UNITED STATES SECURITIES AND EXCHANGE COMMISSION      
                      Washington, D. C.  20549                  
                              Form 10-Q        
        
(Mark One)         
         
[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       
                               _________________________________  
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE      
    SECURITIES EXCHANGE ACT OF 1934        
         
For the transition period from                 to          
                               _______________    _______________ 

Commission file number                  0-19214        
                     ____________________________________________ 

                     Union National Financial Corporation
_________________________________________________________________ 
           (Exact name of registrant as specified in its charter) 

 
           Pennsylvania                             23-2415179    
 ___________________________________      _______________________ 
    (State of Incorporation)             (I.R.S. Employer ID No.) 

 101 East Main Street, P.O. Box 567, Mount Joy, PA          17552 
____________________________________________________     ________ 
     (Address of principal executive offices)            Zip Code 

                            (717) 653 - 1441       
_________________________________________________________________ 
           (Registrant's telephone number, including area code)   

                             Not Applicable        
_________________________________________________________________ 
           (Former name, former address, & former fiscal year,    
                    if changes since last report)        
        
     Indicate by check mark whether the registrant (1) has filed  
all reports required to be filed by Section 13 or 15 (d) of the  
Securities Exchange Act of 1934 during the preceding 12 months    
(or for such shorter period that the registrant was required to   
file such reports), and (2) has been subject to such filing       
requirements for the past 90 days.                 Yes [X] No [ ] 
                                                   ______________ 
 
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS     
DURING THE PRECEDING FIVE YEARS:        
        
     Indicate by check mark whether the registrant has filed all  
documents and reports required to be filed by Section 12, 13, or  
15 (d) of the Securities Exchange Act of 1934 subsequent to the   
distribution of securities under a plan confirmed by a         
court.                                              Yes [ ] No[ ] 
                                                _________________ 
  
                   APPLICABLE ONLY TO CORPORATE ISSUERS        
        
     Indicate the number of shares outstanding of each of the     
issuer's classes of common stock, as of the latest practicable    
date.          
    2,376,799     shares of $.25 (par) common stock were         
_________________        
outstanding as of    October 31, 1996. 
                   ____________________         
<PAGE>      
                UNION NATIONAL FINANCIAL CORPORATION      
                             10Q INDEX                       Page 

 
                                                              #   
PART I    - FINANCIAL INFORMATION:                             
      
          - Consolidated Statements of Financial Condition    1   

          - Consolidated Statements of Income                 2   

          - Consolidated Statements of Cash Flows             3   

          - Notes to Consolidated Financial Statements        4   
       
          - Management's Discussion and Analysis of Financial     
 
          - Condition and Results of Operations             5-12  

 
   
PART II   - OTHER INFORMATION                                13   

Signature Page                                               14   

<PAGE>      
<TABLE>      
Union National Financial Corporation      
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)      
<CAPTION>      
             (In Thousands)                 9/30/96      12/31/95 
                                           ______________________ 

<S>                                           <C>          <C>    

ASSETS      
                      
Cash and Due from Banks                      $6,456      $7,214  
Federal Funds Sold                            1,250           0  
Investment Securities Held to Maturity            
(Market Value - 1996-$17,040;1995-$14,096)   17,059      13,884   
Investment Securities Available for Sale     35,417      25,553  
Loans(Net of Unearned Income)               126,633     120,417   
Less:Allowance for Loan Losses               (1,330)     (1,265)  

                                          ______________________  

   Total Net Loans                          125,303     119,152   
Premises and Equipment - Net                  5,805       5,904   
Accrued Interest Receivable                   1,365       1,217  
Deferred Income Taxes                           342         291 
Investment in Limited Partnerships            1,030       1,111  
Other Assets                                    431         331   

                                         ______________________  
    TOTAL ASSETS                           $194,458    $174,657   

                                         ======================  
LIABILITIES      
      
Deposits:      
 Noninterest-Bearing                        $15,208     $13,452   
Interest-Bearing                            142,861     129,915   

                                         ______________________  
    Total Deposits                          158,069     143,367   
Short-Term Borrowing                          3,148       3,399  
Long-Term Borrowing                          10,176       6,270  
Accrued Interest Payable                        931         763  
Other Liabilities                               381          89   

                                          _____________________  
     TOTAL LIABILITIES                      172,705     153,888   
     
STOCKHOLDER'S EQUITY      
Common Stock (Par Value $.25)                   600         600   
Shares: Authorized - 20,000,000; Issued -      
  2,398,881 in 1996 (2,400,000 in 1995)      
  Outstanding - 2,376,799 in 1996 (2,372,672       
  in 1995)      
Surplus                                       2,026       2,019  
Retained Earnings                            19,582      18,484  
Unrealized gain/(loss) on securities        
  available for sale, net of tax               (121)         93  
Less: Treasury Stock - at cost      
 (22,082 shares in 1996 and 27,328 shares       
  in 1995)                                     (334)       (427)  
                                          ______________________  
     TOTAL STOCKHOLDER'S EQUITY              21,753      20,769   
                                          ______________________  

    TOTAL LIABILITIES AND       
     STOCKHOLDER'S EQUITY                  $194,458    $174,657   
                                          ======================  
 
   
The accompanying notes are an integral part of the       
consolidated financial statements.      
      
