FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C.  20549-1004

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

                                                                  
For the quarter ended September 30, 1997  

Commission file number:  33-66014


                     FNB Financial Corporation                    
       (Exact name of registrant as specified in its charter)

Commonwealth of Pennsylvania                  23-2466821      
(State or other jurisdiction of             (I.R.S. Employer
incorporation or organization)               Identification No.)


  101 Lincoln Way West, McConnellsburg, PA               17233   
  (Address of principal executive offices)         (Zip code)


Registrant's telephone number, including area code:   717/485-3123 

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 September 30, 1997
(Common stock, $0.63 par value)   400,000


















































                            FNB FINANCIAL CORPORATION

                                      INDEX

                                                               Page
PART I  -  FINANCIAL INFORMATION

    Condensed consolidated balance sheets - 
      September 30, 1997 and December 31, 1996                 5

    Condensed consolidated statements of income -     
      Three months ended September 30, 1997 and 1996           6

    Condensed consolidated statements of income - 
      Nine months ended September 30, 1997 and 1996            7 

    Condensed consolidated statements of cash flows -
      Nine months ended September 30, 1997 and 1996            8 
 
    Notes to condensed consolidated financial
      statements                                              9-11

    Table #1 - Schedule of held to maturity and
      available for sale investment activity for the
      period January 1, 1997 through September 30, 1997        12

    Table #2 - Schedule of gross unrealized gains and
      unrealized losses within the held to maturity and
      available for sale investment portfolios by 
      investment type                                          13

    Management's discussion and analysis of financial
      condition and results of operations                    14-17


PART II  -  OTHER INFORMATION                                    19

    Signatures                                                20



























                         PART I - FINANCIAL INFORMATION

































            FNB FINANCIAL CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARY

                      CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<S>                                          <C>            <C>
                                           September 30,     December 31,
                                                1997           1996
ASSETS:                                      (unaudited)    (audited*)

Cash and Due from banks                      $ 2,481,447    $ 2,473,315
Interest-bearing deposits with banks             497,330        327,276
Marketable Debt Securities
       Held-to-maturity (Market value - 1997:
       $3,559,086 and 1996: $4,567,903)        3,547,172      4,559,739
       Available-for-sale                     26,898,014     28,755,272
Marketable Equity Securities
   Available for Sale                            124,020        115,640
Federal Reserve, Atlantic Central Banker's Bank
   and Federal Home Loan Bank Stock              389,600        383,700
Federal Funds Sold                             3,710,000      1,239,000
Loans, net of unearned discount &
       Allowance for loan losses              58,068,358     56,259,929
Bank buildings, equipment, furniture &
       fixtures, net                           3,302,811      3,107,960
Accrued interest receivable                      704,275        675,180
Deferred income tax charges                          0            6,548
Other real estate owned                          418,618        318,992
Intangible Assets                                198,314        210,588
Other assets                                     145,950        210,933

    Total Assets                            $100,485,909    $98,644,072
                                             ===========     ==========
LIABILITIES :
Deposits:
   Demand deposits                           $ 9,198,344    $ 9,249,700
   Savings deposits                           25,232,677     26,674,628
   Time certificates                          52,952,915     50,957,962
   Other time deposits                           673,388        251,678
      Total deposits                         $88,057,324    $87,133,968
Accrued interest payable & other liabilities     866,649        708,072
Deferred income taxes                             40,742            0  
Other Borrowed Funds                             174,296            0  
Accrued dividends payable                         76,000        100,000

    Total Liabilities                        $89,215,011    $87,942,040

STOCKHOLDERS' EQUITY:

Capital stock, Common, par value $0.63; 
   6,000,000 shares authorized; 400,000
   outstanding                               $   252,000    $   252,000
Additional paid-in capital                     1,789,833      1,789,833
Retained earnings                              9,105,251      8,628,183
Net unrealized gain/(loss) on Available-for-sale
   securities, net of tax effects                123,814         32,016

    Total Stockholders' Equity               $11,270,898    $10,702,032

    Total Liabilities & Stockholders' Equity$100,485,909    $98,644,072
                                             ===========     ==========
</TABLE>
*Condensed from audited financial statements.

