FORM 10-Q
                                
                Securities and Exchange Commission
                     Washington, D.C.  20549
                                
       [ X ]   Quarterly Report Pursuant to Section 13 or
           15(d) of the Securities Exchange Act of 1934
                                
         For the quarterly period ended:  September 30, 1998
                                
                               or
                                
       [   ]   Transition Report Pursuant to Section 13 or
          15(d) of the Securities Exchange Act of 1934
                                
            For the transition period from         to
                                           -------    -------
                                
                Commission file no.:     0-12377
                                
                                
                    BT FINANCIAL CORPORATION
     (Exact Name of Registrant as Specified in its Charter)
                                
          Pennsylvania                 25-1441348
       -----------------              ------------
   (State of Incorporation) (I.R.S. Employer Identification Number)
                                
         551 Main Street, Johnstown, Pennsylvania  15901
         -----------------------------------------------
      (Address of Principal Executive Offices)  (Zip Code)
                                
                                
                         (814) 532-3801
                         --------------
                  Registrant's Telephone Number
                                
                                
                                
     Indicate by checkmark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                     Yes  X              No
                         ----              ----

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

                 12,985,272 shares common stock
                        ($5.00 par value)
                      as of November 2, 1998






            BT FINANCIAL CORPORATION AND AFFILIATES

                           FORM 10-Q

                       September 30, 1998


 Part I.  Financial Information                                  Page No.
 ------------------------------                                  --------

     Item 1.
     -------

           Consolidated Balance Sheet - September 30, 1998
            and December 31, 1997                                    3

           Consolidated Statement of Income
            Three and Nine Months Ended September 30, 1998 and 1997  4

           Consolidated Statement of Cash Flows
            Nine Months Ended September 30, 1998 and 1997            5

           Consolidated Statement of Comprehensive Income
            Three and Nine Months Ended September 30, 1998 and 1997  6

           Notes to Consolidated Financial Statements                7

     Item 2.
     -------

           Management's Discussion and Analysis of Financial
              Condition and Results of Operations                   11

 Part II.  Other Information
 ---------------------------


     Item 5.
     -------

          Other Information                                         19

     Item 6.
     -------

           Exhibits and Reports on Form 8-K                         19

 Signatures                                                         20 

                                      2    



                                
                             ITEM 1
                             -------
                      FINANCIAL STATEMENTS
                      --------------------
             BT FINANCIAL CORPORATION AND AFFILIATES
             ---------------------------------------
                   CONSOLIDATED BALANCE SHEET
                   --------------------------

                                               September 30  December 31
                                                       1998         1997
 (In thousands, except share data)               (Unaudited)
-------------------------------------------------------------------------
ASSETS
Cash and cash equivalents                       $    47,639  $    52,028
                                                  -----------------------
Interest-bearing deposits with banks                     32          424   
                                                  -----------------------
Securities available-for-sale                       281,033      194,852
Securities held-to-maturity (market values
   of $97,863 at September 30, 1998 and
   $172,305 at December 31, 1997)                    97,139      171,081
                                                  -----------------------
      Total securities                              378,172      365,933
                                                  -----------------------

Loans                                             1,223,462    1,125,387
   Less:  Unearned interest                          35,305       58,326
          Reserve for loan losses                    10,647        9,766
                                                  -----------------------
      Net loans                                   1,177,510    1,057,295
                                                  -----------------------

Premises and equipment                               29,507       30,424
Accrued interest receivable                          15,508       10,958
Other assets                                         35,377       35,859
                                                  -----------------------
      Total assets                              $ 1,683,745  $ 1,552,921
                                                  =======================

LIABILITIES
Deposits:
   Non-interest-bearing                         $   194,866  $   177,756
   Interest-bearing                               1,157,658    1,168,620
                                                 -----------------------
      Total deposits                              1,352,524    1,346,376
Federal funds purchased and securities
   sold under agreements to repurchase               50,665       36,313
Short-term borrowings                                 3,583        1,871
Accrued interest payable                              7,421        5,820
Other liabilities                                     2,869        2,497
Long-term debt                                      112,179       14,335
                                                 -----------------------
      Total liabilities                           1,529,241    1,407,212
                                                 -----------------------
SHAREHOLDERS' EQUITY
Preferred stock, no par value
   2,000,000 shares authorized                          --           --
Common stock, par value $5 per share,
   25,000,000 shares authorized,
   shares issued: 12,500,872 at 
     September 30, 1998 and December 31, 1997        62,504       31,252
Surplus                                              45,215       76,467
Retained earnings                                    43,648       37,283
Accumulated other comprehensive income                3,137          707
                                                 -----------------------
     Total shareholders' equity                     154,504      145,709
                                                 -----------------------
     Total liabilities and shareholders' equity $ 1,683,745  $ 1,552,921
                                                 =======================
The accompanying notes are an integral part of the consolidated
financial statements.


                                      3
                                
                                
             BT FINANCIAL CORPORATION AND AFFILIATES
             ---------------------------------------
                CONSOLIDATED STATEMENT OF INCOME
                --------------------------------
                           (Unaudited)
                           ----------
                              