</TABLE>      
      
<PAGE>      
      
<TABLE>      
Union National Financial Corporation      
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)      
<CAPTION>                                  
                                 Three Months Ended September 30, 

                                              1996       1995     
<S>                                            <C>        <C>     
(In thousands, except per share data)       
      
INTEREST INCOME      
Interest and Fees on Loans                   $2,824      $2,692  
Investment Securities:      
Taxable                                         553         387   
Exempt from Federal Taxes                       216         172  
Deposits in Banks                                 1           2  
Federal Funds Sold                               32           6   
                                            _____________________ 
  Total Interest Income                       3,626       3,259   
INTEREST EXPENSE      
Deposits                                      1,477       1,295  
Short-Term Borrowing                             42          14  
Long-Term Debt                                  131          53   
                                            _____________________ 
   Total Interest Expense                     1,650       1,362   
                                            _____________________ 
   Net Interest Income                        1,976       1,897   
PROVISION for LOAN LOSSES                        49          61   
                                            _____________________
Net Interest Income after Provision       
  for Loan Losses                             1,927       1,836  
OTHER OPERATING INCOME      
Trust Income                                     23          40  
Service Charges on Deposit Accounts              83          73 
Other Service Charges, Commissions, Fees         79          65  
Investment Securities Gains/(Losses)             (3)          0  
Other Income                                      4           8   
                                            _____________________ 
    Total Other Operating Income                186         186   
OTHER OPERATING EXPENSES       
Salaries and Wages                              651         611  
Retirement Plan and Other Employee Benefits     191         180  
Net Occupancy Expense                           138         117  
Furniture and Equipment Expense                  92          72  
FDIC Insurance Assessment/(Reimbursement)         1          (9)  
Other Operating Expenses                        394         389   
                                            _____________________ 
    Total Other Operating Expenses            1,467       1,360   
                                            _____________________ 

Income before Income Taxes                      646         662   
PROVISION for INCOME TAXES                      101         136  
                                            _____________________ 
    NET INCOME for PERIOD                      $545        $526 
                                            ===================== 

PER SHARE INFORMATION      
 Net Income for Period                        $0.23       $0.22   
 Cash Dividends                              $0.085      $0.060   
Average Common Shares Outstanding         2,376,374   2,379,393   
  
<CAPTION>  
                                 Nine months ended September 30, 
                                               1996       1995    
<S>                                            <C>        <C>     
  
(In thousands, except per share data)       
INTEREST INCOME      
Interest and Fees on Loans                   $8,327      $7,749  
Investment Securities:      
Taxable                                       1,515       1,209   
Exempt from Federal Taxes                       616         476  
Deposits in Banks                                 2           2  
Federal Funds Sold                               81          23   
                                            _____________________ 
 Total Interest Income                       10,541       9,459 
INTEREST EXPENSE      
Deposits                                      4,284       3,627  
Short-Term Borrowing                             74          60  
Long-Term Debt                                  340          70   
                                         ______________________   
 Total Interest Expense                       4,698       3,757   
                                         ______________________   
 Net Interest Income                          5,843       5,702  
PROVISION for LOAN LOSSES                        98         108   
                                         ______________________ 
Net Interest Income after Provision       
  for Loan Losses                             5,745       5,594 
OTHER OPERATING INCOME      
Trust Income                                     70         122  
Service Charges on Deposit Accounts             236         217  
Other Service Charges, Commissions, Fees        218         183  
Investment Securities Gains/(Losses)              0           1  
Other Income                                     58          46   
                                            _____________________ 
    Total Other Operating Income                582         569  
OTHER OPERATING EXPENSES       
Salaries and Wages                            1,934       1,764  
Retirement Plan and Other Employee Benefits     594         560  
Net Occupancy Expense                           431         316  
Furniture and Equipment Expense                 268         199  
FDIC Insurance Assessment                         2         147  
Other Operating Expenses                      1,180       1,067   
                                            _____________________ 
    Total Other Operating Expenses            4,409       4,053   
                                            _____________________ 
    Income before Income Taxes                1,918       2,110  
PROVISION for INCOME TAXES                      274         486   
                                            _____________________ 
  
  NET INCOME for PERIOD                      $1,644      $1,624  
                                            ===================== 

 PER SHARE INFORMATION      
Net Income for Period                         $0.69       $0.68  
Cash Dividends                               $0.230      $0.175  
Average Common Shares Outstanding         2,374,898   2,384,655   
    
The accompanying notes are an integral part of the consolidated   

 
financial statements.      
</TABLE>      
      
<PAGE>      
<TABLE>      
Union National Financial Corporation      
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)      
<CAPTION>      
                                  Nine Months Ended September 30, 

         (In thousands)                        1996         1995  

 
<S>                                             <C>          <C>  

   
CASH FLOWS from OPERATING ACTIVITIES            
Net Income                                   $1,644      $1,624  
Adjustments to Reconcile Net Income to Net             
  Cash Provided by Operating Activities:      
  Depreciation and Amortization                 385         311   
  Provision for Loan Losses                      98         108   
  Investment Securities (Gains)/Losses            0          (1)  
  Provision for Deferred Income Taxes            59          44   
  (Increase)/Decrease in Accrued                    
  Interest Receivable                          (148)        (11)  
  (Increase)/Decrease in Other Assets           (57)       (354)  
  Increase/(Decrease) in Other Liabilities      460         437   
                                            _____________________ 
 
Net Cash Provided by Operating Activities     2,441       2,158   
CASH FLOWS from INVESTING ACTIVITIES         
Net(Increase)/Decrease in Federal Funds Sold (1,250)      1,870  
Proceeds from Sales of      
 Available for Sale Securities                3,502       1,008  
Proceeds from Maturities of       
 Available for Sale Securities                8,063       4,687  
Proceeds from Maturities of      
 Held to Maturity Securities                  1,179       4,575  
Purchases of Available for Sale Securities  (21,753)     (5,966)  
Purchases of Held to Maturity Securities     (4,354)     (3,171)  
Loans Made to Customers, Net of       
 Principal Collected on Loans                (6,248)     (9,559)  
Investment in Limited Partnership                 0        (633)  
Purchases of Property and Equipment            (247)     (2,396)  

