FORM 10-K

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549


ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended December 31, 1996 
Commission file number:  33-85626


                FULTON BANCSHARES CORPORATION              
(Exact name of registrant as specified in its charter)

 Commonwealth of Pennsylvania                25-1598464    
(State or other jurisdiction of         (I.R.S. Employer
 incorporation or organization)          Identification No.)

100 Lincoln Way East
McConnellsburg, Pennsylvania                    17233      
(Address of principal executive offices)      (Zip Code)

Registrant's telephone number,
 including area code:                     (717) 485-3144   


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 shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
             Yes   X    No     
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest
practicable date.

   Class                      Outstanding at March 4, 1997 
(Common stock, .625 par value)         495,000


DOCUMENTS INCORPORATED BY REFERENCE

Portions of the annual shareholders report for the year
ended December 31, 1996 are incorporated by reference into
Parts I and II.  Portions of the Proxy Statement for 1997
Annual Meeting of Security Holders are incorporated by
reference in Part III of this Form 10-K.











































-1-


Item 1.   Business.

Description of the Company

         Fulton Bancshares Corporation (the "Company"), 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 Company was incorporated on March 29, 1989 under the
business corporation law of the Commonwealth of Pennsylvania
for the purpose of becoming a bank holding company.  Since
commencing operations, the Company's business has consisted
primarily of managing and supervising the Fulton County
National Bank and Trust Company (the "Bank"), and its
principal source of income has been dividends paid by the
Bank.  The Company has two wholly-owned subsidiaries - the
Bank, and Fulton County Community Development Corporation
("FCCDC"), which was formed on June 7, 1996 to support
efforts of the local downtown business revitalization
project by making low interest loans to eligible small
businesses for the purpose of facade improvement.  FCCDC had
minimal activity in 1996, and has no employees.
         The principal executive office of the Company is
located at 100 Lincoln Way East, McConnellsburg, Fulton
County, Pennsylvania  17233.  The telephone number of the
Company is (717) 485-3144.
         The Company has no employees.
-2-


Supervision and Regulation - The Company
         The Company is subject to the provisions of the
Bank Holding Company Act of 1956, as amended (the "Bank
Holding Company Act"), and to supervision by the Federal
Reserve Board.  The Bank Holding Company Act requires the
Company to secure the prior approval of the Federal Reserve
Board before it owns or controls, directly or indirectly,
more than five percent (5%) of the voting shares or
substantially all of the assets of any institution,
including another bank.  The Bank Holding Company Act
prohibits acquisition by the Company of more than five
percent (5%) of the voting shares of, or interest in, all or
substantially all of the assets of any bank located outside
of Pennsylvania unless such acquisition is specifically
authorized by the laws of the state in which such bank is
located.
         A bank holding company is prohibited from engaging
in or acquiring direct or indirect control of more than five
percent (5%) of the voting shares of any company engaged in
nonbanking 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.




-3-


         The Company 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 Company and
any or all of its subsidiaries.
         Federal law prohibits acquisitions of control of a
bank holding company without prior notice to certain federal
bank regulators.  Control is defined for this purpose as the
power, directly or indirectly, to direct the Management or
policies of the bank or bank holding company or to vote 25%
or more of any class of voting securities of the bank
holding company.  A person or group holding revocable
proxies to vote 25% or more of the stock of a bank or its
holding company would presumably be deemed to control the
institution for purposes of this federal law.
         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.




-4-


Permitted Activities
         The Federal Reserve Board permits bank holding
companies to engage in activities so closely related to
banking or managing or controlling banks as to be a proper
incident thereto.  The Company does not at this time engage
in any of the permissible activities described below, nor
does the Company have any current plans to engage in these
activities in the foreseeable future.
         While the types of permissible activities are
subject to a variety of limitations and to change by the
Federal Reserve Board, the principal activities that
presently may be conducted by a bank holding company and may
in the future be engaged by the Company are:  (1) making,
acquiring or servicing loans and other extensions of credit
for its own account or for the account of others, such as
would be made by consumer finance, credit card, mortgage,
commercial finance and factoring companies; (2) operating as
an industrial bank or similar entity in the manner
authorized by state law so long as the institution does not
both accept demand deposits and make commercial loans; (3)
operating as a trust company in the manner authorized by
federal or state law so long as the institution does not
make certain types of loans or investments or accept
deposits, except as may be permitted by the Federal Reserve
Board; (4) acting as an investment or financial advisor to
-5-


investment companies and other persons; (5) leasing personal
and real property or acting as agent, broker or advisor in
leasing property; (6) making equity and debt investments in
corporations or projects designed primarily to promote
community welfare; (7) providing to others financially
oriented data processing or bookkeeping services; (8) acting
as an insurance agent or broker in relation to insurance for
itself and its subsidiaries or for insurance directly
related to extensions of credit; (9) acting as underwriter
for credit life insurance and credit accident and health
insurance: (10) providing courier services of a limited
character; (11) providing management consulting advice to
nonaffiliated banks and nonbank depository institutions;
(12) selling money orders, travelers' checks and United
States savings bonds; (13) performing appraisals of real
estate; (14) acting as intermediary for the financing of
commercial or industrial income-producing real estate by
arranging for the transfer of the title, control and risk of
such a real estate project to one or more investors; (15)
providing securities brokerage services, related securities
credit activities and incidental activities such as offering
custodial services, individual retirement accounts and cash
management services, if the securities brokerage services
are restricted to buying and selling securities solely as


-6-


agent for the account of customers and do not include
securities underwriting or dealing or investment advice or
research services; (16) underwriting and dealing in
obligations of the United States, general obligations of
states and their political subdivisions such as bankers'
acceptances and certificates of deposit; (17) providing
general information, advisory services and statistical
forecasting with respect to foreign exchange markets; (18)
acting as a futures commission merchant in the execution and
clearance on major commodity exchanges of futures contracts
and options on futures contracts for bullion, foreign
exchange, government securities, certificates of deposit and
other money market instruments; (19) performing personal
property appraisals that require expertise regarding all
types of personal and business property, including
intangible property such as corporate securities; (20)
providing commodity trading and futures commission merchant
advice; (21) providing consumer financial counseling to
individuals on consumer-oriented financial management
matters, including debt consolidation, mortgage
applications, bankruptcy, budget management, real estate tax
shelters, tax planning, retirement and estate planning,
insurance and general investment management, so long as this
activity does not include the sale of specific products or


-7-


investments; (22) providing tax planning and preparation
advice to corporations and individuals; (23) providing check
guaranty services to subscribing merchants; (24) operating a
collection agency and credit bureau; and (25) acquiring and
operating thrift institutions, including savings and loan
associations, building and loan associations and FDIC-
insured savings banks.
Certain Provisions of Pennsylvania Banking Law
         Under the Pennsylvania Banking Code of 1965, as
amended, (the "Code"), the Company has been permitted since
March 4, 1990 to control an unlimited number of banks. 
However, the Company would be subject to the requirements of
the Bank Holding Company Act as discussed in the
"Supervision and Regulation - The Company" section above.
         Also since March 4, 1990, the Code authorizes
reciprocal interstate banking without any geographic
limitation.  Reciprocity between states exists when a
foreign state's law authorizes Pennsylvania bank holding
companies to acquire banks or bank holding companies located
in that state on terms and conditions substantially no more
restrictive than those applicable to such an acquisition by
a bank holding company located in that state.  For a further
discussion of interstate banking and branching, see the
section entitled "Legislation and Regulatory Changes" below.


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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 Company and its subsidiary, the Bank.  Certain changes
of potential significance to the Company which have been
enacted recently are discussed below.
         The Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Banking and Branch
Act") permits interstate banking to occur.  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% of the deposits in the
United States, or 30% of the deposits in the target bank's
state.  The legislation permits states to waive the
concentration limits and require that the target institution


-9-


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 September 29, 1997 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.  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.
         The Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA") was enacted in August of
1989.  This law was enacted primarily to improve the
supervision of savings associations by strengthening
capital, accounting and other supervisory standards.  In
addition, FIRREA reorganized the FDIC by creating two
deposit insurance funds to be administered by the FDIC:  The
Savings Association Insurance Fund and the Bank Insurance
Fund.  Customers' deposits held by the Bank are insured
under the Bank Insurance Fund.  FIRREA also regulates real
estate appraisal standards and the supervisory/enforcement
powers and penalty provisions in connection with the
regulation of the Bank.
-10-


Effects of Inflation
         Inflation has some impact on the Company's, the
Bank's, and FCCDC's operating costs.  Unlike many industrial
companies, however, substantially all of the Bank's and
FCCDC's assets and liabilities are monetary in nature.  As a
result, interest rates have a more significant impact on the
Company's, the Bank's, and FCCDC'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.
Monetary Policy
         The earnings of the Company, the Bank, and FCCDC
are affected by domestic economic conditions and the
monetary and fiscal policies of the United States Government
and its agencies.  An important function of the Federal
Reserve System is to regulate the money supply and interest
rates.  Among the instruments used to implement those
objectives are open market operations in United States
government
securities and changes in reserve requirements against
member bank deposits.  These instruments are used in varying
combinations to influence overall growth and distribution of
bank loans, investments and deposits, and their use may also
affect rates charged on loans or paid for deposits.
-11-


         The Bank is a member of the Federal Reserve System
and, therefore, the policies and regulations of the Federal
Reserve Board have a significant effect on its deposits,
loans and investment growth, as well as the rate of interest
earned and paid, and are expected to affect the Bank's
operations in the future.  The effect of such policies and
regulations upon the future business and earnings of the
Company, the Bank, and FCCDC cannot be predicted.
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, the Company, the Bank, and
FCCDC are not party to any pending legal proceeding pursuant
to any environmental statute, nor is the Company, the Bank,
or FCCDC aware of any circumstances which may give rise to
liability under any such statute.

-12-


Description of the Bank
         The Bank was organized on February 24, 1887 as a
Pennsylvania state-chartered banking institution.  It
converted to a national banking association on September 5,
1933, and is presently under the supervision of the Office
of the Comptroller of the Currency (the "Comptroller").  The
Bank is a member of the Federal Reserve System.  Customers'
deposits held by the Bank are insured by the FDIC to the
maximum extent permitted by law.  The Bank's legal
headquarters are located at 100 Lincoln Way East,
McConnellsburg, Fulton County, Pennsylvania  17233.
         The Bank engages in a full service commercial and
consumer banking business, including the acceptance of time
and demand deposits and the making of secured and unsecured
commercial and consumer loans, and offering trust services.
 The Bank's primary service area is located in Fulton
County, Pennsylvania.  Specifically, the main office of the
Bank is located in McConnellsburg, the county seat.  Within
the defined service area of the Bank's main office, the
banking business is highly competitive.  The Bank competes
with regionally-based commercial banks, all of which have
greater assets, capital and lending limits.  The Bank also
competes with savings banks, savings and loan associations,
money market funds, insurance companies, stock brokerage



-13-


firms, regulated small loan companies, credit unions and
with the issuers of commercial paper and other securities.
         In order to compete effectively in this market and
to obtain business from individuals, small and medium-sized
businesses and professionals, the Bank offers specialized
services such as extended hours of operation and personal
and business checking accounts at competitive rates in
addition to traditional commercial and consumer banking and
trust services.  The Bank accepts time, demand and savings
deposits, including passbook accounts, statement savings
accounts, NOW accounts, money market accounts, regular
savings accounts, certificates of deposit and club accounts.
 The Bank makes secured and unsecured commercial, consumer,
installment and construction loans.  Consumer loans include
revolving credit lines and commercial lending.  The
following support services are offered by the Bank to make
financial management more efficient and convenient for its
customers:  bank by mail, direct deposit, drive-in banking,
Federal Tax Depository, automatic teller machine,
MasterCard/Visa applications and cash advances, night
deposit services, notary public services, payroll deduction
plan, personal collections, safe deposit boxes, signature
guarantees, travelers checks, treasury securities, U.S.
Savings Bonds, individual retirement accounts, and utility
and municipal payments.  The Bank also provides discount
-14-


brokerage services.  The Bank expects to experience a modest
increase in growth.
Lending Activities
         It is the Bank's general policy to grant all of
its loans in its primary trade area.  This trade area
includes all of Fulton County, Southern Huntington County
and the Hancock, Maryland area.  The Bank's lending
objectives are as follows:  (1) to establish a diversified
loan portfolio composed of a predetermined mix of mortgage
loans, commercial loans, consumer loans and all other loan
types; (2) to provide a satisfactory rate of return to its
shareholders by properly pricing loans to include the cost
of funds, administrative costs, bad debts, local economic
conditions, competition, customer relationships, the term of
the loan, credit risk, and collateral quality; and, (3) to
provide protection for its depositors by maintaining a
predetermined level of loans to deposits to ensure
liquidity.  The Bank recognizes that the lending of money is
a community responsibility which involves a degree of credit
risk and is willing to undertake such risks by utilizing
standard banking procedures and making prudent judgments
when extending credit.
         The Bank makes loans to both individual consumers
and commercial entities.  The types of loans offered
include:  (1) loans for businesses and individuals on a
-15-


short term or seasonal basis; (2) loans to individuals for
consumer purchases such as appliances, furniture, vacations,
etc.: (3) loans secured by marketable stock and bonds
providing adequate margins for market fluctuations; (4)
short term working capital loans secured by the assignment
of accounts receivable and inventory; (5) automobile loans,
and (6) second liens on commercial and residential real
estate.  Loans of these types will be considered desirable
by the Bank provided such loans meet the test of sound
credit.
         The Bank had adopted the following loan-to-value
ratios, in accordance with standards adopted by its bank
supervisory agencies:
<TABLE>
<S>     <C>                             <C>
               Loan Category
                                         Loan-to-Value Limit
         Raw land  65%
         Land development    75%
         Construction:
           Commercial, multifamily, and other             
             nonresidential
           1 to 4-family residential   80%
         Improved property   80%
         Owner-occupied 1 to 4 family and
          home equity   80%
</TABLE>
The Bank does not assume undue risk on any loan within the
loan portfolio, and takes appropriate steps to secure all
loans as necessary.


