<PAGE>
<PAGE>                       FORM 10-Q

                SECURITIES AND EXCHANGE COMMISSION
                      Washington, D.C.  20549

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

        For the Quarterly Period Ended March 31, 1999

                                 or

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

For the transition period from ___________ to ____________

Commission file number   1-11819
                         -------

                     HAYWOOD BANCSHARES, INC.
                    ---------------------------
     (Exact name of registrant as specified in its charter)

      North Carolina                            56-1918006
-----------------------------                ----------------
(State or other jurisdiction of              (I.R.S. Employer
incorporation or organization)               Identification No.)

 370 North Main Street, Waynesville, North Carolina      28786
-----------------------------------------------------------------
(Address of principal executive offices)               (Zip Code)

                        (828) 456-9092
                        --------------
       (Registrant's telephone number, including area code)

                         NOT APPLICABLE     
                       -----------------
(Former name, former address, and former fiscal year, if changed
since last report)

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


                APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

    As of May 14, 1999, shares of common stock outstanding were
1,250,356.<PAGE>
<PAGE> 
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

                 HAYWOOD BANCSHARES, INC. AND SUBSIDIARY
             Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>                                          March 31,      December 31,
                                                     1999            1998     
                                                 ------------    ------------
            Assets                                (Unaudited)
            ------
<S>                                              <C>             <C>
Cash on hand and in banks                         $  1,586,048     1,525,035
Interest-bearing balances in other banks               416,645       805,257
Federal funds sold                                   2,982,496     1,713,611
Investment securities:
  Held to maturity (fair value of $11,815,140
    and $10,332,472, at March 31, 1999 and 
    December 31, 1998, respectively)                11,840,389    10,302,987
  Available for sale (cost of $16,124,088 
    and $19,711,642 at March 31, 1999 and 
    December 31, 1998, respectively)                15,932,099    19,466,200
Loans receivable (net of allowance for loan 
    losses of $768,547 and $758,547, at March
    31, 1999 and December 31, 1998, 
    respectively)                                  110,224,026   110,792,991
Real estate acquired in settlement of loans              7,192         7,192
Federal Home Loan Bank stock, at cost                1,427,300     1,427,300
Premises and equipment                               1,539,163     1,565,173
Investment in mortgage servicing rights              1,020,257       977,720
Goodwill                                               662,105       675,030
Other assets                                         1,432,537     1,697,128
                                                  ------------   -----------
                                                  $149,070,257   150,955,724   
                                                  ============   ===========
       Liabilities and Stockholders' Equity
       ------------------------------------
Deposit accounts:
 Noninterest-bearing                              $    193,562       241,823
 Interest-bearing, including $14,987,697 
  and $15,245,006, respectively, of time 
  deposits for $100,000 or more                    117,809,714   116,519,550
                                                  ------------   -----------
                                                   118,003,276   116,761,373
Advances from Federal Home Loan Bank                 7,000,000    10,500,000
Accrued expenses and other liabilities               2,291,079     2,146,919
                                                  ------------   -----------
            Total liabilities                      127,294,355   129,408,292
                                                  ------------   -----------
Stockholders' equity:
  Serial preferred stock, $1.00 par value, 
   5,000,000 shares  authorized; no 
   shares issued or outstanding                             --            --
  Common stock, $1.00 par value, 10,000,000 
   shares authorized; 1,250,356 shares issued 
   and outstanding, respectively                     1,250,356     1,250,356
  Additional paid-in capital                         3,521,612     3,521,612
  Retained income, substantially restricted         17,131,640    16,937,456
  Accumulated other comprehensive income (loss)       (127,706)     (161,992)
                                                  ------------   -----------
            Total stockholders' equity              21,775,902    21,547,432
                                                  ------------   -----------
                                                  $149,070,257   150,955,724
                                                  ============   ===========
</TABLE>
See accompanying notes to consolidated financial statements.