The accompanying notes are an integral part of these condensed
financial statements.

     FNB FINANCIAL CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARY

            CONDENSED CONSOLIDATED STATEMENTS OF INCOME

          Three Months Ended September 30, 1997 and 1996
                            (UNAUDITED)
<TABLE>
<S>                                              <C>         <C>
                                                     1997      
1996
                    
Interest & Dividend Income

Interest & fees on loans                         $1,325,252 
$1,245,558
       Interest on investment securities:
              U.S. Treasury Securities                7,938     
11,084
              Obligations of other U.S.
                  Government Agencies               359,652    
352,242
              Obligations of State & Political
                  Subdivisions                      104,737    
116,919
       Interest on deposits with banks                7,113      
4,181
       Dividends on Equity Securities                 6,570      
6,350
       Interest on federal funds sold                45,314     
42,187
              Total Interest & Dividend Income    1,856,576  
1,778,521

Interest Expense

       Interest on other borrowed funds               2,419       
 0  
       Interest on deposits                         965,611    
926,206
              Total interest expense                968,030    
926,206
              Net interest income                   888,546    
852,315
       Provision for loan losses                     50,000     
17,500
              Net interest income after 
              Provision for loan losses             838,546    
834,815

Other income

       Service charges on deposit accounts           19,726     
15,367
       Other service charges, collection &
              exchange charges, commissions
              and fees                               55,431     
42,677
       Other income                                   9,427      
6,821
       Net Securities gains/(losses)                  1,806       
 0   
              Total other income                     86,390     
64,865

Other expenses                                      634,295    
570,409
       Income before income taxes                   290,641    
329,271
       Applicable income taxes                       61,931     
67,120
  Net income                                       $228,710   
$262,151
                                                    =======    
=======
Earnings per share of Common Stock:
       Net income per share                           $0.57      
$0.66

Cash dividend declared per share                      $0.19      
$0.18

Weighted average number of shares outstanding       400,000    
400,000
</TABLE>

The accompanying notes are an integral part of these condensed 
financial statements.






     FNB FINANCIAL CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARY

            CONDENSED CONSOLIDATED STATEMENTS OF INCOME

           Nine Months Ended September 30, 1997 and 1996
                            (UNAUDITED)
<TABLE>
<S>                                              <C>         <C>
                                                    1997       
1996
                    
Interest & Dividend Income

       Interest & fees on loans                  $3,914,682 
$3,598,185
       Interest on investment securities:
              U.S. Treasury Securities               30,068     
39,980
              Obligations of other U.S.
                Government Agencies               1,088,071  
1,005,598
              Obligations of State & Political
                Subdivisions                        317,313    
354,105
       Interest on deposits with banks               15,930     
24,620
       Dividends on Equity Securities                20,457     
18,890
       Interest on federal funds sold               107,549    
117,373
              Total Interest & Dividend Income    5,494,070  
5,158,751

Interest Expense
       Interest on Other Borrowed Funds               2,978       
 0  
       Interest on deposits                       2,843,912  
2,783,052
              Total interest expense              2,846,890  
2,783,052
              Net interest income                 2,647,180  
2,375,699
       Provision for loan losses                    102,500     
62,500
              Net interest income after 
                Provision for loan losses         2,544,680  
2,313,199

Other income

       Service charges on deposit accounts           52,722     
46,750
       Other service charges, collection &
             exchange charges, commissions 
             and fees                               153,489    
126,791
       Other income                                  60,106     
26,643
       Net Securities gains/(losses)                  1,901     
(3,843)
              Total other income                    268,218    
196,341

Other expenses                                    1,940,083  
1,630,275
       Income before income taxes                   872,815    
879,265
       Applicable income taxes                      179,749    
175,825

       Net income                                  $693,066   
$703,440
                                                    =======    
=======
Earnings per share of Common Stock:
       Net income per share                           $1.73      
$1.76

