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 March 31, 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 March 31, 1997
(Common stock, $0.63 par value)   400,000


















































                            FNB FINANCIAL CORPORATION

                                      INDEX

                                                               Page
PART I  -  FINANCIAL INFORMATION

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

    Condensed consolidated statements of income -     
      Three months ended March 31, 1997 and 1996           6

    Condensed consolidated statements of cash flows -
      Three months ended March 31, 1997 and 1996           7

    Notes to condensed consolidated financial
      statements                                          8-12

    Table #1 - Schedule of held to maturity and
      available for sale investment activity for the
      period January 1, 1997 through March 31, 1997        10

    Table #2 - Schedule of gross unrealized gains and
      unrealized losses within the held to maturity and
      available for sale investment portfolios by 
      investment type                                      11
    Management's discussion and analysis of financial
      condition and results of operations                12-15   



PART II  -  OTHER INFORMATION                               16

    Signatures                                             18



























                         PART I - FINANCIAL INFORMATION




































            FNB FINANCIAL CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARY

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

Cash and Due from banks                      $ 3,675,005    $ 2,473,315
Interest-bearing deposits with banks             312,152        327,276
Marketable Debt Securities
       Held-to-maturity (Market value - 1997:
       $4,182,999 and 1996: $4,567,903)        4,171,681      4,559,739
       Available-for-sale                     27,202,919     28,755,272
Marketable Equity Securities
   Available for Sale                            115,640        115,640
Federal Reserve, Atlantic Central Banker's Bank
   and Federal Home Loan Bank Stock              389,600        383,700
Federal Funds Sold                             3,254,000      1,239,000
Loans, net of unearned discount &
       Allowance for loan losses              57,234,712     56,259,929
Bank buildings, equipment, furniture &
       fixtures, net                           3,078,109      3,107,960
Accrued interest receivable                      720,743        675,180
Deferred income tax charges                       60,703          6,548
Other real estate owned                          310,917        318,992
Intangible Assets                                196,943        210,588
Other assets                                     244,151        210,933

    Total Assets                            $100,967,275    $98,644,072
                                              ==========     ==========
LIABILITIES :

Deposits:
   Demand deposits                           $ 8,777,310    $ 9,249,700
   Savings deposits                           28,105,391     26,674,628
   Time certificates                          52,044,952     50,957,962
   Other time deposits                           452,714        251,678
      Total deposits                         $89,380,367    $87,133,968
Accrued interest payable & other liabilities     771,830        708,072
Deferred income taxes                                0              0
Accrued dividends payable                         68,000        100,000

    Total Liabilities                        $90,220,197    $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                              8,778,355      8,628,183
Net unrealized gain/(loss) on Available-for-sale
   securities, net of tax effects                (73,110)        32,016

    Total Stockholders' Equity               $10,747,078    $10,702,032

    Total Liabilities & Stockholders' Equity$100,967,275    $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 March 31, 1997 and 1996
                            (UNAUDITED)
<TABLE>
<S>                                              <C>         <C>
                                                     1997      
1996
                    
Interest & Dividend Income

Interest & fees on loans                         $1,270,780 
$1,175,854
       Interest on investment securities:
              U.S. Treasury Securities               11,069     
15,743
              Obligations of other U.S.
                  Government Agencies               369,951    
309,234
              Obligations of State & Political
                  Subdivisions                      106,739    
119,889
       Interest on deposits with banks                3,887     
11,018
       Dividends on Equity Securities                 7,441      
6,179
       Interest on federal funds sold                18,762     
46,618
              Total Interest & Dividend Income    1,788,629  
1,684,535

Interest Expense

       Interest on deposits                         927,263    
935,976
       Interest on Other Borrowed Money                 559       
 0  
              Total interest expense                927,822    
935,976   
              Net interest income                   860,807    
748,559
       Provision for loan losses                      9,000      
7,500
              Net interest income after 
              Provision for loan losses             851,807    
741,059

Other income

       Service charges on deposit accounts           14,728     
15,436
       Other service charges, collection &
              exchange charges, commissions
              and fees                               46,089     
40,983
       Other income                                  10,085      
6,436
       Net Securities gains/(losses)                    0       
(3,843)
              Total other income                     70,902     
59,012

Other expenses                                      655,760    
518,613
       Income before income taxes                   266,949    
281,458
       Applicable income taxes                       48,807     
52,555
  Net income                                       $218,142   
$228,903
                                                    =======    
=======
Earnings per share of Common Stock:
       Net income per share                           $0.55      
$0.57