                                                       
                                 2<PAGE>
<PAGE> 
                 HAYWOOD BANCSHARES, INC. AND SUBSIDIARY
                    Consolidated Statements of Income
<TABLE>
<CAPTION>                                      Three Months Ended March 31,   
                                               ------------------------------
                                                    1999             1998     
                                               -------------    -------------
                                                         (Unaudited)
<S>                                            <C>              <C>
Interest income:
  Loans                                        $2,175,302        2,298,951
  Investment securities                           370,507          456,538
  Interest-bearing balances in other banks          1,395            8,010
  Federal funds sold                               71,550           16,608
  Other                                            26,394           25,515
                                               ----------       ----------
         Total interest income                  2,645,148        2,805,622
                                               ----------       ----------
Interest expense:  
  Deposits, including $167,666 in 1999 and 
    $172,057 in 1998, on time deposits for 
    $100,000 or more                            1,262,219        1,387,126
  Other borrowed money                            116,183          149,910
                                               ----------       ----------
         Total interest expense                 1,378,402        1,537,036
                                               ----------       ----------
         Net interest income                    1,266,746        1,268,586
Provision for loan losses                          10,000            5,000
                                               ----------      -----------
         Net interest income after provision 
           for loan losses                      1,256,746        1,263,586
                                               ----------      -----------
Other income:
  Insurance income, net                            50,912           44,975
  Service charges on deposits                      15,511           16,289
  Rental income                                    13,155           12,463
  Gain on sale of real estate acquired 
   in settlement of loans                              --          406,872
  Real estate operations, net                          --            1,246
  Gain on sale of investment securities 
   available for sale                                  --            6,418
  Income on investment in mortgage 
   servicing rights                                42,537           38,835
  Other income                                     12,484            6,147
                                               ----------      -----------
         Total other income, net                  134,599          533,245
                                               ----------      -----------
General and administrative expenses:
  Salaries and employee benefits                  455,366          444,470
  Occupancy and equipment                          73,330           83,720
  Federal and other insurance premiums             21,264           20,069
  Amortization of goodwill                         13,125           13,125
  Other expenses                                  196,019          193,664
                                               ----------      -----------
         Total general and administrative 
           expenses                               759,104          755,048
                                               ----------      -----------
         Income before income taxes               632,241        1,041,783
Income taxes                                      238,000          407,000
                                               ----------      -----------
         Net income                            $  394,241          634,783
                                               ==========      ===========
Per share amounts:
          Net income - basic                   $     0.32             0.51
                                               ==========      ===========
          Net income - diluted                 $     0.32             0.51
                                               ==========      ===========
</TABLE>
See accompanying notes to consolidated financial statements.
                                  
                                 3<PAGE>
<PAGE> 
            HAYWOOD BANCSHARES, INC. AND SUBSIDIARY
        Consolidated Statements of Stockholders' Equity
             and Comprehensive Income
         Three Months ended March 31, 1999 and 1998
                        (Unaudited)

                                                                  
<TABLE>
<CAPTION> 
                                                                     Accumulated    
                                            Additional                  Other                      Total
                                 Common     Paid-in       Retained   Comprehensive              Stockholders'
                                  Stock     Capital        Income       Income                      Equity
                                ----------  -----------   ----------    --------                -------------
<S>                             <C>         <C>          <C>            <C>                     <C>
Balance at December 31, 1998    $1,250,356    3,521,612   16,937,456    (161,992)                21,547,432
Comprehensive income:
  Net income                            --           --      394,241          --                    394,241      
    
  Other comprehensive income-
    unrealized gain on securities
    available for sale, net of
    income taxes of $19,167             --           --           --      34,286                     34,286
                                                                                                 ---------- 
  Total comprehensive income                                                                        428,527   
Cash dividends declared on
  common stock, $.16 per share          --           --     (200,057)         --                   (200,057)
                                ----------   ----------   ----------    --------                 ----------
Balance at March 31, 1999       $1,250,356    3,521,612   17,131,640    (127,706)                21,775,902
                                ==========   ==========   ==========    ========                 ==========
</TABLE>
<TABLE>
<CAPTION> 
 
                                                                     Accumulated    
                                            Additional                  Other      Obligation      Total
                                 Common     Paid-in       Retained   Comprehensive  of the     Stockholders'
                                  Stock     Capital        Income       Income       ESOP          Equity
                                ----------  -----------   ----------   -----------  ----------  --------------
<S>                             <C>         <C>          <C>            <C>         <C>          <C>
Balance at December 31, 1997    $1,250,356    3,437,275   17,487,686      56,831     (58,616)    22,173,532
Comprehensive income:
  Net income                            --           --      634,783          --          --        634,783
  Other comprehensive income
    (loss)- unrealized gain on 
    securities available for 
    sale, net of income taxes 
    of $41,431                          --           --           --     (78,557)         --        (78,557)
                                                                                                 ---------- 
  Total comprehensive income                                                                        556,226
Cash dividends declared on
  common stock, $.15 per share          --           --     (187,553)         --          --       (187,553)
Principal repayment of
  ESOP debt                             --           --           --          --      15,750         15,750
Release and allocation of
  ESOP shares                           --       29,804      (15,147)         --          --         14,657
                                ----------   ----------   ----------    --------    --------     ----------
Balance at March 31, 1998       $1,250,356    3,467,079   17,919,769     (21,726)    (42,866)    22,572,612
                                ==========   ==========   ==========    ========    ========     ==========

</TABLE>

See accompanying notes to consolidated financial statements.

