the
      Bank as well capitalized under the regulatory framework
      for prompt corrective action. To be categorized as well
      capitalized the Bank must maintain minimum total risk-
      based, Tier I risk-based, and Tier I leverage ratios as
      set forth in the table. There are no conditions or events
      since that notification that management believes have
      changed the institution's category.

      The Bank's actual and required capital amounts and ratios
      are as follows (dollars in thousands):
<TABLE>


<CAPTION>
                                                   For Capital
                                Actual         Adequacy Purposes:    To Be Well Capitalized:
                            Amount    Ratio     Amount    Ratio      Amount     Ratio
      <S>                  <C>        <C>      <C>        <C>       <C>       <C>
      As of December 31, 1997
      Total Risk-Based
       Capital (to Risk-
       Weighted Assets)    $31,757    21.3%    $11,923    =>8.0%    $14,904   =>10.0%
      Tier I Capital
       (to Risk-
       Weighted Assets)     30,107    20.2%      5,962    =>4.0%      8,943    =>6.0%
      Tier I Capital
       (to Adjusted
       Total Assets)        30,107    11.1%     10,832    =>4.0%     13,540    =>5.0%

      As of December 31, 1996
      Total Risk-Based
       Capital (to Risk-
       Weighted Assets)     31,635    22.3%     11,366    =>8.0%     14,207   =>10.0%
      Tier I Capital
       (to Risk-Weighted
       Assets)              29,985    21.1%      5,683    =>4.0%      8,524    =>6.0%
      Tier I Capital
       (to Adjusted
       Total Assets)        29,985    11.6%     10,373    =>4.0%     12,966    =>5.0%
</TABLE>


      The Bank is restricted as to the amount of dividends which
      can be paid. Dividends declared by national banks that
      exceed net income (as defined) for the current year plus
      retained net income for the preceding two years must be
      approved by the Comptroller of the Currency. Under the
      formula, dividends of approximately $4,600,000 may be paid
      without prior regulatory approval. Regardless of formal
      regulatory restrictions, the Bank may not pay dividends
      that would result in capital levels being reduced below
      the minimum requirements shown above.


Note 12.Commitments and Contingencies

      Financial instruments with off balance sheet risk:

        The Bank is party to financial instruments with off
        balance sheet risk in the normal course of business to
        meet the financing needs of its customers. These
        financial instruments include commitments to extend
        credit and standby letters of credit. These instruments
        involve, to varying degrees, elements of credit risk in
        excess of the amount recognized in the statements of
        financial condition.

<PAGE>
Note 12.Commitments and Contingencies, Continued

      Financial instruments with off balance sheet risk,
      continued:

        The Bank's exposure to credit loss in the event of non
        performance by the other party to the financial
        instrument for commitments to extend credit and standby
        letters of credit is represented by the contractual
        amount of those instruments. The Bank uses the same
        credit policies in making commitments and conditional
        obligations as they do for on balance sheet instruments.
        A summary of the Bank's commitments at December 31, 1997
        is as follows (dollars in thousands):


        Revolving open-end lines secured by 1-4 family residential
          Properties                                                   $ 4,212

        Credit card lines                                                5,007

        Commercial real estate, construction and
        land development                                                 2,777

        Commercial and similar letters of credit, net                      254

        Other unused commitments                                        11,975

                                                                       $24,225

        Commitments to extend credit are agreements to lend to a
        customer as long as there is no violation of any
        condition established in the contract. Since many of the
        commitments are expected to expire without being drawn
        upon, the total commitment amounts do not necessarily
        represent future cash requirements. The Bank evaluates
        each customer's creditworthiness on a case by case
        basis. The amount of collateral obtained if deemed
        necessary by the Bank upon extension of credit is based
        on management's credit evaluation of the counterparty.
        Collateral held varies but may include accounts
        receivable, inventory, property, equipment, and income
        producing commercial properties.

        Letters of credit are conditional commitments issued by
        the Bank to guarantee the performance of a customer to a
        third party. Those guarantees are primarily issued to
        support private borrowing arrangements. The credit risk
        involved in issuing letters of credit is essentially the
        same as that involved in extending loan facilities to
        customers. Collateral held varies as specified above and
        is required in instances where the Bank deems necessary.

      Concentrations of credit risk:

        The Company and the Bank are located in the Southern
        Tier of the Finger Lakes region of New York State. The
        Bank grants commercial, consumer and residential loans
        primarily to customers in Allegheny, Livingston,
        Ontario, Schuyler, Steuben and Yates counties. The
        Bank's loan portfolio consists primarily of commercial,
        installment and real estate secured loans. A substantial
        portion of its debtor's ability to honor their contracts
        is dependent upon the economic conditions of the region.
<PAGE>

Note 12.Commitments and Contingencies, Continued

      Concentrations of credit risk, continued:

        All of the Bank's loans, commitments to extend credit,
        and letters of credit have been granted to customers in
        the Bank's market area. Investments in securities issued
        by state and political subdivisions also involve
        governmental entities within the Bank's market area. The
        concentrations of credit by type of loan are set forth
        in Note 4. The distribution of commitments to extend
        credit approximates the distribution of loans
        outstanding. Standby letters of credit were granted
        primarily to commercial borrowers.

