SECURITIES AND EXCHANGE COMMISSION
                                     
                          Washington, D.C. 20549
                                     
                                 FORM 10-Q
                                     
                Quarterly Report under Section 13 or 15 (d)
                  of the Securities Exchange Act of 1934
                                     
                                     
                  For Quarter Ended    December 31, 1995
                                     
                     Commission File Number    0-16329
                                     
                                     
                    First State Financial Services, Inc.
           (Exact name of registrant as specified in its charter)
                                     
                                 Delaware
      (State or other jurisdiction of incorporation or organization)
                                     
                                22-2823506
                  (I.R.S. Employer Identification Number)
                                     
  1120 Bloomfield Avenue, CN 2449, West Caldwell,  New Jersey 07007-2449
                  (Address of principal executive offices)
                                     
                               (201) 575-5800
            (Registrant's telephone number, including area code)
                                     
                                    N/A
      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 report(s), 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 class  of
common stock at December 31, 1995:   3,889,405 shares of common stock,  par
value $.01.





              FIRST STATE FINANCIAL SERVICES, INC.

                             INDEX
                                                            Page
                                                           Number

PART I.   FINANCIAL INFORMATION

     Item 1.   Consolidated Financial Statements (unaudited)

               Consolidated Balance Sheets,
               December 31, 1995  and
               September 30, 1995                              3

               Consolidated Statements of Income,
               three months ended December 31,
               1995 and 1994                                   4

               Consolidated Statements of Cash Flows,
               three months ended December 31, 1995
               and 1994                                        5

               Notes to Consolidated Financial
               Statements                                      6


     Item 2.   Management's Discussion and Analysis
               of Financial Condition and Results of
               Operations                                      7



PART II.  OTHER INFORMATION                                   20
<PAGE>
PART I.   FINANCIAL INFORMATION

     Item 1.   Consolidated Financial Statements

              FIRST STATE FINANCIAL SERVICES, INC.
                   Consolidated Balance Sheets
                           (unaudited)

                                          December        September
                                             31,             30,
                                            1995             1995
                                         -----------       ----------
                                                (in thousands)
ASSETS                                                              
Cash on hand and in banks                 $  14,304        $  11,792
Federal Funds                                     -                -
Investment securities available for sale     13,981           11,799
Investment securities, at cost               11,016           20,889
Federal Home Loan Bank stock, at cost         3,715            3,715
Loans receivable, net                       479,264          461,648
Mortgage loans held for resale                6,168           67,219
Mortgage-backed securities, at cost          30,730           18,961
Accrued interest receivable                   3,855            4,046
Office properties and equipment, net         10,656           10,523
Real estate owned                             6,047            8,564
Cost  in  excess of fair  value  of  net      2,299            2,349
  assets acquired
Other assets                                 15,234           15,515
                                          ----------       ----------
                                          $ 597,269        $ 637,020
                                          ----------       ----------
                                          ----------       ----------       
LIABILITIES AND STOCKHOLDERS' EQUITY                                
Deposits                                  $ 538,626        $ 567,710
Borrowed money                               12,330           23,105
Advance payments by borrowers for                                   
  taxes and insurance                         2,017            3,253
Accrued expenses and other liabilities        1,294            1,360
                                          ----------       ----------
  Total liabilities                         554,267          595,428
                                                                    
Stockholders' Equity:                                               
Preferred stock, $.01 par value,                                    
     2 million shares authorized;  
     none issued                                  -                -
Common stock, $.01 par value,                                       
    8 million shares authorized;                                    
    3,898,765 issued; 
    3,889,405 outstanding at 12/31/95;           39                 
    3,883,765 issued;    
    3,874,405 outstanding at 9/30/95                              39
Paid-in capital                              21,031           20,949
Net unrealized loss on investment                                   
    securities available for sale              (52)             (89)
Retained income                              21,984           20,693
                                          ----------       ----------
    Total stockholders' equity               43,002           41,592
                                          ----------       ----------       
                                          $ 597,269        $ 637,020 
                                          ----------       ----------        
                                          ----------       ----------
<PAGE>                                
              FIRST STATE FINANCIAL SERVICES, INC.
                Consolidated Statements of Income
              (in thousands, except per share data)
                                
                                            Three months ended
                                               December 31,
                                               (unaudited)
                                             1995             1994
                                         ---------       ----------
Interest income:                                                  
   Interest on mortgage loans            $  8,233         $  7,491
    Interest on consumer and commercial     
      loans                                 2,568            1,802 
    Interest on mortgage-backed               
      securities                              363              319
    Interest on investments available         
      for sale                                216              107 
   Interest on investment securities          463              431
                                         ---------       ---------- 
      Total interest income                11,843           10,150
                                         ---------       ----------         
Interest expense:                                                 
   Interest on deposits                     5,828            4,326
   Interest on borrowed money                 109              255
                                         ---------       ----------
      Total interest expense                5,937            4,581
                                         ---------       ----------