                                            _____________________ 
 
    Net Cash (Used in)Investing Activities  (21,108)     (9,585)  
CASH FLOWS from FINANCING ACTIVITIES       
Net Increase/(Decrease)in Demand Deposits       
 and Savings Accounts                         3,280      (7,312)  
Net Increase/(Decrease) in Certificates       
 of Deposits                                 11,421       9,196  
Net Increase/(Decrease) in Short-Term      
 Borrowing                                     (251)      3,102  
Proceeds from Issuance of Long-Term Debt      3,906       3,970  
Acquisition of Treasury Stock                     0        (275)  
Issuance of Treasury Stock                      100           0  
Cash Dividends Paid                            (546)       (417)  
                                            _____________________ 
   Net Cash Provided by (Used in)        
   Financing Activities                      17,910       8,264   
                                            _____________________ 

Net Increase/(Decrease) in Cash      
 and Cash Equivalents                          (757)        837   
CASH and CASH EQUIVALENTS -                             
  Beginning of Period                         7,214       5,572   
                                            _____________________ 

CASH and CASH EQUIVALENTS - End of Period    $6,457      $6,409   
                                            ===================== 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION      
Cash Payments for:      
Interest Paid to Depositor                  $4,145      $3,453   
Interest Paid - Other                           384         112   
Income Taxes                                    140         385  
SUPPLEMENTAL SCHEDULE OF NONCASH  
INVESTING AND FINANCING ACTIVITIES  
 Retirement of 4,000 shares of Treasury Stock   $62          $0  
   
The accompanying notes are an integral part of the consolidated   

financial statements.      
</TABLE>      
      
<PAGE>             
              UNION NATIONAL FINANCIAL CORPORATION      
                     MOUNT JOY, PENNSYLVANIA      
      
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS      
      
1.   The information contained in this interim report is          
     unaudited and subject to year-end adjustment and audit.      
     However, in the opinion of management, the information       
     reflects all adjustments necessary to present fairly the     
     financial condition and results of operations for the latest 
     period.  All such adjustments were of a normal, recurring    
     nature.      
      
2.   These statements should be read in conjunction with notes to 
     the financial statements contained in the 1995 Annual Report 
     to Stockholders.      
      
3.   Management considers the allowance for loan losses (reserve) 
     to be adequate at this time.      
      
4.   No shares of common stock are reserved for issuance in the   
     event of conversions or the exercise of warrants, options or 
     other rights, except for 120,000 shares which are reserved   
     for issuance under the Corporation's 1988 Stock Incentive    
     Plan and 150,000 shares which are reserved for issuance      
     under the Corporation's Dividend Reinvestment Plan.      
     
5.   The results of operations for the six month period ended     
     September 30, 1996 are not necessarily indicative of the     
     results to be expected for the full year.      
       
<PAGE>  
  
    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
                         AND RESULTS OF OPERATIONS 
 
The following is management's discussion and analysis of the 
significant changes in the results of operations, capital 
resources and liquidity presented in its accompanying 
consolidated financial statements for Union National Financial 
Corporation, a bank holding company (the Corporation), and its 
wholly-owned subsidiary, Union National Mount Joy Bank (the 
Bank). The Corporation's consolidated financial condition and 
results of operations consist almost entirely of the Bank's 
financial condition and results of operations. This discussion 
should be read in conjunction with the 1995 Annual Report. 
Current performance does not guarantee, assure, or may be 
indicative of similar performance in the future. 
 
In addition to historical information, this Third Quarter Report 
contains forward-looking statements. The forward-looking 
statements contained herein are subject to certain risks and 
uncertainties that could cause actual results to differ 
materially from those projected in the forward-looking 
statements. Important factors that might cause such a difference 
include, but are not limited to, those discussed in the section 
entitled "Management's Discussion and Analysis of Financial 
Condition and Results of Operations". Readers are cautioned not 
to place undue reliance on these forward-looking statements, 
which reflect management's analysis only as of the date hereof. 
The Corporation undertakes no obligation to publicly revise or 
update these forward-looking statements to reflect events or 
circumstances that arise after the date hereof. Readers should 
carefully review the risk factors described in other documents 
the Corporation files from time to time with the Securities and 
Exchange Commission, including the Quarterly Reports on Form 10-Q 
to be filed by the Corporation in 1996 and 1997, and any Current 
Reports on Form 8-K filed by the Corporation. 
 
RESULTS OF OPERATIONS  
 
Overview 
 
Consolidated net income for the nine months ended September 30, 
1996 was $1,644,000, an increase of 1.2%, as compared to the 
consolidated net income of $1,624,000 for the same period in 
1995. 
 
Consolidated net income for the three months ended September 30, 
1996 was $545,000, an increase of 3.5%, as compared to the 
consolidated net income of $526,000 for the same period in 1995. 
 
On a per share basis, net income for the nine months ended 
September 30, 1996 was $.69, as compared to $.68 for the same 
period in 1995. 
 
Results of operations for the nine months ended September 30, 
1996 as compared to the same period in 1995 were impacted by the 
following items: (1) Net income was positively impacted by an 
8.6% increase in average net loans, primarily residential and 
commercial mortgages, which were funded by growth in deposits and 
by additions to average borrowings; (2) net income was negatively 
impacted by the narrowing of the spread between short-term and 
long-term interest rates during 1995 and these rates related 
effects on loans, investments, and deposits; (3) net income was 
negatively impacted by an 8.8% increase in other operating 
expenses; and (4) net income was positively impacted by income 
tax credits available in 1996. The above items are quantified and 
discussed in further detail under their respective sections 
below. 
 