                                       Three months ended    Nine months ended
(In thousands, except shares              September 30          September 30
 and per share data)                      1998      1997       1998       1997
--------------------------------------------------------------------------------
INTEREST INCOME
Loans, including fees                 $ 24,539  $ 23,291   $ 71,398   $ 67,688
Investment securities:
   Taxable                               5,584     5,623     18,408     15,757
   Tax-exempt                              731       107      1,597        348
Deposits with banks                          2         3          6         13 
Federal funds sold                          26       169        125        429
                                      ------------------------------------------
      Total interest income             30,882    29,193     91,534     84,235
                                      ------------------------------------------
INTEREST EXPENSE
Deposits                                11,650    11,870     35,037     33,008
Federal funds purchased and securities
   sold under agreements to repurchase     580       396      1,545      1,373
Short-term borrowings                       55        65        926        150
Long-term debt                           1,538       286      3,158        861
                                      ------------------------------------------
      Total interest expense            13,823    12,617     40,666     35,392
                                      ------------------------------------------
NET INTEREST INCOME                     17,059    16,576     50,868     48,843
Provision for loan losses                1,600     1,065      4,495      3,155
                                      ------------------------------------------
   Net interest income after
      provision for loan losses         15,459    15,511     46,373     45,688
                                      ------------------------------------------
OTHER INCOME
Trust income                               937       800      2,678      2,329
Fees for other services                  2,326     2,078      6,308      5,793
Net security gains                         302         3        366         24
Other income                               244       478        643        932
                                      ------------------------------------------
      Total other income                 3,809     3,359      9,995      9,078
                                      ------------------------------------------
OTHER EXPENSES
Salaries and wages                       4,997     5,157     15,618     15,085  
Pension and other employee benefits      1,027       865      3,151      2,581
Net occupancy expense                    1,048     1,078      3,248      3,209
Equipment expense                        1,342     1,292      3,835      3,497
F.D.I.C. insurance                          65        65        205        198
Amortization of intangible assets          524       543      1,571      1,477
Other operating expense                  3,280     3,179      9,981      9,415
                                      ------------------------------------------
      Total other expenses              12,283    12,179     37,609     35,462
                                      ------------------------------------------
INCOME BEFORE INCOME TAXES               6,985     6,691     18,759     19,304
Provision for income taxes               2,127     2,303      5,768      6,641
                                      ------------------------------------------
      NET INCOME                      $  4,858  $  4,388   $ 12,991   $ 12,663
                                      ==========================================

Earnings per common share-          
  Basic and Diluted                   $    .39 $     .35   $   1.04   $   1.01
Weighted average common shares
  outstanding-Basic                 12,500,872 12,500,872 12,500,872 12,500,872
Dividends paid per common share       $    .18 $     .15   $    .53    $   .46

Note:  All per share and average share data has been adjusted to reflect the
       10% stock dividend distributed on September 15, 1997 and the 2-for-1
       stock split effected in the form of a stock dividend distributed on
       May 1, 1998.  At December 31, 1997, BT Financial Corporation adopted 
       Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings
       Per Share".  The adoption of this statement did not have any material
       impact on the earnings per share computations.

       
The accompanying notes are an integral part of the consolidated
financial statements.


                                      4
            


                   BT FINANCIAL CORPORATION AND AFFILIATES  
                   ---------------------------------------
                     CONSOLIDATED STATEMENT OF CASH FLOWS
                     ------------------------------------
                                 (Unaudited)
                                 -----------
                                (In thousands)
                                --------------
                                                           Nine months ended
                                                             September 30
                                                            1998        1997
                                                      ----------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                              $ 12,991    $ 12,663
Adjustments to reconcile net income to net cash
 provided by operating activities:
     Provision for loan losses                             4,495       3,155
     Provision for depreciation and amortization           3,312       3,025
     Amortization of intangible assets                     1,571       1,477
     Amortization of premium, net of accretion of
      discount on loans and securities                       433         (36)
     Deferred income taxes                                  (798)       (339)
     Realized securities gains                              (366)        (24)
     Increase in interest receivable                      (4,550)     (1,684)
     Increase in interest payable                          1,601       2,434 
     Equity in loss of limited partnerships                   73          75 
     Other assets and liabilities, net                    (1,308)     (2,270)
                                                      ----------------------- 
          Net cash provided by operating activities       17,454      18,476 
                                                      -----------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities                         44,963      10,612
Repayments and maturities of securities available-for-
   sale                                                   52,635      62,612
Repayments and maturities of securities held-to-
   maturity                                               73,000      20,300
Purchase of securities available-for-sale               (178,154)    (19,816) 
Purchase of securities held-to-maturity                       --    (118,112)
Net decrease (increase) in interest-bearing       
   deposits with banks                                       392      (2,015)
Proceeds from sales of loans                               6,414       6,113
Net increase in loans                                   (131,085)    (48,117)
Purchases of premises and equipment and other             (2,395)     (2,137)
Net increase in investment in limited partnerships        (1,044)       (139)
Acquisition of branches, net of cash acquired                 --      58,819 
                                                      -----------------------
          Net cash used in investing activities         (135,274)    (31,880)
                                                      -----------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits                                   6,148      15,222 
Net increase (decrease) in Federal Funds purchased and
  securities sold under agreements to repurchase          14,352      (8,015)
Net increase in short-term borrowings                      1,712         968 
Common dividends paid                                     (6,625)     (5,739)
Proceeds from long-term debt                             100,000          --
Payment on long-term debt                                 (2,156)     (2,156)
                                                      -----------------------
     Net cash provided by financing activities           113,431         280 
                                                      -----------------------
Decrease in cash and cash equivalents                     (4,389)    (13,124)
Cash and cash equivalents at beginning of the year        52,028      65,305 
                                                      -----------------------
Cash and cash equivalents at end of period               $47,639     $52,181 
                                                      =======================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
     Interest on deposits and other borrowings           $39,065     $32,958 
     Federal income taxes                                  5,300       7,705 

The accompanying notes are an integral part of the consolidated
financial statements.

                                      5
       



                           BT FINANCIAL CORPORTION AND AFFILIATES
                           --------------------------------------
                        CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                        ----------------------------------------------
                                        (Unaudited)
                                        -----------
                                       (In thousands)
                                       --------------

                                        Three months ended    Nine months ended
                                           September 30          September 30
                                          1998       1997      1998       1997
                                       --------------------  ------------------
Net income                              $4,858     $4,388    $12,991   $12,663

Other comprehensive income, net of tax:
Unrealized holding gains (losses) on
       securities arising during period  2,842        437      2,668       (33)
Less: Reclassification adjustment for
       gains (losses) included in net
       income                              196          2        238        16
                                        -------------------  ------------------
Other comprehensive income (loss)        2,646        435      2,430       (49)
                                        -------------------  ------------------
Comprehensive income                    $7,504     $4,823    $15,421   $12,614
                                        ===================  ==================

  The accompanying notes are an integral part of the consolidated financial
statements.