                                                     
                               5<PAGE>
<PAGE>
                   HAYWOOD BANCSHARES, INC. AND SUBSIDIARY
                    Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>                                      Three Months Ended March 31,
                                               ------------------------------
                                                    1999             1998     
                                               -------------    -------------
                                                         (Unaudited)
<S>                                            <C>              <C>
Cash flows from operating activities:
  Net income                                   $   394,241          634,783
  Adjustments to reconcile net income to net
     cash provided by operating activities:
       Provision for loan losses                    10,000            5,000
       Depreciation and amortization                56,620           81,403
       Amortization of goodwill                     13,125           13,125
       Income from investment in mortgage 
         servicing rights                          (42,537)         (38,835)
       Net gain on sale of real estate acquired
         in settlement of loans                         --         (406,872)
       Gain on sale of investment securities 
         available for sale                             --           (6,418)
       Increase (decrease) in allowance for 
         uncollected interest                         (978)             234
       Increase in other assets                    264,392            6,444
       Increase in accrued expenses and 
         other liabilities                         124,993          243,696
       Increase in deferred loan fees               13,766           10,885
       Net noncash expense recorded for ESOP            --           14,657
                                               -----------      -----------
          Net cash provided by operating 
            activities                             833,622          558,102
                                               -----------      -----------
Cash flows from investing activities:
  Purchases of investment securities held to 
    maturity                                    (4,700,000)      (3,900,000)
  Proceeds from maturities and issuer calls
    of investment securities held to maturity    3,136,957        3,000,000
  Principal collected on investment securities
    held to maturity                                27,594           88,784
  Proceeds from maturities and issuer calls 
    of investment securities available for sale     59,020        1,500,000
  Proceeds from sale of investment securities 
    available for sale                           5,750,997        3,505,963
  Purchase of investment securities available
    for sale                                    (2,250,000)      (5,181,508)
  Repayment (origination) of loans, net            546,177          (24,508)
  Purchases of premises and equipment               (5,026)              --
  Proceeds from sales of real estate acquired 
    in settlement of loans                              --          682,194
                                               -----------      -----------
          Net cash provided by (used in) 
            investing activities                 2,565,719         (329,075)
                                               -----------      -----------
<PAGE>
Cash flows from financing activities:
  Net increase (decrease) in deposits            1,241,902       (2,062,726)
  Repayment of advances from FHLB               (3,500,000)              --
  Cash dividends paid                             (200,057)        (187,553)
                                               -----------      -----------
         Net cash used in financing activities  (2,458,155)      (2,250,279)
                                               -----------      -----------
Net increase (decrease) in cash and cash 
  equivalents                                      941,186       (2,021,252)
Cash and cash equivalents at beginning of 
  period                                         4,044,003        4,195,001
                                               -----------      -----------
Cash and cash equivalents at end of period     $ 4,985,189        2,173,749
                                               ===========      ===========
</TABLE>
See accompanying notes to consolidated financial statements.

                                6<PAGE>
<PAGE>
              HAYWOOD BANCSHARES, INC. AND SUBSIDIARY
               Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>                                            Three Months Ended March 31,
                                                     -------------------------------
                                                          1999             1998     
                                                      -------------    -------------
                                                                (Unaudited)
<S>                                                    <C>              <C>
Supplemental disclosures of cash flow information:
  Cash paid during the period for:
     Interest                                          $1,400,135       1,572,611
                                                       ==========       =========
     Income taxes                                      $  102,400         169,273
                                                       ==========       =========
Supplemental schedule of noncash investing and 
  financing activities:
     Loans transferred to real estate acquired in 
      settlement of loans                              $       --          36,436
                                                       ==========       =========
     Dividends payable                                 $  200,057         187,553
                                                       ==========       =========

</TABLE>
See accompanying notes to consolidated financial statements.