-16-


Concentration
         The Bank is neither dependent upon deposits nor
exposed to loan concentrations to a single customer or to a
single industry, the loss of any one or more of which would
have a material adverse effect on the financial condition of
the Bank.
Employees
         As of December 31, 1996, the Bank has forty-six
(46) full-time equivalent employees.
Supervision and Regulation - The 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.  The operations of the Bank are also subject to
regulations of the Comptroller, the Federal Reserve Board
and the FDIC.  The primary supervisory authority of the Bank
is the Comptroller, which regulates and examines the Bank. 
The Comptroller has authority to prevent national banks from
engaging in unsafe or unsound practices in conducting their
businesses.
         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
-17-


collateral it takes, the maximum interest rates a bank may
pay on deposits, the activities of a bank with respect to
mergers and consolidations and the establishment of
branches.  Under Pennsylvania law, the Bank may establish or
acquire branch offices, subject to certain limitations, in
any county of the state.  National bank branches, however
may be established within the permitted area only after
approval by the Comptroller.
         As a subsidiary bank 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, or investments in the
stock or other 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 the 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.
FDIC
         Under the Federal Deposit Insurance Act, the
Comptroller possesses the power to prohibit institutions
-18-


regulated by it (such as the Bank) from engaging in any
activity that would be an unsafe and unsound banking
practice or would otherwise be in violation of the law. 
Moreover, the Financial Institutions Regulatory and Interest
Rate Control Act of 1978 ("FIRA") generally expanded the
circumstances under which officers or directors of a bank
may be removed by the institution's federal supervisory
agency, restricts lending by a bank to its executive
officers, directors, principal shareholders or related
interests thereof and restricts management personnel of a
bank from serving as directors or in other management
positions with certain depository institutions whose assets
exceed a specified amount or which have an office within a
specified geographic area, and restricts management
personnel from borrowing from another institution that has a
correspondent relationship with their bank.  Additionally,
FIRA requires that no person may acquire control of a bank
unless the appropriate federal supervisory agency has been
given sixty (60) days prior written notice and within that
time has not disapproved the acquisition or otherwise
extended the period for disapproval.  Control for purposes
of FIRA, means the power, directly or indirectly, to direct
the management or policies or to vote twenty-five percent
(25%) or more of any class of outstanding stock of a
financial institution or its respective holding company.  A
-19-


person or group holding revocable proxies to vote twenty-
five percent (25%) or more of the outstanding common stock
of a financial institution or holding company such as the
Company, would presumably be deemed to control the
institution for purposes of FIRA.
Garn-St Germain
         The Garn-St Germain Depository Institutions Act of
1982 ("1982 Act") removed certain restrictions on a bank's
lending powers and liberalized its depository capabilities.
The 1982 Act also amended FIRA (see above) by eliminating
the statutory limits on lending by a bank to its executive
officers, directors, principal shareholders or related
interests thereof and by relaxing certain reporting
requirements.  The 1982 Act, however, also tightened FIRA
provisions respecting management interlocks and
correspondent bank relationships involving a bank's
management personnel.
CRA
         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
-20-


branch or other deposit facility, office relocation, a
merger or an acquisition of bank shares.  The Financial
Institutions Reform, Recovery and Enforcement Act 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 and a
statement describing the basis for the rating, which is
publicly disclosed.
BSA
         Under the Bank Secrecy Act ("BSA"), banks and
other financial institutions are 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.
CEBA
         An omnibus federal banking bill, known as the
Competitive Equality Banking Act ("CEBA"), was signed into
law in August of 1987.  Included in the legislation were
measures:  (1) imposing certain restrictions on transactions
-21-


between banks and their affiliates; (2) expanding the powers
available to Federal bank regulators in assisting failed and
failing banks; (3) limiting the amount of time banks may
hold certain deposits prior to making such funds available
for withdrawal and any interest thereon; and (4) requiring
that any adjustable rate mortgage loan secured by a lien on
a one-to-four family dwelling include a limitation on the
maximum rate at which interest may accrue on the principal
balance during the term of such loan.
FDICIA
    Capital Categories
         In December of 1991 the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA") became law. 
Under FDICIA, institutions must be classified, based on
their risk-based capital ratios into one of five defined
categories, as illustrated below:
<TABLE>
<S>           <C>         <C>         <C>      <C>
                 Total       Tier 1    Tier 1     Under a
               Risk-Based  Risk-Based Leverage Capital Order
                 Ratio        Ratio     Ratio  or Directive
CAPITAL CATEGORY
Well capitalized   > 10.0    > 6.0     > 5.0     No
Adequately
 capitalized  > 8.0     > 4.0     > 4.0*
Undercapitalized   < 8.0     < 4.0     < 4.0*
Significantly
 undercapitalized< 6.0  < 3.0     < 3.0
Critically
 undercapitalized       < 2.0
</TABLE>
    *  3.0 for those banks having the highest available

regulatory rating.
-22-


Prompt Corrective Action
         In the event an institution's capital deteriorates
to the undercapitalized category or below, FDICIA prescribes
an increasing amount of regulatory intervention, including:
(1) the institution 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.
Operational Controls
         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.
-23-


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.
Examinations and Audits
         Annual full-scope, on site examinations are
required for all 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
eighteen (18) months.  Banks with total assets of $ 150
million or more are required to submit to their supervising
federal and state banking agencies a publicly available
annual audit report and are subject to additional accounting
and reporting regulations.
Truth-In-Savings
         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
-24-


with regard to deposit accounts and products.  Under this
provision, the Bank is required to provide information to
depositors concerning the terms of their 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
the FDICIA has had no material impact on liquidity, capital
resources or reported results of operation.
Item 2.  Properties
         The main administrative office of the Bank which
also includes a branch, is located in McConnellsburg,
Pennsylvania.  The Bank currently has four branch offices
one of which is located at Penn's Village on Route 16 at the
east end of McConnellsburg, Pennsylvania.  This branch
office opened on May 11, 1981.  In addition, the Bank
installed an ATM at the Penn's Village Shopping Center in
March, 1989.  The Bank also serves the communities
surrounding the Pennsylvania/Maryland border through its
branch office located in Warfordsburg, Pennsylvania.  This
branch opened for business on April 4, 1983.  On the same
day, a third branch office was opened in Hustontown,
Pennsylvania, which services Northern Fulton County. 
Finally, to service the Southern end of Huntington County,
the Bank acquired a branch in Shade Gap, Pennsylvania, on
-25-


September 26, 1988.  On January 7, 1997 ATM's were opened at
the Warfordsburg and Hustontown branches.  The main office,
Warfordsburg, Hustontown and Shade Gap branches are owned by
the Bank.  The Penn's Village branch is rented.
Item 3.  Legal Proceedings.
         Fulton Bancshares Corporation is an occasional
party to legal actions arising in the ordinary course of its
business.  In the opinion of the Company's management,
Fulton Bancshares Corporation has adequate legal defenses
and/or insurance coverage respecting any and each of these
actions and does not believe that they will materially
affect the Company's operations or financial position.
Item 4.  Submission of Matters to Vote of Security Holders.
         None
Item 5.  Market for Registrant's Common Stock and Related  
           Security Holder Matters.

         The corporation's common stock is traded on a
limited basis in the local over-the-counter market.  As of
December 31, 1996, the approximate number of shareholders of
record was 451.
<TABLE>
<S>           <C>        <C>          <C>        <C>
                 Market     Cash        Market      Cash
                 Price    Dividend      Price     Dividend
                       1996                   1995         
First Quarter $ 27.00   $ .15     $ 25.00   $ .00
Second Quarter     32.00     .15  25.00     .25
Third Quarter 35.00     .179 25.00     .15
Fourth Quarter     35.00     .185 26.00     .15
</TABLE>



-26-



Item 6.  Selected Financial Data.
<TABLE>
<S>              <C>      <C>      <C>     <C>     <C>
                    1996     1995    1994    1993     1992
Income (000 omitted)

Interest income    $ 7,513   $ 7,298   $ 6,417   $ 6,349   $ 6,687
Interest expense   3,725     3,732     3,269     3,575     3,953
Provision for
 loan losses            65        62        48        70        84
Net interest
 income after
 provision for
 loan losses       3,723     3,504     3,100     2,704     2,650
Securities gains
 (losses)     (      2) 5     2       89    16   
Other operating
 income            391  276  242  229       240
Other operating
 expenses            2,425     2,304     2,236     2,097     1,972
Income before
 income taxes      1,687     1,481     1,108       925       934
Applicable income
 tax                   455       422       319       225       247
    Net income          $ 1,232   $ 1,059   $   789   $   700   $   687
</TABLE>
Per share amounts are based on following weighted averages:

              1996 - 495,000     1994 - 440,000   1992 - 440,000
              1995 - 480,476     1993 - 440,000
<TABLE>
<S>              <C>     <C>     <C>      <C>     <C>
Income before
 income taxes      $ 3.41    $  3.08   $   2.52  $  2.10   $  2.12
Applicable income
 taxes             .92  .88  .73  .51       .56
   Net income           2.49 2.20 1.79 1.59      1.56
Cash dividend paid      .66  .55  .48  .44       .43
Book value         20.50     19.08     14.12     15.42     14.26
</TABLE>









-27-


Item 6.  Selected Financial Data (Continued).
<TABLE>
<S>          <C>     <C>       <C>      <C>       <C>
               1996      1995     1994      1993     1992
Income (000 omitted)

Year-End Balance Sheet Figures (000 omitted)

Total assets  $ 102,355 $  96,449 $  90,890 $  88,349 $  91,253
Net loans      63,791   59,871    60,321    60,998    63,582
Total investment
 securities        28,474    29,365    24,060    18,350    20,372
Deposits-non-
 interest
 bearing       10,000   7,959      7,266     6,930     7,577
Deposits-interest
 bearing       81,632   78,399    76,728    74,220    76,841
Total deposits 91,632        86,358     83,994   81,150    84,418
Liabilities for
 borrowed money        0     0      220         0     0
Total stock-
 holders'
 equity  10,149    9,445       6,214    6,785    6,276

Ratios

Average equity/
 average assets     9.80     9.29  7.23      7.15           6.96
Return on
 average equity    12.57     12.13     12.08     10.73          11.36
Return on
 average assets    1.23 1.13  .87  .77            .79
</TABLE>
Item 7.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations.

         Management's discussion and analysis of financial
condition and results of operations are included on pages 62
through 68.
Item 8.  Financial Statements and Supplementary Data.
         The report of independent auditors and the
following consolidated financial statements and schedules of


-28-


Fulton Bancshares Corporation and subsidiaries are submitted
herewith:
                                                      Page

         Independent auditor's report  30

         Consolidated balance sheets
          December 31, 1996 and 1995   31

         Consolidated statements of income for
          the years ended December 31, 1996, 1995
          and 1994 32-33

         Consolidated statements of changes in
          stockholders' equity for the years ended
          December 31, 1996, 1995, and 1994 34

         Consolidated statements of cash flows for
          the years ended December 31, 1996, 1995,
          and 1994 35 - 37

         Notes to consolidated financial
          statements    38 - 60

         Summary of quarterly financial data
          (unaudited)   61






















-29-


INDEPENDENT AUDITOR'S REPORT



Board of Directors
Fulton Bancshares Corporation
McConnellsburg, Pennsylvania


    We have audited the accompanying consolidated
balance sheets of the Fulton Bancshares Corporation and its
wholly-owned subsidiaries as of December 31, 1996 and 1995
and the related consolidated statements of income, changes
in stockholders' equity, and cash flows for each of the
three years ended December 31, 1996.  These consolidated
financial statements are the responsibility of the
corporation's management.  Our responsibility is to express
an opinion on these consolidated financial statements based
on our audits.

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

    In our opinion, the consolidated financial
statements referred to above present fairly, in all material
respects, the financial position of the Fulton Bancshares
Corporation and its wholly-owned subsidiaries as of
December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years
ended December 31, 1996 in conformity with generally
accepted accounting principles.





Chambersburg, Pennsylvania
February 12, 1997


-30-


FULTON BANCSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
<TABLE>
<S>                                  <C>             <C>
         ASSETS
                                           1996            1995
Cash and due from banks $   3,731,071  $   2,855,829
Federal funds sold        495,000 600,000
Securities available for sale     27,751,699     28,863,968
Federal Reserve, Atlantic Central
 Bankers Bank and Federal Home Loan
 Bank stocks          722,550     500,650
Loans, net of reserve for loan losses
 1996 - $ 443,659; 1995 - $ 344,801       63,791,136  59,870,747
Premises and equipment      2,148,583  2,059,137
Accrued interest receivable  634,935   606,334
Real estate owned other than premises  337,117   424,245
Cash surrender value of life insurance 2,374,288 552,545
Other assets          369,028          116,009
         Total assets   $ 102,355,407  $ 96,449,464

    LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits
    Noninterest bearing $   9,999,893  $  7,959,377
    Interest bearing       81,632,387    78,399,170
                91,632,280   86,358,547
Accrued interest payable     372,949   369,514
Other liabilities (including accrued
 income taxes 1996 - $ 4,992; 1995 -
 $ 127,517)         201,678       276,419
         Total liabilities      92,206,907    87,004,480

STOCKHOLDERS' EQUITY
    Common stock:  par value $ .625 per
     share, 4,000,000 shares authorized
     and 495,000 shares issued at
     December 31, 1996 and 1995   309,375   309,375
    Additional paid-in capital    2,051,275 2,051,275
    Retained earnings   8,006,318 7,101,377
    Unrealized holding losses, net of
     tax 1996 - $ 112,544; 1995 -
     $ 8,780  (      218,468)     (       17,043)
         Total stockholders' equity       10,148,500      9,444,984
         Total liabilities and
          stockholders' equity    $ 102,355,407  $ 96,449,464
</TABLE>
The Notes to Consolidated Financial Statements are an integral part
  of these statements.
-31-


FULTON BANCSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<S>                           <C>         <C>         <C>
                                 1996         1995         1994
Interest Income
    Interest and fees on loans    $ 5,676,179    $ 5,649,463    $ 5,160,709
    Interest and dividends on
     investment securities:
         U.S. Government securities    15,971    25,874    34,753
         Other U. S. Government
          agencies   415,389 313,159     258,336
         Mortgage backed securities    1,185,034 1,158,881 870,628
         Obligations of states and
          political subdivisions  152,730   80,630    45,758
    Interest on federal funds sold     23,106    38,599    21,574
    Other interest and
     dividends          44,338         31,560         25,143
         Total interest income      7,512,747      7,298,166      6,416,901
Interest Expense
    Interest on deposits     3,659,385 3,687,892 3,245,286
    Interest on federal funds
     purchased     49,609    31,956    16,010
    Interest on other borrowed
     money           16,195       11,786          7,475
         Total interest expense      3,725,189     3,731,634      3,268,771
         Net interest income
          before provision
          for loan losses    3,787,558 3,566,532 3,148,130
Provision for Loan Losses          65,000        62,500         48,000
         Net interest income
          after provision
          for loan losses       3,722,558     3,504,032      3,100,130
Other Income
    Service charges on deposit
     accounts 129,633   98,609    102,277
    Other service charges and fees     102,392   69,147    80,025
    Trust department income  43,132    41,815    41,283
    Gain (loss) on sale of
     investment securities   (       2,044) 5,427     2,192
    Gain (loss) on sale of
     other real estate  (       1,772) 46,252    15,657
    Earnings - Cash surrender
     value of life insurance 112,733   8,157     0
    Other income          4,505        11,720          2,830
         Total other income       388,579       281,127        244,264
</TABLE>
The Notes to Consolidated Financial Statements are an integral part
  of these statements.
-32-


FULTON BANCSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<S>                           <C>         <C>         <C>
                                 1996         1995         1994

Other Expenses
    Salaries, fees and
     employee benefits  $ 1,128,686    $ 1,071,628    $   956,834
    Net occupancy expense
     of bank premises and
     furniture and equipment
     expense  417,777   370,424   325,032
    FDIC insurance premiums  1,493     98,248    195,364
    Other expenses     876,909        763,260        758,777
         Total other expenses       2,424,865      2,303,560      2,236,007
         Income before income
          taxes    1,686,272 1,481,599 1,108,387
    Applicable income taxes      454,631        422,326        319,569
              Net income     $ 1,231,641    $ 1,059,273    $   788,818

Earnings per common share    $     2.49     $     2.20     $     1.79     
</TABLE>
























The Notes to Consolidated Financial Statements are an integral part
  of these statements.
-33-


FULTON BANCSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<S>                <C>       <C>          <C>          <C>
                                Additional               Unrealized
                     Capital     Paid-In     Retained     Holding
                      Stock      Capital     Earnings     Losses

Balance - December 31,
 1993    $ 275,000 $   775,000    $ 5,734,536    $          0
    Net income     0    0    788,818   0
    Cash dividends
     ($ .475 per share) 0    0    (    209,000)  0
    Unrealized (loss)
     on investment
     securities available
     for sale, net of
     tax         0          0              0     (  1,149,895)
Balance - December 31,
 1994      275,000   775,000    6,314,354   (  1,149,895)
    Net income     0    0    1,059,273 0
    Cash dividends
     ($ .55 per share)  0    0    (    272,250)  0
    Proceeds from
     issuance of stock  34,375    1,276,275 0    0
    Unrealized gain
     on investment
     securities available
     for sale, net of
     tax         0          0              0       1,132,852
Balance - December 31,
 1995     309,375    2,051,275     7,101,377     (      17,043)
    Net income     0    0    1,231,641 0
    Cash dividends
     ($ .66 per share)  0    0    (    326,700)  0
    Unrealized (loss)
     on investment
     securities available
     for sale, net of
     tax         0          0              0     (     201,425)
Balance - December 31,
 1996    $ 309,375 $ 2,051,275    $ 8,006,318    ($    218,468)
</TABLE>


The Notes to Consolidated Financial Statements are an integral part
  of these statements.