Net income as a percent of total average assets, also known as 
return on assets  
 
<PAGE> 
 
(ROA), was 1.18% on an annualized basis for the nine months ended 
September 30, 1996, as compared to 1.33% for the same period in 
1995. Net income as a percent of average stockholders' equity, 
also known as return on equity (ROE), was 10.3% on an annualized 
basis for the nine months ended September 30, 1996, as compared 
to 10.9% for the same period in 1995. 
 
The growth in loans is considered a material favorable trend of 
the Corporation which Management expects to continue for the 
remainder of 1996. Management expects the growth in deposits for 
1996 to return to similar historic growth rates achieved prior to 
1995. Management has taken specific actions to enhance the Bank's 
competitive position for core deposits. These actions include the 
implementation of a formal officer calling program to enhance the 
Bank's competitive position for loans, deposits and other 
financial services in the communities it serves and the 
implementation of a bank-wide incentive program for employee 
participation based on deposit growth and other factors. Other 
actions include the strategic promotion of the Bank's branch 
offices in light of continual bank consolidation in the Bank's 
market area; the promotion of intermediate-term certificates of 
deposit including the reintroduced push-button certificate 
allowing a one-time increase in the interest rate during the term 
of the certificate; the promotion of a new certificate of deposit 
which has a no-penalty feature during the life of the 
certificate; and a special promotion of the Bank's regular 
checking account featuring no monthly service charges when 
payroll is electronically deposited. As a result of the above 
described efforts, the Bank's certificate of deposit portfolio 
under $100,000 has increased $8,717,000, or 14.6%, to $68,449,000 
at September 30, 1996, from $59,732,000 at December 31, 1995. The 
funding for the loan growth is further discussed under the 
section on Liquidity.  
 
Management expects the loan growth to continue for the following 
reasons: (1) lending rates are at generally affordable rates for 
prospective borrowers, (2) implementation of a formal officer 
calling program, (3) the addition and promotion in September, 
1996, of a new loan product, home equity lines of credit, (4) 
expansion of the Bank's retail consumer lending through 
automobile dealers, (5) economic stability of Lancaster County as 
discussed later in this section, (6) the recently opened Manheim 
branch office, and (7) continued population growth in the Bank's 
market area. 
 
It is anticipated that economic activity in the Bank's market 
area during 1996 appears favorable due to the availability of 
generally low lending rates and continued construction activity. 
The decline in long-term interest rates from 1994 and early 1995 
levels is expected to augment economic activity. The overall 
effect of the previous economic slowdown as well as other factors 
can be seen by a mild lessening of certain borrowers' financial 
strength. Management is monitoring these general and specific 
trends closely. Their various effects are discussed later under 
the section on Credit Risk and Loan Quality.  
 
Net Interest Income 
 
For analytical and discussion purposes, net interest income and 
corresponding yields are presented on a taxable equivalent basis. 
Net interest income for the nine months ended September 30, 1996 
increased by $214,000, or 3.6%, over the same period in 1995. 
Commercial and residential average loan growth of $9,717,000 and 
average investment security growth of $9,015,000 was funded by 
the growth in average deposits of $13,810,000 and by the growth 
in average long-term debt of $6,344,000. Average earning assets 
increased in the amount of $20,196,000 over the same period from 
1995. The volume growth in earning assets and interest-bearing 
liabilities contributed to the increase in net interest income by 
the amount of $345,000. 
 
<PAGE> 
 
During the first quarter of 1995, the Federal Reserve Bank was 
tightening monetary supply causing the prime interest rate to 
increase to 9%. The immediate impact of these short-term interest 
rate increases was to increase the interest rates on loans that 
adjust according to the prime lending rate and on reinvested 
funds from maturing investment securities. Commencing July 1995, 
the Federal Reserve Bank began loosening the monetary supply by 
lowering short-term rates causing prime to decline to 8.25% in 
the first quarter of 1996. However, current interest rates on 
certificates of deposit remained above the rates being paid 
during the previous low rate environment in the years of 1992, 
1993 and into 1994. Consequently, the effective interest rate on 
the certificate of deposit portfolio increased as funds began to 
renew at higher interest rates. See Management's discussion below 
concerning the anticipated impact of these interest rate 
fluctuations to the results of operations for 1996. The overall 
interest rate on the average total earning assets decreased 
slightly to 8.4% for the current period, as compared to the same 
period last year. More significantly, the overall interest rate 
on the average interest-bearing liabilities increased to 4.2% for 
the current period, as compared to 3.9% for the same period last 
year. Contributing to this increase was the movement of deposits 
from lower interest rate structured money market and savings 
accounts to higher interest rate structured certificates of 
deposit. The net effect of all interest rate fluctuations and 
funding changes was to decrease net interest income in the amount 
of $131,000 for the current period over the same period in 1995. 
 
In 1994, the Bank engaged an outside consulting group to assist 
in monitoring its interest rate risk using income simulation 
models. Based on the models, it is currently anticipated that a 
two percent general rise or decline in interest rates over a
one-year period will negatively impact the Bank's net interest
income 
by under 1% for the first full year. In order to enhance the net 
interest income in future periods, Management has entered into 
transactions that increase earning assets funded by advances from 
the Federal Home Loan Bank of Pittsburgh (FHLB). The structure of 
these transactions are similarly matched with investment 
securities and loans in order to limit net interest income 
exposure to interest rate fluctuations. As of September 30, 1996, 
the Bank has received fixed rate advances of $12,346,000 from its 
available credit at the FHLB for purposes of funding loan demand 
and mortgage-backed security purchases. The total advances have a 
current average effective rate of 5.84% with maturities ranging 
from May, 1997 to June, 2000. Additional asset/liability 
management strategies available from the FHLB include access to 
interest rate caps, floors and swaps. As of September 30, 1996, 
the Bank did not utilize any of these aforementioned strategies. 
 
