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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                       FORM 10-Q


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

    For the quarterly period ended September 30, 1996

                                       OR

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



                          Commission File Number 0-7163


                          AMERICAN FILTRONA CORPORATION
                                  (Registrant)



            Virginia                                     54-0574583
    (State of incorporation)                    (Employer identification no.)




  3951 WESTERRE PARKWAY, SUITE 300
  RICHMOND, VIRGINIA                                          23233
        (Executive offices)                                (Zip code)



Registrant's telephone number:  804-346-2400



Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for at least the past 90 days. Yes. X No.



Number of shares of common stock outstanding as of November 7, 1996: 3,743,751





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<PAGE>



                             AMERICAN FILTRONA CORPORATION




                                         INDEX



                                                                       Page No.

          Part I. Financial Information

            Condensed Consolidated Balance Sheet                          3

            Condensed Consolidated Statement of Income                    4

            Condensed Consolidated Statement of Cash Flows                5

            Notes to Condensed Consolidated Financial
              Statements                                                  5

            Management's Discussion and Analysis of
              Financial Statements                                        6


          Part II. Other Information                                      7

          Signatures                                                      7























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<PAGE>


                          PART I. FINANCIAL INFORMATION

                          AMERICAN FILTRONA CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEET
              September 30, 1996 (Unaudited) and December 31, 1995

<TABLE>
<CAPTION>


                                                             1996             1995
                                                          -----------      ----------
                           ASSETS
<S> <C>
Current assets
   Cash and equivalents                                  $ 40,667,561     $ 34,965,864
   Accounts receivable                                     20,762,139       19,003,632
   Inventories                                             18,446,848       19,666,392
   Prepaid expenses                                         1,336,382        1,498,975
                                                         ------------     ------------
      Total current assets                                 81,212,930       75,134,863

Property, plant and equipment                              25,776,176       25,316,307

Other assets
   Excess cost over net assets of businesses acquired       4,793,803        5,096,827
   Notes receivable                                         2,434,843        2,434,843
   Other assets                                               396,637          282,767
                                                         ------------     ------------
                                                            7,625,283        7,814,437
                                                         ------------     ------------
                                                         $114,614,389     $108,265,607
                                                         ============     ============


           LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
   Accounts payable                                      $ 16,197,394     $ 14,905,395
   Accrued expenses                                         5,658,960        4,929,522
   Income taxes                                               337,217        1,054,216
                                                         ------------     ------------
      Total current liabilities                            22,193,571       20,889,133

Other liabilities
   Notes payable                                                    -          650,000
   Deferred income taxes                                     (450,810)         159,147
   Other liabilities                                        2,017,995        1,742,599
                                                         ------------     ------------
                                                            1,567,185        2,551,746

Shareholders' equity
   Common stock, $1 par value                               3,741,751        3,735,392
   Additional capital                                         887,166          758,190
   Retained earnings                                       87,207,969       81,342,934
   Cumulative translation adjustment                         (983,253)      (1,011,788)
                                                         ------------     ------------
                                                           90,853,633       84,824,728
                                                         ------------     ------------
                                                         $114,614,389     $108,265,607
                                                         ============     ============
</TABLE>



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                          AMERICAN FILTRONA CORPORATION
                   CONDENSED CONSOLIDATED STATEMENT OF INCOME
                    Periods Ended September 30, 1996 and 1995
                                   (Unaudited)
<TABLE>
<CAPTION>



                                        Three Months                     Nine Months
                                  -------------------------     ----------------------------
                                     1996          1995             1996            1995
                                  -----------   -----------     ------------    ------------
<S> <C>
Revenues
   Net sales                      $47,998,797   $43,481,450     $145,157,621    $133,074,217
   Investment income                  403,878       330,099        1,137,214         950,943
                                  -----------   -----------     ------------    ------------
                                   48,402,675    43,811,549      146,294,835     134,025,160

Costs and expenses
   Cost of products sold           38,351,626    34,854,371      116,704,914     107,792,675
   Selling, research,
      administrative and
      general                       5,409,696     4,851,297       15,895,725      14,819,039
                                  -----------   -----------     ------------    ------------
                                   43,761,322    39,705,668      132,600,639     122,611,714
                                  -----------   -----------     ------------    ------------

Income before income taxes          4,641,353     4,105,881       13,694,196      11,413,446

Income taxes                        1,625,000     1,375,000        4,800,000       4,000,000
                                  -----------   -----------     ------------    ------------

Net income                        $ 3,016,353   $ 2,730,881     $  8,894,196    $  7,413,446
                                  ===========   ===========     ============    ============


Average shares outstanding          3,741,751     3,734,059        3,740,063       3,734,425

Earnings per share                       $.81         $ .73            $2.38           $1.98

Dividends per share                      $.28         $.265            $ .81           $.765
</TABLE>

