Net interest income                         5,906            5,569
Provision for loan losses                     300              200
                                         ---------       ----------
Net interest income after provision for   
    loan losses                             5,606            5,369 
                                         ---------       ----------          
Other income:                                                     
   Loan fees and other loan charges         1,815              700
   Service charges on deposit accounts        455              423
   Net gain on sales of loans                 927                1
     Net   gain  (loss)  on  sales   of       
      investments                             110             (156) 
   Other                                      155               86
                                         ---------       ----------
      Total other income                    3,462            1,054
                                         ---------       ----------         
Operating expenses:                                               
   Compensation and employee benefits       1,951            1,800
   Premises and occupancy costs, net          567              483
   Amortization of intangible assets           50              134
   Loan expenses                            2,287              810
   Data processing                            300              262
   Advertising and promotion                  202              201
   Federal insurance premiums                 296              285
   Problem asset expenses, inclusive of                           
      real estate owned write-downs           451              163
   Other expenses                             701              808
                                         ---------       ----------
      Total operating expenses              6,805            4,946
                                         ---------       ----------         
Income before income tax expense            2,263            1,477
Income tax expense                            758              516
                                         ---------       ----------
Net income                               $  1,505        $     961
                                         ---------       ----------          
                                         ---------       ----------        
Primary earnings per share of common 
    stock                                $   0.37        $    0.25
                                         ---------       ----------         
                                         ---------       ----------
<PAGE>
              FIRST STATE FINANCIAL SERVICES, INC.
              Consolidated Statements of Cash Flows
                         (in thousands)
                                                Three months ended
                                                   December 31,
                                                   (unaudited)
                                                 1995           1994
                                              ----------     ----------
OPERATING ACTIVITIES                                                 
Net income                                      $1,505        $   961
Adjustments to reconcile net income to  net                          
cash provided by operating activities:                                          
Amortization of intangible assets                   50            134
Depreciation                                       304            231
Net amortization and accretion of loan fees       
   and discounts                                   (59)            32 
Net amortization   and   accretion    of         
   investment premium and discount                  19            (16)
Net amortization  and  accretion  of  MBS         
   premium and discount                              3              6 
Decrease (increase) in interest receivable         191           (389)
Proceeds from loan sales                        68,673            523
Origination of loans held for resale            (6,695)          (212)
Net gain on sale of real estate owned              (11)             -
Net gain on sale of loans                         (927)            (1)
Net (gain) loss on sales of investments           (110)           156
Provisions for losses on loans                     300            200
Provision  for write-downs of  real  estate       
   owned                                           300              - 
Decrease in other assets                           281          1,547
(Decrease) increase in other liabilities           (66)            38
                                              ----------     ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES        63,758         3,210
                                              ----------     ----------
INVESTING ACTIVITIES                                                 
Net increase in loans, receivable               (18,022)      (25,660)
Purchase of mortgage-backed securities          (13,570)            -
Proceeds from sales of mortgage-backed      
   securities                                     1,179             - 
Principal payments on mortgage-backed        
   securities                                       619           956 
Proceeds from dispositions of real  estate     
   owned                                          2,393           549
Office properties and equipment      
   expenditures                                    (437)         (171)
Purchase of investment securities                     -        (2,322)
Purchase of investment securities available   
   for sale                                     (10,352)            - 
Proceeds from sale of investment securities     
   available for sale                            16,780         7,671 
Proceeds   from  maturities  of  investment      
   securities                                     1,391         1,515
                                               ----------    ----------
NET CASH USED BY INVESTING ACTIVITIES           (20,019)      (17,462)
                                               ----------    ----------  
FINANCING ACTIVITIES                                                 
Net (decrease) increase in deposits             (29,084)       26,224
Dividends paid on common stock                     (214)         (159)
Principal repayments of borrowings              (10,775)      (15,157)
Net decrease in advance payment by    
   borrowers for taxes and insurance             (1,236)         (175)
Common stock issued                                  82            59
                                               ----------    ----------
NET CASH (USED) PROVIDED BY FINANCING   
   ACTIVITIES                                   (41,227)       10,792 
                                               ----------    ----------     
                                               
Increase (decrease) in cash and cash      
   equivalents                                    2,512        (3,460) 
CASH AND CASH EQUIVALENTS AT BEGINNING OF     
   PERIOD                                        11,792        14,137 
                                               ----------    ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD      $14,304       $10,677
                                               ----------    ----------  
CASH PAID DURING THE PERIOD FOR:                                     
   Interest                                     $ 6,210       $ 4,627
   Income taxes                                 $    50       $   495