Cash dividend declared per share                      $0.54      
$0.52

Weighted average number of shares outstanding       400,000    
400,000
</TABLE>



The accompanying notes are an integral part of these condensed
financial statements.
          FNB FINANCIAL CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARY
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                Nine Months Ended September 30, 1997 and 1996
<TABLE>
<S>                                               <C>              <C>
                                 (UNAUDITED)
                                                      1997            1996
Cash flows from operating activities:
      Net income                                  $  693,066       $  703,440
      Adjustments to reconcile net income
       to net cash provided by operating
       activities:                             
            Depreciation & amortization              178,967          147,125
            Provision for loan losses                102,500           62,500
            Net (gain)/loss on sales of
              investments                             (1,901)          
3,843 
            (Increase) decrease in accrued
                   interest receivable               (29,095)        
(50,417)
             Increase (decrease) in accrued
                   interest payable and
                   other liabilities                 158,577         
(23,000)
             Other (net)                              63,137        
(319,981)
Net cash provided (used)by operating
      activities                                   1,165,251          523,510
Cash flows from investing activities:
     Net (increase) decrease in interest-
            bearing deposits with banks             (170,054)        
194,535 
     Purchases of Held-to-maturity securities       (151,662)       
(100,000)
     Purchases of Available-for-sale
            securities                            (4,247,391)     
(7,198,170)
     Proceeds from sales of Available-for-
            sale securities                          709,352              0  
     Proceeds from maturities of Held-to-
            maturity securities                    1,164,229          466,596
     Proceeds from maturities of Available-
            for-sale securities                    5,532,786        5,264,825
     Purchases of marketable equity securities        (5,880)             0 
 
     Net (increase) decrease in loans             (2,018,640)     
(1,056,459)
     Proceeds from sale of Other real
            estate owned                              10,075           39,000
     Purchases of bank premises &
            equipment (net)                         (361,686)       
(977,442)
     Proceeds from sale of equipment                    0                 0  
     Purchase of other bank stock                     (5,900)        
(13,700)
Net cash provided (used) by investing 
            activities                               456,229      
(3,380,815)
Cash flows from financing activities:
     Net increase (decrease) in deposits             923,356       
6,370,001 
     Net increase (decrease) in other borrowed
            funds                                    174,296              0 
 
     Cash dividends paid                            (240,000)       
(228,000)
Net cash provided (used) by financing
     activities                                      857,652        6,142,001
Net increase (decrease) in cash & cash
     equivalents                                   2,479,132       
3,284,696 
Cash & cash equivalents, beginning balance         3,712,315        3,110,762
Cash & cash equivalents, ending balance           $6,191,447       $6,395,458
                                                   =========        =========
Supplemental disclosure of cash flows information
     Cash paid during the year for:
           Interest                               $2,784,186       $2,634,234
           Income taxes                              104,565          275,088
Supplemental schedule of noncash investing &
      financing activities
      Unrealized loss on Available-for-sale         
           securities                                187,602        (277,997)
      Deferred income tax on unrealized loss on
           available-for-sale securities             (63,788)         94,519 
      Accrued dividends payable                       76,000          72,000
      Other real estate acquired in 
           settlement of loans                       201,311          75,027
      Loan advanced for sale of other real
           estate owned                               93,600          50,000
</TABLE> 
The accompanying notes are an integral part of these condensed 
financial statements.

                 FNB FINANCIAL CORPORATION
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                     SEPTEMBER 30, 1997
                         (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

     The financial information presented at and for the nine
     months ended September 30, 1997 and September 30, 1996 is
     unaudited.  Information presented at December 31, 1996, is
     condensed from audited year-end financial statements.
     However, this unaudited information reflects all adjustments,
     consisting solely of normal recurring adjustments, that are,
     in the opinion of management, necessary for a fair
     presentation of the financial position, results of operations
     and cash flows for the interim period.

NOTE 2 - PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of
     the corporation and its wholly-owned subsidiary, The First
     National Bank of McConnellsburg.  All significant
     intercompany transactions and accounts have been
     eliminated.    