Other interest rate risk management tools available to the Bank 
include the promotion and development of specific loan and 
deposit products and the structuring of its investment portfolio. 
In the first quarter of 1995, Management introduced a new 
mortgage product with a seven year payment balloon feature with 
amortized monthly payments over a thirty year period. This 
product is a long-range strategy to increase rate sensitive 
assets, and therefore it will not have an impact on the Bank's 
one-year cumulative gap position in 1996. At September 30, 1996, 
the total balances in this product amounted to $2,234,000. As of 
September, 1996, Management offered a new loan product, home 
equity lines of credit, that will provide additional rate 
sensitive assets. 
 
For 1996, Management expects the effective interest rate in the 
loan and investment portfolios to trend slightly downward as 
compared to the levels of 1995. This is primarily a result of (1) 
the recent Federal Reserve Bank's relaxed monetary policy from 
July, 1995 to February, 1996, resulting in three .25% declines in 
the prime lending rate and a similar decline in the overnight fed 
funds investment rates, and (2) the increased residential 
mortgage refinancing activity to lower borrower's  
 
<PAGE> 
 
interest rate.  
 
In addition, Management expects a modest rise in the effective 
rate on its deposits as deposits of lower interest rate 
structured money market and savings accounts move to higher 
interest rate structured certificates of deposit, partially 
offset by certificates of deposit renewing at lower rates during 
the first nine months of 1996. The impact of these effective 
interest rate changes, including loan and deposit changes 
effected at the customer's option, to the results of operations 
for 1996, as compared to 1995, is expected to have a negative 
impact on the net interest margin. The growth in earning assets 
during 1995 and the first nine months of 1996 is expected to have 
a positive impact on the net interest margin for the remaining 
months of 1996. Although the impact of expected cash flows on 
investments and of renewing certificates of deposit can be 
reasonably estimated at current interest rate levels, the yield 
curve during the last three months of 1996, the options effected 
by customers, and the future mix of the loan, investment and 
deposit products in the Bank's portfolios may significantly 
change the estimates used in the simulation models. However, 
based on the Bank's current model and estimates as of September 
30, 1996, Management expects an overall immaterial impact to the 
net interest margin for the remaining months of 1996, as compared 
to the same period in 1995.  
 
Provision for Loan Losses 
 
The provision for loan losses was $98,000 and $108,000 for the 
nine months ended September 30, 1996 and 1995, respectively. Net 
charge-offs for the nine months ended September 30, 1996 amounted 
to $33,000 as compared to $53,000 for the same period of last 
year. Future adjustments to the allowance, and consequently, the 
provision for loan losses, may be necessary if economic 
conditions or loan credit quality differ substantially from the 
assumptions used in making Management's evaluation of the level 
of the allowance for loan losses, and if the loans outstanding 
substantially increases. 
 
Other Operating Income 
 
Other operating income for the nine months ended September 30, 
1996 was $582,000, representing an increase of $13,000, or 2.3%, 
over the same period in 1995. Contributing to this increase were 
additional earnings resulting from ATM usage, rental income, 
mutual fund commissions, insufficient funds charges, and safe 
deposit box rents. As an offset to the other operating income 
increase was a reduction in trust income due to significant 
estate settlements occurring in 1995. 
 
Other Operating Expenses  
 
Other operating expenses for the nine months ended September 30, 
1996 increased by $356,000, or 8.8%, over the same period in 
1995. Of this increase, employee salaries and wages and related 
fringe benefits increased by $204,000, or 8.8%, over the same 
period in 1995. This increase was essentially due to new staff 
additions and due to annual merit, cost of living, and health 
care cost increases. Staff additions included the initial 
staffing of the recently opened Manheim branch office ($111,000 
in salaries and wages above the same period of last year) and 
several support staff positions. 
 
Occupancy, furniture and equipment expenses for the nine months 
ended September 30, 1996 increased by $184,000, or 35.7%, over 
the same period in 1995. This increase was primarily due to the 
following: (1) the increased depreciation and occupancy costs in 
the amount of $46,000 resulting from the completion of the main 
office expansion and renovation in August, 1995 and the related 
furniture and equipment acquired for the project; (2) the 
additional lease, depreciation, and other costs related to the 
recently opened Manheim branch office in the amount of $48,000; 
and (3) snow removal  
 
<PAGE> 
 
and related costs that exceeded the same period of last year by 
$22,000. 
 
The FDIC Insurance Assessment expense decreased by $145,000 for 
the nine months ended September 30, 1996, as compared to the same 
period of last year. The FDIC Insurance Assessment rate declined 
from $.23 for every $100 in deposits in the first quarter of 1995 
to $500 per quarter in the first quarter of 1996 because the FDIC 
Bank Insurance Fund had reached its statutorily mandated reserve 
level. See further discussion under the Section on Regulatory 
Activity concerning the expected impact to the FDIC Insurance 
Assessment rate for 1997. 
 