NON-CASH TRANSFERS:                                                  
Loans classified as Real Estate Owned           $   165       $   106
Transfer of Investment securities  to     
   Investment securities available for sale     $ 8,463       $ 2,300 
Reclassification  of Loans,  receivable  to      
   Mortgage loans held for resale                    -        $   758

<PAGE>

FIRST STATE FINANCIAL SERVICES, INC.
 Notes to Consolidated Financial Statements




1.   Presentation of Statements

     In the opinion of management the accompanying unaudited
     consolidated   financial   statements    contain    all
     adjustments (all which were normal recurring  accruals)
     necessary  for  a fair presentation.   The  results  of
     operations  for the interim period are not  necessarily
     indicative of the results which may be expected for the
     entire year.

     First  State  Financial Services, Inc. is  the  holding
     company  for  First DeWitt Bank, its principal  wholly-
     owned   subsidiary.   Audited  consolidated   financial
     statements for the year ended September 30,  1995  were
     filed with the Securities and Exchange Commission.



2.   Earnings Per Share

     Earnings  per share was calculated for each  period  by
     dividing  the net income for the period by the  average
     number  of primary shares outstanding over the  period.
     The  actual  average  primary shares  outstanding  were
     4,021,761 for the three months ended December 31, 1995,
     and  3,917,358 for the three months ended December  31,
     1994.



              FIRST STATE FINANCIAL SERVICES, INC.

Item 2.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations


Financial Condition

Total  assets of First State Financial Services, Inc. were $597.3
million  at  December  31, 1995.  This is  a  decrease  of  $39.8
million, or 6.24%, in total assets from September 30, 1995.   The
principal  decreases in assets were in mortgage  loans  held  for
resale of $61.1 million, in investment securities of $9.9 million
and  in  real  estate owned of $2.5 million.  First  DeWitt  Bank
("the Bank") sold $67.7 million in mortgage loans, categorized as
mortgage  loans  held  for resale, for a net  gain  on  sales  of
$927,000.  The cash generated from the sales was principally used
to  repay  maturing brokered and other high yielding certificates
of   deposit  and  also  to  repay  borrowings.   The   Financial
Accounting  Standards  Board created a one-time  window  enabling
banks  to  reallocate their investment securities  between  their
Available-for-Sale  and their Held-to-Maturity  accounts  without
tainting  their total portfolios. The Bank took this  opportunity
to   restructure  fixed  rate  securities  into  adjustable  rate
mortgage-backed  securities, to sell poor  performing  securities
and  to  improve  the  overall  yield  of  its  portfolios.   The
portfolio  restructuring was the principal reason  for  the  $9.9
million decrease in investment securities.  The decrease in  real
estate owned is elaborated on below.

The  principal increases in assets were increases  in  net  loans
receivable  of $17.6 million, in investment securities  available
for  sale of $2.2 million, in mortgage-backed securities of $11.8
million  and  in cash on hand and in banks of $2.5  million.  The
increase  in  loans receivable was mainly due  to  the  continued
aggressive  marketing of a number of competitive  loan  products.
The Bank originated $26.5 million in mortgage loans, $9.2 million
in  consumer  loans, and $10.8 million in commercial loans  since
September  30,  1995.   The  increase  in  investment  securities
available  for  sale was mainly attributable  to  the  securities
portfolio   restructuring  mentioned  above.   The  increase   in
mortgage-backed  securities was mainly due to outright  purchases
of  such  securities.  The increase in cash on hand and in  banks
was  mainly  due  to the increase in volume of check  clearances.
Cash on hand and in banks included approximately $3.0 million  of
funds  in  Nationar Bank ("Nationar") for funds cleared  by  that
correspondent  institution.   On February  6,  1995,  the  Acting
Superintendent  of  Banks  of  the  State  of  New   York   ("the
Superintendent")  took  possession  of  the  business  assets  of
Nationar for purposes of an orderly liquidation of their affairs.
First  DeWitt has received $4.7 million from Nationar  for  check
clearances  and  believes  that, as  a  preferred  creditor,  the
remaining  $3.0  million balance will be  received  in  the  near
future.  First DeWitt's proof of claim for $3.0 million has  been
accepted  and  approved  by  the superintendent.  First  DeWitt's
status as a preferred creditor was concurred with by counsel  for
the Superintendent.