                                      6 


                       BT FINANCIAL CORPORATION AND AFFILIATES
                       ---------------------------------------
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      ------------------------------------------

                                     (Unaudited)




       1.   In the opinion of the management of BT
            Financial Corporation (BT or the Corporation), the
            accompanying consolidated financial statements include
            all normal recurring adjustments necessary for a fair
            presentation of the financial position and results of
            operations of BT for the periods presented.  All
            significant intercompany transactions have been
            eliminated in consolidation.  The consolidated
            financial statements of BT include the accounts of BT
            and its wholly owned affiliates, Laurel Bank (Laurel),
            Laurel Trust Company (the Trust Company), Bedford
            Associates, Inc., and Laurel Community Development
            Corporation.  These statements should be read in
            conjunction with the financial statements and the notes
            thereto included in BT's annual report to the
            Securities and Exchange Commission on Form 10-K for the
            year ended December 31, 1997.  The results of
            operations for the nine month period ended September
            30, 1998 are not necessarily indicative of the results
            which may be expected for the full year.

       2.   Tax provisions for interim financial
            statements are based on the estimated effective tax
            rates for the full fiscal year.  The estimated
            effective tax rates may differ from the statutory tax
            rate due primarily to tax-exempt interest income.

       3.   Reserve for loan losses -- The recorded
            investment in loans for which impairment has been
            recognized in accordance with Statement of Financial
            Accounting Standards (SFAS) No. 114 totaled $1.0
            million at September 30, 1998, compared to $1.9 million
            at December 31, 1997 and $2.1 million at September 30,
            1997.  The corresponding loan loss valuation allowance
            was $609,000, $870,000, and $1.0 million for the same
            periods, respectively.  BT did not recognize any
            interest revenue on impaired loans during the nine
            months ended September 30, 1998.  In the nine months
            ended September 30, 1997, BT recognized approximately
            $5,000 of interest revenue on impaired loans, all of
            which was recognized using the cash basis method of
            income recognition.

                                      7


        4.  Earnings Per Share
            -------------------

            BT's outstanding stock options had an antidilutive
            effect, therefore they are not included in the EPS
            calculation for the three months and nine months ended
            September 30, 1998.



       5.   Recent Accounting Pronouncements
            --------------------------------

            In December of 1996, the FASB issued SFAS No.
            127, "Deferral of the Effective Date of Certain
            Provisions of FASB Statement No. 125."  This statement
            defers the effective date of SAFS No. 125 by one year
            to January 1, 1998 for certain transfer transactions
            including repurchase agreements, dollar rolls,
            securities lending and similar arrangements.  SFAS No.
            127 also delays by one year the provisions of SFAS No.
            125 for recognition of collateral by secured parties in
            conjunction with secured borrowings.  BT adopted SFAS
            No. 127 on January 1, 1998, and the effect of the
            adoption did not have a material impact on the
            Corporation's financial position or results of
            operations.

            In February of 1998, the FASB issued SFAS No.
            132 "Employers' Disclosures about Pensions and Other
            Postretirement Benefits."  SFAS No. 132 revises
            employers' disclosures about pension and other
            postretirement benefit plans.  It does not change the
            measurement or recognition of those plans.  SFAS No.
            132 standardizes the disclosure requirements and
            requires additional information on changes in the
            benefit obligations and fair value of plan assets that
            will facilitate financial analysis, and eliminates
            certain disclosures from SFAS No. 87 "Employers
            Accounting for Pensions", SFAS No. 88 "Employers
            Accounting for Settlements and Curtailments of Defined
            Benefit Pension Plans and for Termination Benefits,"
            and SFAS No. 106 "Employers Accounting for
            Postretirement Benefits Other Than Pensions."  BT will
            adopt SFAS No. 132 for fiscal year 1998 reporting.
            Since SFAS No. 132 is a disclosure based statement, it
            will not have a material impact on the Corporation's
            financial position or results of operations upon
            adoption.

            In June 1998, the FASB issued SFAS No. 133,
            "Accounting for Derivative Instruments and Hedging
            Activities."  The statement establishes accounting and
            reporting standards for derivative instruments,
            including certain derivative instruments embedded in
            other contracts, and for hedging activities.  It
            requires, among other things, that an entity recognizes
            all derivatives as either assets or liabilities in the
            statement of financial condition and measures those
            instruments at fair value.  The statement is effective
            for all fiscal quarters of fiscal years beginning after
            June 15, 1999.  Since BT does not currently use
            derivative financial instruments, the standard will not
            have any material impact on BT's results of operations
            upon adoption.

                                      8

       6.   Recent Acquisition
            ------------------

            On October 23, 1998, BT completed a merger
            with the Peoples National Bank of Rural
            Valley (Peoples), Rural Valley, Pennsylvania
            whereby Peoples merged into Laurel Bank.  At the time
            of the merger, Peoples operated one branch with
            unaudited assets totaling approximately $37 million.
            In connection with the merger, each share of Peoples
            common stock was converted into 12.11 shares of BT
            Common Stock, resulting in the issuance of 484,400
            shares of BT Common Stock.  The value of the
            transaction was approximately $12.6 million based on an
            average market price of approximately $26 per BT common
            share.  The merger has been accounted for as a pooling-
            of-interests.  Pro forma results of the merger would
            not be materially different from the results reported.

       7.   Litigation
            ----------

           A purported class action was instituted in the Court of Common
           Pleas of Cambria County, Pennsylvania against the former
           Johnstown Bank & Trust Company (Bank and Trust), now Laurel Bank,
           and Security of America Life Insurance Company (Security) in
           November, 1996 alleging various calculation irregularities in
           connection with a residential mortgage loan to the plaintiff in
           the principal amount of approximately thirteen thousand dollars
           resulting in, among other things, overcharges on credit life and
           disability insurance coverage and other items.  The plaintiff
           purports to represent a class of persons who made a mortgage
           payment to the former Bank and Trust or any of its subsidiaries
           within six years before November 21, 1996 and/or had credit life or
           disability insurance coverage with Security within six years
           before November 21, 1996.  The complaint seeks unspecified
           damages.  The Corporation has filed an answer denying that its
           actions breached its agreements with plaintiffs.  The class
           potentially includes the borrowers on approximately 2,800
           accounts, the number of residential mortgages held by the
           former Bank and Trust during the relevant period.
           The litigation is currently in the class discovery phase.
           A hearing is scheduled for March 1999 at which time the court
           will determine whether or not to certify the class.
           Management intends to oppose certification of the case as a
           class action, pursue its affirmative defenses and vigorously
           defend the lawsuit.  The impact of this litigation on BT cannot
           be fully assessed at this early stage of the proceedings.