                             7<PAGE>
<PAGE>
              HAYWOOD BANCSHARES, INC. AND SUBSIDIARY
             Notes to Consolidated Financial Statements
                           March 31, 1999
                             (Unaudited)

(1)  Presentation of Financial Statements
     ------------------------------------

     The consolidated financial statements include the accounts
     of Haywood Bancshares, Inc. (the Corporation) and its
     wholly-owned subsidiary, Haywood Savings Bank, Inc., SSB
     (Haywood Savings).  All intercompany transactions and
     balances are eliminated in consolidation.
 
     The preparation of the consolidated financial statements in
     conformity with generally accepted accounting principles
     requires management to make estimates and assumptions that
     affect reported amounts of assets and liabilities at the
     date of the financial statements, as well as the amounts of
     income and expenses during the reporting period.  Actual
     results could differ from those estimates.
 
     All adjustments considered necessary for a fair
     presentation of the results for the interim periods
     presented have been included (such adjustments are normal
     and recurring in nature).  Operating results for the three
     month period ended March 31, 1999, are not necessarily  
     indicative of the results that may be expected for the year
     ending December 31, 1999.

(2)  Summary of Significant Accounting Policies
     ------------------------------------------
 
     For a description of the significant accounting and
     reporting policies, see note (1) in the notes to the
     December 31, 1998 consolidated financial statements of the
     1998 annual report. 
 
(3)  Cash and Cash Equivalents
     -------------------------
 
     Cash and cash equivalents include cash on hand and in
     banks, interest-bearing balances in other banks, and
     federal funds sold.  Generally, cash and cash equivalents
     are considered to have maturities of three months or less.
 
(4)  Investment in Mortgage Servicing Rights
     ---------------------------------------
 
     During 1996, the Corporation made a $3,000,000 commitment
     to be a limited partner in Dovenmuehle Mortgage Company
     L.P. ("DMCLP") Tranche VIII Servicing Division of
     Dovenmuehle Mortgage Inc. ("DMI").  DMI provides mortgage
     servicing for a national portfolio of residential,
     multi-family and commercial mortgage loans.  These loans
     are owned or securitized by national mortgage agencies, and
     by a variety of private banks, thrifts, insurance companies
     and other loan investors.  DMI formed DMCLP as a funding
     vehicle to purchase portfolios of the Federal National
     Mortgage Association and the Federal Home Loan Mortgage
     Corporation nonrecourse residential mortgage servicing. 
     DMI provides the mortgage servicing for these portfolios. 
     Under this structure investors in DMCLP invest in separate
     tranches, each of which has its own identified servicing
     rights and each of which may be owned by one or a group of
     investors.  The equity investors in each tranche benefit
     from a financial return based solely on the performance of
     the mortgage servicing rights purchased for the tranche. 
     The Corporation has funded all of its $3,000,000
     commitment.   
 
                              7<PAGE>
<PAGE>
     The investment is accounted for under the equity
     method.  Management periodically evaluates the fair
     value of the mortgage servicing rights owned by DMCLP
     using appraisals prepared by a third party and adjusts
     the carrying value of their investment when there is
     impairment.  
 
     During the year ended December 31, 1998, the
     Corporation recognized an impairment valuation
     adjustment totaling approximately $2,161,000.  The
     Corporation recognized a recovery of $12,687 during the
     three months ended March 31, 1999 of the impairment
     previously recorded.  Total earnings of DMCLP
     recognized by the Corporation on the equity method of
     accounting were $29,850 and $38,835 for the three
     months ended March 31, 1999 and 1998, respectively.

(5)  Allowance for Loan Losses
     -------------------------
 
     The following is a reconciliation of the allowance for loan
     losses for the three months ended March 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                           1999         1998     
                                          ------       ------    
<S>                                       <C>          <C>       
Balance at beginning of period            $758,547     738,547 
Provision for loan losses                   10,000       5,000
                                          ---------    -------   
Balance at end of period                  $768,547     743,547 
                                          =========    =======   
</TABLE>
(6)  Borrowings
     ----------

     The Corporation has $7,000,000 in advances from the Federal
     Home Loan Bank of Atlanta.  These advances bear interest at
     a floating rate equal to one month LIBOR and mature on
     February 24, 2000.

(7)  Earnings per Share
     ------------------
   
     Basic earnings per share is computed by dividing net
     income by the weighted average number of common shares
     outstanding for the period.  The Corporation had no
     dilutive securities during the three months ended March
     31, 1999 and 1998.  The weighted average number of common
     shares outstanding is 1,250,356 and 1,247,507 for the
     three months ended March 31, 1999 and 1998, respectively.
   