Total liabilities were $554.3 million at December 31, 1995.  This
is  a  decrease of $41.2 million, or 6.91%, in total  liabilities
from  September  30,  1995. The decrease  was  mainly  due  to  a
reduction  in  deposits  of  $29.1 million  and  a  reduction  in
borrowed money of $10.8 million.  Cash generated from the sale of
$67.7  million in mortgage loans, mentioned earlier, was used  to
repay  borrowings and also to repay brokered and other high yield
certificates  of  deposit as they matured. Jumbo certificates  of
deposit, which include brokered deposits, decreased $45.2 million
from  September 30, 1995.  The decrease in deposits due to  jumbo
certificates  was  partially offset  by  new  deposits  of  $10.2
million  received in a branch office opened in October  1995  and
also   from   a  $5.6  million  increase  in  checking  deposits.
Management  anticipates  that  the deposit  restructure  detailed
above will decrease overall cost of funds on a prospective basis.

Nonperforming  assets,  including  current  restructured   loans,
decreased  to  $23.2  million at December  31,  1995  from  $30.5
million  at  September 30, 1995.   The table  below  details  the
composition of these assets.

                                  12/31/95        9/30/95
                                       (in thousands)

     Nonaccrual loans              $15,572        $18,503
     Real estate owned               6,047          8,564
     Current restructured loans      1,581          3,476
                                   --------       --------
     Total nonperforming assets    $23,200        $30,543
                                   --------       --------
                                   --------       --------

When a loan becomes 90 days or more past due or the collection of
interest   becomes   uncertain,  the   accrual   of   income   is
discontinued.  These  loans  are  classified  as  nonaccrual  and
interest  income is only recognized subsequently  in  the  period
collected.  Loans are returned to an accrual status when all past
due  amounts have been collected and factors indicating  doubtful
collectibility on a timely basis no longer exist.  If  nonaccrual
loans  had been current in accordance with their original  terms,
the  Bank  would  have  realized additional  interest  income  of
approximately $300,000 for the period from September 30, 1995  to
December 31, 1995.

The  allowance for loan losses totaled $5.7 million  at  December
31, 1995.  An analysis of the allowance for loan losses follows:


     Balance at September 30, 1995          $6,081,000
     Charge-offs:
          Consumer loans                       123,000
          Mortgage loans                       594,000

     Recoveries:
          Consumer loans                        12,000
                                            -----------
     Net charge-offs                           705,000

     Additions charged to operations           300,000
                                            -----------
     Balance at December 31, 1995           $5,676,000
                                            -----------
                                            -----------

Management   closely   monitors  the  loan   portfolio   and   is
concentrating on workouts with the Bank's troubled loans and real
estate  owned  properties.   The  Bank's  loan  review  committee
analyzes   the   loan   portfolio  on  a  quarterly   basis   for
classification  of  problem and potentially problem  loans.   The
loan  review  committee  also  reviews  the  allocation  of  loss
reserves   to  loans.   Management  believes  that  the   present
allowance  for  loan losses is adequate in light of  management's
assessment of the risk inherent in the portfolio.  However, while
management uses its best judgment in providing for possible  loan
losses,  management  recognizes that  additional  problems  could
develop and that future adjustments may be necessary.

In  May  1993  the  Financial Accounting Standards  Board  (FASB)
issued  Statement  of Financial Accounting Standards  (SFAS)  No.
114,  "Accounting  by Creditors for the Impairment  of  a  Loan."
SFAS  No. 114 was amended by SFAS No. 118 in October 1994.   SFAS
No. 114, as amended, prescribes the recognition criteria for loan
impairment and the measurement methods for certain impaired loans
whose  terms  are modified in troubled debt restructurings.   The
Bank adopted SFAS No. 114, as amended, effective October 1, 1995,
and   the  adoption  has  not  had  a  material  impact  on   the
consolidated financial statements. As a result of the adoption of
SFAS  114,  as  amended,   the Bank had a recorded investment  of
$7.7  million in loans defined as impaired at December 31,  1995.
The  total  allowance associated with these  loans  totaled  $1.4
million  at December 31, 1995.  The loans classified as  impaired
in   accordance  with  SFAS  114  were  classified  as  such  due
management's  belief that it was probable that  all  amounts  due
according  to  the contractual terms of the loans  would  not  be
collected  in full.  In conjunction with the adoption,  the  Bank
chose  to not to recognize interest income on impaired loans  and
instead  recognize the net entire change in net present value  of
impaired loans as bad-debt expense.


Real  estate  owned  totaled $6.0 million at  December  31,  1995
compared to $8.6 million at September 30, 1995.  The decrease was
mainly due to the sales of two properties.  Real estate owned  is
carried on the Bank's books at fair value less estimated costs to
sell the property.  Management recognizes that future adjustments
may be necessary if the real estate values decline.