-34-


FULTON BANCSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<S>                       <C>           <C>         <C>
                               1996          1995        1994
Cash flows from operating activities:
    Net income     $ 1,231,641    $  1,059,273   $     788,818
    Adjustments to reconcile
     net income to net cash
     provided by operating activities:
         Depreciation and
       amortization     169,381   152,452   133,052
         Provision for loan losses     65,000    62,500    48,000
         Deferred income taxes    (     32,037)  (       2,951)           43,584
         (Increase) in CSV -
          Officers' life
          insurance     (     80,743)  (       7,545) 0
         (Gain) loss on disposal
          of other real estate    1,772     (      46,252) (      15,657)
         (Gain) loss on sale of
          investment securities   2,044     (       5,427) (       2,192)
         Loss on disposal of
          fixed assets  0    0    2,414
         (Increase) decrease in
          other assets  (    140,842)  30,675    9,175
         (Increase) decrease in
          interest receivable     (     28,601)  (      31,705) (     101,267)
         Increase (decrease) in
          interest payable   3,435     57,502    10,368
         Increase (decrease) in
          other liabilities  (     48,502)       100,461        37,399
Net cash provided by
 operating activities     1,142,548       1,368,983        95,694

Cash flows from investing activities:
    Maturities of investment
     securities to be held
     to maturity   0    0    300,000
    Purchases of investment
     securities to be held
     to maturity   0    (   1,365,219) (   1,218,824)
    Sales of investment
     securities available
     for sale 5,909,298 8,204,138 2,275,056
</TABLE>

The Notes to Consolidated Financial Statements are an integral part
  of these statements.

-35-


FULTON BANCSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<S>                       <C>           <C>         <C>
                               1996          1995        1994


    Maturities of investment
     securities available
     for sale $ 3,607,407    $  2,953,262   $  3,320,425
    Purchases of investment
     securities available
     for sale (  8,713,580)(  13,271,590)   (  12,127,269)
    Net decrease (increase)
     in loans (  3,985,389)  374,615   321,430
    Purchases of property
     and equipment (    189,847)  (     149,491) (     607,592)
    Purchases of FRB and
     FHLB stock    (    221,900)  (     103,050) 0
    Purchase of officers'
     life insurance     (  1,741,000)  (     545,000) 0
    Proceeds from sales of
     other real estate  16,728    243,502           60,360
    Purchases of other
     real estate   (      1,056)  (      69,684)           0
Net cash (used) by
 investing activities   (  5,319,339)  (    3,728,517)     (  7,676,414)

Cash flows from financing activities:
    Proceeds from issuing
     common stock  0    1,310,650 0
    Net increase in deposits 5,273,733 2,364,440 2,843,560
    Dividends paid (    326,700)  (     272,250) (    209,000)
    Net (decrease) increase
     in federal funds
     purchased               0    (     220,000)     220,000
Net cash provided by
 financing activities     4,947,033       3,182,840     2,854,560

Net increase (decrease)
 in cash and cash equivalents     770,242   823,306   (  3,868,160)

Cash and cash equivalents
 at beginning of year     3,455,829       2,632,523      6,500,683
Cash and cash equivalents
 at end of year    $ 4,226,071    $  3,455,829   $  2,632,523
</TABLE>
The Notes to Consolidated Financial Statements are an integral part
  of these statements.
-36-


FULTON BANCSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Years Ended December 31, 1996, 1995 and 1994

<TABLE>
<S>                       <C>           <C>            <C>

                                                                  
                               1996         1995          1994

Supplemental disclosure of cash flows information:

    Cash paid during the year for:

         Interest  $ 3,721,754    $ 3,674,132    $ 3,258,403
         Income taxes   609,193   375,406   173,284


Supplemental schedule of noncash investing and
  financing activities:

    Unrealized holding gain
     (loss), net of tax ($   201,425)  $ 1,132,852    ($ 1,149,895)

    Loans transferred to
     other real estate owned $         0    $    23,884    $   308,248

    Other real estate owned
     transferred to
     property and equipment  $    69,684    $         0    $         0

    Transfer of investment
     securities from "held
     to maturity" to "available
     for sale"     $         0    $ 2,884,933    $         0
</TABLE>











The Notes to Consolidated Financial Statements are an integral part
  of these statements.

-37-


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1.  Significant Accounting Policies

Nature of Operations

Fulton Bancshares Corporation's primary activity
consists of owning and supervising its
subsidiaries:

O   Fulton County National Bank and Trust Company,
    which is engaged in providing banking and bank
    related services, principally in Fulton and
    Huntingdon Counties.  Its five branches are
    located in McConnellsburg (2), Shade Gap,
    Warfordsburg and Hustontown.

O   Fulton County Community Development Corporation,
    which was formed on June 7, 1996 to support
    efforts of the local downtown business
    revitalization project by making   low interest
    loans to eligible small businesses for the
    purpose of facade improvement.  Future projects
    are expected to include small business
    marketing, new business creation, small business
    education, and housing for low-to-moderate
    income individuals.

Principles of Consolidation

The consolidated financial statements include the
accounts of the corporation and its wholly-owned
subsidiaries, the Fulton County National Bank and
Trust Company and the Fulton County Community
Development Corporation.  All significant
intercompany transactions and accounts have been
eliminated.

See Note 13 for parent company financial
statements.

Basis of Accounting

The corporation uses the accrual basis of
accounting.

Use of estimates

The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make estimates
and assumptions that affect the reported amounts of
-38-


Note 1.  Significant Accounting Policies (Continued)

assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial
statements and the reported amounts of revenues and
expenses during the reporting     period.  Actual
results could differ from those estimates.

Material estimates that are particularly
susceptible to significant change relate to the
determination of the allowance for losses on loans
and the valuation of real estate acquired in
connection with foreclosures or in satisfaction of
loans.  In connection with the determination of the
allowances for losses on loans and foreclosed real
estate, management obtains independent appraisals
for significant properties.

While management uses available information to
recognize losses on loans and foreclosed real
estate, future additions to the allowances may be
necessary based on changes in local economic
conditions.  In addition, regulatory agencies, as
an integral part of their examination process,
periodically review the corporation's allowances
for losses on loans and foreclosed real estate.
Such agencies may require the corporation to
recognize additions to the allowances based on
their judgments about information available to them
at the time of their examination.  Because of these
factors, management's estimate of credit losses
inherent in the loan portfolio and the related
allowance may change in the near term.

Investment Securities

Under SFAS 115, the Corporation's investments in
securities are classified in three categories and
accounted for as follows.

O   Trading Securities.  Securities held principally
    for resale in the near term are classified as
    trading securities and recorded at their fair
    values.  Unrealized gains and losses on trading
    securities are included in other income.  The
    Corporation had no trading securities in 1996 or
    1995.



-39-


Note 1.  Significant Accounting Policies (Continued)
O   Securities to be Held to Maturity.  Bonds and
    notes for which the Corporation has the positive
    intent and ability to hold to maturity are
    reported at cost,   adjusted for amortization of
    premiums and accretion of discounts, which are
    recognized in interest income using the interest
    method over the period to maturity.

O   Securities Available for Sale.  Securities
    available for sale consist of bonds and notes
    not classified as trading securities nor as
    securities to be held to maturity.  These are
    securities that management intends to use as a
    part of its asset and liability management
    strategy and may be sold in   response to changes
    in interest rates, resultant prepayment risk and
    other related factors.

Unrealized holding gains and losses, net of tax, on
securities available for sale are reported as a net
amount in a separate component of stockholders'
equity until realized.

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

Fair values for investment securities are based on
quoted market prices.

The Corporation has classified all of its
investment securities as "available for sale" at
December 31, 1996 and 1995.

Loans and Reserve for Possible Loan Losses

Loans are stated at the amount of unpaid principal,
reduced by a reserve for loan losses and increased
or decreased by net deferred loan origination fees
and costs.  Interest on loans is calculated by
using the simple interest method on daily balances
of the principal amount outstanding.  The reserve
for loan losses is established through a provision
for loan losses charged to expense.  Loans are
charged against the reserve for loan losses when
management believes that the collectibility of the
principal is unlikely.

-40-


Note 1.  Significant Accounting Policies (Continued)

The reserve is an amount that management believes
will be adequate to absorb possible losses on
existing loans that may become uncollectible, based
on evaluations of the collectibility of loans and
prior loan loss experience.  The evaluations take
into consideration such factors as changes in the
nature and volume of the loan portfolio, overall
portfolio quality, review of specific problem
loans, and current economic conditions that may
affect the borrowers' ability to pay.  Accrual of
interest is discontinued on a loan when management
believes, after considering economic and business
conditions and collection efforts, that the
borrowers' financial condition is such that
collection of interest is uncertain.  Interest
accrued but not collected as of the date of
placement on nonaccrual status is reversed and
charged against current income unless fully
collateralized.  Subsequent payments received are
either applied to the outstanding principal balance
or recorded as interest income, depending on
management's assessment of the ultimate
collectibility of principal.

In accordance with SFAS No. 91, loan origination
fees and certain direct loan origination costs are
being deferred and the net amount amortized as an
adjustment of the related loan's yield.  These
amounts are being amortized over the contractual
life of the related loans.

Premises and Equipment

Premises and equipment are carried at cost less
accumulated depreciation.  Depreciation is
calculated on both straight-line and accelerated
methods over the estimated useful lives of the
various assets as follows:

                                      Years

    Computer software   3 - 5
    Premises  5 - 50
    Equipment and vehicles   3 - 25

Repairs and maintenance are charged to operations
as incurred.

-41-


Note 1.  Significant Accounting Policies (Continued)

Assets Received in Foreclosure

Assets received in foreclosure are recorded at the
lower of the outstanding principal balance of the
related loans or the estimated market value of
collateral held less costs to sell.  Any adjustment
required to write down the property to net
realizable value is charged to the allowance for
loan losses.  Costs of holding and maintaining the
property are charged to expense when incurred.

Earnings per Share

Earnings per common share were computed based on: 
495,000 shares of common stock outstanding in 1996;
480,476 shares of common stock outstanding in 1995,
and 440,000 shares of common stock outstanding in
1994 after retroactive recognition of a two-for-one
stock split in August 1994.

Federal income taxes

For financial reporting purposes the provision for
loan losses charged to operating expense is based
on management's judgment, whereas for federal
income tax purposes, the amount allowable under
present tax law is deducted.  Additionally,
deferred compensation is charged to operating
expense in the period the liability is incurred for
financial reporting purposes, whereas for federal
income tax purposes, these expenses are deducted
when paid.  As a result of these and timing
differences in depreciation expense and loan costs,
deferred income taxes are provided in the financial
statements.  See Note 9 for further details.

Statements of Cash Flows

For purposes of the Statements of Cash Flows, cash
and cash equivalents include those amounts in the
balance sheet captions "cash and due from banks"
and "federal funds sold".  As permitted by
Statement of Financial Accounting Standards No.
104, the corporation has elected to present the net
change in interest bearing deposits with banks,
deposits, and loans in the Statements of Cash
Flows.
-42-


Note 1.  Significant Accounting Policies (Continued)

Fair values of financial instruments

Statement of Financial Accounting Standards No.
107, Disclosures About Fair Value of Financial
Instruments, requires disclosure of fair value
information about financial instruments,    whether or
not recognized in the balance sheet.  In cases
where quoted market prices are not available, fair
values are based on estimates using present value
or other valuation techniques.  Those techniques
are significantly affected by the assumptions used,
including the discount rate and estimates of future
cash flows.  In that regard, the derived fair value
estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not
be realized in immediate settlement of the
instruments.  Statement No. 107 excludes certain
financial instruments and all nonfinancial
instruments from its disclosure requirements. 
Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of
the corporation.

The following methods and assumptions were used by
the corporation in estimating fair values of
financial instruments as disclosed herein:

    Cash and Cash Equivalents.  The carrying amounts
    of cash and short-term instruments           
    approximate their fair value.

    Securities to be Held to Maturity and Securities
    Available for Sale.  Fair values for         
    investment securities are based on quoted market
    prices.

    Loans Receivable.  For variable-rate loans that
    reprice frequently and have no significant   
    change in credit risk, fair values are based on
    carrying values.  Fair values for fixed rate      
    loans are estimated using discounted cash flow
    analyses, using interest rates currently being    
    offered for loans with similar terms to
    borrowers of similar credit quality.  Fair
    values for impaired loans are estimated using
    discounted cash flow analyses or underlying
    collateral values, where applicable.

-43-


Note 1.  Significant Accounting Policies (Continued)

    Deposit Liabilities.  The fair values disclosed
    for demand deposits are, by definition, equal     
    to the amount payable on demand at the reporting
    date (that is, their carrying amounts).  The      
    carrying amounts of variable-rate, fixed-term
    money market accounts and certificates of         
    deposit approximate their fair values at the
    reporting date.  Fair values for fixed-rate  
    certificates of deposits and IRA's are estimated
    using a discounted cash flow calculation that     
    applies interest rates currently being offered
    to a schedule of aggregated expected monthly      
    maturities on time deposits.

    Long-Term Borrowings.  The fair value of the
    Bank's long-term debt is estimated using a   
    discounted cash flow analysis based on the
    Bank's current incremental borrowing rate for     
    similar types of borrowing arrangements.

    Accrued Interest.  The carrying amounts of
    accrued interest approximate their fair values.

    Off-Balance-Sheet Instruments.  The Bank
    generally does not charge commitment fees. Fees   
    for standby letters of credit and their off-
    balance-sheet instruments are not significant.

Advertising

The Corporation expenses advertising costs as
incurred.  Advertising expenses for the years    ended
December 31, 1996, 1995 and 1994 were $ 60,361,
$ 55,332, and $ 61,124, respectively.

Note 2.  Investments

The amortized cost and fair value of investment
securities available for sale at December 31, 1996
were:








-44-


Note 2.  Investments (Continued)
<TABLE>
<S>             <C>        <C>        <C>         <C>
                              Gross     Gross
                 Amortized  Unrealized Unrealized  Fair
                   Cost       Gains     Losses     Value
Obligations of U. S.
 Government
 corporations
 and agencies $   7,004,547  $ 13,639  $   63,181     $ 6,955,005
Obligations of
 states and
 political
 subdivisions 4,280,094 74,717    6,432     4,348,379
Mortgage-backed
 securities     16,798,070      9,049    358,804  16,448,315    
    Totals         $ 28,082,711   $ 97,405  $ 428,417 $27,751,699
</TABLE>
During 1995 the Financial Accounting Standards Board
(FASB) issued Supplemental Guidance regarding the
implementation of SFAS No. 115 Accounting for
Certain Investments in Debt and Equity Securities. 
In connection with this supplemental guidance the
FASB provided a one-time opportunity for
institutions to redesignate their security
classifications without "tainting" any of their
investment pools.

After extensive review of the Corporation's security
portfolio in November 1995, management moved
$ 2,884,933 of securities classified as held-to-
maturity to the available for sale classification
and accordingly carries these securities at their
market value.  No securities were moved from the
available for sale classification to the held-to-
maturity classification and no securities were
classified as trading.