(8)  Other Accounting Changes
     ------------------------

     In June 1998, the Financial Accounting Standards Board
     issued Statement of Financial Accounting Standards No. 133,
     "Accounting for Derivative Instruments and Hedging
     Activities"  (SFAS No. 133).  SFAS No. 133 establishes
     accounting and reporting standards for derivative
     instruments and for hedging activities.  SFAS No. 133 is
     effective for all fiscal quarters of fiscal years beginning
     after June 15, 1999.  The Company does not have any
     derivative financial instruments and is not involved in any
     hedging activities.

                              8<PAGE>
<PAGE>
     In October 1998, the Financial Accounting Standards Board
     issued Statement of Financial Accounting Standards No. 134,
     "Accounting for Mortgage-Backed Securities Retained after
     the Securitization of Mortgage Loans Held for Sale by a
     Mortgage Banking Enterprise" (SFAS No. 134).  SFAS No. 134 
     establishes accounting and reporting standards for certain
     mortgage banking activities.  SFAS No. 134 is effective for
     financial statements for the first fiscal quarter beginning
     after December 15, 1998.  The Company adopted SFAS No. 134
     in 1999 without any impact on its financial statements.

                              9<PAGE>
<PAGE>
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS.
                                     
Comparison of Operating Results for the Three Months Ended March
----------------------------------------------------------------
31, 1999 and 1998
-----------------

Net income for the first quarter of 1999 decreased to $394,241
or $.32 per basic and diluted share, from $634,783 or $.51 per
basic and diluted share for the same period in 1998.  The
decrease in net income was due to a non-recurring item in the
1998 period.  During the three months ended March 31, 1998, the
Corporation recognized a $403,000 pretax gain on the sale of two
outparcels to the Waynesville Plaza Shopping Center which the
Corporation had been holding as real estate acquired in
settlement of loans. 

Total interest income in 1999 was $2,645,148, a $160,474
decrease from the same period in 1998.  The reason for the
change was a decrease in the average yield on interest earning
assets.  The average yield on interest earning assets decreased
by 50 basis points to 7.24% for the three months ended March 31,
1999 compared to 7.74% for the same period in 1998.  The
decrease in average yield is partially due to a change in the
mix of interest earning assets from loans receivable to federal
funds sold. The average yield on loans receivable was 7.83% for
the three months ended March 31, 1999 compared to 5.08% on
federal funds sold.  Average loans receivable decreased $3.4
million between periods and average federal funds sold increased
$4.4 million between periods.  The decrease in loans receivable
is due to significant prepayments during the period and
competitive pressures in the marketplace.  The Corporation
invested excess funds in federal funds sold for liquidity
purposes.  Also attributing to the decrease in average yield on
interest earning assets is a decrease in the average yield on
investment securities of 141 basis points from 6.73% for the
three months ended March 31, 1998 to 5.32% for the three months
ended March 31, 1999.  This is due to some of the Corporation's
higher yielding securities either maturing or being called
during the period.  Proceeds were reinvested in lower yielding
investments.  

Interest expense in 1999 decreased from 1998 by $158,634 or
10.3%  mainly due to a decrease in the average balance of
interest bearing liabilities of $1.8 million.  The decrease is
mainly due to the Corporation repaying $3.5 million in advances
from the Federal Home Loan Bank of Atlanta ("FHLB") in 1999. 
The rate paid on interest bearing liabilities decreased 41 basis
points between periods from 4.80% for the three months ended
March 31, 1998 to 4.39% for the three months ended March 31,
1999.

The overall net effect of these changes was a $1,840 decrease in
net interest income and a decrease in the interest rate spread
between interest earning assets and interest bearing liabilities
from 2.94% in 1998 to 2.85% in 1999.   