Liquidity and Capital Resources

First State's principal sources of funds are funds provided  from
operations and dividends received from subsidiaries.  The  Bank's
principal   sources  of  funds  are  deposits;   scheduled   loan
amortization  payments; sales and prepayments of loan  principal;
sales  and  repayments of mortgage-backed securities,  sales  and
maturities  of investment securities and short-term  investments;
borrowings and funds provided from operations.

The financing activities section of the Consolidated Statement of
Cash  Flows reflects a net decrease in deposits of $29.1  million
during  the  quarter  ended  December  31,  1995.   The  decrease
consisted  of  $34.9 million in net withdrawals  offset  by  $5.8
million  in interest credited to deposit accounts.  The  decrease
was  mainly  due  to  the repayment of jumbo high  interest  rate
certificates  of  deposit as they matured.   See  the  "Financial
Condition"  section  of  this report for additional  information.
Deposits  increased $26.2 million during the same  1994  quarter.
The  increase  consisted of $21.9 million in net  deposits  along
with $4.3 million in interest credited to deposit accounts.   The
Bank  reduced  borrowings by $10.8 million  in  the  1995  period
compared  to the net repayment of $15.2 million in borrowings  in
the 1994 period.

Cash  provided by operating activities amounted to $63.8  million
in  the  quarter ended December 31, 1995 compared to $3.2 million
in the 1994 period.  The 1995 activity was mainly attributable to
the  sale  of mortgage loans from the Bank's mortgage loans  held
for  resale accounts.  The proceeds from the sales were primarily
used to repay certificates of deposit as they matured and also to
repay borrowings.

In  the  investing  activities section of the Statement  of  Cash
Flows,  a  net increase in loans receivable of $18.0  million  is
reported  for the quarter ended December 31, 1995 compared  to  a
net  increase  of $25.7 million for the same 1994 period.   Loans
originated  in  the  1995  quarter totaled  $46.5  million.  Loan
amortization,  repayments  and  proceeds  from  sales  of   loans
provided  funds for the origination of loans.  The Bank  actively
markets  several  competitive loan programs and has  successfully
utilized  the services of loan solicitors for the origination  of
mortgage  loans.   Cash generated from the sale and  maturity  of
investment  securities totaled $18.2 million, and cash  generated
from mortgage-backed securities sales and repayments totaled $1.8
million  in the 1995 quarter.  The funds received were reinvested
in  investment  securities held for resale of $10.4  million  and
mortgage-backed securities of $13.5 million.  See the  "Financial
Condition" section of this report for additional information.  In
the  1994  quarter, the Bank received $7.7 million in  cash  from
activities  in  its investments held for sale accounts  and  $1.5
million  from  maturities of investments. The cash proceeds  were
mainly  reinvested  in short term notes of local  municipalities.
Cash  funds  received from the disposition of real  estate  owned
properties  amounted  to  $2.4  million  in  the  quarter   ended
December 31, 1995 compared to $549,000 in the same 1994 period.

At  December  31, 1995 First State's liquid assets  consisted  of
$14.3  million in cash on hand and in banks and $21.2 million  in
securities  which qualify as liquid assets for Office  of  Thrift
Supervision  (OTS)  regulatory requirements.  The  cash  balances
will  be used in normal operations.  First DeWitt is required  to
maintain  minimum levels of liquid assets as defined by  the  OTS
regulations, such as United States Government and federal  agency
securities.  This requirement, which may be varied by the OTS, is
based  upon  a percentage of deposits and short-term  borrowings.
The required ratio is currently 5.00%. The Bank's ratio was 6.41%
at  December  31,  1995.   The Bank anticipates  maintaining  its
liquidity at or above the level required by regulatory agencies.

The  Bank  had  $15.3  million  in  outstanding  commitments   to
originate loans, $28.8 million in commitments to sell loans,  and
$35.5 million in unused lines of credit primarily available under
home equity loan credit lines at December 31, 1995.  The Bank had
no  material commitments for capital expenditures at  that  date.
The  vast  majority of the commitments to sell  loans  are  best-
effort commitments with no negative impact if the commitments are
not  filled  in their entirety.  Management intends to  fund  the
loan  commitments  from internal operations and available  liquid
assets.  Any shortfall in obtaining the funds internally will  be
satisfied  by additional borrowings.  As a member of the  Federal
Home  Loan Bank (FHLB) system, the Bank may borrow from the  FHLB
of  New  York. The Bank maintains a $60.4 million line of  credit
with  the FHLB. The Bank had $12.3 million in borrowings  against
the line of credit at December 31, 1995.