The amortized cost and fair value of investment
securities available for sale at December 31, 1995
were:









-45-


Note 2.  Investments (Continued)
<TABLE>
<S>            <C>         <C>         <C>       <C>
                              Gross      Gross
                  Amortized Unrealized Unrealized   Fair
                    Cost      Gains      Losses     Value
Obligations of U. S.
 Government
 corporations
 and agencies $   4,925,750  $  31,212 $  38,255 $ 4,918,707
Obligations of
 states and
 political
 subdivisions 1,738,975 58,063    5,701     1,791,337
Mortgage-backed
 securities   21,822,191     34,774    109,793   21,747,172
U. S. Treasury
 securities        402,875       3,877         0     406,752
    Totals         $ 23,889,791    $ 127,926     $ 153,749 $28,863,968
</TABLE>
The amortized cost and fair value of investment
securities available for sale at December 31, 1996,
by expected maturity, are shown below.  Expected
maturities will differ from contractual maturities
because borrowers may have the right to call or
prepay obligations with or without call or
prepayment penalties.
<TABLE>
<S>  <C>                         <C>         <C>
                                   Amortized      Fair
                                     Cost         Value

    Due in one year or less  $          0   $           0
    Due after one year through
     five years    8,371,264 8,338,059
    Due after five years through
     ten years     2,913,377 2,965,325
    Mortgage-backed securities      16,798,070     16,448,315
         $ 28,082,711   $ 27,751,699

Proceeds from sales of securities available for
sale during 1996 were $ 5,909,298.  Gross gains and
losses on those sales were $ 9,818 and $ 11,862,
respectively.  Proceeds from maturities of
investment securities during 1996 were $ 3,607,407,
resulting in no gains or losses.  Included in
shareholders' equity at December 31, 1996 is
$ 218,468 of unrealized holding losses on
securities available for sale, net of $ 112,544 in
deferred taxes.
-46-


Note 2.  Investments (Continued)

Proceeds from sales of securities available for
sale during 1995 were $ 8,204,138.  Gross gains and
losses on those sales were $ 33,278 and $ 27,851,
respectively.  Proceeds from maturities of
investment securities during 1995 were $ 2,953,262,
resulting in no gains or losses.  Included in
shareholders' equity at December 31, 1995 is
$ 17,043 of unrealized holding losses on securities
available for sale, net of $ 8,780 in deferred
taxes.

The Bank owns the following equity securities at
December 31:

</TABLE>
<TABLE>
<S>       <C>                        <C>         <C>
                                   1996       1995

    Federal Home Loan Bank   $ 491,700 $ 419,800
         Atlantic Central Bankers Bank 10,000    10,000
         Federal Reserve Bank     70,850    70,850
         FNMA Preferred   150,000         0
              $ 722,550 $ 500,650
</TABLE>
Securities with a cost basis of $ 4,403,144 (fair
value of $ 4,362,560) and $ 3,927,652 (fair value
of $ 3,908,488) at December 31, 1996 and 1995,
respectively, were pledged to secure public funds
and for other purposes as required or permitted by
law.

Note 3.  Reserve for Loan Losses

Activity in the reserve for loan losses is
summarized as follows:
<TABLE>
<S>                           <C>       <C>       <C>
                                 1996      1995      1994

Balance at beginning of period    $ 344,801 $ 358,006 $ 400,388
Recoveries         43,050    7,472     9,356
Current year provision charged
 to income            65,000    62,500    48,000
    Total               452,851   427,978   457,744
Losses                      9,192    83,177    99,738
Balance at end of period     $ 443,659 $ 344,801 $ 358,006
</TABLE>


-47-


Note 4.  Premises and Equipment

A summary of bank premises and equipment is as
follows:
<TABLE>
<S>                    <C>          <C>          <C>
                                     Accumulated Depreciated
    Description            Cost      Depreciation  Cost
                                        1996
Premises and improvements
 (including land
 $ 269,586)   $ 2,065,990    $   399,769    $ 1,666,221
Equipment, furniture &
 fixtures     1,154,990 709,836   445,154
Vehicles 35,749    17,863    17,886
Construction in
 process      19,322               0        19,322
         $ 3,276,051    $ 1,127,468    $ 2,148,583
                                                           
                                        1995
Premises and improvements
 (including land
 $ 199,902)   $ 1,949,974    $   347,423    $ 1,602,551
Equipment, furniture &
 fixtures     1,031,501 599,950   431,551
Vehicles      35,749         10,714         25,035
         $ 3,017,224    $   958,087    $ 2,059,137
</TABLE>
Depreciation expense amounted to $ 169,381 in 1996,
$ 152,452 in 1995 and $ 124,608 in 1994.

Note 5.  Loans

The Bank grants agribusiness, commercial and
residential loans to customers primarily in Fulton
County, Pennsylvania and adjoining counties in
Pennsylvania and Maryland.  Although the Bank has a
diversified loan portfolio, a significant portion
of its customers' ability to honor their contracts
is dependent upon the agribusiness economic sector
(approximately 11.5% of loan portfolio).

The Bank evaluates each customer's creditworthiness
on a case-by-case basis.  The amount of collateral
obtained, if deemed necessary by the corporation
upon the extension of credit, is based on
management's credit evaluation of the customer. 
Collateral held varies but generally includes
equipment and real estate.

-48-


Note 5.  Loans (Continued)

Loans consist of the following at December 31 (in
thousands):
<TABLE>
<S>   <C>                        <C>            <C>
                                      1996          1995
    Real estate loans:
         Secured by construction and
          land development   $         0    $      386
         Secured by farmland 6,038     6,029
         Secured by 1-4 family
          residential   33,183    27,471
         Secured by nonfarm
          nonresidential     8,318     4,322
    Loans to finance agricultural
     production:
         Loans to farmers    1,342     1,385
    Commercial and industrial loans    4,254     7,761
    Loans to individuals for
     household, family and other
     personal expenditures   9,023     10,866
    Obligations of states and
     political subdivisions in
     the U. S.     2,052     1,989
    All other loans           25         6
               64,235   60,215
    Less:  reserve for loan
            losses (     444)     (    345)
              $ 63,791  $ 59,870

Loans 90 days or more past due (still accruing
interest) and those on nonaccrual status were as
follows at December 31 (in thousands):

</TABLE>
<TABLE>
<S>          <C>       <C>      <C>    <C>    <C>    <C>
                  90 Days or More            Nonaccrual
              - - - -Past Due- - - -   - - - -Status- - - -

                1996     1995    1994   1996    1995   1994

Real estate
 mortgages         $ 1,038   $    4    $ 83 $ 310     $ 310     $   0
Installment
 loans             3    20   2    0    0    0
Time and demand
 loans                   0     229        0     0         0        80
  Total       $ 1,041   $ 253     $ 85 $ 310     $ 310     $  80
</TABLE>

-49-


Note 5.  Loans (Continued)

The amounts of foregone interest and recognized
interest income on loans placed on nonaccrual
status were:
<TABLE>
<S>       <C>        <C>                    <C>
                Foregone Interest     Interest Income
                 at December 31         Recognized

         1996 $ 37,278  $ 21,030
         1995 25,144      3,078
         1994 8,261     2,894
</TABLE>
Loan balances are stated net of deferred loan
origination (fees) costs.  These net (fees) costs
amounted to the following at December 31:
<TABLE>
<S>       <C>                   <C>            <C>
                                    1996             1995

              Installment    $  9,625  $  6,728
              Time and demand     534  (   2,982)
              Mortgage  (  75,028)     (  60,930)
                        ($ 64,869)     ($ 57,184)
</TABLE>
    The corporation had no impairment of loans during
1996 or 1995 as defined by Statement of     Financial
    Accounting Standard No. 114.

Note 6.  Loans to Related Parties

The Bank has granted loans to the officers and
directors of the corporation and its subsidiary and
to their associates.  Related party loans are made
on substantially the same terms, including interest
rates and collateral, as those prevailing at the
time for comparable transactions with unrelated
persons and do not involve more than normal risk of
collectibility.  The aggregate dollar amount of
these loans was $ 639,266 and $ 1,384,650 at
December 31, 1996 and 1995, respectively.  During
1996, $ 1,524,274 of new loans were made and
repayments totalled $ 1,720,888.  The remaining
decrease was due to the retirement of several
directors during 1996.  During 1995, $ 2,309,381 of
new loans were made and repayments totalled
$ 2,107,887.


-50-


Note 6.  Loans to Related Parties (Continued)

Outstanding loans to Bank employees totalled
$ 540,534 and $ 702,289 at December 31, 1996     and
1995, respectively.

Note 7.  Financial Instruments With Off-Balance-Sheet Risk

The Bank is a party to financial instruments with
off-balance-sheet risk in the normal course of
business to meet the financial needs of its
customers and to reduce its own exposure to
fluctuations in interest rates.  These financial
instruments include commitments to extend credit
and standby letters of credit.  Those instruments
involve, to varying degrees, elements of credit and
interest rate risk in excess of the amount
recognized in the balance sheets.  The contract
amounts of those instruments reflect the extent of
involvement the Bank has in particular classes of
financial instruments.

The Bank's exposure to credit loss in the event of
nonperformance by the other party to the financial
instrument for commitments to extend credit and
standby letters of credit and financial guarantees
written is represented by the contractual amounts
of those instruments.  The Bank uses the same
credit policies in making commitments and
conditional obligations as it does for on-balance-
sheet instruments.
<TABLE>
<S>                                 <C>         <C>
                                          Contract or
                                        Notional Amount
                                       1996         1995
Financial instruments whose contract amounts
 represent credit risk at December 31:
  Commitments to extend credit    $ 4,800,512    $ 4,198,000
  Standby letters of credit and
   financial guarantees written   491,045   188,865
</TABLE>
Commitments to extend credit are agreements to lend
to a customer as long as there is no violation of
any condition established in the contract. 
Commitments generally have fixed expiration dates
or other termination clauses and may require
payment of a fee.  Since many of the commitments
are expected to expire without being drawn upon,
the total commitment amounts do not necessarily
represent future cash requirements.

-51-


Note 7.  Financial Instruments With Off-Balance-Sheet Risk
         (Continued)

Standby letters of credit and financial guarantees
written are conditional commitments issued by the
Bank to guarantee the performance of a customer to
a third party.  Those guarantees are primarily
issued to support public and private borrowing
arrangements.  The credit risk involved in issuing
letters of credit is essentially the same as that
involved in extending loans to customers.  The Bank
holds collateral supporting those commitments when
deemed necessary by management.

Note 8.  Retirement Plan

The Bank maintains a 401-K profit-sharing plan
covering substantially all full-time employees. 
The plan allows contributions of up to 15% by
employees and requires Bank contributions of at
least 1% of salaries.  Additional contributions can
be made at the discretion of the board of
directors.  The Bank contributions made to the plan
were $ 60,000 for 1996, $ 50,000 for 1995, and
$ 35,000 for 1994.

Note 9.  Federal Income Taxes

The components of federal income tax expense are
summarized as follows:
<TABLE>
<S>                     <C>           <C>        <C>
                            1996         1995      1994

Current year provision  $ 487,363 $ 423,432 $ 296,731
Deferred income taxes
 (benefits)   (   32,037)    (   2,951)     43,584
Refund due - prior
 year amendment    0    0    (   21,491)
Income tax effect of
 securities
 transactions (      695)        1,845       745
Applicable income
 taxes             $ 454,631 $ 422,326 $ 319,569
</TABLE>
Federal income taxes were computed after reducing
pretax accounting income for nontaxable income in
the amount of $ 321,305, $ 261,107, and $ 169,712
for 1996, 1995 and 1994, respectively.

-52-


Note 9.  Federal Income Taxes (Continued)

A reconciliation of the effective income tax rate
to the federal statutory rate is as follows:
<TABLE>
<S>                                 <C>       <C>     <C>
                                      1996     1995    1994

Applicable federal income tax rate     34.0%     34.0%     34.0%

Reductions resulting from:
    Nontaxable interest income and
     other items, net of
     nondeductible expenses  (  7.0)   (  5.5)   (  4.1)
    Rehabilitation tax credit       0.0       0.0     (  1.1)
Effective income tax rate    27.0%     28.5%     28.8%
</TABLE>
Deferred tax liabilities have been provided for
taxable temporary differences related to
accumulated depreciation and deferred loan costs. 
Deferred tax assets have been provided for
deductible temporary differences related to the
allowance for loan losses and unrealized losses on
available for sale securities.  The net deferred
tax assets (liabilities) included in other assets
(other liabilities) in the accompanying
consolidated balance sheets include the following
components:
<TABLE>
<S>                      <C>        <C>          <C>
                            1996        1995        1994

Total deferred tax assets    $ 230,283 $   74,239     $ 654,681
Total deferred tax
 liabilities       (  120,721)    (   100,478)   (  100,281)
Net deferred tax asset
 (liability)       $ 109,562 ($   26,239)   $ 554,400
</TABLE>
The corporation has not recorded a valuation
allowance for the deferred tax assets as they feel
that it is more likely than not that they will be
ultimately realized.

Note 10. Leases

The Bank is party to real estate leases with base
monthly rental charges of $ 2,450.  These charges
are to be adjusted on specified dates and by agreed
upon amounts or by the net change in the consumer
price index.  The original leases expire on
-53-


Note 10. Leases (Continued)

January 7, 2001 and December 31, 1998,
respectively.  Each lease contains a provision for
renewal under various terms at the Bank's option. 
In addition, the Bank leases certain equipment on a
54 month lease which expires in 2001.  Total rental
expense charged to operations for the years ended
December 31, 1996, 1995 and 1994 was $ 45,921,
$ 43,413 and $ 42,635, respectively.

Based on the current monthly rent, future minimum
rental payments for the next five years are as
follows:
<TABLE>
<S>              <C>                 <C>

                   1997 $ 58,231
                   1998 58,231
                   1999 58,231
                   2000 58,231
                   2001 47,784
</TABLE>
Note 11. Other Assets

Other assets include the following at December 31:
<TABLE>
<S>      <C>                      <C>            <C>
                                      1996          1995

         Net deferred tax asset   $ 109,562 $       0
         Prepaid expenses    98,188    107,594
         Deposits on equipment    140,557   0
         Others                           20,721     8,415
                   $ 369,028 $ 116,009
</TABLE>
Note 12. Deposits

Included in interest-bearing deposits at December
31 are NOW and Money Market Account balances
totaling $ 15,555,335 and $ 15,266,252 for 1996 and
1995, respectively.

Time deposits of $ 100,000 and over aggregated
$ 9,554,650 and $ 8,640,425 at December 31, 1996
and 1995, respectively.  Interest expense on time
deposits of $ 100,000 and over was $ 521,000,
$ 524,000, and $ 410,000 for 1996, 1995, and 1994,
respectively.
-54-


Note 12. Deposits (Continued)

The amount of time deposits maturing over the next
5 years is as follows:
<TABLE>
<S>       <C>                        <C>
         1997 $ 18,160,160
         1998 15,867,118
         1999 8,082,106
         2000 4,754,842
         2001    4,643,163
              $ 51,507,389
</TABLE>
The Bank accepts deposits of the officers and
directors of the corporation and its subsidiaries
on the same terms, including interest rates, as
those prevailing at the time for comparable
transactions with unrelated persons.  The aggregate
dollar amount of deposits of officers and directors
totaled $ 3,845,539 and $ 3,361,667 at December 31,
1996 and 1995, respectively.

Overdrafts of $ 24,676 and $ 6,313 at December 31,
1996 and 1995, respectively, were      reclassified as
loans for financial reporting purposes.