Comparative yields, costs and spreads for the respective periods
are as follows:
<TABLE>
<CAPTION>                                     Three months                 Twelve Months
                                                 ended           At            ended
                                              March 31, (1)    March 31,     December 31,
                                              1999    1998      1999            1998
                                              ----    ----      ----            ---- 
<S>                                           <C>     <C>       <C>            <C> 
Average yield on interest earning assets      7.24%   7.74%     7.02%          7.64%
Average rate on interest bearing liabilities  4.39%   4.80%     4.43%          4.76%
                                              ----    ----      ----           ---- 
 Asset/liability spread                       2.85%   2.94%     2.59%          2.88%
                                              ====    ====      ====           ====
<FN>
(1)  Annualized
</FN>
</TABLE>
                                                (Continued)
                              9<PAGE>
<PAGE>
During the three months ended March 31, 1999 and 1998,
management recorded provisions for loan losses of $10,000 and
$5,000, respectively.  The increase in the provision for loan
losses in 1999 was due to the increase in nonaccrual loans
between the period.  Nonaccrual loans were approximately
$1,007,000 at March 31, 1999 compared to $558,000 at March 31,
1998.  The Corporation had no charge-offs and no recoveries in
either 1999 or 1998.  As discussed below, management determines
the provision for loan losses based on their review of the loan
portfolio and their estimate of the allowance for loan losses
required to absorb estimated probable losses inherent in the
loan portfolio.

Other income decreased $399,000 or 75% in 1999 compared to the
same period in 1998  primarily as a result of the sale of two
outparcels to the Waynesville Plaza Shopping Center for a gain
of approximately $403,000 in 1998.  Absent this non-recurring
gain in the 1998 period, other income would have improved
$4,354, or 3.3%, between the periods mainly due to a $5,937, or
13.2% increase in insurance income due to an increase in the
volume of business during the period.

General and administrative expenses increased by approximately
$4,100 or 0.5%, between periods. 

As a result of these and other factors, income before income
taxes decreased $409,542 or 39.3% in 1999 versus 1998.  Income
tax expense of $238,000 during the period resulted in an
effective income tax rate of 37.6% compared to 39.1% in 1998.

Comparison of Financial Condition at March 31, 1999 and December
----------------------------------------------------------------
31, 1998
--------

Total assets decreased by $1.9 million or 1.25% from $151.0
million at December 31, 1998 to $149.1 million at March 31,
1999.  The decrease is mainly due to a decrease in investment
securities of $2.0 million due to the repayment of $3.5 million
of Advances from the Federal Home Loan Bank.  In addition, the
loan portfolio decreased by $568,965.  Loan originations for the
period were approximately $10.0 million but were offset by
significant prepayments.

Total liabilities decreased by $2.1 million to $127.3 million at
March 31, 1999.  The decrease is due to the repayment of $3.5
million of Advances from the Federal Home Loan Bank.

Stockholders' equity increased by $228,000 from $21.5 million at
December 31, 1998 to $21.8 million at March 31, 1999.  This
increase is due to net income of $394,000 for the quarter and a
decrease in unrealized loss on securities available for sale of
$34,000.  This was offset by a quarterly dividend of $.16 per
share or $200,057.

Asset Quality
-------------

At March 31, 1999, the Corporation had approximately $1,007,000
of loans in nonaccrual status as compared to $841,000 at
December 31, 1998 and $558,000 at March 31, 1998.  At March 31,
1999 and December 31, 1998, the Corporation had no loans that
were considered to be impaired under Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for
Impairment of a Loan".  There were no loans contractually past
due 90 days or more and still accruing interest at March 31,
1999 and December 31, 1998.  In the opinion of management, there
are no other loans which cause management to have serious doubts
as to the ability of such borrowers to comply with the present
repayment terms and thus resulting in such loans becoming
classified as problem assets.  The Corporation's allowance for
loan losses was $768,547 or .69% of outstanding loans at March
31, 1999.  This compares to .68% at December 31, 1998.

The allowance for loan losses represents management's estimate
of an amount adequate to provide for probable losses inherent in
the loan portfolio.  The adequacy of the allowance for loan
losses and the related provision are based upon management's
evaluation of the risk characteristics of the loan portfolio
under current economic conditions with consideration to such
factors as financial condition of the borrower, collateral
values, 

                                                (Continued)

                            11<PAGE>
<PAGE>
growth and composition of the loan portfolio, the
relationship of the allowance for loan losses to outstanding
loans, and delinquency trends.  Management believes the
allowance for loan losses is adequate.  While management uses
all available information to recognize losses on loans, future
additions to the allowance may be necessary based on changes in
economic conditions.  Various regulatory agencies, as an
integral part of their examination process, periodically review
the Corporation's allowance for loan losses.  Such agencies may
require the Corporation to recognize additions to the allowance
based on their judgments about information available to them at
the time of their examination.

