UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

                                  FORM 10-KSB

[x]  ANNUAL REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934 [FEE REQUIRED]

For the fiscal year ended December 31, 1995

                                       OR

[ ]  TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 [NO FEE REQUIRED]

For the transition period from _____________to________________

Commission file Number:  2-88927

                           FIRST KEYSTONE CORPORATION
                 (Name of small business issuer in its charter)

PENNSYLVANIA                                 23-2249083
(State or other jurisdiction of              (I.R.S. Employer
incorporation or organization)               Identification
                                             Number)

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

Issuer's telephone number, including area code:  (717) 752-3671

Securities registered pursuant to Section 12(b) of the Act:  Not Applicable

Securities registered pursuant to Section 12(g) of the Act:  Common Stock,
par value $2.00 per share.

          Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past
90 days.  
                                 Yes  X   No______

          Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B contained in this form, and no disclosure
will 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-KSB or any amendment to this Form 10-KSB.  [ ]

          The issuer's revenues for the year ended December 31, 1995, are
$17,605,694.

          The aggregate market value of the voting stock held by non-
affiliates computed by reference to the price as of March 18, 1996, is
$26,939,700.

          The number of shares outstanding of the issuer's Common Stock, as
of March 18, 1996, was 889,147 shares of Common Stock, par value $2.00 per
share.

                      DOCUMENTS INCORPORATED BY REFERENCE

Parts I and III     -    Definitive Proxy Statement, Notice of Annual
                         Meeting and Form of Proxy for the Annual Meeting
                         of Shareholders to be held April 16, 1996.
Part II             -    Annual Report to Shareholders for Fiscal Year
                         Ended December 31, 1995.


<PAGE>

                           FIRST KEYSTONE CORPORATION
                                  FORM 10-KSB

                                     PART I


Item 1.   DESCRIPTION OF THE BUSINESS


               General
                      

          First Keystone Corporation (the "Corporation"), a Pennsylvania
business corporation, is a bank holding company, registered with and
supervised by the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board").  The Corporation was incorporated on July 6,
1983, and commenced operations on July 2, 1984, upon consummation of the
acquisition of all of the outstanding stock of The First National Bank of
Berwick (the "Bank").  Since commencing operations, the Corporation's
business has consisted primarily of managing and supervising the Bank, and
its principal source of income has been dividends paid by the Bank.  The
Corporation has one wholly-owned subsidiary, the Bank.  At December 31,
1995, the Corporation had total consolidated assets, deposits and
stockholders' equity of approximately $226.0 million, $187.3 million and
$25.4 million, respectively.

          The Bank was organized in 1864.  The Bank is a national banking
association that is a member of the Federal Reserve System and the deposits
of which are insured by the Federal Deposit Insurance Corporation (the
"FDIC").  The Bank, having five branch locations (three branches within
Columbia County and two branches within Luzerne County, Pennsylvania), is a
full service commercial bank providing a wide range of services to
individuals and small to medium sized businesses in its Northeastern
Pennsylvania market area, including accepting time, demand, and savings
deposits and making secured and unsecured commercial, real estate and
consumer loans.

          FKC Realty Corporation commenced operations July 2, 1984.  It's
major asset is a parcel of real estate currently utilized for parking
located in Berwick, Pennsylvania and its only source of income is parking
fees.  On December 29, 1995, FKC Realty, Inc., a wholly owned realty
subsidiary of the Corporation, was liquidated.  Transfer of assets in
liquidation were at book value to the Corporation and bank subsidiary.  No
gain or loss is recognized in these consolidated financial statements.


          Supervision and Regulation - Corporation
                                                  

          The Corporation is subject to the jurisdiction of the Securities
and Exchange Commission ("SEC") and of state securities laws administrators
for matters relating to the offering and sale of its securities.  The
Corporation is currently subject to the SEC's rules and regulations
relating to periodic reporting in accordance with Section 13 of the
Securities Exchange Act of 1934.  Furthermore, the Company qualifies as a
"small business issuer" as that term is defined under Item 10 of Regulation
S-B of the SEC, and has elected to make its SEC filings under the
disclosure requirements afforded to small business issuers.

                                       1

<PAGE>

          The Corporation is also subject to the provisions of the Bank
Holding Company Act of 1956, as amended ("Bank Holding Company Act"), and
to supervision by the Federal Reserve Board.  The Bank Holding Company Act
requires the Corporation to secure the prior approval of the Federal
Reserve Board before it owns or controls, directly or indirectly, more than
5% of the voting shares of substantially all of the assets of any
institution, including another bank.  In addition, the Bank Holding Company
Act has been amended by the Riegle-Neal Interstate Banking and Branching
Efficiency Act which permits bank holding companies to acquire a bank
located in any state, subject to certain limitations and restrictions as
more fully described below.

          A bank holding company is prohibited from engaging in or
acquiring direct or indirect control of more than 5% of the voting shares
of any company engaged in non-banking activities unless the Federal Reserve
Board, by order or regulation, has found such activities to be so closely
related to banking or managing or controlling banks as to be a proper
incident thereto.  In making this determination, the Federal Reserve Board
considers whether the performance of these activities by a bank holding
company would offer benefits to the public that outweigh possible adverse
effects.