           On November 19, 1997, Laurel Capital Group, Inc, and its
           wholly-owned subsidiary, Laurel Savings Bank, filed a suit in
           the United States District Court in the Western District of
           Pennsylvania claiming that Laurel Bank infringed on its common
           law trademark and servicemark rights by using the name "Laurel"
           and a related logo in an undefined market segment referred to
           as the "Pittsburgh area."  The suit seeks to enjoin Laurel from
           using its name and related logo in the "Pittsburgh area" and
           seeks unspecified damages.  Laurel Savings Bank is a thrift
           institution with five branch locations in the North Hills of
           Pittsburgh and one branch in Butler County. Pending a hearing
           on plaintiffs' motion for preliminary injunction, Laurel agreed
           to refrain from using the "Laurel" name or any related logo on
           any bank documents, advertisements, or promotional materials in
           the "Pittsburgh area".  While BT denies the use of the name
           "Laurel" and related logo infringes on plaintiff's trademark
           and servicemark rights and believes that its rights to the name
           "Laurel" and related logo are senior to that of the plaintiffs,
           there is a risk that Laurel might be prevented from using the
           "Laurel" name and related logo in the "Pittsburgh area". 
           Motions for summary judgement filed by both parties are pending.

                                       9

           The impact of this litigation on BT cannot be fully assessed at
           this early stage of the proceedings.

           Due to the nature of their activities, BT and its
           subsidiaries are at all times engaged in other various legal
           proceedings which arise in the normal course of their
           businesses.  While it is difficult to predict the outcome of
           these proceedings, management believes the ultimate liability,
           if any, will not materially affect BT's consolidated financial
           position or results of operations.


      8.   Stock Dividends
           ---------------

            On March 25, 1998, BT's Board of
            Directors declared a 2-for-1 stock split effected in
            the form of a stock dividend.  The dividend was
            distributed on May 1, 1998, to shareholders of record
            as of April 8, 1998.  The stock dividend, representing
            6,250,436 shares, increased common shares issued and
            outstanding to 12,500,872.  Accordingly, a transfer of
            $31,252,180, representing the par value of additional
            shares issued, was made from surplus to common stock.
            On September 15, 1997, a 10% stock dividend was
            distributed to shareholders of record as of August 27,
            1997.  All share and per share data in this report has
            been adjusted to reflect the stock dividends.


                                      10


                                ITEM 2
                                ------
               MANAGEMENT'S DISCUSSION AND ANALYSIS OF
               ----------------------------------------
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS
             ---------------------------------------------



The following is Management's Discussion and Analysis of the material
changes in financial position between September 30, 1998 and December 31,
1997, and the material changes in results of operations comparing the three
and nine month periods ending September 30, 1998 with the respective
results for the comparable period of 1997 for BT Financial Corporation.
The following should be read in conjunction with BT's Annual Report on Form
10-K for the year ended December 31, 1997.

Certain statements contained in this report constitute "forward-looking"
statements with respect to BT Financial Corporation and its subsidiaries.
Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the financial condition and
results of operations of BT Financial Corporation and its subsidiaries to
be materially different from any future financial condition or results of
operations suggested or implied by such forward-looking statements.  BT
undertakes no obligation to update any forward-looking statements made
herein.  The factors that may cause actual results to differ materially
from the forward-looking statements include: interest rates, market and
monetary fluctuations, monetary and fiscal policies, changes in laws and
regulations, inflation, general economic conditions, competition and
economic conditions in the geographic region and industries in which the
Corporation conducts its operations, introduction and acceptance of new
products and enhancements, mergers and acquisitions and their integration
into BT, and management's ability to manage these and other risks.


FINANCIAL REVIEW
----------------

1998 Highlights
---------------

On March 25, 1998, BT's Board of Directors declared a 2-for-1 stock split
in the form of a stock dividend that was distributed on May 1, 1998 to
shareholders of record as of April 8, 1998.  A ten percent stock dividend
was distributed on September 15, 1997, to shareholders of record at August
27, 1997.  All per share data in the following discussions has been
adjusted to reflect the stock dividends.  BT's common stock price increased
16.7%, adjusted for the stock split, at September 30, 1998 compared to
September 30, 1997.  BT's historical stock price performance is not
necessarily indicative of future price performance.

During the first quarter of 1998, several senior officers of BT elected to
retire early.  Certain severance and legal costs associated with these
retirements were approximately $337,000 and were recorded in the first
quarter.  The retiring officers will not be replaced, and the costs
associated with the early retirements are expected to be recovered by
reduced salary and benefits expense throughout the remainder of 1998.  BT
also expensed approximately $348,000 in the first quarter of 1998 in
connection with two legal settlements, their associated costs, and other
legal fees related to various lawsuits.  The settlements and their costs
represented the majority of the expensed amount in the first quarter.  As a
result of the special charges incurred with early retirements and
litigation costs, BT's 1998 earnings per share through September were
reduced by approximately $.04, adjusted for the 2-for-1 stock split.

During October 1998, BT completed the previously announced consolidations
of its banking offices located in Duquesne, West Lebanon, Duncansville and
Somerset (Route 31), Pennsylvania.  The branches consolidated into nearby
Laurel Bank offices.  The branch closures were undertaken to increase
efficiencies within the corporation by eliminating redundant, underperforming

                                      11  

offices.  The costs associated with the branch closings did not have a material
impact on BT's financial position or results of operations.