Year 2000 Readiness Disclosure
------------------------------

The Corporation recognizes and is addressing the potentially
severe implications of the "Year 2000 Issue." The "Year 2000
Issue" is a general term used to describe the various problems
that may result from the improper processing of dates and date-
sensitive calculations as the Year 2000 approaches. This issue
is caused by the fact that many of the world's existing computer
programs use only two digits to identify the year in the date
field of a program. These programs were designed and developed
without considering the impact of the upcoming change in the
century and could experience serious malfunctions when the last
two digits of the year change to "00" as a result of identifying
a year designated "00" as the year 1900 rather than the year
2000. This misidentification could prevent the Corporation from
being able to engage in normal business operations, including,
among other things, miscalculating interest accruals and the
inability to process customer transactions.

The Corporation's Board of Directors has approved a Year 2000
Plan that was developed in accordance with guidelines set forth
by the Federal Financial Institutions Examination Council. This
plan has three primary phases related to internal Year 2000
compliance. 

The first phase of the Corporation's efforts to address the Year
2000 Issue was to inventory all known Corporation processes that
could reasonably be expected to be impacted by the Year 2000
Issue and their related vendors, if applicable. This phase is
complete, although it is periodically updated as necessary. 

The Corporation's second phase in addressing the Year 2000 Issue
was to contact all third party vendors, request documentation
regarding their Year 2000 compliance efforts, and analyze the
responses. This was a significant phase because the Corporation
does not perform in-house programming, and thus is dependent on
external vendors to ensure and modify, if necessary, the
hardware, software, or service it provides to the Corporation to
be Year 2000 compliant.  This phase is now virtually complete
and the Corporation is currently following up on any issues or
concerns identified in the responses received, as necessary. 

The next phase for the Corporation under the plan is to complete
a comprehensive testing of all known processes. The most
significant phase of testing is the testing of the Corporation's
mainframe computer system, teller terminals and core software
applications.   The Corporation installed a new mainframe
computer system and teller terminals in September 1998 that are
Year 2000 compliant.  Both systems were tested in September
1998.  Upgrades of the core software applications currently used
by the Corporation were received from the software vendor in
September and were represented to be Year 2000 compliant by the
vendor. These applications were successfully loaded onto the
Corporation's hardware system in September and Year 2000 testing
was also completed immediately after installation.

Another part of the Corporation's Year 2000 plan is to assess
the Year 2000 readiness of its significant borrowers and
depositors. Through the use of questionnaire's and personal
contacts, the Corporation is in the process of assessing the
Year 2000 readiness of significant borrowers and depositors of
the Corporation.  Since the majority of the loans are to
individuals and secured by one to four family residences this
step is not expected to require a significant amount of time or
resources.

                                                (Continued)

                            12<PAGE>
<PAGE>
The Corporation has estimated the total costs to address the
Year 2000 Issue to be approximately $202,000 . Approximately
$117,500 of these costs related to the installation of the
mainframe computer system and were capitalized in accordance
with the Corporation's capitalization policy.  Year 2000 project
costs incurred and expensed during the year ended December 31,
1998 were approximately $149,000.  There were no Year 2000
project costs incurred or expensed during the three months ended
March 31, 1999. Funding of the Year 2000 project costs will come
from normal operating cash flow, however the expenses associated
with the Year 2000 Issue will directly reduce otherwise reported
net income for the Corporation. 

Management of the Corporation believes that the potential
effects on the Corporation's internal operations of the Year
2000 Issue can and will be addressed prior to the Year 2000.
However, if required modifications or conversions are not made
or are not completed on a timely basis prior to the Year 2000,
the Year 2000 Issue could disrupt normal business operations.
The most reasonably likely worst case Year 2000 scenarios
foreseeable at this time would include the Corporation
temporarily not being able to process, in some combination,
various types of customer transactions. This could affect the
ability of the Corporation to, among other things, originate new
loans, post loan payments, accept deposits or allow immediate
withdrawals, and, depending on the amount of time such a
scenario lasted, could have a material adverse effect on the
Corporation. Because of the serious implications of these
scenarios, the primary emphasis of the Corporation's Year 2000
efforts is to correct, with complete replacement if necessary,
any systems or processes whose Year 2000 test results are not
satisfactory prior to the Year 2000. Nevertheless, should one of
the most reasonably likely worst case scenarios occur in the
Year 2000, the Corporation is also in the process of formalizing
a contingency plan that would allow for limited transactions,
including the ability to make certain deposit withdrawals, until
the Year 2000 problems are fixed. 