          The Bank Holding Company Act also prohibits acquisitions of
control of a bank holding company, such as the Corporation, without prior
notice to the Federal Reserve Board.  Control is defined for this purpose
as the power, directly or indirectly, to direct the management or policies
of a bank holding company or to vote twenty-five percent (25%) (or ten
percent (10%), if no other person or persons acting on concert, holds a
greater percentage of the Common Stock) or more of the Corporation's Common
Stock.

          The Corporation is required to file an annual report with the
Federal Reserve Board and any additional information that the Federal
Reserve Board may require pursuant to the Bank Holding Company Act.  The
Federal Reserve Board may also make examinations of the Corporation and any
or all of its subsidiaries.  Further, under Section 106 of the 1970
amendments to the Bank Holding Company Act and the Federal Reserve Board's
regulations, a bank holding company and its subsidiaries are prohibited
from engaging in certain tie-in arrangements in connection with any
extension of credit or provision of credit or provision of any property or
services.  The so-called "Anti-tie-in" provisions state generally that a
bank may not extend credit, lease, sell property or furnish any service to
a customer on the condition that the customer provide additional credit or
service to the bank, to its bank holding company or to any other subsidiary
of its bank holding company or on the condition that the customer not
obtain other credit or service from a competitor of the bank, its bank
holding company or any subsidiary of its bank holding company.  

          Subsidiary banks of a bank holding company are 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, on investments in
the stock or other securities of the bank holding company and on taking of
such stock or securities as collateral for loans to any borrower.

                                       2

<PAGE>

          Permitted Non-Banking Activities
                                          

          The Federal Reserve Board permits bank holding companies to
engage in non-banking activities so closely related to banking, managing or
controlling banks as to be a proper incident thereto.  The Corporation does
not at this time engage in any of these non-banking activities, nor does
the Corporation have any current plans to engage in any other permissible
activities in the foreseeable future.


          Legislation and Regulatory Changes
                                            

          From time to time, legislation is enacted which has the effect of
increasing the cost of doing business, limiting or expanding permissible
activities or affecting the competitive balance between banks and other
financial institutions.  Proposals to change the laws and regulations
governing the operations and taxation of banks, bank holding companies and
other financial institutions are frequently made in Congress, and before
various bank regulatory agencies.  No prediction can be made as to the
likelihood of any major changes or the impact such changes might have on
the Corporation and its subsidiary bank.  Certain changes of potential
significance to the Corporation which have been enacted recently and others
which are currently under consideration by Congress or various regulatory
agencies are discussed below.

          On September 29, 1994, President Clinton signed into law the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Interstate Banking and Branch Act").  The legislation permits interstate
banking twelve months after its enactment into law.  Bank holding
companies, pursuant to an amendment to the Bank Holding Company act, can
acquire a bank located in any state, as long as the acquisition does not
result in the bank holding company controlling more than 10 percent of the
deposits in the United States, or 30 percent of the deposits in the target
bank's state.  The legislation permits states to waive the concentration
limits and require tat the target institution be in existence for up to
five years before it can be acquired by an out-of-state bank or bank
holding company.  Interstate branching and merging of existing banks is
permitted after three years from the enactment of the Interstate Banking
and Branching Act, if the bank is adequately capitalized and demonstrates
good management.  Branch merging will be permitted earlier if a state
undertakes to enact a law which allows it and states may also enact a law
to permit banks to branch de novo.  See also, pages 17 and 18 of
Registrant's 1995 Annual Report, which is incorporated by reference herein. 
The Interstate Banking and Branching Act also amends the International
Banking Act to allow a foreign bank to establish and operate a federal
branch or agency upon approval of the appropriate federal and state banking
regulator.  As a national bank, the Bank currently can relocate its main
office across state lines by utilizing a provision in the National Bank Act
which permits such relocation to a location not more than thirty miles from
its existing main office.  In effect, a national bank can thereby move
across state lines as long as the relocation does not exceed thirty miles,
and also retain as branches the offices located in the original state.

          The Federal Reserve Board, the FDIC and the Comptroller of the
Currency ("Comptroller") have issued certain risk-based capital guidelines,
which supplement existing capital requirements.  The guidelines require all
United States banks and bank holding companies to maintain a minimum risk-
based capital ratio of 8 percent (of which at least 4 percent must be 


                                       3

<PAGE>

in the form of common stockholders' equity).  Assets are assigned to five
risk categories, with higher levels of capital being required for the
categories perceived as representing greater risk.  The required capital
will represent equity and (to the extent permitted) nonequity capital as a
percentage of total risk-weighted assets.  The risk-based capital rules are
designed to make regulatory capital requirements more sensitive to
differences in risk profiles among banks and bank holding companies and to
minimize disincentives for holding liquid assets.  On the basis of an
analysis of the rules and the projected composition of the Registrant's
consolidated assets, it is not expected that such risk-based capital rules
will have a material effect on the Registrant's business and capital plans. 
The Bank has capital ratios exceeding the regulatory requirements.