NOTE 3 - CASH FLOWS

     For purposes of the statements of cash flows, the corporation
     has defined cash and cash equivalents as those amounts
     included 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 increase or decrease in
     deposits in banks, loans and time deposits in the statement
     of cash flows.

NOTE 4 - FEDERAL INCOME TAXES

     For financial reporting purposes the provision for loan
     losses charged to operating expense is based on management's
     judgement, whereas for federal income tax purposes, the
     amount allowable under present tax law is deducted. 
     Additionally, certain expenses are 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
     timing differences, deferred taxes were computed after
     reducing pre-tax accounting income for nontaxable municipal
     and loan income.

NOTE 5 - INVESTMENTS

     The activity within the held to maturity and available for
     sale portfolios for the period January 1, 1997, through
     September 30, 1997, is summarized in Table #1 on page 12. No
     sales were conducted from securities contained within the held
     to maturity portfolio.

     The amortized cost and estimated market values of investments
     by investment type and classification as available for sale or
     held to maturity along with each portfolio's gross unrealized
     gain or gross unrealized loss are contained in Table #2 on
     page 13.

     Management has purchased for the portfolio mortgage-backed
     securities.  The large portion of these securities have a
     variable rate coupon and all have scheduled principal
     payments.  During periods of rising interest rates, payments
     from variable rate mortgage-backed securities may accelerate
     as prepayments of underlying mortgages occur as home-owners
     refinance to a fixed rate while during periods of declining
     interest rates, prepayments on high fixed rate mortgage-backed
     securities may accelerate as home owners refinance to lower
     rate mortgages. These prepayments cause yields on mortgage-
     backed securities to fluctuate as larger payments of principal
     necessitate the acceleration of premium amortization or
     discount accretion.  Due to the low dollar amount of mortgage-
     backed securities in relation to the total portfolio,
     management feels that interest rate risk and prepayment risks
     associated with mortgage-backed securities will not have a
     material impact on the financial condition of the Bank.

     In regard to Collateralized Mortgage Obligations (CMOs), the
     Bank presently has none of these types of investments in its
     portfolio.

NOTE 6 - ALLOWANCE FOR LOAN LOSSES AND NONACCRUAL LOANS

     Activity in the allowance for loan losses is summarized as
     follows:
<TABLE>
<S>                                          <C>       <C>
                                                1997       1996    
                                             
     Allowance for loan losses beginning of the year   $405,612   
$405,000
     Loans charged-off during the year:
          Real estate mortgages                     22,820     
51,090
          Installment loans                         43,307     
24,135
          Commercial & all other                    65,995      
4,530
               Total charge-offs                   132,122     
79,755
     Recoveries of loans previously charged-off:
          Real estate mortgages                        507        
 0 
          Installment loans                          6,535      
9,636
          Commercial & all other                       805        
830
               Total recoveries                      7,847     
10,466
     Net loans charged-off (recovered)             124,275     
69,289 
     Provision for loan losses charged to operations    102,500   
  62,500
     Allowance for loan losses, September 30           $383,837   
$398,211
                                             ========  ========
</TABLE>
     
The following table shows the principal balance of nonaccrual loans
as of September 30, 1997:
<TABLE>
<S>                                                 <C>     
Nonaccrual loans                                    $ 457,920.02
                                                      ==========
Interest income that would have been
   accrued at original contract rates                $ 33,503.14 
Amount recognized as interest income                   16,043.71
   Foregone revenue                                  $ 17,459.43
                                                       =========   
</TABLE>
NOTE 7  - COMMITMENTS
     
     Fort Loudon Office Renovation/Expansion
     As of September 30, 1997, the Board of Directors has committed
     to an expansion project for the Fort Loudon Branch Office. 
     This project was approved by the Board on August 28, 1996. 
     This renovation/expansion will increase the size of the
     office, improve customer access and add a one lane drive-up
     facility.  Management estimates total expenditures related to
     this project including additional equipment purchases will be
     approximately $200,000.  Renovation, design, and construction
     costs of $173,709 were incurred as of September 30, 1997. 
     These expenditures are included in the September 30, 1997
     financial statements under the balance sheet caption "Bank
     building, equipment, furniture and fixtures, net." 