Other operating expenses for the nine months ended September 30, 
1996, increased by $113,000, or 10.6%, over the same period in 
1995. Net losses and charge-offs from the limited partnerships in 
the amount of $81,000 were recognized as other operating expenses 
for the nine months ended September 30, 1996. In addition, 
general volume growth, amortization expense for software 
additions, and the timing of significant supply orders 
contributed to the increase in other operating expenses. As an 
offset to the increase in other operating expenses was a 
nonrecurring charge to expense in the amount of $75,000 during 
the third quarter of 1995. This charge of $75,000, after netting 
for state tax credits, related to the initial funding arrangement 
for the Nissly Factory Apartments Associates, a limited 
partnership. Additional information concerning the investment in 
the partnership is discussed under the section on Income Taxes. 
 
Income Taxes 
 
The Corporation's income tax expense decreased by $212,000 for 
the nine months ended September 30, 1996 to $274,000 from 
$486,000 for the same period in 1995. The decline was due to the 
decline in taxable earnings and newly available federal income 
tax credits. The tax credits result from the Corporation's 
$632,500, 49.5%, investment in Nissly Chocolate Factory 
Apartments Associates, which was formed to rehabilitate the 
former Nissly Chocolate Factory into 28 housing units to be 
marketed to seniors with low-to-moderate incomes. Currently, the 
effective tax rate of the Corporation for the remaining months of 
1996 is expected to be less than the effective tax rate in 1995 
due to Nissly's tax credits amounting to approximately $185,000 
for 1996. 
 
Building Expansion and Branch Office 
 
The expenses related to the building expansion and branch office 
projects completed in 1995 are expected to have an immaterial 
impact to the results of operations for the remaining months of 
1996, as compared to the same period in 1995.  
 
<PAGE> 
 
REGULATORY ACTIVITY 
 
The passage of the Riegle-Neal Interstate Banking and Branching 
Efficiency Act of 1994 and the Riegle Community Development and 
Regulatory Improvement Act may have a significant impact upon the 
Corporation. The key provisions pertain to interstate banking and 
interstate branching as well as a reduction in the regulatory 
burden on the banking industry. Since September, 1995, bank 
holding companies may acquire banks in other states without 
regard to state law. In addition, banks can merge with other 
banks in another state beginning in June, 1997. States may adopt 
laws preventing interstate branching but, if so, no out-of-state 
bank can establish a branch in such state and no bank in such 
state may branch outside the state. Pennsylvania recently amended 
the provisions of its Banking Code to authorize full interstate 
banking and branching under Pennsylvania law and to facilitate 
the operations of interstate banks in Pennsylvania.  
 
Although, the United States Supreme Court has rendered a decision 
in favor of nationwide insurance sales by banks and which also 
bars states from blocking insurance sales by national banks in 
towns with populations of no more than 5,000, the entrance of 
banks into the insurance industry is hotly contested. On the 
heels of the Supreme Court's ruling, the Office of the 
Comptroller of the Currency has issued draft guidelines for 
national banks to sell insurance. This federal guidance, however, 
will not necessarily ease state restrictions which currently 
hinder bank insurance sales. States that have traditionally been 
opposed to bank insurance sales could impose licensing 
requirements and other restrictions hampering bank insurance 
activities. Because the insurance industry is opposed to banks 
selling and underwriting insurance, it is difficult to determine 
to what extent banks will be allowed to engage in insurance 
activities and the regulatory costs that will be attached to such 
activities.   
 
Congress is currently considering legislative reform centered on 
repealing the Glass-Steagall Act which prohibits commercial banks 
from engaging in the securities industry. The major initiative 
proposed by the House Banking Committee Chairman, James Leach, 
has recently been defeated. Leach's proposal required a financial 
services holding company structure which would be permitted to 
own a bank and a separately capitalized securities firm. Under 
Leach's proposal, banks, however, would be prohibited from 
affiliating with insurance companies or nonfinancial firms. The 
holding company structure would be regulated by the Federal 
Reserve Board, and its subsidiaries would be supervised by the 
applicable regulator based on their respective functions. 
Alternatively, Leach's proposal also permitted a securities firm 
to establish an investment bank holding company to own an 
uninsured wholesale financial institution and a securities unit. 
Although Leach's proposal, as currently drafted, has been 
cancelled, he has announced his plans to introduce legislation 
proposing limited regulatory relief. 
 
On September 30, 1996, the President signed into law the Deposit 
Insurance Funds Act of 1996 to recapitalize the Savings 
Association Insurance Fund ("SAIF") administered by the Federal 
Deposit Insurance Corporation ("FDIC") and to provide for 
repayment of the FICO (Financial Institution Collateral 
Obligation) bonds issued by the United States Treasury 
Department. The FDIC will levy a one-time special assessment on 
SAIF deposits equal to 65.7 cents per $100 of the SAIF-assessable 
deposit base as of March 31, 1995. During the years 1997, 1998, 
and 1999, the Bank Insurance Fund ("BIF") will pay $322 million 
of FICO debt service, and SAIF will pay $458 million. 
 
During 1997, 1998 and 1999, the average regular annual deposit 
insurance assessment is estimated to be about 1.29 cents per $100 
of deposits for BIF deposits and 6.44 cents per $100 of deposits 
for SAIF deposits. Individual institution's assessments will 
continue to vary according to their capital and management 
ratings.  As always, the FDIC will be able to raise the 
assessments as necessary to maintain the funds at 
 
<PAGE> 
 
their target capital ratios provided by law. After 1999, BIF and 
SAIF will share the FICO costs equally.  Under current estimates, 
BIF and SAIF assessment bases would each be assessed at the rate 
of approximately 2.43 cents per $100 of deposits. The FICO bonds 
will mature in 2018-2019, ending the interest payment obligation. 
 