Cash dividend declared per share                      $0.17      
$0.17

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
                 Three Months Ended March 31, 1997 and 1996
<TABLE>
<S>                                               <C>              <C>
                                 (UNAUDITED)
                                                      1997            1996
Cash flows from operating activities:
      Net income                                  $  218,171       $  228,903
      Adjustments to reconcile net income
       to net cash provided by operating
       activities:                             
            Depreciation & amortization               68,364           41,633
            Provision for loan losses                  9,000            7,500
            Net (gain)/loss on sales of
              investments                                0             
3,843 
            (Increase) decrease in accrued
                   interest receivable               (45,561)        
(28,299)
             Increase (decrease) in accrued
                   interest payable and
                   other liabilities                  63,758           25,759
             Other (net)                             (33,076)        
(94,730)
Net cash provided (used)by operating
      activities                                     280,656          184,609
Cash flows from investing activities:
     Net (increase) decrease in interest-
            bearing deposits with banks               15,124        
(493,081)
     Purchases of Held-to-maturity
            securities                                   0          
(100,000)
     Purchases of Available-for-sale
            securities                                   0        
(3,162,592)
     Proceeds from sales of Available-for-
            sale securities                              0                0  
     Proceeds from maturities of Held-to-
            maturity securities                      388,058           17,063
     Proceeds from maturities of Available-
            for-sale securities                    1,393,072        2,711,749
     Purchases of marketable equity securities          0                 0 
 
     Net (increase) decrease in loans               (983,783)      
2,040,599 
     Proceeds from sale of Other real
            estate owned                               8,075           33,750
     Purchases of bank premises &
            equipment (net)                          (25,011)       
(413,293)
     Proceeds from sale of equipment                    0                 0  
     Purchase of other bank stock                     (5,900)        
(13,700)
Net cash provided (used) by investing 
            activities                               789,635         
620,495 
Cash flows from financing activities:
     Net increase (decrease) in deposits           2,246,399       
2,217,056 
     Cash dividends paid                            (100,000)        
(92,000) 
Net cash provided (used) by financing
     activities                                    2,146,399        2,125,056
Net increase (decrease) in cash & cash
     equivalents                                   3,216,690       
2,930,160 
Cash & cash equivalents, beginning balance         3,712,315        3,110,762
Cash & cash equivalents, ending balance           $6,929,005       $6,040,922
                                                   =========        =========
Supplemental disclosure of cash flows information
     Cash paid during the year for:
           Interest                               $  867,978       $  738,681
           Income taxes                                  0             69,888
Supplemental schedule of noncash investing &
      financing activities
      Unrealized loss on Available-for-sale         
           securities                               (110,772)         47,035
      Deferred income tax on unrealized loss on
           available-for-sale securities              37,662          15,992 
      Accrued dividends payable                       68,000          68,000
      Other real estate acquired in 
           settlement of loans                           0            12,000
      Loan advanced for sale of other real
           estate owned                                  0            50,000
</TABLE> 

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


                 FNB FINANCIAL CORPORATION
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                     MARCH 31, 1997
                         (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

     The financial information presented at and for the nine
     months ended March 31, 1997 and March 31, 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
     March 31, 1997, is summarized in Table #1 on page 10.  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 11.

     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                        253     
19,216
          Installment loans                          1,100      
5,469
          Commercial & all other                     3,313      
3,766
               Total charge-offs                     4,666     
28,451
     Recoveries of loans previously charged-off:
          Real estate mortgages                        0          
0
          Installment loans                          2,197      
1,719
          Commercial & all other                       341        
291
               Total recoveries                      2,538      
2,010
     Net loans charged-off (recovered)               2,128     
26,441 
     Provision for loan losses charged to operations      9,000   
   7,500
     Allowance for loan losses, March 31               $412,484   
$386,059
                                             ========  ========
</TABLE>
     
The following table shows the principal balance of nonaccrual loans
as of March 31, 1997:
<TABLE>
<S>                                                 <C>     
Nonaccrual loans                                    $ 920,113.00
                                                      ==========
Interest income that would have been
   accrued at original contract rates                $ 21,021.12
Amount recognized as interest income                   10,754.96
   Foregone revenue                                  $ 10,266.16
                                                       =========   
</TABLE>
NOTE 7  - COMMITMENTS
     
     Fort Loudon Office Renovation/Expansion
     As of March 31, 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.
      