NOTE 8 - OTHER COMMITMENTS

     In the normal course of business, the bank makes various
     commitments and incurs certain contingent liabilities which
     are not reflected in the accompanying financial statements. 
     These commitments include various guarantees and commitments
     to extend credit.  The bank does not anticipate any losses
     as a result of these transactions.





















                             TABLE #1
        SCHEDULE OF HELD TO MATURITY AND AVAILABLE FOR SALE
                     DEBT SECURITY PORTFOLIOS
                        TRANSACTION SUMMARY
     FOR THE PERIOD JANUARY 1, 1997 THROUGH SEPTEMBER 30, 1997
<TABLE>
<S>                        <C>           <C>          <C>
                            HELD TO        AVAILABLE      TOTAL
                            MATURITY       FOR SALE    INVESTMENT
                            PORTFOLIO      PORTFOLIO    PORTFOLIO

BEGINNING BALANCE 1/1/97   $4,559,739    $28,737,883  $33,297,622

PURCHASES                     151,662      4,247,391    4,399,053

PROCEEDS FROM SALES                 0        709,352      709,352

NET GAINS (1)                       0         (1,901)      (1,901)

MATURITIES/CALLS PAYDOWNS/
PREMIUM AMORTIZATION/DISCOUNT
ACCRETION                   1,164,229      5,533,786    6,698,015

ENDING BALANCE 9/30/96     $3,547,172    $26,744,037  $30,291,209
                            =========     ==========   ==========
</TABLE>
NOTE (1):  THE NET SECURITY GAINS ARE THE RESULT OF DISCOUNT      
 
           REMAINING ON AFS SECURITIES WHICH HAD BEEN CALLED.




























                                     TABLE #2
                SCHEDULE OF UNREALIZED GAINS AND UNREALIZED LOSSES
                WITHIN THE HELD TO MATURITY AND AVAILABLE FOR SALE
                     INVESTMENT PORTFOLIOS BY INVESTMENT TYPE
                                SEPTEMBER 30, 1997
<TABLE>
<S>                        <C>        <C>            <C>         <C>      <C>    
    <C>             <C>         <C>       
                             HELD TO    HELD TO     HELD TO    HELD TO     
AVAILABLE   AVAILABLE   AVAILABLE   AVAILABLE
                             MATURITY   MATURITY    MATURITY   MATURITY     FOR
SALE    FOR SALE    FOR SALE    FOR SALE
                              BOOK      MARKET     UNREALIZED UNREALIZED     BOOK
      MARKET     UNREALIZED  UNREALIZED
SECURITY PORTFOLIO            VALUE      VALUE         GAIN       LOSS      
VALUE       VALUE         GAIN        LOSS   

U.S. GOVERNMENT TREASURIES         0          0           0           0     
498,622     499,970        1,348            0

U.S. GOVERNMENT TREASURIES         0          0           0           0          
 0           0            0            0 

U.S. GOVERNMENT AGENCIES           0          0           0           0   
8,946,545   8,994,631       48,086            0

U.S. GOVERNMENT AGENCIES           0          0           0           0   
6,089,777   6,058,297            0      (31,480)

SBA GUARANTEED LOAN POOL 
CERTIFICATES                 826,258    829,516        3,258          0   
2,747,024   2,795,962       48,938            0

SBA GUARANTEED LOAN POOL
CERTIFICATES                 725,468    721,332           0       (4,136)   
121,864     121,045            0         (819)

MORTGAGE-BACKED SECURITIES         0          0           0           0     
957,395     978,859       21,464            0

MORTGAGE-BACKED SECURITIES         0          0           0           0     
145,626     145,339            0         (287)

SECURITIES ISSUED BY STATES
& POLITICAL SUBDIVISIONS IN
THE U.S.                   1,920,074  1,933,156      13,082           0   
5,068,294   5,144,436       76,142            0 

SECURITIES ISSUED BY STATES
& POLITICAL SUBDIVISIONS IN
THE U.S.                      75,373     75,083           0         (290) 
2,168,890   2,159,475            0       (9,415)