The  Bank's  capital exceeds all regulatory requirements  and  is
categorized  as  "well  capitalized" under  the  Federal  Deposit
Insurance  Corporation Improvement Act of 1991 definitions.   The
regulatory  capital requirements and First DeWitt Bank's  capital
position as of December 31, 1995 are as follows:

                                       Capital
                      Capital        Requirement      Excess
                       Amount   %      Amount   %     Amount   %
                               (Dollars in Thousands) 
Tangible   Capital    $38,892  6.5%  $  8,975  1.5%  $29,917  5.0%
Core Capital           38,892  6.5     17,949  3.0    20,943  3.5
Risk-based Capital     43,741 11.3     31,006  8.0    12,735  3.3

The  OTS has proposed an increase in the core capital requirement
from the current 3% to a level that is expected to be between  4%
and 5%.

The  deposits  of  the  Bank are insured by  the  FDIC  primarily
through  the  Savings Association Insurance Fund ("SAIF")  ($64.1
million of deposits at December 31, 1995 were insured through the
Bank  Insurance Fund [the "BIF"], the deposit insurance fund that
insures  most commercial bank deposits).  Both the SAIF  and  the
BIF are statutorily required to be recapitalized to a level equal
to  1.25% of insured deposits.  Members of the SAIF are currently
paying  average deposit insurance premiums of between 24  and  25
basis  points per $100 of insured deposits.  While  the  BIF  has
reached  the required reserve ratio, the SAIF is not expected  to
be recapitalized until 2002 at the earliest.

On  August  8,  1995, the FDIC established a new assessment  rate
schedule of 4 to 31 basis points for BIF members beginning on  or
about  June  30,  1995.  Under the new assessment rate  schedule,
approximately  92% of BIF members will pay the lowest  assessment
rate   of   4   basis  points.   With  respect  to  SAIF   member
institutions,  the  FDIC  determined  to  retain   the   existing
assessment  rate schedule of 23 to 31 basis points  per  $100  of
insured deposits. In announcing the assessment reduction for  BIF
deposits, the FDIC noted that the premium differential  may  have
adverse consequences for SAIF members, including reduced earnings
and  an  impaired ability to raise funds in the capital  markets.
Moreover,  the  FDIC has announced that for the six-month  period
commencing  January  1,  1996, no insurance  assessment  will  be
levied  with  respect to an estimated 90% of the banks  that  are
members of BIF.

Legislation is pending in Congress to recapitalize the SAIF by  a
one-time  charge  to SAIF-insured institutions  of  approximately
$.85  to  $.90  for  every $100 of assessable  deposits,  and  to
eventually merge the SAIF with the BIF.  If the Bank were subject
to  a  special  assessment of $.85 for every $100  of  assessable
deposits,  the  Bank would be required to pay approximately  $4.0
million,  or  $2.5 million net of income taxes,  based  upon  its
deposits at December 31, 1995.

Results of Operations

Comparison of Three Months Ended December 31, 1995 and
December 31, 1994

First  State  recorded net income of $1.5 million,  or  $.37  per
share, for the quarter ended December 31, 1995 compared to a  net
income  of  $961,000, or $.25 per share, for the same quarter  in
1994.   The  most  significant contribution  to  the  net  income
improvement in the 1995 period was net gains on the sale of loans
of  $927,000.  Net interest income increased $337,000 in the 1995
quarter;  other income, exclusive of net gains on  the  sales  of
loans,  increased $1.5 million; and operating expenses  increased
$1.9 million in the same period.

Total  interest income increased $1.7 million during the  quarter
ended December 31, 1995 compared to the same period in 1994.  The
increase  in  interest income was primarily due to  the  $742,000
increase  in  interest  on mortgage loans  and  the  increase  in
interest  on  consumer  and commercial loans  of  $766,000.   The
increases  were  mainly  attributable to  the  increased  average
balance of the loan portfolios outstanding in the 1995 period and
also  to  the  increased average yield of  the  portfolios.   The
average  balance of loans outstanding was $483.5 million  in  the
1995  period compared to $453.2 million in the 1994 period.   The
average  yield of the loan portfolios was 8.61% at  December  31,
1995  compared  to 8.07% at December 31, 1994.   Interest  income
from  the  investment  securities portfolio  and  also  from  the
investment  securities  available  for  sale  increased  $109,000
during the 1995 quarter.  The Bank primarily invests its funds in
loans  and intends to continue to be active in originating  loans
both  for  its own portfolio and also for sale to others.   Long-
term,  fixed-rate loans are mainly originated with the intent  of
selling  the  loans to others.  Adjustable-rate and shorter  term
fixed-rate  loans are mainly originated for the  loan  portfolio.
If  nonaccrual loans of $15.6 million at December  31,  1995  had
been  current in accordance with their original terms,  the  Bank
would  have  realized additional interest income of approximately
$300,000 during the quarter ended December 31, 1995.  The average
yield on loans and investments was 8.37% at December 31, 1995.