<TABLE>

               Regulatory Capital Requirements
                                              

<CAPTION>

          The following table presents the Corporation's capital ratios at
December 31, 1995:

<S>                                                 <C>
Tier I Capital                                      $ 23,335,000
Tier II Capital                                        1,681,000
Total Capital                                         25,016,000

Adjusted Total Average Assets                       $220,848,000
Total Adjusted Risk-Weighted Assets <F1>             134,117,000

Tier I Risk-Based Capital Ratio <F2>                      17.40%
Required Tier I Risk-Based Capital Ratio                   4.00%
Excess Tier I Risk-Based Capital Ratio                    13.40%

Total Risk-Based Capital Ratio <F3>                       18.65%
Required Total Risk-Based Capital Ratio                    8.00%
Excess Total Risk-Based Capital Ratio                     10.65%

Tier I Leverage Ratio <F4>                                10.22%
Required Tier I Leverage Ratio                             3.00%
Excess Tier I Leverage Ratio                               7.22%
______________________________
<FN>
<F1>
Includes off-balance sheet items at credit-equivalent values.
<F2>
Tier I Risk-Based Capital Ratio is defined as the ratio of Tier I Capital
to Adjusted Total Risk-Weighted Assets.
<F3>
Total Risk-Based Capital Ratio is defined as the ratio of Tier I and Tier
II Capital to Total Adjusted Risk-Weighted Assets.
<F4>
Tier I Leverage Ratio is defined as the ratio of Tier I Capital to Adjusted
Total Average Assets.

</FN>
</TABLE>


          The Corporation was required to implement, on January 1, 1995,
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" ("FASB 115").  For
regulatory capital reporting purposes, FASB 115 changed the composition of
stockholders' equity in financial statements prepared in accordance with
generally accepted accounting principles by including as a separate
component of equity the 

                                       4

<PAGE>

amount of net unrealized holding gains or losses on debt and equity
securities that are deemed to be available-for-sale.  The implementation of
FASB 115 did not have a material effect during 1995 on the regulatory
capital ratios of the Corporation.

          Effective January 27, 1995, the FDIC has issued a final rule with
respect to the implementation of FASB 115 for regulatory capital reporting
purposes.  Under this final rule, net unrealized holding losses on
available-for-sale equity securities (but not debt securities) with readily
determinable fair values will be included (i.e., deducted) when calculating
the Corporation's consolidated Tier I Capital.  All other unrealized
holding gains and losses on available-for-sale securities will be excluded
(i.e., not deducted) from the Corporation's consolidated Tier I Capital. 
Based upon the composition of the Corporation's investment portfolio as of
the filing date of this report, such final rule will have no material
effect on the Corporation's Tier I Capital.

          The Corporation's ability to maintain the required levels of
capital is substantially dependent upon the success of the Corporation's
capital and business plans; the impact of future economic events on the
Corporation's loan customers; and the Corporation's ability to manage its
interest rate risk and investment portfolio and control its growth and
other operating expenses.


          Pending Legislation
                             

          Various congressional bills and other proposals have proposed a
sweeping overhaul of the banking system, including provision for: 
limitations on deposit insurance coverage; changing the timing and method
financial institutions use to pay for deposit insurance; expanding the
poser of banks by removing the restriction on bank underwriting activities;
and tightening the regulation of bank derivatives activities; allowing
commercial enterprises to own banks.  Set forth below are some of the
proposals advanced by the federal banking agencies.

          Congress is currently considering legislative reform centered on
repealing the Glass-Steagall Act which prohibits commercial banks from
engaging in the securities industry.  During the course of the legislative
reform, three major initiatives have been proposed to remove these
barriers.  All three initiatives include various firewalls to protect the
integrity of the insured financial institution.  The initiative, proposed
by the House Banking Committee Chairman, James Leach, is the most
significant.  Leach's proposal, which has been adopted by the House Banking
Committee, would require a financial services holding company structure
which would be permitted to own a bank an a separately capitalized
securities firm.  Banks, however, would be prohibited from affiliating with
insurance companies or non-financial firms.  The holding company would be
regulated by the Federal Reserve Board, and its subsidiaries would be
supervised by the applicable regulator based on their respective functions. 
Alternatively, the proposal would also allow a securities firm to establish
an investment bank holding company to own an uninsured wholesale financial
institution and a securities unit.

          Legislation providing regulatory relief to banks was introduced
in late 1995 by Senator Alfonse D'Amato.  The legislation would cut the
banking industry's paper work, protect institutions from environmental
lender 

                                       5

<PAGE>

liability, extend the examination cycle for healthy banks with assets of
less than $250 million to two years, and expand the exemption from Home
Mortgage Data reporting to banks with $50 million in assets or less.  The
legislation, however, also includes measures requiring banks to disclose to
consumers their credit reports.