Consolidated net income increased 2.6%, to $13.0 million, or $1.04 per
share, in the first nine months of 1998 compared to $12.7 million, or $1.01
per share, in the same period of 1997.  Excluding the special charges
discussed earlier, net income for the first nine months of 1998 would have
increased 6.1% to $13.4 million, or $1.07 per share.  Increases in net
interest income and non-interest income along with a lower income tax
provision offset  increases in the provision for loan losses and a higher
level of other expenses.

Total assets grew to $1.68 billion at September 30, 1998 compared to $1.55
billion at year-end 1997 and September 30, 1997.  The growth in the current
period resulted from targeted balance sheet leveraging in 1998 along with
strong loan growth.  BT's organizational realignment in 1997 to a single
bank charter, supported by five marketing regions, has enhanced product
delivery channels which allow BT to focus on its customer needs more
effectively.  In addition, resources have been targeted to support the
organizational changes through expanded sales training and incentive
programs.  As a result of these measures, BT experienced internal growth in
both loans and non-interest-bearing deposits in the first nine months of
1998.

On October 23, 1998, BT completed a merger with the Peoples
National Bank of Rural Valley (Peoples), Rural Valley, Pennsylvania
whereby Peoples merged into Laurel Bank.  At the time of the merger,
Peoples operated one branch with unaudited assets totaling approximately
$37 million.  In connection with the merger, each share of Peoples common
stock was converted into 12.11 shares of BT Common Stock, resulting in the
issuance of 484,400 shares of BT Common Stock.  The value of the transaction
was approximately $12.6 million based on an average market price of
approximately $26 per BT common share. The merger has been accounted for as
a pooling-of-interests.  This acquisition increases BT's market share in
Armstrong County, located north of Pittsburgh, Pennsylvania.

CHANGES IN FINANCIAL POSITION

Total assets at September 30, 1998 increased $130.8 million, or 8.4%,
compared to year-end 1997 and $132.1 million, or 8.5%, compared to
September 30, 1997.  The higher balance sheet levels over both periods
resulted primarily from strong loan growth and increases in securities
levels.  Funding for the loan and security growth was provided mainly by
increased borrowings, primarily long-term debt.  In 1998, the availability
of favorably priced wholesale funding allowed BT to prudently leverage its
balance sheet by increasing earning asset levels in order to enhance income
while contributing to the management of interest rate risk.  Funding
strategies are managed by BT's Asset/Liability Committee to ensure adequate
liquidity and to control interest rate risk exposure.

Total shareholders' equity increased $8.8 million, or 6.0%, and $11.1
million, or 7.8%, compared to year-end 1997 and September 30, 1997,
respectively, primarily due to BT's net income.

Period end total loans outstanding, net of unearned interest, increased
$121.1 million, or 11.3%, and $116.6 million, or 10.9%, compared to year-
end 1997 and September 30, 1997, respectively.  The loan increases were due
primarily to internal growth in both commercial and consumer loans.  Loan
expansion has been attributable to increased market demand and aggressive
sales efforts.  While recent loan growth has been substantial, BT adheres
to strict underwriting and credit guidelines in its loan review processes
to preserve a quality loan portfolio.  The vast majority of BT's loans are
made to customers located in Western Pennsylvania within BT's primary
market area.  BT does not have any foreign loans or any loan concentrations
in any category exceeding 10% of total loans.

                                      12 

BT's nonperforming assets decreased $1.7 million, or 14.8%, compared to
year-end 1997 and $1.8 million, or 16.0%, compared to September 30, 1997.
The decline in nonperforming assets compared to year-end 1997 and September
30, 1997 was due to a lower level of repossessed automobile inventory, a
reduction in commercial loans 90 days or more past-due, and a decrease in
nonaccrual loans.  The reduction of nonperforming assets has been a focus
area for BT in 1998.  The ratio of nonperforming loans to loans, net of
unearned interest, improved to .70% at September 30, 1998 from .86% and
 .91% at year-end 1997 and September 30, 1997, respectively.  BT's Special
Assets department concentrates on nonperforming commercial loans.

Management's policy is to maintain an adequate loan loss reserve to cover
inherent losses in the loan portfolio.  The evaluation process to determine
potential losses includes loan reviews, collateral adequacy assessments, an
analysis of specific conditions of the borrower and an assessment of
general economic conditions.  The BT Credit and Collection functions
continuously monitor and assess credit quality to minimize exposure to
potential future credit losses.  BT's coverage ratio (reserve for loan
losses to nonperforming loans) improved to 1.3x at September 30, 1998
compared to 1.1x at year-end 1997 and 1.0x at September 30, 1997.  The
ratio of the reserve for loan losses to loans, net of unearned interest,
was .90% at September 30, 1998, compared to .92% at year-end 1997 and .91%
at September 30, 1997.  The following table provides information with
respect to the components of BT's nonperforming assets and related ratios
for the periods indicated.



                                      September 30   December 31  September 30
 (In thousands)                               1998          1997          1997
                                          ------------------------------------
    Loans 90 days or more past-due          $  719       $ 1,208       $   794
    Restructured loans                         265           266           266
    Nonaccrual loans                         7,357         7,678         8,651
                                          ------------------------------------
      Total nonperforming loans              8,341         9,152         9,711
    Other real estate owned                    575           710           659
    Repossessed assets                         605         1,312           961
                                          ------------------------------------
      Total nonperforming assets          $  9,521      $ 11,174      $ 11,331 
                                          ====================================

    Nonperforming loans as a % of
      loans, net of unearned interest         .70%          .86%          .91%
    Reserve for loan losses to
      nonperforming loans                     1.3x          1.1x          1.0x
    Reserve for loan losses as a % of
      loans, net of unearned interest         .90%          .92%          .91%


Throughout the first nine months of 1998, BT's investment portfolio was
impacted by calls of various securities.  Based on the market outlook, a
strategy was utilized in 1998 to invest in additional securities prior to
the actual call dates of existing securities.  This strategy allowed BT to
capture higher yields on securities purchased before interest rates
declined later in 1998.  More securities were purchased in 1998 as part of
a balance sheet leveraging plan that enables BT to enhance net interest
income by utilizing favorably priced wholesale funding.  As a result,
average securities increased $82.6 million, or 25.3%, in the nine months
ended September 30, 1998 compared to the same period of 1997.  The higher
level in 1998 was primarily due to purchases of municipal securities and
U.S. federal agency securities.  Period end total securities increased
$12.2 million, or 3.3%, compared to year-end 1997 and $31.5 million, or
9.1%, compared to September 30, 1997 mainly due to municipal securities

                                      13

purchases.  BT's security portfolio does not contain any derivative
investments or any investments in hedge funds.

