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, 1996  

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, 1996
(Common stock, $0.63 par value)   400,000


















































                            FNB FINANCIAL CORPORATION

                                      INDEX

                                                               Page
PART I  -  FINANCIAL INFORMATION

    Condensed consolidated balance sheets - 
      September 30, 1996 and December 31, 1995                 5

    Condensed consolidated statements of income -     
      Three months ended September 30, 1996 and 1995           6

    Condensed consolidated statements of income - 
      Nine months ended September 30, 1996 and 1995            7 

    Condensed consolidated statements of cash flows -
      Nine months ended September 30, 1996 and 1995            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, 1996 through September 30, 1996        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,
                                                1996           1995
ASSETS:                                      (unaudited)    (audited*)

Cash and Due from banks                      $ 2,752,458    $ 2,633,762
Interest-bearing deposits with banks             223,938        418,473
Marketable Debt Securities
       Held-to-maturity (Market value - 1996:
       $5,021,947 and 1995: $5,402,945)        5,034,667      5,401,263
       Available-for-sale                     27,712,525     26,234,019
Marketable Equity Securities
   Available for Sale                            111,800        101,880
Federal Reserve, Atlantic Central Banker's Bank
   and Federal Home Loan Bank Stock              383,700        370,000
Federal Funds Sold                             3,643,000        477,000
Loans, net of unearned discount &
       Allowance for loan losses              53,762,797     52,793,865
Bank buildings, equipment, furniture &
       fixtures, net                           2,953,148      2,086,560
Accrued interest receivable                      698,338        647,921
Deferred income tax charges                      130,475            0  
Other real estate owned                          382,492        395,752
Intangible Assets                                215,858        255,506
Other assets                                     427,787        105,141

    Total Assets                             $98,432,983    $91,921,142
                                              ==========     ==========
LIABILITIES :

Deposits:
   Demand deposits                           $ 9,269,143    $ 7,778,115
   Savings deposits                           28,234,548     23,955,468
   Time certificates                          49,152,388     48,942,142
   Other time deposits                           630,209        240,562
      Total deposits                         $87,286,288    $80,916,287
Accrued interest payable & other liabilities     741,901        764,901
Deferred income taxes                                0           19,490
Accrued dividends payable                         72,000         92,000

    Total Liabilities                        $88,100,189    $81,792,678

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                              8,474,439      7,979,001
Net unrealized gain/(loss) on Available-for-sale
   securities, net of tax effects               (183,478)       107,630

    Total Stockholders' Equity               $10,332,794    $10,128,464

    Total Liabilities & Stockholders' Equity $98,432,983    $91,921,142
                                              ==========     ==========
</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, 1996 and 1995
                            (UNAUDITED)
<TABLE>
<S>                                              <C>         <C>
                                                     1996      
1995
                    
Interest & Dividend Income

Interest & fees on loans                         $1,245,558 
$1,181,138
       Interest on investment securities:
              U.S. Treasury Securities               11,084     
16,294
              Obligations of other U.S.
                  Government Agencies               352,242    
224,031
              Obligations of State & Political
                  Subdivisions                      116,919    
110,941
       Interest on deposits with banks                4,181     
10,057
       Dividends on Equity Securities                 6,350      
6,312
       Interest on federal funds sold                42,187     
45,417
              Total Interest & Dividend Income    1,778,521  
1,594,190

Interest Expense

       Interest on deposits                         926,206    
845,428
              Net interest income                   852,315    
748,762
       Provision for loan losses                     17,500      
7,500
              Net interest income after 
              Provision for loan losses             834,815    
741,262

Other income

       Service charges on deposit accounts           15,367     
17,156
       Other service charges, collection &
              exchange charges, commissions
              and fees                               42,677     
45,952
       Other income                                   6,821     
12,741
       Net Securities gains/(losses)                    0       
(1,846)
              Total other income                     64,865     
74,003

Other expenses                                      570,409    
482,642
       Income before income taxes                   329,271    
332,623
       Applicable income taxes                       67,120     
68,004
  Net income                                       $262,151   
$264,619
                                                    =======    
=======
Earnings per share of Common Stock:
       Net income per share                           $0.66      
$0.66