          The Comptroller is proposing to revise regulations governing
national bank's fiduciary activities.  The proposal would abolish a number
of restrictions on the way national banks pay trust customers withdrawing
collective investment funds (collective investment funds allow banks to
pool their trust accounts, rather than investing the money in each account
separately).  Currently, national banks are required to pay trust customers
in cash or a proportional share of the investments in the fund or a
combination of both.  The proposal abolishes this requirement.  Instead,
the Comptroller would defer to state fiduciary laws, state courts, or the
specific terms of the collective investment fund.  The proposal would also
allow national banks that manage collective investment funds to delegate
investment decisions to affiliated or unaffiliated advisors.

          Management has no way of anticipating whether these measures will
be enacted or if enacted, their impact on the Company's financial position
and reported results of operation.  As a consequence of the extensive
regulation of commercial banking activities in the United States, the
Company's and the Bank;'s business is particularly susceptible to being
affected by federal and state legislation and regulations that may increase
the costs of doing business.  Se also, page 18 of Registrant's 1995 Annual
Report, which is incorporated herein by reference.

          Effects of Inflation
                              

          Inflation has some impact on the company's and the Bank's
operating costs.  Unlike many industrial companies, however, substantially
all of the Bank's assets and liabilities are monetary in nature.  As a
result, interest rates have a more significant impact on the Company's and
the Bank's performance than the general level of inflation.  Over short
periods of time, interest rates may not necessarily move in the same
direction or in the same magnitude as prices of goods and services.


          Effect of Government Monetary Policies
                                                

          The earnings of the Corporation are and will be affected by
domestic economic conditions and the monetary and fiscal policies of the
United States government and its agencies.  

          The monetary policies of the Federal Reserve Board have had, and
will likely continue to have, an important impact on the operating results
of commercial banks through its power to implement national monetary policy
in order, among other things, to curb inflation or combat a recession.  The
Federal Reserve Board has a major effect upon the levels of bank loans,
investments and deposits through its open market operations in United
States government securities and through its regulations of, among other
things, the

                                       6

<PAGE>

discount rate on borrowings of member banks and the reserve requirements
against member bank deposits.  It is not possible to predict the nature and
impact of future changes in monetary and fiscal policies.


          Environmental Regulation
                                  

          There are several federal and state statutes which regulate the
obligations and liabilities of financial institutions pertaining to
environmental issues.  In addition, to the potential for attachment of
liability resulting from its own actions, a bank may be held liable under
certain circumstances for the actions of its borrowers, or third parties,
when such actions result in environmental problems on properties that
collateralize loans held by the bank.  Further, the liability has the
potential to far exceed the original amount of the loan issued by the Bank. 
Currently, neither the Corporation nor the Bank is a party to any pending
legal proceeding pursuant to any environmental statute, nor is the
Corporation and the Bank aware of any circumstances which may give rise to
liability under any such statute.


          History and Business - Bank
                                     

          The Bank's legal headquarters are located at 111 West Front
Street, Berwick, Pennsylvania.

          As of December 31, 1995, the Bank had total assets of
$224,995,788, total shareholders' equity of $20,935,255 and total deposits
and other liabilities of $204,060,533.

          The Bank engages in a full-service commercial banking business,
including accepting time and demand deposits, and making secured and
unsecured commercial and consumer loans.  The Bank's business is not
seasonal in nature.  Its deposits are insured by the FDIC to the extent
provided by law.

          At December 31, 1995, the Bank had seventy-four (76) full-time
employees and thirty-three (30) part-time employees.  In the opinion of
management, the Bank enjoys a satisfactory relationship with its employees. 
The Bank is not a party to any collective bargaining agreement.


          Competition - Bank
                            

          The Bank competes actively with other area commercial banks and
savings and loan associations, many of which are larger than the Bank, as
well as with major regional banking and financial institutions.  The Bank's
major competitors in its home county of Columbia are:  First Columbia Bank
& Trust Co. of Bloomsburg, PNC Bank, N.A., CCFNB, Mellon Bank, N.A. of
Wilkes-Barre and Franklin First Savings Bank of Wilkes-Barre.  Except with
respect to First Columbia Bank & Trust Co. and CCFNB, all of the Bank's
major competitors are larger than it in terms of assets.  The Bank is
generally competitive with all competing financial institutions in its
service area with respect to interest rates paid on time and savings
deposits, service charges on deposit accounts and interest rates charged on
loans.

                                       7

<PAGE>

          Supervision and Regulation - Bank
                                           

          The operations of the Bank are subject to federal and state
statutes applicable to banks chartered under the banking laws of the United
States, to members of the Federal Reserve System and to banks whose
deposits are insured by the FDIC.  Bank operations are also subject to
regulations of the OCC, the Federal Reserve Board and the FDIC.

          The primary supervisory authority of the Bank is the OCC, which
regulates and examines the Bank.  The OCC has the authority under the
Financial Institutions Supervisory Act to prevent a national bank from
engaging in an unsafe or unsound practice in conducting its business.

          Federal and state banking laws and regulations govern, among
other things, the scope of a bank's business, the investments a bank may
make, the reserves against deposits a bank must maintain, loans a bank
makes and collateral it takes, and the activities of a bank with respect to
mergers and consolidations and the establishment of branches.  