MARKETABLE EQUITY SECURITIES       0          0           0           0      
90,400     124,020       33,620            0

FEDERAL RESERVE BANK STOCK,
ATLANTIC CENTRAL BANKERS BANK
STOCK AND FEDERAL HOME LOAN
BANK STOCK                         0          0           0           0     
389,600     389,600            0            0

GRAND TOTALS               3,547,172  3,559,086       16,340      (4,426)
27,224,037  27,411,634      229,598      (42,001)
                           =========  =========       ======      ====== 
==========  ==========      =======      =======
</TABLE>
CLASSIFICATION OF HELD TO MATURITY AND AVAILABLE FOR SALE
SECURITIES

Due to the implementation of FAS 115, management has segregated
securities as Held to Maturity, Available for Sale or Trading
securities.  At the implementation of FAS 115 on January 1, 1994,
management determined that no securities were Trading securities;
that tax-free municipal with maturity dates less than the year 2000
were classified as Held to maturity securities due to management's
intention to hold these securities for tax planning purposes; and
that all other securities were classified as Available for Sale
securities due to management's intention to hold these securities
for liquidity planning purposes.  Purchases of tax-free municipals
with maturities of 5 years or less made following implementation of
FAS 115 are classified as Held to Maturity securities with all
other purchase Available for Sale; however, management may decide
on a case-by-case basis that a security may be either classified as
Held to Maturity or Available for Sale depending upon the reasons
for purchase.  Held to Maturity classifications are typically used
for securities purchased specifically for interest rate management
or tax-planning purposes while Available for Sale classifications
are typically used for liquidity planning purposes.         



                  FNB FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                  AND RESULTS OF OPERATIONS

Net income for the first nine months of 1997 was $693,066 compared
to $703,440 for the same period in 1996.  This represents a
decrease of $10,374 or 1.47%.  Net income on an adjusted per share
basis for the first nine months of 1997 was $1.73 per share, a
decrease of $0.03 from the $1.76 per share for the nine months
ended September 30, 1996.

Total interest and dividend income for the first nine months of
1997 was $5,494,070 compared to $5,158,751 for the nine months
ended September 30, 1996, representing an increase of $335,319. 
This increase is a result of both an increase in the balance of
loans in the loan portfolio and higher yields on investments in the
Bank's security portfolio.  Since December 31, 1996, net loans have
increased $1,808,429 or 3.21%.  This increase combined with a
slight decrease in the yield on  the loan portfolio from 9.36% for
the first nine months of 1996 to 9.18% for the first nine months of
1997 resulted in an increase to loan interest income in the amount
of $316,497.  The book value of investment debt securities has
decreased $3,007,413 or 9.03% since December 30, 1996; however,
interest income on these securities increased $35,769 as a result
of an increase in the yield on these securities from 6.52% for the
first nine months of 1997 to 6.77% for the first nine months of
1997. 

During the first quarter of 1997, short-term interest rates were
increased 0.25% by the Federal Reserve Board.  Since that increase,
interest rates have remained relatively stable.  As a result of
this interest rate environment in which interest rates are not
anticipated to increase in the short term, several investment
securities with call features were called by the issuer, resulting
in the loss of higher interest earning assets.  The result,
combined with the aforementioned increase in loans and increase in
investment yield, has been an increase in the bank's net interest
margin and interest spread during the first three quarters of
1997. 
Management anticipates the net interest margin and interest spread
decrease slightly due to calls of higher yielding securities and
movement of lower yielding savings account investments to higher
yielding time certificates of deposit.  To lessen the impact of
these two items, management intends to retain deposit rates at
relatively the same levels.