Cash dividend declared per share                      $0.18      
$0.19

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, 1996 and 1995
                            (UNAUDITED)
<TABLE>
<S>                                              <C>         <C>
                                                    1996       
1995
                    
Interest & Dividend Income

       Interest & fees on loans                  $3,598,185 
$3,405,086
       Interest on investment securities:
              U.S. Treasury Securities               39,980     
39,671
              Obligations of other U.S.
                Government Agencies               1,005,598    
696,588
              Obligations of State & Political
                Subdivisions                        354,105    
296,662
       Interest on deposits with banks               24,620     
30,547
       Dividends on Equity Securities                18,890     
18,871
       Interest on federal funds sold               117,373     
95,952
              Total Interest & Dividend Income    5,158,751  
4,583,377

Interest Expense

       Interest on deposits                       2,783,052  
2,339,177
              Net interest income                 2,375,699  
2,244,200
       Provision for loan losses                     62,500     
33,174
              Net interest income after 
                Provision for loan losses         2,313,199  
2,211,026

Other income

       Service charges on deposit accounts           46,750     
50,186
       Other service charges, collection &
             exchange charges, commissions 
             and fees                               126,791    
130,456
       Other income                                  26,643     
25,942
       Net Securities gains/(losses)                 (3,843)    
(5,210)
              Total other income                    196,341    
201,374

Other expenses                                    1,630,275  
1,437,686
       Income before income taxes                   879,265    
974,714
       Applicable income taxes                      175,825    
218,274

       Net income                                  $703,440   
$756,440
                                                    =======    
=======
Earnings per share of Common Stock:
       Net income per share                           $1.76      
$1.89

Cash dividend declared per share                      $0.52      
$0.54

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, 1996 and 1995
<TABLE>
<S>                                               <C>              <C>
                                 (UNAUDITED)
                                                      1996            1995
Cash flows from operating activities:
      Net income                                  $  703,440       $  756,440
      Adjustments to reconcile net income
       to net cash provided by operating
       activities:                             
            Depreciation & amortization              147,125           92,786
            Provision for loan losses                 62,500           33,174
            Net (gain)/loss on sales of
              investments                              3,843           
5,210 
            (Increase) decrease in accrued
                   interest receivable               (50,417)       
(132,132)
             Increase (decrease) in accrued
                   interest payable and
                   other liabilities                 (23,000)         155,733
             Other (net)                            (319,981)          54,421
Net cash provided (used)by operating
      activities                                     523,510          965,632
Cash flows from investing activities:
     Net (increase) decrease in interest-
            bearing deposits with banks              194,535          
84,266 
     Purchases of Held-to-maturity
            securities                              (100,000)     
(5,035,910)
     Purchases of Available-for-sale
            securities                            (7,198,170)       
(397,078)
     Proceeds from sales of Available-for-
            sale securities                             0             196,469
     Proceeds from maturities of Held-to-
            maturity securities                      466,596          480,470
     Proceeds from maturities of Available-
            for-sale securities                    5,264,825        2,924,730
     Purchases of marketable equity securities          0            
(25,000)
     Net (increase) decrease in loans             (1,056,459)     
(3,302,061)
     Proceeds from sale of Other real
            estate owned                              39,000           21,500
     Purchases of bank premises &
            equipment (net)                         (977,442)       
(289,378)
     Proceeds from sale of equipment                    0              13,729
     Purchase of other bank stock                    (13,700)        
(30,500)
Net cash provided (used) by investing 
            activities                            (3,380,815)     
(5,358,763)
Cash flows from financing activities:
     Net increase (decrease) in deposits           6,370,001       
4,005,011 
     Cash dividends paid                            (228,000)       
(228,000)
Net cash provided (used) by financing
     activities                                    6,142,001        3,777,011
Net increase (decrease) in cash & cash
     equivalents                                   3,284,696        
(616,120)
Cash & cash equivalents, beginning balance         3,110,762        4,629,079
Cash & cash equivalents, ending balance           $6,395,458       $4,012,959
                                                   =========        =========
Supplemental disclosure of cash flows information
     Cash paid during the year for:
           Interest                               $2,634,234       $2,188,081
           Income taxes                              275,088          101,840
Supplemental schedule of noncash investing &
      financing activities
      Unrealized loss on Available-for-sale         
           securities                               (277,997)          5,002
      Deferred income tax on unrealized loss on
           available-for-sale securities              94,519          (1,701)
      Accrued dividends payable                       72,000          76,000
      Other real estate acquired in 
           settlement of loans                        75,027         139,524
      Loan advanced for sale of other real
           estate owned                               50,000          29,983
</TABLE> 