Note 13. Fulton Bancshares Corporation (Parent Company Only)
       Financial Information

The following are the condensed balance sheets,
income statements and statements of cash flows for
the parent company as of and for the periods ended
December 31:
Balance Sheets
<TABLE>
<S>                          <C>               <C>
              Assets               1996             1995
Cash                    $     22,243   $         0
Investment in the Fulton
 County National Bank
 & Trust Company   10,079,881       9,444,290
Investment in Fulton County
 Community Development
 Corporation       46,376    0
Due from subsidiary                0           694
    Total assets   $ 10,148,500   $ 9,444,984
</TABLE>
-55-


Note 13. Fulton Bancshares Corporation (Parent Company Only)
       Financial Information (Continued)
<TABLE>
<S>                          <C>               <C>
              Stockholders' Equity   1996           1995
Common stock, par value
 $ .625 per share, 4,000,000
 shares authorized and 495,000
 shares issued at December 31,
 1996 and 1995     $     309,375  $    309,375
Additional paid-in capital   2,051,275 2,051,275
Retained earnings     8,006,318   7,101,377
Unrealized holding (loss), net
 of tax $ 112,544 - 1996 and
 $ 8,780 - 1995    (     218,468) (      17,043)
    Total stockholders'
     equity     10,148,500      9,444,984
    Total liabilities and
     stockholders' equity    $ 10,148,500   $ 9,444,984
</TABLE>
<TABLE>
<S>                   <C>          <C>           <C>
                           1996        1995         1994
Statements of Income
Years Ended December 31
Cash dividends from wholly-owned
 subsidiary        $   430,250    $   283,500    $ 209,000
Equity in undistributed
 income of subsidiaries 833,391   786,021   592,093
Printing, supplies,
 amortization and
 other expenses    (     32,000)  (     10,248)  (   12,275)
    Net income     $ 1,231,641    $ 1,059,273    $ 788,818

Statements of Cash Flows
Years Ended December 31
Cash flows from operating activities:
    Net income          $ 1,231,641    $ 1,059,273    $ 788,818
    Adjustments to
     reconcile net income
     to cash provided by
     operating activities:
         Amortization -
          Organization costs 0    0    8,228
         Equity in
          undistributed
          income of
          subsidiary    (    833,391)  (     786,021) (  592,093)
Net cash provided by
 operating activities       398,250         273,252     204,953
</TABLE>


-56-


Note 13. Fulton Bancshares Corporation (Parent Company Only)
       Financial Information (Continued)
<TABLE>
<S>                   <C>          <C>           <C>
                           1996        1995         1994

Cash flows from investing activities:
    Investment in
     subsidiary    ($  50,000)    ($ 1,310,650)  $       0
Cash flows from financing activities:
    Dividends paid (  326,700)    (    272,250)  (  209,000)
    Net proceeds from
     issuing common stock    0    1,310,650 0
    Net (repayments from)
     advances to
     subsidiary          693 (      1,002)      4,047
Net cash provided
 (used) by financing
 activities        (  326,007)      1,037,398    (  204,953)
Net change in cash 22,243    0    0
Beginning cash             0           0            0

Ending cash        $  22,243 $         0    $       0
</TABLE>
Note 14. Compensating Balances

The corporation is required to maintain certain
compensating balances with its correspondent banks
to cover processing costs and service charges. 
Required compensating balances were $ 125,000 at
December 31, 1996 and 1995.

Note 15. Regulatory Matters

Dividends paid by Fulton Bancshares Corporation are
generally provided from the Bank's dividends to it.
The Federal Reserve Board, which regulates bank
holding companies, establishes guidelines which
indicate that cash should be covered by current
year earnings and the debt to equity ratio of the
holding company must be below 30%.

Fulton County National Bank and Trust Company, as a
National Bank, is subject to the dividend
restrictions set forth by the Comptroller of the
Currency.  Retained earnings available for the
payment of dividends without approval of the
Comptroller amounted to $ 2,235,877, $ 1,843,532
and $ 1,574,857 at December 31, 1996, 1995 and
1994, respectively.
-57-


Note 15. Regulatory Matters (Continued)

The Bank is also required to maintain minimum
amounts of capital to total "risk weighted" assets,
as defined by the banking regulations.  At December
31, 1996, the Bank's actual ratios and required
levels were as follows:
<TABLE>
<S>                                     <C>          <C>
                                         Required     Actual

Leverage (total capital/total assets)  4.0  10.1
Tier 1 (Tier 1 capital/risk weighted
 assets)           4.0  17.1
Total capital (total capital plus allowance
 for loan losses/risk weighted assets) 8.0  17.8
</TABLE>
Note 16. Line of Credit

The Bank has established a line of credit at
Federal Home Loan Bank (FHLB) of Pittsburgh to
improve liquidity.  The line limit fluctuates on a
quarterly basis depending on various factors
reported by the Bank.  The line was limited to
$ 4,184,000 at December 31, 1996 and carries a
variable interest rate.  No funds were drawn on the
line at that date.  In addition, the Bank may
borrow up to $ 31,638,750 from FHLB under the terms
of certain commitment agreements.  The rates and
terms of the commitments are flexible and will not
be fixed until the funds are withdrawn.  The
agreements expire December 11, 1997.  Collateral
for the lines consist of substantially all Bank
assets.

Note 17. Changes in Common Stock

Fulton Bancshares Corporation issued 34,484 and
20,516 shares of stock at March 15 and May 15,
1995, respectively.  The net proceeds of
$ 1,310,650 were advanced to the subsidiary bank to
increase its capital position.

Note 18. Fair Value of Financial Instruments

Statement on Financial Accounting Standards (SFAS)
No. 107, Disclosure About Fair Value of Financial
Instruments, became effective for the corporation's
1995 financial statements.  The estimated fair
values of the corporation's financial instruments
were as follows at December 31, 1996 and 1995:
-58-


Note 18. Fair Value of Financial Instruments (Continued)
<TABLE>
<S>                      <C>      <C>      <C>     <C>
                          Carrying Amount     Fair Value
                                    (000 Omitted)
                            1996     1995    1996     1995
FINANCIAL ASSETS
    Cash and due from banks  $  3,731  $  2,856  $  3,731  $  2,856
    Federal funds sold  495  600  495  600
    Securities available for
     sale          28,083    28,890    27,752    28,864
    Other bank stock    723  501  723  501
    Loans receivable    63,791    59,871    63,401    60,451
    Accrued interest receivable   635  606  635  606

FINANCIAL LIABILITIES
    Time certificates   51,528    49,112    51,935    49,308
    Other deposits 40,104    37,247    40,104    37,247
    Accrued interest payable 373  370  373  370
</TABLE>
Note 19. Deferred Compensation and Other Benefit Programs

The Corporation has adopted several benefit
programs, some of which result in the deferral of
payments for services rendered:

(1) The CEO Salary Continuation Plan - This Plan is
         funded by single premium life insurance           
         on the CEO, with the Bank as beneficiary.    
         Actual payments to the CEO will not begin until
         2005.

(2) The Director Emeritus Program - This plan,   
         funded by life insurance, will allow the Bank     
         to reward its directors for longevity of          
         service to the Board.  Directors who qualify      
         would be eligible at age 75 to receive $ 4,000    
         annually for up to 10 years under this program.

(3) The Director Deferred Compensation Plan - This    
         plan, also funded by life insurance, will allow
         directors to defer up to 100% of directors fees
         annually.  The amounts deferred will be paid      
         out over a period of up to 10 years beginning     
         when the director reaches the age of 75.

(4) The Officer Supplemental Life Insurance Plan      
         provides for officer life insurance coverage of
         double their current salary level, and is also    
         funded by single premium life insurance.
-59-


Note 19. Deferred Compensation and Other Benefit Programs  
          (Continued)

As a result of these plans, the following items are
recognized in the financial statements:
<TABLE>
<S>                              <C>             <C>
                                     1996           1995

Cash surrender value of life
 insurance         $ 2,374,288    $ 552,545
Deferred compensation liability   52,668    10,059
Deferred directors fees liability 34,020    0

Income

Earnings on cash surrender value
 of life insurance 112,733   8,157

Expenses

Life insurance expense  31,990    0
Salary continuation expense  42,609    10,059
Deferred directors fees 34,020    0
Director emeritus fees  9,000     0
</TABLE>














-60-


FULTON BANCSHARES CORPORATION AND SUBSIDIARIES

SUMMARY OF QUARTERLY FINANCIAL DATA

    The unaudited quarterly results of operations for the years ended
December 31, 1996 and 1995 are as follows:
<TABLE>
<S>            <C>       <C>     <C>     <C>      <C>     <C>     <C>     <C>
                             1996                              1995
($ 000 omitted           Quarter Ended                     Quarter Ended
 except per
 share)         Mar. 31  June 30 Sept. 30 Dec. 31 Mar. 31  June 30 Sept. 30
Dec.
31

Interest income    $ 1,841   $ 1,868   $ 1,922   $ 1,882   $ 1,742   $ 1,830   
$
1,873    $ 1,853
Interest
 expense                943      929       926       927       889       931   
  
 971         941
    Net interest
     income     898     939  996  955  853    899       902     912    
Provision for
 loan losses         0        0        50        15        10        20        
8        25
    Net interest income
      after provision for
      loan losses    898     939  946  940  843  879    894     887    

Securities gains
 (losses)     2    (      2) (     2)  0    0            1        2         2
Other income   77  88   91   135  66   80    54   76
Other expenses         563       615      580        667       574       638   
  
 525         566
    Operating income
      before income
      taxes   414  410  455  408  335  322  425  399
Applicable income
 taxes            114       103       104       134        98        88      
126     110
    Net income     $   300   $   307   $   351   $   274   $   237   $   234   
$ 
 299     $   289


Net income applicable
  to common stock
Per share data:
    Net income     $  .61    $  .62    $  .71    $  .55    $  .53         $ 
 .48      $  .61    $  .58
         
</TABLE>











-61-


MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED       
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    The following discussion and analysis should be read
in conjunction with the selected supplementary financial
information presented in this report.

    OPERATING RESULTS

    Net income was $ 1,232,000 for 1996, compared to
$ 1,059,000 for 1995, representing an increase of $ 173,000,
or 16.3%.  Net income on an adjusted per share basis for
1996 was $ 2.49, up $ .29 from the $ 2.20 per share realized
during 1995.

    Interest income for 1996 was $ 7,513,000, up
$ 215,000, or 2.9% more than 1995.  The increase was due
primarily to a combination of higher interest rates earned
on debt securities and higher average balances of loans and
investments in 1996 compared to 1995.

    Average earning assets increased 3.8% in both 1996
and 1995.  Average loan demand, which typically produces
higher yields than investments, increased 2.5% in 1996.  Net
loans at December 31, 1996 stood at $ 63,791,000 compared
with $ 59,871,000 as of December 31, 1995, an increase of
6.5%.  Average investment securities increased 7.6%, with
most of the increase concentrated in tax-exempt state and
political subdivisions and U.S. Government Agencies.

    Total interest expense was $ 3,725,000 for 1996, a
decrease of $ 7,000, or .19% from the $ 3,732,000 for 1995.
Total deposits increased 6.1% in 1996 compared to 2.8% in
1995.  Deposit growth for 1996 occurred as follows:
    O    Noninterest-bearing deposits increased 25.6%
    O    Interest-bearing demand and savings deposits           
         increased 2.8%
    O    Time deposits increased 4.9%
         Since a higher portion of deposit growth occurred
in noninterest-bearing deposits and average rates moderated
during 1996, the bank experienced lower interest costs. 
Management continues to competitively price its interest-
bearing deposits to maintain a favorable net interest
margin.

    Net interest income is the difference between total
interest income and total interest expense.  Interest income
is generated through earning assets which include loans,
deposits with other banks, and investments.  Interest income
is dependent on many factors including the volume of earning
assets, the level of interest rates and the changes in
interest rates, and volumes of nonperforming loans.  The
cost of funds varies with the volume of funds necessary to
support earning assets, the rates paid to maintain deposits,
rates paid on borrowed funds and the level of interest-free
deposits.
-62-


    Net interest income for 1996 totaled $ 3,788,000, up
6.2% from 1995.  Management continuously monitors liquidity
and interest rate risk through its Asset-Liability Committee
reporting and reprices products to maintain a desired net
interest margin.

    Other income represents service charges on deposit
accounts, commissions on loan insurance, fees for travelers'
checks and other services, safe deposit box rents, fees for
trust services, securities gains (losses), gains (losses) on
sales of other real estate owned, and earnings on cash
surrender value of directors and officers life insurance.

    Other income increased $ 108,000 from 1995 to 1996. 
The increase in 1996 resulted primarily from a $ 105,000
increase in earnings on cash surrender value of directors
and officers life insurance.

    The noninterest expenses are classified into four
main categories:  salaries, fees and employee benefits,
occupancy expenses and furniture and equipment expenses that
include depreciation, maintenance, utilities, taxes,
insurance and rents; FDIC insurance premiums; and other
operating expenses that include all other expenses incurred
in daily operations.

    Employee related expenses increased 5.3% and 12.0%
for 1996 and 1995, respectively, primarily due to salary and
related benefit increases and the addition of the business
development representative position in 1995.  Occupancy and
furniture and equipment expenses increased 13.0% and 14.2%
in 1996 and 1995, respectively.  These increases were due
primarily to the additional depreciation expense associated
with the purchase of a local area network, deposit and loan
processing software and additional computer equipment in
1995 and 1996.  Other operating expenses increased $ 17,000,
or 1.9% over 1995.  A $ 97,000 decrease in FDIC insurance
premiums in 1996 was largely offset by increases in director
fees, deferred director fees and directors and officers life
insurance expense.

    Applicable income taxes changed between 1994, 1995
and 1996 because of changes in pretax accounting income and
taxable income.  The effective income tax rate for 1996 was
27.0% compared with 28.5% and 28.8% for 1995 and 1994,
respectively.  The decrease in the effective income tax rate
for 1996 was due primarily due to an increase in tax-exempt
interest on obligations of state and political subdivisions
and the nontaxable income related to the increase in the
cash surrender value of directors and officers life
insurance.

    FINANCIAL CONDITION

    Total assets at December 31, 1996 were $ 102,355,000,
a 6.1% increase over December 31, 1995.  Net loans at
December 31, 1996 totaled $ 63,791,000, an increase of
$ 3,920,000 over the $ 59,871,000 at December 31, 1995.
-63-


    The provision for loan losses was $ 65,000 in 1996
compared to $ 63,000 in 1995.  The provisions were based on
management's evaluation of the adequacy of the reserve
balance and represent amounts considered necessary to
maintain the reserve at the appropriate level based on the
quality of the loan portfolio and economic conditions.  The
bank's history of net charge-offs has traditionally been
better than peer group performance with an average rate of
less than .10% of average loans outstanding over the past
five years.  Though this trend is expected to continue,
management intends to maintain the reserve at appropriate
levels based on an ongoing evaluation of the loan portfolio.

    Loans 90 days or more past due (still accruing
interest) and those on nonaccrual status were as follows at
December 31 (in thousands):
<TABLE>              <C>        <C>      <C>         <C>
                       90 Days or More
                           Past Due      Nonaccrual Status
                        1996     1995      1996       1995

Real estate mortgages   $ 1,038   $   4     $ 310     $ 310
Installment loans  3    20    0     0
Demand and time loans       0            229         0         0
     Total    $ 1,041   $ 253     $ 310     $ 310
</TABLE>
    There were no restructured loans for any of the time
periods set forth above.

    Total deposits increased to $ 91,632,000 at December
31, 1996 compared to $ 89,359,000 at December 31, 1995,
primarily in noninterest-bearing demand and interest-bearing
time deposits.

    Stockholders' equity reached $ 10,148,000 at
December 31, 1996 for a 7.4% increase over the prior year. 
The increase in stockholders' equity was due to retained
earnings.  Total stockholders' equity represented 9.9% and
9.8% of total assets at the end of 1996 and 1995,
respectively.  Cash dividends paid in 1996 were $ 327,000,
up $ 55,000 over 1995.  It is management's and the Board of
Directors' intention to continue to pay a fair return on the
stockholders' investment while retaining adequate earnings
to allow for continued growth.

    As described in Note 1 of the Notes to Consolidated
Financial Statements, deferred income taxes have been
provided for timing differences in the recognition of
certain expenses between financial reporting and tax
purposes.  Deferred income taxes have been provided at
prevailing tax rates for such items as depreciation,
provision for loan losses, deferred compensation and
unrealized holding losses on available for sale securities.
At December 31, 1996, net deferred tax assets amounted to
$ 110,000.  If all timing differences reversed in 1997, the
actual income taxes incurred by the recognition of these
items would not be significantly different from the deferred
income taxes recognized for financial reporting purposes.
-64-


    FUTURE IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

    In June of 1996 the Financial Accounting Standards
Board issued SFAS No. 125 Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of
Liabilities.  Management has not concluded on the impact on
future operations.  This statement may significantly affect
accounting for and disclosures about certain bank
transactions including the following:

    d    Assets subject to prepayment risk
    d    Servicing assets and liabilities
    d    Securities lending transactions
    d    Loan participations
    d    Extinguishment of liabilities
    d    Collateral controlled by an institution as a      
         secured party

    This statement is effective for transfers and
servicing of financial assets and extinguishment of
liabilities occurring after December 31, 1996.

    LIQUIDITY

    Liquidity and interest rate sensitivity are related
but distinctly different from one another.