          As a subsidiary of a bank holding company, the Bank is subject to
certain restrictions imposed by the Federal Reserve Act on any extensions
of credit to the bank holding company or its subsidiaries, on investments
in the stock or other securities of the bank holding company or its
subsidiaries and on taking such stock or securities as collateral for
loans.  The Federal Reserve Act and Federal Reserve Board regulations also
place certain limitations and reporting requirements on extensions of
credit by a bank to principal shareholders of its parent holding company,
among others, and to related interests of such principal shareholders.  In
addition, such legislation and regulations may affect the terms upon which
any person becoming a principal shareholder of a holding company may obtain
credit from banks with which the subsidiary bank maintains a correspondent
relationship.

          From time to time, various types of federal and state legislation
have been proposed that could result in additional regulations of, and
restrictions on, the business of the Bank.  It cannot be predicted whether
any such legislation will be adopted or how such legislation would affect
the business of the Bank.  As a consequence of the extensive regulation of
commercial banking activities in the United States, the Bank's business is
particularly susceptible to being affected by federal legislation and
regulations that may increase the costs of doing business.  

          Under the Federal Deposit Insurance Act, the OCC possesses the
power to prohibit institutions regulated by it (such as the Bank) from
engaging in any activity that would be an unsafe and unsound banking
practice and in violation of the law.

          Under the Community Reinvestment Act of 1977, as amended ("CRA"),
the Comptroller is required to assess the record of all financial
institutions regulated by it to determine if these institutions are meeting
the credit needs of the community (including low and moderate income
neighborhoods) which they serve and to take this record into account in its
evaluation of any application made by any of such institutions for, among
other things, approval of a branch or other deposit facility, office
relocation, a merger or any acquisition of bank shares.  The Financial
Institutions Reform, Recovery and Enforcement Act

                                       8

<PAGE>

of 1989 amended the CRA to require, among other things that the Comptroller
make publicly available the evaluation of a bank's record of meeting the
credit needs of its entire community, including low and moderate income
neighborhoods.  This evaluation will include a descriptive rating
("outstanding", "satisfactory", "needs to improve" or "substantial
noncompliance") and a statement describing the basis for the rating.  These
ratings are publicly disclosed.

          In April 1995, regulators revised the CRA with an emphasis on
performance over process and documentation.  Under the revised rules, the
five-point rating scale is still utilized; however, the 12 assessment
factors have been replaced with a three-prong test whereby examiners assign
a numerical score for a bank's performance in each of three areas: 
lending, service and investment.  The area of lending is weighted to
increase its importance in the application of the test.  The rule became
effective July 1, 1995.

          Under the Federal Deposit Insurance Corporation Improvement Act
of 1991 ("FDICIA"), institutions must be classified in one of five defined
categories as illustrated below (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized).

<TABLE>
<CAPTION>

                             Total        Tier 1                      Under a
                             Risk-        Risk-        Tier 1         Capital
                             Based        Based        Leverage       Order 
                             Ratio        Ratio        Ratio          of
                                                                      Direc-
                                                                      tive
                                                                               
<S>                          <C>          <C>          <C>              <C>
CAPITAL CATEGORY
Well capitalized             > = 10.0     > = 6.0      > = 5.0          No
Adequately capitalized       > = 8.0      > = 4.0      > = 4.0 <F1>
Undercapitalized             <8.0         <4.0         <4.0 <F1>
Significantly 
   undercapitalized          <6.0         <3.0         <3.0
Critically
   undercapitalized                                    < = 2.0
                     
<FN>
<F1>
3.0 for those banks having the highest available regulatory rating.

</FN>
</TABLE>

                                       9

<PAGE>

          In the event an institution's capital deteriorates to the
undercapitalized category or below, FDICIA prescribes and increasing amount
of regulatory intervention, including: (1) the institution by a bank of a
capital restoration plan and a guarantee of the plan by a parent
institution; and (2) the placement of a hold on increases in assets, number
of branches or lines of business.  If capital has reached the significantly
or critically undercapitalized levels, further material restrictions can be
imposed, including restrictions on interest payable on accounts, dismissal
of management and (in critically undercapitalized situations) appointment
of a receiver.  For well capitalized institutions, FDICIA provides
authority for regulatory intervention where the institution is deemed to be
engaging in unsafe or unsound practices or receives a less than
satisfactory examination report rating for asset quality, management,
earnings or liquidity.  All but well capitalized institutions are
prohibited from accepting brokered deposits without prior regulatory
approval.

          Under FDICIA, financial institutions are subject to increased
regulatory scrutiny and must comply with certain operational, managerial
and compensation standards to be developed by Federal Reserve Board
regulations.  FDICIA also requires the regulators to issue new rules
establishing certain minimum standards to which an institution must adhere
including standards requiring a minimum ratio of classified assets to
capital, minimum earnings necessary to absorb losses and minimum ratio of
market value to book value for publicly held institutions.  Additional
regulations are required to be developed relating to internal controls,
loan documentation, credit underwriting, interest rate exposure, asset
growth and excessive compensation, fees and benefits.