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

                 FNB FINANCIAL CORPORATION
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                     SEPTEMBER 30, 1996
                         (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

     The financial information presented at and for the nine
     months ended September 30, 1996 and September 30, 1995 is
     unaudited.  Information presented at December 31, 1995, 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, 1996, through
     September 30, 1996, is summarized in Table #1 on page 11.  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 12.

     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>
                                                1996       1995    
                                             
     Allowance for loan losses beginning of the year   $405,000   
$405,036
     Loans charged-off during the year:
          Real estate mortgages                     51,090      
2,517
          Installment loans                         24,135     
50,609
          Commercial & all other                     4,530      
9,168
               Total charge-offs                    79,755     
62,294
     Recoveries of loans previously charged-off:
          Real estate mortgages                        0          
460
          Installment loans                          9,636     
21,138
          Commercial & all other                       830      
5,253
               Total recoveries                     10,466     
26,851
     Net loans charged-off (recovered)              69,289     
35,443 
     Provision for loan losses charged to operations     62,500   
  33,174
     Allowance for loan losses, September 30           $398,211   
$402,767
                                             ========  ========
</TABLE>
     
The following table shows the principal balance of nonaccrual loans
as of September 30, 1996:
<TABLE>
<S>                                                 <C>     
Nonaccrual loans                                    $ 381,081.48
                                                      ==========
Interest income that would have been
   accrued at original contract rates                $ 26,203.78
Amount recognized as interest income                   13,650.07
   Foregone revenue                                  $ 12,553.71
                                                       =========   
</TABLE>
NOTE 7  - COMMITMENTS
     
     Main Office Renovation/Expansion
     As of September 30, 1996, the Board of Directors has committed
     to an expansion project for its main office facilities.
     Demolition, design, and construction costs of $1,721,978 were
     incurred as of September 30,1996.  These expenditures are
     included in the September 30, 1996 financial statements under
     the balance sheet caption "Bank building, equipment, furniture
     and fixtures, net."  Management estimates total expenditures
     related to this project including additional equipment
     purchases will be approximately $1,750,000.
      
     Hancock, Maryland Branch Office
     In May 1996, the Board of Directors approved management to
     seek approval from The Office of the Comptroller of the
     Currency to locate a branch office in Hancock, Maryland to be
     known as "Hancock Community Bank, a Division of The First
     National Bank of McConnellsburg".  Management negotiated the
     lease of a facility located in the Hancock Shopping Center
     adjacent to Pittman's IGA Supermarket which formerly had been
     occupied by First Federal Savings Bank of Western Maryland.
     The size of this facility is approximately 1,500 square feet,
     has a two lane drive-up window and an automatic teller
     machine. Eventually in the 1997 calendar year, this office 
     will be designed as a supermarket branch in addition to a
     regular branch office as management of Pittman's IGA and the
     Bank have agreed to remove the wall between the two businesses
     in order to establish a supermarket branch in 1997.

     The Office of the Comptroller of the Currency approved this
     branch office on August 23, 1996 and gave the Bank 18 months
     from this date to open this branch office.  Management
     anticipates opening this office during the month of November
     1996.  Total expenditures anticipated in the opening of this
     branch office are estimated to be approximately $200,000.     