      Line of credit:

        The Bank has credit available from the Federal Home Loan
        Bank and Manufacturers and Traders Bank in the amount of
        $17,812,000 and $2,000,000, respectively, at the
        overnight federal funds rate.


Note 13.  Disclosures About Fair Value of Financial Instruments

      The fair values shown below (in thousands) represent
      management's estimates of values at which the various
      types of the Bank's financial instruments could be
      exchanged in transactions between willing, unrelated
      parties. They do not necessarily represent amounts that
      would be received or paid in actual trades of specific
      financial instruments.

<TABLE>

                              [-------1997 -------]      [-------1996-------]
                                 Carrying   Fair            Carrying   Fair
                                 Amount    Value             Amount   Value
<CAPTION>
      <S>                       <C>       <C>               <C>       <C>
      Financial assets:
        Cash and short term
         investments            $  8,931  $  8,931          $ 12,816  $ 12,816
        Securities                89,031    89,570            90,060    90,390
        Loans, net               163,009   170,048           156,441   157,340
                                $260,971  $268,549          $259,317  $260,546

      Financial liabilities:
        Deposits                $212,042  $212,171          $208,473  $208,535
        Federal funds purchased    -         -                 3,825     3,825
        Securities sold under
          agreements to
          repurchase              23,841    23,841            21,929    21,929
        Borrowed funds             -         -                 2,000     2,000

                                $235,883  $236,012          $236,227  $236,289

      Unrecognized financial
        instruments Commitments
        to extend credit        $ 24,225  $ 24,225          $ 24,214  $ 24,214
</TABLE>
<PAGE>

Note 13.  Disclosures About Fair Value of Financial Instruments,
          Continued

      The specific estimation methods and assumptions used can
      have a substantial impact on the resulting fair values of
      financial instruments. Following is a brief summary of the
      significant methods and assumptions used in the above
      table:

      Cash and short term investments:

        For those short term instruments, the carrying amount is
        a reasonable estimate of fair value.

      Securities:

        For securities held as investments, fair value equals
        quoted market price, if available. If a quoted market
        price is not available, fair value is estimated using
        quoted market prices for similar securities.

      Loans, net:

        For certain homogeneous categories of loans, such as
        residential mortgages, credit card receivables, and
        other consumer loans, fair value is estimated using the
        quoted market prices for securities backed by similar
        loans, adjusted for differences in loan characteristics.
        The fair value of other types of loans is estimated by
        discounting the future cash flows using the current
        rates at which similar loans would be made to borrowers
        with similar credit ratings and for the same remaining
        maturities.

      Deposits:

        The fair value of demand deposits, savings accounts, and
        certain money market deposits is the amount payable on
        demand at the reporting date. The fair value of fixed
        maturity certificates of deposit is estimated using the
        rates currently offered for deposits of similar
        remaining maturities.

      Securities sold under agreements to repurchase and
      borrowed funds:

        The carrying amounts of securities sold under agreements
        to repurchase and borrowed funds approximate their fair
        values.

      Commitments to extend credit and standby letters of
      credit:

        The fair value of commitments is estimated using the
        fees currently charged to enter into similar agreements,
        taking into account the remaining terms of the
        agreements and the present creditworthiness of the
        counterparties. For fixed rate loan commitments, fair
        value also considers the difference between current
        levels of interest rates and the committed rates. The
        fair value of letters of credit is based on fees
        currently charged for similar agreements or on the
        estimated cost to terminate them or otherwise settle the
        obligations with the counterparties at the reporting
        date.


<PAGE>





Note 14.Parent Company Only Financial Information

      Parent company (Bath National Corporation) only condensed
      financial information is as follows:

      Condensed Statements of Financial Condition
      December 31, 1997 and 1996


                                              1997         1996

      Assets

      Cash                               $     1,297   $     2,920

      Dividend receivable                  1,886,000       615,000

      Investment in subsidiary            31,163,993    30,391,234

            Total assets                 $33,051,290   $31,009,154


      Liabilities and Stockholders'
      Equity

      Liabilities

        Dividend payable                 $1,884,723   $   614,610
        Other liabilities                    29,163        31,951
                                          1,913,886       646,561

      Stockholders' Equity

        Common stock                      6,829,005     6,829,005
        Additional paid in capital        1,494,678     1,494,678
        Undivided profits                22,816,135    21,980,350
        Unrealized appreciation on
          available-for-sale
          securities, net                   736,902        58,560

        Treasury stock                     (739,316)         -
                                         31,137,404    30,362,593

            Total liabilities and
      stockholders' equity              $33,051,290   $31,009,154



      Condensed Statements of Operations
      Years Ended December 31, 1997, 1996 and 1995


                                             1997         1996       1995

      Revenue                             $    -      $     -      $   -

      Expenses

         Other operating expenses             2,165         1,835       4,728

      Loss before equity in earnings of
         subsidiary                          (2,165)       (1,835)     (4,728)