Total  interest expense increased $1.4 million (or 29.6%) in  the
quarter  ended December 31, 1995, compared to the same period  in
1994.   The increase was mainly due to the $1.5 million  increase
in  interest  expense  on deposits and was  attributable  to  the
increased  average balance of total deposits outstanding  in  the
1995  period  and  also  to  increased  interest  rates  paid  on
deposits.    The  increased  interest  rates  paid  on   deposits
reflected  the  increases  in  general  market  interest   rates.
Average  deposits outstanding during the 1995 period were  $549.9
million  compared to $496.1 million during the 1994 period.   The
average interest rate on deposits was 4.17% at December 31,  1995
compared to 3.52% at December 31, 1994.  Proceeds from the  sales
of mortgage loans during the 1995 quarter were used to repay high-
rate  certificates, mainly jumbo certificates, and also to  repay
borrowings.   Jumbo certificates were reduced  by  $45.2  million
during  the  quarter.  The average cost of deposits decreased  to
4.17%  at  December  31, 1995 from 4.27% at September  30,  1995.
Management anticipates that the changes in the deposit  portfolio
will  continue  to  have a favorable effect on  overall  cost  of
funds.  The Bank will continue to offer deposit programs that are
competitively  priced to attract new deposits as well  as  retain
savings  of  existing  depositors.  Interest  on  borrowed  money
decreased $146,000 in the 1995 period.  The average interest rate
on deposits and borrowed money was 4.20% at December 31, 1995.

Net  interest income increased $337,000 during the quarter  ended
December  31,  1995  compared to the same  period  in  1994.  The
interest  income and interest expense elements of the changes  in
net interest income are described above.

Provisions for loan losses totaled $300,000 in the quarter  ended
December  31, 1995 compared to $200,000 in the same 1994 quarter.
The  related  allowance for loan losses totaled $5.7 million  and
was 36.5% of nonaccrual loans at December 31, 1995. Substantially
all  of the nonaccrual loans are secured by first mortgage  liens
on   real  property.   See  "Financial  Condition"  section   for
information   regarding  factors  which  influence   management's
judgment in determining the amount of additions to the loan  loss
allowance.  Although management considers the allowance for  loan
losses  to  be  adequate, management recognizes  that  additional
problems could develop and lead to additional loss provisions and
asset write-downs.

Total  other  income increased $2.4 million in the quarter  ended
December  31,  1995.  The increased income is mainly attributable
to a $1.1 million increase in loan fees and other loan charges, a
$926,000 net gain on the sales of loans, and a $266,000 net  gain
on  sales of investments.  First State obtained a serviced credit
card portfolio through the merger with Ocean Independent Bank  in
October  1994.  The effect of the accounting for the credit  card
portfolio  has  caused increases in the areas  of  consumer  loan
interest,  loan  fees and other loan charges, and loan  expenses.
Details  regarding First State's serviced credit  card  portfolio
are discussed below; however, the increase in loan fees and other
loan   charges  is  directly  attributable  to  the  credit  card
portfolio.  The sale of $67.7 million of mortgage loans from  the
available-for-sale portfolio generated a net  gain  on  sales  of
loans  of $927,000.  On October 1, 1995, the Corporation  adopted
SFAS  No. 122, "Accounting for Mortgage Servicing Rights."   This
statement  requires the recognition of mortgage servicing  rights
as  an  asset  when  a mortgage loan is sold or  securitized  and
servicing   is   retained.   The  statement  also  requires   the
Corporation  to  measure the impairment of the  servicing  rights
based  on  the  difference between the  carrying  amount  of  the
servicing rights and their current value.  The adoption  of  SFAS
No.  122  had  a  material  effect  on  the  gain  recognized  in
connection   with  the  sale  detailed  above.   The  Corporation
recorded  an asset of $472,000, during the quarter ended December
31,  1995,  in connection with loan sales recorded in  accordance
with SFAS No. 122.  It is anticipated that the volume of mortgage
loan  sales  and  corresponding  gains  on  the  sales  will   be
considerably  less  going forward.  Net gains  on  the  sales  of
investments  totaled $110,000 in the 1995 quarter compared  to  a
loss  of  $156,000  in the 1994 quarter.  The loss  in  1994  was
mainly  attributable to the sale of several of Ocean  Independent
Bank's  investment  securities at time of  merger.   First  State
maintains  an investment securities available-for-sale  portfolio
of  approximately $14.0 million and anticipates periodic gains on
the  sales of such securities.  The securitites in the available-
for-sale  are subject to the accounting requirements of SFAS  No.
115  (previously adopted) and are adjusted to market  value  with
the  resulting  offset  reported in the  equity  section  of  the
financial statements.