Period end deposits increased $6.1 million, or 0.5%, and $3.9 million, or
0.3%, compared to year-end 1997 and September 30, 1997, respectively.  The
increase over both periods was due to substantial growth in non-interest-
bearing deposits.  These accounts have increased $17.1 million, or 9.6%,
and $22.8 million, or 13.3%, compared to year-end 1997 and September 30,
1997, respectively.  Total interest-bearing accounts have declined $11.0
million, or 0.9%, and $18.9 million, or 1.6%, compared to the same periods,
respectively. The growth trend in BT's total deposits in 1998 is expected
to have a positive effect on net interest income in the future as higher
cost deposits (primarily certificates of deposit) have declined while non-
interest paying checking deposits have increased.

BT's short-term borrowings are comprised of federal funds purchased,
securities sold under agreements to repurchase, and other short-term
borrowings.  The average balance of these borrowings during the first nine
months of 1998 was $66.9 million, an increase of $25.6 million, or 62.1%,
over the same period of 1997.  The average balance of long-term debt in
1998 through September was $76.6 million, an increase of $60.2 million, or
367.0%, over the corresponding period in 1997.  The higher levels reflect
increases in wholesale funding levels used by BT to support recent loan
growth and securities purchases.  The wholesale funding has been provided
by the Federal Home Loan Bank (FHLB).  In the first quarter of 1998, the
FHLB advanced a $25 million long-term borrowing to BT.  The interest rate
on the borrowing at September 30, 1998 was 5.22%.  In the second quarter of
1998, additional long-term borrowings of $25 million and $50 million were
provided by the FHLB with interest rates of 5.24% and 5.08%, respectively.
The borrowings, all scheduled to mature in the year 2008, were used for
selected loan and investment funding and to enhance liquidity while
mitigating BT's interest rate risk exposure.  The long-term borrowings are
collateralized by BT's residential mortgage loan portfolio.  At the present
time, BT does not anticipate additional increases in current wholesale
funding levels in its near-term outlook.  Short-term borrowings at
September 30, 1998 increased $16.1 million compared to year-end 1997 and
$20.6 million compared to September 30, 1997 while long-term debt increased
$97.8 million and $97.1 million over the same periods, respectively.  BT's
short-term borrowings at September 30, 1998 consisted primarily of retail
repurchase agreements.  The higher levels of long-term debt at September
30, 1998 compared to year-end 1997 and September 30, 1997 reflect the FHLB
borrowings issued in the first and second quarters of 1998.

RESULTS OF OPERATIONS


Third Quarter 1998 vs. Third Quarter 1997

In the third quarter of 1998, BT produced record net income of $4.9
million, or $.39 per share compared to $4.4 million, or $.35 per share
earned in the same period of 1997.  The earnings improvement was driven by
a $483,000, or 2.9% increase in net interest income and a $450,000, or
13.4%, rise in total other income.  These advances offset higher levels in
the provision for loan losses and increased total other expenses. In
addition, a lower income tax provision had a positive impact on earnings in
the third quarter of 1998.

The annualized return on average assets for the third quarters of 1998 and
1997 was 1.14% and 1.13%, respectively.  The annualized return on average
shareholders' equity for the third quarter was 12.77% in 1998 and 12.36% in
1997.  The return on average tangible shareholders' equity, which excludes
intangible amortization expense from net income and intangibles from
average shareholders' equity, was 16.54% and 16.71% for the third quarters
of 1998 and 1997, respectively.

                                      14 

Net interest income on a fully taxable equivalent basis was $17.7 million
for the third quarter of 1998 compared to $16.9 million for the same period
in 1997.  The increase of $808,000 was due essentially to a $135.6 million,
or 9.4%, increase in average interest-earning assets in the third quarter
of 1998. The earning asset growth was mainly from increases of $92.4
million and $53.8 million in average loans and average securities,
respectively.  Third quarter net interest margins for 1998 and 1997 were
4.48% and 4.68%, respectively.  The decline in the net interest margin in
1998 is attributable to higher interest rates paid on interest-bearing
liabilities, lower loan yields, and the impact of balance sheet leveraging
in which wholesale funding was utilized to fund increases in interest-
earning asset levels in order to enhance net interest income.

The provision for loan losses increased $535,000 in the third quarter of
1998 compared to the third quarter of 1997 based on management's assessment
of the provision necessary to maintain an adequate reserve against
potential future losses based upon the current size and quality of the loan
portfolio.  Net charge-offs were $1.2 million in the third quarter of 1998
compared to $1.0 million in 1997.  The higher level of net charge-offs in
1998 was primarily due to higher levels of commercial and consumer loan
credit losses which were partially offset by a decline in commercial
mortgage net charge-offs.

Total other income increased $450,000, or 13.4%, in the third quarter of
1998 compared to the same period in 1997.  Trust income increased $137,000,
or 17.1%, due to increased assets under management.  Service fees grew
$248,000, or 11.9%, due to increased ATM/debit card revenue, higher service
charges on deposit accounts, and a rise in loan insurance commissions.
These fee gains offset the absence of credit card commission income due to
the sale of the credit card portfolio in the fourth quarter of 1997.
Income from securities transactions rose $299,000 in 1998 as BT realized
gains related to called securities and sales of U.S. federal agency
securities as part of a strategy involving the selling of securities likely
to be called and reinvesting the proceeds into tax-exempt municipal issues.
Other income declined $234,000 in the third quarter of 1998 compared to the
same period in 1997 mainly due to a profit of $250,000 realized in the
third quarter of 1997 in connection with the sale of BT's merchant credit
card relationships.