The law also provides that BIF and SAIF are to merge and to form 
the Deposit Insurance Fund ("DIF") at the beginning of 1999, 
provided that there are no SAIF institutions in existence at that 
time. Merger of the Funds will require state laws to be amended 
in those states authorizing savings associations to eliminate 
that authorization (state chartered savings banks will not be 
affected).  This provision reflects Congress's apparent intent to 
merge thrift and commercial bank charters by January 1999; 
however, no law has yet been enacted to achieve that purpose. 
 
Based on current deposit levels, Management expects that the 
increase in the FDIC assessment rate will adversely impact 
results of operations in an amount estimated at $20,000. 
 
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 Corporation and the 
Bank. It cannot be predicted whether such legislation will be 
adopted or, if adopted, how such legislation would affect the 
business of the Corporation and the Bank. As a consequence of the 
extensive regulation of commercial banking activities in the 
United States, the Corporation's and the Bank's business is 
particularly susceptible to being affected by federal legislation 
and regulations that may increase the costs of doing business. 
Except as specifically described above, Management believes that 
the effect of the provisions of the aforementioned legislation on 
the liquidity, capital resources, and results of operations of 
the Corporation will be immaterial. Management is not aware of 
any other current specific recommendations by regulatory 
authorities or proposed legislation, which if they were 
implemented, would have a material adverse effect upon the 
liquidity, capital resources, or results of operations, although 
the general cost of compliance with numerous and multiple federal 
and state laws and regulations does have, and in the future may 
have, a negative impact on the Corporation's results of 
operations. 
 
Further, the business of the Corporation is also affected by the 
state of the financial services industry in general. As a result 
of legal and industry changes, Management predicts that the 
industry will continue to experience an increase in 
consolidations and mergers as the financial services industry 
strives for greater cost efficiencies and market share. 
Management believes that such consolidations and mergers may 
enhance its competitive position as a community bank. 
 
CHANGES IN ACCOUNTING STANDARDS 
 
In March 1995, the Financial Accounting Standards Board issued 
Statement No. 121 (SFAS No. 121), "Accounting for the Impairment 
of Long-Lived Assets and for Long-Lived Assets to Be Disposed 
Of." This Statement requires that long-lived assets and certain 
identifiable intangibles to be held and used by an entity be 
reviewed for impairment whenever events or changes in 
circumstances indicate that the carrying amount of an asset may 
not be recoverable. In performing the review for recoverability, 
the Corporation estimates the future cash flows expected to 
result from the use of the asset and its eventual disposition. If 
the sum of the expected future cash flows is less than the 
carrying amount of the asset, an impairment loss is recognized. 
Otherwise, an impairment loss is not recognized. SFAS No. 121 was 
adopted by the Corporation as of January 1, 1996. No impairment 
of applicable assets was currently recognized for 1996. 
 
In May 1995, the Financial Accounting Standards Board issued 
Statement No. 122 (SFAS No. 122), "Accounting for Mortgage 
Servicing Rights an amendment of SFAS No. 65."  
 
<PAGE> 
 
SFAS No. 65 and SFAS No. 122 require that a mortgage banking 
enterprise recognize as separate assets rights to service 
mortgage loans for others. This Statement requires that a 
mortgage banking enterprise assess its capitalized mortgage 
servicing rights for impairment based on the fair value of those 
rights. SFAS No. 122 was adopted by the Corporation as of January 
1, 1996 and is to be applied prospectively to transactions with 
retained servicing rights and to impairment evaluations of 
capitalized amounts. Currently, the Corporation is not servicing 
mortgage loans for others. 
 
In October 1995, the Financial Accounting Standards Board issued 
Statement No. 123 (SFAS No.123), "Accounting for Stock-Based 
Compensation." This Statement defines a fair value based method 
of accounting for an employee stock option or similar equity 
instrument. Under this method, compensation cost is measured at 
the grant date or other measurement date over the amount an 
employee must pay to acquire the stock. The accounting 
requirements of SFAS No.123 were adopted as of January 1, 1996. 
Currently, there is no incidence of coverage under this 
Statement.  
 
In June 1996, the Financial Accounting Standards Board issued 
Statement No. 125 (SFAS No. 125), "Accounting for Transfers and 
Servicing of Financial Assets and Extinguishments of 
Liabilities." This Statement becomes effective for transfers and 
servicing of financial assets and extinguishments of liabilities 
occurring after December 31, 1996 and shall be applied 
prospectively. SFAS No. 125 provides consistent standards for 
distinguishing transfers of financial assets that are sales from 
transfers that are secured borrowings. The accounting approach is 
called the financial-components approach that focuses on control. 
Under that approach, after a transfer of financial assets, an 
entity recognizes the financial and servicing assets it controls 
and the liabilities it has incurred, derecognizes financial 
assets when control has been surrendered, and derecognizes 
liabilities when extinguished. The Bank does not expect this 
Statement to have a material effect on the liquidity, results of 
operations or capital resources when it becomes effective in 
1997. 
 
CREDIT RISK AND LOAN QUALITY 
 
Other than as described herein, Management does not believe there 
are any trends or uncertainties which are reasonably expected to 
have a material impact on future results of operation, liquidity 
or capital resources. Further based on known information, 
Management believes that the ongoing effects of the previous 
economic slowdown and other unfavorable specific business 
conditions may result in the inability of loans amounting to 
$2,170,000 to comply with their respective repayment terms. These 
loans are well secured essentially with real estate, equipment 
and vehicles. Management believes that potential losses on these 
loans have already been provided for in the Allowance for Loan 
Losses. The borrowers are of special mention since they have 
shown a decline in financial strength and payment quality. 
Management has increased its monitoring of the borrowers' 
financial strength. In addition, Management expects that a 
portion of these loans will be classified as nonperforming in 
1996 and continues to monitor this situation. 
 