    Liquidity involves the bank's ability to meet cash
withdrawal needs of customers and their credit needs in the
form of loans.  Liquidity is provided by cash on hand and
transaction balances held at correspondent banks.  Liquidity
available to meet credit demands and/or adverse deposit
flows is also made available from sales or maturities of
short-term assets.  Additional sources of funds to meet
credit needs is provided by access to the marketplace to
obtain interest-bearing deposits and other borrowings,
including special programs available through Federal Home
Loan Bank.

    Interest rate sensitivity is the matching or
mismatching of the maturity and rate structure of the
interest-bearing assets and liabilities.  It is the
objective of management to control the difference in the
timing of the rate changes for these assets and liabilities
to preserve a satisfactory net interest margin.  The
following table approximately reflects the matching of
assets and liabilities maturing within one year and
thereafter, which management feels is adequate to meet
customer cash and credit needs while maintaining a desired
interest rate spread.







-65-


LIQUIDITY (CONTINUED)
<TABLE>         <C>      <C>       <C>      <C>       <C>       <C>
                  Due       Due      Due        Due     Due
                  0-30     31-90    91-180    181-360   After
(000 omitted)     Days     Days      Days      Days    1 Year     Total

Rate Sensitive Assets
    Other short-term
     investments   $    495  $     0   $      0  $      0  $      0  $    495
    Investment
     securities    1,324     880  2,015     5,968      17,565   27,752
    Real estate,
     commercial
     and consumer
     loans      3,078     8,362     11,765     4,382    36,648    64,235
              $ 4,897   $ 9,242   $ 13,780  $ 10,350  $ 54,213  $ 92,482

Rate Sensitive Liabilities
    Certificates of
     deposit over
     $ 100,000     $   387   $   497   $  5,409  $    634  $  2,628  $  9,555
    Other certificates
     of deposit    1,111     2,029     20,104    3,666     15,057    41,967
    Money market
     deposit
     accounts   423     423  846  5,408     0    7,100
    Other interest-
     bearing
     deposits        1,215     1,215      1,805    18,775         0    23,010
              $ 3,136   $ 4,164   $ 28,164  $ 28,483  $ 17,685  $ 81,632

    Cumulative GAP $ 1,761   $ 6,839   ($  7,545)     ($ 25,678)     $ 10,850
</TABLE>
-66-


    Loan rates have remained relatively unchanged over
the past six months.  However, management anticipates that
the Federal Reserve Board will increase short term interest
rates to keep inflation under control.  Management expects
the increases in the short-term interest rates to take
place slowly over the next 360 days.  As a result,
management has assessed probabilities to each time period
and proportionately included variable rate loans in rate
sensitive assets of one year or less.

    In monitoring and evaluating liquidity, management
generally does not consider regular savings or interest-
bearing checking accounts to be particularly rate sensitive
since it is highly improbable that 100% of these deposits
will be withdrawn within the next 360 days.  Therefore,
management has assessed probabilities to each time period
and proportionately included these funds in rate sensitive
liabilities of one year or less.  Variable rate certificates
of deposit totalling $ 19,080,000, which can reprice June,
1997, have been reflected in the 91-180 days time period.

    CAPITAL FUNDS

    Internal capital generation has been the primary
method utilized by Fulton Bancshares Corporation to
increase its capital.  This was supplemental in 1995 with
the issuance of 55,000 shares of capital stock, which
netted proceeds of $ 1,310,000.  Stockholders' equity
exceeded $ 10 million at December 31, 1996.  Regulatory
authorities have established capital guidelines in the form
of the "leverage ratio" and "risk-based capital ratios." 
The leverage ratio compares capital to total balance sheet
assets, while the risk-based ratios compare capital to
risk-weighted assets and off-balance-sheet activity in
order to make capital levels more sensitive to risk
profiles of individual banks.  A comparison of Fulton
Bancshares Corporation's capital ratios to regulatory
minimums at December 31 is as follows:
<TABLE>
<S>                   <C>         <C>     <C>
                         Fulton Bancshares
                             Corporation      Regulatory Minimum
                          1996        1995       Requirements

Leverage ratio               10.1%      9.8%     4%

Risk-based capital ratio
    Tier I (core capital)    17.1%     16.4%     4%
    Combined Tier I and
     Tier II (core capital
     plus allowance
     for loan losses)        17.8%     17.0%     8%
</TABLE>
    Fulton Bancshares Corporation has traditionally been
well above required levels and expects equity capital to
continue to exceed regulatory guidelines and industry
averages.  Certain ratios are useful in measuring the
ability of a company to generate capital internally.

-67-


    The following chart indicates the growth in equity
capital for the past three years.
<TABLE>
<S>                          <C>         <C>       <C>
                                 1996      1995      1994

Equity capital at December 31
 ($ 000 omitted)             $ 10,148  $ 9,445   $ 6,214
Equity capital as a percent
 of assets at December 31          9.9%          9.8%      6.8%
Return on average assets               1.23%     1.13%          .87%
Return on average equity          12.49%    12.13%         12.08%
Cash dividend payout ratio        26.51%    25.7%          26.5%
</TABLE>
    STOCK MARKET ANALYSIS AND DIVIDENDS

    The corporation's common stock is traded inactively
in the over-the-counter market.  As of December 31, 1996 the
approximate number of shareholders of record was 451.
<TABLE>
<S>              <C>        <C>        <C>      <C>
                    Market   Cash       Market     Cash
                    Price   Dividend    Price    Dividend
                          1996               1995
First Quarter      $ 27.00   $ .15     $ 25.00   $ .00
Second Quarter          32.00     .15  25.00     .25
Third Quarter           35.00     .175 25.00     .15
Fourth Quarter          35.00     .185 26.00     .15
</TABLE>





























-68-


FULTON BANCSHARES CORPORATION AND SUBSIDIARY

    For additional information concerning liquidity, refer to statistical
disclosures applicable to the investment and loan portfolio.

    Closely related to the management of liquidity is the management of rate
sensitivity which focuses on maintaining stability in the net interest
margin.  As illustrated in the table below the tax equivalent net interest
margin ranged from 3.7% to 4.1% of average earning assets during the past 3
years. An asset/liability committee monitors and coordinates the overall
asset/liability strategy.

DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY
Interest Rates and Interest Differential Tax Equivalent Yields
                        Years Ended December 31
<TABLE>
<S>                  <C>      <C>     <C>    <C>     <C>      <C>  <C>      
<C>     <C>
      ASSETS                  1996                     1995                 
1994
                      Average                 Average                Average
(000 omitted)         Balance Interest Rate   Balance Interest Rate  Balance
Interest Rate
Investment securities:
    Taxable interest
  income      $  26,647 $ 1,651   6.2% $ 26,010  $ 1,498   5.7% $ 23,458  $
1,164    5.0%
Nontaxable interest
  income          3,040    153    5.0     1,586       81   5.1       906      
46  5.1
         Total investment
          securities    29,687    1,804     6.1  27,596    1,579     5.7  24,364
    1,210     5.0
Loans (net of unearned
 discounts)        62,530    5,686     9.1  61,011    5,649     9.3  61,062    
5,16
1   8.5
Other short-term
 investments        430      23   5.3       661       70   5.9       536      
46   4.0
         Total interest
           earning assets      92,647  $ 7,513   8.1% 89,268    $ 7,298   8.2%  
85,962   $ 6,417   7.5%
Allowance for loan
  losses      (      392)              (     364)               (     388)     
       
Cash and due from banks 2,638               2,399               2,402          
   
Bank premises and
 equipment         2,083               2,028               1,931              
Other assets      3,211              1,440                 408              
         Total assets   $ 100,187           $ 94,771            $ 90,315       
       

  LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing demand
 deposits          $  15,758 $   413   2.6% $ 14,871  $   398   2.7% $ 14,876  
$
  382    2.6%
Savings deposits   14,578    400  2.7  14,663    417  2.8  16,641    488  2.9
Time deposits 49,582    2,847     5.7  47,502    2,872     6.0  43,920    2,376 
5.4
Short-term borrowings      1,196       65   5.4       709       44   6.2      
607      23   3.8
         Total interest
          bearing
       liabilities 81,114    $ 3,725   4.6% 77,745    $ 3,731   4.8% 76,044    
$
3,269    4.3%
Demand deposits     8,562              7,902                7,449              
Other liabilities        645                394                 292           
Total liabilities    90,321            86,041              83,785              
Stockholders'
 equity           9,866              8,730               6,530              
         Total liabilities &
           stockholders'
           equity       $ 100,187           $ 94,771            $ 90,315       
      
Net interest income/net
  yield on average
  earning assets        $ 3,788   4.1%      $ 3,567   4.0%      $ 3,148   3.7%
</TABLE>
              For purposes of calculating loan yields, the average loan volume
includes
nonaccrual loans.  For purposes of calculating yields on nontaxable interest
income, the taxable equivalent adjustment is made to equate nontaxable
interest on the same basis as taxable interest.  The marginal tax rate was
34% for 1996, 1995 and 1994.
-69-


FULTON BANCSHARES CORPORATION AND SUBSIDIARY

CHANGES IN NET INTEREST INCOME TAX EQUIVALENT YIELDS
<TABLE>
<S>          <C>         <C>    <C>         <C>         <C>      <C>

                      1996 Versus 1995             1995 Versus 1994
                    Increase (Decrease)          Increase (Decrease)
                     Due to Change in              Due to Change in

                                   Total                           Total
               Average  Average   Increase     Average   Average  Increase
               Volume     Rate   (Decrease)    Volume      Rate  (Decrease)
(000 omitted)
Interest Income
    Loans (net of
     unearned
     discounts)    $ 138     ($ 111)   $  27     ($    4)  $ 492     $ 488
    Taxable
     investment
     securities       39     92   131  209     126       335
    Nontaxable
     investment
     securities        73    (    1)   72   36   (    1)        35
    Other short-term
     investments   (   12)   (    3)   (   15)       5        18        23
         Total interest
          income     238     (   23)     215       246       635       881

Interest Expense
    Interest bearing
     demand    23  (    9)   14   0        18         18
    Savings
     deposits (   2)    (   15)   (   17)   (    85)      14    (     71)
    Time deposits  119  (  144)   (   25)   154      342   496
    Short-term
     borrowings           26 (    4)      22         4        16          20
         Total interest
          expense    166     (  172)   (    6)      73       390       463

         Net interest
          income             $ 221               $ 418 

</TABLE>
                   Changes which are attributed in part to volume and in part
to
rate are allocated in proportion to their relationships to the amounts of
changes.












-70-


FULTON BANCSHARES CORPORATION AND SUBSIDIARY

    The following table shows the maturities of investment
securities at book value as of December 31, 1996, and weighted average
yields of such securities.  Yields are shown on a tax equivalent basis,
assuming a 34% federal income tax rate.
<TABLE>
<S>            <C>      <C>            <C>           <C>       <C>
                         After 1 year   After 5 years
                 Within   but within      but within    After
                 1 year    5 years         10 years   10 years    Total

(000 omitted)

Bonds:
    U. S. Treasury
              Book value     $ 0  $     0   $     0   $       0 $     0
         Yield     0%   0%   0%   0%   0%
    
    U. S. Government agencies
         Book value     0    7,005     0    0    7,005
         Yield     0%   6.17%     0%   0%   6.14%

    State and municipal
         Book value     0    1,193       3,087   0    4,280
         Yield     0%   4.41%     5.30%     0%   5.05%

    Mortgage-Backed
         Book value     0    37   1,051     15,710    16,798
         Yield     0%   9.12%     6.13%     6.55%     6.53%

    Total book value    $ 0  $ 8,235   $ 4,138   $ 15,710  $ 28,083

    Yield      0%     5.93%     5.51%      6.55%    6.21%


Equity Securities:
    Total Equity Securities                      $    722

         Yield                                  6.23%



Total Investment Securities                      $ 28,805

         Yield                                  6.21%
</TABLE>













-71-


FULTON BANCSHARES CORPORATION AND SUBSIDIARY

LOAN PORTFOLIO


    The following table presents the loan portfolio at the end of
each of the last five years:
<TABLE>
<S>                     <C>       <C>      <C>      <C>      <C>
                            1996     1995    1994      1993    1992
        (000 omitted)

Commercial, financial and
 agricultural $  7,648  $ 11,135  $ 11,641  $ 10,337  $ 13,471
Real estate - Construction     0  386    159     386  1,041
Real estate - Mortgage  47,519    37,822    37,196    38,221    36,074
Installment and other
 personal loans (net of
 unearned discount)        9,068    10,872    11,682    12,455    13,372
    Total loans    $ 64,235  $ 60,215  $ 60,678  $ 61,399  $ 63,958
</TABLE>

         Presented below are the approximate maturities of the loan
portfolio (excluding real estate mortgages and installments) at
December 31, 1996:
<TABLE>
<S>                        <C>       <C>         <C>       <C>
                            Under One   One to    Over Five
                              Year    Five Years    Years    Total

(000 omitted)

Commercial, financial and
 agricultural $ 4,940   $ 1,405   $ 1,303   $ 7,648
Real estate - Construction         0         0         0         0
    Total          $ 4,940   $ 1,405   $ 1,303   $ 7,648
</TABLE>

         The following table presents the approximate amount of fixed
rate loans and variable rate loans due as of December 31, 1996:
<TABLE>
<S>                                  <C>                <C>
                                       Fixed Rate          Variable
                                          Loans           Rate Loans
   (000 omitted)

Due within one year     $   4,292 $  8,782
Due after one but within five years     8,308     4,520
Due after five years      15,228    23,105
    Total          $ 27,828  $ 36,407
</TABLE>










-72-


FULTON BANCSHARES CORPORATION AND SUBSIDIARY

SUMMARY OF LOAN LOSS EXPERIENCE
<TABLE>
<S>                      <C>       <C>       <C>     <C>       <C>
                                      Years Ended December 31          
                            1996      1995     1994     1993    1992

        (000 omitted)

Average total loans
 outstanding (net of
 unearned income)  $ 62,530  $ 61,011  $ 61,062  $ 64,104  $ 62,073

Allowance for loan losses,
 beginning of period    $    345  $    358  $    400  $    376  $    372
Additions to provision
 for loan losses charged
 to operations     65   62    48   70   84
Loans charged off during
 the year
   Commercial 0    35   68   39   85
    Installment          9         48        31        14       14
         Total charge-off's        9         83        99        53       99 

Recoveries of loans
 previously charged off:
    Commercial     33   1    6    2    2
    Installment          10         7         3         5       17
         Total recoveries         43          8         9         7       19 

Net loans charged off   (     34)       75        90        46       80 

Allowance for loan losses,   $   444   $    345  $    358  $     400      $  
376 

Ratio of net loans
 charged off to average
 loans outstanding (    .05)     .12%       .15%      .07%     .13%
</TABLE>

              The provision is based on an evaluation of the adequacy of
the allowance for possible loan losses.  The evaluation includes, but is
not limited to, review of net loan losses for the year, the present and
prospective financial condition of the borrowers and evaluation of
current and projected economic conditions.
















-73-


FULTON BANCSHARES CORPORATION AND SUBSIDIARY

LOANS


    The following table sets forth the outstanding balances
of those loans on a nonaccrual status and those on accrual status
which are contractually past due as to principal or interest
payments for 30 days or more at December 31.
<TABLE>
<S>                  <C>       <C>      <C>     <C>       <C>
                        1996     1995    1994     1993      1992

       (000 omitted)

Nonaccrual loans   $   310   $   310   $    80   $    249  $   135

Accrual loans:
    Restructured   $     0   $     0   $     0   $     0   $     0
    30 through 89 days
     past due 1,716     2,533     3,876     2,551     2,052
    90 days or more
     past due   1,041       253        85       147       124
         Total accrual
          loans    $ 2,757   $ 2,786   $ 3,961   $ 2,698   $ 2,176
</TABLE>

         See Note 5 of the notes to consolidated financial
statements for details of income recognized and foregone revenue on
nonaccrual loans for the past three years.