Interest expense for the nine months ended September 30, 1997, was
$2,846,890, an increase of $63,838 from the $2,783,052 incurred for
the same period in 1996.  This very small increase is due to the
retention of deposit rates at lower levels during the first nine
months of 1997.  Total deposit volume increased $923,356 or 1.06%
since December 31, 1996.  This increase is the result of a
$1,994,953 or 3.91% increase in time certificates of deposit due to
movement of funds from lower yielding savings accounts and from
other financial institutions.  Savings accounts decreased
$1,441,951 or 5.41% due to movement of funds to time certificates. 
Non-interest bearing demand deposit accounts remained relatively
the same at $9,198,344, only a slight decrease of $51,356 from
December 31, 1996.  The increase in the balances of the higher cost
time deposits while the lower cost savings accounts decreased,
contributed to the increase in interest cost when compared to 1996.

The tax-adjusted net interest margin has increased 15 basis points
to 4.11% for the first nine months of 1997 from that of the first
nine months of 1996 which was 3.96%.  This increase occurred due to
an increase in the yield on earning assets while the cost of
interest bearing liabilities has decreased.  The tax-equivalent
yield on earning assets for the first nine months of 1997 increased
0.08% to 8.22% from 8.14% for the first nine months of 1996 while
the cost of interest-bearing liabilities decreased 0.08% to 4.82%
from 4.90% for the same period in 1996.  This decrease in cost of
interest-bearing liabilities and increase in yield on earning
assets has resulted in an increase in the net interest margin. 
Management anticipates to continue to concentrate on the retention
and improvement of the net interest margin; however, recent calls
of higher yielding securities threatens to decrease the yield on
the investment portfolio as reinvestment yields on securities of
similar term and maturity are at a lower rate of interest and
movement of lower yielding savings account investments to higher
yielding time certificates of deposit increase the cost of
interest-bearing liabilities.  To offset this decrease in yield and
lessen the impact of the savings to time deposit movement, deposit
rates have been held consistent and in some cases have been
decreased.  

Total noninterest income increased $71,877 due primarily to a
$31,211 gain on the sale of the Bank's portfolio of student loans
on June 19; a $16,180 increase in the commission received on
disability and life insurance written on consumer installment and
mortgage loans over the same period in 1996; an $11,800 increase in
other service charges, collection and late fees; and a $5,971
increase in service charges on deposit accounts.  Operating
expenses for the period ended September 30, 1997, were $1,940,083
a $309,808 increase from the operating expenses incurred for the
same period in 1996 of $1,630,275.  This increase is due to 1)
increases in employee wages and benefits of $146,239 as a result of
an increase in wage rates, an increase in the number of employees
due to the opening of Hancock Community Bank in November 1996 which
increased personnel by six employees and an increase in employee
participation in the Company's retirement plan and health insurance
plans; 2) an increase in the cost of fixed assets in the amount of
$71,980 due to increased utility/communication billings,
depreciation, insurance and taxes as a result of the purchase of
the completed renovation/expansion of the main office facility in
September 1996 and the opening of Hancock Community Bank in
November 1996; 3) an increase in the Promotion/Advertising expenses
of the Bank in the amount of $25,551 over 1996 due to increased
promotional/advertising campaigns; 4) a new expense in 1997 for the
lease of the office housing Hancock Community Bank in the amount of
$16,200; 5) an $11,149 increase in collection and repossession
costs due to increased collection efforts in 1997; 6) a $11,934
increase in professional fees due to appraisal fees for the all
Bank properties of over $6,000; and 7) a $9,033 increase in
regulatory assessments due to FDIC charges for FICO Bond interest. 
Management anticipates the cost of fixed assets to increase
slightly during the fourth quarters of 1997 and in 1998 as the Fort
Loudon branch office renovation comes to a close.  Increased costs
associated with this construction will include additional
depreciation, utility billings, real estate insurance, real estate
taxes and equipment and maintenance costs.  These increased costs
may result in a decrease to net income during the next few
quarters; however, due to the strength of the Bank in regard to its
capital position, the Board and management felt it wise to plan for
the future growth of the organization and particularly the Franklin
County market by expanding the size of the Fort Loudon facilities.

The company's income tax provision for the first nine months of
1997 was $179,749 as compared to $175,825 for the first nine months
of 1996.  This increase in the tax provision in the amount of
$3,924 is due to a 1996 tax accounting change which resulted in a
payment for additional 1996 income taxes of $13,551.  Without this
1996 tax accounting adjustment, the actual 1997 tax provision is
$166,198.  This decrease in actual 1997 income taxes from 1996 is
a result of an increase in the tax deduction for loan losses in
1997 when compared to 1996 due to the increase net charge-offs in
1997 over 1996 as noted in Footnote 6.