          Annual full-scope, on site examinations are required for all the
FDIC-insured institutions except institutions with assets under $100
million which are well capitalized, well-managed and not subject to a
recent change in control, in which case, the examination period is every 18
months.  Banks with total assets of $500 million or more as of the
beginning of the fiscal year, are required to submit to their supervising
federal and state banking agencies a publicly available annual audit
report.  The independent accountants of such bank shall attest to the
accuracy of management's report.  The accounts shall also monitor
management's compliance with governing laws and regulations.  In addition,
such bank also is required to select an independent audit committee
composed of outside directors who are independent of management, to review
with management and the independent accountants, the reports that must be
submitted to the bank regulatory agencies.  If the independent accountants
resign or are dismissed, written notification must be given to the bank's
supervising government banking agencies.

          FDICIA also requires that banking agencies reintroduce loan-to-
value ("LTV") ratio regulations which were previously repealed by the 1982
Act.  LTV's will limit the amount of money a financial institution may lend
to a borrower, when the loan is secured by real estate, to no more than a
percentage to be set by regulation of the value of the real estate.

          A separate subtitle within FDICIA, called the "Bank Enterprise
Act of 1991", requires "truth-in-savings" on consumer deposit accounts so
that consumers can make meaningful comparisons between the competing claims
of banks with regard to deposit accounts and products.  Under this
provision, the Bank is required to provide information to depositors
concerning the terms of their 
                                       10

<PAGE>

deposit accounts, and in particular, to disclose the annual percentage
yield.  There are some operational costs of complying with the Truth-In-
Savings law.

          Management believes that full implementation of FDICIA has had no
material impact on liquidity, capital resources or reported results of
operation.  If FDIC insurance premiums assessments increase in the future,
Management believes such future increase many have a material impact on
future reported results of operations.

          Under the Bank Secrecy Act ("BSA"), the Bank is required to
report to the Internal Revenue Service currency transactions of more than
$10,000 or multiple transactions of which the Bank is aware in any one day
that aggregate in excess of $10,000.  Civil and criminal penalties are
provided under the BSA for failure to file a required report, for failure
to supply information required by the BSA or for filing a false or
fraudulent report. 

          From time to time, various types of federal and state legislation
have been proposed that could result in additional regulation of, and
restrictions on, the business of the Bank.  It cannot be predicted whether
any such legislation will be adopted or, if adopted, how such legislation
would affect the business of the bank.  As a consequence of the extensive
regulation of commercial banking activities in the United States, the
Bank's business is particularly susceptible to being affected by federal
legislation and regulations that may increase the costs of doing business.


          Concentration
                       

          The Corporation and Bank are not dependent for deposits nor
exposed by loan concentrations to a single customer or to a small group of
customers the loss of any one or more of which would have a materially
adverse effect on the financial condition of the Corporation or the Bank.

<TABLE>

ITEM 2.  DESCRIPTION OF PROPERTIES

         The Corporation owns no property other than through its subsidiaries. 
These are:

<CAPTION>

                               Type of      Square
Location                       Ownership    Footage          Use
                                                                
<S>                            <C>          <C>              <C>
The First National 
Bank of Berwick 
Offices:

Columbia County, PA

111 W. Front Street, 
Berwick                        Owned        12,500           Administrative
                                                             office, banking
                                                             and trust services
                                                             and computer
                                                             department.

2nd & Market Streets,          Owned        Land Area        No buildings, held
Berwick                                                      for possible
                                                             expansion.
                                            1.45 Acres       Present use,
                                                             parking.


                                        11

<PAGE>


701 Freas Avenue, 
Berwick                        Owned        3,744            Banking services.

2401 New Berwick 
Highway, Bloomsburg            Leased       2,000            Banking services.
                               Annual
                               Rental
                               $21,800

U.S. Route 11 &                Owned        Land Area        No buildings,
Central Road,                               1.11 Acres       held for
Bloomsburg                                                   expansion.
                                                             Present use,
                                                             rental.

Third & Race Streets,          Owned        2,500            Banking services.
Mifflinville
                                            

Luzerne County, PA

Salem Township                 Owned        3,700            Banking
Post Office Address -                                        services.
400 Fowler Avenue,
Berwick

West Third Street,             Leased       2,300            Banking
Nescopeck                      Annual                        services.
                               Rental
                               $8,400


</TABLE>


          It is Management's opinion that the facilities currently utilized
are suitable and adequate for current and immediate future purposes.


ITEM 3.  LEGAL PROCEEDINGS


          The caption "Legal Matters" contained in the Corporation's Annual
Report filed as Exhibit 13 hereto is incorporated in its entirety by
reference under this Item 3.


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

          Not applicable.


                                    Part II


ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS


          The Corporation's Common Stock is traded on a limited basis in
the local over the counter market.  The following table sets forth:  (1)
the quarterly high and low prices for a share of the Corporation's Common
Stock during the periods indicated as reported by the management of the
Corporation and (2) quarterly dividends on a share of the Common Stock with
respect to each quarter since January 1, 1994.  The following quotations
represent prices

                                       12
<PAGE>

between buyers and sellers and do not include retail markup, markdown or
commission.  They may not necessarily represent actual transactions.