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 MARCH 31, 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                           0              0            0

NET LOSSES                          0              0            0

MATURITIES/CALLS PAYDOWNS/
PREMIUM AMORTIZATION/DISCOUNT
ACCRETION                     388,058      1,393,072    1,781,130

ENDING BALANCE 3/31/97     $4,171,681    $27,344,811  $31,516,492
                            =========     ==========   ==========
</TABLE>




                                    TABLE #2
               SCHEDULE OF UNREALIZED GAINS AND UNREALIZED LOSSES
               WITHIN THE HELD TO MATURITY AND AVAILABLE FOR SALE
                    INVESTMENT PORTFOLIOS BY INVESTMENT TYPE
                                 MARCH 31, 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     
550,771     551,285          514            0

U.S. GOVERNMENT TREASURIES         0          0           0           0     
198,764     197,910            0         (854)

U.S. GOVERNMENT AGENCIES           0          0           0           0     
897,585     903,276        5,691            0

U.S. GOVERNMENT AGENCIES           0          0           0           0  
13,895,407  13,647,242            0     (248,165)

SBA GUARANTEED LOAN POOL 
CERTIFICATES                 925,405    930,351        4,946          0   
3,471,611   3,542,967       71,356            0

SBA GUARANTEED LOAN POOL
CERTIFICATES                 658,492    655,789           0       (2,704)   
182,038     178,850            0       (3,188)

MORTGAGE-BACKED SECURITIES         0          0           0           0   
1,028,891   1,051,663       22,773            0

MORTGAGE-BACKED SECURITIES         0          0           0           0     
582,716     578,017            0       (4,699)

SECURITIES ISSUED BY STATES
& POLITICAL SUBDIVISIONS IN
THE U.S.                   1,629,866  1,641,727      11,860           0   
3,369,624   3,414,716       45,092            0 

SECURITIES ISSUED BY STATES
& POLITICAL SUBDIVISIONS IN
THE U.S.                     957,917    955,134           0       (2,783) 
3,167,403   3,136,992            0      (30,411)

MARKETABLE EQUITY SECURITIES       0          0           0           0      
84,520     115,640       31,120            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               4,171,681  4,183,000       16,806      (5,487)
27,818,930  27,708,158      176,546     (287,319)
                           =========  =========       ======      ====== 
==========  ==========      =======      =======
</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 three months of 1997 was $218,142 compared
to $228,903 for the same period in 1996.  This represents a
decrease of $10,761 or 4.70%.  Net income on an adjusted per share
basis for the first three months of 1997 was $0.55 per share, a
decrease of $0.02 from the $0.57 per share for the three months
ended March 31, 1996.

Total interest and dividend income for the first three months of
1997 was $1,788,629 compared to $1,684,535 for the three months
ended March 31, 1996, representing an increase of $104,094.  This
increase is a result of both a general increase in the balance of
earning assets and higher yields on investments in the Bank's
security portfolio and on adjustable rate loans which have repriced
to higher interest rates.  Since December 31, 1996, net loans have
increased $974,783 or 1.73% while the book value of investment debt
securities and federal funds sold have increased $233,869.  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 three months of 1997.  

During the last quarter of 1996 and the first quarter of 1997,
interest rates on loans, adjustable rate investments and federal
funds sold increased.  At the end of the first quarter of 1997,
short term interest rates were increased by the Federal Reserve
Board.  During the first quarter, some 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
increasing deposit rates but not at the same pace as that of
earning assets.  Combined with the aforementioned increase in loans
and increase in investments and federal funds sold, net interest
income has increased and the bank's net interest margin and
interest spread during the first quarter of 1997 have accordingly
increased.  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.  Although maturing liabilities will be repriced to
slightly higher interest rates, the anticipated larger interest
rate increases in earning assets is anticipated to create a slight
increase in interest spreads and net interest margins.

Interest expense for the three months ended March 31, 1997, was
$927,822, a decrease of $8,154 from the $935,976 incurred for the
same period in 1996.  This decrease is due to a reduction in the
cost of time certificates of deposit is a result of the maturity of
a large certificate of deposit to a local school district which was
earning a premium interest rate for a one year period and the March
1, 1996 reduction of savings account interest rates by 25 basis
points.  Total deposit volume increased $2,246,399 or 2.58% since
December 31, 1996.  Savings accounts increased $1,430,763 or 5.36%
due to the Bank acquiring a money market account of over $1,000,000
for a local school district on July 1,1996 for the next two year
period and the acquisition of a temporary savings account with a
balance in excess of $900,000.  Non-interest bearing demand deposit
accounts decreased $472,390 or 5.11% from December 31, 1996.  Time
certificates increased $1,086,990, while other time deposits,
comprised of Christmas and vacation club accounts, increased
$201,036.  The increase in the lower cost interest-bearing savings
deposits and club accounts contributed to the decrease in interest
expense when compared to 1996.