         Management has not identified any significant problem
loans in the accrual loan categories shown above.
























-74-


FULTON BANCSHARES CORPORATION AND SUBSIDIARY


    The following is an allocation by loan categories of the
allowance for loan losses at December 31 for the last five years.  In
retrospect the specific allocation in any particular category may prove
excessive or inadequate and consequently may be reallocated in the future
to reflect the then current conditions.  Accordingly, the entire allowance
is available to absorb losses in any category:

                         Years Ended December 31                          
<TABLE>
<S>      <C>        <C>        <C>       <C>         <C>       <C>
                    1996              1995                  1994          
   

                    Percentage            Percentage             Percentage
          Allowance of Loans to Allowance of Loans to Allowance of Loans to
           Amount   Total Loans  Amount   Total Loans  Amount   Total Loans
(000 omitted)

Commercial,
 financial and
 agri-
 cultural     $  53     11.91%    $ 123      35.68%   $ 136     37.92%
Real estate -
 Constr-
 uction   0   0.00 2    0.64  1    .27
Real estate -
 Mortgage     328  73.98     157  45.62     152  42.55
Instal-
 lment      63      14.11       63      18.06       69      19.26
    Total     $ 444     100.00%   $ 345     100.00%   $ 358     100.00%
</TABLE>

                                                                          
<TABLE>
<S>                 <C>             <C>             <C>        <C>
                                  Years Ended December 31
                              1993                          1992           

                                     Percentage                  Percentage
                     Allowance       of Loans to     Allowance  of Loans to
                      Amount         Total Loans      Amount    Total Loans

    (000 omitted)

Commercial,
 financial and
 agricultural $ 144     36.05%    $  96     25.48%
Real estate -
 Construction  3   .63  6    1.62
Real estate -
 Mortgage     172  43.01     177  47.06
Installment                81      20.31       97      25.84
    Total     $ 400     100.00%   $ 376     100.00%
</TABLE>




-75-


FULTON BANCSHARES CORPORATION AND SUBSIDIARY

DEPOSITS


    The average amounts of deposits are summarized below:
<TABLE>
<S>                               <C>         <C>         <C>     
                                       Years Ended December 31   

                                     1996        1995       1994

      (000 omitted)

Demand deposits    $  8,562  $  7,902  $  7,449
Interest bearing demand deposits  15,758    14,871    14,876
Savings deposits   14,578    14,663    16,641
Time deposits   49,582    47,502    43,919
     Total deposits     $ 88,480  $ 84,938  $ 82,885
</TABLE>

    The following is a breakdown of maturities of time
deposits of $ 100,000 or more as of December 31, 1996:

                  Maturity                       (000 omitted)

    Certificates of Deposit
         Three months or less     $   884
         Over three months through six months      1,884
         Over six months through twelve months   1,046
         Over twelve months    5,741
                   $ 9,555


   RETURN ON EQUITY AND ASSETS (APPLYING DAILY AVERAGE BALANCES)


    The following table presents a summary of significant
earnings and capital ratios:
<TABLE>
<S>                           <C>           <C>          <C>
                                   1996        1995        1994

    Assets    $ 100,187 $ 94,771  $ 90,315
    Net income     $   1,232 $  1,059  $    789
    Equity    $   9,866 $  8,730  $  6,530
    Cash dividends paid $     327 $    272  $    209
    Return on assets    1.23%     1.13%      .87%
    Return on equity    12.49%    12.13%    12.08%
    Dividend payout ratio    26.5%     25.7%     26.5%
    Equity to asset ratio     9.85%    9.21%      7.23%
</TABLE>





-76-


FULTON BANCSHARES CORPORATION AND SUBSIDIARY

CONSOLIDATED SUMMARY OF OPERATIONS

                                                                          
                                        Years Ended December 31          
<TABLE>
<S>                         <C>      <C>      <C>        <C>      <C>
                               1996    1995      1994      1993     1992
(000 omitted)

Interest income    $ 7,513   $ 7,298   $ 6,417   $ 6,349   $ 6,687   
Interest expense     3,725     3,732     3,269     3,575     3,953   
Net interest income     3,788     3,566     3,148     2,774     2,734
Provision for loan losses         65        62        48         70       84   
 

         Net interest income after
       provision for loan
       losses 3,723     3,504     3,100     2,704     2,650

Other income:
    Trust      43  42    41   30  26
    Service charges - Deposits     130 99   102  127  132
    Other service charges,
     collection and exchange,
     charges, commission fees      102 69    80   67   79
Other operating income
 (loss)      114        71        21        94        19   
         Total other income      389       281       244       318       256    

Income before operating
 expense 4,112     3,785     3,344     3,022     2,906

Operating expenses:
    Salaries and employees
     benefits 1,129     1,072       957      934   905
    Occupancy and equipment
     expense  418  370  325  258  259
    Other operating expenses     875       862       954       905       808    
         Total operating
          expenses   2,425     2,304     2,236     2,097     1,972   

Income before income taxes   1,687     1,481     1,108       925       934
Income tax        455       422       319       225       247    

         Net income applicable
          to common stock    $ 1,232   $ 1,059   $   789   $   700   $   687


Per share data:
    Earnings per common share     $ 2.49         $ 2.20         $ 1.79         
$
1.59          $ 1.56
    Cash dividend - Common   .66       $  .55 *  $  .48         $  .44         
$ 
 .43
    Weighted average number
     of common shares   495,000   480,476   440,000   440,000   440,000
</TABLE>

                 * Based on 495,000 shares outstanding     




-77-


FULTON BANCSHARES CORPORATION AND SUBSIDIARIES

STATEMENTS OF AVERAGE BALANCES AND AVERAGE RATES
<TABLE>
<S>                     <C>         <C>       <C>      <C>       <C>

  ($ 000 omitted)           1996     1995      1994       1993      1992

LOANS
    Lines of credit     $  3,492  $  3,556  $  3,606  $  3,611  $  3,529
    Tax free  2,458     3,027     1,930         2,846 2,637
    Commercial     12,702    10,356    10,533       11,873 12,728
    Mortgage  32,833    33,430    34,458       34,793 31,103
    Consumer                   11,045    10,642    10,535     10,981   12,076
         Total loans                62,530    61,011    61,062     64,104  
62,073

INVESTMENT SECURITIES
    U.S. Government     254  404    564          665  583
    U.S. Government agencies 6,984     5,361     4,743         6,206 7,170
    State & municipal   3,040     1,586       906           553 841
    Mortgage-backed securities    18,730    19,777    17,744    13,741    11,397
    Other          679       468       407       468      585   
         Total investment
          securities      29,687    27,596    24,364    21,633    20,576

OTHER SHORT-TERM INVESTMENTS
    Federal funds sold       430       661       536     1,713       603

TOTAL EARNING ASSETS      92,647    89,268    85,962    87,450    83,252

TOTAL ASSETS  $ 99,844  $ 93,959  $ 90,315  $ 91,297  $ 86,916

Percent increase   6.3% 4.0% (1.1)%    5.0% 13.8%

DEPOSITS
    Interest-bearing demand  $ 15,758  $ 14,871  $ 14,876  $ 15,431  $ 15,822
    Savings   14,578    14,663    16,641       16,052 15,338
    Time   49,582    47,502    43,919    44,283     40,788
         Total interest-
          bearing deposits     79,918    77,036    75,436    75,766    71,948

OTHER BORROWINGS
    Federal funds purchased  908  524  408          0 499
    Liabilities for borrowed
     money         288       185       200     1,030     2,222

TOTAL INTEREST-BEARING
  LIABILITIES   81,114    77,745    76,044    76,796    74,669
</TABLE>












-78-


FULTON BANCSHARES CORPORATION AND SUBSIDIARIES

STATEMENTS OF AVERAGE BALANCES AND AVERAGE RATES (CONTINUED)
<TABLE>
<S>                            <C>       <C>    <C>     <C>      <C>
                                 1996      1995   1994      1993    1992
AVERAGE RATES EARNED
                                   %        %      %         %       %

Loans
    Commercial     9.31      9.95 8.90 7.77 8.32
    Mortgage  8.64 8.99 7.94 7.42 7.99
    Consumer       9.58 10.09     10.14     10.42     10.81
    Tax free  5.91 6.05 6.73 6.21 6.15
    Lines of credit                    9.13  9.84      8.63      7.31      7.62
         Total     9.09  9.22      8.45      7.92      8.48 


Investment Securities
    U.S. Government     6.40 6.40 6.11 5.90 5.90
    U.S. Government agencies 6.09 5.86 5.35 5.34 7.61
    State & municipal                  5.02 5.08 5.34 7.18 6.69
    Mortgage-backed securities    6.50 5.94 4.87 5.59 7.02
    Other     6.32   6.54      6.17      7.06     8.00
         Total     6.08   5.89      5.03     5.60      6.93 

Other Short-Term Investments
    Federal funds sold  5.30  5.85      4.02      3.63      2.99 

Total earning assets    8.11  8.15      7.44      7.24      8.05 

AVERAGE RATES PAID
    Time & savings deposits  4.59 4.77 4.29 4.69 5.24
    Federal funds purchased       5.61 6.09 3.93 0.00 5.00
    Liabilities for borrowed money     5.55  6.36      3.74      3.26      2.88
  

Total interest-bearing
 liabilities  4.59  4.78      4.29      4.67      5.31
</TABLE>
     





















-79-


Item 9.  Disagreements on Accounting and Financial Disclosures.

         Not applicable.























































-80-


PART III
    The information required by Items 10, 12 and 13 is
incorporated by reference from Fulton Bancshares
Corporation's definitive proxy statement for the 1997 Annual
Meeting of shareholders filed pursuant to Regulation 14A.
















































-81-


Item 11. Executive Compensation
         Shown below is information concerning the annual
compensation for services in all capacities to the Company,
the Bank, and FCCDC for the fiscal years ended December 31,
1996, 1995 and 1994 of the Chief Executive Officer.  There
was no executive officer of the Company, the Bank, or FCCDC
whose total annual salary and bonus during that time frame
exceeded $ 100,000.
Summary Compensation Table
<TABLE>
<S>        <C>    <C>   <C>   <C>        <C>       <C>     <C>     <C>
                     Annual Compensation  Long-Term Compensation
                                                Awards     Payouts
  (a)        (b)   (c)   (d)      (e)       (f)       (g)     (h)      (i)

                                 Other    Restricted       
Name and                         Annual      Stock   Options/ LTIP   All Other
 Principal        Salary Bonus Compensation Award(s)   SARs Payouts Compensation
 Position    Year  ($)    ($)       ($)       ($)    (#)    ($)         ($)
Clyde H.
 Bookheimer
 President &
 CEO          1996 $ 83,200  $ 0  $ 0  $ 0  $ 0  $ 0  $ 60,987
         1995  77,850    0    0    0   0     0    19,873
         1994 70,200    0    0    0    0    0    7,255
</TABLE>

     Footnotes:
     (1)  All other compensation includes the following:
<TABLE>
<S> <C>           <C>                   <C>         <C>               <C>
                     Fringe Benefits                                   Deferred
                  (Personal Use of Bank  Retirement   Deferred Salary  Directors
    Directors Fees   Owned Vehicle)        Plan      Continuation Plan   Fees

1996     $ 6,000   $ 1,351   $ 9,027   $ 42,609  $ 2,000
1995      2,000        875    6,939     10,059   0
1994     2,000     1,037     4,218     0    0
</TABLE>
    The deferred salary continuation plan was funded by single premium
life insurance policies on the    CEO, with the Bank named as beneficiary.
Actual payments to the CEO amounting to $ 73,000 annually will not begin
until 2005.   At December 31, 1996, the cash surrender value of the policies
were $ 682,882.  See a copy of this agreement as amended, at Exhibit 10.

-82-


PART IV
Item 14. Exhibits, Financial Statement Schedules and       
           Reports on Form 8-K.
         (a)  Certain documents filed as part of Form 10-K
         Financial Statement Schedules and Exhibits
              (1)  Financial statements.  See Item 8 of this
                   report for the index to financial       
                   statements.
              (2)  Financial statement schedules.  Not          
                   applicable.
              (3)  Exhibits.
    Exhibit Numbers
              (2)       Plan of acquisition, reorganization,    
                        arrangement, liquidation or succession.      
                        Not applicable.
              (3)  (a)  Articles of incorporation.  Incorporated
                             by reference to Exhibit 3A to the       
                             Registrant's Registration Statement on  
                             Form SB-2, Registration No. 33-85626.
                   (b)  By-laws.  Incorporated by reference to  
                             Exhibit 3B to the Registrant's          
                             Registration Statement on Form SB-2,    
                             Registration No. 33-85626.
              (4)       Instruments defining the rights of           
                        security holders including indentures.       
                        The rights of the holders of Registrant's
                        common stock are contained in:

-83-


                   (i)  Articles of Incorporation of Fulton     
                             Bancshares Corporation, filed as Exhibit
                             3A to Registrant's Registration         
                             Statement on Form SB-2 (Registration No.
                             33-85626).
                   (ii)By-laws of Fulton Bancshares             
                             Corporation, filed as Exhibit 3B to the
                             Registrant's Registration Statement on  
                             Form SB-2 (Registration No. 33-85626).
         (9)  Voting trust agreement.  Not applicable.
         (10) Material contracts.  See Exhibit 10.
         (11) Statement re:  computation of per share      
              earnings.  Not applicable.
         (12) Statements re:  computation of ratios.  Not  
              applicable.
         (13) Annual report to security holders, Form 10-Q
              or quarterly report to security holders.  Not
              applicable.
         (16) Letter re:  change in certifying accountant.
              not applicable.
         (18) Letter re:  change in accounting principles.
              Not applicable.
         (21) Subsidiaries of the registrant.  Filed       
              herewith as Exhibit 21.
         (22) Published report regarding matters submitted
              to vote of security holders.  Not            
              applicable.

-84-


         (23) Consents of experts and counsel.  Not        
              applicable.
         (24) Power of attorney.  Not applicable.
         (27) Financial data schedule.  Filed herewith.
         (28) Information from reports furnished to state  
              insurance regulatory authorities.  Not       
              applicable.
         (99) Additional exhibits.  Not applicable.
    (b)  Reports on Form 8-K.  None.





































-85-


SIGNATURES


    In accordance with the requirements of Section 13 or
15(d) of the Securities Act of 1934, this report was signed by the
following persons on behalf of the Registrant in the capacities and
on the dates indicated.

      Signature                    Title                Date

/s/ Clyde H. Bookheimer      Director, President &    March     , 1997
Clyde H. Bookheimer     CEO (Principal Executive
    Officer)

/s/ Raleigh V. Barnett       Director  March     , 1997
Raleigh V. Barnett

/s/ David L. Seiders         Director  March     , 1997
David L. Seiders

/s/ John J. Kelso            Director & Chairman March     , 1997
John J. Kelso of the Board

/s/ Cecil B. Mellott         Director                 March     , 1997
Cecil B. Mellott

/s/ Robert C. Snyder         Director & Vice-         March     , 1997
Robert C. Snyder   Chairman

/s/ Ellis L. Yingling        Director                 March     , 1997
Ellis L. Yingling


























-86-


Exhibit Index



Exhibit No.                            Sequentially numbered pages

   10     CEO Deferred Compensation
     Agreement and Amendments     88 - 98

   21    Subsidiaries of the Registrant     99
















































-87-


                                               EXHIBIT 10

FIRST AMENDMENT TO THE FULTON COUNTY NATIONAL BANK AND
TRUST COMPANY MCCONNELLSBURG, PA SALARY CONTINUATION
AGREEMENT DATED SEPTEMBER 1, 1995

THIS AMENDMENT is dated as of October 15, 1996, and is by
and between THE FULTON COUNTY NATIONAL BANK AND TRUST
COMPANY, a Pennsylvania corporation located in
McConnellsburg, Pennsylvania (the "Corporation") and CLYDE
H. BOOKHEIMER (the "Executive").