Total other expenses rose slightly by $104,000, or 0.9%, in the third
quarter of 1998 compared to the third quarter of 1997.  Total employee
costs, including employee benefits, remained relatively consistent in the
third quarter of 1998 compared to the same period in 1997.  Employee
benefit costs rose primarily due to increased hospitalization premiums,
offsetting a decline in costs related to the reduction of full time
equivalent employees from 776 to 761 at September 30, 1998.  Equipment
expense was up 3.9% largely due to higher depreciation levels associated
with BT's ongoing technology investments.  Amortization of intangible
assets decreased 3.5% due the expiration of goodwill expense associated
with a prior acquisition.  Other operating expenses rose 3.2% while BT's
efficiency ratio improved to 58% in the third quarter of 1998 compared to
60% in the third quarter of 1997.

BT's effective tax rate was 30.5% for the third quarter of 1998 compared to
34.4% in the same period of 1997 due to a higher level of tax-exempt
interest income and increased low income housing tax credits.

Nine Months Ended September 30, 1998 vs. Nine Months Ended September 30,
1997

In the first quarter of 1998, earnings were impacted by special charges
associated with the retirement of several senior officers of BT and certain
costs in connection with two legal settlements along with other legal fees
related to various lawsuits.  The total charges approximated $685,000 and
reduced earnings per share by approximately $.04 in 1998.  Excluding these
charges, net income for the nine months ended September 30, 1998 was $13.4
million, or $1.07 per share, compared to $12.7 million, or $1.01 per share

                                      15 

earned for the same period of 1997.  The special charges reduced 1998 year-
to-date earnings to $13.0 million, or $1.04 per share.

For the first nine months of 1998, the annualized return on average assets
was 1.05% compared to 1.12% in 1997.  The annualized return on average
shareholders' equity for the first nine months of 1998 and 1997 was 11.72%
and 12.12%, respectively.  The return on average tangible shareholders'
equity, which excludes intangible amortization expense from net income and
intangibles from average shareholders' equity, was 15.46% for the first
nine months of 1998 compared to 16.03% in 1997.

Fully taxable equivalent net interest income increased $2.6 million, or
5.2%, to $52.5 million in the first nine months of 1998 compared to $49.9
million in 1997.  The increase was primarily due to a $146.3 million, or
10.5%, rise in average earning assets in 1998.  The earning asset increase
was due to higher levels of securities and loans in 1998.  The year-over-
year increase in average securities was $82.6 million, or 25.3%, while
average loans grew $71.3 million, or 6.7%.  The net interest margin
compressed 22 basis points in 1998 to 4.55% due to lower yields on interest-
earning assets, higher rates paid on interest-bearing liabilities, and the
impact of BT's 1998 balance sheet leveraging strategy.

The provision for loan losses increased $1.3 million in the first nine
months of 1998, compared to the same period of 1997 due to management's
assessment of the provision necessary to maintain an adequate reserve
against potential future losses based upon current size and quality of the
loan portfolio.  Net charge-offs were approximately $3.6 million in 1998
compared to $3.1 million in 1997.

Total other income increased $917,000, or 10.1%, in the first nine months
of 1998 compared to 1997. Trust income gained $349,000, or 15.0%,
commensurate with a greater volume of assets under management.  Service
fees grew $515,000 or 8.9%, primarily resulting from increased ATM/debit
card service revenue and a rise in loan insurance commissions.  These gains
offset the absence of credit card commission revenue due to the credit card
portfolio sale in 1997.  Securities transactions income rose $342,000 in
1998 as BT realized gains related to called securities and sales of U.S.
federal agency securities as part of a strategy involving the selling of
securities likely to be called and reinvesting the proceeds into tax-exempt
municipal issues.  Other income declined $289,000 in the first nine months
of 1998 compared to 1997 primarily due to the sale of BT's merchant credit
card relationships in 1997.

Total other expenses increased $2.1 million, or 6.1%, in the first nine
months of 1998 compared to the same period of 1997.  Total employee costs,
including employee benefits, increased 6.2% in 1998 compared to 1997.
Salaries and wages rose reflecting the impact of merit increases and
special charges of approximately $322,000 associated with the retirement of
several senior officers of BT in the first quarter of 1998.  Employee
benefit costs increased mainly due to higher hospitalization expense
resulting from premium increases.  Occupancy expense was up 1.2% due to
three branches acquired from National City Bank of Pennsylvania in June
1997.  Equipment expense increased 9.7% reflecting higher levels of ongoing
technology-based expenditures.  Amortization of intangible assets rose 6.4%
due to the branches acquired from National City.  Other operating expense
increased 6.0% largely due to $363,000 in special charges mentioned earlier
in this discussion related to litigation and legal settlement costs.
Excluding the special charges, BT's efficiency ratio improved to 59% in the
first nine months of 1998 compared to 60% in the same period of 1997.

BT's effective tax rate was 30.7% for the first nine months of 1998
compared to 34.4% for the same period in 1997.  The lower rate in 1998
reflects an increased application of low income housing tax credits and a
higher level of tax-exempt interest income.

                                      16


CAPITAL ADEQUACY

At September 30, 1998, BT continued to maintain capital levels well above
the minimum regulatory levels.  BT's capital ratios as of September 30,
1998 and December 31, 1997 are presented in the table below.  The required
regulatory ratios, representing the level needed to meet "Adequately
Capitalized" status are also presented.


                                                           Regulatory
                                       9-30-98   12-31-97  Requirement
                                       -------   --------  -----------
     Tier I Risk Based Ratio            10.50%     10.83%      4.00%
     Total Capital Risk Based Ratio     11.36%     11.70%      8.00%
     Tier I Leverage Ratio               7.79%      7.94%      4.00%


YEAR 2000 ISSUES



In 1996, BT created a special task force to analyze any Year 2000 issues
pertaining to BT's business and operations.  Year 2000 issues refer to
uncertainties regarding the ability of various software systems to
interpret dates correctly after the beginning of the Year 2000.  BT
utilizes and is dependent upon data processing systems and software in its
normal course of business.  BT is in the process of (1) analyzing its
information systems and vendor supplied application systems to address any
Year 2000 issues, (2) developing detailed plans for system corrections and
testing, (3) correcting or replacing all critical applications, and (4)
evaluating the potential effects of Year 2000 issues on both the customer
and vendors of Laurel and the Trust Company.