<TABLE>
<CAPTION>
                                          Stock Prices      
                                                      
                                                            Dividends
                                       High     Low         Declared 
                                                                    

<S>                                    <C>      <C>         <C>
1994:
First quarter                          $32.25   $32.25      $.270
Second quarter                         $35.00   $27.00      $.270
Third quarter                          $35.00   $35.00      $.270
Fourth quarter                         $35.00   $35.00      $.290

1995:
First quarter                          $35.00   $35.00      $.290
Second quarter                         $35.00   $35.00      $.290
Third quarter                          $37.00   $35.00      $.290
Fourth quarter                         $37.00   $37.00      $.310

</TABLE>

          As of December 31, 1995, the Corporation had approximately 562
shareholders of record.

          The Corporation has paid dividends since commencement of business
in 1984.  It is the present intention of the Corporation's Board of
Directors to continue the dividend payment policy; however, further
dividends must necessarily depend upon earnings, financial condition,
appropriate legal restrictions and other factors relevant at the time the
Board of Directors of the Corporation considers dividend policy.  Cash
available for dividend distributions to shareholders of the Corporation
must initially come from dividends paid by the Bank to the Corporation. 
Therefore, the restrictions on the Bank's dividend payments are directly
applicable to the Corporation.

          The OCC has issued rules governing the payment of dividends by
national banks.  Consequently, the Bank which is subject to these rules,
may not pay dividends from capital (unimpaired common and preferred stock
outstanding) but only from retained earnings after deducting losses and bad
debts therefrom.  "Bad debts" are defined as matured obligations in which
interest is past due and unpaid for ninety (90) days, but do not include
well-secured obligations that are in the process of collection. 
Previously, the Bank was permitted to add the balances in its allowance for
loan and lease losses in determining retained earnings, but the OCC's new
regulations prohibit that practice.  However, to the extent that (1) the
Bank has capital surplus in an amount in excess of common capital and
(2) if the Bank can prove that such surplus resulted from prior period
earnings, the Bank, upon approval of the OCC, may transfer earned surplus
to retained earnings and thereby increase its divided policy capacity.

          If, however, the Bank has insufficient retained earnings to pay a
dividend, the OCC's regulations allow the Bank to reduce its capital to a
specified level and to pay dividends upon receipt of the approval of the
OCC as well as that of the holders of two-thirds of the outstanding shares
of the

                                       13

<PAGE>

Common Stock.  The Bank is allowed to pay dividends no more frequently than
quarterly.  Moreover, the Bank must obtain the OCC's approval before paying
a dividend if the total of all dividends declared by the Bank in any
calendar year would exceed the total of (1) the Bank's net profits for that
year plus (2) its retained net profits for the preceding two years less
(3) any required transfers to surplus or a fund for the retirement of
preferred stock.

          The Bank may not pay any dividends on its capital stock during
the period in which it may be in default in the payment of its assessment
for the deposit insurance premium due to the FDIC, nor may it pay dividends
on Common Stock until any cumulative dividends on the Bank's preferred
stock (if any) have been paid in full.  The Bank has never been in default
in the payments of its assessments to the FDIC; and, moreover, the Bank has
no outstanding preferred stock.  In addition, under the Federal Deposit
Insurance Act (912 U.S.C. Section 1818), dividends cannot be declared and
paid if the OCC obtains a cease and desist order because such payment would
constitute an unsafe and unsound banking practice.  As of December 31,
1995, there was $4,646,920 in unrestricted retained earnings and net income
available at the Bank that could be paid as a dividend to the Corporation
under the current OCC regulations.


          Dividend Restrictions on the Corporation
                                                  

          Under the Pennsylvania Business Corporation Law of 1988, as
amended (the "BCL"), the Corporation may not pay a dividend if, after
giving effect thereto, either (a) the Corporation would be unable to pay
its debts as they become due in the usual course of business or (b) the
Corporation's total assets would be less than its total liabilities.  The
determination of total assets and liabilities may be based upon: (i)
financial statements prepared on the basis of generally accepted accounting
principles, (ii) financial statements that are prepared on the basis of
other accounting practices and principles that are reasonable under the
circumstances, or (iii) a fair valuation or other method that is reasonable
under the circumstances.


ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION


          The caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained in the Corporation's Annual
Report filed as Exhibit 13 hereto is incorporated in its entirety by
reference under this Item 6.


ITEM 7.   FINANCIAL STATEMENTS


          The Corporation's Consolidated Financial Statements and notes
thereto contained in the Annual Report filed as Exhibit 13 hereto are
incorporated in their entirety by reference under this Item 7.

                                       14

<PAGE>

ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING 
          AND FINANCIAL DISCLOSURE

          Not applicable.