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, 1996 THROUGH SEPTEMBER 30, 1996
<TABLE>
<S>                        <C>           <C>          <C>
                            HELD TO        AVAILABLE      TOTAL
                            MATURITY       FOR SALE    INVESTMENT
                            PORTFOLIO      PORTFOLIO    PORTFOLIO

BEGINNING BALANCE 1/1/96   $5,401,263    $26,088,301  $31,489,564

PURCHASES                     100,000      7,198,170    7,298,170

NET LOSSES (1)                      0          3,843        3,843

MATURITIES/CALLS PAYDOWNS/
PREMIUM AMORTIZATION/DISCOUNT
ACCRETION                     466,596      5,264,825    5,731,421

ENDING BALANCE 9/30/96     $5,034,667    $28,017,803  $33,052,470
                            =========     ==========   ==========
</TABLE>
NOTE (1):  THE SECURITY LOSSES ARE THE RESULT OF PREMIUM REMAINING
ON AFS SECURITIES WHICH HAD BEEN CALLED DURING THE FIRST
QUARTER.  





























                                     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, 1996
<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     
102,864     103,250          386            0

U.S. GOVERNMENT TREASURIES         0          0           0           0     
647,744     644,345            0       (3,399)

U.S. GOVERNMENT AGENCIES           0          0           0           0   
1,799,966   1,807,248        7,282            0

U.S. GOVERNMENT AGENCIES           0          0           0           0  
13,024,580  12,680,086            0     (344,494)

SBA GUARANTEED LOAN POOL 
CERTIFICATES                 402,581    403,594        1,013          0   
3,405,374   3,483,630       78,255            0

SBA GUARANTEED LOAN POOL
CERTIFICATES               1,293,586  1,276,676           0      (16,910)   
650,397     645,940            0       (4,456)

MORTGAGE-BACKED SECURITIES         0          0           0           0     
502,324     514,159       11,835            0

MORTGAGE-BACKED SECURITIES         0          0           0           0   
1,249,570   1,230,328            0      (19,242)

SECURITIES ISSUED BY STATES
& POLITICAL SUBDIVISIONS IN
THE U.S.                     864,647    876,851      12,204           0   
2,521,699   2,564,379       42,681            0 

SECURITIES ISSUED BY STATES
& POLITICAL SUBDIVISIONS IN
THE U.S.                   2,473,853  2,464,826           0       (9,027) 
4,113,285   4,039,160            0      (74,126)

MARKETABLE EQUITY SECURITIES       0          0           0           0      
84,520     111,800       27,280            0

FEDERAL RESERVE BANK STOCK,
ATLANTIC CENTRAL BANKERS BANK
STOCK AND FEDERAL HOME LOAN
BANK STOCK                         0          0           0           0     
383,700     383,700            0            0

GRAND TOTALS               5,034,667  5,021,947       13,217     (25,937)
28,486,023  28,208,025      167,719     (445,717)
                           =========  =========       ======      ====== 
==========  ==========      =======      =======
</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 1996 was $703,440 compared
to $756,440 for the same period in 1995.  This represents a
decrease of $53,000 or 7.01%.  Net income on an adjusted per share
basis for the first nine months of 1996 was $1.76 per share, a
decrease of $0.13 from the $1.89 per share for the nine months
ended September 30, 1995.

Total interest and dividend income for the first nine months of
1996 was $5,158,751 compared to $4,583,377 for the nine months
ended September 30, 1995, representing an increase of $575,374. 
This increase is a result of both a general increase in the balance
of earning assets and slightly higher yields on investments in the
Bank's security portfolio and on adjustable rate loans which have
repriced to higher interest rates.  However, since December 31,
1995, net loans have increased $968,932 or 1.84% while the book
value of investment debt securities have increased $1,562,906 and
federal funds sold have increased $3,166,000.  This increase in
loans, the Bank's highest yielding interest-earning asset, and
subsequent increases in the lower yielding assets of investments
and federal funds sold have increased the Bank's interest income
for the first nine months of 1996.  