At September 30, 1996, total nonperforming loans decreased to a 
level of $666,000, or .5% of total net loans, from a level of 
$1,225,000, or 1.0%, at December 31, 1995. The reduction is a 
result of increased review and supervision of the applicable loan 
credits. Historically, the percent of nonperforming loans to 
total net loans as of December 31, for the previous five year 
period was an average of .9%. 
 
The reserve increased by $65,000 for the nine months ended 
September 30, 1996, and the ratio of the allowance for loan 
losses to net loans was 1.05% at September 30, 1996, as compared 
to 1.05% at December 31, 1995. Management believes based on 
information currently available that the current allowance for 
loan losses of $1,330,000 is adequate to meet potential loan 
losses. 
 
<PAGE> 
 
LIQUIDITY 
 
The Corporation's objective is to maintain adequate liquidity 
while minimizing interest rate risk. Adequate liquidity provides 
resources for credit needs of borrowers, for depositor 
withdrawals, and for funding Corporate operations. Sources of 
liquidity are maturing investment securities which include 
overnight investments in federal funds sold, overnight 
correspondent bank borrowings on various credit lines, payments 
on loans and mortgage-backed securities, a growing core deposit 
base, primarily certificates of deposit, and FHLB funding 
products as discussed below. Management believes that its core 
deposits are fairly stable even in periods of changing interest 
rates. There are no known trends or any known demands, 
commitments, events or uncertainties that will result in, or that 
are reasonably likely to result in, liquidity increasing or 
decreasing in any material way. Membership in the FHLB provides 
the Bank with additional liquidity alternatives such as short or 
long-term funding on fixed or variable rate terms. Available 
funding from the FHLB amounts to an overnight borrowing capacity 
of up to $6,532,000 and a maximum available funding capacity of 
up to $71,600,000. In order to provide funding for the Bank's 
loans and mortgage-backed security investments, the Bank utilized 
FHLB's fixed rate advances totaling $12,346,000 as of September 
30, 1996, an increase from $5,800,000 at December 31, 1995. 
 
<TABLE>   
   
SUPPORTING SCHEDULES   
   
<CAPTION>   
   
Schedule of Nonperforming Assets   
                                   September 30,  December 31,    
      (In Thousands)                  1996            1995   
<S>                                    <C>             <C>    
Nonaccruing Loans                     $ 56            $203   
Accrual Loans - 90 days or more   
 past due                              450           1,022   
Restructured Accrual Loans               0               0   
Other Real Estate Owned                160               0   
                                     ______         ______  
   Total Nonperforming Assets       $  666          $1,225   
                                     ======         ======   
   Nonperforming Assets   
   as a % of Net Loans                 0.5%            1.0%   
                                     ======         ======   
   Allowance for Loan Losses   
   as a % of Nonperforming Assets      200%            103%   
                                     ======         ======   
</TABLE>   
   
<TABLE>   
   
<CAPTION>   
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES   
                                  Nine Months Ended September 30, 

           (In Thousands)                    1996        1995   
<S>                                           <C>          <C>   
Average Total Loans Outstanding      
   (Less Unearned Income)                  $123,268    $113,551   
                                           ========     ========  
Allowance for Loan Losses,   
   Beginning of Period                       $1,265      $1,182 
Loans Charged-off During Period                  49          82  
Recoveries of Loans Previously   
   Charged-off                                   16          29   

                                           ______________________ 

   Net Loans Charged-off                         33          53   
Addition to Provision for Loan Losses     
   Charged to Operations                         98         108   

                                           ______________________ 
 
Allowance for Loan Losses,   
   End of Period                             $1,330      $1,237   

                                            ========     ======== 
Ratio of Net Loans Charged-off to Average   
    Loans Outstanding (Annualized)             0.04%       0.06%  

                                            ========     ======== 
 
   
Ratio of Allowance for Loan Losses to   
    Net Loans at End of Period                 1.05%       1.05%  

                                            ========     ======== 

 
</TABLE>  
<PAGE>  
  
Part II - Other Information: 
 
Item 1. Legal Proceedings 
 
Management is not aware of any litigation that would have a 
material adverse effect on the consolidated financial position of 
the Corporation.  There are no proceedings pending other than the 
ordinary routine litigation incident to the business of the 
Corporation and its subsidiary, Union National Mount Joy Bank. In 
addition, no material proceedings are pending or are known to be 
threatened or contemplated against the Corporation and the Bank 
by government authorities. 
 
Item 2.  Changes in Securities - Nothing to report. 
 
Item 3.  Defaults Upon Senior Securities - Nothing to report. 
 
Item 4.  Submission of Matters to a Vote of Security Holders -    

         Nothing to report. 
 
Item 5.  Other Information - Nothing to report. 
 
Item 6.  Exhibits and Reports on Form 8-K - Nothing to report. 
 
<PAGE> 
 
                          SIGNATURES 
 
Pursuant to the requirements of the Securities Exchange Act of 
1934, the Registrant has duly caused this report to be signed on 
its behalf by the undersigned thereunto duly authorized. 
 
                             Union National Financial Corporation 
                                         (Registrant) 
 
 
 
                            By: /s/ William E. Eby  
                                _________________________________ 

                                William E. Eby 
                                President & CEO 
                                (Principal Executive Officer) 
 
                                Date:  November 7, 1996 
 
 
                            By: /s/ Clement M. Hoober 
                               __________________________________ 

                                Clement M. Hoober, 
                                Chief Financial Officer 
                                (Principal Financial and 
                                Accounting Officer) 
 
                                Date:  November 7, 1996