The ongoing process of analyzing its information systems involves internal
testing of computer hardware and software and the modification and/or
replacement of such systems if necessary.  BT is also assessing its
noncomputer (non-IT) systems for year 2000 compliance.  These non-IT
systems such as ATM machines and security systems typically utilize
embedded technology, such as microcontrollers, which could contain a date
element.  While BT is taking all appropriate steps to assure Year 2000
compliance, it is dependent on its information systems vendor's compliance
to a large extent.  BT is requiring systems and software vendors to
represent that the services and products provided are, or will be Year 2000
compliant and are tested for such compliance.  Currently, 71% of the
mission critical systems that BT and its affiliates utilize, have been
certified by the respective vendor or service provider as being Year 2000
compliant, and additionally, 29% that are not yet certified have a
renovation plan in place to become compliant.  Successful internal unit
testing or other internal certification has been performed on 55% of these
systems.  Management expects to have all or substantially all systems and
applications compliant or near completion of any necessary remedial actions
by the end of 1998. BT's mainframe system, as well as BT's core business
application software packages have been certified by the respective vendors
for Year 2000 compliance.  Contingency planning efforts, specific to
critical systems and applications, are underway in the event that primary
systems, although certified, are deemed inadequate for processing after the
beginning of the Year 2000.  BT has also contacted its utility service
suppliers and requested written assurance of their Year 2000 compliancy.
BT's task force will assess these vendor relationships upon determination
of each vendor's Year 2000 readiness.  The failure to correct a material
Year 2000 problem could result in an interruption in, or a failure of,
certain normal business activities or operations.  Such failures could
materially and adversely affect the Corporation's results of operations,
liquidity and capital resources.  Although BT believes that it will be
adequately prepared for potential Year 2000 risks, the Corporation is
unable to determine at this time whether the consequences of Year 2000
failures will have a material impact on the Corporation's results of
operations, liquidity or capital resources, due to the general uncertainty

                                      17

inherent in the Year 2000 problem, resulting in part from the uncertainty
of the Year 2000 readiness of third-party suppliers and customers.

BT estimates that the total cumulative cost of this process will
approximate $756,000, which includes costs associated with modifying the
systems as well as the cost of purchasing or leasing certain hardware and
software.  Purchased hardware and software will be capitalized in
accordance with normal policy.  Personnel and all other costs related to
this process are being expensed as incurred.  Currently, approximately
$347,000 of the estimated total cumulative cost has been expended.  The
total cost of this process and the expected completion dates are based on
management's best estimates and are believed to be reasonably accurate.
The expenditure is not expected to be material to the Corporation's
business, operations or financial condition and should have no material
impact on the Corporation's results of operations, liquidity or capital
resources.

BT's process of evaluating potential effects of Year 2000 issues on
customers of Laurel is 77% complete, and at this time BT has not identified
any potentially adverse effects of Year 2000 problems on Laurel's loan
customers.  Risk assessments are currently being performed on Laurel's
larger commercial borrowers.  The failure of a commercial bank customer to
prepare adequately for Year 2000 compatibility could have a significant
adverse effect on such customer's operations and profitability, in turn
inhibiting its ability to repay loans in accordance with their terms to Laurel.
Information will continue to be accumulated from customers of Laurel to
enable BT to assess the degree to which customers' operations are
susceptible to potential problems.

FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

The Corporation is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers.  These financial instruments consist of loan commitments and
standby letters of credit.

The Corporation's exposure to loss in the event of nonperformance by the
other party to the financial instrument for loan commitments and standby
letters of credit is represented by the contractual amount of these
instruments.  The Corporation uses the same credit policies in making
commitments and conditional obligations as it does for on-balance-sheet
instruments.

The face amounts of financial instruments with off-balance-sheet risk at
September 30, 1998 were as follows:

               (In thousands)
               Loan commitments                   $214,115
               Standby letters of credit            11,501

Since many of the loan commitments may expire without being drawn upon, the
total commitment amount does not necessarily represent future cash
requirements or loss exposures.  The Corporation evaluates each customer's
creditworthiness on a case-by-case basis.  The amount of collateral
obtained, if deemed necessary by the Corporation upon extension of credit,
is based on management's credit evaluation of the customer.  Standby
letters of credit are unconditional commitments issued by the Corporation
to support the financial obligations of a customer to a third party.  These
guarantees are primarily issued to support public and private borrowing
arrangements.  The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loans.  The collateral
varies but may include accounts receivable, inventory and property, plant
and equipment for those commitments for which collateral is deemed
necessary.

                                       18


                                   PART II
                                   -------
                              OTHER INFORMATION
                              -----------------



                                   ITEM 5
                                   ------
                              OTHER INFORMATION
                              -----------------

The information contained in footnote 6 to the Consolidated Financial
Statements included in Part I of this report on Form 10-Q is incorporated
by reference in response to this item.


                                    ITEM 6
                                    ------
                      EXHIBITS AND REPORTS ON FORM 8-K
                      --------------------------------

  (a)  Exhibits
       --------

       Exhibit 27          Financial Data Schedule

  (b)  Reports on Form 8-K
       --------------------

      No reports on Form 8-K have been filed by the Registrant during the
      quarter for which this report is filed.


                                       19
                                           

                                     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.



   
                                         BT FINANCIAL CORPORATION
                                         (Registrant)


  Date      November 13, 1998             /s/ John H. Anderson
            ------------------            ----------------------------
                                          John H. Anderson, Chairman
                                          and Chief Executive Officer




  Date      November 13, 1998            /s/ Mark L. Sollenberger
            -----------------            -------------------------------
                                         Mark L. Sollenberger,
                                         Executive Vice President, Treasurer,
                                         and Assistant Secretary
                                         (Principal Financial Officer)


                                      20