During the last quarter of 1995 and the first quarter of 1996,
interest rates on loans, adjustable rate investments and federal
funds sold decreased due to decreases in short-term interest rates
by the Federal Reserve Board. Since the first quarter of 1996,
interest rates have begun to increase.  During the first quarter,
several investment securities with call features were called by the
issuer resulting in the loss of higher interest earning assets.  At
the same time, management was decreasing deposit rates but not at
the same pace as that of earning assets.  The result combined with
the aforementioned increase in loans and increase in investments
and federal funds sold resulted in a decrease in the bank's net
interest margin and interest spread during the first and second
quarters of 1996.  However, during the third quarter of 1996, the
Federal Reserve Board maintained short term interest rates at the
same level during the second quarter.  This allowed management to
maintain deposit rates at relatively the same levels as in the
first and second quarters while interest rate indexes on loans and
securities increased resulting in a higher interest spread and net
interest margin than that during the first and second quarters of
1996.  Management anticipates the continued increase in interest
rates on loans and investments and the retention of deposit rates
at lower levels will result in the average interest rates earned on
assets to increase during the next few earning periods while
maturing liabilities will be repriced to lower interest rates
thereby creating a slight increase in interest spreads and net
interest margins.

Interest expense for the nine months ended September 30, 1996, was
$2,783,052, an increase of $443,875 from the $2,339,177 incurred
for the same period in 1995.  This increase is due to the
significant increase in total interest-bearing deposits as a result
of the purchase of the Fort Loudon Branch of Dauphin Deposit Bank
in November 1995.  Total deposit volume increased $6,370,001 or
7.87% since December 31, 1995.  Savings accounts increased
$4,279,080 or 17.86% due to the Bank acquiring a money market
account of over $1,000,000 for a local school district on July 1
for the next two year period and an increase in the money market
account balances of two large business accounts.  Non-interest
bearing demand deposit accounts increased $1,491,028 or 19.17% from
December 31, 1995, the result of new account openings and an
increase in the balance of business accounts.  Time certificates
increased only $210,246, while other time deposits, comprised of
Christmas and vacation club accounts, increased $389,647.  The
increase in the lower cost interest-bearing savings deposits and
club accounts as well as the noninterest-bearing demand deposit
accounts while the higher cost time deposits increased only
slightly, contributed to this increase in interest cost when
compared to 1995.

The tax-adjusted net interest margin has decreased 22 basis points
to 3.96% for the first nine months of 1996 from that of the first
nine months of 1995 which was 4.18%.  This decrease occurred due to
an increase in the cost of interest-bearing liabilities which
occurred throughout the 1995 year and the first quarter of 1996 due
to a general increase in the cost of all deposits while the yield
on earning assets increased only slightly.  The tax-equivalent
yield on earning assets for the first nine months of 1996 decreased
 .02% to 8.14% from 8.16% for the same period in 1995 while the cost
of interest-bearing liabilities increased .13% to 4.90% from 4.77%
for the same period in 1995.  This increase in cost of
interest-bearing liabilities has surpassed that of the decrease in
yield on
earning assets resulting in a decrease in net interest margin. 
Management anticipates to continue to concentrate on the
improvement of net interest margin throughout the year and has
taken steps to improve it by decreasing rates on savings accounts
by 25 basis points during the first quarter and retaining the cost
time deposits at lower levels.  Recent increases in interest rates
on adjustable rate loans and securities while higher cost time
deposits have matured and been repriced to lower yielding deposits
have resulted in a gradual increase in the net interest margin.

Total noninterest income decreased $5,033 due primarily to the 1995
receipt of interest in the amount of $3,927 from the IRS on a prior
year tax refund and $587 from the FDIC for the 1995 FDIC Insurance
premium refund.  Operating expenses for the period ended September
30, 1996, were $1,630,275 a $192,589 increase from the operating
expenses incurred for the same period in 1995 of $1,437,686.  This
increase is due to 1) increases in employee wages and benefits of
$109,768 as a result of an increase in wage rates, an increase in
the number of employees due to the purchase of the Fort Loudon
Branch which increased personnel by three employees, an increase in
employee participation in the Company's retirement plan and a
decrease in the deferral of loan origination costs associated with
SFAS 91; 2) an increase in the cost of fixed assets in the amount
of $50,012 due to increased utility bills, depreciation, insurance
and taxes as a result of the purchase of the Fort Loudon Branch of
Dauphin Deposit Bank in November 1995 and the main office
renovation and expansion for which depreciation began in the third
quarter of 1996; 3) an additional new expense in 1996 of
amortization of the premium on deposits purchased at the Fort
Loudon Office for which the first nine months of 1996 expense was
$39,648; and 4) additional expenses in 1996 for the 90th
anniversary stockholders banquet which cost approximately $10,000. 
These increases were offset by a decrease in other operating
expenses of $75,979 due to the reduction in FDIC insurance
assessments.  Management anticipates the cost of fixed assets to
increase significantly during the fourth quarters of 1996 and in
1997 as the main office construction comes to a close and the
operation of the Hancock branch office begins.  Increased costs
associated with this construction will include additional
depreciation, utility billings, real estate insurance, real estate
taxes and equipment and maintenance costs.  Additional costs
associated with the Hancock office will be employee wages and
benefits, lease payments and depreciation on equipment.  These
costs will result in a decrease in net income during the next
several 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 by expanding
its main office facilities and seizing the opportunity to expand
into a new market area which had been targeted by the Board for
several years.