The costs of the Year 2000 project and the date on which the
Corporation plans to complete Year 2000 compliance are based on
management's best estimates, which were derived using numerous
assumptions of future events such as the availability of certain
resources (including internal and external resources), third
party vendor plans and other factors. However, there can be no
guarantee that these estimates will be achieved at the cost
disclosed or within the time frame indicated, and actual results
could differ materially from these plans. Factors that might
affect the timely and efficient completion of the Corporation's
Year 2000 project include, but are not limited to, vendors'
abilities to adequately correct or convert software and the
effect on the Corporation's ability to test its systems, the
availability and cost of personnel trained in the Year 2000
area, the ability to identify and correct all relevant computer
programs and similar uncertainties. 

Liquidity
---------

The Corporation's asset-liability management policy is to
maintain and enhance the net interest income and provide
adequate liquidity to meet continuing loan demand, withdrawal
requirements, and pay for normal operating expenses.  Liquidity
is primarily provided by the ability to attract deposits,
maturities in the investment portfolio, loan repayments, and
current earnings.

At March 31, 1999, Haywood Bancshares had approximately $32.8
million in cash, interest bearing balances in other banks,
federal funds sold and investment securities.  Management
believes that the level of liquidity at March 31, 1999, is
adequate and in compliance with regulatory requirements.

Impact of Inflation and Changing Prices
---------------------------------------

The consolidated financial statements and accompanying footnotes
have been prepared in accordance with generally accepted
accounting principles, which require the measurement of
financial position and operating results in terms of historical
dollars without consideration for changes in the relative
purchasing power of money over time due to inflation.  The
assets and liabilities of the Corporation are primarily monetary
in nature and changes in interest rates have a greater impact on
the Corporation's performance than the effect of inflation.

                                                (Continued)

                            13<PAGE>
<PAGE>
Capital Resources
-----------------

As a North Carolina-chartered savings bank, Haywood Savings is
subject to the capital requirements of the FDIC and the N.C.
Administrator of Savings Institutions ("the Administrator"). 
The FDIC requires Haywood Savings to maintain minimum ratios of
Tier I capital to total risk-weighted assets and total capital
to risk-weighted assets of 4% and 8%, respectively.  To be well-
capitalized, the FDIC requires ratios of Tier I capital to total
risk-weighted assets and total capital to risk-weighted assets
of 6% and 10%, respectively.  Tier I capital consists of total
stockholders' equity calculated in accordance with generally
accepted accounting principles less intangible assets, and total
capital is comprised of Tier I capital plus certain adjustments,
the only one of which is applicable to Haywood Savings is the
allowance for loan losses.  Risk-weighted assets reflect Haywood
Savings' on- and off-balance sheet exposures after such
exposures have been adjusted for their relative risk levels
using formulas set forth in FDIC regulations.  Haywood Savings
is also subject to a leverage capital requirement, which calls
for a minimum ratio of Tier I capital (as defined above) to
quarterly average total assets of 3%, and a ratio of 5% to be
"well capitalized."  The Administrator requires a net worth
equal to at least 5% of assets.  At March 31, 1999, Haywood
Savings was in compliance with all of the aforementioned capital
requirements and is deemed to be "well capitalized".  The
Corporation must comply with FRB capital requirements which are
substantially the same.

Regulatory Matters and Contingencies
------------------------------------

Management is not presently aware of any current recommendations
to the Corporation or to Haywood Savings by regulatory
authorities which, if they were to be implemented, would have a
material effect on the Corporation's liquidity, capital
resources, or operations.


ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
          RISK
                                                      
                             
          Not Applicable.


                             14<PAGE>
<PAGE>
PART II.  OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits.  The following exhibits are being filed with
          the report.

        Exhibit
        Number           Description
        ------           -----------
         27              Financial Data Schedule (EDGAR only)

     (b)  Reports on Form 8-K. During the quarter ended
          March 31, 1999, the Registrant did not file any
          reports on Form 8-K.

                             15<PAGE>
<PAGE>
                         SIGNATURES
                         ----------


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


                               HAYWOOD BANCSHARES, INC.
                               (Registrant)


Date: May 14, 1999         By: /s/Larry R. Ammons  
                               ----------------------
                               Larry R. Ammons
                               (President and Principal
                                Executive Officer)
                               (Duly Authorized Representative)




Date: May 14, 1999         By: /s/Jack T. Nichols  
                               ----------------------
                               Jack T. Nichols
                               (Principal Financial Officer
                               and Principal Accounting Officer)


                            16