The tax-adjusted net interest margin has increased 27 basis points
to 4.08% for the first three months of 1997 from that of the first
three months of 1996 which was 3.81%.  This increase occurred due
to an increase in the yields on earning assets as a result of
rising interest rates on adjustable rate loans and investments
while the cost of interest-bearing liabilities decreased.  The
tax-equivalent yield on earning assets for the first three months
of
1997 increased .06% to 8.15% from 8.09% for the same period in 1996
while the cost of interest-bearing liabilities decreased .26% to
4.75% from 5.01% for the same period in 1996.  Management
anticipates to continue to concentrate on the improvement of net
interest margin throughout the year.  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 an increase in the net interest margin.

Total noninterest income for the first three months of 1997
increased $11,890 due to the net security loss for the same period
in 1996 of $3,843 and a $5,100 increase in other service charges
and collection fees.  Operating expenses for the period ended March
31, 1997, were $655,760 a $137,147 increase from the operating
expenses incurred for the same period in 1996 of $518,613.  This
increase is due to 1) increases in employee wages and benefits of
$54,266 as a result of an increase in wage rates, an increase in
the number of employees due to the opening of Hancock Community
Bank which increased personnel by six employees and an increase in
employee participation in the Company's retirement plan; 2) an
increase in the cost of fixed assets in the amount of $33,587 due
to increased utility bills, depreciation, insurance and taxes as a
result of the completed expansion/renovation of the main office
facility in September 1996 and the opening of Hancock Community
Bank in November 1996 for which depreciation began in the third
quarter of 1996; 3) a $16,050 increase in advertising/promotional
expenses due to an increased emphasis on television advertising and
promotion of the Hancock Community Bank office; and 4) a $3,000
increase in supplies expense, a $6,000 increase in Directors fees
due to increased meeting attendance and a $3,000 increase in FDIC
assessment expenses due to FICO Bond insurance assessments. 
Management anticipates the cost of fixed assets to be higher in
1997 than in 1996 due to the main office renovation/expansion
depreciation, operating costs of Hancock Community Bank and
depreciation costs associated with the Fort Loudon branch office
renovation scheduled to begin in mid spring.  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, seizing the opportunity to expand into a new market
area which had been targeted by the Board for several years and
expanding the size of the Fort Loudon office to better serve
customers in that area.

The company's income tax provision for the first three months of
1997 was $48,807 as compared to $52,555 for the first three months
of 1996.  This decrease in the tax provision in the amount of
$3,748 is due to an increase in operating expenses as highlighted
above which has reduced taxable income.

The Company continues to operate with a marginal tax rate of 34%,
during the first quarter of 1997.  The effective income tax rate
for the first three months of 1997 was 18.28%, a decrease of .39%
from the effective tax rate for the first three months of 1996 of
18.67%.  This decrease in the effective tax rate is primarily due
to the increase of operating expenses decreasing taxable income.

Total assets as of March 31, 1997, were $100,967,275, an increase
of $2,323,203 over the period ending December 31, 1996,
representing an increase of 2.36%.  Funding this increase in total
assets was an increase in total deposits of $2,246,399 or 2.58%. 
The increase in deposits was the result of increased balances in
time deposits of $1,086,990 and in savings account balances of
$1,430,763.  Net loans as of March 31, 1997, were $57,234,712
compared to $56,259,929 as of December 31, 1996.  The allowance for
loan losses at the end of the three months was $412,484 compared to
$405,607 at year end 1996 and is considered adequate, in
management's judgement, to absorb possible losses on existing
loans.  The provision for loan losses for the first three months of
1997 was $9,000 compared to $7,500 for the same period in 1996. 

Total deposits were $89,380,367 as of March 31, 1997, compared to
$87,133,968 on December 31, 1996.  This represents an increase of
$2,246,399 or 2.58% which reflects the activity as discussed
previously.

Total equity as of March 31, 1997, was $10,747,078, 10.64% of total
assets as compared to $10,702,032, 10.85% of total assets as of
December 31, 1996.  This slight increase in equity reflects
earnings for the first quarter of 1997 offset by 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 ($73,110), a $105,126 decrease 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 March 31, 1997, the risk-based capital ratio of
the Corporation was 19.83% 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>
                                           March 31,    Regulatory
                                             1997        Minimum

Leverage Ratio                               10.51%       3.00%
Risk-based capital ratios:
    Tier I (core capital)                    19.09%       4.00%
    Total Capital
    (Tier I and Tier II Capital)             19.83%       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 May 6, 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)