                                    PART III


ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
          COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT


          The captions "Information As To Nominees, Directors and Executive
Officers," "Principal Officers of the Corporation," "Principal Officers of
the Bank" and "Compliance with Section 16(a) of the Securities Act of 1934"
contained in the Corporation's Definitive Proxy Statement filed at Exhibit
99 hereto is incorporated in their entirety by reference under this Item 9.


ITEM 10.  EXECUTIVE COMPENSATION


          The caption "Executive Compensation" contained in the
Corporation's Definitive Proxy Statement filed as Exhibit 99 hereto is
incorporated in its entirety by reference under this Item 10.


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


          The caption "Principal Beneficial Owners of the Corporation's
Stock" contained in the Corporation's Definitive Proxy Statement filed as
Exhibit 99 hereto is incorporated in its entirety by reference under this
Item 11.


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


          The information under the caption "Certain Transactions"
contained in the Corporation's Definitive Proxy Statement filed as Exhibit
99 hereto is incorporated in its entirety by reference under this Item 12.

                                       15

<PAGE>


ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K


          (a)  Exhibits required by Item 601 of Regulation S-B:


Exhibit Number Referred to
Item 601 of Regulation S-B     Description of Exhibit
                                                     

2                              None.
3i                             Hereby incorporated by reference,
                               previously
                               filed with the Commission.
3ii                            Hereby incorporated by reference,
                               previously
                               filed with the Commission.
4                              None.
9                              None.
10                             None.
11                             None.
13                             Annual Report to Shareholders for Fiscal
                               Year Ended December 31, 1995.




Exhibit Number Referred to
Item 601 of Regulation S-B     Description of Exhibit
                                                     

16                             None.
18                             None.
21                             List of Subsidiaries of the Corporation
                               filed at Exhibit 22 to Form 10-KSB for
                               the year ended December 31, 1995, and
                               hereby incorporated by reference.
23                             Consent of Independent Auditors.
24                             None.
27                             Financial Data Schedule.
99                             Definitive Proxy Statement, Notice of
                               Annual Meeting and Form of Proxy for the
                               Annual Meeting of Shareholders to be held
                               April 16, 1996.



          (b)  Reports on Form 8-K.


          The Corporation has filed no reports on Form 8-K during the last
quarter of the fiscal year ended December 31, 1995.

                                       16

<PAGE>

<TABLE>

                               INDEX TO EXHIBITS

<CAPTION>

Exhibit                Description                                 Page
                                                                       

<S>         <C>                                                     <C>
13                                                                  Annual Report to Shareholders for
            Fiscal Year Ended December 31, 1995                     22

21                                                                  List of Subsidiaries of the 
            Issuer                                                  23

23                                                                  Consent of Independent Auditors    25

27                                                                  Financial Data Schedule            27

99                                                                  Definitive Proxy Statement, Notice of 
            Annual Meeting and Form of Proxy for
            the Annual Meeting of Shareholders
            to be held April 16, 1996                               28


                                       17

<PAGE>


                                   SIGNATURES


          In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


FIRST KEYSTONE CORPORATION
 (Issuer)


By:            /s/ J. Gerald Bazewicz      
               J. Gerald Bazewicz
               President and Chief Executive Officer

Date:          March 29, 1996


          In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.



By:            /s/ John L. Coates
               John L. Coates
               Secretary and Director

Date:          March 29, 1996



By:            /s/ J. Gerald Bazewicz      
               J. Gerald Bazewicz
               President, Chief Executive
                Officer and Director
               (Chief Executive Officer
                and Principal Financial
                 Officer)

Date:          March 29, 1996

                                       18

<PAGE>



By:            /s/ John E. Arndt               
               John E. Arndt
               Director

Date:          March 29, 1996



By:            /s/ Budd L. Beyer              
               Budd L. Beyer
               Director

Date:          March 29, 1996



By:            /s/ Robert E. Bull                                   
               Robert E. Bull
               Chairman of the Board 
                and Director

Date:          March 29, 1996



By:            /s/ Dudley P. Cooley          
               Dudley P. Cooley
               Director

Date:          March 29, 1996



By:            /s/ Frederick E. Crispin, Jr.
               Frederick E. Crispin, Jr.
               Director

Date:          March 29, 1996

                                       19

<PAGE>



By:            /s/ Stanley E. Oberrender    
               Stanley E. Oberrender
               Director

Date:          March 29, 1996



By:            /s/ David R. Saracino          
               David R. Saracino
               Treasurer and Assistant Secretary
               (Principal Accounting Officer)

Date:          March 29, 1996



By:            /s/ F. Stuart Straub
               F. Stuart Straub
               Director

Date:          March 29, 1996



By:                            
               Robert J. Wise
               Director

Date:          March 29, 1996

                                       20

<PAGE>


              List of Attached Exhibits

13     Annual Report to Stockholders

21     Subsidiaries of First Keystone Corporation

23     Consent of Independent Auditors

27     Financial Data Schedule

99     Definitive Proxy Statement, Notice of Annual Meeting and Form
       of Proxy for the Annual Meeting of shareholders to be held 
       April 16, 1996

CVR    Cover letter to the SEC


                                       21

<PAGE>



</TABLE>