Total  operating expenses increased $1.9 million in  the  quarter
ended   December   31,   1995.   The  increase   is   principally
attributable  to  a  $1.5 million increase in  loan  expenses,  a
$151,000  increase in compensation and employee benefits,  and  a
$288,000  increase in problem asset expenses.  Substantially  all
of  the  increase  in  loan  expenses  was  attributable  to  the
accounting  for  credit card expenses.  Details  regarding  First
State's  serviced credit card portfolio are discussed  separately
below.   The  $151,000  increase  in  compensation  and  employee
benefits  was  mainly  due  to  the continually  rising  cost  of
employee  benefits, a cost of living increase, and the employment
of  personnel  to staff the new branch office opened  in  October
1995.  The $288,000 increase in problem asset expenses, inclusive
of real estate owned write-downs was mainly due to write-downs on
properties disposed of during the quarter.  The "other  expenses"
category was greater in the 1994 quarter mainly because of  costs
incurred with the acquisition of Ocean Independent Bank.

The Corporation acquired a serviced credit card portfolio through
the  acquisition of Ocean Independent Bank in October 1994.   The
arrangement  with  the  servicer of the portfolio,  Applied  Card
Systems  (ACS) of Wilmington, Delaware, provides the  Corporation
with a guaranteed net return based on the outstanding receivables
associated  with  the serviced portfolio.   The  return  that  is
guaranteed  to  the  Corporation is net of all  costs,  including
credit  loss  and  cost of funds.  The size of  the  credit  card
portfolio subject to this arrangement may be reduced by ACS after
providing First State with certain notices.  First State  records
all   interest  income  associated  with  the  portfolio  in  the
"Interest on consumer and commercial loans" caption, and all fees
associated with the portfolio are recorded in the "Loan fees  and
other  loan charges" caption.  The difference between the amounts
received for the two captions above and the net return guaranteed
to  the  Corporation  is considered "credit card  expenses"  that
represent  the  fees  paid  to ACS for  their  servicing  of  the
portfolio.   This  amount  is recorded  in  the  "Loan  expenses"
caption.   The Corporation's business with ACS has expanded,  and
this  growth has caused an increase in all three income statement
captions.   The  detail  effects  of  the  serviced  credit  card
portfolio on the income statement for the quarters ended December
31,  1995  and 1994, and the year ended September 30,  1995,  are
presented below.

                                   3 Months  12 Months  3 Months
                                     Ended     Ended      Ended
                                   12/31/95   9/30/95   12/31/94
                                      (in thousands)
Income Statement Caption                                             
Interest on consumer and            
   commercial loans                 $ 1,048   $ 2,265   $   402         
Loan fees and other loan charges      1,572     2,991       519   
                                    --------  --------  --------
          Total credit card income    2,620     5,256       921

Loan expenses                         2,274     4,469       792   
                                    --------  --------  -------- 
Net credit card income (pre tax)    $   346   $   787   $   129
                                    --------  --------  --------
                                    --------  --------  --------
Net credit card income (after tax)  $   211   $   480   $    79
                                    --------  --------  -------- 
                                    --------  --------  --------

The  total credit card receivables outstanding that were serviced
by  ACS totaled $25.9 million, $19.7 million and $11.9 million at
December  31,  1995, September 30, 1995, and December  31,  1994,
respectively.

Income  tax  expense of $758,000 incurred in  the  quarter  ended
December 31, 1995 and income tax expense of $516,000 incurred  in
the quarter ended December 31, 1994 was due to the generation  of
taxable income.


 PART II.   OTHER INFORMATION

              FIRST STATE FINANCIAL SERVICES, INC.


Item 1.   Legal Proceedings
                 The   company  is  not  engaged  in  any   legal
          proceedings  of a material nature at the present  time.
          From  time  to time, First DeWitt is a party  to  legal
          proceedings within the normal course of business.

Item 2.   Changes in Securities
               Not applicable.

Item 3.   Defaults Upon Senior Securities
               Not applicable.

Item 4.   Submission of Matters to a Vote of Security Holders
               None

Item 5.   Other Information
               Not applicable.

Item 6.   Exhibits and Reports on Form 8-K
               (a)       None
               (b)   No reports on Form 8-K have been filed
                     during the quarter ended December 31, 1995.


                SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.


                First State Financial Services, Inc.


Dated:  02/14/96                By:   Michael J. Quigley, III
                                      --------------------------
                                      Michael J. Quigley, III
                                      Chairman, President and
                                      Chief Executive Officer

Dated:  02/14/96                By:   Emil J. Butchko
                                      --------------------------
                                      Emil J. Butchko
                                      Senior Vice President
                                      and Treasurer