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                          AMERICAN FILTRONA CORPORATION
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
              Nine-Month Periods Ended September 30, 1996 and 1995
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                             1996             1995
                                                          ----------       ----------
<S> <C>
Operating
   Net income                                            $ 8,894,196      $ 7,413,446
   Reconciling items
      Depreciation and amortization                        4,601,829        4,643,176
      Deferred income taxes                                 (609,957)         188,829
      Increase (decrease) from noncash working
         capital                                             928,068          (99,628)
      Other - net                                            148,352          249,268
                                                         -----------      -----------
                                                          13,962,488       12,395,091

Investing
   Acquisitions of property, plant and equipment          (4,716,965)      (3,185,045)
   Increase in notes receivable                                    -          (84,388)
                                                         -----------      -----------
                                                          (4,716,965)      (3,269,433)

Financing
   Decrease in notes payable                                (650,000)        (650,000)
   Issuance of common stock                                  135,335           57,950
   Repurchase of common stock                                      -         (138,125)
   Dividends paid                                         (3,029,161)      (2,857,296)
                                                         -----------      -----------
                                                          (3,543,826)      (3,587,471)
                                                         -----------      -----------
Net increase in cash and equivalents                     $ 5,701,697      $ 5,538,187
                                                         ===========      ===========
</TABLE>


                  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE A. BASIS OF PRESENTATION

The accompanying  unaudited condensed  consolidated financial statements include
all adjustments (consisting only of normal recurring accruals) which the Company
considers  necessary  to  present  fairly  the  financial  position,  results of
operations, and cash flows for the interim periods.

The results of operations for the nine-month period ended September 30, 1996 are
not necessarily indicative of the results to be expected for the entire year.

The financial  statements have been prepared in accordance with  instructions to
Form 10-Q and, therefore, do not include all information and notes necessary for
a fair presentation in conformity with generally accepted accounting principles.
For additional  information regarding significant  accounting policies and other
financial data see the Company's December 31, 1995 Form 10-K.










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NOTE B. INVENTORIES

At  September  30, 1996 and  December  31,  1995  inventories  consisted  of (in
thousands):

                                           1996        1995
                                         -------     -------
FIFO
   Finished products                     $10,284     $ 8,886
   Work in process                         1,412       1,408
   Raw materials                           9,362      11,622
                                         -------     -------
                                          21,058      21,916
Less excess of FIFO over LIFO
   inventory value                         2,611       2,250
                                         -------     -------
                                         $18,447     $19,666
                                         =======     =======

Inventories stated at LIFO approximated $8,426 (1995 - $10,559).


          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL STATEMENTS

BALANCE SHEET

The Company's  strong financial  condition and liquidity  continued in the first
nine months of 1996.  Cash and  equivalents  represented  35% of total assets at
September  30, 1996  compared to 32% at December 31, 1995.  The ratio of current
assets to current  liabilities  was 3.7 at September 30, 1996 compared to 3.6 at
December 31, 1995.

INCOME STATEMENT

Comparison Between Three-Month and Nine-Month Periods Ended September 30, 1996
and 1995

Net sales  increased  10%  between  the third  quarters  and 9% between the nine
months of each year. The bonded fibers segment posted higher sales for the third
quarter in each of its product lines. The plastic products segment's solid sales
growth for the third quarter was at approximately  the same rate for the plastic
extrusion companies and the Canadian flexible packaging company.

Investment  income  increased 22% between the third quarters and 20% between the
nine months of each year as a result of the higher level of  investments,  which
more than offset lower yields.

Costs and expenses  increased 10% between the third  quarters and 8% between the
nine months of each year.  Cost of products sold  increased at a slightly  lower
rate than the sales  increase.  Selling,  research,  administrative  and general
expenses  increased at a somewhat  higher rate than sales for the third  quarter
and at a lower rate than sales for the nine months.

The bonded fibers  segment's  third quarter  operating  earnings  increased very
substantially  as  a  result  of  the  sales  increase  and  improved  operating
efficiencies. In the plastic products segment, earnings of the plastic extrusion
companies increased  substantially.  The Canadian flexible packaging company had
improved operating earnings;  however, overall performance was below last year's
third quarter because of a one-time  recovery of costs from settling  litigation
of approximately $1,200,000 pretax received in that quarter.

The combination of the above factors  resulted in pretax income increases of 13%
between the third quarters and 20% between the nine months of each year.



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Income  taxes  increased  18% between the third  quarters  because of the higher
level of income and the  effects of the  litigation  recovery  in the 1995 third
quarter.  Income  taxes  increased  20%  between  the nine  months  of each year
reflecting  the higher  level of  income.  Therefore,  net  income  and  related
earnings per share  increased 11% between the third quarters and 20% between the
nine months of each year.


                           PART II. OTHER INFORMATION


Item 6.  Exhibits and Reports on Form 8-K

     (b) Reports  on Form 8-K -- There were no reports on Form 8-K filed for the
         three months ended September 30, 1996.





                                     SIGNATURES


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



                                      AMERICAN FILTRONA CORPORATION
                                              (Registrant)





Date     November 7, 1996            /s/ John D. Barlow, Jr.
                                     --------------------------------
                                     John D. Barlow, Jr., Vice President-Finance
                                     (Chief Financial Officer)



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