The company's income tax provision for the first nine months of
1996 was $175,825 as compared to $218,274 for the first nine months
of 1995.  This decrease in the tax provision in the amount of
$42,449 is due to an increase in tax-free income in relation to
income before income taxes.  During the first nine months of 1996
total tax-free income was $498,116 or 56.65% of income before
income taxes compared to $419,605 or 43.05% of income before income
taxes for the same period in 1995.

Although the Company continues to operate with a marginal tax rate
of 34%, during the first quarter of 1996, the Company was subject
to the alternative minimum tax of 20% due to the increase in
tax-free income as highlighted earlier.  The effective income tax
rate
for the first nine months of 1996 was 20.00%, a decrease of 2.39%
from the effective tax rate for the first nine months of 1995 of
22.39%.  This decrease in the effective tax rate is primarily due
to the increase of tax-free interest income in relation to income
before income taxes.

Total assets as of September 30, 1996, were $98,432,983 an increase
of $6,511,841 over the period ending December 31, 1995,
representing an increase of 7.08%.  Funding this increase in total
assets was an increase in total deposits of $6,370,001 or 7.87%. 
The increase in deposits was the result of increased balances in
time deposits of $210,246, in savings account balances of
$4,279,080 and in demand deposits of $1,491,028 since December 31,
1995.  Net loans as of September 30, 1996, were $53,762,797
compared to $52,793,865 as of December 31, 1995.  The allowance for
loan losses at the end of the nine months was $398,211 compared to
$405,000 at year end 1995 and is considered adequate, in
management's judgement, to absorb possible losses on existing
loans.  The provision for loan losses for the first nine months of
1996 was $62,500 compared to $33,174 for the same period in 1995. 

Total deposits were $87,286,288 as of September 30, 1996, compared
to $80,916,287 on December 31, 1995.  This represents an increase
of $6,370,001 or 7.87% which reflects the activity as discussed
previously.

Total equity as of September 30, 1996, was $10,332,794, 10.50% of
total assets as compared to $10,128,464, 11.02% of total assets as
of December 31, 1995.  This slight increase in equity reflects a
decrease in market value of marketable securities which has
resulted in a net unrealized loss on available for sale securities,
net of tax effects of ($183,478), a $291,108 decrease from the
December 31, 1995 net unrealized gain on available for sale
securities, net of tax effects of $107,630.  

The Corporation has risk-based capital ratios exceeding regulatory
requirements.  Risk-based capital guidelines require a minimum
ratio of 8.0%.  At September 30, 1996, the risk-based capital ratio
of the Corporation was 19.51% while at December 31, 1995, the
risk-based capital ratio was 21.16%.  The following table presents
the
risk-based capital ratios for the Corporation:


<TABLE>
<S>                                          <C>          <C>
                                        September 30,    Regulatory
                                             1996        Minimum

Leverage Ratio                               10.45%       3.00%
Risk-based capital ratios:
    Tier I (core capital)                    18.78%       4.00%
    Total Capital
    (Tier I and Tier II Capital)             19.51%       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, President           
                               and Director of the Company and
                               President/CEO of the Bank)
                              (Duly Authorized Officer)



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