      Equity in earnings of subsidiary    3,535,729     3,449,914   3,383,290

      Net income                         $3,533,564    $3,448,079  $3,378,562

<PAGE>
Note 14.Parent Company Only Financial Information, Continued
<TABLE>
<CAPTION>
      Condensed Statements of Cash Flows
      Years Ended December 31, 1997, 1996 and 1995


                                              1997          1996         1995
      <S>                                   <C>          <C>          <C>
      Cash Flows from Operating Activities
        Net income                          $3,533,564   $3,448,079   $3,378,562
        Adjustments to reconcile net
           income to net cash used in
           operating activities:

              Net earnings of subsidiary    (3,535,729)  (3,449,914)  (3,383,290)
              Change in other liabilities       (2,788)      (1,392)      (3,740)
                Net cash used in operating
                  activities                    (4,953)      (3,227)      (8,468)

      Cash Flows from Investing Activities
        Cash dividend received               2,170,316    1,506,000    1,623,000

      Cash Flows from Financing Activities
        Payments for purchase of
          treasury stock                      (739,316)       -            -
        Cash dividends paid                 (1,427,670) (1,500,135)   (1,619,826)


                Net cash used in            (2,166,986) (1,500,135)   (1,619,826)
                  financing activities

      Net increase (decrease) in cash           (1,623)      2,638        (5,294)

      Cash, January 1                            2,920         282         5,576

      Cash, December 31                     $    1,297 $     2,920    $      282

</TABLE>
<PAGE>

ITEM 9.   Changes in and Disagreements with Accountants on
          Accounting and Financial Disclosures
                             None

                            Part III

ITEM 10.  Directors and Executive Officers of the Registrant

Information under this Item 10 has been included in the
Registrant's Proxy Statement, included on pages 6 through 8, for
its 1997 Annual Meeting filed with the Securities and Exchange
Commission in March 1998 and which is incorporated herein by
reference.

ITEM 11.  Executive Compensation

Information under this Item 11 has been included in the
Registrant's Proxy Statement, pages 8 through 11, for its 1998
Annual Meeting filed with the Securities and Exchange Commission
in March 1998 and which is incorporated herein by reference.

ITEM 12.  Security Ownership of certain Beneficial Owners and
          Management

Information under this Item 12 has been included in Registrant's
Proxy Statement, page 7, for its 1998 Annual Meeting filed with
the Securities and Exchange Commission in March 1998 and which is
incorporated herein by reference.

ITEM 13.  Certain Relationships and Related Transactions

Information under this Item 13 has been included in the
Registrant's Proxy Statement, page 11, for its 1998 Annual
Meeting filed with the Securities and Exchange Commission in
March 1998 and which is  incorporated herein by reference.
<PAGE>

                                 PART IV

ITEM 14.  Exhibits, Financial Statement Schedules, and Reports on
          Form 8-K

A. Finacial Statements, Financial Statement Schedules and
   Exhibits

   1. Financial Statements

      The information required under this section is located in
      Item 8 of this 10-K report.

B. Reports on Form 8-K

   No reports on form 8-K were required to be filed for the
   fourth quarter of 1997.

C.  Exhibits

The following exhibits are filed with this report.

         S-K
     Exhibit No.     Description of Exhibit

        3.1          Certificate of Incorporation*

        3.2          By-Laws of Registrant*

        4.1          Specimen Common Stock Certificate*

       10.1          Deferred Compensation Agreement*

       10.2          Severance Agreement of Robert H. Cole*

       10.3          Early Retirement Plan - Officers*

       10.4          Trustee Fee Plan*

       22            Subsidiaries of the Registrant*

       Registrant has only one subsidiary as follows:
                                 Bath National Bank
                                 Bath, New York

*Filed with Registrant's Form 10-K for the year ended December
31, 1991 and incorporated herein by reference thereto.

D. Financial Statements Schedules

   Financial Statements Schedules are omitted in this particular
   section since the required information is inapplicable or
   the required information is presented in the Consolidated
   Finacial Statements and related Notes to Consolidated Financial
   Statements presented as Item 8 in Part II.


<PAGE>

















                           SIGNATURES

Pursuant to the requirements of Section 13 of the Securities and
Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, hereunto duly
authorized as of the       day of        , 1998.

                                          BATH NATIONAL CORPORATION




                                          By:
                                            Douglas McCabe, President
                                            Chief Executive Officer

Pursuant to the requirements of the Securities and Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities
indicated all as of the      day of         1998.

Principal Executive Officer:


_____________________________
Douglas McCabe, President
Chief Executive Officer and
Director


Principal Financial and Accounting Officer:



_______________________________________
Edward C. Galpin, Vice President,
Chief Financial Officer, and Director



Directors:


____________________________
Laverne H. Billings, Director




____________________________
Theodore P. Capron, Director

<PAGE>

________________________
Herbert Fort, Director




___________________________
Lisle E. Hopkins, Director




_________________________
Lawrence Howell, Director



______________________
Constance Manikas, Director




____________________________
Robert H. Cole, Director




_____________________
Joseph F. Meade, Jr., Director




___________________________
Freeman H. Smith, III, Director




___________________________
Patrick Sullivan, Director




___________________________
Alan J. Wilcox, Director