Although the Company continues to operate with a marginal tax rate
of 34%, the effective income tax rate for the first nine months of
1997 (not considering the $13,551 payment in 1997 for 1996
additional income taxes) was 19.04%, a decrease of 1.96% from the
effective tax rate for the first nine months of 1996 of 20.00%. 
This decrease in the effective tax rate is primarily due to the
increase in the tax deduction for loan losses in 1997 when compared
to 1996.

Total assets as of September 30, 1996, were $100,485,909 an
increase of $1,841,837 over the period ending December 31, 1996,
representing an increase of 1.87%.  Funding this increase in total
assets was an increase in total deposits of $923,356 or 1.06% and
an increase in stockholders' equity of $568,866.  The increase in
deposits was the result of increased balances in time deposits of
$1,994,953, while savings account balances decreased $1,441,951
since December 31, 1996.  Net loans as of September 30, 1997, were
$58,068,358 compared to $56,259,929 as of December 31, 1996.  The
allowance for loan losses at the end of the nine months was
$383,837 compared to $405,612 at year end 1996.  Management
anticipates the need to increase the reserve by at least $30,000 to
year-end 1997 in order to increase the allowance to a level
sufficient to absorb possible losses on existing loans.  If
additions to the allowance above the $30,000 are necessary, net
income will be reduced in order to fund these additional
provisions.  The provision for loan losses for the first nine
months of 1997 was $102,500 compared to $62,500 for the same period
in 1996. 

Total deposits were $88,057,324 as of September 30, 1997, compared
to $87,133,968 on December 31, 1996.  This represents an increase
of $923,356 or 1.06% which reflects the activity as discussed
previously.

Total equity as of September 30, 1997, was $11,270,898, 11.22% of
total assets as compared to $10,702,032, 10.85% of total assets as
of December 31, 1996.  This increase in equity reflects earnings
for the first nine months of 1997 and an increase in market value
of marketable securities which has resulted in a net unrealized
gain on available for sale securities, net of tax effects of
$123,814, a $91,798 increase from the December 31, 1996 net
unrealized gain on available for sale securities, net of tax
effects of $32,016.  

The Corporation has risk-based capital ratios exceeding regulatory
requirements.  Risk-based capital guidelines require a minimum
ratio of 8.0%.  At September 30, 1997, the risk-based capital ratio
of the Corporation was 19.55% while at December 31, 1996, the
risk-based capital ratio was 20.05%.  The following table presents
the
risk-based capital ratios for the Corporation:


<TABLE>
<S>                                          <C>          <C>
                                        September 30,    Regulatory
                                             1997        Minimum

Leverage Ratio                               10.91%       3.00%
Risk-based capital ratios:
    Tier I (core capital)                    18.88%       4.00%
    Total Capital
    (Tier I and Tier II Capital)             19.55%       8.00%
</TABLE>


























                    PART II - OTHER INFORMATION

















































                    PART II - OTHER INFORMATION

Item 1 - Legal Proceedings

          None

Item 2 - Changes in Securities

          None

Item 3 - Defaults Upon Senior Securities

          Not Applicable

Item 4 - Submission of Matters to a Vote of Security Holders

          None

Item 5 - Other Information

          None

Item 6 - Exhibits and Reports on Form 8-K

          a.  Exhibits - None

          b.  Reports on Form 8-K  - None




























                            SIGNATURES

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




                              /s/John C. Duffey             
                              (John C. Duffey, President           
                               and Director of the Company and
                               President/CEO of the Bank)
                              (Duly Authorized Officer)



Date October 27, 1997         /s/Daniel E. Waltz            
                              (Daniel E. Waltz, Treasurer
                               and Director of the Company and
                               Senior Vice President/CFO of
                               the Bank)
                              (Principal Financial &               
                               Accounting Officer)