RECITALS:

1.  On September 1st, 1995, the Corporation executed The
    Fulton County National Bank and Trust Company
    McConnellsburg PA Salary Continuation Agreement for
    Clyde H. Bookheimer (the "Agreement").

2.  The Board deems it to be in the best interests of the
    Corporation to execute the First Amendment to The Fulton
    County National Bank and Trust Company McConnellsburg PA
    salary Continuation Agreement for Clyde H. Bookheimer
    (the "First Amendment") to increase the retirement
    benefit payable to Mr. Bookheimer from $ 61,500 annually
    to $ 73,000 annually for the reasons stated in the
    minutes of action authorizing the execution of this
    First     Amendment.

3.  Article 8 of the Agreement provides that the Agreement
    may be amended or terminated at any time only by a
    written agreement signed by the Corporation and the
    Executive.  This First Amendment is intended to be such
    signed agreement.

NOW, THEREFORE, the Agreement is amended as follows:

1.  Article 2, Section 2.1.1 is hereby amended in its
    entirety to read as follows:

    "2. 1.1 Amount of Benefit - The benefit under this
    Section 2.1 is $ 6,O83.33.  Said amount shall be
    increased each month between the date the Executive
    reaches age 65 and the Executive's Normal Retirement
    Date by .67% per month until retirement.

2.  Schedule of the Agreement is hereby amended in its
    entirety to read as follows:

-88-


"THE FULTON COUNTY NATIONAL BANK & TRUST COMPANY

SCHEDULE A
<TABLE>
<S>  <C>             <C>                  <C>
                          Early                 Early
                        Retirement            Retirement
    Plan Year        Monthly Benefit      Annual Benefit
         1               $   780              $ 11,114
    2    1,777     21,326
    3    2,559     30,709
    4    3,277     39,329
    5    3,937     47,249
    6    4,544     54,526
    7    5,101     61,213
    8    5,613     67,356
    9    6,083     73,000
</TABLE>

    IN WITNESS OF THE ABOVE, Executive has executed this
First Amendment and the Corporation has caused its duly
authorized officers to execute this First Amendment.


Executive:                        Corporation:
                                  THE FULTON COUNTY        
                                  NATIONAL BANK & TRUST    
                                  COMPANY



______________________            _________________________
CLYDE H. BOOKHEIMER                    Its _____________________



                                  _________________________
                                  Its _____________________

-89-


THE FULTON COUNTY NATIONAL BANK AND TRUST COMPANY
MCCONNELLSBURG, PA
SALARY CONTINUATION AGREEMENT


    THIS AGREEMENT is made this 1st day of September, 1995,
by and between The Fulton County National Bank & Trust
Company, McConnellsburg, Pennsylvania ("Company"), and Clyde
H. Bookheimer (the "Executive").

INTRODUCTION

    To encourage the Executive to remain an employee of the
Company, the Company is willing to provide salary
continuation benefits to the Executive.  The Company will
pay the benefits from its general assets.

AGREEMENT

    The Executive and the Company agree as follows:








-90-


Article I

Definitions

1.1 Definitions.  Whenever used in this Agreement, the
    following words and phrases shall have the meanings
    specified:

    1.1.1 "Change of Control" means the transfer of 51% or
    more of the Company's outstanding voting common stock
    followed within twelve (12 ) months by replacement of
    fifty percent (50%) or more of the members of the
    Company's Board of Directors (for reasons other   than
    death or disability).

    1.1.2 "Code" means the Internal Revenue Code of 1986,
    as amended.  References to a Code Section shall be
    deemed to be to that section as it now exists and to
    any successor provision.

    1.1.3 "Company" means The Fulton County National Bank &
    Trust Company, and any successor thereto.

    1.1.4 "Normal Retirement Date" means the Executive
    attaining age 65, or his actual retirement date if
    after age 65.

    1.1.5 "Termination of Employment" means the Executive's
    ceasing to be employed by the company for any reason
    whatsoever, voluntary or involuntary, other than by
    reason of an approved leave of absence.

    1.1.6 "Plan Year" means each twelve-month period from
    the effective date of this Agreement.



-91-


Article 2

Retirement Benefits


2.1 Normal Retirement Benefit.  If the Executive terminates
    employment on or after the Normal Retirement Date for
    reasons other than death, the Company shall pay to the
    Executive the benefit described in this Section 2. 1.

    2.1.1  Amount of Benefit.  The benefit under this
    Section 2.1 is $ 5,125. Said amount shall be increased
    each month between the date the Executive reaches age
    65 and the Executive's Normal Retirement Date by .67%
    per month until retirement.

    2.1.2 Payment of Benefit.  The Company shall pay the
    benefit to the Executive on the first day of each month
    commencing with the month following the Executive's
    Normal Retirement Date and continuing for 179
    additional months.

2.2 Early Retirement Benefit.  If the Executive terminates
    employment before the Normal Retirement Date, and for
    reasons other than death or following a Change of
    Control, the Company shall pay to the Executive the
    benefit described in this Section 2.2.

    2.2.1 Amount of Benefit.  The benefit under this
    Section 2.2 is the benefit determined under Schedule A
    based on the date of the Executive's Termination of
    Employment.

    2.2.2 Payment of Benefit.  The Company shall pay the
    benefit to the Executive on the first day of each month
     commencing with the month following the Executive's   
     Normal Retirement Date and continuing for 179
    additional months.

2.3 Change of Control Benefit.  If Executive is in active
    service at the time of a Change of Control, the
    Executive shall be entitled to the Normal Retirement
    Benefit described in Section 2. 1, whether or not
    Termination of Service occurs prior to Normal
    Retirement Date.


-92-


Article 3

Survivor Benefits

3.1 Death During Active Service.  If the Executive dies
    while in the active Service of the Company, the Company
    shall pay to the Executive's beneficiary the benefit
    described in this Section 3.1.

    3.1.1 Amount of Benefit.  The benefit under Section 3.1
    is the lifetime benefit that would have been paid to
    the Executive under Section 2.1 calculated as if the
    date of the Executive's death were the Normal
    Retirement Date.

    3.1.2 Payment of Benefit. The Company shall pay the
    benefit to the Beneficiary on the first day of each
    month commencing with the month following the
    Executive's death and continuing for 179 additional
    months.

3.2 Death During Benefit Period.  If the Executive dies
    after benefit payments have commenced under this
    Agreement but before receiving all such payments, the
    Company shall pay the remaining benefits to the
    Executive's beneficiary at the same time and in the
    same amounts they would have been paid to the Executive
    had the Executive survived.

3.3 Death Following Active Service Before Benefits
    Commence. If the Executive is entitled to benefit
    payments under this Agreement, but dies prior to
    receiving said benefit payments, the Company shall pay
    the Executive's beneficiary the benefit described in
    this Section 3.3.

    3.3.1 Amount of Benefit.  The benefit under Section 3.3
    is the vested benefit that would have been paid to the
    Executive pursuant to Schedule A.

    3.3.2 Payment of Benefit.  The Company shall pay the
    benefit to the Beneficiary on the first day of each
    month commencing with the month following the
    Executive's death and continuing for 179 additional
    months.

3.4 "Death After Change of Control".  If Executive dies
    following a Change of Control, provided Executive was
    in active service at the time of the Change of Control,
    the Company shall pay the Executive's beneficiary the
    benefit described in this Section 3.4.

    3.4.1 Amount of Benefit.  The benefit under Section 3.4
    is the lifetime benefit that would have been paid to
    the Executive under Section 2.1 calculated as if the
    date of the Executive's death were the Normal
    Retirement Date.

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    3.4.2 Payment of Benefit. The Company shall pay the
    benefit to the Beneficiary on the first day of each
    month commencing with the month following the
    Executive's death and continuing for 179 additional
    months.

Article 4

Beneficiaries

4.1 Beneficiary Designations.  The Executive shall
    designate a beneficiary by filing a written designation
    with the Company. The Executive may revoke or modify
    the designation at any time by filing a new
    designation.  However, designations will only be
    effective if signed by the Executive and accepted by
    the Company during the Executive's lifetime.  The
    Executive's beneficiary designation shall be deemed
    automatically revoked if the beneficiary predeceases
    the Executive, or if the Executive names a spouse as
    beneficiary and the marriage is subsequently dissolved.
    If the Executive dies without a valid beneficiary
    designation, all payments shall be made to the
    Executive's surviving spouse, if any, and if none, to
    the Executive's surviving children and the descendants
    of any deceased child by right of representation, and
    if no children or descendants survive, to the
    Executive's estate.

4.2 Facility of Payment.  If a benefit is payable to a
    minor, to a person declared incompetent, or to a person
    incapable of handling the disposition of his or her
    property, the Company may pay such benefit to the
    guardian, legal representative or person having the
    care or custody of such minor, incompetent person or
    incapable person.  The Company may require proof of
    incompetency, minority or guardianship as it may deem
    appropriate prior to distribution of the benefit.  Such
    distribution shall completely discharge the Company
    from all liability with respect to such benefit.

Article 5

General Limitations

    Notwithstanding any provisions of this Agreement to the
contrary, the Company shall not pay any benefit under this
Agreement:

5.1 Excess Parachute Payment.  To the extent the
    benefit would be an excess parachute payment under
    Section 28OG of the Code.

5.2 Termination for Cause.  If the Company terminates the
    Executive's employment for:


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    5.2.1 Gross negligence or gross neglect of duties;

    5.2.2 Commission of a felony or of a gross misdemeanor
    involving moral turpitude; or

    5.2.3 Fraud, disloyalty, dishonesty or willful
    violation of any law or significant Company policy
    committed in connection with the Executive's employment
    and resulting in an adverse effect on the Company.

5.3 Competition After Termination of Employment.  No
    benefits shall be payable, except for benefits paid due
    to a Change of Control, if the Executive, without the
    prior written consent of the Company, engages in,
    becomes interested in, directly or indirectly, as a
    sole proprietor, as a partner in a partnership, or as a
    substantial shareholder in a corporation, or becomes
    associated with, in the capacity of employee, director,
    officer, principal, agent, trustee or in any other
    capacity whatsoever, any enterprise conducted in the
    trading area (a 25 mile radius) of the business of the
    Company which enterprise is, or may deemed to be,
    competitive with any business carried on by the Company
    as of the date of termination of the Executive's
    employment or his retirement.

5.4 Suicide.  No benefits shall be payable if the Executive
    commits suicide within two years after the date of this
    Agreement, or if the Executive has made any material
    misstatement of fact on any application for life
    insurance purchased by the Company.

Article 6

Claims and Review Procedures

6.1 Claims Procedure. The Company shall notify the
    Executive's beneficiary in writing, within ninety (90)
    days of his or her written application for benefits, of
    his or her eligibility or noneligibility for benefits
    under the Agreement.  If the Company determines that
    the beneficiary is not eligible for benefits or full
    benefits, the notice shall set forth (1) the specific
    reasons for such denial, (2) a specific reference to
    the provisions of the Agreement on which the denial is
    based, (3) a description of any additional information
    or material necessary for the claimant to perfect his
    or her claim, and a description of why it is needed,
    and (4) an explanation of the Agreement's claims review
    procedure and other appropriate information as to the
    steps to be taken if the beneficiary wishes to have the
    claim reviewed.  If the Company determines that there
    are special circumstances requiring additional time to
    make a decision, the Company shall notify the
    beneficiary of the special circumstances and the date
    by which a decision is expected to be made, and may
    extend the time for up to an additional ninety-day
    period.
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6.2 Review Procedure.  If the beneficiary is determined by
    the Company not to be eligible for benefits, or if the
    beneficiary believes that he or she is entitled to
    greater or different benefits, the beneficiary shall
    have the opportunity to have such claim reviewed by the
    Company by filing a petition for review with the
    Company within sixty (60) days after receipt of the
    notice issued by the Company.  Said petition shall
    state the specific reasons which the beneficiary
    believes entitle him or her to benefits or to greater
    or different benefits.  Within sixty (60) days after
    receipt by the Company of the petition, the Company
    shall afford the beneficiary (and counsel, if any) an
    opportunity to present his or her position to the
    Company orally or in writing, and the beneficiary (or
    counsel) shall have the right to review the pertinent
    documents.  The Company shall notify the beneficiary of
    its decision in writing within the sixty-day period,
    stating specifically the basis of its decision, written
    in a manner calculated to be understood by the
    beneficiary and the specific provisions of the
    Agreement on which the decision is based.  If, because
    of the need for a hearing, the sixty-day period is not
    sufficient, the decision may be deferred for up to
    another sixty-day period at the election of the
    Company, but notice of this deferral shall be given to
    the beneficiary.

Article 7

Amendments and Termination

    This Agreement may be amended or terminated only by a
written agreement signed by the Company and the Executive.

Article 8

Miscellaneous

8.1 Binding Effect.  This Agreement shall bind the
    Executive and the Company, and their beneficiaries,
    survivors, executors, successors, administrators and  
              transferees.

8.2 No Guaranty of Employment.  This Agreement is not an
    employment policy or contract.  It does not give the
    Executive the right to remain an employee of the
    Company, nor does it interfere with the Company's right
    to discharge the Executive.  It also does not require
    the Executive to remain an employee nor interfere with
    the Executive's right to terminate employment at any
    time.

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8.3 Non-Transferability.  Benefits under this Agreement
    cannot be sold, transferred, assigned, pledged,
    attached or encumbered in any manner.

8.4 Tax Withholding.  The Company shall withhold any taxes
    that are required to be withheld from the benefits
    provided under this Agreement.

8.5 Applicable Law.  The Agreement and all rights hereunder
    shall be governed by the laws of Pennsylvania, except
    to the extent preempted by the laws of the United
    States of America.

8.6 Unfunded Arrangement.  The Executive and beneficiary
    are general unsecured creditors of the Company for the
    payment of benefits under this Agreement.  The benefits
    represent the mere promise by the Company to pay such
    benefits.  The rights to benefits are not subject in
    any manner to anticipation, alienation, sale,
    transfer, assignment, pledge, encumbrance, attachment,
    or garnishment by creditors.  Any insurance on the
    Executive's life is a general asset of the Company to
    which the Executive and beneficiary have no preferred
    or secured claim.

8.7 Recovery of Estate Taxes.  If the Executive's gross
estate for federal estate tax purposes includes any amount
determined by reference to and on account of this Agreement,
and if the beneficiary is other than the Executive's estate,
then the Executive's estate shall be entitled to recover
from the beneficiary receiving such benefit under the terms
of the Agreement, an amount by which the total estate tax
due by Executive's estate, exceeds the total estate tax
which would have been payable if the value of such benefit
had not been included in the Executive's gross estate.  If
there is more than one person receiving such benefit, the
right of recovery shall be against each such person.  In the
event the beneficiary has a liability hereunder, the
beneficiary may petition the Company for a lump sum payment
in an amount not to exceed the beneficiary's liability
hereunder.

    IN WITNESS WHEREOF, the Executive and a duly authorized
Company officer have signed this Agreement.

EXECUTIVE:                        COMPANY:
                                  Fulton County National   
                                  Bank and Trust Company


______________________            By  ____________________
Clyde H. Bookheimer

                                  Title __________________


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Clyde H. Bookheimer


Schedule "A"

<TABLE>
<S> <C>               <C>                   <C>

                            Early               Early
                         Retirement          Retirement
    Plan Year          Monthly Benefit     Annual Benefit

         1    $   780   $ 9,364
         2    1,497     17,967
         3    2,156     25,871
         4    2,761     33,133
         5    3,317     39,806
         6    3,828     45,937
         7    4,298     51,570
         8    4,729     56,745
         9    5,125     61,500
</TABLE>

                                                           
       






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                                                 EXHIBIT 21


SUBSIDIARIES OF THE REGISTRANT



1.  Fulton County National Bank and Trust, Pennsylvania; a
    national bank organized February 24, 1887 under the
    Pennsylvania Banking Code.

    It converted to a national banking association on
    September 5,   1933.

2.  Fulton County Community Development Corporation, which
    was  formed on June 7, 1996 under the Pennsylvania
    Business Corporation Law of 1988, as amended.








































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